Beginning in 2023, the banking sector has faced persistent headwinds in mergers and acquisitions (M&A), reminiscent of the 2008–2009 liquidity crisis—though with different underlying drivers, such as high interest rates and post-regional bank failure regulations. However, activity began to slowly rebound in 2024, and the first half of 2025 has shown 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% 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:
Compared to recent years, 2025 YTD volume is slightly ahead of 2024’s early pace (57 vs. 56 deals through May), with values up 2-3x due to larger transactions. Community bank transactions averaged 1.4x book the first half of the year and are on track to go higher in the last half. This reflects pent-up demand, lower financing costs, and growing confidence, though volumes remain below pre-2022 peaks (e.g., 200+ deals in some of the 2010s). Smaller banks (under $10 billion in assets) dominate ~80% of deals, but credit unions are increasingly active buyers (15 of 34 Q1 deals), acquiring banks for deposit bases and fueling growth in a segment with less heavy regulation.
Several dynamics are expected to accelerate M&A activity in 2025, particularly among banks with under $50 billion in assets. Key among these are balance sheet pressures, regulatory challenges, the accelerating pace of digital transformation, and opportunities for geographic expansion amid anticipated regulatory easing under the current administration.
Overcoming Mark-to-Market Headwinds
Community banks continue to wrestle with liquidity constraints and capital pressures, even where core operations remain sound. Many institutions are still managing investment portfolios misaligned with prevailing rates, limiting both lending capacity and earnings potential. Meanwhile, evolving regulatory expectations—particularly around liquidity, capital (e.g., Basel III), and antitrust reviews—are narrowing access to funding. Subordinated debt, once a useful tool for capital management, remains costly and structurally complex. These conditions are fueling consolidation, with average deal closure times dropping to 193 days in 2025 (down from 203 in 2024), signaling improving efficiency.
For example, in April 2025, Cadence Bank (approximately $50 billion in assets) announced the acquisition of Texas-based Industry Bancshares ($1.2 billion in assets) for $45 million (completed July 1, 2025). The mark-to-market on Industry’s securities portfolio exceeded its book equity, creating severe regulatory concerns. The deal addressed Industry’s underwater securities portfolio while expanding Cadence’s presence in Texas, demonstrating how strategic buyers can navigate balance sheet issues in high-growth markets.
Achieving Geographic Scale
Expanding into attractive regions to achieve geographic scale often trumps severe balance sheet issues, as seen in recent deals. For instance, 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 (priced at 126% of tangible book), enhancing its regional scale in Pennsylvania.
This week’s announcements of Huntington Bancshares’ all-stock acquisition of Dallas-based Veritex Holdings—the first mega-deal of 2025 (announced on July 14)—exemplifies this trend. Columbus, Ohio-based Huntington is targeting Texas for its booming economy and population growth, adding ~$12 billion in assets and bolstering commercial banking footprint in Dallas/Fort Worth and Houston. Valued at ~1.5x tangible book, the deal is expected to boost Huntington’s EPS by 10-15% post-synergies and close in Q1 2026. Rationale includes diversifying from Midwestern markets, acquiring Veritex’s strong deposit base amid competition, and capitalizing on falling rates for financing—aligning with Midwestern banks’ southward expansion strategies. This deal could signal a wave of larger transactions in the second half of 2025, especially if regulatory approvals come swiftly amid a more permissive environment.
Similarly, Prosperity’s merger with American Bank follows the same theme. American Bank’s strong presence in south Texas, especially San Antonion and Corpus Christi, fill in markets where Prosperity needed a stronger presence. The all stock deal valued American Bank at 2.3x tangible book (1.8x after taking the securities marks into account), adds $2.5 billion in assets to Prosperity’s asset base of $39 billion and is expected to boost EPS 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. Many smaller banks lack the scale to absorb these costs. In response, 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 create a stronger Greater Boston presence.
The emergence of blockchain-based financial infrastructure is adding urgency. Stablecoins and tokenized deposits—digital assets pegged to fiat or representing bank deposits on blockchains—enable near-instant settlement and programmable payments. Major institutions such as JPMorgan (via JPM Coin) and Citi are already piloting these tools for corporate treasury automation. Meanwhile, bitcoin lending—though higher risk—is drawing attention, particularly following regulatory clarity from the 2025 GENIUS Act. Banks unable to invest in the necessary infrastructure may look to mergers as a path to innovation. Bitcoin-backed lending remains a volatile proposition, but its appeal to affluent clients and institutional firms is prompting banks to partner or merge with crypto-fluent peers. Further insight: With AI and blockchain investments potentially straining smaller banks, expect more tech-driven deals, including partnerships with fintechs or acquisitions by digitally advanced regionals.
Succession Issues
Generational change is also quietly shaping the M&A landscape. According to Chartwell Partners, survey data shows that 40% of the banks in the U.S. will be transitioning their CEOs in the next 3-5 years. “Leadership advisory is a hot business right now”, according to Scott Petty “often bank boards are finding it difficult to execute on internal succession plans and that is leading to outside recruiting and M&A solutions. With the competition to fill these roles increasing, the pool of available outside candidates continues to shrink. This will worsen until millennials reach the 25-year experience level in 2030.”
As regulatory and market complexity increases, some community bank leaders are prioritizing long-term legacy. Mergers offer an exit strategy that preserves community identity. One example: in July, Norwood Financial ($2 billion in assets) announced the acquisition of PB Bankshares ($400 million in assets) for $55 million. This deal helps transition ownership while expanding market reach in Pennsylvania.
Further Insights
Additional trends include rising credit union acquisitions (e.g., Navy Federal targeting small banks for branch networks and deposits) and potential for mega-deals if economic confidence builds. Outlook for the remainder of 2025 is optimistic, with expectations of 150+ total deals if rates stabilize and Basel III clarity emerges—potentially a 50%+ value increase over 2024. Despite ongoing challenges—including valuation gaps, heightened regulatory review, and macroeconomic uncertainty—strategic mergers can create shareholder value and enhance 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.
At Endurance Advisory Partners, we specialize in guiding institutions through the complexities of capital markets, preparation to become a seller or buyer, assisting with regulatory challenges and digital transformation. Our advisory solutions help banks navigate M&A and digital asset strategies with confidence. Our firm draws on partners with over 40 years of senior banking experience—from the Texas banking crisis of the 1980s to leading bank consolidations in the 1990s, surviving the liquidity crisis and succeeding during the periods of regulatory scrutiny and rate volatility. For the last 15 years, our firm has empowered banks and financial firms to thrive in a rapidly evolving landscape through tailored strategies, robust risk management, and deep regulatory expertise.
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