Community banks are slowly beginning to witness a rebirth of consolidation in the initial weeks of 2012.

Center Bancorp Inc. of Union, N.J., agreed last week to buy Saddle River Valley Bank, giving the acquirer a way to grow beyond its historic base in central New Jersey by entering the more-affluent area of Bergen County. The deal will take Center, which two months ago completed its exit from the Troubled Asset Relief Program, to $1.6 billion in assets.

The deal ends an extended absence from acquisitions. Center's last deal was its purchase of Red Oak Bank in Morristown, N.J., in 2005.

In an interview Friday, Tony Weagley, Center's president and chief executive, discussed the reasons for the Saddle River acquisition, along with a broader outlook for merger activity this year.

The following is an excerpt:

Why were you interested in acquiring Saddle River Valley Bank?
TONY WEAGLEY: We already had a presence in Bergen County through a number of our directors. One of our directors [Howard Kent] is a real estate developer in Englewood, N.J. and our vice chairman, Raymond Vanaria, is a partner in an accounting firm in Englewood. A number of our other directors live in that area. We've already been pulling business from there and this opportunity was presented to us. We're using it as a beachhead into Bergen County and we'll be expanding from there.

Are the two branches you are acquiring from Saddle River going to be your only expansion into Bergen County?
No. We already had strategic plans to look at branch sites in Bergen County, which we'll now be able to do quicker.

Why did you make an acquisition now, especially since Center's last deal was in 2005?
This opportunity was presented to us, and the deal is good for Center Bancorp on the metrics. The deal is accretive to us both on an earnings basis and on a tangible book basis.

It seems like merger-and-acquisition activity is starting to heat up in community banking. Do you agree? If so, why?
You're going to continue to see deals. As the economy continues to lag and other environmental factors continue to affect banks in the smaller arena, you'll find people more amenable to saying they need to partner up, in order to continue to grow the organization.

People had not been as realistic on their valuations, but given the economic factors and the regulatory hurdles, smaller banks are going to have to couple with larger banks in order to survive. Margin and income is becoming more of a challenge. In 2012, moving into 2013, [the] size of the deals will become larger because I think people will become more realistic.

What were some factors that led to Center having a balance sheet to allow it to make deals?
Center is very well-positioned. We're continuing to gain market share based on the model we've built. We're continuing to pull business from our peer group and from larger organizations because we're able to react. Even through the worst of the economic storm, our nonperforming assets as a percentage of total assets were way below our peer group [at $8.5 million, or 0.59% of total assets at Dec. 31.].

Was the relative economic health of the northeastern United States a contributing factor?
There has been a lot of resiliency in this region and that's held things in check. The wealth pockets, the diversity in the economic base. Obviously in the Northeast, the Manhattan area was a bastion for financial services, but even through that, things continued to hold their own and things will start to move back in the other direction.

Do you see Center pursuing more deals this year?
We're still on the lookout for more acquisitions. We're running the business to produce return on investment for the shareholders. We continue to operate the business on a daily basis, not as if it's for sale, but as if it could be for sale. If you can find opportunities to add to your existing franchise, where you already are going to have a return on investment, that's better for your stakeholders than if you were to bulk up just for the sake of bulking up.

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