Most US regional banks that reported earnings for the three months ended Sept. 30 posted weaker results on a sequential and year-over-year basis amid a challenging macroeconomic environment.

Of the 35 banks with assets ranging from $10 billion and $100 billion that disclosed third-quarter financial results between Oct. 16 and Oct. 23, 24 posted lower earnings per share compared to the previous quarter, and 26 recorded year-over-year declines, according to S&P Global Market Intelligence data.

Higher credit costs and funding pressures were recurring topics in earnings calls as rates remain higher for longer, with a number of banks reporting increased charge-offs and slimmer net interest margins.

'Idiosyncratic' charge-offs hit several large regionals

Only three banks with assets between $25 billion and $100 billion reported that third-quarter EPS increased compared to the linked quarter and the prior-year period: Wintrust Financial Corp., F.N.B. Corp. and Bank OZK.

First Horizon Corp., Synovus Financial Corp., Pinnacle Financial Partners Inc., United Community Banks Inc., BankUnited Inc. and Hancock Whitney Corp. all reported double-digit declines in third-quarter EPS on a sequential and year-over-year basis.

First Horizon, Synovus, United Community Banks and Hancock Whitney reported results for the quarter affected by higher charge-offs stemming from their previously disclosed participation in a $218.5 million nationally syndicated credit to a wholesale oil distributor that converted from a Chapter 11 to Chapter 7 bankruptcy.

First Horizon recorded an "idiosyncratic charge-off" of $72 million related to its participation in the nationally syndicated credit, Chairman President and CEO D. Bryan Jordan said during the institution's earnings call. United Community Banks posted a $19 million charge-off from its 8.7% participation, while Hancock Whitney disclosed a $29.7 million charge-off from its 10.7% participation. At Synovus, about 50% of third-quarter charge-offs, excluding the medical office building loan sale, was attributable to the shared national commercial and industrial credit.

Pinnacle Financial Partners also reported that charge-offs increased due to a single loan acquired through its syndication platform. The institution charged off substantially all of the loan, or $9.5 million, during the third quarter after being notified by the lead syndication bank that the borrower filed for bankruptcy protection.

At BankUnited, earnings for the quarter ended Sept. 30 reflected an increase in provision for credit losses, the most significant driver of which was the impact of a less favorable economic forecast, according to the bank's earnings release.

Smaller regionals report loss on sale of securities, severance costs

Among the smaller regional banks, or those with assets between $10 billion and $25 billion, Dime Community Bancshares Inc., FB Financial Corp., OceanFirst Financial Corp. and WaFd Inc recorded double-digit declines in third-quarter EPS compared to the linked quarter and prior-year period.

Dime Community Bancshares, which logged the largest sequential and year-over-year EPS declines, disclosed that third-quarter results included $8.9 million of aggregate pretax adjustments related to severance from the previously disclosed CEO succession and loss on equity securities.

FB Financial's earnings reflected the impact of a $14.2 million pretax loss, or $10.4 million after-tax loss, from the sale of $77 million of securities as well as $4.8 million in early retirement and severance costs.

At OceanFirst, third-quarter results reflected net interest income and margin that were adversely impacted by a "continued mix-shift and repricing to higher cost deposits that outpaced the repricing and increase in yields on interest-earning assets," according to the bank's earnings release. OceanFirst also recorded $8.3 million in net charge-offs during the quarter, up from just $123,000 in the second quarter, largely due to one office commercial real estate credit relationship.

Hilltop Holdings Inc., First BanCorp. and OFG Bancorp were the only banks in the group to record EPS increases on a quarter-over-quarter and year-over-year basis.

Hilltop, in particular, recorded EPS of 57 cents for the third quarter, more than double its EPS posted in the second quarter and 14.0% higher compared to the 2022 third quarter.