First M&A Deal Will Hardly Be the Last, Young N.J. Bank Says

Regal Bank in Livingston, N.J., isn’t letting its privately held status deter it from pursuing acquisitions.

The $373 million-asset bank, which agreed on Tuesday to buy the $99 million-asset Community First Bank in Somerset, N.J., in a deal that largely consisted of stock, is already counting the days before it is ready for another deal.

“We are eager about doing more acquisitions,” Thomas Lupo, Regal’s chief executive, said Tuesday. “First, we have to focus on getting the acquisition approved and getting the accretion. … Let’s get 2016 under our belt.”

Community First would be Regal’s first acquisition. The bank, formed in 2007, has focused on a steady stream of branch openings, gathering deposits in two counties and lending statewide. Management, however, realizes that it could be better positioned by adding a bit of heft.

“I think we’re already at a decent size … but we would be better served if we were even larger,” said David Orbach, Regal’s chairman.

“We’ve been carefully targeting banks of a size that we thought we could handle,” Orbach said.

While there is no set size target, Lupo said he’d like to see Regal reach $1 billion in assets in “the next couple of years” through organic growth and the possible purchase of banks with $150 million to $400 million in assets.

New Jersey has a number of banks in that asset range, meaning Regal has “plenty of room to grow” without looking beyond the state, Orbach said.

Eight banks in New Jersey have agreed to sell themselves since June 2014, with sellers averaging just $356 million in assets, based on data compiled by Keefe, Bruyette & Woods. Deal values have ranged from $10 million to $56 million.

Regal’s biggest accomplishment may have been persuading Community First to accept a $10 million deal that included 90% stock. Regal, which would prefer to do all-stock deals, opted for a small cash consideration at Community First’s request, Lupo said.

Community First, meanwhile, lists its shares on the OTC Bulletin Board, so shareholders are swapping out their stock for a less liquid holding, at least for now.

“For them to take 90% stock meant they had a level of comfort with what we’re doing,” Orbach said.

"Regal is a very good bank," Peter Schoberl, Community First's chairman, president and chief executive, said, adding that he has known Lupo for a long time. "The environment for little banks is not good ... and you have to partner with someone on the upswing with the same values."

Lupo said it could be a challenge to pursue more stock deals given Regal’s status as a privately held company. One option, he said, would be to list on a bulletin board after the bank completes its first acquisition.

A number of banks have taken a similar step in recent months, joining an exchange run by OTC Markets Group.

“That could make the next deal a little less challenging,” Lupo said.