Texas is likely to remain one of the most-targeted states for bank M&A this year, but total activity in the Lone Star State has trended downward alongside the rest of the country.

This article is part of S&P Global Market Intelligence's series of state profiles, which take an in-depth look at M&A and key banking metrics for banks and thrifts with less than $10 billion in assets.

The M&A race: Texas vs. Illinois

As of Sept. 26, 11 whole-bank M&A deals involving a Texas-based target have been announced this year, down from 17 in all of 2021 and 13 in all of 2020. Before the COVID-19 outbreak, there were 20 Texas deals announced in all of 2017 and 21 deals announced in both 2018 and 2019, according to S&P Global Market Intelligence data.

The only other state with more M&A announcements this year is Illinois, with 14 whole-bank deals, compared to 16 last year and eight in 2020.

6 deals announced in Q3

While M&A across the country has slowed, deal activity in Texas picked up in the third quarter, with more than half of the state's 11 bank transactions announced since July 1.

Two deals have been announced in September. San Antonio-based Vavane Inc announced on Sept. 17 that it would form a bank holding company and buy Texas-based San Diego Bancshares Inc.

* Download an Excel template containing second-quarter 2022 financial information for Texas community banks and thrifts. * Download a state banking profile template in Excel.

Earlier in the month, Dallas-based FNBK Holdings Inc. announced it would acquire Texas Brand Bank, marking its second Texas bank acquisition within nine months.

Once both deals close — FNBK's acquisition of Rice-based First State Bank was completed July 1 — Kemp-based Harmony Bank NA, FNBK's bank subsidiary, is expected to report about $700 million in assets, up from just $135.8 million at the end of 2021.

Stephens lead financial adviser in subdued 2022

Stephens Inc. has served as financial adviser for four of the deals announced in Texas this year, compared to five last year. Piper Sandler & Co. tied with Stephens last year but has only been credited with one Texas deal announced in 2022.

Texas community banks outperform

Texas community banks and thrifts under $10 billion in assets nearly accomplished a clean sweep in the second quarter, outperforming both regional and national peers in five of the six major banking metrics examined. The state's 3.39% median net interest margin was 10 basis points lower than the Southwest median but was 12 basis points higher than the national mark.

M&A set to shuffle top Texas community banks

On Sept. 14, the Federal Reserve approved the merger of equals between Houston-based Allegiance Bancshares Inc. and Beaumont-based CBTX Inc. — holding companies for the state's 4th- and 8th-largest community banks by assets, respectively — paving the way for an expected Oct. 1 deal close.

In order to receive the Federal Deposit Insurance Corp.'s approval of the deal in June, the companies were required to submit a plan to increase mortgage applications and originations to African Americans, an unusual stipulation that may become more common.

Once completed, the combined company, which is to be renamed Stellar Bancorp, is expected to report more than $11 billion in assets.

Meanwhile, Corpus Christi-based American Bank Holding Corp. expects its total assets to increase to about $2.5 billion once its deal for Universal City-based TexStar National Bank closes, which would make its subsidiary, American Bank NA, a top 25 Texas community bank by assets based on June 30 data.