Lakeland Bancorp (LBAI) 8-K Lakeland Bancorp Reports a 31% increase in Fourth Quarter Net Income

FOR RELEASE:  Thursday January 16, 2003	CONTACT:	Roger Bosma
		President & CEO
		Joseph F. Hurley EVP & CFO 973-697-2000

Lakeland Bancorp Reports a 31% increase in Fourth Quarter Net Income

Oak Ridge, NJ – January 16th, 2003 — Lakeland Bancorp, Inc. (NASDAQ:LBAI) reported fourth quarter net income of $4.0 million, or $0.28 per diluted share which was 31% higher than the $3.1 million or $0.21 per diluted share reported in fourth quarter last year. Return on Average Assets was 1.34% and Return on Average Equity was 17.89% for the fourth quarter 2002.

Net Income for the year ended December 31, 2002 was $10.1 million or $0.69 per diluted share including a $7.5 million additional provision for loan and lease losses relating to $16.0 million in commercial leases that are on a non-accrual status. Excluding the additional provision, net income would have been $14.7 million or $1.01 per diluted share, up 34% from the $11.0 million or $0.76 per diluted share reported for 2001.

Lakeland Bancorp also announced its quarterly cash dividend of $0.095 per common share. The cash dividend will be paid on February 14, 2003 to holders of record as of the close of business on January 31, 2003. After giving effect to the 5% stock dividend that the Company paid in November 2002, the $0.095 per share effectively represents a 5% increase in the amount paid to shareholders. All share amounts have been retroactively restated to reflect the 5% stock dividend.

Roger Bosma, Lakeland Bancorp’s President and CEO said, “Despite the additional provision recorded for the commercial leases in the third quarter, Lakeland’s core earnings in 2002 are up 34% from last year reflecting our strong deposit and loan growth. We continue to vigorously pursue our insurance claims relating to the commercial leases and believe that we have substantial and meritorious positions.”

-Continued-

Earnings

Net Interest Income

Net interest income for the fourth quarter of 2002 was $12.9 million or 19% higher than the $10.9 million earned in the fourth quarter of 2001 reflecting growth in interest earning assets. Net interest margin increased to 4.72% in the fourth quarter 2002 from 4.71% for the same period last year.

For the full year, net interest income was $48.2 million, or 19% higher than the $40.5 million reported for 2001. Net interest margin increased to 4.75% for the year ended December 31, 2002 from 4.69% for the same period last year.

Noninterest income

Noninterest income (exclusive of gains/losses on sales of investment securities) was $2.3 million in the fourth quarter 2002 which was $136,000 or 6% higher than the fourth quarter 2001. Commissions and fees increased to $494,000 in fourth quarter 2002 as a result of increased fees on construction loans and investment services commission income. Gains on sales of leases declined due to the decision to retain a larger amount of lease originations in the Company’s own portfolio.

For the entire year, noninterest income (exclusive of gains on sales of investment securities) increased from $8.3 million for 2001 to $9.0 million for 2002. Service charges on deposit accounts increased $423,000 or 8% to $5.9 million. Commissions and fees increased $499,000 or 35% to $1.9 million as a result of increases in loan fees and investment services commission income. Gains on sales of leases declined by $550,000 as a result of retaining a larger percentage of lease originations throughout 2002.

Noninterest expense

Noninterest expense for the fourth quarter of 2002 was $8.8 million as compared to $8.1 million in the fourth quarter of 2001, an increase of $685,000 or 8%.The bank’s efficiency ratio improved from 59% in the fourth quarter of 2001 to 56% in the fourth quarter of 2002 as revenue growth outpaced expense growth.

For the year, noninterest expense was $33.6 million compared to $31.2 million in 2001, an increase of $2.4 million or 8%.Of this increase, $1.2 million relates to increased salary and benefit costs. Occupancy expenses increased by $324,000 reflecting five new branch openings over the past two years. Stationery, supplies and postage expense decreased by $351,000, which reflects the outsourcing of statement rendering and higher 2001 costs due to the merger of our subsidiary banks.

Financial Condition

At December 31, 2002, total assets were $1.21 billion compared to $1.04 billion at year-end 2001, an increase of $163 million or 16%. Loans increased 20% from $600 million at year-end 2001 to $719 million at December 31, 2002 while deposits grew $147 million or 16% during the same time period.

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-Continued-

Loans

Loans have increased to $719 million in 2002, an increase of $119 million or 20% from year-end 2001. Although there has been an increase in all loan categories this year, the most substantial growth has been in consumer loans, which have increased to $234 million, an increase of $58 million or 33% from year-end. Commercial loans have increased $53 million or 20% to $314 million at December 31.

Asset Quality

At December 31, 2002, non-performing assets totaled $20 million (1.66% of total assets) including $16 million related to commercial lease pools and $4 million of other non-performing assets (0.33% of total assets). The Allowance for Loan and Lease Losses totaled $18 million at December 31, 2002 or 2.50% of total loans. Net charge-offs totaling $780,000 dropped to 0.12% of average loans from 0.41% on December 31, 2001.

Deposits

At December 31, 2002, total deposits were $1.06 billion, an increase of $147 million or 16% from December 31, 2001. Core deposits, which are defined as noninterest bearing deposits and savings and interest bearing transaction accounts, increased by $130 million or 19% to $808 million at December 31, 2002. Core deposits, as defined, represent 76% of total deposits as compared to 74% on December 31, 2001.

Capital

As of December 31, 2002, stockholders’ equity was $91 million and book value per common share was $6.38. The Company’s leverage ratio was 7.01%. Tier I and total risk based capital ratios were 10.94% and 12.21%, respectively. These regulatory capital ratios exceed those necessary to be considered a well-capitalized institution under Federal guidelines.

The information disclosed in this document includes various forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to credit quality (including delinquency trends and the allowance for possible loan losses), corporate objectives, and other financial and business matters. The words “anticipates”, “projects”, “intends”, “estimates”, “expects”, “believes”, “plans”, “may”, “will,”, “should”, “could”, and other similar expressions are intended to identify such forward-looking statements. The Company cautions that these forward-looking statements are necessarily speculative and speak only as of the date made, and are subject to numerous assumptions, risks and uncertainties, all of which may change over time. Actual results could differ materially from such forward-looking statements.

In addition to the factors disclosed by the Company elsewhere in this document, the following factors, among others, could cause the Company’s actual results to differ materially and adversely from such forward-looking statements: pricing pressures on loan and deposit products; competition; changes in economic conditions nationally, regionally and in the Company’s markets; the extent and timing of actions of the Federal Reserve Board; changes in levels of market interest rates; clients’ acceptance of the Company’s products and services; credit risks of lending activities and competitive factors; whether or not the Company ultimately receives payment of all amounts due from the lease portfolio as described in Note 15-Commitments and Contingencies in Notes to the Consolidated Financial Statements contained in Form 10-K for the period ended December 31, 2001; and the extent and timing of legislative and regulatory actions and reforms.

The above-listed risk factors are not necessarily exhaustive, particularly as to possible future events, and new risk factors may emerge from time to time. Certain events may occur that could cause the Company’s actual results to be materially different than those described in the Company’s periodic filings with the Securities and Exchange Commission. Any statements made by the Company that are not historical facts should be considered to be forward-looking statements. The Company is not obligated to update and does not undertake to update any of its forward-looking statements made herein.

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Lakeland Bancorp, Inc.

Financial Highlights

(unaudited)

	Three months ended December 31,						Year ended December 31,
	2002			2001			2002			2001
	(Dollars in thousands except per share amounts)
INCOME STATEMENT
Net Interest Income	$	12,883		$	10,870		$	48,174		$	40,492
Provision for Loan and Lease Losses		(750	)		(400	)		(10,500	)		(1,600	)
Noninterest Income		2,314			2,178			9,001			8,347
Gains (losses) on sales of investment securities		1			(92	)		876			(57	)
Noninterest Expense		(8,760	)		(8,075	)		(33,587	)		(31,206	)
Pretax Income		5,688			4,481			13,964			15,976
Tax Expense		(1,652	)		(1,395	)		(3,887	)		(4,953	)
Net Income	$	4,036		$	3,086		$	10,077		$	11,023
Basic Earnings Per Share	$	0.28		$	0.21		$	0.70		$	0.76
Diluted Earnings Per Share	$	0.28		$	0.21		$	0.69		$	0.76
Dividends per share	$	0.09		$	0.08		$	0.35		$	0.31
Weighted Average Shares—Basic		14,265,575			14,373,372			14,320,188			14,417,820
Weighted Average Shares—Diluted		14,551,623			14,607,226			14,586,706			14,592,310
SELECTED OPERATING RATIOS
Return on Average Assets		1.34	%		1.20	%		0.89	%		1.14	%
Return on Average Equity		17.89	%		14.36	%		11.29	%		13.37	%
Yield on Interest Earning Assets		6.21	%		7.69	%		6.41	%		7.26	%
Cost of funds		1.87	%		3.83	%		2.10	%		3.94	%
Net interest spread		4.34	%		3.86	%		4.31	%		3.32	%
Net interest margin		4.72	%		4.71	%		4.75	%		4.69	%
Efficiency ratio		56.30	%		59.10	%		57.50	%		61.70	%
Stockholders’ equity to total assets								7.52	%		8.19	%
Book value per share							$	6.38		$	5.96
Closing stock price							$	17.87		$	15.52
ASSET QUALITY RATIOS
Ratio of net charge-offs to average loans								0.12	%		0.41	%
Ratio of allowance to total loans								2.50	%		1.37	%
Non-performing loans to total loans								2.77	%		0.56	%
Non-performing assets to total assets								1.66	%		0.37	%
Allowance to non-performing loans								90	%		245	%
SELECTED BALANCE SHEET DATA AT PERIOD-END								12/31/2002			12/31/2001
Loans							$	718,676		$	600,074
Allowance for Loan and Lease Losses								17,940			8,220
Investment Securities								407,843			343,341
Total Assets								1,207,105			1,044,338
Deposits								1,059,092			912,110
Other Borrowings								19,974			19,920
Long Term Debt								31,000			21,000
Stockholders’ Equity								90,767			85,567
SELECTED AVERAGE BALANCE SHEET DATA
	For the quarter ended						For the year ended
	12/31/2002			12/31/2001			12/31/2002			12/31/2001
Loans, net	$	707,022		$	586,666		$	666,952		$	558,027
Interest Earning Assets		1,111,260			939,924			1,041,048			888,020
Deposits		1,054,118			900,698			986,232			843,717
Total Assets		1,198,130			1,028,856			1,129,280			966,988
Stockholders’ Equity		89,487			85,968			89,295			82,452

Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS	December 31, 2002			December 31, 2001
	(dollars in thousands)
Cash and due from banks	$	35,465		$	48,615
Investment securities available for sale		361,760			273,082
Investment securities held to maturity; fair value of $48,436
in 2002 and $72,101 in 2001		46,083			70,259
Loans:
Commercial		314,378			261,101
Residential mortgages		170,039			162,569
Consumer and home equity		234,259			176,404
Total loans		718,676			600,074
Plus: deferred costs		982			1,885
Less: Allowance for loan and lease losses		17,940			8,220
Net loans		701,718			593,739
Premises and equipment—net		25,167			24,785
Accrued interest receivable		5,495			5,041
Other assets		31,417			28,817
TOTAL ASSETS	$	1,207,105		$	1,044,338
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest bearing	$	214,110		$	206,783
Savings and interest-bearing transaction accounts		593,637			470,563
Time deposits under $100		180,257			184,011
Time deposits $100 and over		71,088			50,753
Total deposits		1,059,092			912,110
Federal funds purchased and securities sold under
agreements to repurchase		19,974			19,920
Long-term debt		31,000			21,000
Other liabilities		6,272			5,741
TOTAL LIABILITIES		1,116,338			958,771
STOCKHOLDERS’ EQUITY
Common stock, no par value; authorized shares, 40,000,000; issued
shares, 14,671,093 at December 31, 2002 and December 31, 2001		101,664			88,273
Accumulated Deficit		(9,436	)		(931	)
Treasury stock, at cost, 442,497 shares at December 31, 2002 and
306,414 at December 31, 2001		(5,881	)		(3,175	)
Accumulated other comprehensive income		4,420			1,400
TOTAL STOCKHOLDERS’ EQUITY		90,767			85,567
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,207,105		$	1,044,338

Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED INCOME STATEMENTS

(Unaudited)

	Three months Ended December 31,					Year Ended December 31,
	2002		2001			2002		2001
	(In thousands, except per share data)
INTEREST INCOME
Loans and fees	$	12,642	$	11,118		$	47,076	$	44,286
Federal funds sold and interest bearing deposits with banks		96		161			357		802
Taxable investment securities		3,706		4,277			15,758		16,109
Tax-exempt investment securities		618		529			2,329		2,126
TOTAL INTEREST INCOME		17,062		16,085			65,520		63,323
INTEREST EXPENSE
Deposits		3,698		4,842			15,462		21,231
Securities sold under agreements to repurchase		72		81			293		751
Long-term debt		409		292			1,591		849
TOTAL INTEREST EXPENSE		4,179		5,215			17,346		22,831
NET INTEREST INCOME		12,883		10,870			48,174		40,492
Provision for loan and lease losses		750		400			10,500		1,600
NET INTEREST INCOME AFTER PROVISION FOR LOAN AND LEASE LOSSES		12,133		10,470			37,674		38,892
NONINTEREST INCOME
Service charges on deposit accounts		1,564		1,572			5,940		5,517
Commissions and fees		494		408			1,927		1,428
Gains (losses) on sales of investment securities		1		(92	)		876		(57	)
Gains on sales of leases		36		105			176		726
Other income		220		93			958		676
TOTAL NONINTEREST INCOME		2,315		2,086			9,877		8,290
NONINTEREST EXPENSE
Salaries and employee benefits		4,498		4,393			18,491		17,262
Net occupancy expense		879		811			3,370		3,046
Furniture and equipment		929		726			3,255		2,978
Stationery, supplies and postage		307		359			1,255		1,606
Other expenses		2,147		1,786			7,216		6,314
TOTAL NONINTEREST EXPENSE		8,760		8,075			33,587		31,206
INCOME BEFORE PROVISION FOR INCOME TAXES		5,688		4,481			13,964		15,976
Provision for income taxes		1,652		1,395			3,887		4,953
NET INCOME	$	4,036	$	3,086		$	10,077	$	11,023
EARNINGS PER COMMON SHARE
Basic	$	0.28	$	0.21		$	0.70	$	0.76
Diluted	$	0.28	$	0.21		$	0.69	$	0.76
DIVIDENDS PER SHARE	$	0.09	$	0.08		$	0.35	$	0.31