Banks haven't been buying one another as fast as they did in the past, and with a mild recession potentially looming in 2023, that probably won't change much, Kansas City-area banking experts say. Bank transactions in 2022 included several notable area bank deals, such as CrossFirst Bank acquiring Farmers & Stockmen's Bank, First Interstate Bank acquiring Great Western Bank, Luna Parent Inc. acquiring Lead Bank and Southern Bank buying Citizens Bank and Trust. 'So if a bank has $10 million in capital, but a $4 million unrealized loss in their bond portfolio, buyers will only pay a price for the bank based on $6 million of capital instead of $10 million. If the bank doesn't sell right now, the bonds will either eventually par out, or interest rates might start coming down again. So a lot of bankers are deciding to just wait for a year or so before they do anything because otherwise they're just going to lose a bunch of money they don't have to lose. The result is that industrywide, deals are slowing down dramatically.' Credit unions also remain in the market as buyers because they don't have to account for capital the same way as a commercial bank. But those deals are generating controversy because of credit unions' nonprofit status, and about 10 states already have enacted legislation blocking them from buying commercial banks. 'But if rates come down because of a recession, that typically means banks are going to be purchased for less money, which could have a neutralizing impact where sellers push off a sale into the future.' But he said it does create opportunities for well-capitalized banks with few credit issues to find deals. 'But buyers who have access to capital and historically don't have any credit problems they're concerned about, like UMB Bank or Commerce Bank, they tend to look for opportunities to buy at lower prices than they may have been able to buy a year before or that they might get in a couple of years in the future.' Sellers may go to market next year, once their bond situation is cleaned up, unless a recession drops prices too low. 'When they're ready to go to market, if we're in a recession, pricing will come down. They may decide they don't have to sell and hold off. So it will be really interesting because we've got more pent-up supply, kind of like we did when we came out of the Covid-19 pandemic. We have people who want to go to market, but market forces may limit the valuations, pushing people to hold off, slowing down the numbers again.' They're constantly looking to grow by adding new markets, products and services, and acquisitions are a good way to enter a new market or nab a product line they otherwise wouldn't be able to offer. Small, family-owned banks also face situations where the next generation isn't interested in taking the reins, forcing a sale. 'Some small banks also sell because they need to get bigger to keep up with banking regulations and technology but don't have the capital to grow.'