OAK RIDGE, N.J., July 28, 2022 (GLOBE NEWSWIRE) — Lakeland Bancorp, Inc. (NASDAQ: LBAI), the parent company of Lakeland Bank, reported net income of $29.1 million and earnings per diluted share 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.
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.
