A surge in merger and acquisition activity that began in December and carried into January petered out in February.

Only seven deals for banks and thrifts were announced in February, according to data from Keefe, Bruyette & Woods Inc. and SNL Financial, against 17 in January and 15 in December.

Pricing also contracted in February as buyers targeted smaller banks, according to Sheshunoff & Co. Inc. in Austin.

In the deals announced last month, the median asset size among sellers was $169 million, and sellers fetched a price equal to about 0.87 times their tangible book value, or equity excluding goodwill and other intangibles. Among the January deals, the median seller had $244 million of assets and fetched 1.18 times tangible book.

John Blaylock, an associate director with Sheshunoff, said buyers seemed to take a step back last month after an improvement in economic conditions early in the fourth quarter led to a spate of transactions in December and January.

"We had a very active January, as Januaries go," said Blaylock, whose firm offers investment banking services to community banks. "It seems like what happened is everyone took a breath."

An exception was Prosperity Bancshares in Houston, which in February struck its fourth deal in five months, agreeing to pay $528 million for American State Financial Corp. of Lubbock. The deal, equal to about 2.06 times American's tangible book value, was the priciest transaction announced since January 2011, when Comerica Inc. of Dallas agreed to pay about $1 billion for Sterling Bancshares Inc. of Houston, according to Sheshunoff data.

So far in March three deals have been announced, including another sizable one in Texas. On March 6 Cadence Bancorp Inc. of Houston said it was buying Encore Bancshares Inc., also of Houston, for $250 million in cash, or 2.4 times the seller's tangible book value.

"March has certainly started off with a bang, certainly in Texas," Blaylock said. "The last week or so, I think we've seen activity pick up."

He expects the Texas market to remain relatively busy, saying the high prices American State and Encore Bancshares fetched have more banks in the Lone Star states — particularly those with around $1 billion of assets — exploring their options.

With a little more than three weeks to go in the quarter, M&A activity would have to pick up slightly to match activity in last year's first quarter, when 37 deals were announced. Through March 6, 27 bank and thrift transactions had been announced so far this year, according to Keefe, Bruyette & Woods.

Still, while the pace of dealmaking appears to have slowed a bit, the deals year-to-date are getting bigger. So far this year there have been four bank and thrift deals announced valued at $100 million or more. There were only eight $100 million-plus deals in all of 2011, and none announced during the last five months of the year.

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