Provident Financial Services, the Jersey City, New Jersey-based holding company for Provident Bank, will be opportunistic for acquisitions in 2014 and beyond but is not actively looking for buys following the recent purchase of Team Capital Bank, CEO Christopher Martin said.
Provident Financial, with $921.1 million book value, has no set timeframe on when it will make its next purchase following the acquisition in December of Bethlehem, Pennsylvania-based Team Capital but will continue to be on the hunt for targets primarily in eastern Pennsylvania and in Huntington and Warren counties in New Jersey, Martin said in a recent interview.
Those areas are where Provident Financial has increased its presence as a result of the Team Capital deal, which will bring in 12 branches and $949 million in assets when the $122 million acquisition closes in 2Q14. Provident will have $8.3 billion in assets and 91 locations in New Jersey and Pennsylvania after the deal closes.
He said that Provident Financial will lean more towards Pennsylvania because there is a lot less competition amongst banks in that state as opposed to New Jersey, which he said had an over-competitive banking market in terms of vying for customers for Provident. Martin said Provident's competitors ranged from too-big-to-fail banks such as Wells Fargo and TD Bank to more regional institutions including Valley National Bank and Investors Bancorp.
He also said Pennsylvania is more business-friendly than New Jersey, which has led to some of Provident's corporate clients moving to the Keystone state. Specifically, the company is looking at the area surrounding the Pennsylvania city of Allentown, which Martin said is a growing city that has rebounded from years of decline.
The size of any targets will probably be in the same asset-size range as Team Capital, according to Martin, although he points out that the bank wouldn't have any problems acquiring a larger-size bank just as it did back in 2003 when it purchased First Sentinel Bancorp, a bank that had $2.2 billion in assets at that time. He then said Provident will look to make any buys in the future with a combination of cash and stock just as it did with the Team Capital deal.
Provident was advised in the Team Capital acquisition by financial advisory firm RBC Capital Markets and law firm Luse, Gorman, Pomerenk and Schick while Team Capital retained Keefe Bruyette & Woods on the financial side and Windels, Marx, Lane & Mittendorf for the legal side. Martin said it was not sure about the financial advisor the company will use for a future acquisition since there has been a different advisor on each of its four acquisitions, but it will continue to work with Luse, Gorman, Pomerenk and Schick as it has had a longstanding professional relationship with the law firm.
When asked why Provident has made only four acquisitions in the past ten years, Martin said it's because Provident likes to take a disciplined approach in its acquiring. He explained that Provident looks more at how a purchase can help the bank achieve total shareholder value and how it will be a good fit more so than how it will increase its assets. Provident acquired Beacon Trust Company & Beacon Global Asset Management in 2011 and First Morris Bank & Trust, $570 million asset-size bank, in 2006.
An industry analyst said Provident could make a buy as soon as early 2015 because the Team Capital purchase will be small enough for Provident integrate into its operations to allow for the company to go looking for acquisitions in 2014. However, a second industry analyst said the company is usually pretty cautious when it makes any buys and will take its time to find the right one.
Both analysts agreed that a potential target for Provident will be Fox Chase Bancorp, the holding company for Hatboro, Pennsylvania-based Fox Chase Bank. The first analyst said the $1.1 billion asset-size bank fits Provident's plans to establish a greater foothold in Pennsylvania, and the second analyst said Fox Chase will be a good buy as Provident will look for any future target that is between $1 billion to $1.5 billion and Fox Chase has a management team that has carried out sales of banks before.
As far as the rest of its growth strategy, Martin said Provident looks to get to $8.7 billion by the end of 2014, which will come not only from the assets gained from the acquisition but also by continued growth in non-interest bearing deposits and through its personal and business lending.
Provident has $1.2 billion market cap, trades at 1.3x book value, and its stock traded recently at $19.45 per share.