Midwest Was Heart of '12 Bank M&A

It played well in Peoria.

The gold standard for political sales pitches — broad appeal in the heartland — could easily describe bank consolidation last year, which surged in the Midwest.

Perhaps overlooked in all of the woulda-coulda-shoulda analysis of last year's merger activity were the 80 transactions for whole banks or branches in the 13-state Midwest. That figure was the highest regional total in the United States and a 60% increase from a year earlier, according to Dealogic.

Hot markets in the south and west commanded more attention — as they should have, given some of the high-profile transactions in states like Texas and California — but there was also a big rise in the overall number of deals that took place in New England, where there was a 63% increase, and the mid-Atlantic, where deals rose by 40%, according to Dealogic's regional breakdowns.

Deals fell 24% in the Southeast. Activity decreased by 13% in the West and rose slightly in the Southwest.

To be sure, overall deal values fell precipitously in the Midwest, to $1.3 billion from $12.4 billion a year earlier. But that pattern held true in other regions, reflecting a trend in 2012 M&A where there were more deals for smaller banks. In 2011, there were a number of big deals, including PNC Financial Services Group's (PNC) purchase of Royal Bank of Canada's U.S. bank and Capital One Financial's (COF) acquisition of ING Direct.

Royal Bank's RBC Capital Markets was the lead advisor in the Midwest, handling deals valued at $1.1 billion. RBC represented the buyers for the region's two largest deals: First Merit's (FMER) agreement to buy Citizens Republic Bancorp (CRBC) in Michigan and Old National Bancorp's (ONB) purchase of Indiana Community Bancorp. Those deals were valued at $952 million and $79 million, respectively, when they were announced.

Prices for other deals in the Midwest fell significantly. Smaller deals in the region included Frandsen Financial's $11.2 million purchase of Clinton State Bank in Minnesota and PSB Holdings' (PSBH) $5.5 million purchase of Marathon State Bank in Wisconsin.

Sandler O'Neill & Partners was the top advisor in three regions: the Southeast ($532 million), Southwest ($786 million) and West ($2.3 billion). The firm advised Pacific Capital Bancorp in its $1.5 billion sale to UnionBanCal; American State Financial in its $529 million sale to Prosperity Bancshares (PB); and Park Sterling (PSTB) in its $85 million purchase of for Citizens South, among other engagements.

What 2013 has in store for deals and dealmakers remains unclear. Bank deals for the first quarter fell short of the pace of a year earlier, and deals for Southeastern targets dominated the field.

The Midwest will continue to make noise, as predictions about consolidation around Chicago abound, especially with the rise of potential acquirers such as Wintrust Financial (WTFC), PrivateBancorp (PB), MB Financial (MBFI) and First Midwest Bancorp (FMBI).