Lakeland Bancorp, Inc. Investor Conference Call, July 12, 2021
One of the important benefits of this deal is that we are both operating under the same (inaudible) platform,
which should make our conversion simpler. The mortgage banking platform is also the same as ours. For those of you who arent familiar with 1st Constitution, Ill refer you to Page 5 which is a recap of the Company.
As you can see, the Company covers a wide footprint across the center of the state from the Jersey Shore to the Pennsylvania border. The bank has been around
for 32 years and has assets of $1.8 billion, loans of $1.3 billion and deposits of over $1.5 billion. Of those deposits, 30% of those are demand deposits. The equity base is around $200 million, profitability metrics have been
solid historically.
Before turning the call over to Tom to go over the next couple of pages, I wanted to address our thoughts on crossing the
$10 billion threshold. This acquisition accelerates and better positions us across the $10 billion as compared to crossing organically over a long period of time. For the last few years, weve been preparing our company for that
eventuality. Much of the costs associated with crossing are currently in our stand alone run rates, and they include the hiring of Chief Risk Officer James Nigro, over five years ago, the doubling of our risk management and information security
teams, conducting comprehensive loan stress testing over the last two years, and enhancements to our compliance BSA and AML policies and staff. Some of the additional areas include an Enterprise Risk Management Committee, which has been in place for
over 10 years, and three years ago, we formed the Board Level Risk Committee. Most recently, we conducted a GAAP analysis with a well-known risk management vendor which has showed us to be well positioned to cross $10 billion.
Lastly, weve been in regular contact with our regulators as weve grown, and they will be on site in August conducting board training. As it
relates to the Durbin impact, we believe the impact will be approximately $3.3 million on a pretax basis. Based on current projects, we expect to cross over 10 billion in 2023, with the impact from Durbin occurring in 2024. This gives us
ample time to find revenue enhancements and cost saves to offset these costs.
At this point, Id like to turn this call over to Tom to go over the
pro forma overview and assumptions. Following that, well open the call up for questions. Tom, take it away.
Tom Splaine
Thanks, Tom.
As you can see on Slide 6, its a pro forma
of the franchise that would lookwere basically combining two footprints of two high growth areas in New Jersey with very little overlap in the existing branch network. As Tom mentioned, we closed in on the $10 billion asset mark
threshold, but its expected that approximately $400 million of PPP loans currently on the books are likely to run off prior to the year end and the close of the deal. That solidifies our position as the fifth largest New Jersey bank in
terms of deposits here in the state of New Jersey.
On Page 7, pro forma loan and deposit composition, as you can see, the loan mix is favorable on a pro
forma basis with 1st Constitutions higher CNI loan portfolio reducing the combined CRE to tangible risk-based capital ratio into the 420% file. As well, were combining two of the low-cost positive
portfolios in the state with interest bearing accounts of approximately 26% on a pro forma basis and a projected cost of deposits of only 33 basis points.
As we move to Slide 8, looking at the financial performance on a pro forma basis, comparing ourselves to New Jersey, New York and Pennsylvania banks, with
total assets between $3 billion and $15 billion dollars, you can see where Lakeland stands on a standalone basis, and where we would be on a pro forma basis. Return on assets moving to the top end of the scale at 121 as well as the
efficiency ratio dropping to a sub 50 percentile.