Provident (PFS) & Lakeland (LBAI) Get Conditional Nod for Merger
Provident Financial Services, Inc. PFS and Lakeland Bancorp, Inc. LBAI have received regulatory consent from the Federal Deposit Insurance Corporation and the New Jersey Department of Banking and Insurance to complete their previously announced merger. The deal was announced in September 2022.
The approval is based on “certain conditions and commitments,” which PFS needs to fulfill before the completion of the deal. The company needs to complete a $200 million capital raise. For this, PFS plans to raise $200 million of Tier 2 qualifying subordinated debt.
Also, Provident Financial will have to maintain a Tier 1 capital to total asset leverage ratio of at least 8.5% and a total capital to risk-based asset ratio of 11.25% or above for the three years since the completion of the deal. Further, the company will be required to maintain its ratio of commercial real estate loans to total capital and reserves at or below “the levels set forth in the three-year projections supporting its regulatory applications.”
Additionally, the combined companies’ board of directors will comprise nine directors from Provident Financial and five directors from LBAI.
Now, the companies are awaiting the nod from the Federal Reserve. For this and to complete the subordinated debt issuance, PFS and LBAI have extended the merger agreement to Jun 30, 2024.
Anthony Labozzetta, the president and CEO of Provident Bank, said, “We are very pleased to be closer to combining our two great banks to create a top-tier super-community bank. This merger will afford us greater opportunity to serve the financial needs of our customers and communities, and to continue to expand and grow our product offerings.”
Under the terms of the deal at the time of announcement, Lakeland Bancorp’s shareholders will receive 0.8319 shares of Provident Financial for each share owned. PFS and LBAI shareholders will own 58% and 42% of the combined company, respectively. Consequently, the combined bank will operate under the Provident Financial name.
The transaction is aimed at combining two of New Jersey’s complementary banking platforms to form a super-community bank. The merged entity is projected to have approximately 4% of all bank deposits in the state.
The combined franchise will benefit from incremental revenue growth opportunities. It will include Provident Financial’s fee-based insurance and wealth management businesses as well as LBAI’s growth in asset-based lending, equipment lease financing and mortgage warehouse lending.
Since the announcement of the deal, shares of PFS have dropped 26.4%, and LBAI shares have declined 24.7%.
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Currently, Provident Financial has a Zacks Rank #3 (Hold), while Lakeland Bancorp carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Last week, Prosperity Bancshares, Inc. PB obtained all regulatory approvals required to complete the acquisition of Lone Star State Bancshares, Inc. The deal is now expected to be effective as of Apr 1, 2024, subject to customary closing conditions.
The deal, announced in October 2022, received the Lone Star shareholders’ approval in March 2023.
Under the terms of the transaction, Prosperity Bancshares will issue 2.38 million shares along with $64.1 million in cash. Based on its closing price of $69.27 on Oct 7, 2022, the total consideration has been valued at roughly $228.7 million.
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