We recently published a list of 10 Best Small Cap Bank Stocks To Invest In Now. In this article, we are going to take a look at where Berkshire Hills Bancorp Inc. (NYSE:BHLB) stands against other best small cap bank stocks to invest in now.

The global banking market was valued at $35.4 billion in 2024, according to Market Research Future. It’s expected to grow from $37.17 billion in 2025 to $55.25 billion by 2034 at a CAGR of 4.55%. McKinsey and Company’s Global Banking Annual Review for 2024 stated that the global banking industry has consistently displayed low price-to-book multiples, ranking at the bottom of all sectors. This raises a lot of questions regarding the industry’s long-term value creation.

However, in the past 2 years, the sector has seen healthy profitability, capital, and liquidity since the global financial crisis of 2007-2009. Because these gains are attributed to the surging interest rates, there are several questions about their sustainability. However, without these gains, the Return on Tangible Equity (ROTE) for many regions would fall below the cost of capital. The banking market should focus on structural changes and operational efficiency to counteract these concerns. Analyzing high-performing banks shows that they often result from specific segment selection and strategic scaling within the value chain and geographically.

Barclays senior equity analyst Jason Goldberg joined CNBC’s ‘Squawk Box’ on March 20 to discuss the state of the banking sector. Goldberg talked about the recent volatility in bank stocks, which initially increased after the presidential election but was followed by a drop. He thinks that bank valuations are currently lower than their historical averages, considering that the price-to-book ratios are about half a point lower than usual. Goldberg explained that the reason for the initial surge in this sector remains intact when asked about whether the fundamental environment for banks shifted since their peak during the recent rally. This is because of market enthusiasm for a pro-growth agenda and expectations of reduced regulation. He acknowledged the presence of near-term uncertainties about taxes, immigration, and tariffs. But he’s positive that these issues will be resolved shortly and followed by increased corporate borrowing, investment, M&A, and IPO activity.

Overall, Goldberg is of the idea that the potential for loan growth, increased merger activity, and reduced regulations will all contribute to an optimistic banking sector.

Our Methodology

We sifted through the Finviz stock screener to compile a list of all the bank stocks that were trading between $300 million and $2 billion. We then selected the 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q4 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Berkshire Hills Bancorp Inc. (NYSE:BHLB)

Market Capitalization as of March 28: $1.21 billion

Number of Hedge Fund Holders: 28

Berkshire Hills Bancorp Inc. (NYSE:BHLB) operates as the bank holding company for Berkshire Bank and provides financial services in the US. It provides both deposit and loan products and services. It also offers wealth management and investment products & brokerage services. It caters to personal, commercial, non-profit, and municipal deposit customers.

In Q4 2024, the company’s Commercial Real Estate (CRE) lending segment showed solid credit quality, with only 0.22% of the loans not earning income by the end of this period. To mitigate risks in this segment, the company is diversifying its CRE book across geography and collateral types. The CRE segment makes up about 294% of the bank’s total capital.

The company’s office loan portfolio, which is a part of the CRE sector, has an average loan-to-value of 60%, which shows a cautious lending strategy. While the current credit quality metrics for the CRE segment are strong, Berkshire Hills Bancorp Inc. (NYSE:BHLB) acknowledges the impact of economic uncertainties here. The company is also focused on integrating with Brookline Bancorp, which is expected to close in H2 2025.

Overall, BHLB ranks 1st on our list of best small cap bank stocks to invest in now. While we acknowledge the growth potential of BHLB, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than BHLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

Disclosure: None. This article is originally published at Insider Monkey.