Regional Banks: Deposit Repricing and Uneven Credit Exposure
Regional banks reported cheaper deposit funding, changing deposit mixes and uneven movements in commercial real estate exposure.
The banking company Western Alliance Bancorporation (WAL) moved from projecting lower funding costs through “deposit optimization” in May to reporting “initial results” in July, alongside an $849 million quarterly decline in deposits.
Western Alliance's May strategy targeted larger deposit shares for specialty escrow services, commercial banking and homeowners associations, and smaller shares for mortgage banking, consumer digital and corporate or brokered funding. Its second-quarter update reported a $528 million decline in savings and money-market deposits and a $258 million decline in noninterest-bearing deposits. The company reported an average deposit cost of 1.78%.
The commercial lender Lakeland Financial Corp (LKFN) changed its headline emphasis from “Deposit Costs Coming Down Rapidly” in April to “Deposit Costs Have Repriced More Quickly Than Loans” in July. Its net interest margin held at 3.49% in both the first and second quarters. The banking company Northwest Bancshares, Inc. (NWBI) attributed its second-quarter margin improvement to lower deposit costs, growth in average earning balances and increased securities portfolio yields.
The banking company First Bancorp (FBNC) reported successive increases in end-of-period deposits in the first and second quarters. The lender Southern Missouri Bancorp, Inc. (SMBC) said loan generation had outpaced deposit growth during the first nine months of fiscal 2026. Its combined cash equivalents and time deposits fell 51.7% to $93.3 million between June 30, 2025, and March 31, 2026.
The banking company Valley National Bancorp (VLY) reported a decline in its commercial real estate concentration ratio from 329% at March 31 to 317% at June 30. Its loan-to-deposit ratio rose over the same period, reaching 96.9%.
Commercial real estate balances increased at the lender Cvb Financial Corp (CVBF), from $6.63 billion at March 31 to $8.98 billion at June 30. The lender Oceanfirst Financial Corp (OCFC) attributed most of its total loan growth to Flushing. Excluding Flushing, its commercial loans grew 2% from the first quarter.
Northwest reported easing credit-loss measures: annualized net charge-offs to average loans fell from 0.40% in the fourth quarter of 2025 to 0.15% in the second quarter of 2026. Its quarterly provision declined to $4.3 million, continuing the decreases reported since the September 2025 quarter.
Southern Missouri describes commercial real estate concentration and portfolio growth criteria that may trigger further supervisory analysis. The lender Axos Financial, Inc. (AX) says regulators may require banks with higher commercial real estate lending to adopt stricter underwriting, more detailed reporting and portfolio stress testing. It also flags “potential higher allowances for credit losses and capital levels” resulting from lending growth and exposure.