Q2 2022 Lakeland Bancorp Inc Earnings Call
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Operator: Good morning, and welcome to the Lakeland Bancorp, Inc. second quarter earnings conference call. My name is Tamia 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, ma'am.
Mary Russell: Thank you, Tamia. 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 Shara and Executive Vice President and Chief Financial Officer, Thomas Splaine.
Today's presenters are President and CEO, Thomas Shara and Executive Vice President and Chief Financial Officer, Thomas Splaine.
Before beginning a review of our financial results, we ask that you please take note of our standard caution as to any forward-looking 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 Shara who will offer his perspective on our second quarter.
To introduce kind of sheriff, who will offer his perspective on our second quarter.
Thomas J. Shara: 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 Splaine, our CFO, who will walk you through our earnings in detail.
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 Splaine, 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, action merger-related items first constitution acquisition earlier this year.
For the quarter, our ROA, ROE and ROTCE were $115, 10.71, and $14.45, respectively. We posted record net income of $29 million, driven by net interest income of $18 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 were able to keep deposit betas low during the quarter.
We posted record net income of $29 million driven by net interest income of $80 million, representing a 14% increase from the prior quarter.
Increase in net interest income is attributable to a meaningful margin expansion.
our organic loan generation during the quarter, which totaled $270 million, representing a 16% annualized growth rate.
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 loss during the quarter and PPP was reduced by $26 million and now stands at only $10 million at the end of the quarter.
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 [inaudible] the first quarter total orders, 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 for the year as well. Recently, we're also starting to develop new relationships as a result of the recent large Bank M&A in our 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 all of 2022.
<unk> the first quarter total orders, 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 in our 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.
All of 2022.
On the residential mortgage side, originations remained 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 alarms on the balance sheet while the market stabilizes. The average FICO score in this portfolio year to date has been 754.
Four.
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 run-off in the deposit base from the first constitution.
Non-interest income-bearing deposits increased $30 million during the quarter and now totaled 27% of total deposits, while core deposits now make up 91% of total deposits.
On the credit side, asset quality remains 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 year-end. Overall, the central and Northern New Jersey economy remains strong.
Seven basis points at year end.
Overall, the central and Northern New Jersey economy remains strong.
Despite implications with higher installation, 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 and 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.
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.
Thomas F. Splaine: Thank you, Tom and good morning, everyone. As Tom mentioned Lakeland's second quarter net income was a record $29.1 million or 44 cents per diluted share compared to the first quarter of 2020 of $15.9 million or 25 cents per diluted share and the second quarter of 2021, which was our previous record net income of $27.4 million or 53 cents per diluted share.
As Tom mentioned Lakeland second quarter, net income was a record $29 $1 million or <unk> 44 per diluted share compared to the first quarter of 2020 to $15 $9 million or 25 per diluted share in the second quarter of 2021, which was our pre.
Record net income of $27 4 million or <unk> 53 per diluted share.
To crystallize their record net income for this quarter, our previous high record income in Q2 of 2021 was aided by a negative provision for credit losses of $6 million compared to the current quarter provision for credit losses of $3.6 million, which equates to a $9.9 million unfavorable impact to pre-tax earnings.
$3 6 million, which equates to a $9 $9 million unfavorable impact to pre tax earnings.
On the income statement, Q2 financial results were favorably impacted by the organic loan growth of $270 million. The deployment of excess cash into higher-yielding assets and the increase in interest rates all combining to increase yields on our interest earning assets by 36 basis points for the quarter. As a result, net interest margin for Q2 increased 36 basis points to 3.38%, compared to the linked quarter of 3.02% in the prior year quarter of $3.27%.
Deployment of excess cash into higher yielding assets and the increase in interest rates all combining to increase yields on our interest earning assets by 36 basis points for the quarter.
As a result net interest margin for Q2 increased 36 basis points to 338%.
Compared to the linked quarter of three 2% in the prior year quarter of $3 two 7%.
In comparison to the prior quarter, our pre-provision net revenue, excluding merger-related charges in Q1, increased $10.5 million or 33% to $43.2 million in Q2. The yield on our loans increased 30 basis points from the linked quarter to 4.22% while loan pre-payment fees remain elevated and combined with interest recoveries on non-accrual loans and PPP fees had a positive net impact of eight basis points to net interest margin compared to the prior quarter. Deposit rates remained fairly steady with interest rate increasing only on products related to the Fed funds rate.
Our pre provision net revenue excluding merger related charges in Q1 increase.
Increased $10 5 million or 33% to $43 2 million in Q2.
The yield on our loans increased 30 basis points from the linked quarter to four 2% while loan prepayment speeds remain elevated and combined with interest recoveries on non accrual loans and PPP fees had a positive net impact of eight basis points to net interest margin compare.
To the prior quarter.
Deposit rates remained fairly steady with interest rate.
Increasing only on products related to the fed funds rate.
The strength of our banking franchises and the composition of our core deposit portfolio, as evidenced by the total cost of deposits, increasing three basis points to 22 basis points compared to the linked quarter.
Our Q2 provision for loan losses was an expense of $3.6 million and was comprised of $1.6 million in provision for credit losses on loans, $1.5 million provision for credit losses on investments, and $500,000 provisions for credit losses on unfunded loan commitments. Our current quarter provision for credit losses on loans further loan growth in the portfolio for the quarter while the provision for credit losses on investments was a result of a decrease in the market value of corporate securities based on interest rates and not related to any credit downgrades on the securities.
And provision for credit losses on loans, $1 5 million provision for credit losses on investments and $500000 provision for credit losses on unfunded loan commitments.
Our current quarter provision for credit losses on loans.
Further loan growth in the portfolio for the quarter.
the provision for credit losses on investments was a result of a decrease in the market value of corporate securities based on interest rates and not related to any credit downgrades on the securities.
Regarding asset quality, as Tom mentioned, non-performing assets increased two basis points to 21 basis points of total assets for the quarter and the credit remains stellar.
Q2 net charge-offs were at a recovery of $141,000 and would represent the fourth consecutive quarter of net recoveries, excluding the accounting for the acquired first constitution purchase credit deteriorated loans in Q1.
<unk> credit deteriorated loans in Q1.
At June 30, the allowance for loan losses on loans represents 93 basis points of total loans compared to 94 basis points in the trailing quarter.
Q2 non-interest income increased slightly in Q2 to $7.1 million as improvements in swap fees and wealth management fees were partially offset by continued softness in the gain on sale of residential mortgages and SBA loans.
And SBA loans.
Q2 non-interest expense of $45.1 million decreased $4.9 million in the linked quarter, which reflected the merger related expenses from the first constitution acquisition in Q1.
A $45 $1 million decreased $4 $9 million in the linked quarter, which reflected the merger related expenses from the first constitution acquisition in Q1.
For the second quarter, lower expenses for compensation and benefits and occupancy expenses were partially offset by higher data processing and other operating expenses.
Our efficiency ratio dropped to 51% compared to 58% in the linked quarter. Our Q2 effective tax rate was 24.7% compared to 23.9% in Q1.
Our Q2 effective tax rate was 24, 7% compared to 23, 9% in Q1.
On the balance sheet, in comparison to the prior quarter, total assets increased $98.9 million or 1% with loans increasing $270.4 million or 3.8% while our cash balances decreased $176.2 million to historical liquidity levels.
While our cash balances decreased $176 $2 million to historical liquidity levels.
Deposit balances decreased $247 million or 2.8% due mainly to municipal depositors reducing excess funds and the continued run-off of interest-sensitive time deposit accounts. Borrowings increased $329.4 million to fund the loan growth. At June 30, our loan to deposit ratio was 87%, up from 82% at March 31st.
Due mainly to municipal depositors, reducing excess funds and the continued run off of interest sensitive time deposit accounts.
Borrowings increased $329.4 million to fund the loan growth.
To fund the loan growth.
At June 30, our loan to deposit ratio was 87%, up from 82% at March 31st.
For capital management, our capital levels remained strong and we're relatively static compared with the prior quarter with tangible capital ratio decreased less than 1% to 8.01% at June 30, compared to 8.07% at March 31st as asset growth, cash dividends, and other comprehensive income changes offset earnings retention for the quarter.
as asset growth, cash dividends, and other comprehensive income changes offset earnings retention for the quarter.
Income changes offset earnings retention for the quarter.
Based on the high degree of uncertainty regarding economic conditions during the quarter and the potential impact of interest rate changes causing additional mark to market adjustments in our available for sale investment securities portfolio, as well as significant growth in our loan portfolio, we did not repurchase any common stock in Q2 under our existing authorized share repurchase program.
Stock in Q2 under our existing authorized share repurchase program.
We believed it was prudent to maintain our tangible capital ratio at 8% in light of the economic uncertainty as well as the anticipated strong loan growth and we will continue to evaluate our capital ratios moving forward.
Regarding our outlook for the remainder of 2022, we believe that we are well positioned for rising interest rates. Our projected interest rate risk position is neutral and we become more asset sensitive in future periods.
The significant increase in net interest margin experienced in Q2 is unlikely to be repeated as excess liquidity is removed from our financial system and deposit pricing reacts to the Federal Reserve's recent increases in the Fed funds rate. Deposit betas are likely to transition higher in Q3 as deposit competition increases.
As excess liquidity is removed from our financial system and deposit pricing reacts to the federal reserve's recent increases in the fed funds rate.
Deposit betas are likely to transition higher in Q3 as deposit competition increases.
As Tom discussed earlier, we expect the loan portfolio to grow organically in the high single digits for 2022 and asset quality to remain very high.
Non-interest expenses for 2022, excluding the merger-related costs in Q1 are expected to be in the low $180 million range inclusive of the higher run rate in Q1.
In Q1.
Are expected to be in the low $180 million range inclusive of the higher run rate in Q1.
Salary and benefits expenses are likely to trend slightly higher due to the current hiring conditions and our development of our current digital initiatives.
Income tax expense for 2022 is expected to be approximately 24.5%.
That concludes our prepared remarks, and we will be happy to address any questions. And with that, Tamia can you open the question period for us?
With that to me. It can you open the question period for us.
Operator: Absolutely. We will now begin the question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason at all you would like to remove that question, please press star followed by two.
Again, to ask a question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause briefly as questions are registered.
The first question comes from Frank Schiraldi with Piper Sandler. Your line is open.
Frank Joseph Schiraldi: Good morning.
Thomas F. Splaine: Hey, good morning, Frank.
Frank Joseph Schiraldi: A couple of questions-first on you noted liquidity is kind of back to historic levels and I know deposit balances can be a bit volatile given some of the buckets, but a sense of where you expect or where your target loan to deposit ratio in coming quarters.
You noted liquidity kind of back to historic levels.
And I know deposit balances, Ken can be a bit volatile.
Given some of the buckets, but.
Sense of where you expect or where your target loan to deposit ratio.
In coming quarters.
Thomas F. Splaine: Yeah, I think Frank we're meandering back to our more normalized levels. For us, historically, we tend to have our loan-to-deposit ratio in the low to mid-90s so between 92% to 95%, still slightly lower than some of our peers. But as we move forward now over the next couple of quarters I think that we can start seeing that move from where we're at currently and continue to move slightly higher, but I don't think we're going to see as big of an increase that we saw this quarter.
Yes, I think Frank were meandering back to our more normalized levels for us historically, we tend to have our loan to deposit ratio in the low.
Low to mid Ninety's, so between 92% to 95%.
Still slightly lower than some of our peers.
But as we move forward now over the next couple of quarters I think that we can start seeing that move from where we're at currently and.
And continue to move slightly higher but I don't think were going to see it as.
<unk> been increases that we saw this quarter.
Frank Joseph Schiraldi: Right, okay. In terms of pressures on the deposit base, in terms of pricing, I know it's early in the quarter, but are you starting to see those pressures build?
In terms of pressures on the deposit base in terms of pricing.
I know it's early in the quarter, but are you starting to see those pressures bill.
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Thomas F. Splaine: I think that as we head forward, we've kept our deposit betas through the prior interest rate changes at a very low level and I think now we're going to start seeing them start to migrate closer back to model betas as we move forward. So we won't have as much NIM expansion based on deposit betas going forward.
We've kept our deposit betas.
Through the prior interest rate changes it.
A very low level and I think now we're going to start seeing them start to migrate closer back to <unk>.
Model betas as we move forward, but.
So we won't have as much NIM expansion based on deposit betas golf outward.
Frank Joseph Schiraldi: Got you and then just lastly, I wonder just on loan growth, I get a sense that the outsized growth we're seeing, not only from you guys, but in the industry here is this sort of a pull forward from later in the year, just given that option, just trying to lock in pricing maybe. I'm not sure if you can comment on that and just kind of what you're hearing on that front from your customers.
A sense of that.
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See outsized growth, we're seeing not only from you guys, but in the industry here is this sort of a pull forward.
From from later in the year, just given that option.
Just trying to lock in pricing maybe not sure.
As you can comment on that and we're just kind of what you're hearing on that front from your from your customers.
Thomas J. Shara: Yeah, Frank, the feedback we're getting from our customers is very positive. Maybe in the North Jersey marketplace, it's a little different than other parts of the country, but people are very optimistic, we're seeing sales grow, we are actually starting to get some requests for larger lines of credit, which we haven't seen in years. So it seems like the Central North Jersey economy is faring pretty well and we've surveyed customers and virtually every asset class and they are all saying the same things that things are quite good, they are optimistic about the back half of the year. And like I said in my opening comments, our pipeline is continuing to stay full even though we are accelerating closing, so it feels pretty good frankly, I think the loan growth should continue.
The feedback we're getting from our customers is very positive but maybe.
In the North Jersey marketplace, it's a little different than other parts of the country, but people are very optimistic we're seeing sales grow we are actually starting to get.
Some request for larger lines of credit, which we haven't seen in years. So it seems like the central North Jersey economy is faring pretty well and we've surveyed customers and virtually every asset class and they are all saying the same things that things are quite good. They are optimistic about the back half of the year and like I said in my.
Opening comments, so our pipeline is continuing to stay full even though.
We are accelerating closing so it feels pretty good frankly, I think the loan growth should continue.
Frank Joseph Schiraldi: Okay, great. Thank you for all the color.
Thomas J. Shara: Yes, no problem.
Operator: Thank you. The next question comes from Christopher O'Connell with KVW. Please proceed.
Christopher Thomas O'Connell: Good morning.
Thomas J. Shara: Good morning, Chris.
Christopher Thomas O'Connell: I was hoping to start off on the expense comment. I think previously you were thinking a little bit closer to the high 170s range for the year, now low 180s. I'm just curious as to what's driving that and is that a result of an improved loan growth outlook or is there higher revenues tied to that or is it--yeah, it would be great.
I think previously you were thinking a little bit closer to the high 100 Seventy's range for the year.
Now on <unk>.
Just curious as to whats driving that and is there is that a result of it.
<unk> loan growth outlook.
Or is there higher revenues tied to that or is it.
Yes, it would be great.
Thomas F. Splaine: Yeah, if you were to back out the merger-related expenses that we had for first constitution in Q1, what we're looking at now is the $45 million of operating expenses in Q2 as a pretty good run rate for us as we head forward for the rest of the year. We are getting the cost saves as targeted from first constitution, so we're still on track for that. It's just that some of our other expenses are creeping upward mainly on salaries and benefits due to the hiring constraints that are out there right now that are putting a little upward pressure on our expenses. But overall, that's kind of the way expenses are forecasted as we get through the rest of this year.
If you were to back out the.
Okay.
The merger related expenses that we had for first constitution in Q1.
It's.
What we're looking at now is the $45 million of operating expenses in Q2 is a pretty good run rate for us as we head forward for the rest of the year.
We are getting the cost saves is targeted from first constitution. So we're still on track for that.
It's just that some of our other expenses are creeping upward.
Mainly on salaries and benefits due to the hiring constraints that are out there right now that are putting a little upward pressure on our expenses, but overall.
That's kind of the way expenses are forecasted as we get through the rest of this year.
Christopher Thomas O'Connell: Got it. So there are still some cost saves yet to be achieved but just being offset by the higher salaries?
Thomas F. Splaine: Yeah, that's the way it's shaking out right now.
Christopher Thomas O'Connell: Okay, great. And on the comments around mortgage banking, the gain on sale of going into the back half of the year, any other color there or how we should frame kind of that line item going forward?
And on.
The comments around mortgage banking.
Gain on sale of going into the back half of the year.
Any other color there or how we should frame.
Kind of that line item going forward.
Thomas J. Shara: Chris, I think it's going to remain under pressure. The refinance activities is gone and inventory in this part of the country is pretty restricted, so I think we will continue to be opportunistic, put some things in portfolio like I said earlier, we're putting some jumbos on, some arms on, and those rates are in the high fours, low fives right now, so it seems like a better place to put loans than to sell. But we're hoping things pick up in the back half of the year, but they're not going to be anywhere near where we projected at the beginning of the year. And we're also offsetting some of that loss with swaps. We're starting to see much more swap activity in the second half of the year.
The refinance activities is gone. And inventory in this part of the country is pretty restricted so I think we will continue to. The opportunistic put some things in portfolio like like I said earlier, we're putting some jumbos. Some arms on and those rates are in the high fours low fives right now so it seems like a better place to put loans than to sell well. But we're hoping things pick up in the back half of the year, but they're not going to be anywhere near where we projected at the beginning of the year. And we're also offsetting some of that loss with swaps were starting to see much more swap activity in the second half of the year.
And inventory in this part of the country is pretty restricted so I think we will continue to. The opportunistic put some things in portfolio like like I said earlier, we're putting some jumbos. Some arms on and those rates are in the high fours low fives right now so it seems like a better place to put loans than to sell well. But we're hoping things pick up in the back half of the year, but they're not going to be anywhere near where we projected at the beginning of the year. And we're also offsetting some of that loss with swaps were starting to see much more swap activity in the second half of the year.
The opportunistic put some things in portfolio like like I said earlier, we're putting some jumbos. Some arms on and those rates are in the high fours low fives right now so it seems like a better place to put loans than to sell well. But we're hoping things pick up in the back half of the year, but they're not going to be anywhere near where we projected at the beginning of the year. And we're also offsetting some of that loss with swaps were starting to see much more swap activity in the second half of the year.
Some arms on and those rates are in the high fours low fives right now so it seems like a better place to put loans than to sell well. But we're hoping things pick up in the back half of the year, but they're not going to be anywhere near where we projected at the beginning of the year. And we're also offsetting some of that loss with swaps were starting to see much more swap activity in the second half of the year.
But we're hoping things pick up in the back half of the year, but they're not going to be anywhere near where we projected at the beginning of the year. And we're also offsetting some of that loss with swaps were starting to see much more swap activity in the second half of the year.
And we're also offsetting some of that loss with swaps were starting to see much more swap activity in the second half of the year.
Christopher Thomas O'Connell: Okay, got it. So like all in on a core basis is the same $7 million to $8 million a good range with the swaps kind of offsetting some of the lower mortgage banking?
So like all in on a core basis is the same $7 million to $8 million, a good range or the swaps kind of offsetting some of the lower mortgage banking.
Thomas J. Shara: Yes, that's a good assumption there Chris.
Christopher Thomas O'Connell: Okay. And then the comments around the buyback and keeping capital ratios kind of 8% plus on TCE, I know you guys had previously indicated you wanted to start utilizing the buyback. If there's not a ton of AOCI coming in future quarters even with maybe a little bit more questionable economic environment, do you think you can start to repurchase again?
And then the <unk>.
Comments around.
The buyback and keeping capital ratios kind of 8% plus on TCE.
I know you guys had previously indicated wanted to start utilizing the buyback.
<unk>.
If there's not a ton of OCI its coming in future quarters.
Even with maybe a little bit.
Yeah.
More questionable economic environment do you think you can.
Start to repurchase again.
Thomas F. Splaine: Yeah, I think you're looking at it the same way we are looking at it there Chris. With the economic uncertainty, we were a little hesitant. We really wanted to start up on the share repurchase plan and basically, we just weren't there and we saw a lot of loan growth coming at us that we knew was going to put downward pressure on our capital level. So we will take the loan growth, share repurchases are good for us when we don't have something better to do with our capital and as long as we have a really healthy loan pipeline and we're growing the bank, that's the most important thing right now. So yes, as we look into the second half of this year, if the economic uncertainty settles down as well as loan growth gets a little bit softer as we head forward-right now it's looking very good-yes, we will definitely look at share repurchases as a tool to manage our capital levels.
We were with the economic uncertainty we were a little hesitant.
We did really wanted to start up on the share repurchase plan.
Basically.
We just weren't we weren't there and we saw a lot of loan growth coming at us that we knew was going to put downward pressure on our capital level. So we will take the loan growth share repurchases are good for us when we don't have something better to do with our capital and as long as we have a really healthy loan pipeline and we're growing the bank.
That's the most important thing right now so.
Yes, as we look into the second half of this year.
If the economic uncertainty settles down as well as loan growth gets a little bit softer as we head forward right now it's looking very good.
Yes, we will definitely look at share repurchases as a tool to manage our capital levels.
Christopher Thomas O'Connell: Okay, great. That is all I have for now, thank you.
Sure.
That is all I have for now thank you.
Thomas F. Splaine: Thanks, Chris.
Operator: Thank you. Our next question comes from Manuel Navas with [inaudible] Davidson. Your line is open.
Our next question comes from Manuel Nava.
Davidson Your line is open.
Manuel Antonio Navas: Good morning.
Thomas F. Splaine: Hey, Manuel.
Manuel Antonio Navas: Hey, so I might've missed this-what are you booking new loans at and has that shifted a little bit into here in July?
I might've missed this what are you booking new loans at and has that shifted a little bit into here in July .
Thomas J. Shara: Yes, we've put on rates probably in the mid to high fours right now Manuel and moving up and that was prior to the Fed's move yesterday. So we're seeing much, much better pricing and we're seeing that across the board.
Put on rates are probably in the mid to high fours right now Emmanuel and moving up and that was prior to the fed move yesterday, so we're seeing much much better pricing.
And we're seeing that across the board.
Manuel Antonio Navas: Okay, that's helpful. Is there a thought process of--I understand that deposit betas are creeping up, but thinking big picture, how high could the NIM get by the year-end or early next year?
I understand that deposit betas are creeping up.
But thinking big picture, how high could that get by the year end or early next year.
Thomas F. Splaine: So that's a great question. If we had a look behind the curtain at the Fed, maybe we'd have a better indication, but I think that right now, the NIM expansion that we had this quarter was based upon the adjustable rate of our portfolio plus we did have the tailwind for us of some non-accrual interest recapture, so that benefited the quarter. So as we look forward, these increases, it's all going to come down to deposit pressure with competition and so for us, as we head forward, I think that for us being in the 330 range, going forward, it's going to be where we're kind of targeting right now based upon where we're at and where we see things going as we move forward.
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Sure.
If we had to look behind the curtain at the fed we maybe we'd have a better indication but.
I think that right now.
The NIM expansion that we had this quarter was based upon.
The adjustable rate of our portfolio plus we did have the tailwind for us of.
Some non accrual interest recapture.
So that benefited the quarter. So as we look forward. These increases it's all going to come down to deposit pressure with competition and.
So for us as we head forward I think that you know.
For us being in the in the $3 30 range.
Going forward, it's going to be where we're kind of targeting right now based upon where we're at and where we see things going as we move forward.
Manuel Antonio Navas: Do you think that there comes a point with Betas catching up that you could see NIM kind of bounce around rather than expanding?
Beta is catching up.
That you could see NIM kind of bounce around rather than expanding.
Thomas F. Splaine: I guess that's always a possibility, but I think that there's still a lot of liquidity out in the system. So I think deposit pressure is probably at this point of the cycle, not as intense as it was when we were at the last time we were in an uprate environment.
So I think deposit pressure is probably at this point of the cycle not as intense as it was when we were at the last time, we were in an uprate environment.
Manuel Antonio Navas: Okay, that's really helpful. Thank you.
Okay, that's really helpful. Thank.
Thomas J. Shara: Thank you.
Thomas F. Splaine: Thanks.
Operator: Thank you. There are no further questions in the queue, so as a reminder, it is star one on your telephone keypad if you would like to ask a question.
There are no further questions in the queue. So as a reminder, it is star one on your telephone keypad. If you would like to ask a question.
We have a follow-up question from Christopher O'Connor with KVW. Please proceed.
Christopher Thomas O'Connell: Hey, just wanted to circle back on those last comments there on the margin. I thought if I heard correctly the impact of PPP non-accrual prepays was eight basis points this quarter, right?
I thought if I heard correctly the impact of PPP nonaccrual Prepays was eight basis points this quarter right.
Thomas F. Splaine: Yes, compared to the increase over Q1.
The increase over Q1.
Christopher Thomas O'Connell: So backing that out, we're already really in the 330 range with the NIM, so just trying to get a sense of the NIM expansion comments versus the 330 range and already kind of being there.
Just trying to get a.
Sensitive.
The NIM expansion comments.
The $3 30 range and already kind of being there.
Thomas F. Splaine: Right, so if you if you were to back off some of that positive impact that we had this quarter with PPP's virtually going away and with the one-time non-accrual recapture, NIM comes back more of a core NIM basis comes down somewhat, and then we get some expansion based upon the recent increases in rates offset by deposit beta. So for us, I think we're looking at keeping the NIM in the range of low-to-mid 330 that will be conservative on our projections and we will take it from here as we move forward. So we do still see some NIM expansion.
Pvp's virtually going away and what.
The non accruals. The one time non accrual recapture NIM comes back more of a core NIM basis comes down somewhat. And then we get some expansion based upon their recent increases in rates offset by deposit beta so sofa. So for US I think we're. We're looking at keeping the NIM. In the range of low to mid. 300, <unk> that will be conservative on our projections and I will take it from here as we move forward. So we do still see some NIM expansion.
The one time non accrual recapture NIM comes back more of a core NIM basis comes down somewhat. And then we get some expansion based upon their recent increases in rates offset by deposit beta so sofa. So for US I think we're. We're looking at keeping the NIM. In the range of low to mid. 300, <unk> that will be conservative on our projections and I will take it from here as we move forward. So we do still see some NIM expansion.
And then we get some expansion based upon their recent increases in rates offset by deposit beta so sofa. So for US I think we're. We're looking at keeping the NIM. In the range of low to mid. 300, <unk> that will be conservative on our projections and I will take it from here as we move forward. So we do still see some NIM expansion.
So for US I think we're. We're looking at keeping the NIM. In the range of low to mid. 300, <unk> that will be conservative on our projections and I will take it from here as we move forward. So we do still see some NIM expansion.
We're looking at keeping the NIM. In the range of low to mid. 300, <unk> that will be conservative on our projections and I will take it from here as we move forward. So we do still see some NIM expansion.
In the range of low to mid. 300, <unk> that will be conservative on our projections and I will take it from here as we move forward. So we do still see some NIM expansion.
300, <unk> that will be conservative on our projections and I will take it from here as we move forward. So we do still see some NIM expansion.
So we do still see some NIM expansion.
Christopher Thomas O'Connell: Got it. So some NIM expansion but just modest core basis once backing out those items.
Thomas F. Splaine: Right, there were some positive impacts in Q2 that will not repeat themselves.
Some positive impacts in Q2 that will not repeat themselves.
Christopher Thomas O'Connell: Okay, that's all I had. Thank you.
Thomas F. Splaine: Thanks.
Operator: Thank you. There are no further questions in the queue, so I will now pass it back to Tom Shara.
There are no further questions in the queue. So I will now pass it back to Tom sure.
Thomas J. Shara: Okay, thanks, everybody. Thanks for joining us this morning. If you have any additional questions, feel free to give Tom and I a call. Enjoy the rest of the summer and thanks again for participating this morning. Take care.
Operator: This concludes the Lakeland Bancorp Inc. Q2 2022 earnings conference call. Thank you for your participation. You may now disconnect your lines.
This concludes the Lakeland Bancorp, Inc. Q2, 2022 earnings conference call. Thank you for your participation you may now disconnect your line.