<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 33-27312
--------
LAKELAND BANCORP, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2953275
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Oak Ridge Road, Oak Ridge, New Jersey 07438
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(Address of principal executive offices) (Zip Code)
(973) 697-2000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of March 31, 2000 there were 12,666,862 outstanding shares of Common Stock,
no par value.
<PAGE>
LAKELAND BANCORP, INC.
Form 10-Q Index
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Part I Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets - March 31, 2000 (unaudited) and December 31, 1999 1
Consolidated Income Statements - Unaudited Three Months Ended
March 31, 2000 and 1999 2
Consolidated Statements of Changes in Stockholders' Equity - Unaudited Three
months ended March 31, 2000 and 12 months ended December 31, 1999 3
Consolidated Statements of Cash Flows - Unaudited Three Months Ended March 31,
2000 and 1999 4
Notes to Consolidated Financial Statements (unaudited) 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Part II Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
</TABLE>
The Securities and Exchange Commission maintains a web site
which contains reports, proxy and information statements and
other information relating to registrants that file
electronically at the address: http:/ / www.sec.gov.
<PAGE>
Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
ASSETS (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C>
Cash and due from banks $41,387 $31,386
Federal funds sold 6,000 8,956
- ------------------------------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 47,387 40,342
Interest bearing deposits with banks 216 216
Investment securities available for sale 156,018 152,591
Investment securities held to maturity; fair value of $116,422
in 2000 and $122,751 in 1999 119,532 125,130
Loans, net of deferred loan fees 482,299 476,514
Less: allowance for possible loan losses 7,705 7,668
- ------------------------------------------------------------------------------------------------------------------------------
Net loans 474,594 468,846
Premises and equipment - net 21,876 21,897
Accrued interest receivable 5,495 5,979
Other assets 15,061 15,169
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $840,179 $830,170
==============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Deposits:
Non-interest bearing $169,298 $165,559
Savings and interest bearing transaction accounts 357,902 355,845
Time deposits under $100 178,233 180,287
Time deposits $100 and over 40,392 35,048
- ------------------------------------------------------------------------------------------------------------------------------
Total deposits 745,825 736,739
Securities sold under agreements to repurchase 10,248 10,489
Long-term debt 6,000 6,000
Other liabilities 4,777 4,660
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 766,850 757,888
- ------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies ---- ----
Stockholders' equity:
Common stock, no par value, 1999; authorized shares,
40,000,000 at March 31, 2000 and December 31, 1999;
issued shares, 12,672,262 at March 31, 2000 and
December 31, 1999; outstanding shares, 12,666,862 at
March 31, 2000 and 12,668,262 at December 31, 1999 71,291 71,330
Retained Earnings 5,002 3,548
Treasury stock, at cost (59) (67)
Accumulated other comprehensive income (loss) (2,762) (2,381)
Loan for options exercised (143) (148)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 73,329 72,282
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $840,179 $830,170
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
1
<PAGE>
Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
For the three months ended
March 31,
2000 1999
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
INTEREST INCOME
Loans and fees $9,806 $9,034
Federal funds sold 68 393
Taxable investment securities 3,361 3,063
Tax exempt investment securities 630 525
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 13,865 13,015
- ------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
Deposits 4,687 4,934
Interest on short-term borrowings 180 83
Long-term debt 77 75
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 4,944 5,092
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 8,921 7,923
Provision for possible loan losses 500 105
- ------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR
POSSIBLE LOAN LOSSES 8,421 7,818
NONINTEREST INCOME
Service charges on deposit accounts 1,125 988
Commissions and fees 352 333
Gain (loss) on the sales of securities (42) 25
Other income 150 168
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST INCOME 1,585 1,514
- ------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE
Salaries and employee benefits 3,546 3,646
Net occupancy expense 612 565
Furniture and equipment 712 645
Stationary, supplies and postage 371 361
Other expenses 1,125 1,408
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NONINTEREST EXPENSE 6,366 6,625
- ------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 3,640 2,707
Provision for income taxes 1,236 867
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME $2,404 $1,840
==============================================================================================================================
EARNINGS PER COMMON SHARE
Basic and diluted $0.19 $0.15
==============================================================================================================================
For the three months ended
March 31,
2000 1999
(unauditied)
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
NET INCOME $2,404 $1,840
- ------------------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME NET OF TAX:
Unrealized securities losses arising during period (398) (311)
Less: reclassification for gains(losses) included in Net Income 17 (16)
- ------------------------------------------------------------------------------------------------------------------------------
Other Comprehensive Loss (381) (327)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME $2,023 $1,513
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common stock Retained Other
----------------------- Additional earnings Comprehensive Loan for
Number of Paid-in (Accumulated Treasury Income Options
(dollars in thousands) Shares Amount Capital deficit) Stock (Loss) Exercised Total
- ---------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1998 12,672,262 $31,681 $50,836 ($9,297) ($129) $841 ($169) $73,763
Net Income 1999 --- --- --- 5,400 --- --- --- 5,400
Other comprehensive loss,
net of tax --- --- --- --- --- (3,222) --- (3,222)
Reallocate for no par value stock --- 40,077 (50,836) 10,759 --- --- --- 0
Exercise of stock options --- (428) --- --- 697 --- --- 269
Payment on loan issued for
options exercised --- --- --- --- --- --- 21 21
Cash dividend --- --- --- (3,314) --- --- --- (3,314)
Purchase of treasury stock --- --- --- --- (635) --- --- (635)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1999 12,672,262 71,330 --- 3,548 (67) (2,381) (148) 72,282
Net Income, first quarter 2000 2,404 2,404
Other comprehensive income,
net of tax --- --- --- --- --- (381) --- (381)
Exercise of stock options --- (39) --- --- 60 --- --- 21
Stock dividends --- --- --- --- --- --- --- ---
Stock issuances --- --- --- --- --- --- --- 0
Payment on loan issued for
options exercised --- --- --- --- --- --- 5 5
Cash dividend --- --- --- (950) --- --- --- (950)
Purchase of treasury stock --- --- --- (52) --- --- (52)
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE MARCH 31, 2000
(unaudited) 12,672,262 $71,291 $0 $5,002 ($59) ($2,762) ($143) $73,329
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
Lakeland Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS-(UNAUDITED)
<TABLE>
<CAPTION>
For the three months ended
March 31,
2000 1999
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES (in thousands)
<S> <C> <C>
Net income $2,404 $1,840
Adjustments to reconcile net income to net cash
provided by operating activities:
Net amortization of premiums, discounts and deferred loan fees
and costs 155 163
Depreciation and amortization 498 504
Provision for loan losses 500 105
Provision for losses on other real estate -- --
(Gain) loss on sales and calls of securities 42 (25)
Gains on dispositions of premises and equipment (7) 1
(Gain) loss on other real estate owned (89) --
Provision for income taxes 1,236 867
(Increase) decrease in other assets (306) 96
Increase (decrease) in other liabilities 314 (195)
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,747 3,356
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in interest bearing deposits with banks -- (10)
Proceeds from repayments on and maturity of securities:
Available for sale 7,135 8,850
Held for maturity 6,512 6,684
Proceeds from sales of securities available for sale 1,978 4,413
Purchase of securities:
Available for sale (13,343) (28,201)
Held for maturity (938) (9,564)
Net increase in loans (6,258) (5,134)
Proceeds from dispositions of premises and equipment 8 3
Capital expenditures (728) (505)
Net decrease in other real estate owned 121 940
- ----------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (5,513) (22,524)
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits 9,034 13,843
Increase (decrease) in securities sold under agreements
to repurchase (241) 3,039
Purchase of treasury stock (52) (141)
Exercise of stock options 20 38
Dividends paid (950) (629)
- ----------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,811 16,150
- ----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 7,045 (3,018)
Cash and cash equivalents, beginning of year 40,342 63,805
- ----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $47,387 $60,787
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (UNAUDITED)
Note 1. Basis of Presentation.
This quarterly report presents the consolidated financial statements of
Lakeland Bancorp, Inc. (the Company) and its subsidiaries, Lakeland Bank
(Lakeland) and The National Bank of Sussex County (NBSC) (collectively, the
Banks).
The Company's financial statements reflect all adjustments and
disclosures which management believes are necessary for a fair presentation of
interim results. The results of operations for the quarter presented does not
necessarily indicate the results that the Company will achieve for all of 2000.
You should read these interim financial statements in conjunction with the
consolidated financial statements and accompanying notes that are presented in
the Lakeland Bancorp, Inc. Annual Report on Form 10-K for the year ended
December 31, 1999.
The financial information in this quarterly report has been prepared in
accordance with the Company's customary accounting practices; these financial
statements have not been audited. Certain information and footnote disclosures
required under generally accepted accounting principles have been condensed or
omitted, as permitted by rules and regulations of the Securities and Exchange
Commission.
Note 2. Statement of Cash flow information.
<TABLE> <CAPTION>
For the three months ended
March 31,
2000 1999
----------------------------------------------
Supplemental schedule of noncash investing and (in thousands)
financing activities:
<S> <C> <C>
Cash paid during the period for income taxes $126 $225
Cash paid during the period for interest 4,872 5,022
Transfer of securities available for sale to securities held
to maturity --- 15,314
Transfer of loans receivable to other real estate owned 115 201
Loans to facilitate the sale of other real estate owned --- 394
Transfer of premises to other real estate owned --- 272
</TABLE>
Note 3. Earnings Per Share.
Basic earnings per share for a particular period of time is calculated
by dividing net income by the weighted average number of common shares
outstanding during that period.
Diluted earnings per share is calculated by dividing net income by the
weighted average number of outstanding common shares and common share
equivalents. The Company's only outstanding "common share equivalents" are
options to purchase its common stock.
5
<PAGE>
Note 4. Investment Securities
AVAILABLE FOR SALE March 31, 2000
- -------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
U.S. Treasury and
U.S. government agencies $83,335 $23 $(2,165) $81,193
Mortgage-backed securities 17,259 26 (467) 16,818
Obligations of states and
political subdivisions 41,039 6 (1,428) 39,617
Other debt securities 9,661 --- (466) 9,195
Other equity securities 9,184 11 --- 9,195
- -------------------------------------------------------------------------------
$160,478 $66 $(4,526) $156,018
===============================================================================
AVAILABLE FOR SALE December 31, 1999
- -------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
U.S. Treasury and
U.S. government agencies $83,693 $92 $(1,798) $81,987
Mortgage-backed securities 12,330 54 (378) 12,006
Obligations of states and
political subdivisions 42,236 23 (1,426) 40,833
Other debt securities 9,683 --- (397) 9,286
Other equity securities 8,467 12 --- 8,479
- -------------------------------------------------------------------------------
$156,409 $181 $(3,999) $152,591
===============================================================================
HELD TO MATURITY March 31, 2000
- -------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
U.S. Treasury and
U.S. government agencies $68,904 $6 $(1,593) $67,317
Mortgage-backed securities 23,574 3 (653) 22,924
States and political subdivisions15,867 7 (300) 15,574
Other 11,187 --- (580) 10,607
- -------------------------------------------------------------------------------
$119,532 $16 $(3,126) $116,422
===============================================================================
HELD TO MATURITY December 31, 1999
- -------------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
- -------------------------------------------------------------------------------
U.S. Treasury and
U.S. government agencies $72,311 $48 $(1,197) $71,162
Mortgage-backed securities 24,882 15 (522) 24,375
States and political subdivisions16,735 12 (240) 16,507
Other 11,202 --- (495) 10,707
- -------------------------------------------------------------------------------
$125,130 $75 $(2,454) $122,751
===============================================================================
<TABLE>
<CAPTION>
March 31, 2000
- -----------------------------------------------------------------------------------------------
Available for Sale Held to Maturity
------------------- ---------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
- -----------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Due in one year or less $19,535 $19,507 $15,970 $15,951
Due after one year through
five years 80,305 77,889 72,914 70,770
Due after five years through ten
years 24,606 23,640 5,574 5,436
Due after ten years 9,589 8,969 1,500 1,341
- -----------------------------------------------------------------------------------------------
134,035 130,005 95,958 93,498
Mortgage-backed securities 17,259 16,818 23,574 22,924
Other investments 9,184 9,195 --- ---
- -----------------------------------------------------------------------------------------------
Total securities $160,478 $156,018 $119,532 $116,422
===============================================================================================
</TABLE>
Note 5. Impaired Loans.
The Company adopted Statement of Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" (known as "SFAS No. 114"),
and Statement of Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a Loan, Income Recognition and Disclosures," as of January 1,
1995. SFAS No. 114 requires that certain impaired loans be measured based on the
present value of expected future cash flows, discounted at the loan's original
effective interest rate.
The following table shows the Company's recorded investment in impaired
loans and the related valuation allowance calculated under SFAS No. 114 as of
March 31, 2000 and 1999, and the average recorded investment in impaired
6
<PAGE>
loans during the three months preceding those dates:
Average Recorded
Investment (over
Date Investment Valuation Allowance preceding three months)
- -------------------------------------------------------------------------------
March 31, 2000 $4.8 million $728,000 $3.8 million
- -------------------------------------------------------------------------------
March 31, 1999 $4.0 million $622,000 $5.3 million
- -------------------------------------------------------------------------------
Interest received on impaired loans ordinarily is recorded as interest
income. However, if management is not reasonably certain that an impaired loan
will be repaid in full, all payments received are recorded as reductions of
principal. The Company recognized interest on impaired loans of $109,000 in the
first three months of 2000. Interest that would have accrued had the loans
performed under original terms would have been $123,000 for the first three
months of 2000.
Note 6. Acquisition
On January 28, 2000, Metropolitan State Bank, a wholly owned subsidiary
of the Company, was merged into Lakeland Bank. There was no impact to the
results of operations as a result of the merger.
Note 7. Stockholders' Equity
On May 3, 2000, at the Annual Meeting of Shareholders, the shareholders
approved the adoption of the 2000 Equity Compensation Plan.
In March 2000, the Company's Board of Directors approved a stock
repurchase plan of up to 200,000 shares of its common stock. Repurchases may be
made from time to time and will be used for general corporate purposes.
PART I -- ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
You should read this section in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
Statements Regarding Forward Looking Information
This document contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
can be identified by use of words such as "believes," "expects" and similar
words or variations. Such statements are not historical facts and involve
certain risks and uncertainties. Actual results may differ materially from the
results discussed in these forward looking statements. Factors that might cause
a difference include, but are not limited to, changes in interest rates,
economic conditions, deposit and loan growth, loan loss provisions, or customer
retention. The Company assumes no obligation for updating any such forward-
looking statements at any time.
Results of Operations
(First three months of 2000 compared to first three months of 1999)
Net Income
Net income for the first three months of 2000 was $2.4 million or $0.19
per diluted share compared to net income of $1.8 million or $0.15 per diluted
share for the same period in 1999. Return on Average Assets was 1.16% and Return
on Average Equity was 13.80% for the first quarter 2000 compared to 0.94% and
10.63% for the first quarter last year.
7
<PAGE>
Net Interest Income
Net interest income on a tax equivalent basis for first quarter 2000 was
$9.3 million, representing a $1.1 million or 13.4% increase from the $8.2
million earned in 1999. The increase in net interest income results from an
increase in yields on average earning assets combined with a more favorable mix
of interest earning assets and interest bearing liabilities.
Interest income on a tax equivalent basis increased from $13.3 million
in first quarter 1999 to $14.2 million in 2000, an increase of $906,000 or 6.8%.
The increase in interest income in first quarter 2000 was due to a $23.1 million
increase in earning assets and a 26 basis point increase in the yield on earning
assets. Increases in rates contributed to the 26 basis point increase in yield
on earning assets. An improvement in the mix of earning assets also contributed
to the increase in yields. Loans as a percent of average earning assets
increased from 60% in first quarter last year to 62% in first quarter this year.
Federal funds sold declined from 4.5% in first quarter 1999 to 1% in first
quarter 2000.
Total interest expense decreased from $5.1 million in first quarter 1999
to $4.9 million in first quarter 2000, a decline of $148,000. A 17 basis point
decline in the cost of funds from first quarter 1999 to first quarter 2000
caused interest expense to decline by $248,000 but was offset by an increase in
average interest bearing liabilities of $11.1 million, which caused interest
expense to increase by $100,000. The change in the mix of deposits played an
important role in the decline in the cost of funds. Non-interest bearing demand
deposits as a percent of total deposits increased from 20.4% to 22.1% from first
quarter 1999 to first quarter 2000. In the same time period, interest bearing
transaction accounts and savings accounts increased from 46.8% to 48.3%. Time
deposits declined from 32.7% of total deposits to 29.6% from first quarter 1999
to first quarter 2000. In 1998, Lakeland offered a special rate on a CD for a
limited period of time. Many of these CDs did not renew when they came due in
mid-1999.
Provision for Possible Loan Losses
In determining the provision for possible loan losses management
considers historical loan loss experience, changes in composition and volume of
the portfolio, the level and composition of non-performing loans, the adequacy
of the allowance for possible loan losses, and prevailing economic conditions.
The provision for loan losses increased to $500,000 for the three months
ended March 31, 2000, as compared with $105,000 for the same quarter last year.
During the first quarter of 2000, the Company charged off loans of $554,000 and
recovered $91,000 in previously charged off loans compared to $178,000 and
$103,000, respectively, during the same period in 1999. The $554,000 in
charged-off loans in 2000 was primarily associated with one loan relationship.
Noninterest Income
Non-interest income increased from $1.5 million to $1.6 million from
first quarter 1999 to first quarter 2000 primarily as a result of an increase in
service charges on deposit accounts from $1.0 million to $1.1 million as a
result of an increase in the volume of overdraft fees.
Noninterest Expense
Non-interest expense declined from $6.6 million in the first quarter of
1999 to $6.4 million in 2000, a decline of $259,000 or 3.9%. Salaries and
employee benefits declined $100,000 from first quarter 1999 to $3.5 million in
2000 as a result of a reduction in the staff resulting from attrition related to
the acquisition of NBSC and the merger of Metropolitan State Bank into Lakeland
on January 28, 2000. Net occupancy expense increased from $565,000 in first
quarter 1999 to $612,000 in 2000 as a result of the addition of a branch office
for NBSC in fourth quarter 1999. Furniture and equipment expense increased from
$645,000 in 1999 to $712,000 in 2000 as a result of increased software licensing
fees for the Company's computer system which was upgraded in late 1999. Other
expenses declined from $1.4 million in first quarter 1999 to $1.1 million in
first quarter 2000 as a result of declines in other real estate owned expense,
marketing expense, audit fees and legal fees.
8
<PAGE>
Income Taxes
The Company's effective tax rate was 33.9% in first quarter 2000
compared to 32.0% in first quarter 1999. The Company's interest income on
tax-exempt securities as a percent of pre-tax income decreased from 19.4% in
first quarter 1999 to 17.3% in first quarter 2000, causing the Company's
effective tax rate to increase.
Financial Condition
The Company's total assets increased $10.0 million or 1.2% from $830.2
million at December 31, 1999, to $840.2 million at March 31, 2000. Total
deposits increased from $736.7 million on December 31, 1999 to $745.8 million on
March 31, 2000, an increase of $9.1 million.
Loans
Loans, net of deferred loan fees increased from $476.5 million on
December 31, 1999 to $482.3 million on March 31, 2000, an increase of $5.8
million, or 1.2%. Most of this growth was in commercial loans which increased
$5.6 million, or 3.4% to $168.6 million at March 31, 2000.
Risk Elements
The following schedule sets forth certain information regarding the
Company's non-accrual, past due and renegotiated loans and other real estate
owned as of March 31, 2000 and as of December 31, 1999:
March 31, December 31, March 31,
(in thousands) 2000 1999 1999
---------------------------------------
Non-performing loans:
Non-accrual loans $3,611 $2,961 $3,097
Loans past due 90 days or more 2,339 2,210 2,726
Renegotiated loans --- 389 398
---------------------------------------
TOTAL NON-PERFORMING LOANS 5,950 5,560 6,221
Other real estate owned 385 418 1,049
---------------------------------------
TOTAL NON-PERFORMING ASSETS $6,335 $5,978 $7,270
=======================================
There were no loans at March 31, 2000, other than those included on the
above table, where the Company was aware of any credit conditions of any
borrowers that would indicate a strong possibility of the borrowers not
complying with present terms and conditions of repayment and which may result in
such loans being included as non-accrual, past due or renegotiated at a future
date.
Non-accrual loans increased from $3.0 million on December 31, 1999 to
$3.6 on March 31, 2000. There are no loan relationships in non-accrual loans
with balances in excess of $1 million, and one loan in non-accrual loans with a
balance between $500,000 and $1 million.
Loans past due ninety days or more and still accruing increased $678,000
to $2.3 million on March 31, 2000 from $2.2 million on December 31, 1999.
Other real estate owned declined from $418,000 on December 31, 1999 to
$385,000 on March 31, 2000. The decline reflected $148,000 in sold properties
and $115,000 in new properties. Gains on sale of other real estate owned totaled
$89,000.
On March 31, 2000, the Company had $4.8 million in impaired loans
compared to $4.3 million at year-end 1999. For more information on these loans
see Note 5 in Notes to the Consolidated Financial Statements of this Quarterly
Report
9
<PAGE>
on Form 10-Q. The impairment of the loans is measured using the present value of
future cash flows on certain impaired loans and is based on the fair value of
the underlying collateral for the remaining loans. Based on such evaluation,
$728,000 has been allocated to the allowance for possible loan losses for
impairment.
The following table sets forth for the periods presented, the historical
relationships among the allowance for loan losses, the provision for loan
losses, the amount of loans charged-off and the amount of loan recoveries:
March 31, December 31, March 31,
(dollars in thousands) 2000 1999 1999
---------------------------------------
Balance of the allowance at the
beginning of the year $7,668 $7,984 $7,984
---------------------------------------
Loans charged off:
Commercial 533 1,670 41
Home Equity and consumer 21 182 56
Real estate--mortgage --- 571 81
---------------------------------------
Total loans charged off 554 2,423 178
---------------------------------------
Recoveries:
Commercial 45 228 87
Home Equity and consumer 46 88 16
Real estate--mortgage --- 10 ---
---------------------------------------
Total Recoveries 91 326 103
---------------------------------------
Net charge-offs: 463 2,097 75
Provision for possible loan losses
charged to operations 500 1,781 105
---------------------------------------
Ending balance $7,705 $7,668 $8,014
=======================================
Ratio of net charge-offs to average loans
outstanding 0.38% 0.45% 0.45%
Ratio of allowance at end of period as a
percentage of period end total loans 1.60% 1.61% 1.61%
The ratio of the allowance for possible loan losses to loans outstanding
reflects management's evaluation of the underlying credit risk inherent in the
loan portfolio. The determination of the adequacy of the allowance for possible
loan losses and periodic provisioning for estimated losses included in the
consolidated financial statements is the responsibility of management. The
evaluation process is undertaken on a quarterly basis.
Methodology employed for assessing the adequacy of the allowance for
possible loan losses consists of the following criteria:
. The establishment of reserve amounts for all specifically
identified criticized loans that have been designated as
requiring attention by management's internal loan review
program.
. The establishment of reserves for pools of homogeneous types of
loans not subject to specific review, including 1 - 4 family
residential mortgages and consumer loans.
. An allocation for the non-criticized loans in each portfolio is
based upon the historical average loss experience of these
portfolios. The same percentage is applied to all off-balance
sheet exposures.
10
<PAGE>
Consideration is given to the results of ongoing credit quality
monitoring processes, the adequacy and expertise of the Company's lending staff,
underwriting policies, loss histories, delinquency trends, and the cyclical
nature of economic and business conditions. Since many of the Company's loans
depend on the sufficiency of collateral as a secondary means of repayment, any
adverse trend in the real estate markets could affect underlying values
available to protect the Company against loss.
Based upon the process employed and giving recognition to all
accompanying factors related to the loan portfolio, management considers the
allowance for possible loan losses to be adequate at March 31, 2000.
Investment Securities
For detailed information on the composition and maturity distribution of
the Company's investment security portfolio, see Note 4. Total investment
securities declined from $277.7 million on December 31, 1999 to $275.6 million
on March 31, 2000, a decrease of $2.1 million, or less than 1%. Investment
securities held to maturity declined from $125.1 million on December 31, 1999 to
$119.5 million on March 31, 2000, a decrease of $5.6 million. Investment
securities available for sale increased from $152.6 million on December 31, 1999
to $156.0 million on March 31, 2000 as maturities in the held to maturity
portfolio were invested in the available for sale portfolio.
Deposits
Total deposits increased from $736.7 million on December 31, 1999 to
$745.8 million on March 31, 2000, an increase of 1.2%. Total non-interest
bearing deposits increased from $165.6 million to $169.3 million, an increase of
$3.7 million, or 2.3%. Time deposits over $100,000 increased from $35.0 million
at year-end 1999 to $40.4 million on March 31, 2000 as a result of an increase
in municipal certificates of deposit.
Liquidity
Cash and cash equivalents increased by $7.1 million from December 31,
1999 to March 31, 2000. Operating activities, principally the result of the
Company's net income, provided $4.8 million in net cash. Investing activities
used $5.5 million in net cash, primarily reflecting use of funds for the
purchase of investment securities of $14.3 million and use of funds for loans of
$6.3 million. Financing activities provided $7.8 million in net cash, reflecting
an increase in deposits and short-term borrowings of $8.8 million, offset
partially by a payment of cash dividends of $950,000. The Banks anticipate that
they will have sufficient funds available to meet their current loan commitments
and deposit maturities. At March 31, 2000, the Banks have outstanding loan
origination commitments of $64.2 million and total time deposits issued in
amounts of $100,000 or more maturing within one year of $36.6 million.
Capital Resources
Stockholders' equity increased from $72.3 million on December 31, 1999
to $73.3 million on March 31, 2000. Book value per common share increased to
$5.79 on March 31, 2000 from $5.70 on December 31, 1999. The increase in
stockholders' equity from December 31, 1999 to March 31, 2000 results from net
income offset by dividends to shareholders and increases in accumulated other
comprehensive losses resulting from declines in market values of the Company's
investment securities available for sale.
The Company and its subsidiaries, Lakeland and NBSC, are subject to
various regulatory capital requirements that are monitored by federal banking
agencies. Failure to meet minimum capital requirements can lead to certain
supervisory actions by regulators; any supervisory action could have a direct
material effect on the Company or its subsidiaries' financial statements.
Management believes, as of March 31, 2000, that the Company and its subsidiaries
meet all capital adequacy requirements to which they are subject.
The capital ratios for the Company and its subsidiaries at March 31,
2000, and the minimum regulatory guidelines for such capital ratios for
qualification as a well-capitalized institution are as follows:
11
<PAGE>
<TABLE>
<CAPTION>
Tier 1 Capital Tier 1 Capital Total Capital
to Total Average to Risk-Weighted to Risk-Weighted
Assets Ratio Assets Ratio Assets Ratio
March 31, March 31, March 31,
Capital Ratios: 2000 2000 2000
------------ ------------- ------------------
<S> <C> <C> <C>
The Company 9.13% 15.64% 16.92%
Lakeland Bank 9.01% 14.71% 15.85%
NBSC 7.93% 15.43% 16.70%
"Well capitalized" institution under FDIC
Regulations 5.00% 6.00% 10.00%
</TABLE>
12
<PAGE>
ITEM 3 Quantitative and Qualitative Disclosures about Market Risk
Not applicable - no significant change from Annual Report on Form 10-K.
13
<PAGE>
PART II OTHER INFORMATION
Item 1 Legal Proceedings Not Applicable
Item 2 Change in Securities Not Applicable
Item 3 Defaults Upon Senior Securities Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable
Item 5 Other Information Not Applicable
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits
Exhibit 11 Earnings Per Share Schedule
Exhibit 27.1 Financial Data Schedule
(b) Current Reports on form 8-K filed during the quarter ended
March 31, 2000.
None
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Lakeland Bancorp, Inc.
-------------------------------------
(Registrant)
/s/ Roger Bosma
-------------------------------------
Roger Bosma
President and Chief Executive Officer
/s/ Joseph F. Hurley
-------------------------------------
Joseph F. Hurley
Executive Vice President and
Chief Financial Officer
May 12, 2000
- ---------------
Date
15
<PAGE>
EXHIBIT 11
Exhibit 11. Statement of Computation of Per Share Income
For the three months ended
March 31,
(In thousands except per share data) 2000 1999
------------------------------
Income (loss) applicable to common stock $2,404 $1,840
Weighted average number of common
shares outstanding 12,669 12,662
Options issued to executive and officers 59 57
------------------------------
Weighted average number of common
shares and common share equivalents 12,728 12,719
Basic earnings per share $0.19 $0.15
------------------------------------------------------------------------
Diluted earnings per share $0.19 $0.15
------------------------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 41,387
<INT-BEARING-DEPOSITS> 216
<FED-FUNDS-SOLD> 6,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 156,018
<INVESTMENTS-CARRYING> 119,532
<INVESTMENTS-MARKET> 116,422
<LOANS> 482,299
<ALLOWANCE> 7,705
<TOTAL-ASSETS> 840,179
<DEPOSITS> 745,825
<SHORT-TERM> 10,248
<LIABILITIES-OTHER> 4,777
<LONG-TERM> 6,000
0
0
<COMMON> 71,291
<OTHER-SE> 2,038
<TOTAL-LIABILITIES-AND-EQUITY> 840,179
<INTEREST-LOAN> 9,806
<INTEREST-INVEST> 3,991
<INTEREST-OTHER> 68
<INTEREST-TOTAL> 13,865
<INTEREST-DEPOSIT> 4,687
<INTEREST-EXPENSE> 4,944
<INTEREST-INCOME-NET> 8,921
<LOAN-LOSSES> 500
<SECURITIES-GAINS> (42)
<EXPENSE-OTHER> 6,366
<INCOME-PRETAX> 3,640
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,404
<EPS-BASIC> .19
<EPS-DILUTED> .19
<YIELD-ACTUAL> 7.39
<LOANS-NON> 3,400
<LOANS-PAST> 2,888
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 8,744
<ALLOWANCE-OPEN> 7,668
<CHARGE-OFFS> 554
<RECOVERIES> 91
<ALLOWANCE-CLOSE> 7,705
<ALLOWANCE-DOMESTIC> 7,705
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
