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The Zacks Savings and Loan industry is gaining from the improving lending environment, supported by relatively low rates and expectations of rate cuts later this month. Additionally, lower rates have stabilized funding costs, boosting net interest income (NII) and net interest margin (NIM) expansion.

The digitization of operations will also support industry players. Despite deteriorating asset quality, companies like ServisFirst Bancshares Inc. (SFBS - Free Report), WSFS Financial (WSFS - Free Report), and Provident Financial Services (PFS - Free Report) are poised to benefit from these developments.

The Industry's Description

The Zacks Savings and Loan industry consists of specialized U.S. banks, which are generally locally owned, focusing on extending residential mortgage finance. Companies in the industry provide residential mortgages, commercial and industrial mortgages, home equity loans, vehicle loans, and other business loans.

The institutions fund mortgages with savings insured by the Federal Deposit Insurance Corporation ("FDIC"). They offer high interest rates on savings to attract deposits, enhancing their ability to lend mortgages. Although the firms operate similarly to commercial banks by providing various banking services, such as checking and savings accounts, they were previously legally bound to invest at least 65% of their asset holdings in mortgages. Effective July 1, 2019, a ruling lifted the restriction for institutions insured by the FDIC.

3 Savings & Loan Industry Trends to Watch

Relatively Lower Interest Rates to Aid NII: The Federal Reserve lowered interest rates by 100 basis points in 2024. Also, the Fed is expected to reduce the rate later this month. As rates come down further, savings and loan companies will likely witness an improvement in their NII and margins, which were under pressure because of higher funding/deposit costs.

Further, mortgage rates are declining lately, given the expectation of rate cuts. As such, purchase originations and refinancing activities are improving. This is expected to instill confidence among borrowers and support loan demand in most loan categories.

Digital Ramp-Ups: Savings and loan companies have been facing numerous challenges, including legacy technologies and an unbalanced customer base. To counter this, industry players have been ramping up the transition to digitally focused, technology-driven, and flexible operating institutions to remain competitive and reap profits in the rapidly evolving market.

Though technology upgrades are expected to increase costs in the near term, these will support industry participants' operational efficiency as expenses come down eventually.

Worsening Asset Quality: Though the central bank is expected to cut rates, it is less likely to be substantial. This, along with rising inflation numbers as tariffs result in higher prices, is expected to hurt borrowers’ loan repayment capacity to some extent. As such, industry players are likely to witness some weakness in asset quality.

The Zacks Industry Rank Indicates Solid Prospects

The Zacks Savings and Loan industry currently carries a Zacks Industry Rank #19, which places it in the top 8% of more than 245 Zacks industries. The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near-term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 7% of the Zacks-ranked industries is an outcome of the positive earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group's earnings growth potential. The industry’s current-year earnings estimate has moved up 25.6% over the past year.

Before we present a few stocks that you may want to bet on, let us take a look at the industry's recent stock market performance and valuation picture.

The Industry Underperforms the Sector and S&P 500

The Zacks Savings and Loan Industry has widely underperformed the Zacks Finance sector and the S&P 500 composite over the past year.

The stocks in the industry have collectively rallied 14.7%, whereas the S&P 500 Index has risen 21.3%. In the same period, the sector has appreciated 22.5%.

Price Performance
 

​Image Source: Zacks Investment Research

The Industry's Recent Valuation

One might get a good sense of the industry's relative valuation by looking at its price-to-tangible book ratio (P/TB), which is commonly used for valuing finance companies because of large variations in their earnings from one quarter to the next.

The industry has a trailing 12-month P/TBV of 2.00X, below the median level of 2.09X over the past five years. The industry has been trading at a discount compared with the market at large, as the trailing 12-month P/TBV ratio for the S&P 500 composite is 13.39X and the median level is 13.83X.

Price-to-Tangible Book (TTM)
 

​Image Source: Zacks Investment Research

As finance stocks typically have a low P/TB ratio, comparing savings and loan stocks with the S&P 500 may not make sense to many investors. A comparison of the group's P/TB ratio with that of its broader sector ensures that the group has been trading at a decent discount. The Zacks Finance sector's trailing 12-month P/TBV of 5.69X is way above the Zacks Savings and Loan industry's ratio.

Price-to-Tangible Book (TTM)
 

​Image Source: Zacks Investment Research

3 Savings & Loan Stocks Worth Betting On

Presented below is a brief overview of the previously-mentioned stocks to consider.

ServisFirst Bancshares

ServisFirst Bancshares offers a range of business and personal financial services across Alabama, Florida, Georgia, North and South Carolina, Tennessee, and Virginia. The company also operates loan production offices in Florida and Tennessee. As of June 30, 2025, the company has $17.4 billion of total assets and $13.2 billion of loans.

Solid loan balance, improving market share, and relatively lower rates will support the company’s financials. A strong balance sheet and capital levels will help ServisFirst Bancshares amid a challenging operating environment. Also, the bank’s net interest margin continues to improve.

The Zacks Consensus Estimate for its 2025 earnings is pegged at $5.22, indicating a year-over-year rise of 24.9%. Revenue estimates for 2025 are pegged at $568.7 million, indicating year-over-year growth of 18.1%. ServisFirst Bancshares has a market cap of $4.5 billion. The company’s shares have rallied 10% in the past year. At present, the stock sports a Zacks Rank of #2 (Buy).

Price & Consensus: ServisFirst Bancshares
 

Image Source: Zacks Investment Research

WSFS Financial

This is a multi-billion-dollar financial services company with $20.8 billion in assets on its balance sheet, and $92.4 billion in assets under management and administration as of June 30, 2025. It provides comprehensive financial services, including commercial banking, treasury management, consumer banking, and trust and wealth management services.

WSFS Financial is managing a stable, sustainable loan growth trajectory, backed by deposit strength and a diversified lending pipeline. For 2025, the company expects low-single-digit growth in commercial lending, with consumer loans projected to remain steady. The net interest margin is expected to be 3.85% through strategic repricing and funding cost management. The deposit is anticipated to grow in the low-single digit in 2025.

WSFS Financial presently carries a Zacks Rank of #3 (Hold). The Zacks Consensus Estimate for the company’s current-year earnings is pegged at $4.91, indicating an 11.9% year-over-year rise. Revenues for 2025 are expected to be $1.06 billion, suggesting a 1% rise. Shares of the company, which has a market cap of $3.13 billion, have gained 10.3% in the past year.

Price & Consensus: WSFS Financial
 

​Image Source: Zacks Investment Research

Provident Financial

This company offers a broad array of deposit, loan, trust, and investment products through its extensive network of branches.

In May 2025, Provident Financial completed its merger with Lakeland Bancorp, Inc., creating a super-community bank. The combined franchise will benefit from incremental revenue growth opportunities. It will include Provident Financial’s fee-based insurance and wealth management businesses, as well as Lakeland Bancorp’s growth in asset-based lending, equipment lease financing and mortgage warehouse lending.

As of June 30, 2025, the company had assets of $24.6 billion and net loans of $19.1 billion.

Given the improving mortgage origination market, Provident Financial’s mortgage banking revenues are likely to improve in the upcoming period. The company’s servicing business is expected to continue driving earnings, with an additional upside potential from the production segment, backed by improvement in the origination market.

Provident Financial presently carries a Zacks Rank #2 (Buy) rating. The Zacks Consensus Estimate for its 2025 earnings is pegged at $2.15, indicating a year-over-year surge of 77.7%. Revenue estimates for this year are pegged at $865.7 million, indicating a year-over-year rise of 24.6%. The company has a market capitalization of $2.58 billion. Its shares have climbed 14.7% over the past year. 

Price & Consensus: Provident Financial

​ Image Source: Zacks Investment Research

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