LBAI - Earnings call transcript Q3 2021

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Operator

Good morning and welcome to the Lakeland Bancorp, Inc.

Third Quarter Earnings Conference Call. My name is Daisy and I'll be coordinating today's call.

You will have the opportunity to ask a question at the end of the presentation. [Operator Instructions] Please note, this event is being recorded. to and conference Director like Russell, to now Controller Assistant of would turn over the Mary I Financial Reporting. ma'am. ahead go Please

Mary Russell

Thank President our ladies for morning, and CEO, Today's you, And and President Financial Daisy. you Executive Officer, Shara; thank Splaine. Vice presenters and are joining Chief quarter third gentlemen. for Thomas earnings and call. us Good Thomas

statements take as our their results, we call. forward-looking please review to you cautions standard of today's financial may during note beginning made our Before that of of be the which any ask course

Our which full disclaimer is Relations contained the lakelandbank.com. in this morning’s has earnings posted page release, website, been on our Investor to

my perspective will pleasure is Thomas introduce offer it on Shara, quarter. his third who Now our to

Thomas Shara

Bank’s that conference We Thank you, Mary. and Good you morning, safe Lakeland quarter sincerely call. third everyone. and hope families to And are your healthy. earnings welcome

and despite results our quite York quarter well very markets were pandemic. New third continued Jersey in as Our remained New the and solid generally positive perform ongoing to trends

We have continue we this in these on uncertain will on discuss steer results call through and XXXX. the times quite fronts so which impressive several far a been to Lakeland

flat to by quarter our of loan quality earnings operating third strong interest both exceed loans remains challenged In quarter for remained growth essentially credit the as portfolio Regarding continued continue income, forecast. strong quarter excellent and led payoffs growth. earnings, deposit and originations, continued year-to-date. net spite loan the were in Ex-PPP

into Bank, Mercer, merger in Constitution’s attractive Lakeland January well close warehouse merger and counties. counties, progressing value. Ocean is Constitution of The which Monmouth, July, enhance long-term In also shareholder Xst mortgage its positions the and and Xst increase Just Somerset In XXXX. banking expand presence to in markets to our we're Lakeland growth and to reminder the mortgage announced early banking Middlesex performance that made franchise will several moves lines. another quarter, the Constitution leverage strategic in to we their business and strategically in X.XXX%. our The acquisition Bergen, the expecting September, and case strong non-performing which content. is successfully sale we reporting prior of subordinated on charge non-local offering net five a resulted it for for for addition years in very week. also $XXX,XXX rate and In sold loan executed million of minimal completed Friday. debt of with $XXX fixed you And Xst at in results the of we the missed non-performers loss in a where third recovery we've This row quarter quarter, posted offs. quarter interest third last $XXX,XXX with

result, been $XX a our non-performance last million million year at to from reduced As $XX have XX.XX% currently.

loans positioned continued loans We success. XX for equals September to Our these Lakeland basis as non-performing of XX. actions believe points future

will continue the local we Long-term it and to and As manageable consumer our in outlook remains to future. economic growth COVID-XX correlated to the conditions our clients to loan markets the our in and economic and economic future optimistic relates for markets as are highly believe growth. growth continues economy, is support loan improve improve businesses

the is consumers continue positive spending future. the consumer pent-up which position, personal support to Another will solid and their in savings

with as all is a pipeline our The to fourth currently see strong time. our has prepayments growth usage, it throughout businesses moving relief with interest slower increases recent pricing adjustments continues despite positive well. Lakeland asset that and deposit increasing Bank and in year. over in is term was quarter, increase been and rates strong anticipate expect higher. very strong for to line longer unabated anticipated likely the loan quarter increase As on loan demand credit all-time The growth provide is which pressure rates to deposit originations at should next see quarter also pricing categories, we The lows, historically

Tom in have our experienced at net our this additionally to million interest $XX by deploy which intention margin of present compound further will increasing discuss securities excess growth of loan excess in this It shortly. margin. is increasing forgiveness the has the loan quarter which PPP reduction quarter, resulted funding in quarter, We interest a also liquidity our liquidity, net providing and for investment position, these

month. reduced also XX/X again, this positive have We of pricing as the

items non-recurring technology pending debt extinguishing enhancements increased with the quarter. customer for Our We've Xst our positioning. continued pre-tax and improving merger primarily Constitution these of operating experience a items couple attributed during totaled costs our our expenses to the competitive related million quarter, $X.X and subordinated the also debt, of at to to existing commitment

to steps call quarter, Officer, we Tom over Chief growth, navigate you long-term our these we and several Splaine, unpredictable financial to the on to sheet prudent remain our of results. this as our value Financial to focused taken you've margin conditions. commitment through While Tom? enhance detailed like management active shareholder credit to unwavering I'd turn With take that, balance quality economic

Thomas Splaine

Thank everyone. and morning, you, good Tom,

credit a net during $XX.X per and related impacted for share the the or provisions or of million. Our on diluted the QX's results million rate quarter of for quarter. return trailing merger impacted for benefit quarter compared by million unfavorably with assets. $X.XX average per $X debt the was million credit $X.XX earnings QX was a totaling reflected net $X.X negative or X.XX% revenue and for provisions annualized negative of million share benefit cost losses million. of $XX.X non-recurring totally losses, expenses income were by extinguishment $X.X Pre-provision $XX

compressed XX our net in investments. margin excess increase Our average an as despite basis liquidity quarter increased trailing the points versus interest

and quarter average remain increased Loan and deposits grew repayments loans for included average forgiveness. As elevated PPP decreased the

balance $XXX average total As a X.X% for QX. of average assets and as result cash our X.X% comprises of compared million increased with QX

increase quarter, million compared quarter. or interest the to in income. and $XXX QX deploy yields excess the total Told liquidity into of cost near fell XX the increased deposits XX and trailing deposits non-interest-bearing XX% earning quarter We annualized average of group. an million deposits this continue to the quarter. remain to improve of to increased this to best X.X% deposits $XX or deposits loans in and Including asset our peer to trailing expect $X.XX in term points non-interest-bearing Average rate the for much our securities XX% billion our points among basis from or in basis

emphasizing as $XX offering subordinated at on offering average of Our by new carry and to the increased the million QX slightly negative we into debt borrowing redemption securities, end X the to result We basis the decreased into deposit and funding of levels and costs pressure loans QX. of as remain interest quarter points anticipate the million X debt managing to $XX growth. margin during $XXX deploy subordinated our continue under liquidity million the non-interest-bearing and approximately while existing our net a excess

for the decrease asset benefit loans, attributable previously million benefit macro-economic million for $X.X a quality, continued the forecasts, The quarter, in current benefit provision losses loans was in net with to quarter of compared Our off and a charged current interest $X on improved favorable was outstanding. credit trailing quarter. recoveries

total from assets non-performing all improved decreased and metrics, levels, ratios of assets XXth. basis criticized the Non-performing classified XX at basis loans points Asset quarter. points versus XX% trailing delinquencies quality to June XX and early-stage loan

debt versus total compared million. Non-interest costs quarter. PPP impacted and trailing stable points of loans extinguishment with expenses the income $X.X million this quarter, of XXX and Excluding trailing remained basis merger the non-recurring quarter expenses including by were loans, points basis relatively at allowance has negatively two Operating of the represents XXX $XXX,XXX. related $X.X items

higher Excluding and items, million and compensation expenses to from continued bonus $X.X due initiative. accrual costs these investments our non-recurring strategy into linked operating quarter digital increased the

from of XX% in XXXX. trailing quarter to the third the for of Our efficiency XXXX third quarter ratio and compares XX% quarter the XX% of

tax XX.X% you And was for effective related Daisy, due effective That question non-taxable prepared to we are Our open please. the XX% concludes if an of merger projecting can quarter. costs tax increased period, up for for rate currently remarks. approximately versus the rate our XXXX. QX of XX.X% year the and trailing

Operator

Frank, Schiraldi So go from Instructions] Piper [Operator Sandler. course. is question from our ahead. first Frank please Of

is open line Your

Frank Schiraldi

Good morning.

Thomas Shara

Good morning, Frank.

Thomas Splaine

Good Frank. morning,

Frank Schiraldi

talked peak in color about the still little like pretty Can wondered opportunity. guys business past give it you talked pipeline. the closes, could color what's given you there, the activity. about talk about a about in you of and a I constitution loan as mortgage once you being rates have the it a guys But if are given if more bit think here. in you quite an We've about some tailwind seen terms being a good talk optimistic warehousing in expectations wondered seems you just deal probably you give pretty I can moving little higher? growth guys that first you

give just color could you So, I wondered if more there. some

Thomas Shara

constitution spending Sure. first question. with team. warehouse lot good of time Yes. Frank, a been We've the

million constitution and talk warehouse First of increasing most $XX to ability warehouse of their a clients billion to out to relationships million; the loan, we've gone $X.X those is $XX billion lines. to $XX some are pretty bank, $XX million obviously combined And significant. upsize already lines their about in around

In one moving doing warehouse a of result as well. credit the as where that, to fact, of and doubled already we've their funds companies already operating committed we us to line the

if in And first in here is expect the market to So at upsize that's long market. that line, that production purchase purchase see the be to the the market the for existing kinds time. refinance And to through good a that we warehouse the they've the own our those a market, thing XXXX. we had frankly are continued just more moving from mortgage is relationships market of happening least see of half opportunities was in a other

Frank Schiraldi

And from deal expense Thanks. you could on base, rate both the just wondered us your terms thoughts just closes? could in of before of maybe the and Tom, after give in Great. if growth Okay. then run you terms here; if I

Thomas Splaine

back at the conversions and indications out two look will impacted we QX and a if have will the we that XXXX is Frank back February. projecting into about to early think be to around well. get still events. have where million which in were into in think deal rate then the as we'll of through And barring We $X.X right some right quarter be Yes. for we close you scheduled to expense first that do that by point that And we and able run those non-recurring if now be the significant systems that keep – back-office are are, consolidation any XXXX, items progressing things the

the through on So there's up XXX% still in cost closer, think days a year. to and the as quarter guidance will can we gets the of but expenses it next in be continue you we air more things XXXX move we as forward where right are rest this get of And in give not realized lot first quarter. now

Frank Schiraldi

Okay. All right. Thank you. Great.

Thomas Shara

right, Frank. That's

Operator

Chris is Our your from question go Chris comes next O'Connell ahead. from KBW. line open. Please

Chris O'Connell

came could compared apologize the I line where and growth I quarter? house Good but late, maybe bit the the hoping pipeline this out the flush opening And morning. just maybe utilization was to a then quarter fared I origination's quarter? well? compared comments little out And just lone missed if quarter bit last was to this pre-COVID a this you also as last at in

Thomas Splaine

Yeah. Sure, Chris.

of the cases, So, interest some deals, GSCs this get for quarter. continues just are part last twos about and seeing year. But origination so which The we're the far in to most XX-year the what this doing year's And last prepayment we're for chase point. some these in at companies generally insurance for five want mostly only look years, originations seeing the were we XX% is and good are at speeds. be originations lot. of don't the to challenge and deals We rates seven a competitors

reminder, fine. on year, where same The and the volumes grew time pipeline a year, we top just this they're XX% about is organically. it was we of last with So, last

prepayments bit, XX% around today, just is on down fourth was question will prepayment us. pipeline to utilization; speeds and it's the the expect think line for And quarter on the based to run So, are to with your utilization where really is historically utilization for would rates continue. XX% I last We slow. always a up one Historically XX%. coming the moving line us around at quarter from that's that do been quarter that strong a

but the amount that's liquidity work that create in out the back system utilization we'll now XX%. organic right eventually will around is So that some way shows and growth, its loan now right the just of rate

Chris O'Connell

quarter. you million Got it. this Thanks. I then one helpful. the one was $X.X That's interest PPP, And think quick it had if income the

then And the quarter, put cash as the next what you be that'd this also to quarter, quarter sounds of If slight was have pressure it core margin it amount like great? we're last for to looking of can at rate here. excess shake PPP as out post three of you the run this deployed? think the core margin after look Where two out we quarters of PPP, gets cash of kind do out kind on

Thomas Splaine

income now, is balances incurred. where PPP million quarter was $X.X to quarter $X.X now Chris. $X.X outstanding are Right million. down our fees you like it for Sure, – balances $XXX said un-recognize yet million, was right we to stand million of PPP And outstanding, and last be this

through applications. So, that of the we we all but QX pipeline anticipate to unlikely by year get will the PPP end additional loans forgiveness as it's we due customer the get through

wonderful complicating makes as value Chris as There's that here, do other a we of where be in parts things plan to going that quarter we as the right hitting is work we to marks first the two the provision as on NIM question is and we the excess XXXX, of well that's that liquidity forward like date head very for answering and factor utilize through difficult acquisition the us will to the and Looking out XXXX, lot all fair a put first get moving shake now, constitution into earnings. that the think but question. of the in

into And not as earnings insight for and it's better interest So, be XXXX net margin, get right that it's giving through QX just now. QX. looking we into we'll

that's have right we for the that's know the one but not now. best answer, I So,

Chris O'Connell

Got helpful. you. now. And Thanks. have it. I for it. Got Thank all That's that's

Thomas Shara

Chris. Thanks,

Operator

Our next William James. ahead. Raymond your question William, from comes from Please is open. Wallace go line

William Wallace

growth wanted commentary. I loan thanks. Hi, to back the circle on

of of, and – bigger customers potential constitution is in – mortgage growth if think kind comments let's existing type with work layer the how in of against of of might existing business type what building portfolio merger kind the around pressures what kind your proforma balances If you the the you offset picture, just let's business, just the warehouse to with grower Lakeland trying first you. in

of just overall what you thinking kind do can think kind of So next you holistically, growth year?

Thomas Splaine

historically from growing the while good relationships really bank. think a we've I job existing acquired done Well,

five As we ten of small sit from probably our have acquisitions. top bank here today, clients come

talking deals having bank. Constitution customers So, that to done relationships Xst we an lot Constitution. been we've ability to getting the within and a smaller have And upsize of they participations that constrained do are places Xst in have out to that not outgrown a about other they have

very goal, I growth So, very, as Constitution an Xst mid-single-digit think, for initial including seems XXXX, growth. realistic

William Wallace

then believe can’t due the that cetera? around of cetera, you I what kind in how et settles saves, in cost with base might Xst and understanding parts inflation, that going on to release, worded a digital you And inflationary anticipate whatever Constitution, of pressures et wage you Okay. to expense transformation, core technology, it investments in with is worded be there the as lot the, I it moving remember that

Thomas Splaine

get Natural as XXXX. are year. hire getting up. more prices Constitution it's cost that to right next We've everyone And the savings difficult going XX% and deal in then are and people inflation knows, Xst now through into to we going stated more

I So, in anticipate off the maybe X% to X%, neighborhood into year range, natural inflation in be top. next digits, the would of the just XXXX mid-single somewhere

where a like timely now. get and of to system indication things when lot getting like kind out conversion my once through And just we're and comes a manner, that's the parts said, an you it in savings there we So cost that. acquisition is of heading moving right of costs

William Wallace

to of be on that digital X% to kind X% top to business, the would X% that kind would in your, would side or be of investments of X% that then related inflation? potential of included the And base

Thomas Splaine

X%. think be in Yes, or to not that I addition would X% the

I the and run think in automation things rate manpower and the like out are in investments helps that saving from basis. making forward that, that and of you get customer the your expense put just us of digital with in additional control that you on dealing going kind efficiencies the we're from go there hiring and strategy a the there

William Wallace

quick Okay. the have then you. third just That's quarter? the do balances Thank question, in housekeeping helpful. And PPP you average

Thomas Splaine

were the of outstanding We of the last the and at this X.XX% at quarter quarter end at at quarter X.XX%. end

X.XX%-ish, just average about simple throws you X.XX%. So

William Wallace

right. All you. Thank Okay.

Thomas Shara

Thanks.

Operator

Our next question & comes Scattergood. line from please Erik open, from is go Zwick Boenning ahead. Eric, your

Erik Zwick

you. Good Thank morning, guys.

Thomas Shara

Hey Erik.

Thomas Splaine

Good morning, Erik.

Erik Zwick

process well do that talked excess the pipeline, into as about in mentioned back prepared or opportunity was that remarks cash look you've kind it expect curious, would balances Just the take? get their just months long you and that target and deploying as long back, X%-ish we the the several how of the of level, nine about to in does answers the and ago, and loans investments think curious, capital and in how twelve more to, you And is I if in were talked securities, the your take?

Thomas Splaine

Tom Yes, that a that good. XX% run factors one, into go been at grew comments has Eric. year level we indicated generation Like XX%. his this of Loan good. is and very production We last our of is in lot year's there

right been that's really wild speeds and that So, has affecting it's us. the card prepayment the now,

So, the same we're stay to place. of working hard kind in really

excess and good rates would be capital, and pre-payment little tick excess slow booking higher, The starting pipelines maybe strong are speeds, to a down we the begins. there. loan deploying the a capital that more deploying if us So, factor to out bit, up long-term contributing loans. with are very That some

yield the that quarter, your encouraged put portfolio. like $XXX securities give it loan into helps, in which the And this get you that. by portfolio, we're another you So, million very doesn't we but would

some coming the as cash at deploy in looking that getting And forgiveness. PPP with out will more us that well. be QX there balance runoff and we're to in already So, QX

So, and to it going try take continue at fast prudent and to to too we investing too as trying to as the not can. deploy cash we're point. out we're manage this of excess be But risk much long

are too ourselves at portfolio. So, to the anything when far in haven't really looking investment loans it getting silly it stuff putting in our to done long-term of comes we comes when offering over – front

Erik Zwick

to in Got curious, curious, the the sold loans point? sell bank about at another non-performing in anything this or entity? it. there thinking additional quarter, to And non-bank And a that portfolio were sold opportunity those you then that NPL is

Thomas Shara

of investors, down a the good they Erik, investors. of Well, we're of are these thing. sell are all we've realization tell XX get And really, which running frankly. the able it's the that quite kind these but not we're each bank you things, been are that But will Probably to investors is folks million. they for on in is stuff to do getting plus things, But institutional one that time we I out sale ferocious. $XX yield. to XXs surprised last but hungry been we've rate the was demand

over have importantly. more any $X don't sell. non-performing, a new million not there's formations left so see loan in We anything really to we And one

So, one credit we is have of size contract. that under that

So product is there no to sell. really left

Erik Zwick

Got it.

manage to seeing continue and then you've any there. left outsized got risk what So, not

that's good. So

if provisioning ex-PPP think of going you of about guess loans. credit kind are Is sticking ramps I up front should reserves forward? today? kind Okay. that total it, And X% a I'm how loan the level on then of thinking we mentioned more expecting growth as good that now about you And

Thomas Splaine

can at of all What you low just to we very you give the problem tell don't very and Tom nature non-performing non-accrual, just down are the because as account. discussed, delinquencies, and levels. are low-level of a loss on of for loans a Okay, I provisions our loan guidance lot the early-stage allowance

continue forward, macro-economic to improve. we As look conditions

with than net So CECL for the indicating in allowance being they loan levels were lower modeler XXXX. should reserve loss, a it's be

we're we're that's now kind level. very, general So going any expense to of looking of give guidance very from general right forward. not But the going what indication on provision a high at

Erik Zwick

questions my taking today. for thanks Understood,

Thomas Splaine

Thanks Eric.

Thomas Shara

Eric. Thanks

Operator

[Operator to Instructions] I'll hand questions, back so team We for no closing. further the have over

Thomas Shara

you of all for call. thanks for today's And Daisy. in you, participating Thank

free feel stay us If you everybody. you do being out Tom to for safe. [ph] River But anytime. any to have reach further questions, please Take thank and with care,

Operator

for Thank all you joining.

lines your lovely have may now a You day. disconnect and

Lakeland Bancorp (LBAI) 26 Oct 212021 Q3 Earnings call transcript