PLAIN SIGNAL
We all know the drill in financial news. Inflation ticks up. Debt gets more expensive. Rents climb. The narrative is to panic. And before long someone on CNBC is warning about bank failures again.
Back in 2023, regional banks stole the show. Silicon Valley Bank collapsed. First Republic tapped out. Everyone started wondering who was next. That fear made sense at the time. But the regional banks standing today are not the same ones that folded three years ago.
I am here to say a handful of regional banks are not just surviving in this rate world. They are winning in it. You might even want to pop your head into your local branch and thank your tellers.
Even if interest rates stay high until 2028, two names stand out as ready to use the story in their favor instead of fearing it.
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Not Your Average Banks
Two names to watch while every other headline promotes angst about AI: Regions Financial (RF) and FirstBank Financial (FBK).
They are not building robots or self-driving cars. Instead, they are doing what investors actually love most. They are printing cash flow.
FirstBank runs around 90 branches across the country. Their model is old school. It is built on localized-relationships, not apps and algorithms. That might sound boring. But it is exactly why they post the best net interest margins in the business at 3.94%. In plain English, they earn more on every dollar they lend out than almost anyone else in their class.
Regions Financial plays a different game. They lean into commercial banking and wealth management. They also run a newer interest rate hedging program that helps them stay steady when markets get choppy. Their latest filings put them at the top of the KRE (the regional bank index) for return on equity at 18.26%. Put simply, for every dollar of investor money sitting inside the bank, they turn it into more profit than almost any competitor.
Where is the Love?
Before we break into a Black Eyed Peas singalong, these two banks deserve their flowers. There are really two numbers that matter when you are sizing up a local bank:
Net Interest Margin (NIM) is how much the bank earns on the loans it hands out.
Return on Equity (ROE) is how well the bank turns investor money into profit.
The broader market may have just caught on to regional banks. The KRE is up 38% year over year. But RF and FBK still look cheap under the hood.
Both RF and FBK clear the flourishing bar. ROE across all US banks averages around 13.5%. Both names beat that too. One crushes it.
“We believe that fixed rate loans and securities turnover in the prevailing rate environment and improving deposit cost trends will drive net interest income higher over the remainder of the year.”
Translation: the same rate world that scared everyone three years ago is now working in their favor.
Local Bank Signal
Regional banks still pull in their share of fear mongering headlines. But there are a few real diamonds in the rough. The KRE index is having a great year, and these two names stick out for longer term reasons:
RF spent $401 million buying back its own stock in the last 90 days. When a bank is this confident it buys itself at a discount.
RF’s PE ratio sits 14% below the regional bank average. Top marks at a bargain price.
FirstBank carries more excess capital than any other regional bank. When markets get weird, excess capital is the best seatbelt you can have.
You have two chances here to zig while the investors zag. Regions Financial looks like a quality name with room for its valuation to grow. FirstBank is the premium pick that can ride out whatever shakes out of the next rate cycle.
Either way, your local bank might be worth a second look before Wall Street fully catches on.
Housekeeping
Analysis Platform: Plain Signal Risk Model and Filings
All analysis combines publicly available disclosures with proprietary risk modeling produced by Plain Signal, designed to surface forward-looking signals from SEC filings rather than backward-looking narratives.
Until next time, speed kills.