NEW YORK ( TheStreet) -- Analysts are predicting that the banking industry's heavy consolidation will continue this year, especially in the small cap and community- banking sector.

According to SNL Financial, there have been four bank and thrift deals worth $1.6 billion announced so far this year. That compares to a total of 207 in 2010, valued of $12.1 billion.

"I think M&A is going to be stronger than people expect. What you have seen thus far has been the purchase of healthy banks with excess capital of troubled banks. We think 2011 will be the year that healthy banks will purchase healthy banks," said FBR Capital Markets analyst Brett Scheiner in an interview with TheStreet.

Bank deals so far this year include Bank of Montreal's ( BMO) acquisition of Marshall & Ilsley ( MI) and Comerica's ( CMA) acquisition of Sterling Bancshares ( SBIB).

Mergers in small cap will likely provide some good investment opportunities, especially for shareholders of non-failing banks who sell, according to analysts.

Brain Foran - an analyst with Nomura Securities International, is struck by "how quickly it has transitioned from a buyer's market to a seller's market," pointing how that recent sellers, including M&I, Whitney Holding ( WTNY) (which Hancock Holding ( HBHC) agreed in December to acquire for $1.5 billion) and Sterling, are all being taken out for "around 15 times normalized earnings."

Foran said that level of valuation was "a big price from where we were a couple years ago. As a result what you are seeing is the sellers stock goes up a lot and the buyers stock go down a lot."

Matt Olney, an analyst at Stephens Inc, said that "while earnings have traditionally been the primary catalyst for the bank industry, we believe valuations in 2011 will be driven by M&A volume and pricing."

Olney sees M&A valuations returning to normal levels in 2011 and 2012, but says most exits will be at a bank to bank basis due to the high supply of banks looking to exit and the limited number of banks with cash on hand to acquire. TARP of course is also a factor in deals as healthy bank deals are back and banks without TARP will make for cleaner deals.

At the moment some of the most attractive small cap bank takeout targets are in Texas, says Olney.

"We believe the only Southeastern state that can sustain elevated takeout multiples is Texas as it contains several strong buyers, few sellers and a relatively positive economic climate," Olney said in a note.

Olney and Scheiner and other industry analysts have singled out some of the most likely small cap banks that will be acquired this year along with potential acquirers and possible valuations.

Among possible buyers, Scheiner lists Eagle Bancorp ( EGBN) of Bethesda, Md., United Bankshares ( UBSI) of Charleston, W.V., and First Citizens BancShares ( FCNCA) of Raleigh, N.C.

Here are the 10 community bank targets, by ascending asset size. Most are trading at forward price-to-earnings ratios below the "15 times normalized earnings" that Brian Foran said was the trend for recent deals. Of course, for many banks, the consensus earnings estimates for 2012 will still be below the "normalized" levels, so potential takeout deals for most of these banks would be winners for their shareholders, provided the recent pricing trend were to hold up.

Terms

For each of the 10 banks discussed on the following pages, we'll be looking at capital strength, earnings quality and asset quality. For an explanation of those terms you can click on the box below.

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