Provident Financial Services, Inc. Announces Pricing and Upsizing of Subordinated Notes Offering

Rhea-AI Summary

Provident Financial Services, Inc. announced the pricing and upsizing of a subordinated notes offering totaling $225 million. The Notes will bear interest at 9.00% initially, with a fixed-to-floating rate structure. The purpose is to satisfy regulatory conditions related to a merger with Lakeland Bancorp, Inc.

Insights

Financial Analyst

Provident Financial Services, Inc.'s upsizing of their subordinated notes offering reflects a high demand from the market, which allowed them to increase the offer from $200 million to $225 million. The fixed-to-floating rate of 9.00% is considerably higher than current low-interest environments, suggesting a higher yield to compensate for potential risks associated with the notes. The funds raised are earmarked for investment in Provident Bank, which shows a directive towards bolstering the bank's capital structure and meeting regulatory requirements post-merger with Lakeland Bancorp, Inc. The ability to redeem the notes post-2029 provides the company with financial flexibility. However, investors should be aware of the risk associated with the potential for rising interest rates, which could devalue fixed-income securities. The notes' qualification as Tier 2 capital will positively support the bank's regulatory capital ratios, a critical aspect for financial stability and investor confidence.

Market Research Analyst

The decision by Provident Financial Services, Inc. to upsize their offering and the subsequent market demand could signal a positive market perception of the company's creditworthiness and its growth prospects post-merger. The fixed-to-floating interest structure may appeal to investors seeking higher returns amid economic conditions that forecast rising interest rates. It's also indicative of the company's strategic planning, as the floating rate provides a hedge against future interest rate changes. Looking at the overall banking sector, subordinated debt offerings are a common practice for capital raise and often viewed as a strength when managed effectively. The company's strategic move to invest the proceeds into general corporate purposes and meeting regulatory conditions can enhance the bank's competitiveness and ability to scale.

Banking Industry Analyst

The pivot towards a larger offering by Provident Financial Services, Inc. suggests a strategic move to strengthen the company's balance sheet in anticipation of the Merger Transaction's completion. The use of the raised funds for satisfying regulatory conditions implies prudent management and a proactive approach to ensuring a smooth merger process. The note's maturity term and the interest rate reset mechanism starting in 2029 are structured to align with the bank's long-term financial planning. This may be indicative of the company's confidence in its future cash flows and its ability to meet its obligations post-reset. Investors should closely monitor the company's post-merger integration process and the subsequent performance of Provident Bank as economic and regulatory environments evolve.

ISELIN, N.J., May 09, 2024 (GLOBE NEWSWIRE) -- Provident Financial Services, Inc. (NYSE:PFS) (the “Company”), the holding company for Provident Bank (the “Bank”), today announced the pricing of its offering of $225 million of its 9.00% fixed-to-floating rate subordinated notes due 2034 (the “Notes”) in a registered public offering (the “Offering”). The Notes will initially bear interest at 9.00% per annum, with interest payable semiannually in arrears, commencing on the issue date, to, but excluding, May 15, 2029. Commencing May 15, 2029, the interest rate on the Notes will reset quarterly to a floating rate per annum equal to a benchmark rate that is expected to be Three-Month Term SOFR (which is defined in the Notes) plus 476.5 basis points, with interest payable quarterly in arrears. The Company may redeem the Notes, in whole or in part, on and after May 15, 2029, at a price equal to 100% of the principal amount of the Notes being redeemed plus accrued and unpaid interest thereon. The Notes will mature on May 15, 2034 if they are not earlier redeemed. Based upon the pricing and market demand for the Notes, the Company elected to increase the aggregate principal amount of the Notes to $225 million from the previously announced amount of $200 million.

The Company expects to close the Offering, subject to the satisfaction of customary closing conditions, on or about May 13, 2024. The purpose of the Offering is to satisfy certain previously announced regulatory conditions that were agreed to in connection with the merger (the “Merger Transaction”) between the Company and Lakeland Bancorp, Inc. (“Lakeland”). The Company intends to invest all of the net proceeds from the Offering in the Bank. The Bank expects that the net proceeds will be initially invested in securities and used for other general corporate purposes, which may include the repayment of Federal Home Loan Bank advances and other indebtedness. The Notes are intended to qualify as Tier 2 capital for regulatory purposes.

Piper Sandler & Co. and Keefe, Bruyette & Woods, A Stifel Company are acting as joint book-running managers for the Offering.

This press release is neither an offer to sell nor a solicitation of an offer to purchase any securities of the Company. There will be no sale of securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. Any offer to sell or solicitation of an offer to purchase securities of the Company will be made only pursuant to a prospectus supplement and prospectus filed with the Securities and Exchange Commission (the “SEC”). The Company has filed a registration statement (including a prospectus) (File No. 333-275213) and a preliminary prospectus supplement with the SEC for the Offering to which this press release relates. Before making an investment decision, you should read the prospectus and preliminary prospectus supplement and other documents that the Company has filed with the SEC for additional information about the Company and the Offering.

Copies of the preliminary prospectus supplement and accompanying base prospectus relating to the Offering can be obtained without charge by visiting the SEC’s website at www.sec.gov, or may be obtained by emailing Piper Sandler & Co. at fsg-dcm@psc.com or by emailing Keefe, Bruyette & Woods, A Stifel Company at USCapitalMarkets@kbw.com.

About Provident

Provident Financial Services, Inc. (NYSE: PFS) is the holding company for Provident Bank, a New Jersey State-charted community-oriented bank offering “Commitment you can count on” since 1839. Provident Bank provides a comprehensive array of financial products and services through its network of branches throughout northern and central New Jersey, Bucks, Lehigh and Northampton counties in Pennsylvania, as well as Queens and Nassau Counties in New York. The Bank also provides fiduciary and wealth management services through its wholly owned subsidiary, Beacon Trust Company, and insurance services through its wholly owned subsidiary, Provident Protection Plus, Inc.

Forward-Looking Statements

This news release contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements may be identified by use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions.

The forward-looking statements reflect the Company’s current views about future events and financial performance and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from historical results and those expressed in any forward looking statement. Some factors that could cause actual results to differ materially from historical or expected results include, but are not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, as may be supplemented by its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and those related to the economic environment, particularly in the market areas in which the Company operates; inflation and unemployment; competitive products and pricing; real estate values; fiscal and monetary policies of the U.S. Government; changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters; changes in government regulations affecting financial institutions, including regulatory fees and capital requirements; changes in prevailing interest rates; acquisitions and the integration of acquired businesses; credit risk management; asset-liability management; the financial and securities markets, the availability of and costs associated with sources of liquidity; the ability of the Company to complete the Offering on expected terms or at all; the possibility that the Merger Transaction does not close when expected or at all; the risk that any announcements relating to the Offering or the Merger Transaction could have adverse effects on the market price of the Company’s common stock; risks related to the potential impact of general economic, political and market factors on the Company or the Offering; and uncertainty as to the impacts of natural disasters or health epidemics on the Company.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date they are made. The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not assume and expressly disclaims any duty, and does not undertake, to update any forward-looking statements in this presentation to reflect events or circumstances after the date of this statement or otherwise.

Contact:	Provident Financial Services, Inc.
	Thomas M. Lyons
	Senior Executive Vice President and Chief Financial Officer
	Phone: 732-590-9348
	Email: thomas.lyons@provident.bank

FAQ

What is the total amount of the subordinated notes offering by Provident Financial Services, Inc.?

The offering totals $225 million.

What is the interest rate on the subordinated notes initially?

The notes will bear interest at 9.00% per annum.

What is the purpose of the offering by Provident Financial Services, Inc.?

The purpose is to satisfy regulatory conditions related to a merger with Lakeland Bancorp, Inc.