Lakeland Bancorp, Inc. (LBAI)

250 Oak Ridge Road, Oak Ridge, New Jersey, 07438-8906

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Sector: Financial services; Regional - Northeast banks

Market Capitalization: $ 598.19M

Total Assets: $ 3,869,550,000

Profile:

Lakeland Bancorp, Inc. was founded in 1989 and provides a whole range of lending services through its subsidiary Lakeland Bank (Marketwatch.com, n.a.). The corporation has 53 banking offices, 5 regional commercial lending centers, and 2 commercial loan production centers located throughout New Jersey and in the Hudson Valley in New York. The company follows aggressive growth strategy and continuously increases its assets and presence through acquisitions of community and other types of small banks. The latest activity in this field is a merger with Harmony Bank (owned by the state of New Jersey) with the total assets of USD 295 million. Further, the narrative part provides the analysis of several two-year average ratios and the banks financial position based on the financial statements retrieved from the SECs EDGAR database.

Narrative:

ROE is 8.16 percent

ROA is .86 percent

Equity Multiplier is 9.5

Profit Margin: 22.02 percent

Interest Income: 86.54 percent

Provision for loan losses: 2.70 percent

Non-interest expense: 57.58 percent

Income Taxes: 10.84 percent

Asset Utilization: 3.05 percent

Interest Income: 3.38 percent

Non-interest Income: 0.52 percent

As compared to its close competitor ACBN Corp., Lakeland Bancorp Inc. obtains by 1.6% lower average return on equity. Still, the bank can be considered as making returns close to the regional banks averages. The banks return on assets is close to its peer having 98 percent in 2015. The bank has reasonably matched assets and liabilities with net loans representing 75.83 percent of its total assets and deposits constituting 86.35 percent of total liabilities and 77.41 percent of total liabilities and equity.

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Most of the banks operating income (86.54 percent) is represented by interest income. At the same time, non-interest expense cuts 57.58 percent of total operating income indicating that the bank should revise its cost policy and also upgrade the non-interest income on provided services. Nevertheless, the bank has strong net profit margin of 22.02 percent that is slightly higher compared to its peer. This is partly driven by relatively low effective income tax rate (10.84 percent) that is positively affected by the banks mergers and acquisitions policy.

The bank has strong enough and close to the peer asset utilization rate of 3.05 percent. As most of its income is provided by interest bearing services, assets utilization on interest income attains 3.38 percent while that on non-interest income constitutes only 0.52 percent. So, most of the banks assets generate interest income for the company.

The negative point in the banks outlook is the level of its provision for loan losses. Thus, on average, over the past two years the bank has had to recognize expenses for loan loss provisions of USD 3.9 million. This constituted 2.7 percent of the companys total operating income and indicates unsecure lending policy of the bank.

Overall, Lakeland Bancorp Inc. is a rather financially healthy bank. Still, some of its problems include: risky lending policy providing significant percentage of loan loss expenses but also allowing the bank to enjoy high net income margin; unbalanced interest and non-interest bearing operations; unbalanced cost policy with non-interest expenses overweighing the percentage of non-interest income in the total operating income of the bank.

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