3 Savings & Loan Stocks Worth Picking on Improving Industry Prospects

. The Federal Reserve has paused rate cuts and signaled a hike amid signs of higher inflation. Yet, decent economic growth is expected to continue and even boost loan demand, supporting top-line growth.

The digitization of operations will also support the industry players. However, credit quality is expected to remain under pressure, given high inflation. Nonetheless, companies like WSFS Financial

, Provident Financial Services

and Southern Missouri Bancorp

are worth betting on.

Industry 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 for 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

Interest Rates & Loan Demand: After lowering interest rates by 175 basis points since 2024, the Federal Reserve has paused its easing cycle and adopted a more hawkish stance.

This shift reflects inflation remaining well above the central bank’s 2% target, exacerbated by the recent oil price shock stemming from geopolitical tensions in the Middle East. 

Nonetheless, demand for loans is expected to remain resilient and gradually improve, supported by solid economic growth and a still-low unemployment rate.

Mortgage rates are also relatively lower than the highs seen in 2025. As such, purchase originations and refinancing activities are improving. This is expected to instill confidence among borrowers and support demand in most loan categories.

Consequently, industry participants are likely to benefit from continued expansion in the net interest margin (NIM) and net interest income (NII) in the coming quarters.

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.

These initiatives are expected to reduce processing expenses, support scalable growth and ultimately boost profitability through higher operating leverage and stronger returns.

Asset Quality: While lower interest rates have helped borrowers stay current on loan and interest repayments, persistent macroeconomic and geopolitical headwinds have kept inflation elevated. This has prompted the central bank to signal a potential rate hike later this year, which could somewhat weaken borrowers’ repayment capacity. '

As a result, Savings & Loans industry providers are likely to set aside substantial reserves for potential delinquencies. Moreover, several credit quality metrics are already trending above the pre-pandemic levels.

Zacks Industry Rank Indicates Solid Prospects

The Zacks Savings and Loan industry is a 17-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #83, which places it in the top 34% of more than 240 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.

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 the valuation picture.

Industry Outperforms S&P 500 & Sector

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

The stocks in the industry have collectively returned 36.9%, whereas the S&P 500 Index has risen 25.7%. In the same period, the sector has appreciated 18.2%.

Price Performance

Industry's Current 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 currently has a trailing 12-month P/TB of 2.61X. The industry is trading at a discount compared with the market at large, as the trailing 12-month P/TB ratio for the S&P 500 composite is 10.47X.

Price-to-Tangible Book TTM

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 is trading at a decent discount. The Zacks Finance sector's current trailing 12-month P/TB of 6.52X is above the Zacks Savings and Loan industry's ratio.

Price-to-Tangible Book TTM

3 Savings & Loan Stocks to Invest In: WSFS, PFS & SMBC

WSFS Financial is a multi-billion-dollar financial services company with $22.6 billion in assets, as of June 30, 2026. WSFS is managing a stable, sustainable loan growth trajectory, backed by deposit strength and a diversified lending pipeline.

Declining deposit costs and disciplined expense management continue to support profitability, while strategic capital returns enhance shareholder value.

WSFS Financial is also benefiting from diversified revenue streams, growing market share, and continued investments in talent and product offerings that strengthen its competitive position.

The company witnessed an improving credit trend across its loan portfolio in the second quarter of 2026. Looking ahead, WSFS should benefit from continued deposit and loan growth, further expansion in Wealth & Trust, and reinvestment of more than $1 billion of expected investment-portfolio cash flows at higher yields, which management expects to support earnings stability and NIM.

Reflecting these trends, the company raised its 2026 outlook of core ROA to 1.50% from the 1.40% mentioned previously. The company also expects deposit growth in the high-single-digit range (up from the prior stated mid-single-digit growth). NIM is expected to be 3.85% (up from the 3.80% stated previously).

The Zacks Consensus Estimate for WSFS’s 2026 earnings and sales indicates 26.3% and 6.8% year-over-year rallies, respectively. It has a market capitalization of $4.15 billion.

WSFS Financial presently carries a Zacks Rank of 2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: WSFS

Provident Financial, 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, 2026, the company had assets of $25.7 billion and net loans of $20.1 billion.

Given improving origination volume, 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.

PFS presently carries a Zacks Rank #2. The Zacks Consensus Estimate for its 2026 earnings and sales indicates 7.6% and 7.4% year-over-year increases, respectively.

The company has a market capitalization of $3.2 billion.

Price and Consensus: PFS

Southern Missouri Bancorp, the parent corporation of Southern Bank, provides a broad range of commercial and consumer banking products, including lending, deposit services, wealth management and digital banking solutions. 

The company continues to demonstrate strong growth through expanding loan balances, improving profitability and disciplined capital management.

SMBC also benefited from an expanding NIM of 3.67%, supported by lower funding costs and higher earning assets, which helped increase NII year over year by more than 10.1% in the fourth quarter of fiscal 2026 (ended June 30). 

Southern Missouri is strengthening shareholder value through steady earnings growth, share repurchases and its 129th consecutive quarterly dividend, while continuing to expand its regional footprint and loan origination pipeline across the key Midwest and Southern markets.

However, weakening asset quality is concerning for the company. Non-performing assets represented 0.64% of the total assets, while the allowance for credit losses was 1.26% of gross loans as of June 30, 2026.

The Zacks Consensus Estimate for its 2026 earnings and sales indicates 6.6% and 5.8% year-over-year increases, respectively. The company has a market capitalization of $849.9 million.

SMBC presently carries a Zacks Rank #2.

Price and Consensus: SMBC

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This article originally published on Zacks Investment Research (zacks.com).

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