More community bank boards could consider M&A in the face of earnings headwinds

Community bank earnings will fall this year as institutions face liquidity pressures and build reserves for a slip in credit quality.

Results are unlikely to recover in 2024 as funding costs and credit costs remain elevated amid a higher for longer interest rate environment.

The hits to earnings and returns will be manageable for the vast majority of institutions but could change the strategic outlook for many as boards and management teams contemplate stagnant earnings over the next few years.