Higher-For-Longer Stocks in Focus: 3 Regional Banks to Watch

Fed Chair Warsh's comments on higher for longer interest rates have put certain US financial stocks in focus. While some growth stories may struggle, certain financials can see their core earnings tied to interest rates.

Amerant Bancorp (AMTB), Community West Bancshares (CWBC), and NB Bancorp (NBBK) are three stocks that come to mind, with business models closely linked to the new rate reality. These banks have traditionally driven revenue through lending and deposit activities, which respond directly to Fed policy.

Amerant Bancorp's core earnings are tied to interest income from its loan and securities portfolio. The bank has been working to improve margins by producing higher-yielding loans and lower-cost funding. However, investors need to monitor a 2.5% bad loan ratio and relatively light reserve coverage.

Community West Bancshares gives focused exposure to a loan and deposit-driven regional bank. Its earnings are closely linked to the spread between what it pays on deposits and earns on its loan book. The recent jump in net loan charge-offs shows that changes in interest rates can affect smaller regional lenders in multiple ways.