Regional banks are set to benefit from the Federal Reserve’s interest rate cuts, which will help lower deposit costs and improve lending conditions. As borrowing becomes more affordable, banks are likely to see stronger loan demand, boosting their net interest income (NII) and overall profitability. In this environment, fundamentally sound stocks like BOK Financial Corporation (BOKF - Get Rating), Columbia Banking System, Inc. (COLB - Get Rating), and Sierra Bancorp (BSRR - Get Rating) are well-positioned for long-term growth.

The sector’s outlook is further supported by improving loan demand, moderating credit concerns, and strong profitability. According to S&P Capital Global Market Intelligence, U.S. banks’ net interest income is projected to rise 5.7% year-over-year in 2025. Additionally, a potential shift toward a more business-friendly regulatory framework could accelerate bank consolidation, streamline mergers and acquisitions (M&A) activity, and enhance growth prospects.

Moreover, with expectations of pro-growth policies and regulatory easing, banks are likely to expand loan origination and underwrite capital markets. A post-election survey by Chief Executive Group revealed that 73% of CEOs expect higher profits within the next year, marking the most optimistic sentiment since 2021. As corporations adjust their strategies to leverage this evolving financial landscape, regional banks are poised to benefit from increased demand for capital and financing solutions.

Beyond macroeconomic factors, regional banks are also embracing technological advancements to enhance efficiency. The adoption of artificial intelligence (AI) is accelerating, with leading banks integrating AI-driven workflows to streamline operations and improve risk management. With the global AI banking market expected to grow at a CAGR of 31.8% through 2030, institutions that invest in AI-driven solutions could gain a competitive edge.

BOK Financial Corporation (BOKF - Get Rating)

BOKF is a financial holding company based in Tulsa, Oklahoma, that offers various financial products and services. It operates through Commercial Banking; Consumer Banking; and Wealth Management segments.

In terms of the trailing-12-month net income margin, BOKF’s 25.76% is 14.9% higher than the 22.41% industry average. Also, its trailing-12-month CAPEX/Sales of 7.94% compares favorably to the industry average of 1.78%.

BOKF’s net interest income for its fiscal fourth quarter (ended December 31, 2024) increased 5.5% year-over-year to $313.05 million. Its total other operating revenue grew 2.5% from the year-ago value to $210.04 million. The company’s net income amounted to $136.15 million and $2.12 per share, representing an increase of 64.9% and 68.3% year-over-year, respectively.

The consensus revenue estimate of $521.82 million for the fiscal first quarter (ending March 2025) represents a 14.1% increase year-over-year. The consensus EPS estimate of $1.98 for the same period indicates a 53.3% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

Shares of BOKF have gained 31.3% over the past year and 2.8% year-to-date to close the last trading session at $109.43.

BOKF’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

It also has a B grade for Momentum, Stability, and Quality. Among 23 stocks in the Southwest Regional Banks industry, BOKF is ranked first. Click here to see the other BOKF ratings for Growth, Value, and Sentiment.

Columbia Banking System, Inc. (COLB - Get Rating)

COLB operates as the holding company for Umpqua Bank, offering a wide range of banking and financial services. It serves corporate, institutional, small business, and individual clients with specialized lending solutions, including commercial lines of credit, term loans, real estate financing, and small business administration loans. The bank also offers private banking, mortgage services, and capital market solutions, catering to diverse financial needs.

On December 16, 2024, continuing its strong commitment to returning cash to shareholders, the company paid a quarterly dividend of $0.36 per common share. COLB pays an annual dividend of $1.44, which translates to a yield of 5.27% at the current share price. Its four-year average dividend yield is 4.67%. Moreover, the company’s dividend payouts have increased at a CAGR of 5.5% over the past five years.

COLB’s trailing-12-month net income margin of 29.27% is 30.9% higher than the industry average of 22.37%. Likewise, its 10.55% trailing-12-month ROCE exceeds the 10.30% industry average by 2.4%.

During the fiscal fourth quarter (ended December 31, 2024), COLB’s net interest income amounted to $437.37 million. The company’s net income grew 53.2% from the year-ago value to $143.27 million. Also, its earnings per share for the quarter came in at $0.68, up 51.1% year-over-year.

Analysts expect COLB’s revenue for the fiscal first quarter (ending March 2025) to increase 2% year-over-year to $483.02 million, while its EPS is expected to come in at $0.63. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is promising.

Over the past year, the stock has gained 43.8%, closing the last trading session at $28.04.

COLB’s stance is apparent in its POWR Ratings. The stock has a B grade for Momentum and is ranked #20 out of 40 stocks in the Pacific Regional Banks industry.

Click here to see the additional COLB ratings (Growth, Value, Stability, Sentiment, and Quality).

Sierra Bancorp (BSRR - Get Rating)

BSRR, the parent company of Bank of the Sierra, provides retail and commercial banking services across California. It offers a range of deposit accounts, loans, and digital banking solutions, along with business services like remote deposit capture, automated payroll, online banking, and electronic payment solutions.

On January 24, 2025, buoyed by its strong financials, the company’s board of directors declared a quarterly dividend of $0.25 per share, reflecting an increase of 4% over the last quarter. The dividend will be paid on February 14, 2025, to shareholders of record as of January 31, 2025.

BSRR’s annual dividend of $1 translates to a yield of 3.38% on the current share price, while its four-year average yield is 4.02%. In addition, the company’s dividend payout has grown at CAGRs of 2.9% and 4.8% over the past three and five years, respectively.

The stock’s trailing-12-month net income margin of 27.64% is 23.6% higher than the industry average of 22.37%. Similarly, its trailing-12-month ROCE of 11.67% is 13.2% above the industry average of 10.30%.

BSRR’s net interest income increased 8.9% year-over-year to $30.35 million in the fourth quarter, which ended on December 31, 2024. Its non-interest expenses declined 5.3% from the prior-year quarter to $22.86 million. In addition, the company’s net income and EPS came in at $10.36 million and $0.72, up 64.8% and 67.4% year-over-year, respectively.

Street expects BSRR’s revenue for the fiscal first quarter (ending March 2025) to increase marginally year-over-year to $37.51 million. Its EPS for the same quarter is expected to grow 2.8% from the prior year period to $0.66. It is no surprise the company has topped the EPS estimates in each of the trailing four quarters.

The stock has gained 64.2% over the past year and 12.1% over the past three months to close the last trading session at $31.73.

BSRR’s POWR Ratings reflect this outlook. The stock has a B grade for Momentum and Sentiment. Within the Pacific Regional Banks industry, it is ranked #2 out of 40 stocks.

Click here to see the other ratings of BSRR for Growth, Value, Stability, and Quality.

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BOKF shares rose $1.37 (+1.25%) in premarket trading Wednesday. Year-to-date, BOKF has gained 2.80%, versus a 2.68% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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