By Stephen K. Curry and Steven Patrick
Beginning in 2023, the banking sector faced persistent headwinds in mergers and acquisitions, reminiscent of the 2008 to 2009 liquidity crisis though with different underlying drivers, chiefly high interest rates and post-regional-bank-failure regulation. Activity began to rebound slowly in 2024, and the first half of 2025 showed continued momentum, fostering growing optimism for the rest of the year.
According to Bank Director's 2025 Bank M&A Survey, conducted in partnership with Crowe, nearly 40 percent of bank executives and directors anticipate pursuing acquisitions this year. A more stable interest rate environment, bolstered by potential further easing and a rebound in bank stock valuations, is unlocking capital for synergistic transactions.
Deal volumes and historical comparisons
US bank M&A has seen a notable recovery since the 2023 trough. Based on data from S&P Global Market Intelligence:
- 2022: approximately 150 deals announced, aggregate value about $20 billion, a post-pandemic high that tapered as rates rose.
- 2023: only 101 deals, valued at $4.2 billion, a volume drop of roughly 35 percent from 2022, driven by economic uncertainty and regulatory scrutiny.
- 2024: 130 completed deals worth $16.3 billion, a volume increase of roughly 29 percent and nearly four times the value of 2023. Six were mega-deals above $1 billion, involving regional rather than community banks.
- 2025 year to date, as of July 14: over 70 deals announced, 57 through May plus roughly 15 in June and July, with aggregate value exceeding $5 billion. That pace suggests a full-year total of 140 to 160 deals. The first quarter alone saw 34 deals worth $1.6 billion, with April and May adding roughly $3 billion. These totals include no mega-deals.
Compared with recent years, 2025 volume is slightly ahead of 2024's early pace, 57 deals versus 56 through May, with values up two to three times on larger transactions. Community bank transactions averaged 1.4 times book in the first half and are on track to go higher in the second. This reflects pent-up demand, lower financing costs, and growing confidence, though volumes remain below pre-2022 peaks, which exceeded 200 deals in some years of the 2010s. Banks under $10 billion in assets account for roughly 80 percent of deals, but credit unions are increasingly active buyers, taking 15 of 34 first-quarter deals, acquiring banks for their deposit bases and growing in a segment with lighter regulation.
Several dynamics are expected to accelerate activity in 2025, particularly among banks under $50 billion in assets: balance sheet pressures, regulatory challenges, the accelerating pace of digital transformation, and opportunities for geographic expansion amid anticipated regulatory easing.
Overcoming mark-to-market headwinds
Community banks continue to wrestle with liquidity constraints and capital pressure even where core operations remain sound. Many still hold investment portfolios misaligned with prevailing rates, limiting both lending capacity and earnings. Evolving regulatory expectations around liquidity, capital, and antitrust review are narrowing access to funding. Subordinated debt, once a useful capital management tool, remains costly and structurally complex. These conditions are fueling consolidation, with average deal closure times dropping to 193 days in 2025 from 203 in 2024.
In April 2025, Cadence Bank, at approximately $50 billion in assets, announced the acquisition of Texas-based Industry Bancshares, $1.2 billion in assets, for $45 million, completed on July 1. The mark-to-market on Industry's securities portfolio exceeded its book equity, creating severe regulatory concerns. The deal addressed that underwater portfolio while expanding Cadence's presence in Texas, demonstrating how strategic buyers can navigate balance sheet problems in high-growth markets.
Achieving geographic scale
Expanding into attractive regions often trumps severe balance sheet issues. Citizens & Northern, $2.6 billion in assets, announced the acquisition of Susquehanna Community Financial, $598 million in assets, in May 2025 for $44.3 million at 126 percent of tangible book, enhancing its regional scale in Pennsylvania.
Huntington Bancshares' all-stock acquisition of Dallas-based Veritex Holdings, announced July 14 as the first mega-deal of 2025, exemplifies the trend. Columbus-based Huntington is targeting Texas for its economy and population growth, adding roughly $12 billion in assets and bolstering its commercial banking footprint in Dallas-Fort Worth and Houston. Valued at roughly 1.5 times tangible book, the deal is expected to boost earnings per share by 10 to 15 percent after synergies and to close in the first quarter of 2026. The rationale includes diversifying away from Midwestern markets, acquiring a strong deposit base amid competition, and capitalizing on falling rates for financing. This could signal a wave of larger transactions in the second half of 2025, especially if regulatory approvals come swiftly.
Prosperity's merger with American Bank follows the same theme. American Bank's strong presence in south Texas, especially San Antonio and Corpus Christi, fills markets where Prosperity needed more weight. The all-stock deal valued American Bank at 2.3 times tangible book, or 1.8 times after securities marks, adds $2.5 billion in assets to Prosperity's $39 billion base, and is expected to boost earnings per share immediately.
Building scale to fund technology investment
Technology is another accelerating force behind consolidation. Banks must contend with rapid advances in generative AI, embedded finance, real-time payments, and open banking. These innovations demand significant investment in digital infrastructure, cybersecurity, compliance, and operational risk management, and many smaller banks lack the scale to absorb the cost. Eastern Bankshares, $21 billion in assets, announced the acquisition of HarborOne Bancorp, $6 billion in assets, in April 2025 for approximately $493 million in stock and cash, citing the need to expand digital capabilities and build a stronger Greater Boston presence.
Blockchain-based financial infrastructure is adding urgency. Stablecoins and tokenized deposits enable near-instant settlement and programmable payments, and major institutions including JPMorgan and Citi are already piloting these tools for corporate treasury automation. Bitcoin lending, though higher risk, is drawing attention following the regulatory clarity of the 2025 GENIUS Act. Banks unable to invest in the necessary infrastructure may look to mergers as a path to innovation, and its appeal to affluent clients and institutional firms is prompting some to partner or merge with crypto-fluent peers. Expect more technology-driven deals, including partnerships with fintechs and acquisitions by digitally advanced regionals.
Succession
Generational change is quietly shaping the landscape. According to Chartwell Partners, survey data shows that 40 percent of US banks will transition their chief executives in the next three to five years. Bank boards are increasingly finding it difficult to execute internal succession plans, which leads to outside recruiting and to M&A as a solution. As competition to fill these roles increases, the pool of available outside candidates continues to shrink, and that will worsen until millennials reach the 25-year experience mark in 2030.
As regulatory and market complexity increases, some community bank leaders are prioritizing long-term legacy, and mergers offer an exit that preserves community identity. In July, Norwood Financial, $2 billion in assets, announced the acquisition of PB Bankshares, $400 million in assets, for $55 million, helping transition ownership while expanding market reach in Pennsylvania.
What to watch
Additional trends include rising credit union acquisitions and the potential for mega-deals if economic confidence builds. The outlook for the remainder of 2025 is optimistic, with expectations of 150 or more total deals if rates stabilize and Basel III clarity emerges, potentially a value increase above 50 percent over 2024.
Despite ongoing challenges, including valuation gaps, heightened regulatory review, and macroeconomic uncertainty, strategic mergers can create shareholder value and improve competitiveness. Transactions that expand capabilities, reduce compliance burdens, resolve regulatory problems, or improve digital readiness are more likely to win support from regulators, investors, customers, and employees alike.
