Decades-high inflation, economic uncertainty, increased funding costs, compressing margins, heightened regulatory scrutiny, bank failures and a general decline in bank stock valuations have taken their toll as 2022 and 2023 were turbulent years for banks. Since March 2022, the federal funds rate has increased by 525 basis points—the sharpest increase in more than 40 years. In March 2023, Silicon Valley Bank (SVB), a $209 billion asset bank, failed—the first of five bank failures that would kickstart a historic year for bank failures. However, while the bank failures of 2023 served as attention-grabbing headlines (First Republic Bank, SVB and Signature Bank rank as the second, third and fifth largest failures in U.S. history, respectively), the 2023 failures largely represented unique business models, while the overall strength of the industry prevented a wider problem.

Further, the turbulence of the past couple of years contributed to one of the slowest years in bank merger activity. 2023 saw only 98 transactions announced, roughly 40% lower than those announced in 2022. The absolute number of bank mergers has declined over the last 35 years, largely due to the continued consolidation of the industry— from 1990 through 2022, the number of commercial banks in the United States has declined from over 12,000 to just over 4,000. As a result of market turbulence, 2023 also saw the smallest percentage of banks involved in merger activity in years.