The financial sector has its troubles, to be sure. But don’t write it off entirely. Regional bank exchange traded funds (ETFs) are handily outpacing their big-bank counterparts year-to-date.

Bank of New York Mellon (NYSE: BK) reported its first-quarter profit topped expectations, as rising financial markets bolstered its assets under custody and fee revenue. Likewise, US Bancorp (NYSE: USB) reported that first-quarter profit increased almost 27%, helped by higher revenue from its fee-based businesses and slowing consumer loan losses, reports Reuters on The New York Times.

Regional banks have largely benefited from financial reform in Washington, because their size falls well under the restrictions that most Wall Street banks could potentially face.

Although regional banks large and small are seeing an uptick in profit and lending, larger regionals are still posting lackluster earnings and are at a loss in finding credit-worthy borrowers, says Matthias Rieker for The Wall Street Journal. [Why Regional Banks are Ahead of the Rest.]

The irony for regional banks is that their loans are drying up just as the potential profit from lending is high, mainly because banks can borrow cheaply. Although loan growth has been off to a slow start, the profits that some regional banks posted are enough to celebrate. [ETFs to Consider for a Financial Recovery.]

For more stories about regional banks, visit our regional banks category.

  • SPDR KBW Regional Banking (NYSEArca: KRE)

  • Regional Bank HOLDRs (NYSEArca: RKH)

  • iShares Dow Jones U.S. Regional Banks (NYSEArca: IAT)

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.