Provident Bank and Lakeland Bank to Combine in $1.3B Merger

Provident Financial Services, the parent company of Provident Bank, and Lakeland Bancorp, the parent company of Lakeland Bank, entered into a definitive merger agreement pursuant to which the companies will combine in an all-stock merger valued at approximately $1.3 billion.

The combined company will have more than $25 billion in assets and $20 billion in total deposits. It will also 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 combined company expects that the transaction will fortify Provident and Lakeland’s positions in the commercial real estate market, while Provident’s two ancillary fee-based business lines in insurance and wealth management and Lakeland’s asset-based lending and equipment lease financing divisions will provide opportunities for additional growth and relationship expansion.

The merger is expected to close in Q2/23, subject to satisfaction of customary closing conditions, including receipt of customary regulatory approvals and approval by the shareholders of each company.

“We are excited to announce this transformational combination of two amazing organizations. 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. We bring together a diverse group of employees who are committed to delivering exceptional service to our customers and the communities we serve,” Anthony Labozzetta, president and CEO of Provident, 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.”

“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,” Shara, who serves as Lakeland’s president and CEO, 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.”

“Lakeland’s board of directors and executive leadership are fully aligned with Provident’s vision, values and culture,” Martin, who serves as executive chairman of Provident, 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.”

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. The combined company’s 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 is expected to result in an internal rate of return of approximately 20%.

Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both companies, Lakeland will merge with and into Provident, with Provident as the surviving corporation, and Lakeland Bank will merge with and into Provident Bank, with Provident Bank as the surviving bank. Following the closing of the transaction, Lakeland shareholders will receive 0.8319 shares 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.

The combined company will operate under the “Provident Financial Services” name and the combined bank will operate under the “Provident Bank” name. The administrative headquarters of the combined company will be located in Iselin, NJ. The combined company will trade under the Provident ticker symbol “PFS” on the New York Stock Exchange.

The combined company’s board of directors will have 16 directors, consisting of nine directors from Provident and seven directors from Lakeland.

  • Martin will continue to serve as executive chairman of the combined company’s board of directors.
  • Shara will serve as executive vice chairman of the combined company’s board of directors.
  • Labozzetta, a current director and president and CEO of Provident, will continue to serve as a director and as president and CEO of the combined company.
  • A Provident board representative will serve as the independent lead director of the combined company’s board of directors.
  • Thomas Lyons, Provident’s current senior executive vice president and CFO, will continue to serve in that role in the combined company.
  • The remainder of the executive team will draw from both Provident and Lakeland.

Piper Sandler is acting as financial advisor and has rendered a fairness opinion to the board of directors of Provident. Sullivan & Cromwell is serving as legal counsel to Provident. Keefe, Bruyette & Woods is acting as financial advisor and has rendered a fairness opinion to the board of directors of Lakeland. Luse Gorman is serving as legal counsel to Lakeland.

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