LBAI - Lakeland Bancorp Announces Record Quarterly Results

OAK RIDGE, N.J., July 28, 2022 (GLOBE NEWSWIRE) -- Lakeland Bancorp, Inc. (NASDAQ: LBAI ) (the “Company”), the parent company of Lakeland Bank (“Lakeland”), reported net income of $29.1 million and earnings per diluted share ("EPS") of $0.44 for the three months ended June 30, 2022 compared to net income of $27.4 million and diluted EPS of $0.53 for the three months ended June 30, 2021. For the second quarter of 2022, annualized return on average assets was 1.15%, annualized return on average common equity was 10.71% and annualized return on average tangible common equity was 14.45%.

For the six months ended June 30, 2022, the Company reported net income of $45.0 million and diluted EPS of $0.69 compared to net income of $50.6 million and diluted EPS of $0.98 for the first six months of 2021. Annualized return on average assets was 0.89%, annualized return on average common equity was 8.31% and annualized return on average tangible common equity was 11.16% for the first six months of 2021.

Thomas Shara, Lakeland Bancorp’s President and CEO commented, “We are delighted with the Company’s results for the quarter which include record net income of $29.1 million, record net interest income of $80.3 million, expansion in net interest margin and loan growth of 4%. Lakeland continues to effectively navigate the current challenging economic conditions with prudent loan underwriting standards as evidenced in our continued stellar asset quality. We are very proud to be awarded the 2022 Best-In-State Banks in New Jersey by Forbes, representing the fourth consecutive year of outstanding achievement.”

Second Quarter 2022 Highlights

• Loan growth for the second quarter of $270.7 million or 3.8% compared to the prior quarter was attributed to both commercial and consumer portfolio expansion.
• Net interest margin increased to 3.38% for the second quarter compared to 3.02% in the first quarter of 2022 and 3.27% in the second quarter of 2021.
• Nonperforming assets to total assets decreased eight basis points to 0.21% at June 30, 2022 compared to 0.29% at June 30, 2021.
• Efficiency ratio of 50.7% in the second quarter of 2022 compared to 57.8% in the first quarter of 2022.

Net Interest Margin and Net Interest Income

Net interest margin for the second quarter of 2022 of 3.38% increased 11 basis points compared to the second quarter of 2021 and increased 36 basis points compared to the first quarter of 2022. The increase in net interest margin compared to the second quarter 2021 and first quarter 2022 was due primarily to an increase in yields on loans, increased loan prepayment fees, higher securities balances and non-accrual interest recoveries in the second quarter of 2022. Net interest margin for the first six months of 2022 was 3.20% compared to 3.23% for the same period of 2021. The variance in net interest margin compared to the first six months of 2021 is due primarily to a decrease in the yield on investment securities.

The yield on interest-earning assets for the second quarter of 2022 was 3.61% as compared to 3.57% for the second quarter of 2021 and 3.25% for the first quarter of 2022. The increase in the yield on interest-earning assets compared to the second quarter of 2021 and the linked quarter was due primarily to an increase in the yield on loans driven primarily by increases in market interest rates, increased loan prepayment fees and non-accrual interest recoveries. Also increasing the yield on interest-earning assets during the second quarter of 2022 was a reduction in the average balance of lower-yielding federal funds sold. The yield on interest-earning assets for the first six months of 2022 was 3.42% as compared to 3.57% during the same period in 2021. The decrease in yield on interest-earning assets for the first six months of 2022 compared to the same period in 2021 was due primarily to a decrease in the yield on securities as well as an increase in lower-yielding federal funds sold, partially offset by higher average balances of securities and loans.

The cost of interest-bearing liabilities for the second quarter of 2022 was 0.40% compared to 0.42% for the second quarter of 2021 and 0.34% for the first quarter of 2022. The cost of interest-bearing liabilities for the first six months of 2022 was 0.37% compared to 0.47% for the same period in 2021. The reduction in the cost of interest-bearing liabilities compared to the second quarter of 2021 and the first six months of 2021 was largely driven by reductions in the cost of time deposits and long-term borrowings. The increase in the cost of interest-bearing liabilities compared to the linked quarter was due primarily to an increase in the cost of interest-bearing deposits and borrowings driven primarily by increases in market interest rates.

Net interest income for the second quarter of 2022 of $80.3 million increased $20.6 million compared to the second quarter of 2021. Net interest income for the first six months of 2022 was $150.7 million as compared to $116.5 million for the first six months of 2021. The increase in net interest income compared to prior periods was due primarily to growth of loans and investment securities. Also contributing to the increase were higher loan prepayment fees and non-accrual interest recoveries during the second quarter of 2022.

Noninterest Income

For the second quarter of 2022, noninterest income increased $1.8 million to $7.1 million compared to the second quarter of 2021. Commissions and fees increased $800,000 driven primarily by an increase in wire transfer charges and financial services income. Other income increased $500,000 due primarily to reductions in write-downs on premises and equipment as well as recoveries on loans charged off from prior acquisitions. Service charges on deposit accounts increased $266,000 compared to the second quarter of 2021 due predominately to increases in debit card income. Swap income for the second quarter of 2022 was $399,000 compared to $72,000 during the same period of 2021 due primarily to changes in the yield curve which increased demand for swap transactions. Losses on equity securities totaled $364,000 in the second quarter of 2022 compared to gains of $11,000 in the second quarter of 2021.

For the first six months of 2022, noninterest income increased $2.8 million to $13.8 million compared to the first six months of 2021. Commissions and fees increased $1.3 million due primarily to higher loan fees and increases in financial services income. Other income increased $672,000 and service charges on deposits increased $596,000 compared to the first half of 2021 due primarily to the same reasons mentioned in the quarterly analysis. Losses on equity securities totaled $849,000 in the first six months of 2022 compared to losses of $133,000 in the first six months of 2021.

Noninterest Expense

Noninterest expense for the second quarter of 2022 of $45.1 million increased $11.0 million compared to the second quarter of 2021. The increase in noninterest expense was primarily due to compensation and employee benefits which increased $6.5 million resulting primarily from additions to our staff from the 1st Constitution acquisition and normal merit increases. Premises and equipment expense and data processing expense increased $1.6 million and $592,000, respectively, compared to the second quarter of 2021 due primarily to increases related to expansion of the franchise as a result of the 1st Constitution acquisition. Other operating expenses in the second quarter of 2022 increased $2.2 million compared to the same period in 2021 due primarily to increased core deposit intangible amortization, marketing expense, appraisal fees, consulting fees and insurance expense.

Noninterest expense for the first half of 2022 of $95.0 million increased $27.0 million compared to the first half of 2021. Compensation and employee benefit expense and premises and equipment expense increased $13.7 million and $3.3 million, respectively, compared to the first half of 2021 due to the same reasons discussed in the quarterly comparison. Merger related expenses were $4.6 million due to the acquisition of 1st Constitution Bancorp. Data processing expense increased $1.0 million due to the same reasons mentioned in the quarterly analysis. Other operating expenses increased $4.5 million in the first half of 2022 compared to the same period in 2021 due primarily to an increase in consulting and marketing fees.

Income Tax Expense

The effective tax rate for the second quarter of 2022 was 24.7% compared to 25.7% for the second quarter of 2021. The decreased effective tax rate for the second quarter of 2022 was primarily a result of tax advantaged items increasing as a percentage of pretax income.

Financial Condition

At June 30, 2022, total assets were $10.37 billion, an increase of $2.18 billion, compared to December 31, 2021. As of June 30, 2022, total loans grew $1.43 billion, including $1.10 billion from 1st Constitution, to $7.41 billion while investment securities increased $502.9 million, including $342.3 million from 1st Constitution, to $2.12 billion. On the funding side, total deposits increased $1.54 billion, including $1.65 billion from 1st Constitution, to $8.50 billion. At June 30, 2022, total loans as a percent of total deposits was 87.1%.

Asset Quality

At June 30, 2022, non-performing assets totaled $22.2 million or 0.21% of total assets compared to $22.6 million or 0.29% of total assets at June 30, 2021. Non-accrual loans as a percent of total loans was 0.30% at June 30, 2022, compared to 0.38% at June 30, 2021. The allowance for credit losses on loans totaled $68.8 million, 0.93% of total loans, at June 30, 2022, compared to $60.4 million, 1.01% of total loans, at June 30, 2021. At June 30, 2022, the allowance for credit losses included a day one purchase accounting adjustment of $12.1 million for purchased credit impaired loans. In the second quarter of 2022, the Company had net recoveries of $141,000 or (0.01)% of average loans on an annualized basis, compared to net charge-offs of $1.5 million or 0.10% for the same period in 2021.

The provision for credit losses for the second quarter of 2022 was $3.6 million compared to a benefit of $6.0 million in the second quarter of 2021. The provision in the 2022 period is comprised of a provision for credit losses on loans of $1.6 million, a provision for credit losses on securities of $1.5 million and a provision for off-balance-sheet exposures of $535,000. For the six months ended June 30, 2022, the provision for credit losses was $9.9 million, while the Company recorded a benefit of $8.6 million for the same period in 2021. As of June 30, 2022, the provision was comprised of a provision for credit losses on loans of $6.2 million, a provision for credit losses on securities of $2.7 million and a provision for off-balance-sheet exposures of $975,000.

Capital

At June 30, 2022, stockholders' equity was $1.09 billion compared to $827.0 million at December 31, 2021, a 32% increase, resulting primarily from the issuance of stock in connection with the 1st Constitution acquisition. Lakeland Bank remains above FDIC “well capitalized” standards, with a Tier 1 leverage ratio of 9.05% at June 30, 2022. The book value per common share increased 7% to $16.82 at June 30, 2022 compared to $15.74 at June 30, 2021. Tangible book value per common share was $12.47 and $12.60 at June 30, 2022 and 2021, respectively (see "Supplemental Information - Non-GAAP Financial Measures" for a reconciliation of non-GAAP financial measures, including tangible book value). At June 30, 2022, the Company’s common equity to assets ratio and tangible common equity to tangible assets ratio were 10.51% and 8.01%, respectively, compared to 10.14% and 8.29% at June 30, 2021. On July 26, 2022, the Company declared a quarterly cash dividend of $0.145 per share to be paid on August 17, 2022, to shareholders of record as of August 8, 2022.

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. Accordingly, you should not place undue reliance on forward-looking statements. In addition to the specific risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, 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 1st Constitution Bancorp into Lakeland Bancorp and the merger of 1st Constitution Bank into Lakeland Bank. Further, given its ongoing and dynamic nature, it is difficult to predict the continuing effects that the COVID-19 pandemic will have on our business and results of operations. 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 U.S. generally accepted accounting principles ("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.

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.

Specifically, 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, 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, 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 "Supplemental Information - Non-GAAP Financial Measures" for a reconciliation of non-GAAP financial measures.

About Lakeland

Lakeland Bank is the wholly-owned subsidiary of Lakeland Bancorp, Inc. (NASDAQ:LBAI), which had $10.37 billion in total assets at June 30, 2022. With an extensive branch network and commercial lending centers throughout New Jersey and Highland Mills, New York, 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 Best-In State-Bank by Forbes and Statista for the fourth consecutive year, Best Banks to Work For by American Banker, rated a 5-Star Bank by Bauer Financial and named one of New Jersey's 50 Fastest Growing Companies by NJBIZ. Visit LakelandBank.com or 973-697-6140 for more information.

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