Regional Banks Split on CRE Growth as Deposit Costs Ease
A wave of second-quarter filings shows commercial real estate books expanding sharply at some regional lenders while deposit repricing and credit costs eased at others.
CVB Financial Corp (CVBF), the Ontario, California-based commercial bank, had commercial real estate loans of $8.98 billion at June 30, 2026, up from $6.63 billion at March 31, 2026. Gross loans at amortized cost across the bank rose to $12.02 billion from $8.64 billion over the same three months, with construction loans nearly quadrupling to $209.99 million from $59.33 million.
Southern Missouri Bancorp, Inc. (SMBC), a Poplar Bluff, Missouri-based community bank, had a concentration in non-owner-occupied commercial real estate loans of 287.9% of Tier 1 capital. The company's own risk-factor language cites federal banking guidance flagging institutions for further supervisory analysis once that concentration ratio exceeds 300% of Tier 1 capital plus the allowance for credit losses, or when construction and land development loans reach 100% of that capital base. Axos Financial, Inc. (AX), a Las Vegas-based online bank, carries standing risk disclosure that regulators may require banks with fast-growing or outsized commercial real estate portfolios to adopt stricter underwriting, more detailed reporting, portfolio stress testing, and higher allowances or capital levels.
Deposit repricing moved faster than loan repricing at Lakeland Financial Corp (LKFN), an Indiana-based commercial bank. Its cumulative deposit beta was 47% against a cumulative loan beta of 33% for the current easing cycle in its first-quarter disclosure, narrowing to a 43% deposit beta and 30% loan beta by the second quarter. Lakeland's net interest margin expanded 9 basis points year over year in the first quarter and 7 basis points in the second, reaching 3.49%, while noninterest-bearing deposits held at 20% of average total deposits in both periods.
Western Alliance Bancorporation (WAL), a Phoenix-based commercial bank, shifted its mix away from higher-cost funding through a "deposit optimization strategy". Total deposits' average cost stood at 1.78% in the second quarter, while total deposits declined by $849 million quarter over quarter, driven by decreases of $528 million in savings and money-market accounts and $258 million in non-interest-bearing balances. The company's medium-term outlook projects further gains in commercial banking and specialty escrow deposit share alongside declines in mortgage banking, consumer digital, and corporate/brokered funding.
Northwest Bancshares, Inc. (NWBI), a Columbus, Ohio-based bank, had net interest income growth of 3.1% quarter over quarter, with net interest margin improving to 3.75% because of growth in average earning balances, higher securities yields, and a decrease in the cost of deposits. Credit costs eased alongside the margin gain: annualized net charge-offs to average loans fell to 0.15% in the second quarter from 0.40% in the fourth quarter of 2025, with the allowance for credit losses provision dropping to $4.28 million from $5.74 million over the same span.
Valley National Bancorp (VLY), a New Jersey-based commercial bank, had a rising allowance-to-loans ratio across recent periods, climbing to 1.19% at year-end 2025 from 0.93% at year-end 2023 before easing slightly to 1.16% at June 30, 2026. Its commercial real estate concentration ratio, measured against total risk-based capital, declined to 317% at June 30, 2026, and 329% at March 31, 2026, down from 474% at year-end 2023.
First Bancorp (FBNC), a North Carolina-based commercial bank, had allowance coverage by loan category showing commercial real estate—non-owner-occupied loans at 0.86% of loans outstanding in the second quarter of 2026, up from 0.83% in the first quarter, while residential 1-4 family coverage held near 1.85% to 1.98% across both periods. Deposit composition at First Bancorp stayed largely stable, with money-market balances near 42% of total deposits and time deposits near 7% to 8% across the five quarters reported.
Regions Financial Corp (RF), a Birmingham, Alabama-based commercial bank, benchmarked its funding profile against thirteen peers in an August disclosure, reporting a peer median loan-to-deposit ratio of 82%, a peer median non-interest-bearing deposit share of 24%, a peer median total liability cost of 1.88%, and a peer median wholesale borrowings share of 9% of total liabilities. Oceanfirst Financial Corp (OCFC), a New Jersey-based bank whose total loans grew 46% versus the first quarter of 2026 largely on the Flushing transaction, projected a net interest margin of 3.09% to 3.14% for the balance of the year with no additional rate changes modeled, and flagged one-time digital banking platform implementation costs running through operating expenses before cost savings begin flowing through in October.