It's clear that Jay Sidhu is trying to aggressively expand Customers Bancorp (CUUU) through acquisitions and internal growth. The question remains of how much Sidhu is willing to pay for that growth.

In Sidhu's latest deal, Customers agreed to acquire CMS Bancorp (CMSB), the $247 million-asset thrift holding company for CMS Bank. The all-stock deal is valued at $20.8 million, according to the companies.

Based on the book value for CMS, it appears that Customers is paying a premium, says Joshua Siegel, chief executive of StoneCastle Partners, which invests in community banks, including Customers and CMS. Siegel estimated CMS's book value at $19.1 million before writedowns, and said its adjusted book value could be around $17.9 million.

Sidhu denies that Customers will pay a premium for CMS. CMS stock is to be valued at 95% of its common stockholders' equity at the end of month before closing, he says. Customers' stock is to be valued at 125% of its modified stockholder equity.

"It's 95% of tangible book value," Sidhu says, referring to CMS stock. "We're putting a value on our stock as 125% of book and a value on their stock at 95%. There is no premium over book at all."

Even if Customers is paying a premium for CMS, it's not necessarily a bad thing, Siegel says. CMS is based in White Plains, N.Y., and has five locations in Westchester County, a suburb of New York City. If any bank wants to expand in the New York area, the options are limited. Siegel noted one recent deal in the New York area, Provident New York Bancorp's $40.5 million cash deal for Gotham Bank

"There are not a whole lot of bite-sized acquisitions in the tri-state New York area that are available," Siegel says.

With the CMS deal, Customers has reached its second agreement in two months to acquire a thrift. In June, Customers struck a deal to buy the $1 billion-asset Acacia Federal Savings Bank in Falls Church, Va., from Ameritas Mutual Holding for $65 million in stock.

Saying that it's just a coincidence that his past two deals were for thrifts, Sidhu says he's looking to acquire small banks that have acknowledged they will struggle to survive over the long term.

"It's very difficult for small banks below $500 million to $1 billion in assets, and I would hope they would take a serious look and do an authentic self-assessment," Sidhu says. "If they can have a return on assets of 95 basis points or higher, and a double-digit return on equity, then they have a right to remain independent. If not, they should join forces with someone else."

CMS is attractive because of its location in New York — not just because it's the metro New York area, but also because of the characteristics of that market, Sidhu says.

"Our focus is on markets where there is a dominance by large banks, where more than 60% of the market is controlled by the top four to six banks," he says. "We compete much better with large banks than with community banks."

The top three banks in metro New York, in terms of deposit market share, are JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C), according to the Federal Deposit Insurance Corp.

The CMS deal also raises the question of what is Sidhu's ultimate goal with Customers Bancorp.

"It sounds like he's building a smaller version of Sovereign," says banking consultant Bert Ely, referring to Sovereign Bancorp, which Sidhu grew to $90 billion of assets while CEO. Sidhu left Sovereign in 2006.

One of the main bones of contention between Sidhu and the Sovereign board was the investment time frame, Siegel says.

"Jay is famous for having a long-term view and that's what caused strife with the Sovereign board," Siegel says.

With that in mind, it's understandable why Sidhu would agree to pay generously for CMS Bancorp, Siegel says.

"Jay's view is, I don't care if I overpay right now, it will be worth a fortune in 20 to 25 years," Siegel says.

Sidhu denies he's trying to rebuild his Sovereign empire.

"I'm not trying to build another Sovereign," Sidhu says. "I'm trying to build a profitable company under $10 billion in [assets]."

Sandler O'Neill & Partners gave financial advice to CMS on the deal, and Paul Hastings gave the seller legal advice. Stradley Ronon Stevens & Young was legal counsel to Customers.

John Ritacco, the president and chief executive of CMS, did not return a call seeking comment.

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