Neighboring community banks recently have been making deals with local competitors before out-of-market buyers get interested.

Though the pace of open-bank deals among community banks has picked up generally, analysts have noticed a shift back to unions between in-market or neighboring bank companies.

Many of the deals early this year and in 2009 involved larger banks expanding out of their state or region by purchasing failed or ailing banks.

Now, though, the combination of community bank boards' tiring of fighting the recession, lower valuations and increased regulation and compliance burdens has made it tougher for long-time competitors to resist each other.

"As the ominous clouds of regulatory oversight and souring economy gather, naturally, the people we've already talked to in the past are the ones you hear from now," said David Rainbolt, the president and chief executive of BancFirst Corp. in Oklahoma City.

The $4.6 billion-asset company has announced four deals for smaller banks in its home state so far this year. It closed the purchase of Union National Bancshares Inc. in Chandler on Oct. 8.

Last week, a pair of competitors in Cincinnati announced a deal in which Cheviot Financial Corp. on the city's west side plans to buy its neighbor to the east, First Franklin Corp., for $24.4 million.

A month earlier, a handful of deals involving competitors were unveiled across the country. They included one in Texas in which First Financial Bankshares Inc. in Abilene is to buy Sam Houston Financial Corp. in Huntsville and one in Florida in which Stonegate Bank in Fort Lauderdale agreed to buy Southwest Capital Bancshares Inc. in Fort Myers.

"The 'unassisted' market is waking up, and we are seeing a number of deals taking place," said C.K. Lee, a managing director for investment banking at Commerce Street Capital LLC in Dallas. "Naturally, some of those will be in-market competitors."

Analysts said the deal surge is causing prices to heat up in some markets, especially where a buyer has long wanted to acquire a rival.

Such was the case with Cheviot Financial, which has had its eye on First Franklin for a long while.

"We've been courting them since 2004," Cheviot's president and chief executive, Thomas Linneman, said in an interview. "It was a marriage that was meant to be."

Yet First Franklin was not interested until its chairman, president and chief executive, Thomas Siemers, retired in March after more than 60 years with the company. Linneman said Cheviot had bid on other banks and lost on price.

It purposely bid much higher for First Franklin, he said. Immediately after the deal was announced Oct. 13, a handful of law firms said they were investigating whether First Franklin's board conducted a fair sales process and whether the offer undervalues the company.

Cheviot views the First Franklin purchase as a way to create "greater economies of scale," Linneman said, including broadening its advertising and reducing operating costs.

Size has played a role in some deals announced recently. This was because many banks with less than $1 billion of assets were concerned about being profitable in the future given changes in the regulatory environment.

As a result of those changes, "a lot of bankers expect that … those $200 million- to $300 million-asset banks are going to need to partner," said Carter Bundy, a Stifel Nicolaus & Co. Inc. analyst.

And linking up with a local competitor is often the best way to grow.

For example, all four Oklahoma deals BancFirst announced this year were for banks with less than $150 million of assets.

Rainbolt said BancFirst had been in talks with these banks for years and they were comfortable selling to a neighbor that knows the market.

BancFirst also bid on failed banks with operations outside the state, yet the pricing has become too competitive.

"The more recent ones that we've bid on are a lot more expensive by any metric," Rainbolt said. "And, frankly, we have not seen a lot of attractive opportunities."

Though more open-bank deals are expected as regulators resolve the failed banks, Bundy said he does not think prices will go sky-high. That's because valuations are still much lower than several years ago, even for healthy banks in good markets.

"A bank that was two or three times book two to three years ago is now sitting at book or slightly below," he said. "A lot of institutions are going to have to eat their humble pie."