Despite the collapse of three large banks last year, many smaller banks remain vulnerable due to high exposure to commercial real estate and rising interest rates, which have driven down bond and loan values. Regulators have ordered some banks to address capital and staffing issues. Merger activity has slowed due to uncertainty around regulatory approvals and the impact of portfolio markdowns on capital levels. However, industry experts expect an increase in mergers this year as bank executives recognize the need to consolidate and older leaders consider retirement.
