The merger of two New Jersey banks has received two of three approvals necessary for the creation of what they’ve dubbed a “super-community bank.”
Provident Financial Services and Lakeland Bancorp said Monday they’d received approvals from the Federal Deposit Insurance Corp. and the New Jersey Department of Banking and Insurance, leaving just one pending regulatory approval — from the board of governors of the Federal Reserve — before their merger can be finalized under the Provident Bank name.
The regulatory approvals were given on the condition that Provident complete a $200 million capital raise ahead of the merger’s completion. The bank plans to raise that amount of Tier 2 qualifying subordinated debt.
Additionally, for three years following the merger, Provident will be required to maintain a Tier 1 capital to total assets leverage ratio of 8.5% and a total capital to risk-based assets ratio of 11.25%. The bank must also maintain its ratio of commercial real estate loans to total capital and reserves at or below levels indicated in its regulatory applications; and it must develop an FDIC-approved action plan to better mortgage applications from and originations to all demographics within its market area.
The deal was originally inked in September 2022 and expected to close in the second quarter of 2023, but the banks extended their merger agreement in December 2023 to ensure time for required approvals. Now, they plan to extend their merger agreement to June 30 for the same reason, and to complete the subordinated debt issuance.
Iselin-based Provident will pay $1.3 billion in stock for $11.2 billion-asset Lakeland, which is headquartered roughly 35 miles away in Oak Ridge. The combined bank will have more than $25 billion in assets, $20 billion in deposits and locations throughout New Jersey, New York and Pennsylvania.
“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,” Provident CEO Anthony Labozzetta said in a prepared statement.
Labozzetta will maintain his role at the combined company, as will Thomas Lyons, Provident’s senior executive vice president and CFO. The rest of the executive team will come from both banks, a Provident spokesperson told Banking Dive.
The deal will make “the new Provident” the second-largest bank by asset size based in the Garden State, following $61 billion-asset Valley Bank in Wayne.
Thomas Shara, Lakeland’s CEO, said the merger “gives me great pride as we bring together top talent and leadership under one team.”
Shara will serve as executive vice chairman of the combined company, alongside Provident executive chairman Chris Martin, who will keep his position following the merger. Labozzetta will serve as a director of the combined company. All in, the combined bank will have 14 directors, with five from Lakeland and nine from Provident, according to Monday’s announcement.
A Provident spokesperson said the bank aims to offer an expanded branch network and broader product offerings and services through the tie-up. Lakeland customers, he noted, will benefit from the addition of wealth management and insurance services offered by the acquiring bank.
Additionally, the combined bank has a strong capital base and low credit risk profile, the spokesperson said, and the ability to “weather systemic stresses and challenges in the current economic environment.”
