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Lakeland Bancorp Reports Increased Third Quarter Earnings

Oak Ridge, NJ – October 18, 2011 -- Lakeland Bancorp, Inc. (NASDAQ: LBAI) reported Net Income Available to Common Shareholders in the third quarter of 2011 of $4.8 million or $0.19 per diluted share compared to $3.3 million, or $0.13 per diluted share for the same period last year.  Net Income Available to Common Shareholders for the first nine months of 2011 was $12.9 million or $0.50 per diluted share, as compared to $10.8 million, or $0.43 per diluted share for the same period last year.

The Company declared a quarterly cash dividend of $0.06 per common share, payable on November 15, 2011 to holders of record as of the close of business on October 31, 2011. The Company also declared a dividend of 5% for the quarterly dividend payment due November 15, 2011 for the preferred stock issued to the U.S. Department of the Treasury under the Capital Purchase Program (“CPP”).

Thomas J. Shara, Lakeland Bancorp’s President and CEO said, “Our earnings growth in the third quarter of 2011 compared to the same period last year was driven by a reduced provision for loan and lease losses, controlled noninterest expenses, lower costs associated with Preferred Stock, reflecting a total of $40.0 million in repayments to the U.S. Department of the Treasury to repurchase Preferred Stock under the CPP, and a lower effective tax rate.”    

Earnings

Net Interest Income

Net interest income for the third quarter of 2011 was $24.4 million, as compared to $25.0 million for the same period in 2010. Net Interest Margin for the third quarter of 2011 was 3.85%  compared to 3.93% reported in the third quarter of 2010, which reflected a greater reduction in yields on interest-earning assets as compared to interest-bearing liabilities. The yield on interest-earning assets declined 30 basis points to 4.63% in the third quarter of 2011 compared to 4.93% for the same period last year. The cost of interest-bearing liabilities decreased 23 basis points from 1.18% in the third quarter of 2010 to 0.95% in the third quarter of 2011.

Net interest income for the first nine months of 2011 totaled $73.4 million compared to $74.5 million reported for the first nine months of 2010. Net Interest Margin for the first nine months of 2011 at 3.89% compared to 3.96% for the same period last year. The Company’s yield on earning assets decreased from 5.02% for the first nine months of 2010, to 4.69% for the same period this year. The Company’s cost of interest bearing liabilities decreased from 1.26% for the first nine months of 2010 to 0.98% for the first nine months of this year.

Noninterest Income

Noninterest income, exclusive of gains on sales of investment securities, totaled $4.3 million for the third quarter of 2011, as compared to $4.4 million for the same period last year. In the third quarter of 2011, the Company recorded $785,000 on gains on sales of investment securities, as compared to gains of $1.7 million for the same period last year. Service charges on deposit accounts totaling $2.6 million were equivalent to last year’s total, while commissions and fees at $915,000 reflected a 5% decrease. Gains on leasing related assets at $117,000 decreased by $195,000, reflecting a smaller leasing portfolio, while other income at $299,000 was $222,000 higher than the same period last year, as the Company recorded a gain of $173,000 on the sale of a branch office building in the third quarter of 2011.

Noninterest income, exclusive of gains on sales of investment securities, totaled $12.8 million for the first nine months of 2011 compared to $13.1 million for the same period last year. Gains on investment securities totaled $1.2 million for the first nine months of 2011 as compared to $1.7 million in the first nine months of 2010. Service charges on deposit accounts at$7.7 million were equivalent to last year’s total, while commissions and fees at $2.8 million were up 4%, reflecting a 7% increase in investment commission income. Gains on leasing related assets at $810,000 decreased by $361,000 in the first nine months of 2011, while other income at $467,000 was equivalent to last year’s nine month total.

Noninterest Expense  

Noninterest expense for the third quarter of 2011 was $18.0 million, as compared to $19.0 million for the same period last year. Included in non-interest expense in the third quarter of 2011 was an $800,000 prepayment fee on the repayment of $20.0 million in long-term debt, at an average rate of 4.10%. In the third quarter of 2010, a similar prepayment fee of $1.8 million was included in non-interest expense. Additionally, the provision for unfunded lending commitments in the third quarter of 2011 totaled $365,000, as compared to $137,000 for the same period last year. Exclusive of these two items, non-interest expense in the third quarter of 2011 totaled $16.9 million, which was equivalent to the total for the same period last year. Salary and benefit expense at $9.3 million increased by 2%, while occupancy, furniture and equipment expenses at $2.9 million were equivalent to last year’s total.  FDIC insurance expense at $636,000 decreased by $301,000, or 32%, primarily as a result of changes made by the FDIC in the method of calculating assessment rates, while collection expense at $70,000 decreased by $118,000, due to a reduction in leasing related collection costs. Expenses on other real estate owned and other real repossessed assets increased by $217,000 to $336,000. Other expenses at $2.6 million were $253,000 higher than last year’s total primarily due to the aforementioned increase in the provision for unfunded lending commitments.

For the first nine months of 2011, noninterest expense was $51.8 million, compared to $52.8 million in 2010. Excluding the prepayment fees in both years, noninterest expense for the first nine months of 2011 was $51.0 million, which was equivalent to the total for the same period last year. Salary and benefit costs at $27.5 million increased 2%, while occupancy, furniture and equipment expenses at $8.8 million were equivalent to last year’s total. FDIC insurance expense at $2.2 million decreased by $656,000, or 23%, resulting from the aforementioned change in FDIC assessment rate methodology. Collection expense at $195,000 decreased by $300,000, while other real estate owned and other repossessed asset expense at $808,000 increased by $454,000.

Financial Condition

At September 30, 2011, total assets were $2.74 billion, a decrease of 2% from December 31, 2010. Total loans were $1.99 billion, a decrease of $20.4 million from $2.01 billion at year-end 2010, primarily due to leasing loans, which have decreased by $31.0 million this year. Total deposits were $2.23 billion, an increase of $36.7 million from December 31, 2010. Noninterest bearing demand deposits at $424.8 million have increased by $40.9 million or 11% from year-end 2010. Savings and interest-bearing transaction accounts at $1.41 billion have increased by $11.9 million, while time deposits at $396.7 million have decreased by $16.1 million this year. Core deposits were 82% of total deposits at September 30, 2011.

Asset Quality

At September 30, 2011, non-performing assets totaled $57.7 million (2.11% of total assets) compared to $56.5 million (2.06% of total assets) at June 30, 2011. The Allowance for Loan and Lease Losses totaled $28.0 million at September 30, 2011 and represented 1.41% of total loans, as compared to 1.36% at year-end 2010.  In the third quarter of 2011, the Company had net charge-offs totaling $4.3 million, as compared to $5.3 million in the second quarter of 2011. For the first nine months of 2011, the Company had net charge-offs of $13.7 million, as compared to $13.1 million for the same period last year.

Capital

At September 30, 2011, stockholders' equity was $254.9 million and book value per common share was $9.26. As of September 30, 2011, the Company’s leverage ratio was 8.29%. Tier I and total risk based capital ratios were 11.21% and 13.46%, respectively. These regulatory capital ratios exceed those necessary to be considered a well-capitalized institution under Federal guidelines.  

Forward-Looking Statements

The information disclosed in this document includes various forward-looking statements (with respect to corporate objectives, trends, and other financial and business matters) that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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: changes in the financial services industry and the U.S. and global capital markets, changes in economic conditions nationally, regionally and in the Company’s markets, the nature and timing of actions of the Federal Reserve Board and other regulators, the nature and timing of legislation affecting the financial services industry, government intervention in the U.S. financial system, passage by the U.S. Congress of legislation which unilaterally amends the terms of the U.S. Department of the Treasury’s preferred stock investment in the Company, changes in levels of market interest rates, pricing pressures on loan and deposit products, credit risks of the Company’s lending and leasing activities, customers’ acceptance of the Company’s products and services and competition. 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. 

EXPLANATION OF NON-GAAP FINANCIAL MEASURES

Reported amounts are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP").  The Company’s management believes that the supplemental non-GAAP information, which consists of measurements and ratios based on tangible equity and tangible assets, is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors.  These disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies.

The Company also uses an efficiency ratio that is a non-GAAP financial measure. The ratio that the Company uses excludes amortization of core deposit intangibles, expenses on other real estate owned and other repossessed assets, provision for unfunded lending commitments, and, where applicable, long-term debt prepayment fees. Income for the non-GAAP ratio is increased by the favorable effect of tax-exempt income and excludes securities gains and losses, which can vary from period to period. The Company uses this ratio because it believes the ratio provides a better comparison of period to period operating performance.

Lakeland Bancorp, the holding company for Lakeland Bank, has a current asset base of $2.7 billion and forty-seven (47) offices spanning six northern New Jersey counties: Bergen, Essex, Morris, Passaic, Sussex and Warren. Lakeland Bank, headquartered at 250 Oak Ridge Road, Oak Ridge, New Jersey offers an extensive array of consumer and commercial products and services, including online banking, localized commercial lending teams, and 24-hour or less turnaround time on consumer loan applications. For more information about their full line of products and services, visit their website at www.lakelandbank.com.