Regional banks faced a tough time in 2023 and most of 2024 because of deposit runs and multiple bank failures, which impacted their performance. In 2023, banks like Zions Bancorporation (ZION Quick QuoteZION - Free Report) , Prosperity Bancshares (PB Quick QuotePB - Free Report) and Regions Financial Corporation (RF Quick QuoteRF - Free Report) saw their shares decline 10.8%, 6.8% and 10.1%, respectively. However, after two years of heavy sell-offs, most of the surviving regional lenders rebuilt their balance sheets by boosting liquidity, shoring up capital ratios and reducing reliance on volatile funding sources.

By 2025, these efforts started paying off as deposit outflows moderated, loan books stabilized and many banks started returning to year-over-year earnings growth — an indication of a rebound in the regional bank sector.

Shifts in the Federal Reserve’s policy toward a more dovish/neutral setting in 2025 helped sentiments. Less aggressive tightening reduced the risk of further deposit stress and eased investor concerns. Expectations for interest-rate cuts or a prolonged pause eased pressure on funding costs and bond portfolios, reducing concerns about unrealized losses and deposit competition. As rate fears subsided in 2025, sentiment toward the regional bank sector improved, fueling a rebound in share prices even before a full earnings recovery was visible.

Industry consolidation and selective growth opportunities have supported performance this year. Increased mergers and acquisitions helped lift valuations (after the regional bank sell-offs, many stocks were priced cheaply relative to historical norms) as investors anticipated cost synergies and scale benefits. At the same time, banks with diversified revenue streams were better positioned to offset margin pressure and demonstrate resilience. The above-mentioned factors helped drive a partial but meaningful rebound in regional banks in 2025, even as risks like commercial real estate exposure have continued to cap a full return to the pre-2023 levels.

Thus, regional banks like ZION, PB and RF, which were overlooked so far for being undervalued (the trailing 12-month price/earnings ratios of these three stocks were below respective industry averages in the last three years), are now expected to benefit from the rebound as confidence and local economies recover. Hence, it seems to be a wise idea to keep these stocks on your radar as we enter 2026.

How Will ZION, PB & RF Benefit From a Rebound?

Zions is well-positioned to benefit from a rebound because of its concentration in faster-growing Western markets like Utah, Arizona, Nevada and parts of California. As local economies recover, rising business formation and small-to-mid-sized enterprise expansion could drive higher commercial and industrial loan demand, which is Zions’ core strength.

Additionally, as confidence returns to the regional banking sector, Zions’ historically strong deposit franchise in its home markets could support margin improvement if funding costs ease alongside lower interest rates.

Likewise, Prosperity Bancshares stands to benefit from its Texas-centric footprint, where population growth, business relocations and energy-related investment have consistently outpaced national averages. A healthier local economy in 2026 could translate into steady loan growth in commercial real estate, energy and middle-market lending, areas where PB has deep local relationships.

For Regions Financial, the bank could benefit from recovery across the Southeast and Midwest, regions that are experiencing manufacturing investment, infrastructure spending and in-migration. As local economies strengthen, Regions Financial may see broader-based loan growth, spanning consumer, commercial and industrial lending, while its diversified fee businesses gain momentum.

Now, since we feel that it is a good idea to keep the above-mentioned banks in your portfolio, let us dig deeper into their fundamental strength and growth prospects.

Zions: With a network of more than 400 branches, ZION has been witnessing steady organic growth. Over the last five years (ended 2024), the company’s revenues witnessed a compound annual growth rate (CAGR) of 2%, driven by robust loan growth. Its loans and leases (net of unearned income and fees) saw a CAGR of 4.1%.

Loan growth, coupled with the bank’s efforts to improve fee income (mainly capital markets fees), will likely keep supporting its top-line improvement. Management expects third-quarter 2026 net interest income to witness a moderate year-over-year increase, primarily driven by earning asset remix, loan and deposit growth, and fixed-rate asset repricing.

Moreover, although the Federal Reserve has reduced interest rates by 75 basis points (bps) in 2025, rates are still relatively higher than the near-zero levels in 2020 and 2021. Given relatively higher rates alongside stabilizing deposit costs, Zions’ net interest margin (NIM) is likely to witness expansion.

Zions has a solid capital distribution plan. In August 2025, the company announced a 4.7% hike in its quarterly dividend to 45 cents per share. In February 2025, it approved a share repurchase plan authorizing the buyback of up to $40 million worth of shares, which was completed in the first quarter of 2025. While the company intends to remain cautious on share repurchases until capital levels (including AOCI) move toward peer ranges, management expects to pursue efficient capital distributions once those levels are achieved.

Analysts seem optimistic regarding ZION’s earnings growth potential. For 2026, the Zacks Consensus Estimate for its earnings of $6.08 per share has been revised 3.4% upward over the past 60 days. The estimated figure indicates a year-over-year rise of 2.5%. Currently, Zions carries a Zacks Rank #3 (Hold).

ZION Earnings Estimate Revision

Image Source: Zacks Investment Research

Prosperity Bancshares: Over the years, the company has significantly expanded its operations through the buyout of community banks and branches of other banks. Since 1998, it has completed more than 30 deals. In October 2025, it agreed to acquire Southwest Bancshares, while in July, the company announced an all-stock deal to buy American Bank Holding Corporation. These deals are expected to expand its footprint across Texas. In 2024, it acquired Lone Star State Bancshares, while in 2023, it acquired First Bancshares of Texas.

While the company’s net revenues declined in 2021 and 2023, the metric witnessed a CAGR of 7.8% over the last five years (2019-2024). The rise was driven by solid loan balances, acquisitions completed during this period and decent fee income performance. PB has been able to improve its deposit mix. As of Sept. 30, 2025, 34.3% of total deposits were non-interest-bearing. Given a decent loan pipeline, a solid deposit mix and efforts to improve fee income, the company’s top-line growth is expected to continue. 

Further, as the Federal Reserve lowers interest rates, Prosperity Bancshares’ NIM is expected to improve. As of Sept. 30, 2025, its total loan portfolio was made up of 36% fixed-rate loans. As the assets reprice and deposit costs decline, NIM is expected to improve. Since the third quarter of 2023, NIM has been expanding.

Prosperity Bancshares is also expected to enhance shareholder value through efficient capital distributions. The company has been increasing its dividend annually since 1999, with the latest hike announced in October 2025. In January 2025, the company announced a stock repurchase program to buy back up to 5% or 4.8 million shares, which is set to expire on Jan. 21, 2026. Though management aims to slow down the repurchase to pursue acquisitions and dividend hikes, it will likely engage in buybacks to some extent.

Currently, PB carries a Zacks Rank #3. The consensus estimate for its 2026 earnings is $6.20, which indicates year-over-year growth of 9%. Over the past 60 days, the estimate has been revised marginally lower.

PB Earnings Estimate Revision

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Regions Financial: The company’s loans and net interest income have seen a CAGR of 3.2% and 6%, respectively, over the past five years (2019-2024). Although the loan balance declined in the first nine months of 2025, a rising loan pipeline, along with the company’s broad exposure across strategic Southeastern and Midwest markets, provides a solid foundation for loan growth in the upcoming period. NII is expected to grow 3-4% in 2025, supported by prudent funding cost management, securities repositioning and higher yields from maturing fixed-rate assets.

Moreover, Regions Financial is focused on expanding and diversifying its business operations through investments in varied product offerings and inorganic expansion efforts. In 2021, the company acquired Clearsight, Sabal Capital and EnerBank USA, which diversified its revenue sources. In 2019, it augmented its competencies in the not-for-profit space in wealth management and the healthcare space through the acquisition of Highland Associates.

As the company is committed to diversifying its revenue streams and meeting customer needs via diverse services, we believe such endeavors will likely support its growth prospects in the long term.

In terms of its capital distributions activities, in July 2025, the bank announced a 6% increase in its quarterly common stock dividend to 26 cents per share. It also has a share repurchase plan in place. Recently, the company's board of directors approved a share repurchase program worth up to $3 billion, effective from Jan. 1, 2026, through Dec. 31, 2027. This new authorization will supersede the existing program set to expire on Dec. 31, 2025.

For 2026, the Zacks Consensus Estimate for RF’s earnings of $2.58 has been revised marginally upward over the past 60 days. The estimated figure indicates a year-over-year rise of 9.2%. Currently, RF carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

RF Earnings Estimate Revision

Image Source: Zacks Investment Research