Liberty Bell Bank Reports Results of Operations for Year Ended December 31, 2005

Business Wire, March 8, 2006

CHERRY HILL, N.J. -- Liberty Bell Bank (Nasdaq:LBBB) today reported that its assets increased $18.7 million to $94.7 million at December 31, 2005, from $76.0 million at December 31, 2004. President and CEO Kevin L. Kutcher noted that, "within the 25% increase in total assets was a significant increase in loans which, net of allowance for loan losses, more than doubled to $53.0 million, compared to $19.2 million at December 31, 2004, an increase of $33.8 million." He added, "the loan growth was funded largely from a redistribution of assets from shorter term investments and from deposit growth."

The Bank reported a net loss of $1,596,336, or $0.71 per basic and diluted common share, for the year ended December 31, 2005, compared to a net loss of $2,432,721, or $1.89 per basic and diluted common share for the year ended December 31, 2004. The per share data for 2005 reflects the impact of the common stock offering completed in April 2005 that increased the total number of common shares outstanding by 1,394,815 shares. The $836,000 ($1.18 per share) improvement in our results of operations is primarily attributable to an increase in net interest income, offset in part by increases in non interest expenses and the provision for loan losses.

The Bank announced that its net interest income, before the provision for loan losses, increased $1,672,702 to $1,934,892 for the year ended December 31, 2005, compared to net interest income of $262,190 for the comparable prior year. While increasing when compared to 2004, Mr. Kutcher noted that net interest income, the interest rate spread and the net interest margin for the year ended December 31, 2005 remained relatively compressed, due somewhat to the higher interest costs of attracting new deposits and also to the relatively low percentage of the Bank's funds that were invested in higher yielding loans during the year. "We anticipate that the continued growth of our loan portfolio will help to alleviate this compression," said Kutcher.

Mr. Kutcher added that the Freedom Statement Savings product, initially introduced in January of 2004, has generated approximately $46.3 million of deposits as of December 31, 2005. Proceeds from this product were initially invested in lower yielding federal funds sold, pending reinvestment into higher-yielding loans and investments. Mr. Kutcher said, "While we have begun to re-deploy these funds into loans, which grew 176.0% during the year of 2005, this re-deployment has been, and for the foreseeable future will continue to be, a gradual process measured against risk."

The Bank reported that interest income increased $2.5 million to $3.9 million for the year ended December 31, 2005, compared to $1.4 million for the prior year. This increase is primarily the result of an increase of $34.3 million in average interest-earning assets to $82.9 million at December 31, 2005 from $48.6 million at December 31, 2004. The Bank also announced that the yield on interest-earning assets increased to 4.76% for 2005 compared to 2.93% for 2004, primarily due to loan growth and the resulting improved mix of interest-earning assets.

Interest expense, consisting entirely of interest expense on deposits, also increased $848,055 to $2,007,866 for the year ended December 31, 2005, compared to $1,159,811 for the year ended December 31, 2004. Mr. Kutcher remarked, "The largest component of interest expense was $1.7 million of interest on savings accounts, primarily Freedom Statement Savings accounts. Largely because of the growth of this product, average interest-bearing liabilities increased $29.2 million to $69.3 million for 2005, compared to $40.1 million for 2004."

The Bank also announced that its net interest spread for the year ended December 31, 2005 was 1.86% compared to 0.04% for 2004. The net interest margin for the year ended December 31, 2005 improved to 2.34% compared to 0.54% for 2004. Mr. Kutcher remarked that the increase in net interest spread is due largely to a $27.9 million increase in the average balance of loans from $7.7 million for 2004 to $35.6 million for 2005.

The Bank reported that its provision for loan losses increased $90,700 to $293,100 for the year ended December 31, 2005 compared with $202,400 for the year ended December 31, 2004, and that there were no loan charge-offs during the year ended December 31, 2005.

The Bank's noninterest income increased by $30,001 to $60,651 for the year ended December 31, 2005. According to Mr. Kutcher, this increase was primarily due to an increase of $13,831 in service charges on deposit accounts to $23,158 in 2005. "In addition, we recorded income from the sale of mortgages held for sale and other loan fees in the amount of $27,064 in 2005 compared to $17,572 for 2004," said Kutcher.

The Bank reported that its total noninterest expenses increased approximately $776,000 to $3.3 million for the year ended December 31, 2005 from $2.5 million for the year ended December 31, 2004. This increase was largely due to compensation and employee benefits increasing by $615,461 and occupancy, equipment and data processing expenses increasing by $184,585 for the year ended December 31, 2005 from the year ended December 31, 2004. "These increases are primarily attributable to the opening and staffing of our Moorestown branch and our Evesham branch and Operations Center, and the hiring of additional loan officers during 2004 and 2005 in an effort to increase loan production for the Bank," said Mr. Kutcher.