Lakeland Bancorp in Oak Ridge, New Jersey, has agreed to acquire 1st Constitution Bancorp in Cranbury, New Jersey, for $244 million.
The all-stock deal would give Lakeland an additional residential mortgage business and bring it into affluent new markets. It would be the fifth bank acquisition for the $7.8 billion-asset Lakeland in the past eight years but its first since the pandemic began.
The combined bank would have $9.6 billion of assets, total loans of $7.4 billion and deposits of $8.2 billion; it would be the fifth-largest bank headquartered in New Jersey by deposit market share.
Lakeland would expand and deepen its presence in heavily populated central New Jersey. It would enter Mercer, Middlesex and Monmouth counties and deepen the company’s footprint in Ocean and Bergen counties. The two most heavily trafficked highways in the state — the New Jersey Turnpike and the Garden State Parkway — intersect in Middlesex County.
The bank is focused on expanding in “desirable markets” in central New Jersey and growing fee income, Thomas Shara, Lakeland's president and CEO, said in a press release Monday. 1st Constitution’s mortgage operation “enhances” Lakeland’s existing home loan business and noninterest income potential, he said.
During a call to discuss the deal with analysts, Shara said Lakeland would try to capitalize on new revenue potential and expense savings from the deal to offset costs of eventually crossing the $10 billion-asset threshold in 2023. Banks that eclipse that asset level give up some of their debit card interchange fee income and face more regulatory scrutiny.
Lakeland estimated the acquisition would prove 10% accretive to its earnings per share, assuming cost savings of 44% in 2022, or $18 million. It estimated the deal would be 3.9% dilutive to tangible book value per share at closing and projected it would earn back the dilution in 3.3 years. Shara estimated the impact of interchange hit at $3.3 million on a pretax basis.
The deal is expected to close by the first quarter of 2022.
