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Lakeland Bancorp Reports 25% Increase in First Quarter Earnings

Oak Ridge, NJ – April 20, 2012 -- Lakeland Bancorp, Inc. (NASDAQ: LBAI) reported the following positive developments for the first quarter of 2012:
 
·           Net Income Available to Common Shareholders in the first quarter of 2012 was $4.4 million, or $0.16 per diluted share, a 25% increase as compared to the $3.5 million, or $0.13 per diluted share reported for the same period last year.  
·           In the first quarter of 2012, the Company redeemed the remaining $19.0 million in preferred stock issued to the U.S. Department of the Treasury (“Treasury”) under the Capital Purchase Program (“CPP”). As a result, a charge of $501,000 or ($0.02) per diluted share was incurred, reflecting the acceleration of the preferred stock discount accretion. In March 2011, the Company made a $20.0 million payment to the Treasury and incurred a similar charge of $745,000, or ($0.03) per diluted share. Additionally, in the first quarter of 2012, the Company repurchased the warrant issued to the Treasury under the CPP for $2.8 million.
·            The Company declared a quarterly cash dividend of $0.06 per common share. The cash dividend will be paid on May 15, 2012 to holders of record as of the close of business on April 30, 2012.  Also in the first quarter of 2012, the Company declared a 5% stock dividend which was distributed on April 16, 2012 to shareholders of record on March 30, 2012.
·           The Company reported strong growth in both loans and core deposits in the first quarter of 2012. Loans totaling $2.07 billion at March 31, 2012 increased by $32.2 million from December 31, 2011, while core deposits at $1.95 billion, increased by $59.3 million in the first quarter of 2012. Non-interest bearing demand deposits at $476.3 million increased by $26.8 million, or 6%, from year-end 2011 and now represent 21% of total deposits.
·           Non-performing assets at March 31, 2012 totaling $43.3 million were $6.9 million, or 14%, lower than the $50.2 million in the fourth quarter of 2011.
·           In the first quarter of 2012, net interest margin (“NIM”) was 3.76%, a three basis point improvement from the fourth quarter of 2011. This improvement in NIM was driven by a seven basis point decline in the yield on average interest-bearing liabilities, which decreased to 0.83% in the first quarter of 2012. This decrease in interest-bearing liabilities exceeded a three basis point decline in interest-earning assets, which yielded 4.43% in the first quarter of 2012.  
Thomas J. Shara, Lakeland Bancorp’s President and CEO said, “In the first quarter of 2012, we continued the trend of favorable financial results, improving asset quality, growth in both loans and core deposits, and a 4% decline in operating expenses. Furthermore, we concluded all aspects of our participation in the Capital Purchase Program, and rewarded our shareholders with a 5% stock dividend which effectively increases the cash dividend by 5%.”  
Earnings
 
Net Interest Income
Net interest income for the first quarter of 2012 was $23.9 million, as compared to $24.6 million for the same period in 2011. Net interest margin at 3.76% compared to 3.91% reported in the first quarter of 2011. The decrease in net interest margin in the first quarter of 2012 as compared to the same period last year reflects a greater reduction in yields on interest-earning assets as compared to interest-bearing liabilities. The Company’s yield on interest-earning assets in the first quarter of 2012 was 4.43%, a decrease of 31 basis points from the same period in 2011. The cost of interest-bearing liabilities was 0.83%, a decrease of 17 basis points from the first quarter of 2011. 
 
Noninterest income
Noninterest income, exclusive of gains on investment securities, totaled $4.0 million for the first quarter of 2012, a decrease of $205,000 as compared to the same period in 2011. Service charges on deposits at $2.4 million were equivalent to the total for the first quarter of 2011, while commissions and fees at $980,000 increased by $148,000, primarily due to an increase in investment commission income. Gains on leasing related assets were $184,000 in the first quarter of 2012, a decrease of $279,000 as compared to the first quarter of 2011 as the leasing portfolio has steadily declined.
 
 
Noninterest expense
Noninterest expense for the first quarter of 2012 was $16.3 million, compared to $17.0 million for the same period in 2011, a decrease of $751,000, or 4%. Salary and benefit expense at $9.4 million increased by 5% as compared to the first quarter of 2011. Net occupancy, furniture and equipment expenses at $2.8 million were $304,000 lower than last year primarily due to lower costs for snow removal in 2012. FDIC costs at $555,000 decreased by $392,000 due to the change in the FDIC’s assessment methodology, while expenses on other real estate owned and other repossessed assets decreased by $234,000.
Financial Condition
At March 31, 2012, total assets were $2.9 billion, a $26.4 million increase from year-end 2011. Total loans at $2.1 billion were $32.2 million higher than at December 31, 2011, primarily due to a $31.3 million increase in commercial loans. Total deposits at $2.3 billion increased by $38.5 million, or 2%, from year-end 2011. Noninterest bearing demand deposits at $476.3 million and savings and interest-bearing transaction accounts at $1.5 billion increased by $26.8 million and $32.5 million, respectively, from year-end 2011. Time deposits at $338.7 million have decreased by $20.8 million from year-end 2011 as depositors have migrated to liquid core deposits in this low interest rate environment.   
 
 
Asset Quality
At March 31, 2012, non-performing assets totaled $43.3 million (1.52% of total assets), as compared to $50.2 million (1.78% of total assets) as of December 31, 2011. The Allowance for Loan and Lease Losses totaled $28.7 million at March 31, 2012, and represented 1.38% of total loans. During the first quarter of 2012, the Company had net charge-offs of $4.3 million (annualized 0.83% of total loans).    
 
Capital
Stockholders' equity was $242.0 million and book value per common share was $8.97 as of March 31, 2012 while tangible book value at $5.74 per common share has increased by 10% since the first quarter of 2011. As of March 31, 2012, the Company’s leverage ratio was 7.46%. Tier I and total risk based capital ratios were 9.92% and 12.37%, respectively. 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 and competition. 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 and, where applicable, long-term debt prepayment fees. Income for the non-GAAP ratio is increased by the favorable effect of tax-exempt income and excludes securities gains and losses, 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.
 
Lakeland Bancorp, the holding company for Lakeland Bank, has a current asset base of $2.9 billion and forty-seven (47) offices spanning six northwestern New Jersey counties: Bergen, Essex, Morris, Passaic, Sussex and Warren. Lakeland Bank, headquartered at 250 Oak Ridge Road, Oak Ridge, New Jersey offers an extensive array of consumer and commercial products and services, including online banking, localized commercial lending teams, and 24-hour or less turnaround time on consumer loan applications. For more information about their full line of products and services, visit their website at www.lakelandbank.com.