Bank consolidation has a realistic shot to post the strongest yearly showing since the financial crisis.

The banking industry agreed to 34 deals in October collectively valued at $8.2 billion, marking the best single month for M&A this year, based on data compiled by Keefe, Bruyette & Woods. Those deals also boasted an average premium of 152% of tangible book value.

Many industry observers predict that the volume and average premiums will continue to steadily rise in coming months. While M&A has largely been dominated by small banks in recent years, some observers are hopeful that more large institutions will get into the game.

"It feels like we're taking the next step in terms of M&A," said Joseph Fenech, a managing director at Hovde Group. "It seems to be a continuation of a gradual pickup of smaller bank deals, but the new news here is the return of larger deals."

Since January 2014, banks have agreed to 11 deals valued at more than $500 million, though three of those were announced in the last two weeks, based on KBW's data.

While it is "impossible to know" if the pace will continue, Harvard Winters, a former investment banker who provides equity research on banks, said BB&T's seemingly seamless purchase of Susquehanna Bancshares, along with M&T Bank's eventual regulatory approval for buying Hudson City Bancorp, have "given people comfort that things can get done." (M&T just closed on the Hudson City purchase.)

KeyCorp in Cleveland, which agreed to buy First Niagara Financial Group in Buffalo, N.Y., and New York Community in Westbury, with its plans to purchase Astoria Financial in Lake Success, N.Y., are the latest regionals to unveil deals.

Each deal has unique traits, particularly from the perspective of the sellers.

First Niagara has been hampered by its own legacy of costly acquisitions and expenses tied to technology upgrades. Astoria was under pressure from an investor to improve returns, possibly by selling itself.

Investors have also reacted harshly to the deals. Key's shares plunged due to a belief that it overpaid, or at least put too much stock into the deal. New York Community, meanwhile, spooked shareholders by announced plans to restructure its balance sheet, raise capital and cut its dividend.

With that in mind, other acquisitive executives will likely study those deals before trying to structure a deal that will be embraced by investors, industry observers said.

"Everyone is always looking to see how investors react," said Robert Kafafian, president and chief executive of Kafafian Group. "I wouldn't overstate that potential impact. I think more banks are afraid" to sit idle.

Banks are facing a number of headwinds, which generate more M&A.

There should be "increased activity across the board in all sizes and all categories," said Lee Burrows, chief executive of Banks Street Partners. Competition is "brutal and loan portfolios are growing slowly, and the best way to grow a portfolio is through an acquisition."

For one, many bankers are revisiting the notion of building scale, particularly at institutions that are around $50 billion in assets, industry observers said. That threshold triggers more regulatory scrutiny, which would add more challenges to an existing low interest rate environment.

"It's better to have more scale," said Arthur Long, a partner at Gibson Dunn. "I think that's one of the things driving this M&A."

Low rates alone have been pushing a number of banks to merge, said Rick Maples, KBW's co-head of investment banking. Potential sellers are running out of ways to pad earnings, and buyers see a chance to complete an acquisition, cut costs and improve their own bottom line.

In addition, shareholder activism has also picked up. Basswood Capital Management disclosed earlier this year that it had built up a significant stake in Astoria; it began pressuring the company's management to explore strategic options.

"Activism is here to stay," Maples said. "Given that we have a steadily improving environment, the activists have places they can push people, as opposed to a down economy where people have nowhere to go."

Many institutions have also moved beyond their crisis-era credit and earnings issues, providing increased confidence that they can successfully complete an acquisition, said Ciaran McMullan, president and chief executive of Suncrest Bank in Visalia, Calif.

The $205 million-asset Suncrest's management team hopes to become more acquisitive. The bank, which has already announced one deal, is looking for more.

"I don't think the reasons boards are considering selling right now are really any different than what has always driven boards to sell," McMullan said.

Banks are "struggling to achieve the growth they want on their own, have no succession plan and aging executive leadership [or] ongoing regulatory issues," McMullan said. "Of course, they just have more people calling on them right now. There are just more buyers out there."

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