3 Banking stocks that may be a buy right now

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Written By Sylvia Thompson

The financial sector is teetering on the brink of a correction, primarily driven by recent results from major banks. Although the news isn’t particularly dire, the market had already priced in many strengths, paving the way for a necessary reset.

The fundamental takeaway is that business remains sound, consumers are resilient, and cash flow is ample. With the Federal Open Market Committee (FOMC) poised to slash rates later this year, the spotlight turns to smaller regional banks, which may experience accelerated growth by year-end.

In this context, the current market correction could be a precursor to lucrative buying opportunities, especially considering the attractive capital returns and yields ranging from 3.25% to 4.3%.

In this article, we will look at 3 smaller bank stocks worth a closer look.

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Bank OZK: An Aggressive Dividend-Growing Stock

Bank OZK (NASDAQ: OZK), formerly Bank of the Ozarks, is a Little Rock-based financial institution renowned for its aggressive dividend growth. Trading at 8x earnings, it stands out as one of the more affordably valued bank stocks.

The company has an impressive history of increasing its annual dividend for 26 consecutive years, boasting a 12% compound annual growth rate (CAGR).

The unique aspect of Bank OZK’s approach is its tendency to raise dividends sequentially each quarter, providing significant market momentum. With a modest payout ratio of just 25%, this trend is likely to persist.

Credit: DepositPhotos

In terms of analyst activity, there’s notable interest. Although price targets were scaled back in early 2023 amidst a banking crisis, this adjustment now appears to be a minor setback.

Analysts have consistently held a “hold” stance on the stock, with price targets seeing an uptick in the third and fourth quarters. The consensus now surpasses early 2023 levels, indicating potential upward price movements, even as the stock currently aligns with these consensus estimates.

Bank OZK’s third-quarter highlights included a 10% credit reserve build, surpassing consensus net interest income (NII), and earnings buoyed by reduced costs. Loan growth also impressed, increasing by 7% in the quarter, with the fourth quarter expected to be even stronger.

Analysts have revised their fourth-quarter estimates upwards, although the consensus still anticipates a modest 10% growth. This cautious outlook contrasts with broader industry trends and Bank OZK’s own results, suggesting potential for positive surprises.

Valley National Bancorp: A Stable 4% Yield Contender

Next, we delve into Valley National Bancorp (NASDAQ: VLY), a New York-based regional banking institution. With a market capitalization exceeding $5 billion and a substantial 4.3% yield, this stock offers a compelling mix of value and income.

Unlike Bank OZK, Valley National’s dividend growth isn’t as dynamic, but it has been consistent for nearly a decade, backed by a low payout ratio and a solid reliability outlook.

However, the fiscal year 2023 posed challenges, with both revenue and earnings showing contractions. The first half of the current year is expected to follow a similar trend, but a recovery is on the horizon.

Growth is anticipated to resume by the end of the fiscal year, reinforcing the bank’s capital return prospects.

Analyst sentiment towards Valley National is more cautious compared to Bank OZK. The consensus rating has shifted to “hold” from a “moderate buy” in 2023, with a declining price target.

Nonetheless, upcoming fourth-quarter results might serve as a catalyst, especially considering the low expectations and the early signs of turnaround efforts initiated in late 2022 and early 2023.

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Cadence Bank: High Value with Growth Prospects

Finally, we examine Cadence Bank (NYSE: CADE), a regional player in the southeastern United States. Positioned at the higher end of the valuation spectrum at nearly 12x earnings, Cadence Bank commands attention with its 3.3% yield and prospects for distribution growth.

Credit: DepositPhotos

The bank has a track record of five consecutive annual dividend increases and a conservative payout ratio of 35%, coupled with a return to growth on the horizon.

Analysts are generally optimistic about Cadence Bank, anticipating that the fourth-quarter results will mark a low point in performance. The consensus among the nine analysts tracked by MarketBeat is a “buy” rating, with price targets being revised upwards at the end of the year.

A recent price target set in early 2024 pegs the stock at $35, approximately 25% higher than its current trading level.


In summary, the financial sector’s imminent correction presents a unique opportunity for astute investors. Bank OZK, Valley National Bancorp, and Cadence Bank each offer distinct advantages, from aggressive dividend growth to stable yields and promising growth prospects.

As the FOMC gears up for rate cuts, these regional banks could see an acceleration in business, turning today’s market correction into tomorrow’s profitable investment. With attractive yields and relative value compared to the broader market, these stocks warrant careful consideration for those seeking to capitalize on the current financial landscape.

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