Interest in bank M&A slumped in 2022 as the U.S. grappled with inflation woes, a slowing economy and rapidly rising interest rates, but there were pockets of high activity across multiple states.

U.S. banks announced 168 whole-bank acquisitions in 2022, not including terminations, down from 204 in 2021, according to S&P Global Market Intelligence data. Deal value also dragged significantly, with just under $23 billion in announced deal value compared to more than $76 billion in 2021.

But some states bucked the downward M&A trend, announcing more deals amid the M&A doldrums in 2022 compared to the standout year for bank M&A in 2021.

Illinois leads the pack

Illinois was the most popular state for bank M&A in 2022 based on the number of deal announcements, with 20 of its banks targeted in whole-bank or franchise acquisitions, up from 16 in 2021 and eight in 2020.

However, the majority of the transactions announced in 2022 were relatively small, with nine of the 20 banks targeted reporting less than $100 million in assets in the quarter prior to the deal announcement.

Only one deal in the state, Chicago-based Byline Bancorp Inc.'s purchase of Oak Brook-based Inland Bancorp Inc., which was announced Nov. 30, had a target with over $1 billion in assets. That transaction was also the 18th-largest U.S. bank deal announced in 2022 based on its deal value of $165.0 million at announcement.

Lone Star State sees a slight dip in activity

Meanwhile, Texas slipped to the No. 2 spot as the number of banks targeted in the state in 2022 fell slightly to 16 from 17 in 2021, but up from 2020's 13 announcements.

Though the Lone Star State saw fewer deals than Illinois, the transactions were larger. Transactions involving Texas-based targets accounted for three of the 20 largest U.S. bank deals announced in 2022, tying with Florida for the most transactions on that list.

Houston-based Prosperity Bancshares Inc.'s announced purchases of Midland-based First Bancshares of Texas Inc. and Lubbock-based Lone Star State Bancshares Inc. took the fifth and 11th spots, respectively, while Ruston, La.-based Origin Bancorp Inc.'s announced the purchase of Quitman, Texas-based BT Holdings Inc. came in seventh.

With almost 400, mostly small, banks headquartered in both Texas and Illinois each, they are regularly two of the most-targeted states every year. Minnesota has the third-most banks headquartered within its borders at 260.

Hot pockets in a cool year

Thirteen states saw more M&A transactions in 2022 compared to 2021. Wisconsin saw the largest jump with 12 of its banks targeted last year, up from four in 2021.

Conversely, five of 2021's hot states — Minnesota, Alabama, California, Oklahoma and Tennessee — saw the number of M&A announcements in their state drop by at least five year over year.

* Download a state banking profile template in Excel. * Access the S&P Capital IQ Pro M&A summary page for U.S. financial institutions. * Read more M&A news.

Credit unions make their mark

In an otherwise down year, credit union-bank M&A hit a new high-water mark with 16 deal announcements in 2022. Credit unions were responsible for four of the 20 bank deals announced in Illinois, as well as three of Florida's nine deals and three of Georgia's seven deals.

Oftentimes, a credit union is an attractive buyer for small community banks in rural markets as bank buyers are usually looking for larger targets in high-growth markets, advisers have told S&P Global Market Intelligence. Industry observers expect a similar level of activity this year.