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Lakeland Bancorp Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 10, 2009 02:28PM
Lakeland Bancorp Inc. (LBAI) filed Quarterly Report for the period ended 2009-06-30.
Highlight of Business Operations:
The second quarter 2009 results were negatively impacted by a loan and lease loss provision of $34.1 million compared to a provision of $8.2 million in the second quarter of 2008. The increased loan loss provision resulted from several factors including continued charge-offs in the Companys leasing portfolio, increases in non-performing loans in its commercial portfolio, and the Companys decision to reduce the exposure in its leasing portfolio by designating lease pools for future sales. In prior quarters, the Company disclosed that two of its leasing originators could no longer fulfill all of their obligations under contractual recourse provisions. The collateral underlying these leases were primarily transportation and construction use vehicles. During the second quarter of 2009, the Company evaluated the trends in the economy that could further impact its leasing portfolio and subsequently entered into agreements to sell pools of leases having a combined balance of $35.9 million for $26.9 million. These sales included all the remaining leases acquired by one of the originators that had not been able to fulfill its contractual obligations to Lakeland. As a result of this sale, we recorded a mark-to-market adjustment of $9.1 million in leases upon the determination that the leases were held for sale purposes and recorded a loss on the sale of other repossessed assets of $400,000. Lakeland also identified other pools of leases (including the remaining lease originator discussed above) as held for sale and recorded an additional mark-to-market adjustment of $12.5 million based on sale price indications from potential buyers and based on the sales prices of prior lease pools sold adjusted for differing characteristics. Lakeland also recorded a loss of $661,000 on other repossessed assets associated with those pools of leases. This will be discussed in more detail below.
Total interest expense decreased from $13.3 million in the second quarter of 2008 to $10.7 million in the second quarter of 2009, a decrease of $2.7 million, or 20%. Average interest-bearing liabilities increased $88.0 million, but the cost of those liabilities decreased from 2.64% in 2008 to 2.03% in 2009. The decrease in liability yields reflects the decrease in short term interest rates, as the Federal Reserve Bank lowered the federal funds target rate from 2.00% at the end of the second quarter of 2008 to a range between 0% and 0.25% at the end of 2008. Lakeland lowered its deposit rates to reflect the lower interest rate environment. Average deposits increased from $1.93 billion in the second quarter of 2008 to $2.09 billion in the second quarter of 2009, an increase of $154.6 million, or 8%. Average borrowings decreased from $393.8 million in 2008 to $332.3 million in 2009 due to increased liquidity as a result of several factors including increased deposits and the receipt of $59.0 million in proceeds from the issuance of
During the second quarter of 2009, the Company recorded $21.6 million in mark-to-market adjustments on lease pools held for sale. Exclusive of the mark to market adjustments discussed above, in the second quarter of 2009, the Company charged off loans of $14.1 million (including $12.5 million in leases) and recovered $390,000 in previously charged off loans and leases compared to $3.6 million and $150,000, respectively, during the same period in 2008. For more information regarding the determination of the provision, see Risk Elements under Financial Condition.
Noninterest income decreased $370,000 or 8% from the second quarter of 2008 to the second quarter of 2009. Included in noninterest income for the second quarter of 2009 was a $532,000 loss on investment securities as the company recorded an other-than-temporary impairment loss on an equity security in its investment portfolio. For more information, please see Note 6 in Notes to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q. Service charges on deposit accounts totaling $2.7 million decreased by $123,000, or 4% in the second quarter of 2009, compared to the same period last year, primarily due to reduced overdraft fees. Income on bank owned life insurance at $818,000 increased by $480,000, as the company received an insurance benefit on a bank owned life insurance policy for insurance proceeds received on the death of a former employee. Leasing income decreased $121,000 as a result of managements determination to reduce activity in the leasing division.
Noninterest expense for the second quarter of 2009 was $20.3 million compared to $14.4 million in 2008. Salary and benefit expense increased by $1.0 million or 14% to $8.7 million due to the addition of two new branch offices, new lending and sales officers, and normal salary increases. Net occupancy expense increased 12% to $1.6 million primarily due to the opening of two new branch offices subsequent to the second quarter of 2008. Marketing expense for the second quarter of 2009 increased $240,000 to $784,000 as a result of deposit promotions and the opening of two new branches. FDIC expense increased by $2.1 million to $2.4 million due to increased assessments, including $1.2 million from an industry wide special assessment. Collection expense increased $220,000 to $377,000 in the second quarter of 2009 due to leasing related costs. Other repossessed asset expense increased by $1.2 million to $1.3 million due to the write down of leasing assets and the loss on sale of leasing equipment. Other expenses increased by $832,000 or 35% to $3.2 million in the second quarter of 2009, primarily due to a $704,000 pretax payout to the beneficiary of the bank owned life insurance proceeds previously mentioned. The Companys efficiency ratio was 68.44% in the second quarter of 2009, compared to 51.89% for the same period last year. The efficiency ratio expresses the relationship between noninterest expense (excluding other repossessed asset expense and
Net loss for the first half of 2009 was ($9.5) million, compared to net income of $8.4 million for the same period in 2008. Loss per share was ($0.46) for the first half of 2009, compared to diluted earnings per share of $0.36 in the first half of 2008. The decline in net income related to the increase in the provision for loan and lease losses from $9.4 million in the first half of 2008 to $40.5 million in the first half of 2009.
Stocks Discussed: LBAI,