(Adds deal details, background)
Sept 27 (Reuters) - Provident Financial Services Inc plans to acquire Lakeland Bancorp in an all-stock deal valued at nearly $1.3 billion to gain a stronger foothold in New Jersey, the regional lenders said on Tuesday.
The combined company will have nearly 4% of all bank deposits in the state, more than $25 billion in assets and $20 billion in total deposits.
The New Jersey-based lenders are joining forces at a time when even diversified Wall Street banks are buckling under pressure from inflation, interest rate hikes and economic downturns, forcing them to report reduced profits and cut costs.
There has been a steady stream of tie-ups among mid-sized lenders in the last few years, as institutions seek increased scale to better compete against big U.S. banks.
Last year, Columbia Banking System Inc said it plans to acquire larger rival Umpqua Holdings Corp in an all-stock deal worth $5.1 billion to consolidate their banking footprints along the U.S. West Coast.
Lakeland shareholders will receive 0.8319 shares of Provident common stock for each share of Lakeland.
The deal, expected to close in the second quarter of 2023, will see Provident shareholders own 58% of the company and Lakeland investors the rest.
The combined company, to be headquartered in Iselin, New Jersey, will be led by Provident Chief Executive Officer Anthony Labozzetta. Provident Chief Financial Officer Thomas Lyons will be the new bank's finance chief.
Piper Sandler Companies is Provident's financial adviser on the deal, while Keefe, Bruyette & Woods, A Stifel Company is advising Lakeland.
The companies agreed to pay a fee of $50 million if the deal is terminated under certain circumstances, according to a regulatory filing. (Reporting by Mehnaz Yasmin in Bengaluru; Editing by Maju Samuel)