Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial information combines the historical consolidated financial position and results of operations of Provident Financial Services, Inc. (“Provident” or “Provident Financial”) and Lakeland Bancorp, Inc. (“Lakeland” or “Lakeland Bancorp”) as an acquisition of Lakeland by Provident. The Agreement and Plan of Merger (the “merger agreement”) was entered into on September 26, 2022, as amended, by and among Provident, Lakeland and NL 239 Corp., a direct, wholly owned subsidiary of Provident (“Merger Sub”), and provides that each share of Lakeland common stock issued and outstanding immediately prior to the effective time will be converted into the right to receive 0.8319 of a share of Provident common stock. The merger agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Lakeland, with Lakeland as the surviving entity (the “merger”), and as soon as reasonably practicable following the merger, Lakeland will merge with and into Provident, with Provident as the surviving entity (the “holdco merger”).
The unaudited pro forma condensed combined financial information has been prepared to give effect to the following:
• | the acquisition of Lakeland by Provident under the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification, ASC 805, “Business Combinations” where the assets and liabilities of Lakeland will be recorded by Provident at their respective fair values as of the date the merger is completed; |
• | the distribution of shares of Provident common stock to Lakeland shareholders in exchange for shares of Provident common stock (based upon a 0.8319 exchange ratio); |
• | certain reclassifications to conform historical financial statement presentations of Lakeland to Provident; and |
• | transaction costs in connection with the merger. |
The unaudited pro forma combined condensed consolidated financial information has been derived from and should be read in conjunction with: Provident’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2023, which were included in Provident’s Annual Report on Form 10-K for the year ended December 31, 2023, and Provident’s unaudited financial statements and the related notes thereto as of and for the three months ended March 31, 2024, which were included in Provident’s Quarterly Report on Form 10-Q for the three months ended March 31, 2024, which were filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 28, 2024, and April 26, 2024, respectively, and Lakeland’s audited consolidated financial statements as of and for the year ended December 31, 2023 and 2022 and Lakeland’s unaudited consolidated financial statements as of and for the three months ended March 31, 2024, which are being filed as Exhibit 99.2 and Exhibit 99.3 to this Current Report on Form 8-K, respectively.
The unaudited pro forma condensed combined income statements for the three months ended March 31, 2024 and for the year ended December 31, 2023 combine the historical consolidated income statements of Provident and Lakeland, giving effect to the merger as if it had been completed on January 1, 2023. The accompanying unaudited pro forma condensed combined balance sheet as of March 31, 2024 combines the historical consolidated balance sheets of Provident and Lakeland, giving effect to the merger as if it had been completed on March 31, 2024.
The unaudited pro forma condensed combined financial information is provided for illustrative information purposes only. The unaudited pro forma condensed combined financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The unaudited pro forma condensed combined financial information has been prepared by Provident in accordance with Regulation S-X Article 11, Pro Forma Financial Information.
The unaudited pro forma condensed combined financial information also does not consider any potential effects of changes in market conditions on revenue enhancements, expense efficiencies, asset dispositions and share repurchases, among other factors. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the merger.
As of the date of this Current Report on Form 8-K, Provident has not completed the valuation analysis and calculations in sufficient detail necessary to arrive at the required estimates of the fair value of Lakeland’s assets to be acquired or liabilities to be assumed, other than a preliminary estimate for intangible assets and certain financial assets and financial liabilities. Accordingly, apart from the aforementioned, certain Lakeland assets and liabilities are presented at their respective carrying amounts and should be treated as preliminary values. A final determination of the fair value of Lakeland’s assets and liabilities will be based on Lakeland’s actual assets and liabilities as of the closing date and therefore cannot be made prior to the completion of the merger. In addition, the value of the merger consideration to be paid by Provident in shares of Provident common stock upon the completion of the merger will be determined based on the closing price of Provident common stock on the closing date of the merger and the number of issued and outstanding shares of Lakeland common stock immediately prior to the closing of the merger. Actual adjustments may differ from the amounts reflected in the unaudited pro forma condensed combined financial information, and the differences may be material.
Further, Provident has not identified all adjustments necessary to conform Lakeland’s accounting policies to Provident’s accounting policies. Upon completion of the merger, or as more information becomes available, Provident will perform a more detailed review of Lakeland’s accounting policies. As a result of that review, differences could be identified between the accounting policies of the two companies that, when conformed, could have a material impact on the combined company’s financial information.
As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma condensed combined financial information.
Provident estimated the fair value of certain Lakeland assets and liabilities based on a preliminary valuation analysis, due diligence information, information presented in Lakeland’s SEC filings and other publicly available information. Until the merger is completed, both companies are limited in their ability to share certain information.
Upon completion of the merger, a final determination of the fair value of Lakeland’s assets acquired and liabilities assumed will be performed. Any changes in the fair values of the net assets or total purchase consideration as compared with the information shown in the unaudited pro forma condensed combined financial information may change the amount of the total purchase consideration allocated to goodwill and other assets and liabilities and may impact the combined company’s statement of income. The final purchase consideration allocation may be materially different than the preliminary purchase consideration allocation presented in the unaudited pro forma condensed combined financial information.
Provident Financial Services, Inc.
Pro Forma Impact of Recognition of Fair Value Adjustments
For the Fiscal Year Ended December 31, 2023, and Three Months Ended March 31, 2024
Recognition of Fair Value Adjustments And Merger-Related Cost Savings | Amount | 1 Year | 1 Quarter | |||||||||||||||
Interest Rate Adjustments | Years | Method | ($000) | |||||||||||||||
Investment - Gross Fair Value Adjustment (AFS and HTM) | $ | (280,137 | ) | $ | (242,786 | ) | ||||||||||||
Accretion in Period (increase to investment income) | 7.5 | Straight Line | $ | 37,352 | $ | 9,338 | ||||||||||||
Loan Interest Rate Fair Value Adjustment | $ | (314,039 | ) | $ | (236,977 | ) | ||||||||||||
Accretion in Period (increase to loan interest) | Level Yield | $ | 77,062 | $ | 19,266 | |||||||||||||
Non-PCD Credit Fair Value Adjustment | $ | (72,910 | ) | $ | (51,375 | ) | ||||||||||||
Accretion in Period (increase to loan interest) | Level Yield | $ | 21,535 | $ | 5,384 | |||||||||||||
CD Interest Rate Fair Value Adjustment | $ | (7,683 | ) | $ | — | |||||||||||||
Accretion in Period (increase to CD interest expense) | 1.0 | Straight Line | $ | 7,683 | $ | 1,921 | ||||||||||||
Borrowed Funds Interest Rate Fair Value Adjustment | ||||||||||||||||||
Wholesale | $ | 1,579 | $ | 790 | ||||||||||||||
Accretion in Period (increase to borrowed funds interest expense) | 2.0 | Straight Line | $ | (790 | ) | $ | (197 | ) | ||||||||||
Core Deposit Intangible Amortization | ||||||||||||||||||
CDI Fair Value | $ | 210,264 | $ | 172,034 | ||||||||||||||
Amortization | 10.0 | Sum of the Years Digits | $ | (38,230 | ) | $ | (9,557 | ) | ||||||||||
Amortizaiton of Existing Intangibles | $ | (2,029 | ) | $ | (436 | ) | ||||||||||||
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Total Intangible Amortization | $ | (36,201 | ) | $ | (9,121 | ) | ||||||||||||
Holding Company - Sub Debt and Trust Preferred Securities Fair Value Adjustment | $ | (45,244 | ) | $ | (36,195 | ) | ||||||||||||
Accretion in Period (increase to interest expense - Holding Co) | 5.0 | Straight Line | $ | 9,049 | $ | 2,262 |
Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet
As of March 31, 2024
(in thousands)
Provident Financial Services | Lakeland Bancorp | Pro Forma Adjustments | Pro Forma Provident Financial Services | |||||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and due from banks | $ | 158,306 | $ | 203,186 | $ | (55,766 | ) | (1 | ) | $ | 305,726 | |||||||||
Short-term invesments | 46 | 4,433 | 4,479 | |||||||||||||||||
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Total cash and cash equivalents | 158,352 | 207,619 | (55,766 | ) | 310,205 | |||||||||||||||
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Available-for-sale securities | 1,666,306 | 914,029 | 2,580,335 | |||||||||||||||||
Held-to-maturity securities | 354,671 | 827,107 | (164,604 | ) | (2 | ) | 1,017,174 | |||||||||||||
Equity Securities, at fair value | 1,341 | 17,646 | 18,987 | |||||||||||||||||
Federal Home Loan Bank and other bank stock | 77,750 | 52,205 | 129,955 | |||||||||||||||||
Loans held for sale | — | 564 | 564 | |||||||||||||||||
Loans, net of deferred fees | 10,842,707 | 8,320,424 | (386,949 | ) | (3 | ) | 18,776,182 | |||||||||||||
Less: Allowance for loan and lease losses | 106,429 | 76,823 | 2,221 | (3 | ) | 185,473 | ||||||||||||||
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Net loans | 10,736,278 | 8,243,601 | (389,170 | ) | 18,590,709 | |||||||||||||||
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Other real estate owned | 11,324 | — | 11,324 | |||||||||||||||||
Bank premises and equipment, net | 69,487 | 51,783 | 2,065 | (4 | ) | 123,335 | ||||||||||||||
Accrued interest receivable | 58,677 | 37,968 | 96,645 | |||||||||||||||||
Goodwill | 443,623 | 271,829 | (191,101 | ) | (5 | ) | 524,351 | |||||||||||||
Core deposit intangible | 13,616 | 6,623 | 203,641 | (6 | ) | 223,880 | ||||||||||||||
Bank-owned life insurance | 243,513 | 160,587 | 404,100 | |||||||||||||||||
Other assets | 295,980 | 173,323 | 84,127 | (7 | ) | 553,430 | ||||||||||||||
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Total assets | $ | 14,130,918 | $ | 10,964,884 | $ | (510,808 | ) | $ | 24,584,994 | |||||||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Liabilities: | ||||||||||||||||||||
Deposits in domestic offices | ||||||||||||||||||||
Demand deposits | $ | 7,905,961 | $ | 5,810,640 | $ | 13,716,601 | ||||||||||||||
Savings deposits | 1,160,951 | 659,027 | 1,819,978 | |||||||||||||||||
Certificates of deposit | 1,031,980 | 2,030,771 | (7,683 | ) | (8 | ) | 3,055,068 | |||||||||||||
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Total deposits | 10,098,892 | 8,500,438 | (7,683 | ) | 18,591,647 | |||||||||||||||
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Mortgage escrow deposits | 43,881 | — | 43,881 | |||||||||||||||||
Borrowed funds | 2,058,098 | 927,956 | 1,579 | (9 | ) | 2,987,633 | ||||||||||||||
Subordinated debentures | 10,744 | 194,814 | (45,244 | ) | (10 | ) | 160,314 | |||||||||||||
Other liabilities | 224,141 | 162,246 | 386,387 | |||||||||||||||||
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Total Liabilities | 12,435,756 | 9,785,454 | (51,348 | ) | 22,169,862 | |||||||||||||||
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Stockholders’ Equity: | ||||||||||||||||||||
Preferred stock | — | — | — | |||||||||||||||||
Common stock | 832 | 859,712 | (859,166 | ) | (11 | ) | 1,378 | |||||||||||||
Additional paid-in capital | 990,582 | — | 820,995 | (12 | ) | 1,811,577 | ||||||||||||||
Retained earnings | 988,480 | 386,319 | (487,890 | ) | (13 | ) | 886,909 | |||||||||||||
Accumulated other comprehensive income | (151,585 | ) | (65,149 | ) | 65,149 | (14 | ) | (151,585 | ) | |||||||||||
Treasury shares, at cost | (129,062 | ) | (1,452 | ) | 1,452 | (14 | ) | (129,062 | ) | |||||||||||
Unallocated common stock held by Employee Stock Ownership Plan | (4,085 | ) | — | (4,085 | ) | |||||||||||||||
Common stock acquired by the Directors’ Deferred Fee Plan | (2,546 | ) | — | (2,546 | ) | |||||||||||||||
Deferred compensation - Directors Deferred Fee Plan | 2,546 | — | 2,546 | |||||||||||||||||
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Total stockholders’ equity | 1,695,162 | 1,179,430 | (459,460 | ) | 2,415,132 | |||||||||||||||
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Total Liabilities and Stockholders’ Equity | $ | 14,130,918 | $ | 10,964,884 | $ | (510,808 | ) | $ | 24,584,994 | |||||||||||
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Footnotes to
Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet
As of March 31, 2024
(in thousands)
(1) | Adjustment to record combined merger related expenses | $ | 55,766 | |||||||
(2) | Adjustment to record held to maturity investment securities at fair value | $ | (164,604 | ) | ||||||
(3) | Adjustment to record loans at fair value | |||||||||
Interest rate adjustment to record loans at fair value | $ | (314,039 | ) | |||||||
Gross credit mark on loans | (79,044 | ) | ||||||||
Purchased credit discount (“PCD”) CECL reserve gross up amount | 6,134 | |||||||||
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Adjustment on loans | $ | (386,949 | ) | |||||||
Eliminate existing Lakeland Bancorp allowance for loan and lease losses | $ | 76,823 | ||||||||
Less: CECL reserve | (79,044 | ) | ||||||||
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Net adjustment to allowance for credit losses on loans and leases | $ | (2,221 | ) | |||||||
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Fair value adjustment to net loans | $ | (389,170 | ) | |||||||
(4) | Adjustment to record real estate at fair value | $ | 2,065 | |||||||
(5) | Excess of purchase price less Lakeland tangible equity, elimination of existing Lakeland goodwill, net fair value adjustments and creation of core deposit intangible (“CDI”) | |||||||||
Total stockholders equity | $ | 1,179,430 | ||||||||
CDI | (6,623 | ) | ||||||||
Goodwill | (271,829 | ) | ||||||||
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Lakeland Tangible equity | $ | 900,978 | ||||||||
Purchase price | $ | 821,541 | ||||||||
Less: Tangible Equity of Lakeland | (900,978 | ) | ||||||||
Plus: Adjustments to record Lakeland Bank merger-related expenses (after tax) | 6,690 | |||||||||
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Excess of purchase price over tangible equity of Lakeland | $ | (72,747 | ) | |||||||
Net fair value adjustments (net of deferred taxes) | 153,475 | |||||||||
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Preliminary pro forma goodwill resulting from merger | 80,728 | |||||||||
Less: Lakeland Bancorp existing goodwill | $ | (271,829 | ) | |||||||
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Net adjustment to goodwill | $ | (191,101 | ) | |||||||
(6) | Adjustment to record CDI | |||||||||
Estimated CDI | $ | 210,264 | ||||||||
Less: Lakeland Bancorp existing CDI | (6,623 | ) | ||||||||
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Net adjustment to CDI | $ | 203,641 | ||||||||
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(7) | Current/deferred income taxes created as a result of purchase accounting adjustments | |||||||||
Securities fair value adjustment | $ | (164,604 | ) | |||||||
Loan fair value adjustment | (389,170 | ) | ||||||||
CDI | 210,264 | |||||||||
Real estate fair value adjustment | 2,065 | |||||||||
Time deposit fair value adjustment | 7,683 | |||||||||
Borrowed funds fair value adjustment | (1,579 | ) | ||||||||
Subordinated debt fair value adjustment | 45,244 | |||||||||
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Net fair value adjustments | (290,098 | ) | ||||||||
Current/deferred income taxes at 28% effective marginal rate | $ | 81,227 | ||||||||
Deferred taxes (net) eliminated on Lakeland existing CDI | 2,900 | |||||||||
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Current/deferred income taxes at 28% effective marginal rate | $ | 84,127 | ||||||||
(8) | Adjustment to record time deposits at fair value | $ | (7,683 | ) | ||||||
(9) | Adjustment to record other borrowings at fair value | $ | 1,579 | |||||||
(10) | Adjustment to record subordinated debt at fair value | $ | (45,244 | ) |
(11) | Elimination of Lakeland Bancorp’s common stock and issuance of 54,587,461 shares of Provident Financial common stock, $0.01 par value, as consideration. Shares issued based on 65,617,816 Lakeland Bancorp shares outstanding as of March 31, 2024 and an exchange ratio of 0.8319x | |||||||||
Common stock, par value $0.01 issued as consideration | $ | 546 | ||||||||
Eliminate existing Lakeland existing common stock | (859,712 | ) | ||||||||
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Adjustment to common stock, par value $0.01 | $ | (859,166 | ) | |||||||
(12) | Record Provident Financial paid in capital issued in consideration | $ | 820,995 | |||||||
(13) | Eliminate Lakeland Bancorp’s retained earnings as of December 31, 2023 | $ | (386,319 | ) | ||||||
Record the impact to equity of the CECL non-purchased deteriorated credit loans net of taxes | (52,495 | ) | ||||||||
Recognition of Provident Bank transaction expenses, net of taxes | (49,076 | ) | ||||||||
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Total adjustments to retained earnings | $ | (487,890 | ) | |||||||
(14) | Eliminate Lakeland Bancorp’s other capital accounts | |||||||||
Accumulated other comprehensive income | $ | 65,149 | ||||||||
Treasury shares, at cost | $ | 1,452 |
Pro Forma Income Statement – March 31, 2024 Consolidated
Provident for the Quarter Ended March 31, 2024 | Lakeland Bancorp for the Quarter Ended March 31, 2024 | Pro Forma Adjustments | Pro Forma Combined for the Quarter Ended March 31, 2024 | |||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||
Interest Income | ||||||||||||||||||||
Loans receivable, including fees | $ | 148,079 | $ | 114,680 | $ | 19,266 | (1 | ) | $ | 282,025 | ||||||||||
Securities, deposits, federal funds sold and other short-term investments | 15,780 | 14,181 | 9,338 | (2 | ) | 39,299 | ||||||||||||||
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Total interest income | 163,859 | 128,861 | 28,603 | 321,323 | ||||||||||||||||
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Interest Expense | ||||||||||||||||||||
Deposits | 52,534 | 54,763 | 1,921 | (3 | ) | 109,218 | ||||||||||||||
Borrowed funds | 17,383 | 5,560 | (197 | ) | (4 | ) | 22,746 | |||||||||||||
Subordinated debentures and trust preferred securities | 272 | 5,980 | 2,262 | (5 | ) | 8,514 | ||||||||||||||
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Total interest expense | 70,189 | 66,303 | 3,986 | 140,478 | ||||||||||||||||
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Net interest income | 93,670 | 62,558 | 24,618 | 180,846 | ||||||||||||||||
Provision charge (benefit) for credit losses | 186 | (2,620 | ) | — | (6 | ) | (2,434 | ) | ||||||||||||
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Net interest income after provision for loan losses | 93,484 | 65,178 | 24,618 | 183,280 | ||||||||||||||||
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Noninterest income | ||||||||||||||||||||
Fees | 5,912 | 3,649 | — | 7,871 | ||||||||||||||||
Wealth management income | 7,488 | | — | | — | 9,178 | ||||||||||||||
Insurance agency income | 4,793 | — | — | 4,793 | ||||||||||||||||
Bank-owned life insurance | 1,817 | 877 | — | 2,694 | ||||||||||||||||
Net loss on securities transactions | (1 | ) | (129 | ) | — | (130 | ) | |||||||||||||
Other income | 798 | 697 | — | 1,495 | ||||||||||||||||
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Total non interest income | 20,807 | 5,094 | — | 25,901 | ||||||||||||||||
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Noninterest expense | ||||||||||||||||||||
Compensation and employee benefits | 40,048 | 26,874 | — | 66,922 | ||||||||||||||||
Net occupancy expense | 8,520 | 7,886 | — | 16,406 | ||||||||||||||||
Data processing expense | 6,783 | 1,781 | — | 8,176 | ||||||||||||||||
FDIC insurance | 2,272 | 1,393 | — | 4,053 | ||||||||||||||||
Amortization of intangibles | 705 | 436 | 9,121 | (7 | ) | 10,262 | ||||||||||||||
Advertising and promotion expense | 966 | 484 | — | 1,450 | ||||||||||||||||
Credit loss (benefit) expense for off-balance sheet exposure | (506 | ) | (72 | ) | — | (578 | ) | |||||||||||||
Merger-related expenses | 2,202 | 68 | — | 2,270 | ||||||||||||||||
Other operating expenses | 10,331 | 5,727 | — | 16,058 | ||||||||||||||||
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Total non interest expense | $ | 71,321 | $ | 44,577 | $ | 9,121 | $ | 125,019 | ||||||||||||
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Income before tax expense | $ | 42,970 | $ | 25,695 | $ | 15,496 | $ | 84,161 | ||||||||||||
Income tax expense | 10,888 | 5,900 | 4,339 | (8 | ) | 21,127 | ||||||||||||||
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Net income available to common shareholders | $ | 32,082 | $ | 19,795 | $ | 11,157 | $ | 63,034 | ||||||||||||
Less: earnings allocated to participating securities | — | — | — | — | ||||||||||||||||
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Net income allocated to common shareholders | $ | 32,082 | $ | 19,795 | $ | 11,157 | $ | 63,034 | ||||||||||||
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Basic earnings per share | $ | 0.43 | $ | 0.30 | $ | 0.49 | ||||||||||||||
Average basic shares outstanding | 75,260,029 | 65,135,000 | (10,036,539 | ) | (9 | ) | 129,847,490 | |||||||||||||
Diluted earnings per share | $ | 0.43 | $ | 0.30 | $ | 0.49 | ||||||||||||||
Average diluted shares outstanding | 75,275,660 | 65,324,000 | (10,330,539 | ) | (9 | ) | 129,863,121 |
Footnotes to
Pro Forma Income Statement – March 31, 2024 Consolidated
(1) | Estimated loan interest yield adjustment amortization | |||||
(2) | Estimated investment securities fair value adjustment amortization | |||||
(3) | Estimated time deposit fair value adjustment amortization | |||||
(4) | Estimated borrowed funds fair value adjustment amortization | |||||
(5) | Estimated subordinated debt fair value adjustment amortization | |||||
Amount ($000) | ||||||
(6) | CDI intangible amortization | |||||
Reverse amortization recorded for the Quarter ended March 31, 2024 | $ | (436 | ) | |||
Adjustment to CDI amortization | 9,557 | |||||
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Net adjustment | $ | 9,121 | ||||
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(7) | Tax effect on the pro forma adjustments at an assumed 28.00% effective combined federal and state tax rate | |||||
(8) | Reflects the issuance of 54,587,461 shares of Provident Financial Services common stock in consideration for the outstanding share of Lakeland Bancorp including conversion of restricted stock units of Lakeland Bancorp into shares of common stock at the effective time |
Pro Forma Income Statement - December 31, 2023 Consolidated
Provident for the Year Ended December 31, 2023 | Lakeland Bancorp for the Year Ended December 31, 2023 | Pro Forma Adjustments | Pro Forma Combined for the Year Ended December 31, 2023 | |||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||
Interest Income | ||||||||||||||||||||
Loans receivable, including fees | $ | 556,235 | $ | 432,038 | $ | 77,062 | (1 | ) | $ | 1,065,335 | ||||||||||
Securities, deposits, federal funds sold and other short-term investments | 59,585 | 59,000 | 37,352 | (2 | ) | 155,937 | ||||||||||||||
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|
|
|
|
|
| |||||||||||||
Total interest income | 615,820 | 491,038 | 114,414 | 1,221,272 | ||||||||||||||||
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|
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|
|
|
| |||||||||||||
Interest Expense | ||||||||||||||||||||
Deposits | 159,459 | 163,095 | 7,683 | (3 | ) | 330,237 | ||||||||||||||
Borrowed funds | 55,856 | 33,564 | (790 | ) | (4 | ) | 88,631 | |||||||||||||
Subordinated debentures and trust preferred securities | 1,051 | 12,698 | 9,049 | (5 | ) | 22,798 | ||||||||||||||
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|
|
|
|
|
| |||||||||||||
Total interest expense | 216,366 | 209,357 | 15,942 | 441,665 | ||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||
Net interest income | 399,454 | 281,681 | 98,472 | 779,607 | ||||||||||||||||
Provision charge for credit losses | 27,904 | 13,578 | — | 41,482 | ||||||||||||||||
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| |||||||||||||
Net interest income after provision for loan losses | 371,550 | 268,103 | 98,472 | 738,125 | ||||||||||||||||
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|
| |||||||||||||
Noninterest income | ||||||||||||||||||||
Fees | 24,396 | 17,564 | — | 41,960 | ||||||||||||||||
Wealth management income | 27,669 | — | — | 27,669 | ||||||||||||||||
Insurance agency income | 13,934 | — | — | 13,934 | ||||||||||||||||
Bank-owned life insurance | 6,482 | 3,450 | — | 9,932 | ||||||||||||||||
Net gain on securities transactions | 30 | 110 | — | 140 | ||||||||||||||||
Other income | 7,318 | 4,014 | — | 11,332 | ||||||||||||||||
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|
|
|
|
|
|
| |||||||||||||
Total non interest income | 79,829 | 25,138 | — | 104,967 | ||||||||||||||||
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|
| |||||||||||||
Noninterest expense | ||||||||||||||||||||
Compensation and employee benefits | 148,497 | 108,874 | — | 257,371 | ||||||||||||||||
Net occupancy expense | 32,271 | 31,304 | — | 63,575 | ||||||||||||||||
Data processing expense | 22,993 | 7,563 | — | 30,556 | ||||||||||||||||
FDIC insurance | 8,578 | 5,294 | — | 13,872 | ||||||||||||||||
Amortization of intangibles | 2,952 | 2,029 | 36,201 | (6 | ) | 41,182 | ||||||||||||||
Advertising and promotion expense | 4,822 | 2,236 | — | 7,058 | ||||||||||||||||
Credit loss expense (benefit) for off-balance sheet exposure | 264 | (526 | ) | — | (262 | ) | ||||||||||||||
Merger-related expenses | 7,826 | 864 | — | 8,690 | ||||||||||||||||
Other operating expenses | 47,397 | 24,810 | — | 72,207 | ||||||||||||||||
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|
|
|
|
|
| |||||||||||||
Total non interest expense | $ | 275,600 | $ | 182,448 | $ | 36,201 | $ | 494,249 | ||||||||||||
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| |||||||||||||
Income before tax expense | $ | 175,779 | $ | 110,793 | $ | 62,271 | $ | 348,843 | ||||||||||||
Income tax expense | 47,381 | 26,053 | 17,436 | (7 | ) | 90,870 | ||||||||||||||
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Net income available to common shareholders | $ | 128,398 | $ | 84,740 | $ | 44,835 | $ | 257,973 | ||||||||||||
Less: earnings allocated to participating securities | — | (857 | ) | — | (857 | ) | ||||||||||||||
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| |||||||||||||
Net income allocated to common shareholders | $ | 128,398 | $ | 83,883 | $ | 44,835 | $ | 257,116 | ||||||||||||
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| |||||||||||||
Basic earnings per share | $ | 1.72 | $ | 1.29 | $ | 1.99 | ||||||||||||||
Average basic shares outstanding | 74,844,489 | 65,039,000 | (10,451,539 | ) | (8 | ) | 129,431,950 | |||||||||||||
Diluted earnings per share | $ | 1.71 | $ | 1.29 | $ | 1.99 | ||||||||||||||
Average diluted shares outstanding | 74,873,256 | 65,217,000 | (10,629,539 | ) | (8 | ) | 129,460,717 |
Footnotes to
Pro Forma Income Statement - December 31, 2023 Consolidated
(1) | Estimated loan interest yield adjustment amortization | |||||
(2) | Estimated investment securities fair value adjustment amortization | |||||
(3) | Estimated time deposit fair value adjustment amortization | |||||
(4) | Estimated borrowed funds fair value adjustment amortization | |||||
(5) | Estimated subordinated debt fair value adjustment amortization | |||||
Amount ($000) | ||||||
(6) | CDI intangible amortization. | |||||
Reverse amortization recorded for the Year ended December 31, 2023 | $ | (2,029 | ) | |||
Adjustment to CDI amortization | 38,230 | |||||
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| |||||
Net adjustment | $ | 36,201 | ||||
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(7) | Tax effect on the pro forma adjustments at an assumed 28.00% effective combined federal and state tax rate | |||||
(8) | Reflects the issuance of 54,587,461 shares of Provident Financial Services common stock in consideration for the outstanding share of Lakeland Bancorp including conversion of restricted stock units of Lakeland Bancorp into shares of common stock at the effective time |
Note—Basis of Presentation
The unaudited pro forma condensed combined financial information and explanatory notes have been prepared to illustrate the effects of the merger under the acquisition method of accounting with Provident as the acquirer. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily indicate the financial condition or results of operations of the combined company had the companies been combined at the beginning of each period presented, nor does it necessarily indicate the results of operations in future periods or the future financial position of the combined company. Under the acquisition method of accounting, the assets and liabilities of Lakeland, as of the effective time, will be recorded by Provident at their respective fair values and the excess of the merger consideration over the fair value of Lakeland’s net assets will be allocated to goodwill.
The merger provides for Lakeland shareholders to receive 0.8319 of a share of Provident common stock, valuing the transaction at approximately $1.3 billion based on the closing share price of Provident common stock of $23.16 as of September 26, 2022.
The pro forma allocation of the purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time the merger is completed. Adjustments may include, but not be limited to, changes in (i) Lakeland’s balance sheet through the effective time; (ii) the aggregate value of merger consideration paid if the price of shares of Provident common stock varies from the assumed $23.16 per share, which represents the closing share price of Provident common stock on September 26, 2022; (iii) total merger-related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iv) the underlying values of assets and liabilities if market and credit conditions differ from current assumptions.