Much of the banking sector has seen share prices decline in 2020 due to the coronavirus pandemic. Not only did the pandemic result in rising credit costs for banks, but it also caused the Federal Reserve in March to drop its benchmark lending rate to practically zero, which significantly hurt the sector’s revenue outlook. But not all banks struggled — in fact some will likely remember this year for a long time to come. Here are five bank stocks that excelled in 2020.
1. Silvergate Capital
Based in beautiful La Jolla, California, Silvergate Capital (NYSE:SI) went public at the end of 2019, and has rode the recent surge in bitcoin to a 148% jump in its stock price year to date. The bank as of this writing trades around $39.50 per share.
Put simply, Silvergate is the crypto bank. Management realized years ago that bitcoin would one day be an investable asset and built a real-time payments network called the Silvergate Exchange Network (SEN).
SEN essentially allows institutional investors looking to trade crypto assets to clear transfers instantly with crypto exchanges around the clock, 365 days a year. In October, SEN surpassed $100 billion in transfer volume. SEN has allowed Silvergate to bring in tons of non-interest-bearing deposits and solid levels of fee income as well. Although the bank may be a bit volatile considering the stock price seems to at least partially move with bitcoin, expect a strong fourth quarter as much of bitcoin’s recent surge has occurred in the last few months .
2. Live Oak Bancshares
If you follow bank stocks, then you have probably heard about Live Oak Bancshares (NASDAQ:LOB) this year. The $8 billion asset bank based in North Carolina had a breakout year, and recently has seen its stock price grow 124% year to date. The bank has really good technology built into its infrastructure and is the No. 1 lender of U.S. Small Business Administration (SBA) loans in the country. Because the Paycheck Protection Program (PPP) is built on top of the SBA program, it set up the bank for a once-in-a-lifetime opportunity.
Live Oak originated about $1.7 billion in PPP loans, which is a massive amount for a bank of its size. Those loan originations translate into more than $60 million in fees for the bank that will eventually roll into interest income. The bank has only recognized a small portion of those fees as profits, and the majority remain on the balance sheet until the PPP loans are forgiven. So there are likely some more strong earnings quarters ahead for the bank. Congress may also pass a second stimulus bill at some point with more PPP funding, which would be another boon for the bank.
3. Merchants Bancorp
The $9.5 billion asset Merchants Bancorp (NASDAQ:MBIN) in Carmel, Indiana, has taken advantage of the ultra-low-rate environment and the surge in mortgage activity to generate…
Read More: 5 of the Best-Performing Bank Stocks in 2020