The year 2019 was a wild one for banks. The threat of recession doesn't bode well for any stock's value, but banks are especially at risk, as they are particularly reliant on the health of economic activity to make money. An inverted yield curve last year didn't help either, as the spread between short-term and long-term borrowing rates is a key way banks generate revenue.

The situation has since improved considerably, though, and it seems the possibility of economic contraction in the next year is less than it was last autumn. Given that, three bank stocks look like good buys during the first quarter of 2020: SVB Financial (NASDAQ:SIVB), Western Alliance Bancorp (NYSE:WAL), and Axos Financial (NYSE:AX).

2 Year Treasury Rate Chart

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1. SVB Financial: A different take on Silicon Valley investing

One bank stock that had a particularly wild ride was SVB Financial, operator of Silicon Valley Bank based in the California Bay Area. Though up 20% in the last year, the stock tumbled some 30% from highs during the late summer and early autumn. Why such volatility for a bank stock?  

Besides the general uncertainty over the fate of the economy, the company gears its services to start-ups and entrepreneurs. The general weakness in the small tech outfits that cropped up last year was enough to send SVB investors into a mini tailspin. Thus, if you're interested in steady-Eddie banking, this isn't the one for you. If investing in a roundabout way in the private equity and entrepreneurial community is your bag, then this banking services, business valuation, and asset and private wealth management business is worth a look.  

In spite of the elevated uncertainty, SVB has continued to put up solid results. Average loan balances, fixed-income investments, and average client funds on deposit increased by 1.4%, 8.7%, and 5.2% respectively, on a sequential basis in the third quarter of 2019. Earnings per share through the first nine months of the year were up 27%, and operating efficiency (non-interest expenses divided by net revenue) was 46.2%, making SVB one of the more efficient revenue generators in the banking industry.

This bank-for-start-ups' solid growth, its ratio of price-to-trailing-12-month free cash flow (money left after operating and capital expenses) of 15.0, and expected one-year forward price to earnings of 12.0 looks like a pretty solid bet right now.  

A bank branch with the facade of marble and columns displayed over the front door.

Image source: Getty Images.

2. Western Alliance Bancorp: One of the best banks of the decade

Let's move on to another incredibly efficient bank, Western Alliance Bancorp. The West Coast regional bank overlaps with some of SVB's territory, but caters to a broader business audience, offering basic banking and money management services to professionals and business owners across all industries.  

The outfit may sound boring, but Western Alliance was one of the best-performing financial stocks of the 2010s with a more than 1,320% total return. The bank is also very good at generating revenue, with an efficiency ratio of 42.3% through the first three quarters of the year. As the economies in the states west of the Rockies continue to grow, Western Alliance's business services have also expanded and are still going strong. Total loans and deposits were up 20% and 19% year over year in Q3. Thus, there's no reason to fear this regional stock's epic run is over.  

Even after shares surged 36% in the last year, Western Alliance still trades for just 9.0 times trailing 12-month free cash flow and 10.6 times expected one-year forward price-to-earnings. Add in a current dividend yield of 1.8%, and this is one bank investment worth a look.

3. Axos Financial: Internet banking keeps rolling

The final stock on this list is a departure from the more traditional: Axos Financial, formerly known as BofI Holding, or Bank of Internet. As its now-retired name implies, this financial services outfit is one without bank branches, opting instead for a digital customer experience.  

It too is one of the best-performing stocks of the last decade, with a more than 1,110% return during the 2010s in the wake of the Great Recession of 2008-09. Returns have gotten a bit choppy the last couple of years, though, as personal and internet banking and loans have become more of a rule than an exception. That has put a damper on Axos growth in recent years, with total asset growth notching a 12% and 18% rate in fiscal 2018 and 2019.

Despite its internet-based services becoming a bit commoditized -- as are most other traditional banking services -- things have been heating up again for Axos. Assets in Q1 2020 surged 20% higher as management has expanded into new areas like home and auto loans. That, of course, increases the risk of the bank's overall asset portfolio, but so far, so good. Net income was up 11% and earnings per share up 14% in Q1, and the online bank's efficiency ratio also improved to 43.9% compared with 44.5% the year prior. All of that for a price-to-free-cash-flow of 11.3 and expected forward price-to-earnings of 9.2. With shares up only 10% in the last year and still well off all-time highs set in 2018, this one looks like a real value.