Provident Financial Services, Inc. PFS and Lakeland Bancorp, Inc. LBAI announced the extension of their merger agreement to Mar 31, 2024. This would provide both banks some additional time to obtain the required regulatory approvals.

The merger between PFS and LBAI was announced back in September 2022. At that time the deal was expected to close in second-quarter 2023. The banks would combine in an all-stock deal valued at approximately $1.3 billion.

On closure of the transaction, Lakeland’sshareholders will receive 0.8319 shares of Provident for each share owned. PFS and LBAI shareholders would own 58% and 42% of the combined company, respectively. Consequently, the combined bank will operate under the Provident name.

The deal is a strategic fit for both banks as it will enhance scale and geographic footprint, significantly positioning the merged entity for stronger financial results. At the time of merger declaration, the banks expected to have a combined total of more than $25 billion in assets, $20 billion in deposits and $18 billion in loans.

At the time of unification announcement, Anthony Labozzetta, president and chief executive officer of PFS stated, “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.”

The transaction is aimed at combining two of New Jersey’s complementary banking platform 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’s fee-based insurance and wealth management businesses as well as Lakeland’s growth in asset-based lending, equipment lease financing and mortgage warehouse lending.

The merger deal also offered favorable financial projections at the time of announcement. Notably, the combined bank’s 2024 earnings per share accretion is forecast to be around 24% and 9%, with and without purchase accounting interest rate marks, respectively. The transaction is expected to result in an internal rate of return of approximately 20%.

Management estimates achievable cost savings of around 35% of Lakeland’s expense base post merger. This will significantly support the combined entity’s bottom-line growth. It is also projected to have an efficiency ratio of less than 40% in 2024.

Chris Martin, executive chairman of Provident, stated, “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.”