Lakeland Bancorp, Inc.

Good morning and welcome to the Lakeland Bancorp Inc. Second Quarter Earnings Conference Call. My name is Tamiya and I'll be coordinating today's call. You will have the opportunity to ask a question at the end of the presentation. If you would like to register a question, please press star followed by one on your telephone keypad. Please note this event is being recorded. I would now like to turn the conference over to Mary Russell, Assistant Controller and Director of Financial Reporting. Please go ahead, Mary.

Thank you, Tamiya. Good morning, ladies and gentlemen, and thank you for joining us for our second quarter earnings call. Today's presenters are President and CEO Thomas Schara and Executive Vice President and Chief Financial Officer Thomas Blaine. Before beginning the review of our financial results, we ask that you please take note of our standard caution as to any further booking statements which may be made during the course of today's call. Our full disclaimer is contained in this morning's earnings release. which has been posted to the investor relations page on our website, lakelandbank.com. Now it is my pleasure to introduce Thomas Shariff, who will offer his perspective on our second quarter.

Thank you, Mary. Good morning, everyone, and welcome to our second quarter earnings call. I will start off the call with a high-level summary of the quarter, followed by Tom Splane, our CFO, who will walk you through our earnings in detail. We're delighted by our financial results for the quarter, which represents a clean quarter after an merger-related items for the first Constitution acquisition earlier this year. For the quarter, our ROA, ROE, and ROTCE were 115, 1071, and 1445, respectively. We posted record net income of $29 million, driven by net interest income of $80 million, representing a 14% increase from the prior quarter. The increase in net interest income is attributable to our meaningful margin expansion plus our organic loan generation during the quarter, which totaled $270 million, representing a 16% annualized growth rate, while we're able to keep deposit paid as low during the quarter. The loan growth was across all categories in commercial and consumer portfolios except for construction and PPP loans. Construction loans decreased 33 million as several loans converted to permanent loans during the quarter, and PPP was reduced by 26 million and now stands at only 10 million at the end of the quarter. I'm happy to report that our commercial closings for the second quarter were a record and eclipsed the first quarter totals, which were also a record. The pipeline going into the second half of the year is still very strong. Our healthcare lending team and Hudson Valley lending teams had a tremendous quarter, and we expect them to have a strong balance of the year as well. Recently, we're also starting to develop new relationships as a result of the recent large bank M&A markets, this will be beneficial in subsequent quarters. Overall, we expect continued loan growth to remain strong for the balance of the year, with organic growth for the year expected to be in the high single digits for fall of 2022. On the residential mortgage side, originations remain subdued as refinance activity has ended and customers become acclimated to the current rate environment. We continue to retain some high-quality, well-priced jumbos and arms on the balance sheet while the market stabilizes. The average FICO score in this portfolio year-to-date has been 754. On the deposit side, deposits decreased organically 3% for the quarter, with some planned reductions in municipal deposits and a continued decrease in time deposits. We have not experienced any runoff in the deposit base from First Constitution. Non-interest income-bearing deposits increased $30 million during the quarter and now total 27% of total deposits, while core deposits now make up 91% of total deposits. On the credit side, asset quality remained very solid. For the quarter, we had a small net recovery of $141,000. Non-performing assets to assets at the end of the quarter were 21 basis points. The allowance remained relatively stable at $69 million. or 93 basis points of loans versus $58 million and 97 basis points at your end. Overall, the central and northern New Jersey economy remains strong, despite implications with higher inflation. Our commercial customers continue to report strong results and a fairly positive outlook, although there are some concerns around inflation, supply chain challenges, and in some cases a lack of staffing, which is slowing sales a bit. Overall, the local economy remains very strong. The unemployment rate in the state is now 3.9%, and the state has fully recovered all the jobs lost during the pandemic. Our outlook for credit and the economy remains very, very strong. That concludes my prepared remarks. I'm now going to turn over the balance of the presentation to Tom. Once he's concluded with his comments, we're happy to answer your questions. Tom, take it away.