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Provident Financial Services in Iselin, New Jersey, is moving aggressively to meet cost-saving goals tied to its acquisition of in-state peer Lakeland Bancorp in Oak Ridge.
Provident, which bought Lakeland in May after lengthy delays, is moving quickly to make up time. The $24.5 billion-asset company said it would shutter more than 20 overlapping branches in August — nearly 15% of its physical footprint.
"A careful and thorough review of our combined branch network was undertaken, and we have decided to close either a Provident branch or a Lakeland branch in cases where a single location can serve all of our customers," Provident said on its website.
Provident would still have about 140 branches in New Jersey, New York and Pennsylvania.
The all-stock deal, valued at $1.3 billion when it was announced in September 2022, combined Provident's fee-based insurance and wealth management operations and Lakeland's asset-based lending and equipment lease financing units. Both banks' traditional commercial and retail operations gained needed heft to compete with larger competitors and to invest in rapidly evolving technology, executives said in a May release after closing the transaction.
"Our employees will benefit from greater opportunities and resources that a bank with nearly $25 billion in assets possesses," and "customers will benefit by having access to a wider array of products and services driven by enhanced technology," said Provident President and CEO Anthony Labozzetta.
Executives also targeted cost savings of about 35% of Lakeland's expense base when they struck the deal. Provident projected the combined company would generate earnings-per-share accretion of 24% in the first full year following closing.
As is common in bank M&A, savings from branch closures play a prominent role in reaching those targets, given that lenders are already actively pruning their physical operations and driving customer activity through more efficient digital channels.
Banks often acquire neighboring competitors in part to carve out overlapping staff, services and facilities, consultant Ken Thomas, CEO of Community Development Fund Advisors, said in a recent interview. The savings fall to the bottom line and are key to making M&A profitable, he added.
In 2009, the last year that physical locations increased, there were nearly 100,000 branches across the U.S. There are fewer than 80,000 today, according to S&P Global Market Intelligence data.
For Provident, size and efficiency could help the bank to navigate future economic headwinds, Labozzetta said when the deal was announced in the wake of the pandemic and amid the Federal Reserve increasing interest rates that pushed up banks' deposit costs.