Lakeland Bancorp Announces Record 2019 Earnings

OAK RIDGE, N.J., Jan. 24, 2020 (GLOBE NEWSWIRE) -- Lakeland Bancorp, Inc. (NASDAQ: LBAI) (the “Company”), the parent company of Lakeland Bank (“Lakeland”), reported net income of $18.7 million and earnings per diluted share ("EPS") of $0.37 for the three months ended December 31, 2019 compared to net income of $15.6 million and diluted EPS of $0.32 for the fourth quarter of 2018. For the fourth quarter of 2019, annualized return on average assets was 1.15%, annualized return on average common equity was 10.32% and annualized return on average tangible common equity was 13.29%.

For the year ended December 31, 2019, the Company reported net income of $70.7 million, an 11% increase compared to $63.4 million for the same period in 2018 resulting in annualized return on average assets of 1.12%, annualized return on average common equity of 10.14%, and annualized return on average tangible common equity of 13.16%. For 2019, the Company reported diluted EPS of $1.38, compared to diluted EPS of $1.32 for 2018. Excluding merger-related expenses pertaining to the Company’s January 2019 acquisition of Highlands Bancorp, Inc. ("Highlands") of $2.4 million, tax-effected, net income for the year ended December 31, 2019 was $73.0 million, or $1.43 per diluted share. Excluding merger-related expenses, annualized return on average assets was 1.16%, annualized return on average common equity was 10.48% and annualized return on average tangible common equity was 13.60%.

Thomas Shara, Lakeland Bancorp’s President and CEO commented, "2019 was another fantastic year for our Company, marking our 8th consecutive year of record earnings. Our strong loan and deposit growth enabled us to conclude 2019 on an extremely positive note. This success is the result of our associates’ hard work, commitment and passion for excellence.

Some of the 2019 highlights are

• Total asset growth of 16% to $6.7 billion
   
• Solid organic loan growth of 6%, including 4% in the 4th quarter
   
• Consistent deposit generation of 6%, including 10% growth in non-interest bearing deposits
   
• Seamless integration of Highlands State Bank acquisition
   
• Forbes recognition as the Best-In-State Bank in New Jersey

To sustain our high performance and increase shareholder value, we have embarked on a digital strategy initiative, impacting all operational areas of the Bank.  Enhancing our digital capabilities will allow Lakeland to expand our market presence as a community bank, as well as compete long-term in a fast-paced digital marketplace.”

Net Interest Margin and Net Interest Income

Net interest margin for the fourth quarter of 2019 of 3.27% increased two basis points from the linked quarter and decreased two basis points compared to the fourth quarter of 2018, which was due primarily to an increase in the cost of interest bearing liabilities. Net interest margin for 2019 was 3.33% compared to 3.36% for the same period in 2018.

The yield on interest-earning assets for the fourth quarter of 2019 was 4.21% compared to 4.20% for the fourth quarter of 2018. The yield on interest-earning assets for 2019 was 4.36% compared to 4.12% for 2018. The year-to-date increase in yield on interest-earning assets, when compared to the prior year period, was a result of originating higher yielding loans, increased prepayment fees, additional accretion income on loans resulting from the Highlands acquisition and higher investment securities yields.

The cost of interest-bearing liabilities for the fourth quarter of 2019 was 1.26% compared to 1.41% for the linked quarter and 1.21% for the fourth quarter of 2018. The cost of interest-bearing liabilities for 2019 was 1.35% compared to 1.01% during the same period in 2018. The cost of interest-bearing transaction accounts, time deposits and borrowings have increased since 2018 largely driven by competitive pressures and higher market interest rates.

Net interest income increased to $49.5 million for the fourth quarter of 2019 compared to $44.2 million for the fourth quarter of 2018, due primarily to the growth of interest-earning assets and increases in loan yields, partially offset by an increase in average interest-bearing liabilities and higher interest rates on interest-bearing liabilities. Net interest income for 2019 was $196.0 million, as compared to $173.6 million for the same period in 2018 due to the same reasons as the quarterly comparison.

Noninterest Income

Noninterest income increased $2.4 million to $8.0 million for the fourth quarter of 2019 from $5.6 million for the fourth quarter of 2018. Other income increased $1.8 million compared to the fourth quarter of 2018 due primarily to an increase in swap income and gains resulting from payoffs of purchased credit impaired loans during the fourth quarter of 2019.

For 2019, noninterest income totaled $26.8 million compared to $22.3 million for the same period in 2018 as the Company recorded a $496,000 gain on equity securities in 2019 compared to losses of $583,000 during the same period in 2018. In addition, commissions and fees increased $688,000 compared to 2018 due primarily to an increase in investment services income and commercial loan fees, while service charges on deposit accounts increased $621,000 due primarily to deposit growth.  Income on bank owned life insurance decreased $516,000 compared to 2018 due primarily to the receipt of insurance proceeds of $421,000 in 2018.  Other income increased $2.3 million compared to 2018 due primarily to the same reasons discussed above in the quarterly comparison.

Noninterest Expense

Noninterest expense totaled $31.5 million for the fourth quarter of 2019 and increased $2.9 million compared to the fourth quarter of 2018 due primarily to salary and employee benefit expense which increased $1.9 million as a result of staff additions from the Highlands merger, normal merit increases and higher benefit costs.  Furniture and equipment increased $306,000 due primarily to an increase in service agreement expense compared to the fourth quarter of 2018, while marketing expense increased $238,000 due primarily to  the timing of marketing campaigns.  In the fourth quarter of 2019, no FDIC expense was recorded compared to $383,000 in the fourth quarter of 2018 due to assessment credits from the FDIC, resulting from the insurance fund reserve ratio exceeding the required level. Additionally, there were no merger-related expenses booked in the fourth quarter of 2019 compared to  $464,000 during the same period in 2018. Other expenses in 2019 were $811,000 greater than 2018 due primarily to increased donations, audit expense and loan-related expenses.

For 2019, noninterest expense totaled $126.8 million compared to $111.2 million for the same period in 2018. Excluding merger-related expenses of $3.2 million in 2019 and $464,000 in 2018, noninterest expense increased $12.9 million compared to 2018 primarily as a result of additional salary and benefit expenses, as well as Highlands expenses from the merger date in January 2019 through the system conversion date in April and increased data processing expenses. Net occupancy increased $874,000 during 2019 compared to 2018 due primarily to the addition of Highlands branches as well as the acceleration of rental expense on a leased branch slated to close. FDIC insurance expense decreased $1.2 million compared to 2018 due to the credits mentioned above. Other expenses increased $1.3 million compared to 2018 due primarily to increased consulting expense and donations.

Income Tax Expense

The effective tax rate for the fourth quarter of 2019 was 24.9% compared to 24.4% for the fourth quarter of 2018. The effective tax rate for 2019 was 24.8% compared to 21.0% for 2018.

Financial Condition

At December 31, 2019, total assets were $6.71 billion, an increase of $905.1 million, including $496.5 million from the Highlands acquisition compared to December 31, 2018. For the twelve months ended December 31, 2019, total loans grew $681.1 million, including $425.0 million from Highlands, to $5.14 billion and investment securities increased $97.4 million, including $24.5 million from Highlands, to $918.9 million. On the funding side, total deposits increased $673.1 million, including $409.6 million from Highlands, to $5.29 billion, while borrowings increased $92.6 million to $612.7 million. At December 31, 2019, total loans as a percent of total deposits was 97.1%.

Asset Quality

At December 31, 2019, non-performing assets increased to $21.7 million, 0.32% 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 increased to 0.41% at December 31, 2019 compared to 0.27% at December 31, 2018. The allowance for loan losses increased to $40.0 million, 0.78% of total loans, at December 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 0.88%. In the fourth quarter of 2019, the Company had net recoveries of $262,000, or 0.02% of average loans, annualized, compared to net charge-offs of $196,000, or 0.02% of average loans, annualized, for the same period in 2018. Provision for loan losses for the fourth quarter of 2019 was $1.1 million compared to provision for loan losses of $591,000 in the fourth quarter of 2018.

Capital

At December 31, 2019, stockholders' equity was $725.3 million compared to $623.7 million at December 31, 2018, a 16% increase. Lakeland Bancorp remains above FDIC “well capitalized” standards, with a Tier 1 leverage ratio of 9.41% at December 31, 2019. The book value per common share and tangible book value per common share both increased 9% to $14.36 and $11.18, respectively, compared to $13.14 and $10.22 at December 31, 2018. On January 22, 2020, the Company declared a quarterly cash dividend of $0.125 per share to be paid on February 14, 2020, to shareholders of record as of February 4, 2020.

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 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 $6.71 billion in total assets. Lakeland Bank, a wholly-owned subsidiary of Lakeland Bancorp, Inc., operates 52 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