NEW YORK ( TheStreet) -- Financial stocks again got a boost from the regional bank sector as M&A continued to play out this week.

The Keefe, Bruyette & Woods Regional Bank Index was most recently up 3% to $26.64. Regional banks have been surging this month. The index, more commonly known as the "KRE," is up 15% based on Tuesday's closing price.

As predicted by many observers, regional bank M&A is gradually picking up speed. Earlier in the day two small Gulf Coast banks, Hancock Holding Co. ( HBHC)and Whitney Holding ( WTNY) agreed to merge in a $1.49 billion stock deal. The stock for stock exchange equaled 42% premium to Whitney's closing stock price on Tuesday.

Hancock shares were falling 5.3% on $35.09 on strong trading for a bank that averages about 100,000 shares per say. More than 1 million shares had changed hands at last check.

Investors sold off the stock on concerns that Hancock was overpaying for the stock; a concern that was mimicked in Bank of Montreal's ( BMO) agreement to purchase Marshall & Ilsley ( MI), last week.

Morgan Keegan analysts noted this could especially be true given that Whitney is "still a couple of quarters away from getting its worst credit issues behind them," according to a research note Wednesday.

Hancock plans to raise $200 million through a common stock offering in order to repay Whitney's $300 million of outstanding funds garnered through the U.S. Treasury Department's Troubled Asset Relief Program.

On the other hand, Whitney shares soared 31% to $14.20. Roughly 3 million shares had changed hands.

Morgan Keegan analysts speculate that two other Southern regional banks, Synovus ( SNV) and BancorpSouth ( BXS) are likely to benefit from the merger as they are perceived to be next in line for Southern takeout candidates.

BancorpSouth shares surged 8.5% to $15.82 on strong trading of more than 1 million shares for the small cap. Synovus shares were rising 1.8% to $2.59.

"This deal further signals that bank M&A is picking up steam and that banks are actively talking to each other and evaluating strategic options as they look to manage at the other side of the credit cycle," the note says. "Today's announcement also validates Huntington Bancshares ( HBAN) and First Horizon's ( FHN) decision to repay TARP last week in order to position themselves to capitalize on the upcoming consolidation opportunities. Both banks have talked about looking at potential strategic acquisition opportunities."

Shares of Regions Financial ( RF), which operates in the same footprint as Whitney and Hancock and also seen as a potential take out candidate surged 6% to $6.84. SunTrust Banks shares were rising 5% to $29.26.

-- Written by Laurie Kulikowski in New York.

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