New Jersey's Hubco Inc. is one of the most voracious creatures in the bank consolidation food chain.

In the last five years, the Mahwah-based community banking company has grown sixfold in assets, through 16 acquisitions in northern New Jersey and, most recently, Connecticut. Five of the deals have been announced - three completed - in the last 12 months. Three acquisitions announced and two completed since December have made Hubco the most active buyer among community banks this year.

Led by president and chief executive Kenneth T. Neilson, the bank has made a name for itself in the industry as an aggressive and successful - but friendly - acquirer.

Hubco's active growth strategy stems from a conviction among Mr. Neilson and other bank officials that the key to surviving the industry's rampant consolidation is by achieving high performance through continual growth. That enables the bank to leverage its operations over a wider customer base, generating ever-increasing profits.

Despite a steady stream of purchases over the past few years, the company is determined to keep its costs down and returns up. Currently, the bank's efficiency ratio is a low 55%, meaning it costs 55 cents to generate $1 of net operating income. The company has regularly created above-average value for shareholders, generating returns on assets and equity of 1.5% and almost 20%, respectively, in the past six months.

And Hubco officials said they prefer to work with their targets on friendly terms, rather than apply pressure on recalcitrant managements.

"I think we're viewed positively - as a good force in the marketplace and as having built a good franchise and being a good competitor," Mr. Neilson said. "All of our transactions have been friendly mergers. If somebody expresses an interest, we try to take a creative approach in putting the acquisition together, in a way that becomes a win-win situation for both sides."

With industry consolidation growing nationwide, many of the country's 9,000 community banks are considering the role they wish to play in the current mergermania. Managements are trying to decide how active they wish to be in acquiring other banks, and what style they wish to adopt in pursuing their targets.

In contrast to Hubco, for example, Mattituck, N.Y.-based North Fork Bancorp., has consistently used a more aggressive tactic, buying stakes in target institutions and publicly pressuring them to sell out.

Although that style has worked for North Fork, Mr. Neilson said he doesn't think Hubco would follow North Fork's lead. "We're just more comfortable with our approach and we've found that it works well for us," Mr. Neilson said.

"It's a far more genteel style of acquisition," said Frank Barkocy, senior vice president of Josephthal Lyon & Ross Inc. in New York.

Already, the market is saturated with analysts' predictions that the industry eventually will consist of a handful of very large banks at the top, and a plethora of very small ones at the bottom. These analyses project that no midsize banks or large community banks would survive the buying spree.

But Mr. Neilson said he believes high-performing midsize institutions can survive the crunch and prosper, and he intends to be one of them.

"We feel that we are a high-performance institution and plan to continue to be one," Mr. Neilson said. "We've made significant investments in technology and systems, and feel that we can compete with any of the major banks in our market with technology."

Since Mr. Neilson took the helm in 1989, Hubco has followed one of the most aggressive growth tracks of any community bank. Then $500 million in assets, the company hadn't made an acquisition since 1982, but found itself at a crossroads over how to be an efficient, top performer.

"We recognized that to do that we could either grow or reduce expenses and cut back some things," Mr. Neilson said. "We opted for the growth mode."

Hubco made its first move in October 1990, buying Mountain Ridge State Bank in West Orange, N.J. Its ultimate goal: $1 billion in assets within five years.

Over the next four years, Hubco followed up with acquisitions of Meadowlands National Bank, Center Savings Bank, Irving Savings Bank, Broadway Bank and Trust Co., Pilgrim State Bank, Washington Bancorp, Jefferson National Bank, Urban National Bank, and Growth Financial Corp.

The company also purchased four branches of the failed Polifly Savings & Loan Association and three branches of Crossland Federal Savings Bank, and bought Shoppers Charge Accounts Co., a third-party private-label credit card provider.

With assets now bordering the $3 billion mark, and its 85-branch network about to stretch from Middlesex County in New Jersey to Middlesex County in Connecticut, Hubco possesses what analysts call one of the most attractive franchises in the metropolitan New York market.

"The company has looked to build positioning in markets that they felt they knew best, markets that were similar to ones in which they already operated," Mr. Barkocy said. "A lot of banks should be thinking along similar lines. Forget about the barrier of a state boundary. " Hubco is constantly on the lookout for new opportunities, whether through purchases, or by expanding its product offerings to include insurance and mutual funds. However, the company doesn't have any specific goals in mind, having already surpassed its $1 billion goal in 1992.

"Our goal continues to be being one of the highest-performing banks in our marketplace," Mr. Neilson said. "Growth has helped us achieve that, but growth itself isn't the goal. We wouldn't do any acquisitions that wouldn't enhance shareholder value."

Analysts laud his success and style, but Mr. Neilson says he wouldn't recommend the same path for most other community banks looking to join the M&A bandwagon. The risks and complications today, he says, are far too great for the shrinking rewards that can be gained by institutions who are unaccustomed to the merger world.

"While I might have said yes three or four years ago, today growth through acquisition isn't necessarily the best strategy for someone who hasn't done it and doesn't have the experience at achieving the integration and cost savings," Mr. Neilson said.

"It's a lot more difficult today than it was five years ago to structure acquisitions which generate a big increase in shareholder value. It would present too much risk for the reward in the market for a community bank that hasn't done it before."

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