While deal discussions continue and community banks still see acquisitions as an attractive tool for growth, regulatory headwinds have made M&A a little less attractive for growth-mind companies. In the episode, Jonathan Hightower, partner at Fenimore Kay Harrison LLP, discussed the drivers of community bank M&A activity, the impact of rising rates on transactions, how most community banks already satisfy environmental, social and governance considerations and the changing regulatory landscape for community banks, including the agencies' views of deals.

Large banks' second-quarter results likely helped downplay recessionary fears but many investors will remain on the sidelines until it is clear that a severe recession is not on the horizon, according to Gerard Cassidy. In the episode, Cassidy, managing director and head of U.S. Bank Equity Strategy at RBC Capital Markets, discussed banks' second-quarter results, how institutions' deposit bases are reacting to rate hikes by the Federal Reserve, and what results suggest about the health of the US economy.

The Fed has committed to taming elevated inflation by tightening monetary at a rapid pace, stoking fears that the central bank will not be able to achieve a "soft landing" for the U.S. economy. In the episode, S&P Global Market Intelligence's news team highlights interviews with investors, analysts and economists who say that a recession is a real possibility in 2023 and that small businesses and households with lower incomes, in particular, could feel some pain if that occurred. But the members of the investment community also suggested that large corporates, consumers and banks have strong enough balance sheets to weather a storm — possibly even a "hurricane" — should it emerge.

The current economic headwinds might seem like a "hurricane" on the horizon to some, but advisers and bankers at S&P Global Market Intelligence annual community bankers' conference said institutions could navigate choppy waters. In the latest Street Talk podcast, we share the advice that bankers, advisers and investors offered at the event, including on how to prepare for unprecedented changes in rates and how to accelerate growth through recruitment, incentives and fintech partnerships. Conference participants also offered their view of the potential market opportunity and risks from fintech partnerships as well as their view of current bank stock valuations and the economic environment.

While recessionary fears have grown on the Street, S&P Global Ratings U.S. Chief Economist Beth Ann Bovino does not see a downturn developing this year. In the episode, the economist discussed her outlook for the U.S. economy and inflation, the possibility of a wage spiral and the Federal Reserve's plans to wind down its nearly $9 trillion balance sheet. She also discussed how the Fed likely will tighten monetary policy too much in their effort to get inflation under control and the likelihood of a recession occurring as the central bank tries to initiate a soft landing.

While most banks are positioned for higher rates, institutions might be wise to consider the possibility that rates could turn the other way in the future, according to Darling Consulting Group President and CEO Matt Pieniazek. In the episode, Pieniazek discussed balance sheet positioning ahead of the rate hike cycle, the potential for securities portfolios to move further underwater as rates move higher, and how banks should evaluate how sensitive their deposit bases will be to the Fed's tightening cycle.

While a number of investors are looking for higher interest rates to drive bank earnings and stocks higher, not all investors are sold on the prospect. Even with the recent selloff, Brad Rinschler, managing partner at Down Range Capital Management, said in the latest Street Talk podcast that he believes valuations of many regional banks remain too high. In the episode, Rinschler and Connor Labozzetta, a partner at Down Range, discussed year-to-date performance of bank stocks, why they think many bank stocks could face pressure in the future and their favorite banks to own.

Many banks have been hesitant to invest excess cash before the Federal Reserve raises short-term interest rates, but they are likely leaving money on the table given the strong move in immediate rates that has already occurred, according to Piper Sandler's Scott Hildenbrand. In the episode, Hildenbrand, chief balance sheet strategist and head of the financial strategies group at Piper Sandler, discussed how banks should view their excess liquidity, investment opportunities in the current market and whether the outlook for interest rates and loan growth should change investment strategy.

A number of banks during fourth-quarter earnings season, including large players like Wells Fargo and Bank of America, unveiled plans to reduce overdraft and nonsufficient fees in 2022 as competitive pressure mounts from neobanks and regulators seek to increase their oversight of the issue. The group of banks that have cut or reduced their overdraft fees own close to 45% of U.S. deposits and likely will pressure many community banks and credit unions to follow suit, according to Lauren Seay, a banking reporter who has covered the topic for S&P Global Market Intelligence. In the episode, Seay explains why banks are making these changes now and discusses how the moves will impact earnings, the competitive landscape and even prompt more M&A activity.