Last week’s market performance was clouded by uncertainty over tariffs as investors grappled with ongoing policy unpredictability and its broader economic implications. Rapid shifts in trade policy and conflicting signals from President Donald Trump and his advisers unsettled investors, leading to volatile trading. As a result, the S&P 500 Index posted its worst weekly performance since September 2024.

The Nasdaq Composite and Dow Jones also saw steep declines. The S&P 500 dipped 3.1%, while the Nasdaq Composite—having entered correction territory on Thursday—fell 3.8%. The Dow Jones declined 2.5%. Small-cap stocks fared even worse, with the Russell 2000 tumbling 4.3% over the week.

Among the U.S. small-cap sectors, the Financial Services was among the top five worst performers last week. Nonetheless, a handful of U.S.-based financial services stocks defied the broader market's bearish sentiments and ended the week in the green. Today, we bring three such stocks – Medallion Financial Corp. MFIN, OFS Capital Corporation OFS and Finward Bancorp FNWD – which you can consider adding to your portfolio.

One Week Price Performance
 

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If you are thinking that tariffs are of least concern for the financial services sector, you are wrong. Economists and policymakers generally view tariffs as a factor that could drive up prices for U.S. businesses and consumers, at least in the short term, while potentially slowing economic growth over time. 

Even Trump seems to acknowledge that his plans to impose tariffs could adversely impact economic growth. In a taped interview with Fox News Channel's ‘Sunday Morning Futures’, the President, when asked whether he was expecting a recession in 2025, said, “I hate to predict things like that. There is a period of transition because what we’re doing is very big. We're bringing wealth back to America. That's a big thing.” Then, he added, “It takes a little time. It takes a little time.”

As the health of the financial services sector is tied to that of the nation, weak economic performance and rising prices are major concerns. Small-cap stocks usually generate most of their revenue domestically, unlike large-cap companies that have global operations. This makes them more sensitive to the strengths or weaknesses of the national economy.

Amid such an environment, uncertainty is likely to continue, with market movements influenced by ongoing headlines. Thus, enhancing resilience should be a top priority for investors.

3 Small-Cap Financial Services Stocks to Bet on

Instead of succumbing to panic after a market crash, you should use the current situation to build a portfolio that will help generate solid returns over time. We used the Zacks Stock Screener to identify such financial services stocks. 

These companies, with a market cap of more than $100 million, rallied 3.5% or above last week. Also, these stocks witnessed positive estimate revision in the past month and have a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Medallion Financial, with a market cap of $201.8 million, is a specialty finance company. It originates and services consumer loans and loans in various commercial industries through two divisions – Medallion Bank and Medallion Capital. Also, the company offers loan products and services through fintech strategic partners.

Last year, for the first time in its history, MFIN originated more than $1 billion of loans, with roughly 50% being high-yielding recreation loans. Further, in September 2024, Medallion Bank announced a strategic partnership with Kashable, a leading fintech company that offers socially responsible credit and financial wellness solutions. In April, Medallion Bank announced a definitive agreement with TriBeam Financial, Inc. (a fintech company providing a point-of-sale lending platform) to be its finance partner for home solar systems and related products.

Through these efforts, Medallion Financial (based in New York) is expected to keep performing well even during the economic slowdown. In 2024, the company reported total revenues of $213.9 million, which jumped 7% year over year. The trend is expected to continue this year, with sales likely to increase 5.3%.

MFIN’s earnings estimates for 2025 and 2026 have moved marginally north in the past week to $1.62 and $1.80, respectively. This indicates growth of 6.6% for 2025 and 11.42% for 2026. The stock, carrying a Zacks Rank of 2, gained 4.9% last week.

OFS Capital, a business development company, specializes in direct and fund investments as well as add-on acquisitions. The company, with a market cap of $119.6 million, offers flexible capital solutions primarily through debt and, to a lesser extent, minority equity investments to the U.S.-based middle-market companies (with annual EBITDA between $5 million and $50 million) across industries.

As of Dec. 31, 2024, Chicago, IL-based OFS Capital’s fair value of its debt investment portfolio was $224.2 million in 36 portfolio companies. Further, the fair value of the company’s equity investments was $108.6 million in 15 portfolio companies, and the fair value of its 18 Structured Finance Security investments totaled $76.9 million.

As of the same date, OFS had a net asset value per share of $12.85. Further, it had $6.1 million in cash and cash equivalents and $1.06 million of unused capacity under its revolving credit facility at the end of December 2024. 

With demand for specialized financing expected to rise in the quarters ahead, OFS Capital is well-posed to capitalize on it. The company’s earnings estimates for 2025 and 2026 have moved slightly upward in the past seven days. The stock, which has a Value Score of A and Zacks Rank of 1, soared 7.6% last week. The Value Style Score condenses all valuation metrics into one actionable score, which helps investors steer clear of 'value traps' and identify stocks that are truly trading at a discount. 

Finward Bancorp, with a market cap of $120.7 million, is an independent financial holding company for Peoples Bank (the Bank), an Indiana-chartered commercial bank (serving customers and communities across Northwest Indiana and Chicagoland through 26 branches), and NWIN Risk Management, Inc., a captive insurance company.

In 2024, FNWD’s revenues grew 9% year over year to $71.1 million. This was mainly driven by a one-time gain on real estate of $11.9 million. Moreover, the company recorded a provision benefit of $0.5 million last year against a provision for credit losses of $2.03 million in 2023. Also, its net interest margin (NIM) expanded throughout 2024, based on the company’s earning asset position and reduced funding costs because of the Federal Reserve interest rate policy.

As of Dec. 31, 2024, net loans receivable totaled $1.5 billion and total deposits were $1.76 billion. As the demand for loans gradually improves, Finward Bancorp’s net interest income and NIM are expected to rise. 

Headquartered in Munster, IN, FNWD is also striving to bolster fee income. The company remains focused on identifying additional operating efficiencies and third-party expense reductions. This will help the company manage non-interest expenses prudently. 

Finward Bancorp’s earnings estimates for 2025 and 2026 have moved marginally north in the past week. The stock, sporting a Zacks Rank of 1, gained 3.7% last week.

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OFS Capital Corporation (OFS) : Free Stock Analysis Report

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

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