In a year in which US bank M&A skidded to a near halt, activity remained hot in Illinois.

Among all US states, Illinois was the most active state for 2023 bank M&A, with 14 of its banks targeted in whole-bank or franchise acquisitions, down from 19 in the previous year, according to S&P Global Market Intelligence data.

Meanwhile, deal pace slowed notably in Texas. The state recorded only three deals, a significant drop from 15 in 2022. Texas houses the highest number of banks in the US at 395, followed by Illinois at 371.

In 2023, eight out of 18 states with at least three bank M&A targets recorded declines in banks targeted for acquisitions on a year-over-year basis, while seven states logged increases compared to the previous year.

Overall US bank M&A activity fell to a record low in 2023, with just 98 deal announcements amid intense uncertainty. Advisers told Market Intelligence, however, that they expect a wave of activity in 2024 similar to the surge of M&A in 2021 because of fading concerns over major bank failures, more clarity on future interest rates and recent bank stock rallies.

Minnesota was the second-most active state by M&A deal announcements, with six of its banks targeted in acquisitions in 2023. The number of banks in Minnesota is the third-highest among all states at 253.

Kansas, Louisiana and Ohio tied for third-busiest with five deals each, followed by Missouri and Pennsylvania with four transactions each.

Illinois a hotbed of bank M&A

Illinois recorded the highest number of bank M&A deals in the past three years, including a tie with Texas in 2021. Still, only one Illinois deal was among the largest bank deals announced in 2023 by announced value: First Busey Corp.'s pending acquisition of Merchants and Manufacturers Bank Corp. for $42.3 million. None of the targets in the 14 announced Illinois deals had over $500 million in total assets.

In the state, the second-largest bank deal of 2023 was Midfed Acquisition Corp.'s proposed acquisition of Midland Capital Holdings Corp. for $12.1 million. Terms were not disclosed for the remaining deals.

Three of the Illinois deals involved credit union buyers. The transactions are Michigan State University FCU's pending purchase of Algonquin State Bank and substantially all assets and all liabilities of McHenry Savings Bank, and Land of Lincoln CU's acquisition of Nokomis Savings Bank.

Banc of California-PacWest Bancorp deal leads pack

California-based banks were targeted in only three deals in 2023, but one of those is the largest deal of the year: Banc of California Inc.'s merger with PacWest Bancorp, which secured an unusually swift deal close. The transaction is the only 2023 bank deal with over $1 billion in announced deal value.

The second-largest deal of the year is Eastern Bankshares Inc.'s pending acquisition of Cambridge Bancorp for $527.1 million, with the target based in Massachusetts, followed by Atlantic Union Bankshares Corp.'s proposed purchase of American National Bankshares Inc. for $447.6 million, with the target based in Virginia.

– Access the S&P Capital IQ Pro M&A summary page for US financial institutions. – Read more M&A news.

Four acquisition targets among the largest 2023 bank deals are based in Pennsylvania: the Orrstown Financial Services Inc.-Codorus Valley Bancorp Inc. deal; the Peoples Financial Services Corp.-FNCB Bancorp Inc. deal; the CCFNB Bancorp Inc.-Muncy Bank Financial Inc. deal; and the NexTier Inc.-Mars Bancorp Inc. deal.