It's not getting any cheaper to buy a bank.

Prices are high, as evidenced by several large deals announced this year, and that has merger and acquisition executives at some very acquisitive banks predicting a slowdown in deals in the second half.

"I tend to think you'll see at least one sizable acquisition by the end of the year," said William P. Boardman, senior executive vice president of Columbus, Ohio-based Banc One Corp.

Mr. Boardman said he believes bank prices are too high, and that's going to curb merger activity for the near future.

"You look at stock prices and it's difficult to see how (acquisitions) would work," Mr. Boardman added.

"Deals are happening because of the big prices being put on the table," said John Ganoe, executive vice president and head of corporate development at Norwest Corp. in Minneapolis.

Mr. Ganoe also predicted a temporary slowdown in large acquisitions due to expensive markups. He said the pace would pick up once bank stock prices come down. In the meantime, "we find it very challenging when we see huge premiums like that," Mr. Ganoe said.

There have been a slew of high-priced stock deals for banks and thrifts this year. Using price-to-book values as a measure, transaction costs have gone sky high, the dealmakers said.

Though not one bank in the top 80 acquisitions announced last year topped three times book value, half of the top 10 deals of 1997 are valued at three times book or higher.

The largest deal to be announced so far this year is Minneapolis-based First Bank System's $10 billion purchase of U.S. Bancorp. of Portland, Ore. First Bank bought U.S. Bancorp for 3.64 times its book value. Last month First Union Corp. agreed to buy Signet Banking Corp. for 3.49 times book value.

But book value, said Mr. Boardman, is not always a reliable indicator. Many dealmakers use different methods for determining the value of a potential takeover.

"The real question is what is the earnings potential? I don't get too carried away with book value-that's just language," Mr. Boardman said. "The question is what are the real growth prospects?" Banc One looks beyond a five-year average for earnings growth, he said.

With First Union's bid for Signet "you see the value of scarcity," said John Beirise, group president for emerging markets at Mercantile Bancorp. in St. Louis.

Mr. Beirise has the opposite view of Mr. Boardman and Mr. Ganoe. Despite high prices, he said, "I expect it to be exceptionally busy."

"The rise of valuations, in turn, increases the value of private franchises," Mr. Beirise said, which means any bank-big or small-that wants to sell could benefit from the current market.

However, some small banks have unrealistic expectations about their worth, said Marc Maun, senior vice president of mergers and acquisitions at BOK Financial Corp. in Tulsa, Okla. "A lot of sellers in small towns are expecting the same kind of multiples as those in the major metropolitan areas," he said. He predicts a slowdown in acquisitions in the southwest.

Valuations are relative, according to John M. Eggemeyer, president of Castle Creek Capital. Mr. Eggemeyer, whose company owns 15% of the fast- growing Western Bancorp of Laguna Niguel, Calif., has been the architect of an aggressive acquisition strategy for Western. He predicted even higher premiums would be paid for bank takeovers. "My view is as long as the valuations of the acquiring banks are high, the prices they're willing to pay for acquisitions will continue to rise," he said.

That was the case with First Bank, which agreed to buy U.S. Bancorp for $9 billion, or 3.19 times book value. First Bank's stock appreciated, and the final price was $1 billion higher than the original agreement and the price times book value shot to 3.64.

As for their own strategies, bank executives said they'll continue to be in the market for mergers.

Norwest has spent the past couple of years buying companies to fold into its mortgage and consumer finance subsidiaries. It has also focused on small community banks, especially in Texas.

Mr. Ganoe believes there will continue to be a steady stream of small, privately run community banks for sale. Those companies decide to sell more often for reasons related to succession planning or because they have a need for liquidity, he said. Norwest is one of the few superregional banks that actively acquires small, community banks, but Mr. Ganoe said he faces competition from smaller regional banks, other independent bank companies, and even entrepreneurs looking to cash in on small bank deals.

Mr. Eggemeyer of Castle Creek said he continues to look for opportunities in Southern California. His company has grown from $70 million of assets a year ago to $900 million and will be $2.1 billion in October after the close of two acquisitions. Mr. Eggemeyer said he believes only a handful of California banks would be attractive to out-of-state banks. However, "as the economic recovery in California continues to accelerate, the number of out-of-state banks acquiring in California will continue to rise," he said.

In the Midwest, Mercantile has its hands full trying to integrate two large acquisitions, Mark Twain Bancshares and Roosevelt Financial Group, both in St. Louis. Once those two companies are folded into its operations by yearend, Mercantile will probably be on the hunt for more deals.

Mr. Beirise said he would be looking mostly in the states where Mercantile already has a presence: Arkansas, Illinois, Iowa, and Kansas. Mercantile has already reached its legal limit for deposits in its home state of Missouri, which would prohibit it from making acquisitions there.

Banc One, which spans 12 states from Arizona to West Virginia, is digesting its huge $7.9 billion purchase of credit card issuer First USA Inc.

"We're in a position to do a bank acquisition, but quite frankly we're pretty happy with the way things are," said Mr. Boardman.

He predicted the next big deal will take place in the Midwest. "There are probably banks in the Midwest that were acquirers in the first round that could be acquired in the next stage of consolidation," he said.

Mr. Beirise agreed, saying America's heartland remains the least consolidated region, and the one most likely to see activity. "Overall, the Midwest remains more fragmented than other parts of the country," he said.

Mr. Boardman said the seller now has the upper hand.

"Certainly the recent transactions would indicate it's a seller's market," he said.

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