In this piece, we will take a look at the 15 worst performing bank stocks in 2023. If you want to skip our introduction to the banking industry, then head on over to 5 Worst Performing Bank Stocks in 2023.

The banking industry, primarily due to its high exposure to interest rate hikes, has been at the center of the economy lately. A bank’s operations are sensitive to interest rate hikes. At one end, the bank rate determines the rate at which a bank borrows money from other banks. It lends out this money to corporate and individual clients and charges them a fee through the interest rate as well. The difference between the fee of a loan paid by a consumer and the rate that the bank is charged as bank rate is the interest rate spread – or a bank’s profit. A higher bank rate makes it difficult for firms to raise credit since they are charged higher interest payments, a fact that was clear in Canada earlier this year.

Before we get to that, the difference between the impact of a bank rate increase on short term and long term lending rates is sometimes different too. Generally, interest rates for longer term bonds and instruments are generally higher than short term rates. However, a 22-year high interest rate has led to the current yield for two month bonds to sit at 5.26% while the yield for a 30 year treasury bond is 4.23%. This implies that the prices of long term bonds are higher than those of short term debt since move investors are flocking toward them. The tendency of buyers to prefer the stability of long term debt income is also viewed negatively in the stock market since it signals unease about the shorter term economic climate.

Short term rates, which increase rapidly in a high rate environment, are often tightly linked with the ability of consumers and corporations to spend. This fact was visible in Canada by the end of Q1 2023, according to Equifax Canada’s credit trends report which outlines that the balance on longer term installment loans fell by 2.4% for the first time since 2019. However, consumers and businesses continued to take on short term credit in a tight environment where overall business openings fell as well. More businesses also became delinquent, in the financial and industrial sectors, as they failed to keep up with high inflation and other factors. If you want find out which Canadian firms performed well during this tough climate, then you can check out 11 Most Profitable Canadian Stocks.

In America, the high interest rate environment also led to a fall in the prices of bonds that were issued last year. Within a year or so, interest rates have hit a multi-decade high, and naturally this makes the bond market quite fast moving when it comes to setting prices. Several U.S. banks failed to maintain their asset value in the face of a sudden jump in client withdrawal, an event that created a chill at both the Federal Reserve and the Treasury Department. For more details, you can check out Top 20 Most Profitable Banks in the World.

The aftermath of the March banking crisis has also led to new regulations for big banks such as JPMorgan Chase & Co. (NYSE:JPM). As July ended, the Federal Reserve uploaded a crucial data set that laid out that under a stress test where banks have to swiftly raise capital, their tier 1 capital ratio changed by 3.3 on the median. This report, which shared details about all major banks in America, came around the same time that the Fed sought public comment on new rules designed to increase the ability of large banks to withstand adverse economic scenarios.

Put together, all these factors make it clear that there is turmoil in the banking market. This has also affected banking stocks, with the S&P Banks Select Industry Index down 7.56% year to date. The fragility in the banking sector and the aftermath of the March crisis still continue to impact the S&P Regional Banks Select Industry Index which is yet to retake previous highs and has lost 17.54% over the course of this year. This difference in the performance between diversified and regional banks is also clear from the latest slew of banking earnings releases. You can learn more here 10 Oversold Bank Stocks To Buy.

So, which bank stocks have fared poorly on the market this year? Some that have seen the steepest share price drops are BV Financial, Inc. (NASDAQ:BVFL), SHF Holdings, Inc. (NASDAQ:SHFS), and PacWest Bancorp (NASDAQ:PACW).

Our Methodology

To compile our list of the worst performing bank stocks, we ranked regional and diversified banks in terms of their year to date share price losses.

15 Worst Performing Bank Stocks in 2023

15. Bridgewater Bancshares, Inc. (NASDAQ:BWB)

Year To Date Share Price Loss: 37.07%

Bridgewater Bancshares, Inc. (NASDAQ:BWB) is a Minnesota based bank that limits its services to businesses, investors, and high net worth individuals. Like Heritage Financial, its Q2 2023 EPS also beat analyst estimates.

During 2023’s first quarter, six of the 943 hedge funds part of Insider Monkey’s database had held a stake in the bank. Bridgewater Bancshares, Inc. (NASDAQ:BWB)’s biggest investor in our database is Jim Simons’ Renaissance Technologies through its $4.2 million investment.

Bridgewater Bancshares, Inc. (NASDAQ:BWB) joins SHF Holdings, Inc. (NASDAQ:SHFS), BV Financial, Inc. (NASDAQ:BVFL), and PacWest Bancorp (NASDAQ:PACW) in our list of the worst performing bank stocks in 2023.

14. Heritage Financial Corporation (NASDAQ:HFWA)

Year To Date Share Price Loss: 37.38%

Heritage Financial Corporation (NASDAQ:HFWA) is a Washington based bank that managed to meet analyst EPS estimates for its second quarter earnings. The stock is rated Buy on average and has started to reverse some of its losses earlier this year.

Insider Monkey dug through 943 hedge fund holdings for their March quarter of 2023 investments and found out that 14 had bought and owned Heritage Financial Corporation (NASDAQ:HFWA)’s shares. Israel Englander’s Millennium Management is the largest shareholder through a $7.7 million stake.

13. Eagle Bancorp, Inc. (NASDAQ:EGBN)

Year To Date Share Price Loss: 37.47%

Eagle Bancorp, Inc. (NASDAQ:EGBN) is a regional bank that serves the needs of both individual and business customers. Despite turmoil in the regional banking sector, it reported strong second quarter results after beating analyst EPS estimates. However, the bank has embarked on a cost cutting strategy as well as it closes branches and laying off staff.

By the end of this year’s first quarter, 19 of the 943 hedge funds surveyed by Insider Monkey had held a stake in Eagle Bancorp, Inc. (NASDAQ:EGBN). Out of these, the bank’s largest investor is Israel Englander’s Millennium Management courtesy of its $13.4 million stake.

12. Carver Bancorp, Inc. (NASDAQ:CARV)

Year To Date Share Price Loss: 38.89%

Carver Bancorp, Inc. (NASDAQ:CARV) is a New York City based bank that provides accounts and other services. It is one of the few penny bank stocks on our list and one which also announced a partnership earlier this year to use artificial intelligence for streamlining loan operations.

Two of the 943 hedge funds part of Insider Monkey’s Q1 2023 database have invested in the bank. Carver Bancorp, Inc. (NASDAQ:CARV)’s biggest hedge fund investor is Jim Simons’ Renaissance Technologies through a $203,000 investment.

11. Arrow Financial Corporation (NASDAQ:AROW)

Year To Date Share Price Loss: 40.49%

Arrow Financial Corporation (NASDAQ:AROW) is one of the oldest banks on our list since it was set up in 1851. Its operations are limited in New York, and it missed analyst EPS estimates in Q1.

Four of the 943 hedge fund portfolios studied by Insider Monkey had held Arrow Financial Corporation (NASDAQ:AROW)’s shares during Q1 2023. Out of these, the largest stakeholder is Jim Simons’ Renaissance Technologies since it owns $7 million worth of shares.

10. First Horizon Corporation (NYSE:FHN)

Year To Date Share Price Loss: 44.64%

First Horizon Corporation (NYSE:FHN) is a Tennessee based bank whose acquisition by a Canadian bank was called off earlier this year during the turmoil in the regional bank industry. The firm’s Q2 2023 earnings disappointed investors and the shares were rated Sector Perform by RBC Capital in July.

As of March 2023 end, 60 of the 943 hedge funds part of Insider Monkey’s database had held a stake in the bank. First Horizon Corporation (NYSE:FHN)’s largest investor in our database is George Soros’ Soros Fund Management through a stake worth $129 million.

9. First Guaranty Bancshares, Inc. (NASDAQ:FGBI)

Year To Date Share Price Loss: 46.74%

First Guaranty Bancshares, Inc. (NASDAQ:FGBI) serves the needs of both individual and business customers. It is one of the few banks where more shares are owned by retail investors as opposed to institutional investors.

During 2023’s first quarter, only one hedge fund part of Insider Monkey’s survey had bought First Guaranty Bancshares, Inc. (NASDAQ:FGBI)’s shares. This lone investor is Jim Simons’ Renaissance Technologies which owns $179,000 worth of shares.

8. First Foundation Inc. (NASDAQ:FFWM)

Year To Date Share Price Loss: 49.27%

First Foundation Inc. (NASDAQ:FFWM) is based in Dallas, Texas, and has a presence in several American states. It is one of the few regional banks that have beaten analyst EPS estimates for their second quarter results.

In the prior quarter, 16 of the 943 hedge funds polled by Insider Monkey had held a stake in the bank. First Foundation Inc. (NASDAQ:FFWM)’s biggest shareholder out of these is Ravi Chopra’s Azora Capital through a $12.8 million investment.

7. Oconee Federal Financial Corp. (OTCMKTS:OFED)

Year To Date Share Price Loss: 51.00%

A pink sheet stock, Oconee Federal Financial Corp. (OTCMKTS:OFED)’s shares currently trade for $12.25. The firm is a savings and loan association with operations in South Carolina and Georgia. While the stock was previously traded on the NASDAQ exchange, the shares were delisted in July. During the first quarter, two hedge funds of the 943 surveyed by Insider Monkey had invested in Oconee Federal Financial Corp. (NASDAQ:OFED) with Israel Englander’s Millennium Management being the largest investor.

6. Territorial Bancorp Inc. (NASDAQ:TBNK)

Year To Date Share Price Loss: 54.02%

Territorial Bancorp Inc. (NASDAQ:TBNK) offers deposit accounts, loans, and other financial products. Its shares dipped in May and haven’t recovered since then.

Six of the 943 hedge funds polled by Insider Monkey for their Q1 2023 investments had held Territorial Bancorp Inc. (NASDAQ:TBNK)’s shares. Out of these, the biggest stakeholder was Jim Simons’ Renaissance Technologies through a $9.3 million stake.

BV Financial, Inc. (NASDAQ:BVFL), Territorial Bancorp Inc. (NASDAQ:TBNK), SHF Holdings, Inc. (NASDAQ:SHFS), and PacWest Bancorp (NASDAQ:PACW) are some of the worst performing bank stocks in 2023.

Click to continue reading and see 5 Worst Performing Bank Stocks in 2023.

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Disclosure: None. 15 Worst Performing Bank Stocks in 2023 is originally published on Insider Monkey.