Street Talk Nathan Stovall | S&P Global Market Intelligence

Tales from Top Performers features conversations with executives at high-performing banks about their view of current issues, and the greatest challenges and opportunities they see ahead. This episode features executives from three of the highest performing banks in the country: Curtis Griffith, chairman and CEO of Lubbock, Texas-based South Plains Financial; Paul Egge, CFO of Houston-based Stellar Bancorp; and Skip Hageboeck, CEO of Charleston, W. Va.-based City Holding Co. The bankers outlined how they've been able to maintain strong deposit franchises in the face of fierce competition, their outlook for loan growth and credit quality, and the greatest challenges and opportunities they see over the next year.  

Deposits and liquidity remain at the forefront for most bankers and the intense competition for core funding will eventually lead to a resurgence in M&A activity. That was the message delivered by a variety of presenters at S&P Global Market Intelligence’s annual community bankers conference on May 20 and 21, but they acknowledged that transactions face some challenges in the near term, including lower valuations, fewer would-be buyers and regulatory pressures that tend to require more capital in deals. The episode features commentary from banking experts at Ampersand, Curinos, StoneCastle Partners, Performance Trust Capital Partners, Fenimore Kay Harrison, Stephens, Janney Montgomery Scott, Piper Sandler and Klaros Capital.

The investment community has expressed great concern over commercial real estate and questioned whether a severe downturn could lie on the horizon, but Rich Hill, head of real estate strategy and research at Cohen & Steers, is not in the camp.
In the episode, Hill discussed the misconceptions about commercial real estate, the considerable differences in risk across various subcategories and how publicly traded REITs serve as a leading indicator to the private markets. The veteran of the real estate space further argued that the current cycle is very different than the global financial crisis and could represent the greatest opportunity to invest new capital in a generation.

Tales from Top Performers is a new series under the Street Talk banner that will feature conversations with executives at high-performing banks about their bank and experience in the sector; their view of current issues, and the greatest challenges and opportunities they see ahead. The inaugural episode features a discussion between James Beckwith, CEO of Rancho Cordova, Calif-based Five Star Bancorp, a previous winner of S&P's Global Market Intelligence's annual bank rankings, and S&P co-hosts Nathan Stovall, director of financial institutions research, and Jimmy Pittenger, who oversees the firm's US financial institutions commercial team. In the episode, Beckwith discusses how he got into banking, what he loves about the industry, how his institution has built an attractive deposit franchise and managed elevated exposure to commercial real estate, and his view on the greatest challenges and opportunities ahead. 

The banks that failed in the spring of 2023 were outliers that violated some of the golden rules of banking, but many investors continue to unfairly paint the bank group with a broad brush, according to KBW CEO Tom Michaud.
In the episode, Michaud discussed the drivers of the large bank failures in 2023 and the idiosyncrasies of those institutions. He further discussed the regulatory response to the liquidity crunch and criticized the Basel III endgame proposal while advocating for deposit insurance reform. The executive also noted that investors continue to treat all banks the same and express concern over their commercial real estate exposures but noted that most of the industry faces an earnings issue rather than a threat to safety and soundness.

Regulatory scrutiny has intensified in the aftermath of the liquidity crunch that erupted in 2023 and could play an even larger role in bank M&A activity in 2024 by motivating more banks to consider selling, while also standing in the way of some transactions. The episode features views presented by advisers at Hovde Group, KBW and Luse Gorman at the Acquire or Be Acquired conference, commentary from executives at Community Bank System and Columbia Banking System on the current state of bank M&A, and some discussion of the unfolding situation at the New York Community Bancorp.