PHOENIX - The bank acquisition total may have plunged in 1999, but the decline in deal prices was modest by comparison, according to Alex Sheshunoff & Co.

Charles I. Miller, managing director of investment banking at the Austin, Tex., firm, said prices were relatively steady because buyers became more selective, focusing on higher-performing community banks in growth markets.

Deals for 257 banks were announced last year, 34% fewer than in 1998, according to research compiled by Sheshunoff. But Mr. Miller said buyers paid an average of 22.1 times earnings, down just 3.1%.

"Against the backdrop of declining deal volume, prices held up," said Mr. Miller, speaking Sunday to more than 300 bankers here for a two-day merger conference sponsored by Bank Director magazine. "There was certainly some cherry-picking going on."

Dealmaking was particularly slow in the fourth quarter, when the total announced fell 33% from the year earlier. Mr. Miller attributed the full year's slowdown to the declining prices of bank stocks and the fact that many of the most active buyers of recent years were bought themselves.

Buyers were especially willing to pay the price for banks in urban markets. They paid 2.85 times book value and 22.8 times earnings for these banks, compared with 1.89 times book and 20.2 times earnings for banks in rural areas, Mr. Miller said.

He predicted more bank acquisitions this year - about 300 - could be announced. Those in the $200 million to $600 million asset range will be motivated to sell as competition from larger, more efficient banks intensifies.

He added that the regulatory crackdown on pooling-of-interests deal accounting in 2001 would also drive merger activity this year. Pooling has been the preferred method of accounting for mergers because it lets the buyer write off goodwill. The Securities and Exchange Commission is expected to ban pooling starting Jan. 1, and this likelihood could bring a barrage of deal announcements by companies eager to beat the deadline.

"There is a stirring among the larger regional banks that they will do deals again," Mr. Miller said. "It won't be a big wave, but this is the first time a calendar date is attached to all of this."

The end of pooling could also bring another round of megamergers. Large banking companies have typically used pooling to account for acquisitions.

"I think the larger banks may focus on doing deals with each other rather than looking at small banks," said Greg Mitchell, senior vice president at Hovde Financial Inc., a Washington, D.C., investment banking firm.

Others, however, said they expect the slowdown to continue. Except for the accounting-methodology change, these observers said, catalysts are lacking to boost deal volume to pre-1999 levels.

"The market is just too unpredictable right now," said William Boyan, senior vice president at Friedman, Billings, Ramsey & Co. in Arlington, Va. "You don't know where the deals will get done."

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