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Lakeland Bancorp Reports 14% Increase in Net Income and Raises Cash Dividend

Oak Ridge, NJ – October 16, 2012 -- Lakeland Bancorp, Inc. (NASDAQ: LBAI) reported Net Income Available to Common Shareholders of $5.5 million or $0.20 per diluted share for the third quarter of 2012 compared to $4.8 million, or $0.18 per diluted share for the same period last year.  The annualized Return on Average Assets in the third quarter of 2012 was 0.77%, while the annualized Return on Average Common Equity was 8.48%. Net Income Available to Common Shareholders for the first nine months of 2012 was $15.3 million or $0.56 per diluted share, 19% above the $12.9 million, or $0.48 per diluted share reported for the same period last year.
 
The Company declared a quarterly cash dividend of $0.07 per common share, an increase of $0.01 per common share from the previous quarter. The cash dividend will be paid on November 15, 2012 to holders of record as of the close of business on October 31, 2012. 
 
Thomas J. Shara, Lakeland Bancorp’s President and CEO said, “We are pleased to report strong quarterly and year-to-date financial results, as well as improved credit trends. Furthermore, we 0successfully completed a $25 million common stock offering and raised the cash dividend 17%.”
Earnings
Net Interest Income
Net interest income for the third quarter of 2012 was $23.7 million, as compared to $24.4 million for the same period in 2011. The annualized Net Interest Margin (“NIM”) for the third quarter of 2012 was 3.66%, which compared to 3.85% reported in the third quarter of 2011. The decrease in NIM in the third quarter 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 annualized yield on interest-earning assets declined to 4.25% in the third quarter of 2012 compared to 4.63% for the same period last year. The annualized cost of interest-bearing liabilities decreased from 0.95% in the third quarter of 2011 to 0.74% in the third quarter of 2012. Subsequent to the end of the third quarter of 2012 on October 7, 2012, the Company redeemed $25.8 million of junior subordinated debentures with a coupon rate of 7.535%. This transaction will have a positive impact on the cost of interest-bearing liabilities in the fourth quarter this year. 
 
Year-to-date, net interest income at $71.3 million compared to the $73.4 million reported for the first nine months of 2011. Annualized NIM for the first nine months of 2012 at 3.70% compared to 3.89% for the same period last year. The Company’s annualized yield on earning assets decreased from 4.69% for the first nine months of 2011, to 4.34% for the same period this year. The Company’s cost of interest bearing liabilities decreased from 0.98% for the first nine months of 2011 to 0.79% for the same period this year.
 
Noninterest Income
Noninterest income, exclusive of gains on sales of investment securities, totaled $4.6 million for the third quarter of 2012, as compared to $4.3 million for the same period last year, an increase of 8%. In the third quarter of 2011, the Company recorded $785,000 on gains on sales of investment securities, as compared to no gains for the same period this year. Service charges on deposit accounts totaling $2.8 million increased by 5% primarily due to the implementation of a new demand deposit pricing structure in the second quarter of 2012. Commissions and fees at $1.2 million increased by $247,000, or 27%, primarily due to increased loan fees.
 
Noninterest income, exclusive of gains on sales of investment securities, totaled $13.2 million for the first nine months of 2012, which was $389,000 higher than last year’s nine month total. Gains on investment securities totaled $273,000 in 2012 as compared to $1.2 million in 2011. Service charges on deposit accounts at$7.9 million were up 3%, while commissions and fees at $3.4 million increased by 22%, primarily due to increased loan fees and investment commission income. Gains on leasing related assets at $403,000 decreased by $407,000 in 2012, reflecting the reduction in the size of the leasing portfolio.
 
Noninterest Expense  
Noninterest expense for the third quarter of 2012 was $17.0 million, as compared to $18.0 million for the same period last year. Included in the third quarter 2011 total was an $800,000 prepayment fee on long-term debt. Salary and benefit expense at $9.6 million increased by 3%.  Legal expense at $135,000 was $322,000 lower than the third quarter of 2011 partially due to a $150,000 recovery in the third quarter of 2012 of previously expensed legal fees. Net occupancy expense at $1.8 million increased by 7%, primarily due to expenses incurred relating to the new operations and training center that was opened in the second quarter of 2012. Expenses on other real estate owned and other repossessed assets declined $323,000 as compared to the same period last year.
 
For the first nine months of 2012, noninterest expense was $49.7 million, compared to $51.8 million in 2011. Salary and benefit costs at $28.6 million increased 4%, while occupancy, furniture and equipment expenses at $8.6 million decreased by 2%. FDIC insurance expense at $1.6 million decreased by $558,000, or 26%, resulting from a change in FDIC assessment rate methodology. Core deposit intangibles were fully amortized in 2011, which resulted in a $577,000 reduction in expenses in 2012, while expenses on other real estate owned and other repossessed assets declined by $719,000 compared to the first nine months of 2011.
Financial Condition
At September 30, 2012, total assets were $2.86 billion, an increase of $33.7 million from December 31, 2011. Total loans were $2.06 billion, an increase of $23.6 million from $2.04 billion at year-end 2011, primarily due to increases in commercial real estate loans and residential mortgage loans of $15.8 million and $13.5 million, respectively. Total deposits were $2.34 billion, an increase of $91.5 million from December 31, 2011. Noninterest bearing demand deposits at $485.3 million have increased by $35.7 million or 8% from year-end 2011. Savings and interest-bearing transaction accounts at $1.54 billion have increased by $94.9 million, primarily in the public funds sector, while time deposits at $320.4 million, have decreased by $39.1 million.
 
Asset Quality
At September 30, 2012, non-performing assets totaled $29.2 million (1.02% of total assets) compared to $35.3 million (1.24% of total assets) at June 30, 2012. The Allowance for Loan and Lease Losses totaled $28.7 million at September 30, 2012 and represented 1.39% of total loans, and 101% of non-performing loans. In the third quarter of 2012, the Company had net charge offs totaling $3.2 million, or 0.63% of average loans. For the first nine months of 2012, the Company had net charge-offs of $11.5 million, as compared to $13.7 million for the same period last year.
 
Capital
At September 30, 2012, stockholders' equity was $277.5 million and book value per common share was $9.35, as compared to $8.99 at year-end 2011. As of September 30, 2012, the Company’s leverage ratio was 9.05%. Tier I and total risk based capital ratios were 12.24% and      14.14%, respectively. These regulatory capital ratios exceed those necessary to be considered a well-capitalized institution under Federal guidelines. As previously discussed, the Company repaid $25.8 million in subordinated debentures. The Company’s pro forma capital ratios considering the payment of the subordinated debentures would have been 8.61%, 11.65% and 12.90% for the leverage ratio, the Tier I risk based capital ratio and the total risk based capital ratio, respectively.     
 
Lakeland Bancorp, the holding company for Lakeland Bank, has a current asset base of $2.9 billion and forty-six (46) 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.