LBAI - Lakeland Bancorp Announces First Quarter Results and Increases Cash Dividend 9%

OAK RIDGE, N.J., April 29, 2019 (GLOBE NEWSWIRE) -- Lakeland Bancorp, Inc. (NASDAQ: LBAI) (the “Company”), the parent company of Lakeland Bank (“Lakeland”), reported net income of $15.6 million and earnings per diluted share ("EPS") of $0.31 for the three months ended March 31, 2019 versus net income of $15.3 million and EPS of $0.32 for the prior year quarter. 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 2019, annualized return on average assets was 1.02%, annualized return on average common equity was 9.41% and annualized return on average tangible common equity was 12.32%. Excluding merger-related expenses these ratios were 1.17%, 10.71% and 14.01%, respectively.

The acquisition of Highlands, completed on January 4, 2019, added $496.9 million in total assets, $428.1 million in total loans and $409.6 million in total deposits. Goodwill totaled $17.7 million and core deposit intangibles were $3.7 million. The Company’s financial statements reflect the impact of the merger from the date of acquisition, which should be considered when comparing periods.

Thomas Shara, Lakeland Bancorp’s President and CEO commented, "We’re excited to complete the Highlands Bancorp acquisition this quarter and welcome the Highlands customers and shareholders to the Lakeland family. Another highlight is our successful completion the Highlands core conversion to our systems and additional services their customers will benefit from as part of a larger institution. Lakeland continues to carefully grow our assets in a very competitive environment and as a sign of continued confidence, our Board increased the annual cash dividend from $0.46 to $0.50 per share."

Net Interest Margin and Income

Net interest margin for the first quarter of 2019 of 3.42% increased three basis points from the first quarter of 2018 and 13 basis points from the fourth quarter of 2018. The increase in net interest margin from the prior quarter was due to the continued increase in loan portfolio yield as a result of the origination of higher yielding loans and $1.0 million of accretion income on Highlands' loans and deposits.

The yield on interest-earning assets for the first quarter of 2019 was 4.44% compared to 4.02% for the first quarter of 2018 and 4.20% for the fourth quarter of 2018. The increase in yield from the prior quarter was a result of originating higher yielding loans, $787,000 in accretion income on loans and higher investment securities yields.

The cost of interest-bearing liabilities for the first quarter of 2019 was 1.34% compared to 0.83% for the first quarter of 2018 and 1.21% for the fourth quarter of 2018. The cost of interest-bearing transaction accounts, time deposits and borrowings have increased since the first quarter of 2018 largely driven by competitive pressures and higher market interest rates.

Net interest income increased to $48.6 million for the first quarter of 2019 compared to $42.2 million for the first quarter of 2018, due primarily to the growth of interest-earning assets and increases in loan yields, partially offset by an increase in interest-bearing liabilities and higher interest rates on deposits and borrowings.

Noninterest Income

Noninterest income increased $389,000 to $5.7 million for the first quarter of 2019 from $5.3 million for the first quarter of 2018. The Company recorded a $353,000 gain on equity securities in the first quarter of 2019 compared to a loss of $18,000 during the same period in 2018. In addition, commissions and fees increased $140,000 compared to the first quarter of 2018 due primarily to an increase in investment services income, while gains on sales of loans increased $125,000. Other income decreased $173,000 due primarily to a decrease in loan swap income.

Noninterest Expense

Noninterest expense totaled $34.0 million for the first quarter of 2019 compared to $27.1 million for the first quarter of 2018. Excluding $2.9 million in pre-tax merger related expenses, noninterest expense increased $4.0 million primarily due to salary and employee benefit expense increasing $2.4 million as a result of additions to our staff from the Highlands merger, normal merit increases and higher benefit costs. In the first quarter of 2019, data processing expense increased $861,000 compared to the first quarter of 2018 due primarily to the Company’s expansion and improvement of its digital infrastructure. Net occupancy expense and core deposit intangible amortization increased $216,000 and $147,000, respectively, due primarily to the Highlands merger.

Income Tax Expense

The effective tax rate for the first quarter of 2019 was 21.2% compared to 20.3% for the same period last year.

Financial Condition

At March 31, 2019, total assets were $6.37 billion, an increase of $559.0 million, including $496.9 million from Highlands compared to December 31, 2018. Total loans grew $464.2 million, including $428.1 million from Highlands, to $4.92 billion and investment securities increased $29.2 million, including $24.5 million from Highlands, to $850.7 million. On the funding side, total deposits increased $443.9 million, including $409.6 million from Highlands, to $5.06 billion, while borrowings increased $35.2 million, including $41.0 million from Highlands to $555.2 million. At March 31, 2019, total loans as a percent of total deposits was 97.2%.

Asset Quality

At March 31, 2019, non-performing assets totaled $16.4 million, 0.26% of total assets, compared to $13.0 million, 0.22% of total assets, at December 31, 2018. Non-accrual loans as a percent of total loans equaled 0.32% at March 31, 2019 compared to 0.27% at December 31, 2018. The allowance for loan losses increased to $38.0 million, 0.77% of total loans, at March 31, 2019, compared to $37.7 million, 0.84% of total loans, at December 31, 2018. The Company's allowance for loan losses excluding acquired loans would be 0.91%. In the first quarter of 2019, the Company had net charge-offs of $217,000, 0.02% of average loans, annualized, compared to net charge-offs of $1.1 million, 0.10% of average loans, annualized, for the same period in 2018. The first quarter of 2019 provision for loan losses was $508,000 compared to $1.3 million in the first quarter of 2018.

Capital

At March 31, 2019, stockholders' equity was $681.3 million compared to $623.7 million at December 31, 2018, a 9% increase. Lakeland Bank remains above FDIC “well capitalized” standards, with a Tier 1 Leverage Ratio of 9.23% at March 31, 2019. The book value per common share and tangible book value per common share increased 9.0% and 9.2% to $13.51 and $10.35, respectively,  compared to $12.40 and $9.48 at March 31, 2018. On April 25, 2019, the Company increased the quarterly cash dividend by $0.01 per share, or 9% to $0.125 per share to be paid on May 17, 2019 to shareholders of record as of May 9, 2019.

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 and failure to realize anticipated efficiencies and synergies from the merger of Highlands Bancorp, Inc. into Lakeland Bancorp and the merger of Highlands State Bank into Lakeland Bank. Any statements made by the Company that are not historical facts (including statements regarding anticipated synergies from the Highlands Bancorp and Highlands State Bank mergers and regarding positioning for 2019) 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

Lakeland Bancorp, Inc. (NASDAQ:LBAI) has approximately $6.37 billion in total assets. Lakeland Bank, a wholly-owned subsidiary of Lakeland Bancorp, Inc., operates 53 branch offices throughout Bergen, Essex, Morris, Ocean, Passaic, Somerset, Sussex, and Union counties in New Jersey including one branch in Highland Mills, New York; five New Jersey regional commercial lending centers in Bernardsville, Jackson, Montville, 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