The Northeast has emerged as a hotbed of community bank mergers and acquisitions — and the non-distressed kind, with a growing number of deals among small, healthy institutions at premium prices.

When First Niagara Financial Group announced plans to buy NewAlliance Bancshares in August, analysts called it a harbinger for consolidation in the region. Those claims have been validated by a subsequent slew of deals in the region, including five announced in the last three weeks.

"I think we're in the midst of a boom, frankly, or the early start of a boom in the merger market in the Northeast," said Mark Fitzgibbon, an analyst with Sandler O'Neill & Partners LP. "This is a sign that deals beget deals."

Fitzgibbon made his comments following last week's announcement that Brookline Bancorp Inc. in Massachusetts was buying First Ipswich Bancorp for $19.7 million, or 145.2% of tangible book value. It was the tenth deal since Buffalo-based First Niagara announced its $1.5 billion acquisition of NewAlliance, in New Haven, Conn.

In the two weeks before Brookline's announcement, four other companies announced deals, including Community Bank System Inc. in DeWitt, N.Y., which plans to buy Wilber Corp. in Oneonta, and Berkshire Hills Bancorp Inc. in Pittsfield, Mass., which crossed into New York to strike a deal with Rome Bancorp Inc.

"I think momentum is beginning to build, and the expectation that this will continue grows with each deal," said Damon DelMonte, an analyst with KBW Inc.'s Keefe, Bruyette & Woods Inc. "While before we thought 12 to 18 months might have been a time horizon for M&A to return, it appears … it's happening a lot sooner."

The Brookline deal also marked the sixth premium deal — with a price greater than tangible book value — announced in the Northeast in the past three months.

"The one thing that is seemingly the hallmark calling card … of these banks is that they all tend to be clean, or relatively clean," said Laurie Hunsicker, an analyst with Stifel Nicolaus & Co. Inc.

All had nonperforming asset ratios of less than 2.6%, and a handful were less than 1%, Hunsicker said. Nonperforming assets at Capital Bank & Trust Co. in Albany, N.Y., which is selling itself to Chemung Financial Corp. for 127.4% of tangible book, were just 0.57% of total assets at June 30.

In at least two of the deals, buyers were able to settle on a price-to-tangible book ratio in line with where their own shares were trading, meaning a deal would result in little dilution to current shareholders, analysts said.

"That's a big pricing benchmark that people are looking at," Hunsicker said. "It's the ability to grow your franchise without decimating tangible book."

Yet no other seller has been able to hit the same price multiples as NewAlliance, which struck a deal valued at $1.5 billion, or 165.3% of tangible book value.

Most healthy banks are selling in the Northeast for 120% to 140% of tangible book value, said Matthew Kelley, an analyst at Sterne, Agee & Leach Inc. Of the six premium deals announced since August, four involve sellers with fewer than $500 million in assets. (NewAlliance is the only seller with more than $1 billion in assets.)

Still, the smaller deals tend to be more attractive from the buyers' perspective, Kelley said. One reason is that larger transactions attract multiple bids, which can drive up prices. While prices are starting to creep up in the Northeast for healthy banks, they're still much lower than historic averages, Kelley said.

"As you go deeper into the recovery stage, I would expect deal multiples to shift into the 150 to 175 range," he said. "But early in the cycle here is where I think you're go to see the best transactions" for buyers.

Analysts expect more such deals in the region, owing in part to the limited opportunity for failed-bank acquisitions. Only one New England state, Massachusetts, has had a bank fail during the current downturn, and just one has failed in Pennsylvania. Three banks in New Jersey have failed, four in New York, and five in Maryland. There have been no failures in Delaware.

The economy has held up better in these places than elsewhere, but the recovery is still weak, bankers say.

Even if they've been able to manage credit quality issues, the smallest banks have a tougher time accessing the capital markets and have seen their capital bases erode. With rising compliance costs and more stringent capital requirements on the horizon, even healthy banks are looking for merger partners, said Jason O'Donnell, an analyst with Boenning & Scattergood Inc.

"They just cannot get to the profitability goals that they envisioned on their own," Kelley said.

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