The Cubs aren't the only people striking out in Chicago.

The Windy City has long been touted as ripe for consolidation, but FirstMerit (FMER) — which had seemed poised to do a big deal there — cut right and announced last week it would buy Citizens Republic (CRBC) in Flint, Mich., instead.

"We've had a lot of discussions with folks in Chicago and have scanned the market quite thoroughly, and at this point in time don't think that anything that we would find particularly attractive will be available within the next year or so," Paul Greig, the chief executive of FirstMerit, of Akron, Ohio, said in a conference call.

More time will be needed for dealmaking conditions in Chicago to jell than first thought, market watchers concluded from the remarks.

"That is a big statement," Brad Milsaps, an analyst at Sandler O'Neill who covers several local banks, said of Greig's time frame. "It still remains fertile ground [for dealmaking], but when it happens, who knows?"

FirstMerit, which has assets of $14.6 billion, had said repeatedly in the last few years that it was scouring the Midwest for deals. Observers had expected it to do a major one in Chicago. FirstMerit entered Chicago in late 2009 with the acquisition of two dozen branches from First Bank in St. Louis. It followed with two failed-bank acquisitions in 2010. That same year, Greig said during an investor conference that the company had a list of struggling midsize banks in Chicago that it planned to court.

"The market perception was that if FirstMerit was going to do a big deal it would be a Chicago deal," said R. Scott Siefers, also an analyst at Sandler O'Neill.

FirstMerit has gained a strong foothold in Chicago, but the market overall for acquisitions has sputtered even taking into account Wintrust Financial's (WTFC) announcement late Tuesday that it would buy HPK Financial in Chicago for $27.5 million. There are still 30 deeply troubled banks in the market, according to Justin A. Barr, president of BankDATAWORKS. Like in the rest of the country, bank failures there have slowed. There will be few open-bank transactions as long as there is hope that more failed-bank deals are coming, Steve Hovde of Hovde Financial said.

Meanwhile, the tepid economy of Chicago has intensified competition.

"Chicago is competitive, but it is so much more intense right now," Milsaps said. "We are seeing tough competition for not only pricing on loans, but structure and terms, too."

Illinois was one of the last states to allow branch banking, so it has a disproportionately large number of banks.

Chicago is often referred to as the most overbanked city in the country, with one branch for every 3,000 residents based on Federal Deposit Insurance Corp. and U.S. Census Bureau data, Fitch Ratings said in a research note about branch networks Monday. "The density of bank branches is staggering. It is doubtful that all these branches are meeting return requirements," the report said.

In theory, that should drive consolidation, but instead it is causing Chicago bankers to look elsewhere for earnings growth. For instance, Taylor Capital Group is growing its nationwide mortgage platform, as well as asset-based lending and leasing businesses outside of Chicago.

Several of the large Chicago banks talk about the need for consolidation in their home market and predict one big deal would start a wave — but none of them see themselves as a seller.

"A lot of people want to take the first step to be a buyer," said Terry Keating, a managing director at Amherst Partners in Chicago.

An alternative reading of FirstMerit's deal is that it has more to with the rebound in Michigan, some observers say.

"The relative opportunity in Michigan looks pretty attractive. The economy in Michigan as compared to Chicago is surging because of the automobile industry," Keating said. "I don't see it as a snub to Chicago."

The deal doesn't discount its growth in Chicago, it just focuses on short-term opportunity, Siefers said.

"Michigan looks like it is in better shape than Chicago because there are a lot of question marks about Chicago in the near term with things like taxes," Siefers said. "But Chicago is still the third largest city and it is always going to be extremely relevant to the overall economy."

Even Greig did not close the door permanently on a Chicago deal.

"Chicago has been a great story for us and will continue to be a great story for us," he said on the conference call.

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