The regional bank crisis of 2023 felt like an extinction-level event. Silicon Valley Bank's sudden collapse, followed by the failures of Signature Bank and First Republic, triggered a crisis of confidence that sent the SPDR S&P Regional Banking ETF (KRE) plunging nearly 40 percent in weeks. For a moment, it seemed the entire sector might unravel.

Nearly three years later, regional banks are telling a very different story. The KRE has almost fully recovered from its crisis lows, multiple sector leaders are approaching all-time highs, and analysts are projecting the kind of earnings growth that could finally propel the long-suffering sector to outperformance in 2026.

The Recovery Takes Hold

This week's earnings reports from regional banks are reinforcing the bullish narrative. While the mega-banks grabbed headlines with their quarterly results, regional lenders have quietly delivered their own beats, demonstrating that the deposit outflows and margin pressures that defined 2023 have largely stabilized.

JBT Bancorp reported quarterly earnings of $2.89 million on Thursday, representing a 62.82 percent increase compared to the fourth quarter of 2024. Full-year earnings climbed 32.44 percent to $10 million—the kind of growth trajectory that suggests the sector's darkest days are firmly in the rearview mirror.

"Regional banks are well set up entering 2026. We're seeing stabilization in deposits, improving net interest margins, and credit quality that's holding up better than feared."

— Jay Woods, Freedom Capital Markets, CNBC

Three Leaders Approaching Historic Highs

Among the sector's largest names, three regional banks stand out as they approach or test all-time highs:

Citizens Financial Group (CFG)

The Providence, Rhode Island-based bank has emerged as a particular favorite among analysts. Wall Street expects earnings growth exceeding 31 percent in 2026, from $3.83 to $5.03 per share—among the highest projected growth rates in the sector. The stock has climbed more than 50 percent from its 2023 lows.

East West Bancorp (EWBC)

Specializing in serving Asian American communities and facilitating U.S.-Asia trade, East West Bancorp offers differentiated exposure to international commerce. Analysts project 6.7 percent earnings growth, with the stock trading at 13.6 times forward earnings—a reasonable valuation for a consistently profitable franchise.

Wintrust Financial (WTFC)

The Chicago-area bank has built a loyal investor following through aggressive dividend growth, with quarterly payouts expanding by an average of 12.3 percent annually over the past five years. Trading at 12 times forward earnings, Wintrust offers value and income characteristics that appeal to conservative investors.

What's Changed Since the Crisis

The regional bank recovery rests on several fundamental improvements:

  • Deposit stabilization: The flight of deposits that threatened bank liquidity in 2023 has reversed, with most regionals reporting stable or growing deposit bases
  • Net interest margin expansion: As higher rates flow through loan portfolios, margins are expanding after years of compression
  • Credit quality resilience: Despite concerns about commercial real estate and consumer credit, loan losses have remained manageable
  • Regulatory clarity: The Fed's enhanced supervision framework has provided banks with clearer capital and liquidity expectations

Regions Financial Reports Friday

Investors will get another data point Friday morning when Regions Financial (RF), one of the Southeast's largest banks, releases fourth-quarter results. Analysts expect revenue growth of 4.2 percent to $1.94 billion and adjusted earnings of $0.61 per share.

Regions' results will be closely watched for clues about loan demand in the bank's Sun Belt footprint, where population growth and economic activity have remained robust despite higher interest rates. The company's commentary on commercial real estate exposure—a persistent worry for the sector—will also draw attention.

The Bull Case for 2026

CNBC analyst Jay Woods has identified PNC Financial and Fifth Third Bancorp as regional banks particularly well-positioned for 2026. Both offer diversified business models, strong capital positions, and exposure to faster-growing regions of the country.

The broader bull case rests on the expectation that the Federal Reserve will resume cutting interest rates later this year, potentially steepening the yield curve and improving bank profitability. Regional banks, with their greater exposure to traditional lending activities, stand to benefit more than their money-center peers from any normalization of the rate environment.

Risks Remain

Not everyone is convinced the regional bank recovery has legs. Skeptics point to several persistent concerns:

  • Commercial real estate: Office building valuations continue to decline, and many regional banks have significant CRE exposure
  • Competition for deposits: Money market funds and high-yield savings accounts continue to attract deposits away from banks
  • Regulation: Enhanced oversight increases compliance costs and limits risk-taking
  • Economic uncertainty: Any recession would pressure credit quality and loan demand

What Investors Should Watch

For investors considering regional bank exposure, this earnings season offers a wealth of information. Beyond the headline numbers, focus on:

  • Net interest margin trends and management commentary on the rate environment
  • Deposit cost trajectories and competitive dynamics
  • Commercial real estate loan performance and reserve levels
  • Guidance for 2026 earnings and capital return plans

After three years of crisis, recovery, and uncertainty, regional banks are finally approaching a moment of clarity. Whether 2026 delivers the breakout that bulls are anticipating will depend on the sector's ability to translate stabilization into growth—and on an economic backdrop that remains supportive of lending activity.

For now, at least, the momentum is with the bulls.