LBAI - Lakeland Bancorp Announces First Quarter Results

OAK RIDGE, N.J., April 30, 2020 (GLOBE NEWSWIRE) -- Lakeland Bancorp, Inc. (NASDAQ: LBAI) (the “Company”), the parent company of Lakeland Bank (“Lakeland”), reported net income of $12.4 million and earnings per diluted share ("EPS") of $0.24 for the three months ended March 31, 2020 compared to net income of $15.6 million and diluted EPS of $0.31 for the first quarter of 2019. Excluding merger-related expenses pertaining to the Company’s January 2019 acquisition of Highlands Bancorp, Inc. ("Highlands") of $2.1 million, tax-effected, net income for the first quarter of 2019 was $17.8 million, or $0.35 per diluted share. For the first quarter of 2020, annualized return on average assets was 0.76%, annualized return on average common equity was 6.77% and annualized return on average tangible common equity was 8.65%.

The first quarter results were adversely impacted by a $9.2 million provision for loan losses compared to a $508,000 provision for the same period last year. The increased provision was primarily due to an increase in certain qualitative factors to account for the impact of COVID-19 on the local economy, resulting in approximately $8.0 million of the provision. The remaining $1.2 million of the provision is attributable to loan growth, a change in the loan portfolio composition and a change in loss rates. As of March 31, 2020, the ratio of the allowance for loan loss to total loans was 0.92% compared to 0.78% as of December 31, 2019.

Thomas Shara, Lakeland Bancorp’s President and CEO commented, “Although Lakeland began 2020 from a position of strength, the economic impact of COVID-19 is expected to have a meaningful effect on financial institutions’ results, including Lakeland’s, for the balance of the year.  Lakeland’s fundamental strength, solid capital foundation and prudent operating strategies should position the Company well to navigate the challenges that may arise in the months ahead. As the pandemic has advanced, Lakeland has made it a priority to safeguard the health of our associates and customers while assisting customers impacted by the economic burdens of COVID-19 and providing support to our communities."

Mr. Shara continued, “We particularly want to thank our associates for their tireless professionalism, compassion and dedication to serving our customers under unprecedented conditions. These qualities, along with Lakeland’s solid capital position and deep engagement with our customers and communities, will allow all of us to move forward and emerge - strong and united - from this challenging period.”

COVID-19

As part of Lakeland’s response to COVID-19, we initiated remote working plans and encouraged the use of our mobile and online banking alternatives. To assist COVID-19 impacted borrowers, we are offering temporary payment deferrals on commercial, mortgage and consumer loans. As of April 16, 2020, we have applications for payment deferrals on approximately $745 million of commercial loans and $54 million of mortgage and consumer loans. We also are participating in the Small Business Administration Paycheck Protection Program ("PPP") and have loan applications and approvals of approximately $350 million, to help strengthen local  businesses and preserve jobs in our communities.

Net Interest Margin and Net Interest Income

Net interest margin for the first quarter of 2020 of 3.28% decreased fourteen basis points from the first quarter of 2019 and increased one basis point from the fourth quarter of 2019. The decrease in net interest margin compared to the first quarter of 2019 was due primarily to a 27 basis point decrease in the yield on interest-earning assets partially offset by a 16 basis point decrease in the cost of interest bearing liabilities.

The yield on interest-earning assets for the first quarter of 2020 was 4.17% compared to 4.44% for the first quarter of 2019 and 4.21% for the fourth quarter of 2019. The current quarter decrease in yield on interest-earning assets, when compared to the prior year periods, was due primarily to a reduction in the yield on loans due to decreases in the prime rate during 2019 and 2020.

The cost of interest-bearing liabilities for the first quarter of 2020 was 1.18% compared to 1.34% for the first quarter of 2019 and 1.26% for the fourth quarter of 2019. The cost of interest-bearing transaction accounts, time deposits and borrowings have decreased since 2019 largely driven by reductions in the federal funds rate.

Net interest income increased $1.3 million to $49.9 million for the first quarter of 2020 compared to $48.6 million for the first quarter of 2019, due primarily to the growth in the volume of interest-earning assets and a decrease in interest rates on interest-bearing liabilities partially offset by a decrease in the yield on interest-earning assets.

Noninterest Income

Noninterest income increased $2.3 million to $8.0 million for the first quarter of 2020 from $5.7 million for the first quarter of 2019 due primarily to an increase in swap income of $2.6 million. The first quarter of 2020 also included $342,000 in gains on sales of investment securities compared to none in the first quarter of 2019.  Partially offsetting these favorable variances was losses on equity securities of $653,000 compared to gains of $353,000 recorded during the first quarter of 2019.

Noninterest Expense

Noninterest expense totaled $32.5 million for the first quarter of 2020 and decreased $1.5 million compared to the first quarter of 2019.  Excluding merger-related expenses recorded in the first quarter of 2019, noninterest expense increased $1.4 million from the first quarter of 2019 to the first quarter of 2020. Salary and employee benefit expense increased $1.0 million as a result of staff additions, normal merit increases and higher benefit costs. Furniture and equipment expense increased $444,000 compared to the first quarter of 2019 due primarily to an increase in costs associated with the Company's digital strategy initiative, while marketing expense decreased $242,000 due to the timing of marketing campaigns. First quarter 2020 results also included a long-term debt prepayment fee of $356,000 resulting from the payoff of $10.0 million in Federal Home Loan Bank debt yielding 2.89%.

Income Tax Expense

The effective tax rate for the first quarter of 2020 was 23.4% compared to 21.2% for the first quarter of 2019, as a result of a technical bulletin issued by the New Jersey Division of Taxation during the second quarter 2019, which resulted in increasing our estimated effective tax rate.

Financial Condition

At March 31, 2020, total assets were $7.01 billion, an increase of $302.7 million compared to December 31, 2019. For the three months ended March 31, 2020, total loans grew $190.8 million to $5.33 billion and investment securities increased $55.5 million to $974.3 million. On the funding side, total deposits increased $161.4 million to $5.46 billion, while borrowings increased $65.3 million to $678.0 million. At March 31, 2020, total loans as a percent of total deposits was 97.7%.

Asset Quality

At March 31, 2020, non-performing assets increased to $32.8 million, 0.47% of total assets, compared to $21.7 million, 0.32% of total assets, at December 31, 2019. Non-accrual loans as a percent of total loans increased to 0.61% at March 31, 2020 compared to 0.41% at December 31, 2019. The increase in non-accrual loans from December 31, 2019, related primarily to one loan relationship totaling $9.5 million that was not COVID-19 related. The allowance for loan losses increased to $48.9 million, 0.92% of total loans, at March 31, 2020, compared to $40.0 million, 0.78% of total loans, at December 31, 2019.  In the first quarter of 2020, the Company had net charge-offs of $342,000, or 0.03% of average loans, annualized, compared to $217,000, or 0.02%, for the same period in 2019. The provision for loan losses for the first quarter of 2020 was $9.2 million compared to the provision for loan losses of $508,000 in the first quarter of 2019.

Capital

At March 31, 2020, stockholders' equity was $736.9 million compared to $725.3 million at December 31, 2019, a 2% increase. Lakeland Bank remains above FDIC “well capitalized” standards, with a Tier 1 leverage ratio of 9.38% at March 31, 2020. The book value per common share and tangible book value per common share increased 8% and 10% to $14.60 and $11.43, respectively, compared to $13.51 and $10.35 at March 31, 2019. On April 28, 2020, the Company declared a quarterly cash dividend of $0.125 per share to be paid on May 20, 2020, to shareholders of record as of May 11, 2020.

Forward-Looking Statements

The information disclosed in this document includes various forward-looking statements - including the statements regarding the prospective impact of COVID-19 - 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 the Company’s 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; public health crises (such as the governmental, social and economic effects of the novel coronavirus); 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 Lakeland’s lending and equipment financing activities; successful implementation, deployment and upgrades of new and existing technology, systems, services and products; and customers’ acceptance of Lakeland’s products and services.

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

Lakeland Bank is the wholly-owned subsidiary of Lakeland Bancorp, Inc. (NASDAQ:LBAI), which has over $7 billion in total assets. With an extensive branch network and commercial lending centers throughout New Jersey and Highland Mills, N.Y., the Bank offers business and retail banking products and services. Business services include commercial loans and lines of credit, commercial real estate loans, loans for healthcare services, asset based lending, equipment financing, small business loans and lines, and cash management services. Consumer services include online and mobile banking, home equity loans and lines, mortgage options and wealth management solutions. Lakeland is proud to be recognized as New Jersey’s #1 Best-In-State Banks by Forbes and Statista, rated a 5-Star Bank by Bauer Financial and named one of New Jersey’s 50 Fastest Growing Companies by NJBIZ. Visit LakelandBank.com for more information.

Thomas J. Shara
President & CEO

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