With four megadeals in the last two weeks, the race for scale in U.S. banking has made 2021 the busiest year for $500 million deals in more than two decades.

Valley National Bancorp unveiled the year's 18th megadeal on Sept. 23 with its agreement to buy Bank Leumi Le-Israel Corp. The deal came just two days after U.S. Bancorp announced a $7.97 billion purchase of MUFG Union Bank NA, the largest merger of the year. The pair of transactions, which continued a trend of foreign banks off-loading their U.S. units, made for the most $500 million deals since 1998 when there were 24.

Regional banks are increasingly pairing up in strategic, transformational mergers to rapidly gain scale as weak loan growth, low rates and excess deposits weigh on profitability. Ten of the 18 deals carried values of more than $1 billion at announcement, and three of them were marketed as mergers of equals.

"One of the key themes is people are looking to do something ... transformative," Mitch Eitel, a partner with Sullivan & Cromwell LLP, said at S&P Global Market Intelligence's Bank M&A adviser roundtable on Sept. 8. "They've built up positions in certain regions, added business lines, and in some cases strengthened management teams, and those have been, at their core, more strategic transactions."

With the influx of large M&A, aggregate deal value across all M&A has surged to $51.75 billion among 155 whole-bank transactions as of Sept. 23, just shy of 2019 when total deal value stood at $55.03 billion across 256 tie-ups for the entire year. That year's total was inflated by BB&T and SunTrust's merger of equals, which created Truist Financial Corp., and accounted for more than half of the year's aggregate deal value. And bankers expect more to come in the months ahead.

"It's going to be very busy," said Anton Schutz, president of Mendon Capital, a bank investment firm. Schutz pointed to increased competition and a need to invest in technology as drivers of the deal activity. "The investment bankers aren't getting a lot of sleep."

Greater scale was not the top motivator for all deals. While Valley National is excited by the demographics in Bank Leumi's footprint, Bank Leumi's business capabilities — especially its tech and venture capital banking in California and New York and private banking in Florida and New York — were the primary drivers of the deal, said Chairman, President and CEO Ira Robbins on the Sept. 23 deal call. It was Valley's second transaction in three months after its $220.2 million deal with Westchester Bank Holding Corp., which will expand Valley National's footprint into Westchester County, a high-income bedroom community to New York City.

Home Bancshares Inc. will be expanding its market presence with a move into Texas following its $886.8 million acquisition of Happy Bancshares Inc. and its $6.26 billion in total assets as of June 30. But Chairman, President and CEO Johnny Allison said the quality of the bank was more important than the size.

"I was looking for the right trade with the right bank with the right quality of assets ... and the management team that could grow the franchise for us through both organic and acquisitions," Allison said in an interview. "[Size] didn't matter to me."

But scale was top of mind for U.S. Bancorp. The deal comes "at a time when scale is as important as it's ever been for the industry," Chairman, President and CEO Andy Cecere said on the deal call.

Gaining scale through market expansion motivated First Interstate BancSystem Inc.'s pending acquisition of Great Western Bancorp Inc., the eighth-largest U.S. bank deal this year based on its deal value of $1.97 billion at announcement. The combination will expand First Interstate's footprint to 14 states from just six.

The deal marks a notable step-up for First Interstate, as Great Western has $13.07 billion in total assets, as of June 30, only about 30% less than First Interstate's $18.94 billion in total assets. First Interstate's previous two deals, both announced on the same day, were much smaller with each target's total assets coming in under $1 billion.

First Interstate's investments in personnel, technology and processes over recent years "played a big part in our comfort level entering a partnership of this size," President and CEO Kevin Riley wrote in an email.