The recent flood of U.S. regional bank deals may be drying up. After announcing $76 billion in mergers and acquisitions so far this year, the most since 2008, U.S. lenders are now running out of potential partners, according to executives and investment bankers. Fewer buyers exist following takeovers by Citizens Financial Group Inc., PNC Financial Services Group Inc. and M&T Bank Corp. And the small bank acquisition targets that remain aren’t nearly as attractive.

“It’s kind of like musical chairs and when the music stops there are only a few chairs left,” said Bill Burgess, co-head of financial-services investment banking at Piper Sandler Cos. “A number of institutions have made their choices, and once they have picked their acquirer or merger partner, they are essentially off the board for a few years.”

This potential deal slowdown means banks that are still shopping for a tie-up are at risk of falling behind. Mergers are a key way that regional firms accumulate the scale and resources required to compete against Wall Street titans and invest in technology as the industry grapples with low interest rates and tepid loan growth during the pandemic.

Bank deals have surged 352% so far this year compared with 2020, according to data compiled by Bloomberg. The frenzy is part of a wider merger boom that started in the second half of last year after a rebound following the height of Covid-19, and has fueled record profits at Wall Street’s investment banks.

Bank mergers aren’t the only deals poised to slow. With a new appetite for stepped-up antitrust enforcement sweeping Washington under the Biden administration, big transactions are already getting harder to do. The Federal Trade Commission’s new chair, Lina Khan, has signaled the agency is going to take a tougher stance on approving mergers and scrutinizing deals that are coming up for review.

In the banking sector, consolidation is common and has accelerated as financial-technology companies lure customers away from traditional lenders. At the top of the food chain are giants like JPMorgan Chase & Co. and Bank of America Corp., which have enough money to invest in new technology and expand in new markets.

Smaller firms either must have the capabilities to grow organically or become skilled at doing deals, according to Ira Robbins, chief executive officer of Wayne, New Jersey-based Valley National Bancorp.

“Banks just need to be bigger,” said Abbott Cooper, principal of bank-focused activist investor firm Driver Management Co. “They need the benefit from economies of scale.”

But it’s getting harder for firms to find purchasers follow a slew of big transactions. Chicago, where there are about 15 banks between $1 billion and $3 billion in assets, is one market where there aren’t a lot of potential partners left.

“I need buyers here,” said Piper Sandler’s Burgess. “Nearly all of the consolidators in Chicago have either sold, merged or are looking at larger, move-the-needle transactions.”

Takeovers can also be risky

“Most mergers don’t pan out as expected,” said Mike Mayo, a bank analyst at Wells Fargo & Co. “So it’s OK for the larger banks to be choosy.”

In the meantime, there are lots of small banks with less than $10 billion in assets still eager to do deals. Those mergers are likely to drive the bulk of transactions moving forward.

“There’s more bank consolidation that will occur, not necessarily of significant sizes,” Steve Steinour, chief executive officer of Columbus, Ohio-based Huntington Bancshares Inc., said in a Bloomberg Television interview. “You’ll see more smaller banks getting together.”