3 US Bank Stocks Built For Higher Long Term Treasury Yields

Long term US Treasury yields are back at levels last seen before the financial crisis, oil is above $90, and bond markets are forcing investors to think harder about where they take risk. That backdrop can punish some corners of the market, yet it can also reshape earnings power for certain financial stocks. This article walks through three stocks exposed to these yield moves and explains why each one could be worth a closer look now.

The three stocks that follow are a focused sample. The full screen on Simply Wall St surfaced 37 more US financial companies with similar yield exposure profiles and detailed narratives that are not covered here. To go straight to the broader opportunity set, analyze and identify your own highest conviction ideas with the US Financial Institutions Benefiting from Higher Long-Term Yields screener.

First Merchants (FRME)

First Merchants is a regional commercial and consumer bank with roots in Indiana and branches across Ohio and Michigan, earning most of its US$642 million in revenue from community banking services such as loans, deposits and mortgages. That balance of loans and securities funded by deposits means its returns are closely tied to long term interest rates, which is exactly what this screener focuses on as Treasury yields reset higher. The company has a market cap of about US$2.7b, putting it firmly in the mid cap bracket for US financials.

First Merchants gives you exposure to a traditional Midwestern loan and deposit franchise that can be sensitive to long term yields, while still paying a 3.42% dividend and returning capital through buybacks. Forecast revenue and earnings growth look strong relative to the broader US market. However, profit margins and return on equity have come under pressure and credit costs ticked up in recent quarters. Add in recent insider selling and rising non accrual loans, and you have a bank with clear income potential and yield leverage, but also enough questions on credit quality and valuation reset to warrant a closer look before deciding how it fits in your portfolio.

First Merchants looks like a classic Midwestern income story, yet its earnings path may not be as simple as the 3.42% dividend suggests. Get the 3 key rewards and 1 important warning sign and see what could change the script next.

Build your own yield sensitive banking shortlist

First Merchants and the two other financial stocks in this article all came from a single Simply Wall St screener, which is where the real work starts for you. Use our flexible Screener to mix filters like valuation, growth, balance sheet strength, risks and dividends, or jump straight into our curated Investing Ideas if you prefer ready made starting points.

Hope Bancorp (HOPE)

Hope Bancorp is a Los Angeles based retail and commercial bank that fits this higher long term yield theme because its profits rely heavily on the spread between what it earns on loans and securities and what it pays on deposits. The company generates all of its US$534 million in revenue from banking activities in the United States, across products ranging from commercial and industrial loans to residential mortgages and consumer credit. With a market cap of about US$1.8b, Hope Bancorp sits in the mid cap bracket where balance sheet choices and funding mix can have a meaningful effect on earnings as yields move.

Investors looking at Hope Bancorp are really asking whether its push to grow the loan book and reshape funding can turn today’s higher long term yields into a more durable earnings story. Recent results show wider net interest margins and stronger commercial lending, supported by acquisitions that add roughly US$2.3b of loans and US$2.6b of deposits as they close. At the same time, heavy exposure to commercial real estate, regional concentration in California and Hawaii, and ongoing integration and technology costs all leave little room for missteps if credit quality weakens or rate cuts arrive later than expected. The mix of a near 4% dividend, improving efficiency and clear interest rate sensitivity makes Hope Bancorp a stock worth closer inspection rather than a quick pass.

Hope Bancorp’s widening margins and fresh deposits could be setting up an earnings story investors have not fully pieced together yet. Get the full picture in the 4 key rewards and 1 important warning sign

Seacoast Banking Corporation of Florida (SBCF)

Seacoast Banking Corporation of Florida is a Florida focused retail and commercial bank that offers checking and savings accounts, mortgages, commercial real estate and business loans, consumer lending, and wealth and insurance services, giving it direct exposure to loan and deposit spreads as long term US rates move. The company generates all of its US$682 million in revenue from integrated financial services, entirely in the United States, and has a market cap of about US$3.4b.

Investors watching higher long term Treasury yields may find Seacoast Banking Corporation of Florida interesting because its earnings are closely tied to the gap between what it earns on loans and securities and what it pays on deposits. The bank is leaning into growth in Florida with acquisitions and technology investment, and recent results show strong loan pipelines, higher net interest income and active capital returns through dividends and buybacks. The flipside is meaningful exposure to commercial real estate in one state, reliance on smooth deal integration and ongoing pressure on margins and return on equity. How those pieces fit together as yields stay elevated is where the real opportunity or risk sits for this stock.

Seacoast Banking Corporation of Florida is leaning into Florida growth with acquisitions and technology, yet the real story sits in how those moves reshape earnings sensitivity to long term yields. See how the analysis report for Seacoast Banking Corporation of Florida hints at a twist investors often miss.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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