Bound Brook-based Somerset Savings Bank announced it will convert into a new stock form organization and then merge with Livingston-based Regal Bank, creating Somerset Regal Bank, a commercial bank, the parties said this week.
The conversion, offering and merger — which still require various approvals — are expected to be completed in the second quarter of 2023. The merger is valued at $58.4 million.
Under the terms of the conversion, a newly formed Maryland corporation, SR Bancorp, has been organized to facilitate the conversion and offer shares of common stock to certain depositors of Somerset Savings and others in a subscription and community offering.
William Taylor, chairman and CEO of Somerset Savings, will continue as chairman and CEO of Somerset Regal Bank and SR Bancorp. Christopher Pribula, the chief operating officer and a director of Somerset Savings, will continue in that role at Somerset Regal Bank and with SR Bancorp.
The plan of conversion establishes June 30, 2021, as the eligibility record date for determining the eligible account holders of Somerset Savings entitled to receive nontransferable subscription rights to purchase common stock.
Pursuant to the terms of the merger agreement, Regal Bancorp shareholders may elect to receive 1.93 shares of SR Bancorp Inc. common stock (based on a $10 per share offering price) or $19.30 in cash for each share of Regal Bancorp common stock, subject to the allocation and proration procedures set forth in the merger agreement, which require that 80% of the merger consideration be company common stock and 20% of the merger consideration be cash.
If SR Bancorp issues a number of shares of its common stock in its conversion stock offering that is above the midpoint of the offering range established in the independent appraisal, then the aggregate stock portion of the merger consideration will be increased to 90%.
Taylor feels the conversion and merger is a strong move.
“The simultaneous conversion and merger with Regal Bancorp, and our conversion to a commercial bank charter, marks a pivotal point in the history of Somerset Savings,” he said. “This transaction not only combines two well-respected community banking organizations, creating a combined franchise with complimentary business lines and over $1 billion in total assets, but also provides our depositors the ability to benefit as shareholders in the combined organization and allows our customers to benefit from the commercial lending expertise the Regal team brings to the combined company.
“Finally, the additional capital we raise in the offering will help support future growth as we continue our development as a full-service community bank.”