Lakeland Bancorp Reports Third Quarter Results and Increases Cash Dividend by 7%

OAK RIDGE, N.J., Oct. 24, 2013 (GLOBE NEWSWIRE) -- Lakeland Bancorp, Inc. (Nasdaq:LBAI) reported Net Income Available to Common Shareholders in the third quarter of 2013 of $6.6 million or $0.18 per diluted share compared to $5.5 million, or $0.20 per diluted share for the same period last year. Third quarter results included $744,000, or $0.02 per diluted share, in merger expenses relating to the acquisition of Somerset Hills Bancorp, which took place in the second quarter of 2013. Net Income Available to Common Shareholders for the first nine months of 2013 was $17.6 million or $0.54 per diluted share compared to $15.3 million, or $0.56 per diluted share for the same period last year. Excluding merger costs, Net Income Available to Common Shareholders was $19.8 million or $0.61 per diluted share for the first nine months of 2013.The Return on Average Assets for the nine months ended September 30, 2013 was 0.78%, the Return on Average Common Equity was 7.59% and the Return on Tangible Common Equity was 11.12%.

The Company declared a quarterly cash dividend of $0.075 per common share, an increase of 7% from the prior quarter, payable on November 15, 2013 to holders of record as of the close of business on November 5, 2013.

Thomas J. Shara, Lakeland Bancorp's President and CEO said, "Our solid third quarter results reflect the successful completion of the Somerset Hills merger, the continued stability in our net interest margin, and further improvement in asset quality. We are very pleased to be able to reward our shareholders with a 7% increase in the cash dividend. This is the fourth consecutive year of higher cash dividends and/or stock dividends."

Somerset Hills Bancorp Acquisition

As previously noted in the second quarter earnings release, the Company acquired Somerset Hills Bancorp ("Somerset Hills") on May 31, 2013. At the time of acquisition, Somerset Hills had $355.9 million in total assets, $10.4 million in investment securities, $246.4 million in loans (including $2.5 million in mortgages held for sale), and $311.8 million in deposits ($80.8 million in non-interest bearing demand deposits and $231.0 million in interest-bearing deposits) at fair value. Goodwill amounted to $23.3 million and Core Deposit Intangibles were $2.7 million. Accordingly, the Company's financial statements reflect the impact of the merger from the date of acquisition, which should be considered when comparing comparable periods for net income in the third quarter of 2013 and nine months ended September 30, 2013. Merger related costs totaled $744,000 and $2.8 million, respectively, for the third quarter of 2013 and first nine months of 2013.

Earnings

Net Interest Income

Net interest income for the third quarter of 2013 was $27.5 million, as compared to $23.7 million for the same period in 2012. Annualized Net Interest Margin ("NIM") continues to be stable. In the third quarter of 2013, NIM was 3.68%, which equaled the NIM for the second quarter of 2013, and was two basis points higher than 3.66% in the third quarter of 2012. The annualized yield on interest-earning assets declined 25 basis points to 4.00% in the third quarter of 2013 compared to 4.25% for the same period last year. The annualized cost of interest-bearing liabilities decreased 32 basis points from 0.74% in the third quarter of 2012 to 0.42% in the third quarter of 2013, reflecting the management of deposit and borrowing rates.

Year-to-date, net interest income at $76.6 million compared to the $71.3 million reported for the first nine months of 2012. Annualized Net Interest Margin at 3.69% compared to 3.70% for the same period last year. The Company's annualized yield on earning assets decreased from 4.34% for the first nine months of 2012, to 4.05% for the same period this year, while the cost of interest bearing liabilities decreased from 0.79% to 0.46%.

Noninterest Income

Noninterest income totaled $4.6 million for the third quarter of 2013, which equaled the total reported for the same period last year. Service charges on deposit accounts totaling $2.8 million were 3% higher than the total reported for the same period last year, while commissions and fees at $1.1 million were equivalent to last year's third quarter total.

Noninterest income, exclusive of gains on sales of investment securities, totaled $15.0 million for the first nine months of 2013, as compared to $13.2 million for the comparable period last year. Gains on investment securities totaled $506,000 for the first nine months of 2013 as compared to $273,000 for the first nine months of 2012. As previously reported in the second quarter of 2013, the Company acquired and extinguished Lakeland Bancorp Capital Trust I trust preferred securities having a notional value of $9.0 million, recording a $1.2 million gain on this transaction. Exclusive of this transaction and the gains on investment securities mentioned above, noninterest income for the first nine months of 2013 at $13.8 million was $591,000, or 4%, higher than the same period last year. Service charges on deposit accounts at $8.1 million and commission and fees at $3.5 million were 2% and 3% higher, respectively, than last year's total. Other income at $1.2 million increased by $358,000 primarily due to an increase in gains on sales of mortgage loans.

Noninterest Expense

Noninterest expense for the third quarter of 2013 was $20.4 million, as compared to $17.0 million for the same period last year. Included in non-interest expenses in the third quarter of 2013 were $744,000 in merger related expenses. Salary and benefit expense at $11.0 million increased by $1.4 million in the third quarter this year as compared to the same period last year. This increase was primarily due to increased salaries and benefit costs as a result of increased staffing levels from the six new Somerset Hills' branches, as well as the retention of some administrative personnel from the Somerset Hills acquisition. Occupancy, furniture and equipment expense at $3.6 million increased by $630,000, or 21%, primarily due increased costs at the six new branch locations acquired in the Somerset Hills acquisition, a new branch opening in the fourth quarter of 2012, as well as increases in service agreement and depreciation costs resulting from the updating of Lakeland Bank's computer systems. Legal expenses at $406,000 increased by $271,000 compared to the same period last year. In the third quarter of 2012, the Company recovered $150,000 of previously expensed legal fees. Other expenses at $3.0 million increased by 14% from the total reported in the same period last year. The efficiency ratio for the third quarter of 2013 was 60.0%.

For the first nine months of 2013, non-interest expenses, exclusive of $2.8 million in merger related expenses and $526,000 in prepayment fees on long-term debt, totaled $54.7 million, compared to $49.7 million in 2012. Salary and benefit costs at $31.1 million increased 9%, reflecting the increased staffing levels due to the Somerset Hills acquisition, while occupancy, furniture and equipment expenses at $10.4 million increased by $1.9 million, primarily for the same reasons outlined in the three month analysis, as well as expenses incurred in 2013 resulting from the opening of a new Training and Operations Center in mid-2012. Marketing expense at $1.4 million decreased by 13%, while other expenses at $8.0 million increased by 10%.   

Financial Condition

At September 30, 2013, total assets were $3.30 billion, an increase of $380.6 million from December 31, 2012, or 13%. This includes Somerset Hills' assets of $355.9 million at the time of acquisition. Total loans were $2.43 billion, an increase of $281.5 million from $2.15 billion at year-end 2012. Somerset Hills' loans, including mortgages held for sale, totaled $246.4 million at the time of acquisition. In the third quarter of 2013, total loans decreased by $18.9 million, primarily in the commercial and industrial loan category. Total deposits were $2.71 billion, an increase of $337.5 million from December 31, 2012. Somerset Hills' deposits totaled $311.8 million at the time of acquisition. In the third quarter of 2013, total deposits increased by $35.6 million. Noninterest bearing demand deposits at $623.6 million increased by $22.7 million, or 4%, from June 30, 2013.

Asset Quality

In the third quarter of 2013, the Company continued to improve its asset quality metrics. Non-performing assets totaled $18.7 million (0.57% of total assets) at September 30, 2013 compared to $20.1 million (0.62% of total assets) at June 30, 2013, and $28.5 million (0.98% of total assets) at December 31, 2012. In the third quarter of 2013, the provision for loan and lease losses totaled $1.9 million, a decrease of $1.5 million, or 44%, from $3.4 million reported in the third quarter of 2012. On a year-to-date basis, the provision for loan and lease losses at $7.7 million was $4.1 million, or 35%, lower than last year's total. The Allowance for Loan and Lease Losses totaled $29.8 million at September 30, 2013 and represented 1.23% of total loans.  In the third quarter of 2013, the Company had net charge offs totaling $1.7 million. For the first nine months of 2013, the Company had net charge-offs of $6.8 million, or 0.40% of average loans, as compared to $11.5 million for the same period last year.

Capital

At September 30, 2013, stockholders' equity was $347.5 million and book value per common share was $9.70. As of September 30, 2013, the Company's leverage ratio was 8.84%. Tier I and total risk based capital ratios were 11.64% and 13.27%, respectively. The Tangible Common Equity ratio was 7.36%, an increase from 6.84% reported at December 31, 2012. These regulatory capital ratios exceed those necessary to be considered a well-capitalized institution under Federal guidelines.  

Forward-Looking Statements

The information disclosed in this document includes various forward-looking statements (with respect to corporate objectives, trends, and other financial and business matters) 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. Lakeland 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 affecting the financial services industry, government intervention in the U.S. financial system, changes in levels of market interest rates, pricing pressures on loan and deposit products, credit risks of the Company's lending and leasing activities, customers' acceptance of the Company's products and services, competition and the failure to realize anticipated efficiencies and synergies of the merger between Lakeland Bancorp, Inc. and Somerset Hills Bancorp. Any statements made by Lakeland that are not historical facts should be considered to be forward-looking statements. Lakeland 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").  The Company's management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity and tangible assets, is utilized by regulators and market analysts to evaluate a company's financial condition and therefore, such information is useful to investors.  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.

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, expenses on other real estate owned and other repossessed assets, 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 securities gains and losses and gain on debt extinguishment, which can vary from period to period. The Company uses this ratio because it believes the ratio provides a better comparison of period to period operating performance.

About Lakeland Bank

Lakeland Bancorp, the holding company for Lakeland Bank, has $3.3 billion in total assets with 52 offices spanning eight northern New Jersey counties: Bergen, Essex, Morris, Passaic, Somerset, Sussex, Union and Warren. Lakeland Bank is the second largest commercial bank headquartered in the state and offers an extensive array of consumer and commercial products and services, including online and mobile banking, localized commercial lending teams, and 24-hour or less turnaround time on consumer loan applications. For more information about the full line of products and services, visit LakelandBank.com.