NEW YORK ( TheStreet) -- Now that the economy is healing, the rumblings are starting that traditional M&A is on its way back to the bank sector.

There have already been a few smallish transactions, most recently privately held Eastern Bank Corp.'s $163 million agreement to acquire Wainwright Bank & Trust ( WAIN) for a hefty premium. Then on Thursday, private equity stepped up as famed distressed investor Wilbur Ross led a $100 million investment in Sun Bancorp.

But the big deals may have to wait a while. Potential acquirers still need word on capital requirements from regulators, and a return to normalized earnings remains beyond the horizon. Banks that might be open to selling themselves are of course dealing with many of the same issues. The eventual shape of finreg and increased competition for failed institutions are also evolving factors. But when the things do pick up, the activity could be brisk.

"This cycle is going to be even bigger than usual," says analyst Bob Patten of investment bank Morgan Keegan, which is owned by Regions Financial ( RF - Get Report).

Patten predicts the first wave of mergers will be so-called "takeunders" of small banks by larger regional banks looking for fill-in acquisitions. He expects to start to see "transformational" deals in 2011, as well as an increasing amount of smaller transactions. In the near-term, FDIC-assisted deals for failed or teetering institutions, such as TD Bank's agreement to purchase the troubled The South Financial Group ( TSFG) in May, are expected to continue to dominate as the industry isn't quite out of the woods when it comes to credit costs just yet.

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Michael Rose, vice president of equity research at Raymond James & Associates, thinks the pace of economic recovery will be key to timing the next wave of bank M&A as management teams need to get more comfortable with being able to value the troubled assets of targets.

Rose predicts consolidation over the next five to 10 years will bring the current tally of more than 8,000 banks in the United States down to roughly 6,000 banks.

The most likely buyers will be the large and mid-size regional banks. The "too big to fail" bunch -- mainly Bank of America ( BAC), JPMorgan Chase ( JPM - Get Report), Citigroup ( C) and Wells Fargo ( WFC) -- could find it tough to participate as they deal with their sprawling businesses and finreg's impact. Although they could jump in under the right circumstances, as this article later theorizes.

Foreign names like Canada's TD Bank, Barclays ( BCS), Spain's BBVA ( BBVA) and Banco Santander ( STD) also constitute a force to be reckoned with as they are itching for a larger piece of the U.S. consumer.

Sumitomo Mitsui Financial Group is hoping to own a majority stake in a U.S. bank by 2013. The Japanese bank is willing to spend as much as $5 billion to buy a stake and is apparently looking at 20 U.S. banks, according to a Bloomberg article, citing an interview with an executive from Sumitomo on July 7. The executive told Bloomberg that Sumitomo is likely targeting banks in the Midwest or East Coast.

"When it comes, I think it's going to be something like an arms race so to speak. Once one of them gets comfortable with doing these transactions," more banks will do them, Rose says. "At some point - it's not yet -- but when this M&A wave does start, you're going to see the stocks of these companies rebuild in an M&A premium."

So what kind of deals will we see when the cycle kicks in?

The Southeast looks like it could be ripe for significant consolidation. Banks of all sizes sought to capitalize on the massive residential housing wave there, and many of these banks are now sitting on mortgages, residential construction, and land and development loans that soured since the downturn.

That being said, the common historical view is that "banks are sold, not bought," meaning that no deal will get done unless a potential seller's management team is willing to entertain discussions.

For this article, we decided to look at three sizable regional banks in the South that could be potential sellers over the next few years. All three have yet to pay back TARP funds and are still reporting losses while struggling against overwhelming amounts of troubled commercial and residential loans. Once we settled on who might end up on the block, the next logical step was to make an educated guess about who might be the logical buyer. Here then are three potential hookups:

3. TD Bank and Synovus (SNV - Get Report)

Headquarters: Cherry Hill, N.J./Portland, Maine and Columbus, Ga.

Combined Branches: approximately 1,300

Combined Deposits: approximately $120 billion

Combined Assets: $192 billion

Why This Merger: From a geographic standpoint, Synovus' large presence in Georgia, South Carolina as well as Florida, complements TD Bank's "Maine-to-Florida" strategy. Despite a recent large capital raise, Synovus may also be a willing seller in the not so distant future either due to board and/or management exhaustion as it works through its credit troubles.

Commentary: As the U.S. bank subsidiary to Toronto-Dominion Financial Corp. ( TD - Get Report), TD Bank has been aggressively expanding south of the Canadian border for the last five years.

The march began in 2005 when it bought a majority stake in what was once Banknorth of Portland, Maine. TD then bought out the rest of the bank in 2007. It followed that deal up with the acquisition of Mid-Atlantic powerhouse Commerce Bank one year later. Most recently, TD Bank made an entry into Florida through the April FDIC-assisted acquisitions of Riverside National Bank of Florida, First Federal Bank of North Florida and American First Bank, as well as the previously mentioned agreement to acquire South Financial in May.

The Canadian bank is busy these days integrating the multitude of systems and operations that come along with rapid acquisitions, however TD Bank's CEO Bharat Masrani said at a recent investor presentation that the bank isn't ruling out further acquisitions.

" Should a compelling opportunity come up, either an FDIC-assisted transaction or one where the risks are clearly understood and manageable, we would be willing to take a look, provided our current integration plans are finalized and well under way to execution," Masrani said.

Synovus has its fair share of commercial loan problems that it must continue to wade through.

It's a "very challenging market" and it's been a "very exhaustive process" on Synovus' management team, Mogan Keegan's Patten says. "Over the long haul, the board will start to consider their strategic alternatives," and its attractive capital cushion will appeal to buyers, especially to buffer against further writedowns in its loan portfolio, he posits.

One other factor which may induce Synovus to sell -- longtime Chairman and CEO Richard Anthony took a leave of absence for medical reasons in June. While the board named temporary replacements to fill Anthony's position, if Anthony were to be replaced permanently, the board may decide that a sale is the best alternative for shareholders.

For now though Synovus has bought itself time by completing a capital raise of over $1 billion in May.

But Synovus "fits the profile of a highly coveted acquisition candidate," Rose of Raymond James says, noting that it's one of the few banks with size and scale in the South, particularly in Georgia and Florida, which will "become more valuable over time."

2. JPMorgan Chase (JPM - Get Report) and SunTrust Banks (STI - Get Report)

Headquarters: New York and Atlanta

Combined Branches: 6,800

Combined Deposits: $1.04 trillion

Combined Assets: $2.2 trillion

Why This Merger: SunTrust has long been known as the JPMorgan of the South so why not make it official? Seriously though, SunTrust provides across-the-board banking and investment services to consumers and institutional customers, like, you guessed it, JPMorgan! The bank is also located in an area where JPMorgan lacks significant presence, but may want to eventually gain access, given the large amount of retirement assets in region as well as SunTrust's relationships with area businesses.

Commentary: Lots of ifs, ands or buts come along with raising the prospect of this deal, but in theory it does make sense. We know that JPMorgan's CEO Jamie Dimon is looking outside of the U.S. for future growth. We know that the banking titan is hitting the deposit cap limit, if it hasn't already surpassed it. We know it is still integrating Washington Mutual and Bear Stearns and we know that banks are sold not bought.

But let's say in two to three years, SunTrust's management decides to test the waters.

If the price is right, Dimon is smart enough to figure a way to get the deal done.

"I don't think you can discount JPMorgan," says Raymond James' Rose, who does not cover JPMorgan, adding that historically SunTrust's valuation included an M&A premium in the stock.

To be fair, JPMorgan wouldn't be the only bank looking at SunTrust. Other banks including foreign banks (rumors surfaced that Barclays was sniffing around the bank this week), and perhaps even a U.S. Bancorp ( USB) may want a piece of the Southeast via SunTrust.

1. BB&T (BBT - Get Report) and Regions Financial (RF - Get Report)

Headquarters: Winston-Salem, N.C. and Birmingham, Ala.

Combined Branches: approximately 3,700

Combined Deposits: $202.4 billion

Combined Assets: $300.9 billion

Why This Merger: Again, another combination that has been posited in the past, but that doesn't change the fact that BB&T could gain some major cost savings from the overlap of franchises, while at the same time picking up complementary adjacent markets that would make the combined entity a true Southern powerhouse.

Commentary: BB&T has long been friendly to M&A and states in its investor presentation materials that it is looking for banks and thrifts with "compatible cultures" to enhance its banking franchise. The North Carolina-based bank completed one of the largest FDIC-assisted deals of last year by purchasing Colonial Bank.

Morgan Keegan's Patten says BB&T is likely to play defense, given that banks headquartered outside of the South are eager for real estate in that area of the country, such as TD Bank and Fifth Third ( FITB). Patten doesn't discount the possibility of any "substantial in-market" deal for BB&T.

"Looking forward, my view is that BB&T CEO Kelly King and the rest of management see the banking environment as a slower growth revenue scalable environment and the only way to out-earn peers is by integrating strategic acquisitions with good cost saves," says Patten, who declined to comment specifically on the potential for a BB&T/Regions transaction because Morgan Keegan is owned by Regions.)

Regions has been named more than once as a potential seller, including in a recent research report from Credit Suisse that listed the bank as one of its four names with the "highest probability" of a takeout sometime next year.

Analysts say that the culture at Regions, which is a culmination of three large bank mergers including the 2004 merger with Union Planters and the 2006 merger with AmSouth, never really meshed well, which could give BB&T a leg up.

With the economy off its 2008-2009 lows, BB&T CEO King has said that the bank will turn back to unassisted deals, so who knows?

" We're not opposed to looking at unassisted deals at this point, but we are remaining firm in terms of having a conservative view with regard to the economics of it," King said in a recent conference call.

--Written by Laurie Kulikowski in New York.