The buyers are starting to line up.

Though traditional mergers and acquisitions activity plunged to a record low last year, more healthy banking companies say they are eagerly prowling for deals now.

Many industry veterans-it seems like a new group every day-also are busy raising billions to go on a buying spree. They tout ambitious plans to create new regional banking companies by rolling up failures along with struggling sellers.

With the Federal Deposit Insurance Corp. still reliably serving up its smorgasbord of weekly specials, nobody expects the pace of unassisted deals to pick up before summer, and any significant increase is likely to take until next year.

But industry insiders say an attitude shift is underway. The interest in buying-virtually nonexistent at this time a year ago-is gaining momentum. And all share a sense that an explosion in activity is coming.

Northwest Bancshares Inc. in Warren, Pa., completed the second step of its conversion from a mutual to a publicly traded company in December, raising $668 million.

William Wagner, the chairman, president and chief executive officer of the $8 billion-asset Northwest, says it did so to be ready to buy.

"We didn't want to sit on the sidelines during what may be the most active M&A period in the history of the banking industry and not be able to participate in a meaningful way because we didn't have enough capital," Wagner says.

F. Scott Dueser, the president and CEO of the $3.3 billion-asset First Financial Bankshares in Abilene, Texas, says he will be "very disappointed" if his company has not announced at least one deal by this time next year.

"We are looking hard and we are ready to do one," Dueser says.

It is mostly the highly capitalized talking so boldly.

But observers say other healthy institutions with more modest amounts of capital to spare are likely to shift back into growth mode after a few more quarters.

They are holding off not only because they want to be certain the economy is recovering, but because they want to know what regulatory reform will bring. Convinced that higher capital requirements will be imposed on all banks, many want clarity before considering any major move.

Last year only 122 deals were announced, excluding those that were later terminated, according to SNL Financial. The deal values totaled a meager $1.38 billion.

By both measures, it was the slowest year for deals in the 18 years for which reliable data is available.

In an also anemic 2008, there had been 146 deals worth $35.7 billion.

John Duffy, the chairman and CEO of KBW Inc., told investors on a conference call in February that he expects deal activity to be "modest at best" this year, particularly since so many buyers prefer the comfort of an FDIC acquisition.

But, he says, "It doesn't have to do a whole lot to be better than 2009." KBW had only one traditional deal that paid a fee of more than $2 million last year.

The willing buyers say one major hitch is how soon sellers might come around. These days the average deal price is roughly the same as tangible book value, and even distressed banks are reluctant to strike such a bargain.

But the more hostile regulatory environment, and the widely anticipated higher capital requirements, should force more realistic expectations in coming quarters, investment bankers and analysts say.

"A lot of bank boards have just had it," says Jim Gardner, the chairman of Commerce Street Capital. "Bank boards tend not be filled with 30-years-olds; they tend to be filled with 60-year-olds. And it can be a very grueling experience being on a bank board today. It really gets tiring after a while and you say, 'To heck with it. Let's move on and see what we can get.'"

But if some are looking to exit, others are eager to get back in the industry.

Three months after stepping down as the chief executive of Royal Bank of Canada's U.S. operations, Scott Custer is gearing up to build a new bank spanning the Carolinas and Virginia.

Custer recently became chief executive of Piedmont Community Bank Holdings Inc. in Research Triangle Park, N.C., a venture backed by Stone Point Capital LLC, a private-equity firm in Greenwich, Conn., and Lightyear Capital LLC, a private-equity firm in New York.

In late January Piedmont was granted bank holding company status by the Federal Reserve Board. It is preparing to roll out an aggressive acquisition strategy focused on community banks of all stripes - healthy, ailing and failed - principally in North Carolina, South Carolina and Virginia.

"We would very much be interested in doing FDIC-assisted transactions and we plan to pursue those with vigor," Custer says. "But we also think there is a great opportunity with healthy community banks or banks that just need some capital. We are after those, too."

Custer would not specify how much money Piedmont has raised or how big a cluster of banks it is looking to build. "It is a sufficient amount to knit together a nice-sized franchise in three states," he says.

And for banks that can raise capital, the thrill of buying is starting to overtake the danger of it.

So much so that even thrifts that have never done an acquisition are plunging in.

"I think you're starting to get a feel for where credit quality is going, which is the most important part of any acquisition," says John Roman, the president and chief executive officer of Naugatuck Valley Financial Corp. in Connecticut.

The $542 million-asset Naugatuck announced in February that it would buy Southern Connecticut Bancorp Inc. in nearby New Haven for $19.5 million in cash and stock.

Naugatuck's only other acquisition was a single branch 20 years ago, Roman says.

The company is taking its second step to go public as part of its deal for the $138 million-asset Southern Connecticut.

"The acquisition gives us a good reason to do the conversion," Roman says.

He anticipates Naugatuck will have excess capital after the deal closes, though he could not specify how much.

He also foresees an increase in dealmaking for the industry overall.

"Capital requirements most likely will increase, and I think some targets are taking a realistic view of their chances of raising more capital. Maybe they're more willing to come to the table now," he says. I think the ice is starting to break."

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