Lakeland Bancorp (LBAI) 8-K Lakeland Bancorp Reports $3.7 Million in Second Quarter Net Income

Exhibit 99.1

Thursday, July 15, 2004	Roger Bosma
	President & CEO
	Joseph F. Hurley
	EVP & CFO
	973-697-2000

Lakeland Bancorp Reports $3.7 Million in Second Quarter Net Income

Oak Ridge, NJ – July 15, 2004 —Lakeland Bancorp, Inc. (Nasdaq:LBAI) reported second quarter Net Income of $3.7 million, which equaled Net Income for the same period in 2003. Diluted earnings per share was $0.23 per share compared to $0.25 per share for the second quarter 2003. This decrease reflects an increase in outstanding shares following the acquisition of CSB Financial Corp., (“CSB”) in August 2003. Annualized Return on Average Assets was 0.93% and Annualized Return on Average Equity was 13.28% for the second quarter of 2004.

Net Income for the first six months of 2004 was $7.3 million, which equaled Net Income for the same period last year. Diluted earnings per share was $0.45 compared to $0.48 per share for the first six months of 2003. Return on Average Assets was 0.92% and Return on Average Equity was 13.00%.

Lakeland Bancorp also announced that it has declared a quarterly cash dividend of $0.10 per common share. The cash dividend will be paid on August 13, 2004 to holders of record as of the close of business on July 30, 2004.

Roger Bosma, Lakeland Bancorp’s President and CEO said, “We are pleased to announce the closing of our acquisition of Newton Financial Corp. effective July 1, 2004. This acquisition solidifies our position as the predominant bank in Sussex County and enables us to deploy our resources over a larger asset base.”

-continued-

Earnings

Net Interest Income

Net interest income for the second quarter of 2004 was $13.6 million or 9% higher than the $12.5 million earned in the second quarter of 2003. Net interest margin decreased to 3.80% from 4.34% in the second quarter of 2003 while average earning assets rose 25%. The Company’s average cost of interest bearing liabilities increased 5 basis points from 1.48% in the second quarter of 2003 to 1.53% in the second quarter of 2004 primarily due to the issuance of the $56.7 million in trust-preferred securities. Two of the trusts were funded in June 2003 and the third in December 2003. The Company’s yield on interest earning assets declined 46 basis points from 5.53% in the second quarter of 2003 to 5.07% in the second quarter of 2004 primarily from the larger percentage of earning assets in investment securities, as deposit growth outpaced loan growth.

Year-to-date, net interest income was $27.2 million, or 10% higher than the $24.8 million reported for the first six months of 2003. Net interest margin decreased to 3.83% for the first half of 2004 from 4.41% for the same period last year, while average earning assets rose 26%. The Company’s yield on earning assets decreased from 5.68% in 2003 to 5.14% for the first six months of 2004. The Company’s cost of interest bearing liabilities decreased from 1.59% in 2003 to 1.57% for the first six months of 2004.

Noninterest income

Noninterest income, including gains on investment securities sold, totaled $3.3 million or 4% higher than the second quarter of 2003. Gains on sales of investment securities were $413,000 in second quarter 2004 compared to gains of $487,000 for the same period last year. The total in 2004 includes a $400,000 gain that reflects the collection in full of a corporate bond that had been previously written-down. Excluding the gains on sales of securities, noninterest income totaled $2.9 million and was $205,000, or 8% higher than the second quarter of 2003. Commissions and fees increased 18% to $729,000 due to increased loan fees collected and an increase in investment commission income, while other income increased 21% to $347,000, primarily due to an increase in income on bank owned life insurance.

Noninterest income, including gains on investment securities sold, totaled $6.2 million for the first six months of 2004, or 7% higher than the same period last year. Gains on sales of investment securities were $416,000 for the first six months of 2004 as compared to $752,000 last year. Excluding the gains on sales of securities, non-interest income totaled $5.8 million and was $764,000, or 15% higher than the first six months of 2003. Service charges on deposit accounts increased 12% to $3.7 million primarily due to higher return item charges. Commissions and fees increased 18% to $1.4 million due to increases in loan fees collected and investment commission income, while other income increased 32% to $727,000 primarily due to an increase in income on bank owned life insurance.

Noninterest expense

Noninterest expense for the second quarter of 2004 was $10.6 million, an increase of 13% compared to the second quarter of 2003. This increase reflects higher salary and benefit expense due to branch expansion following the acquisition of CSB, as well as normal salary and benefit increases. Occupancy and equipment expenses increased by 19% primarily due to costs incurred at the four new branches of CSB. Other noninterest expenses increased by 14% in the second quarter of 2004 primarily due to legal, marketing, and CSB related costs.

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-continued-

For the first six months of 2004, noninterest expense was $20.9 million compared to $18.4 million in 2003, an increase of $2.5 million or 14%.Of this overall increase, salary and benefit costs increased by $1.1 million or 11%. Occupancy and equipment expenses increased by $426,000, or 13%, reflecting the costs incurred at the four new CSB branches. Other expenses increased $1.0 million or 20%, primarily due to increased legal fees and marketing expenses.

Financial Condition

At June 30, 2004, total assets were $1.642 billion, an increase of $57.1 million or 4% from year-end. (It should be noted that this total does not reflect the assets of $316.0 million of Newton Financial Corp., which merged into Lakeland Bancorp as of July 1, 2004.)

Loans

In the first half of 2004, total loans increased by $40.1 million or 5% from year-end. Commercial loans increased $30.0 million or 7% from year-end, while residential mortgage and consumer and home equity loans showed minor increases for the year.

Asset Quality

At June 30, 2004, non-performing assets totaled $15.7 million (0.96% of total assets) including $10.5 million related to commercial lease pools (0.64% of total assets) and $5.2 million of other non-performing assets (0.32% of total assets). The Allowance for Loan and Lease Losses totaled $17.3 million at June 30, 2004 and represented 1.94% of total loans. During the first half of 2004, the Company had net charge-offs of $1.3 million.

Deposits

At June 30, 2004, total deposits were $1.417 billion, an increase of $91.1 million or 7% from December 31, 2003. Core deposits, which are defined as noninterest bearing deposits and savings and interest bearing transaction accounts, increased by $100.4 million or 10% to $1.139 billion. Core deposits, as defined, represent 80% of total deposits, up from 78% at year-end.

Capital

Stockholders’ equity was $110.3 million and book value per common share was $6.89. As of June 30, 2004, the Company’s leverage ratio was 7.92%. Tier I and total risk based capital ratios were 12.79% and 15.73%, 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 the merger of Newton into Lakeland Bank, 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. Lakeland 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. The following factors, among others, could cause actual results to differ materially and adversely from such forward-looking statements: operational factors relating to the performance of Lakeland Bank and Newton, market conditions, competitive conditions and general economic conditions. Any statements made by Lakeland that are not historical facts should be considered to be forward-looking statements. Lakeland 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 June 30,						Six months ended June 30,
	2004			2003			2004			2003
	(Dollars in thousands except per share amounts)
INCOME STATEMENT
Net Interest Income	$	13,596		$	12,455		$	27,154		$	24,765
Provision for Possible Loan Losses		(875	)		(750	)		(1,750	)		(1,500	)
Noninterest Income		2,915			2,710			5,788			5,024
Gain on sales of securities		413			487			416			752
Noninterest Expense		(10,578	)		(9,387	)		(20,889	)		(18,355	)
Pretax Income		5,471			5,515			10,719			10,686
Tax Expense		(1,753	)		(1,769	)		(3,432	)		(3,397	)
Net Income	$	3,718		$	3,746		$	7,287		$	7,289
Basic Earnings Per Share	$	0.23		$	0.25		$	0.46		$	0.49
Diluted Earnings Per Share	$	0.23		$	0.25		$	0.45		$	0.48
Dividends per share	$	0.10		$	0.09		$	0.20		$	0.18
Weighted Average Shares - Basic		16,004			14,919			15,980			14,921
Weighted Average Shares - Diluted		16,180			15,132			16,169			15,140
SELECTED OPERATING RATIOS
Return on Average Assets		0.93	%		1.18	%		0.92	%		1.17	%
Return on Average Equity		13.28	%		16.20	%		13.00	%		16.02	%
Yield on Interest Earning Assets		5.07	%		5.53	%		5.14	%		5.68	%
Cost of funds		1.53	%		1.48	%		1.57	%		1.59	%
Net interest spread		3.54	%		4.05	%		3.57	%		4.09	%
Net interest margin		3.80	%		4.34	%		3.83	%		4.41	%
Efficiency ratio		62.00	%		59.90	%		61.30	%		59.80	%
Stockholders’ equity to total assets								6.72	%		7.19	%
Book value per share							$	6.89		$	6.42
ASSET QUALITY RATIOS
Ratio of net charge-offs to average loans								0.31	%		0.20	%
Ratio of allowance to total loans								1.94	%		2.54	%
Non-performing loans to total loans								1.76	%		2.69	%
Non-performing assets to total assets								0.96	%		1.51	%
Allowance to non-performing loans								110	%		94	%
SELECTED BALANCE SHEET DATA AT PERIOD-END
							6/30/2004			12/31/2003
Loans							$	892,500		$	852,387
Allowance for Loan Losses								17,329			16,899
Investment Securities								586,058			600,411
Total Assets								1,642,436			1,585,290
Deposits								1,416,758			1,325,682
Short-Term Borrowings								19,294			51,423
Long-Term Debt								90,203			89,500
Stockholders’ Equity								110,319			110,951
SELECTED AVERAGE BALANCE SHEET DATA
	For the three months ended						For the six months ended
	6/30/2004			6/30/2003			6/30/2004			6/30/2003
Loans, net	$	872,408		$	734,455		$	861,393		$	727,372
Interest-Earning Assets		1,482,743			1,187,136			1,468,265			1,166,098
Deposits		1,377,652			1,123,400			1,353,540			1,103,801
Total Assets		1,609,643			1,273,561			1,595,654			1,252,419
Common Equity		112,614			92,769			112,685			91,734

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Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

	June 30, 2004			December 31, 2003
	(unaudited)
ASSETS (dollars in thousands)
Cash and due from banks	$	42,326		$	42,760
Federal funds sold and interest-bearing deposits due from banks		34,353			3,324
Total cash and cash equivalents		76,679			46,084
Investment securities available for sale		523,529			557,402
Investment securities held to maturity; fair value of $62,171 in 2004 and $43,650 in 2003		62,529			43,009
Loans:
Commercial		443,239			413,198
Residential mortgages		187,896			185,153
Consumer and home equity		261,365			254,036
Total loans		892,500			852,387
Plus: deferred costs		(1,640	)		(851	)
Less: Allowance for loan and lease losses		17,329			16,899
Net loans		873,531			834,637
Premises and equipment - net		27,633			27,510
Accrued interest receivable		6,329			6,391
Goodwill and other identifiable assets		28,383			27,609
Bank owned life insurance		28,105			27,575
Other assets		15,718			15,073
TOTAL ASSETS	$	1,642,436		$	1,585,290
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest bearing	$	271,562		$	242,710
Savings and interest-bearing transaction accounts		867,048			795,485
Time deposits under $100		198,233			209,216
Time deposits $100 and over		79,915			78,271
Total deposits		1,416,758			1,325,682
Federal funds purchased and securities sold under agreements to repurchase		19,294			51,423
Long-term debt		33,500			34,500
Subordinated debentures		56,703			—
Other liabilities		5,862			7,734
Guaranteed preferred beneficial interests in Company’s subordinated debentures		—			55,000
TOTAL LIABILITIES		1,532,117			1,474,339
STOCKHOLDERS’ EQUITY
Common stock, no par value; authorized shares, 40,000,000; issued shares, 16,483,551 at June 30, 2004 and December 31, 2003		130,968			131,116
Accumulated Deficit		(8,888	)		(12,980	)
Treasury stock, at cost, 465,026 shares at June 30, 2004 and 535,025 at December 31, 2003		(6,714	)		(7,283	)
Accumulated other comprehensive income		(5,047	)		98
TOTAL STOCKHOLDERS’ EQUITY		110,319			110,951
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,642,436		$	1,585,290

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Lakeland Bancorp, Inc. and Subsidiaries

CONSOLIDATED INCOME STATEMENTS

(Unaudited)

	Three months Ended June 30,				Six Months Ended June 30,
	2004		2003		2004		2003
	(In thousands, except per share data)
INTEREST INCOME
Loans and fees	$	12,812	$	11,725	$	25,481	$	23,578
Federal funds sold and interest bearing deposits with banks		38		58		48		126
Taxable investment securities		4,728		3,507		9,741		7,139
Tax exempt investment securities		735		712		1,499		1,370
TOTAL INTEREST INCOME		18,313		16,002		36,769		32,213
INTEREST EXPENSE
Deposits		3,274		3,030		6,661		6,466
Securities sold under agreements to repurchase		56		47		167		110
Long-term debt		1,387		470		2,787		872
TOTAL INTEREST EXPENSE		4,717		3,547		9,615		7,448
NET INTEREST INCOME		13,596		12,455		27,154		24,765
Provision for possible loan losses		875		750		1,750		1,500
NET INTEREST INCOME AFTER PROVISION FOR POSSIBLE LOAN LOSSES		12,721		11,705		25,404		23,265
NONINTEREST INCOME
Service charges on deposit accounts		1,839		1,808		3,703		3,319
Commissions and fees		729		616		1,358		1,155
Gain on the sales of securities		413		487		416		752
Other income		347		286		727		550
TOTAL NONINTEREST INCOME		3,328		3,197		6,204		5,776
NONINTEREST EXPENSE
Salaries and employee benefits		5,562		5,051		11,109		10,010
Net occupancy expense		1,004		851		2,025		1,776
Furniture and equipment		907		761		1,752		1,575
Stationery, supplies and postage		341		336		689		666
Legal fees		505		399		989		652
Marketing expense		376		315		691		511
Other expenses		1,883		1,675		3,634		3,165
TOTAL NONINTEREST EXPENSE		10,578		9,388		20,889		18,355
INCOME BEFORE PROVISION FOR INCOME TAXES		5,471		5,514		10,719		10,686
Provision for income taxes		1,753		1,768		3,432		3,397
NET INCOME	$	3,718	$	3,746	$	7,287	$	7,289
EARNINGS PER COMMON SHARE
Basic	$	0.23	$	0.25	$	0.46	$	0.49
Diluted	$	0.23	$	0.25	$	0.45	$	0.48
DIVIDENDS PER SHARE	$	0.10	$	0.09	$	0.20	$	0.18

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