Community bankers are increasingly selling out to larger players.

In the first half of the year, 92 acquisitions were announced, up from 59 in the same period a year ago.

And the amount of assets acquired soared to $29 billion from $19 billion, according to data compiled for the American Banker by SNL Securities, Charlottesville, Va.

Why the selling binge? Community bankers cite a host of reasons, including heightened competition and growing frustration with regulatory red tape.

Attractive Bids the Key

But the top factor, most players agree, is extremely attractive bids. Buyers, taking advantage of their lofty stock prices, paid a whopping 1.8 times book value on average in the second quarter, the highest premium in almost four years.

When Pennsylvania giant PNC Bank Corp. offered to pay 1.6 times book, United Federal Savings Bank found the deal too good to pass up, said Charles C. Pearson Jr., chief executive of the $800 million-asset thrift based in State College, Pa.

For their part, buyers are primarily making in-market acquisitions, so-called fill-in deals. "Banks are building market share in markets already served rather than extending service to new markets," said David Berry, director of research at Keefe, Bruyette & Woods, New York.

While community bankers throughout the nation fell into the arms of acquisitive rivals, the Southeast and Midwest accounted for about two-thirds of the 92 deals announced in the first two quarters.

Eleven banks in Florida alone were snatched up, while seven Oklahoma banks and a half-dozen Pennsylvania banks also sold out.

"Interstate and intrastate banking laws continue to become more and more liberalized -- that encourages these transactions," said Joseph A. Stieven, banking analyst at Stifel, Nicolaus & Co., St. Louis.

Kansas, for example, saw six of its community banks sold to regional heavies less than a year after the state was opened to interstate acquisitions.

|Handwriting Is on the Wall'

Tougher competition from larger players and rising costs are common motivations for selling.

"The handwriting is on the wall: If you want the whole customer you have to be able to offer all services," said Elbert R. Strain, chief executive of First Bancorp Indiana, Lafayette.

His $290 million-asset thrift signed an agreement to be acquired by Huntington Bancshares this month. "We just weren't getting there on our own."

"More [community bankers] are questioning the challenging economic and business climate they are going to have to operate in," said Les Biller, executive vice president and head of mergers and acquisitions at Norwest Corp.

"We are having many more conversations" with bankers willing to sell, he added.

Compliance a Full-Time Task

Indeed, many community bankers complain that coping with regulations has become a full-time task that detracts from their ability to make loans.

"We wait on customers as well as deal with regulators," said Russell Lawson, chief executive of Central Banking Group, Oklahoma City. "It is just not possible to be current in all those phases and still do a good job."

Mr. Lawson sold his bank to Banc One Corp. for two times book value in late May. The acquisition was the Columbus, Ohio-based behemoth's first in the Sooner State.

Another sore point for community bankers: paperwork requirements.

"Smaller banks have had it up to their neck and beyond with the regulatory burden," said Kenneth Guenther, executive vice president of the Independent Bankers Association of America. "More are saying the hell with it."

Typically, the superregional banking companies employ full-time compliance officers, freeing up bank officers to drum up business.

"Large companies can create a staff function to deal with these kinds of issues and get on with life," said Mr. Berry of Keefe, Bruyette & Woods.

By joining larger organizations, community banks can also offer products and technology to customers that might have been too costly to provide as an independent bank.

|A Lot of Competition'

"We can allocate our technological innovations over many locations so the cost to us,. . . is a lot cheaper than it is for a small community bank," said Mr. Biller of Norwest, which has signed three merger deals for community banks just this year.

Community bankers say that to remain competitive they need to extend products and services such as check imaging and trust that larger banks routinely offer.

"We have a lot of competition here," said Mr. Strain of First Bancorp Indiana. "To get away from strictly thrift services we needed to bring in some expertise."

Bullish Market an Incentive

The bullish market for bank stocks has also coaxed community bankers into joining with regional powerhouses. With their currencies soaring, acquisitive regional bankers are also making it hard for community bankers to rebuff their overtures.

"Because bank stock prices are a lot higher than they have been in recent years, [community bank] shareholders can realize significant premiums in taking advantage of acquisitions," said Reid Nagle, president of SNL Securities.

Regional banks have become more aggressive in their drives to stake out turf, say bankers. Besides superregionals such as the ever acquisitive Banc One, Norwest, and Huntington, many midsize banking companies are growing their franchises through acquisitions.

"Banks over $2 billion are trying to increase in size," said Mr. Guenther of the IBAA. "If they get a bit bigger, they'll increase the attractiveness of themselves as merger and acquisition targets."

|Just Good Business'

Indeed, fully two-thirds of the banks acquiring community banks in the quarter ended June 30 had less than $10 billion of assets, according to the data.

"Community banking is just good business and I suspect that is what everybody else is seeing," said Gerald R. Williams, chief financial officer at Huntington.

Steve Klinkerman contributed to this story.

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