Interest rates

The Federal Deposit Insurance Corp. and Texas banking regulators issued consent orders against Industry State Bank, Fayetteville Bank and Citizens State Bank, requiring major overhauls of their management, capital and risk controls.

The regional bank has already seen a large reduction in "criticized" loans, and it expects that trend to pick up as lower borrowing costs alleviate the pain in the commercial real estate sector.

Lower interest rates could bolster loan demand, credit quality and securities portfolios. But they could also curb lending profitability faster than they ease deposit costs, crimping net interest margins and eating into near-term profits.

Rate locks have increased every month this year, but May's pace came in more subdued than early-year numbers, according to Mortgage Capital Trading.

Bank stocks are up this year as interest rates have leveled off and there are hopes that pressure on lenders' profits could moderate.

The Federal Open Market Committee held the federal funds rate at current levels, citing "lack of further progress" toward meeting inflation goals.

Banks and other financial market participants have been keyed into the central bank's communications around monetary policy expectations. But in an unpredictable economy, the guidance doesn't always hit the mark.

With high deposit and borrowing costs persisting amid the Federal Reserve's campaign against inflation, lenders face stress on their net interest margins and the potential of troubled loans ticking up.

Lenders collected an estimated $25 billion in additional interest income last year by raising the average margin on annual percentage rates, or the amount above the prime rate, according to the Consumer Financial Protection Bureau.