Lakeland Bancorp Announces Third Quarter Results

OAK RIDGE, N.J., Oct. 25, 2018 (GLOBE NEWSWIRE) -- Lakeland Bancorp, Inc. (NASDAQ: LBAI) (the “Company”), the parent company of Lakeland Bank (“Lakeland”), reported net income of $16.8 million for the three months ended September 30, 2018, a 22% increase compared to $13.7 million for the three months ended September 30, 2017. For the three months ended September 30, 2018, the Company reported diluted EPS of $0.35, an increase of 21% compared to $0.29 for the same period in 2017. For the third quarter of 2018, return on average assets was 1.19%, return on average common equity was 11.02% and return on average tangible common equity was 14.31%.

Reflected in September 30, 2018 results is the impact of the State of New Jersey tax law effective in July and retroactive to the beginning of 2018. The tax changes include a 2.5% tax surcharge which increased tax expense by approximately $0.5 million and a resulting increase in the Company’s deferred tax assets of $1.3 million, reducing tax expense.

For the nine months ended September 30, 2018, the Company reported net income of $47.9 million, a 21% increase compared to $39.4 million for the same period in 2017. For the nine months ended September 30, 2018, the Company reported diluted EPS of $0.99, an increase of 21% compared to $0.82 for the first nine months of 2017. For the first nine months of 2018, return on average assets was 1.17%, return on average common equity was 10.78%, and return on average tangible common equity was 14.06%. 

Thomas Shara, Lakeland Bancorp’s President and CEO commented, “We are pleased to report record quarterly income for the third quarter. Our results were driven by continued steady loan growth and robust deposit growth of over 5% this quarter. We are particularly pleased with our 1.19% return on assets, coupled with a 14.31% return on tangible common equity for the quarter. On the merger front, we were excited to announce the acquisition of Highlands Bancorp during the quarter and look forward to welcoming their customers, shareholders and staff to the Lakeland team.  We anticipate the transaction will be completed in early 2019.”

Net Interest Margin and Income

Net interest margin for the third quarter of 2018 of 3.32% decreased seven basis points from the third quarter of 2017. The decrease in net interest margin was due primarily to an increase in the cost of interest-bearing liabilities, partially offset by an increase in the yield on interest-earning assets. Net interest margin for the first nine months of 2018 of 3.38% equaled net interest margin for the first nine months of 2017. 

The yield on interest-earning assets for the third quarter of 2018 was 4.14% compared to 3.93% for the third quarter of 2017. The increase in yield was due primarily to a 21 basis point increase in the yield on loans and leases as rates continue to rise. The yield on interest-earning assets for the first nine months of 2018 was 4.09% compared to 3.86% during the same period in 2017.

The cost of interest-bearing liabilities for the third quarter of 2018 was 1.08% compared to 0.71% for the third quarter of 2017. The cost of interest-bearing transaction accounts, time deposits and borrowings have increased 40, 58, and 46 basis points, respectively, since the third quarter of 2017 largely driven by higher market interest rates. The Company has run deposit promotions during 2018 to support loan growth and in response to increased market competition. The cost of interest-bearing liabilities for the first nine months of 2018 was 0.94% compared to 0.65% during the same period in 2017.

Net interest income increased to $43.6 million for the third quarter of 2018 compared to $42.1 million for the third quarter of 2017, due primarily to the growth of interest-earning assets and increases in loan and lease yields offset by an increase in the cost of interest-bearing liabilities. Net interest income for the first nine months of 2018 was $129.4 million, as compared to $122.9 million for the same period in 2017. 

Noninterest Income

Noninterest income increased $0.2 million to $5.6 million for the third quarter of 2018 from $5.5 million for the third quarter of 2017 primarily due to death benefit income of $0.4 million in the third quarter of 2018. Commissions and fees increased $0.2 million compared to the third quarter of 2017 due primarily to an increase in investment services income. Partially offsetting these positive variances was a $0.4 million loss on equity securities during the quarter.

For the first nine months of 2018, noninterest income totaled $16.7 million compared to $19.7 million for the same period in 2017. The first nine months of 2017 included $2.5 million in gains on sales of investment securities, $0.9 million gain on the sales of three former branches, $0.4 million in gains on sales of other real estate owned and a $0.3 million gain on the payoff of an acquired loan. Noninterest income for first nine months of 2018 had increases in commissions and fees of $0.5 million, an increase in income on bank owned life insurance of $1.0 million, including the death benefit income discussed above, partially offset by a $0.4 million loss on equity securities.

Noninterest Expense

Noninterest expense totaled $27.8 million for the third quarter of 2018 compared to $24.8 million for the third quarter of 2017, primarily due to salary and employee benefit expense increasing $2.3 million as a result of additions to our staff to support continued growth, normal merit increases, higher benefit costs and a life insurance payout of $0.6 million related to the BOLI death benefit mentioned above. In the third quarter of 2018, data processing expense increased $0.6 million compared to the third quarter of 2017 due primarily to the Company’s expansion and improvement of its digital infrastructure.  

For the first nine months of 2018, noninterest expense totaled $82.5 million compared to $78.7 million for the same period in 2017. Included within 2017 was $2.8 million in long-term debt prepayment fees. Excluding the 2017 long-term debt prepayment fees, the resulting $6.6 million net increase was primarily due to a $5.3 million increase in salary and employee benefit costs resulting from additions to our staff to support continued growth, as well as normal merit increases and higher benefit costs and the life insurance payout related to the BOLI death benefit previously mentioned. Data processing also increased $1.0 million compared to the first nine months of 2017 due primarily to the Company’s expansion and improvement of its digital infrastructure.

Financial Condition

In 2018, total assets increased $221.4 million to $5.63 billion as total loans and leases grew $175.6 million to $4.33 billion, while investment securities increased $4.1 million to $771.8 million. On the funding side, total deposits increased $273.7 million to $4.64 billion, while borrowings decreased $84.8 million to $337.0 million. As of September 30, 2018, total loans and leases as a percent of total deposits was 93%. 

Asset Quality

At September 30, 2018, non-performing assets totaled $13.9 million (0.25% of total assets) compared to $14.5 million (0.27% of total assets) at December 31, 2017. Non-accrual loans and leases as a percent of total loans and leases equaled 0.26% at September 30, 2018 compared to 0.33% at December 31, 2017. The allowance for loan and lease losses increased to $37.3 million at September 30, 2018 (0.86% of total loans and leases) compared to $35.5 million at December 31, 2017 (0.85% of total loans and leases). In the third quarter of 2018, the Company had net charge-offs of $0.4 million (0.03% of average loans and leases, annualized) compared to $0.7 million (0.07% of average loans and leases, annualized) for the same period in 2017. The third quarter of 2018 provision for loan and lease losses was $1.0 million compared to $1.8 million in the third quarter of 2017.

Capital

At September 30, 2018, stockholders' equity was $607.6 million compared to $583.1 million at December 31, 2017, a 4% increase. Lakeland Bank remains above FDIC “well capitalized” standards, with a Tier 1 Leverage Ratio of 9.42% at September 30, 2018. At September 30, 2018, the book value per common share and tangible book value per common share were $12.79 and $9.88 compared to $12.19 and $9.25 at September 30, 2017. On October 23, 2018, the Company declared a quarterly cash dividend of $0.115 per share to be paid on November 15, 2018 to stockholders of record as of November 5, 2018.

Forward-Looking Statements

The information disclosed in this document includes various forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  The words “anticipates”, “projects”, “intends”, “estimates”, “expects”, “believes”, “plans”, “may”, “will”, “should”, “could”, and other similar expressions are intended to identify such forward-looking statements. The Company cautions that these forward-looking statements are necessarily speculative and speak only as of the date made, and are subject to numerous assumptions, risks and uncertainties, all of which may change over time. Actual results could differ materially from such forward-looking statements. The following factors, among others, could cause actual results to differ materially and adversely from such forward-looking statements: changes in the financial services industry and the U.S. and global capital markets, changes in economic conditions nationally, regionally and in the Company’s markets, the nature and timing of actions of the Federal Reserve Board and other regulators, the nature and timing of legislation and regulation affecting the financial services industry, government intervention in the U.S. financial system, changes in federal and state tax laws, changes in levels of market interest rates, pricing pressures on loan and deposit products, credit risks of the Company’s lending and leasing activities, successful implementation, deployment and upgrades of new and existing technology, systems, services and products, customers’ acceptance of the Company’s products and services, competition, failure to obtain the required approval from Highlands Bancorp, Inc. shareholders for the merger of Highlands Bancorp, Inc. into Lakeland Bancorp, Inc. and failure to realize anticipated efficiencies and synergies if the holding company merger and the merger of Highlands State Bank into Lakeland Bank are consummated.  Any statements made by the Company that are not historical facts should be considered to be forward-looking statements. The Company is not obligated to update and does not undertake to update any of its forward-looking statements made herein.

Explanation of Non-GAAP Financial Measures

Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). This press release also contains certain supplemental non-GAAP information that the Company’s management uses in its analysis of the Company’s financial results.  Specifically, the Company provides measures based on what it believes are its operating earnings on a consistent basis, and excludes material non-routine operating items which affect the GAAP reporting of results of operations. The Company’s management believes that providing this information to analysts and investors allows them to better understand and evaluate the Company’s core financial results for the periods in question.

The Company also provides measurements and ratios based on tangible equity and tangible assets. These measures are utilized by regulators and market analysts to evaluate a company’s financial condition and, therefore, the Company’s management believes that such information is useful to investors.

The Company also uses an efficiency ratio that is a non-GAAP financial measure. The ratio that the Company uses excludes amortization of core deposit intangibles, provision for unfunded lending commitments and, where applicable, long-term debt prepayment fees and merger related expenses. Income for the non-GAAP ratio is increased by the favorable effect of tax-exempt income and excludes gains and losses from the sale of investment securities and gain on debt extinguishment, which can vary from period to period. The Company uses this ratio because it believes the ratio provides a relevant measure to compare the operating performance period to period.

These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. See accompanying non-GAAP tables. 

About Lakeland Bank

Lakeland Bank is the wholly-owned subsidiary of Lakeland Bancorp, Inc. (NASDAQ:LBAI), which has $5.6 billion in total assets. The Bank operates 50 branch offices throughout Bergen, Essex, Morris, Ocean, Passaic, Somerset, Sussex, and Union counties in New Jersey including one branch in Highland Mills, New York; six New Jersey regional commercial lending centers in Bernardsville, Jackson, Montville, Newton, Teaneck and Waldwick; and one New York commercial lending center to serve the Hudson Valley region. Lakeland also has a commercial loan production office serving Middlesex and Monmouth counties in New Jersey.  Lakeland Bank offers an extensive suite of financial products and services for businesses and consumers. Visit LakelandBank.com for more information.

Thomas J. Shara
President & CEO

Thomas F. Splaine
EVP & CFO
973-697-2000