Provident Bank and Lakeland Bank announced Tuesday morning that they have entered into a definitive agreement to merge, creating a top-tier community bank in New Jersey and the tri-state area with $25 billion in assets and $20 billion in total deposits.
The combined bank, which will run under the Provident Bank name, will be headquartered in Iselin and led by CEO Anthony Labozzetta, the current CEO of Provident Bank.
Chris Martin, Provident’s current executive chairman, will continue to serve as executive chairman of a new 16-member board of directors, consisting of nine directors from Provident and seven directors from Lakeland.
Thomas Shara Jr., Lakeland’s current CEO and director, will serve as executive vice chairman.
Thomas Lyons, Provident’s current chief financial officer, will continue to serve in that role in the combined company.
The combined company will be created by an all-stock merger, valued at approximately $1.3 billion. It will operate under the “Provident Financial Services Inc.” name and will trade under the Provident ticker symbol “PFS” on the New York Stock Exchange.
Under the terms of the merger agreement, Lakeland shareholders will receive 0.8319 of a share of Provident common stock for each share of Lakeland common stock they own. Upon completion of the transaction, which is subject to both Provident and Lakeland shareholder approval, Provident shareholders will own 58% and Lakeland shareholders will own 42% of the combined company.
Labozzetta said the merger will create a super community bank of significant scale, one with a strong capital base, low credit risk profile and experienced leadership team with mergers & acquisitions integration expertise.
“We are excited to announce this transformational combination of two amazing organizations,” he said. “The scale and profitability of the combined organization will enable us to invest in the future, better compete for market share and better serve our customers and communities.”
Officials with both organizations describe the deal as a merger of like-minded institutions that have shared visions, values and a deep commitment to employees, customers and the community.
“We bring together a diverse group of employees who are committed to delivering exceptional service to our customers and the communities we serve,” Labozzetta said. “It is particularly gratifying to embark on this journey with our colleagues on the Lakeland team and Tom Shara, whom we have held in high regard for many years.”
Shara said the cultural fit is key.
“As two of New Jersey’s most respected banks that nearly mirror each other in our shared cultures and missions to support and deliver to our customers, communities and shareholders, we are thrilled that we’re combining our talented teams,” he said. “The combination of our companies will allow us to achieve substantially more for our clients, associates, communities, and shareholders than we could alone.
“I have tremendous respect for Tony Labozzetta, Chris Martin, Provident’s management team and associates. We will continue to build upon and leverage our combined strengths as we focus on the future together.”
The officials of both banks spelled out the benefits:
- Enhances scale and builds upon complementary strengths: The combined company will be strategically positioned to benefit from enhanced scale and improved opportunities for growth and profitability, they said. While the transaction fortifies Provident and Lakeland’s positions as leading players in the tri-state commercial real estate market, Provident’s two ancillary fee-based business lines in insurance and wealth management and Lakeland’s growing asset-based lending and equipment lease financing provide opportunities for additional growth and relationship expansion.
- Creates a bank with a significant New Jersey banking presence: The combined company will have approximately 4% of all bank deposits in New Jersey, which represents the second-largest share of New Jersey bank deposits for institutions with less than $100 billion in assets. The officials feel its enhanced branch footprint in northern and central New Jersey and strong capital base will allow the combined company to better serve the needs of small to midsized businesses. They feel the combined company will further strengthen its deep commitment to and extensive skillset in commercial lending.
- Financially compelling: Pro forma calculations with respect to the combined company indicate 2024 GAAP earnings per share accretion of approximately 24% or 9%, with and without purchase accounting interest rate marks, respectively. The transaction is approximately 17% (3.6 year earn back) or 4% (1.7 year earn back) dilutive to tangible book value with and without purchase accounting interest rate marks, respectively.
Management believes that conservative and achievable cost savings, projected to be approximately 35% of Lakeland’s expense base, will drive strong financial metrics, material capital generation and tangible book value per share growth. The transaction results in an internal rate of return of approximately 20%.
More than anything, Martin said it’s just a good all-around fit.
“Lakeland’s board of directors and executive leadership are fully aligned with Provident’s vision, values and culture,” he said. “Both companies provide best-in-class products and services to their customers. We are confident that this strategic combination and the resulting strong pro forma financial performance, synergies and experienced management team will deliver on our commitment to providing superior long-term shareholder returns.”
