Most regional banks are expected to report lower quarter-over-quarter earnings as pressures on net interest income, net interest margins and funding costs intensify.

Among the 69 publicly traded banks with assets between $10 billion and $100 billion and at least five normalized earnings per share estimates from analysts, 54 are expected to post lower quarter-over-quarter EPS, according to an S&P Global Market Intelligence analysis of consensus estimates. Analysts estimated that 12 will have linked-quarter EPS gains, while three companies will report no change.

"We maintain our cautious outlook for the bank group. The acute phase of bank stress is over, but a long and winding road remains," Wedbush analysts wrote in a June 26 note. "The underlying fundamental and structural backdrop remains tough for banks, and we continue to believe that the next few quarters could be challenging."

One area that will face pressure in the quarters ahead is net interest income (NII), and many banks will likely revise their NII guidance downward, according to the Wedbush analysts. Those downward revisions will be the result of peak net interest margins (NIM) being "well behind us" and slowed average earning asset growth, they wrote.

Aside from NII and NIM trends, all eyes will be on funding costs this quarter, Wells Fargo analysts wrote in a June 28 note.

Funding costs will continue to climb as "deposit competition remains intense and borrowings remain elevated as banks hold on to extra liquidity" and deposits outflows show "no sign of slowing," the Wedbush analysts wrote.

One bright spot during the quarter will be credit quality, which both the Wedbush and Wells Fargo analysts expect to remain benign. However, "an increasingly negative outlook may begin to weigh on credit metrics over the next 6–12 months, which may lead to higher" reserve building, according to the Wedbush analysts.

Banks that are best positioned to weather the current higher-for-longer environment and protect their EPS have strong deposit bases and asset demand, the Wells Fargo analysts wrote. They named Western Alliance Bancorp., First Horizon Corp. and Synovus Financial Corp. as their top picks for the quarter.

In a July 10 note, the Wedbush analysts named Regions Financial Corp., Customers Bancorp Inc., New York Community Bancorp Inc. and Wintrust Financial Corp. as "well positioned in this challenging backdrop."

Banks with $50B-$100B in assets

Only two banks in the $50 billion to $100 billion asset range are expected to report higher linked-quarter EPS: Columbia Banking System Inc. and Webster Financial Corp.

The second quarter will mark the first full quarter since Columbia and Umpqua came together in a reverse merger. The deal provides the company upside, including cost savings and the ability to sell securities without an outsized loss since they were marked to market at deal close, Piper Sandler analysts wrote in a June 29 note.

With that, Columbia can "drive improved profitability with upside potential," the analysts wrote. The quarter's results "should help the market gain increased confidence in its profitability profile and internal capital generation prospects that could lead to a potential share repurchase authorization some time next year," they added.

Conversely, First Horizon Corp.'s earnings power will be "challenged over the near-term with expenses likely to run at an elevated pace at least through 2024" as the company pivots to organic growth after the fallout of its planned acquisition by Toronto-Dominion Bank, J.P. Morgan analyst Steven Alexopoulos wrote in a June 13 note.

Banks with $20B-$50B in assets

Just eight banks in the $20 billion to $50 billion asset range are expected to report higher linked-quarter EPS.

Bank OZK is one of just four of those banks expected to report higher EPS quarter over quarter and year over year. Janney Montgomery Scott analyst Brian Martin named the bank "one of the best managed, high-performing banks in the country," in a July 7 note.

Conversely, Bank of Hawaii Corp. is expected to report lower linked-quarter and year-over-year EPS. Odeon analyst Dick Bove believes that earnings issues "may plague the company for the next two years" due to weaknesses in real estate and higher deposit costs.

Banks with $10B-$20B in assets

Analysts anticipate that just two banks in the $10 billion to $20 billion asset range will report higher EPS quarter over quarter.