New Jersey banks extend deadline to close their $1.3 billion merger

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Provident Financial Services and Lakeland Bancorp have agreed to extend their merger agreement through March 2024 to allow more time for regulatory approvals. 

In September 2022, the Iselin, New Jersey-based Provident agreed to pay $1.3 billion in stock for the $11.2 billion-asset Lakeland, which is headquartered in Oak Ridge, New Jersey. The deal — originally expected to close in the second quarter of 2023 — would move the $14.1 billion-asset Provident north of $25 billion in total assets and give it more than 160 branches in New Jersey, New York and Pennsylvania. 

The companies stated Wednesday in a press release that they "remained committed to the merger and to obtaining regulatory approvals."

Both Provident and Lakeland share the Federal Deposit Insurance Corp. as their primary federal regulator. Both also are regulated by the Federal Reserve as bank holding companies. Provident filed merger applications with both agencies in November 2022.

Analyst Jake Civiello, who covers Provident for Janney Montgomery Scott, wrote Thursday in a research note that he remains "confident that the transaction will be completed as soon as regulatory approvals are granted." Civiello expects the deal to close in 2024 at the end of the first quarter. Given the slippage in the deal timeline, Civiello reduced his full-year 2024 earnings-per-share projection for Provident by 10 cents to $1.90.

The extension announcement by Provident and Lakeland  comes amid a difficult year for bank merger-and-acquisition activity. The pace of deals slowed markedly as interest rates spiked beginning in the spring of 2022 and continuing into the summer of 2023. Meanwhile, increased scrutiny by federal regulators has led to an ongoing jump in the number of terminations. Through Oct. 30, 10 deals had been nixed, after 13 were called off in 2022. Only four deals were scuttled in 2021.

There have also been a number of delays. Indeed, earlier this month, the $22.5 billion-asset WaFd in Seattle announced the deadline to close its $654 million acquisition of the $8.1 billion-asset Luther Burbank in Santa Rosa, California, had been extended through February. That deal was announced originally in November 2022, and the companies had initially forecast a possible close in the second quarter of 2023.

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According to Seaport Research Partners Senior Analyst Laurie Havener Hunsicker, 2023 deal activity is tracking at the lowest level in 14 years. Through Monday, there were 128 reported bank deals with buyers paying an average 128% of sellers' tangible book value, Hunsicker wrote in a research note. In 2021, before rates began rising, there were 153 reported deals with buyers paying an average of 149% of tangible book value. 

A Provident spokesperson declined additional comment Thursday. A Federal Reserve spokesperson also declined to comment, as did a spokesperson for the FDIC. Attempts to reach New Jersey's Department of Banking and Insurance were unsuccessful. 

On Sept. 27, 2022, the same day the deal with Provident was announced, Lakeland disclosed it was the subject of a Fair Housing investigation by the Justice Department. While denying any impropriety, Lakeland agreed a day later to settle the probe. Lakeland agreed to provide $12 million in loan subsidies for residents in Black and Hispanic neighborhoods in the Newark, New Jersey, region.