Lake City Bank Reports Highest Quarterly Income in History

WARSAW, Ind., Oct. 25, 2013 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported quarterly net income of $9.8 million for the third quarter of 2013, an increase of 5% versus $9.3 million in the third quarter of 2012. Diluted net income per share was $0.59, an increase of 4% versus $0.57 for the comparable period of 2012. This performance represents the highest quarterly net income and earnings per share in the Company's history.

The Company further reported record net income of $28.3 million for the nine months ended September 30, 2013 versus $26.8 million for the comparable period of 2012, which was an increase of 5%. Diluted net income per common share increased 4% to $1.70 for the nine months ended September 30, 2013 versus $1.63 for the comparable period of 2012. This per share performance also represents a record level for the Company.

Michael L. Kubacki, Chairman and Chief Executive Officer of the Company, commented, "We continue to benefit from a strengthening economy in our Indiana markets and are encouraged by this favorable performance. Lake City Bank has a very strong balance sheet, which has allowed us to continue our growth and support our Indiana markets. This has translated into a track record of quality earnings and consistent growth."

Earnings for the nine-month period ended September 30, 2013 were negatively impacted in the second quarter of 2013 by a non-cash provision for state income tax expense of $465,000, which resulted from a revaluation of the Company's state deferred tax items. Excluding the effect of the one-time non-cash adjustment, net income for the nine months ended September 30, 2013 would have been $28.7 million, representing an increase of 7% over the comparable period of 2012. Diluted net income per share would have been $1.73 for the nine month period ended September 30, 2013, representing an increase of 6% over the comparable period in 2012.

The Company also announced that the Board of Directors approved a cash dividend for the third quarter of $0.19 per share, payable on November 5, 2013, to shareholders of record as of October 25, 2013. The quarterly dividend represents a 12% increase over the quarterly dividends paid for each quarter of 2012.

Kubacki continued, "We believe that our consistent day-to-day performance and client-focused business strategy has served our shareholders well. Our mission is to be the acknowledged leader in Indiana community banking, and we'll stay focused on that goal as we close out 2013 and develop our plans for 2014."

Average total loans for the third quarter of 2013 were $2.35 billion versus $2.22 billion for the third quarter of 2012, an increase of 6%. Total loans outstanding grew $189.3 million, or 9%, from $2.20 billion as of September 30, 2012 to $2.39 billion as of September 30, 2013. On a linked quarter basis, average total loans increased $46.5 million, or 2%, from $2.30 billion for the second quarter of 2013 to $2.35 billion for the third quarter of 2013.

David M. Findlay, President and Chief Financial Officer, observed, "We've increased lending by $137 million in 2013, which represents a 6% year-to-date increase. We have established a consistent record of loan growth and are particularly pleased with the loan growth over the past two quarters, which has been led by our Commercial Banking Group. Our commercial loans have grown by $144 million this year as a result of our expanding market share and overall organic growth."

The Company's net interest margin was 3.29% in the third quarter of 2013 versus 3.30% for the third quarter of 2012. The net interest margin improved from 3.20% in the second quarter of 2013. The year-over-year margin decline resulted primarily from reduced yields in the investment portfolio and slightly lower commercial loan yields as interest rates continue to be at historic lows. Despite this pressure on asset yields, the Company has improved its net interest margin in each quarter of 2013 as a result of declines in deposit rates and overall funding costs.

The Company's tangible common equity to tangible assets ratio was 10.25% at September 30, 2013 compared to 9.90% at September 30, 2012 and 10.25% at June 30, 2013. Average total deposits for the quarter ended September 30, 2013 were $2.48 billion versus $2.49 billion for the second quarter of 2013 and $2.49 billion for the third quarter of 2012.

For the third consecutive quarter, the Company did not make a provision for loan losses. As a result, the provision for loan losses in the nine months ended September 30, 2013 was $0 versus $1.3 million in the same period of 2012. The Company's ability to not have a provision expense was generally driven by the stabilization and improvement in key loan quality metrics, including lower levels of net charge offs, appropriate reserve coverage of nonperforming loans, continuing signs of stabilization in the economic conditions of the Company's markets and general signs of improvement in our borrowers' performance and future prospects. The Company's allowance for loan losses as of September 30, 2013 was $49.8 million compared to $51.9 million as of September 30, 2012 and $50.6 million as of June 30, 2013. The allowance for loan losses represented 2.08% of total loans as of September 30, 2013 versus 2.36% at September 30, 2012 and 2.17% as of June 30, 2013. Further, the allowance for loan losses represented 215% of nonperforming loans as of September 30, 2013 versus 156% at September 30, 2012 and 234% as of June 30, 2013.

Net charge-offs totaled $831,000 in the third quarter of 2013 versus net recoveries of $96,000 during the third quarter of 2012 and net charge-offs of $183,000 during the linked second quarter of 2013. Nonperforming assets decreased 31% to $23.3 million as of September 30, 2013 versus $34.0 million as of September 30, 2012. The decrease in nonperforming assets during 2013 primarily resulted from the removal of two commercial credits totaling $8.4 million from the impaired category, as well as sales of other real estate owned and charge-offs taken and payments received on nonperforming loans. The ratio of nonperforming assets to total assets at September 30, 2013 was 0.77% versus 1.15% at September 30, 2012 and 0.73% at June 30, 2013.

Findlay added, "Our balance sheet is well-positioned for future growth. As our Indiana economy continues to improve, we will be there to work with clients to grow their businesses through increased lending and investment in the communities we serve."

The Company's noninterest income increased $1.6 million, or 25%, to $7.8 million for the third quarter of 2013, versus $6.2 million for the third quarter of 2012. On a year-over-year basis, quarterly noninterest income was positively impacted by an $808,000 increase in investment brokerage fees, driven by higher trading volumes and improvements in product mix. Service charges on deposit accounts increased $280,000 and other income increased by $187,000, driven by a $116,000 increase in income from bank owned life insurance. In addition, the Company recognized gains of $106,000 on the sale of securities during the third quarter of 2013, versus losses of $380,000 on the sale of securities during the third quarter of 2012. On a linked quarter basis, noninterest income increased by $240,000 from $7.6 million in the second quarter of 2013.

Findlay further stated, "Our fee-based revenues reflect a diverse mix of commercial, retail and investment management services, all of which have enjoyed growth in 2013. Cross-selling across business lines is an important strategic goal and we've successfully grown these business lines in 2013."

The Company's noninterest expense increased $2.0 million, or 14%, to $16.3 million in the third quarter of 2013 versus $14.3 million in the comparable quarter of 2012. On a linked quarter basis, noninterest expense increased by $1.2 million from $15.1 million in the second quarter of 2013. On a year-over-year basis, salaries and employee benefits increased by $868,000 in the three month period ended September 30, 2013 versus the same period of 2012. These increases in salary and employee benefits were driven by staff additions, normal merit increases, increased health insurance costs and higher performance incentive-based compensation costs. Quarterly data processing fees increased by $300,000 due to a larger customer base as well as greater utilization of services from the Company's core processor, which the Company expects will improve marketing and cross-selling initiatives. In addition, other expense increased $669,000 during the third quarter of 2013, driven by a $307,000 increase in advertising expenses and $310,000 of consulting fees related to the Company's realignment of deposit products. The advertising and consulting expenses, which totaled $617,000, were specific to programs that the Company made investments in during the third quarter and are not expected to be recurring levels of spending. The Company's efficiency ratio was 53% for the third quarter of 2013 compared to 50% for the third quarter of 2012, and 51% for the linked second quarter of 2013, which consistently ranks in the top quartile of peer financial institutions in the country.

Lakeland Financial Corporation is a $3.0 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank serves Indiana with 45 branches located in the following Indiana counties: Kosciusko, Elkhart, Allen, St. Joseph, DeKalb, Fulton, Hamilton, Huntington, LaGrange, Marshall, Noble, Pulaski and Whitley. The Company expects to open a 46th office in the Indianapolis market in the fourth quarter located in Fishers, Indiana.

Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at www.lakecitybank.com. The Company's common stock is traded on the Nasdaq Global Select Market under "LKFN".

In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. Lakeland Financial believes that providing non-GAAP financial measures provides investors with information useful to understanding Lakeland Financial's financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on "tangible common equity" which is "common stockholders' equity" excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables where the non-GAAP measure is presented.

This document contains, and future oral and written statements of the Company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. Additional information concerning the Company and its business, including factors that could materially affect the Company's financial results, is included in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K.

LAKELAND FINANCIAL CORPORATION
THIRD QUARTER 2013 FINANCIAL HIGHLIGHTS
(Unaudited – Dollars in thousands except per share data)
Three Months Ended Nine Months Ended
Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30,
END OF PERIOD BALANCES 2013 2013 2012 2013 2012
Assets $3,041,237 $2,975,462 $2,952,208 $3,041,237 $2,952,208
Deposits 2,444,826 2,483,492 2,476,097 2,444,826 2,476,097
Loans 2,392,715 2,334,700 2,203,388 2,392,715 2,203,388
Allowance for Loan Losses 49,804 50,635 51,912 49,804 51,912
Total Equity 314,544 307,608 294,990 314,544 294,990
Tangible Common Equity 311,508 304,576 291,946 311,508 291,946
AVERAGE BALANCES
Total Assets $3,002,273 $2,982,150 $2,960,363 $2,976,278 $2,956,482
Earning Assets 2,825,503 2,795,925 2,718,318 2,796,663 2,717,325
Investments 464,652 482,628 475,899 475,077 475,028
Loans 2,350,983 2,304,471 2,215,456 2,304,003 2,217,227
Total Deposits 2,479,452 2,490,115 2,492,042 2,480,929 2,491,258
Interest Bearing Deposits 2,044,976 2,102,924 2,127,463 2,079,924 2,142,978
Interest Bearing Liabilities 2,242,072 2,268,230 2,286,151 2,251,195 2,305,946
Total Equity 310,070 309,417 291,513 307,596 284,496
INCOME STATEMENT DATA
Net Interest Income $22,972 $21,912 $22,160 $66,141 $66,805
Net Interest Income-Fully Tax Equivalent 23,432 22,351 22,561 67,467 68,014
Provision for Loan Losses 0 0 0 0 1,299
Noninterest Income 7,809 7,569 6,229 22,859 17,891
Noninterest Expense 16,266 15,091 14,302 46,250 43,231
Net Income 9,769 9,236 9,347 28,251 26,792
PER SHARE DATA
Basic Net Income Per Common Share $0.59 $0.56 $0.57 $1.72 $1.64
Diluted Net Income Per Common Share 0.59 0.56 0.57 1.70 1.63
Cash Dividends Declared Per Common Share 0.19 0.19 0.17 0.38 0.495
Book Value Per Common Share (equity per share issued) 19.11 18.71 18.04 19.11 18.04
Tangible Book Value Per Common Share 18.93 18.54 17.86 18.93 17.86
Market Value – High 34.69 28.5 28.82 34.69 28.82
Market Value – Low 27.74 25.26 25.09 23.92 23.91
Basic Weighted Average Common Shares Outstanding 16,451,199 16,425,382 16,340,425 16,427,060 16,312,896
Diluted Weighted Average Common Shares Outstanding 16,634,933 16,546,547 16,490,390 16,581,089 16,470,485
KEY RATIOS
Return on Average Assets 1.29% 1.24% 1.26% 1.27% 1.21%
Return on Average Total Equity 12.50 11.97 12.76 12.28 12.58
Efficiency (Noninterest Expense / Net Interest Income
plus Noninterest Income) 52.84 51.19 50.38 51.97 51.04
Average Equity to Average Assets 10.33 10.38 9.85 10.33 9.62
Net Interest Margin 3.29 3.20 3.30 3.22 3.34
Net Charge Offs to Average Loans 0.14 0.03 (0.02) 0.10 0.17
Loan Loss Reserve to Loans 2.08 2.17 2.36 2.08 2.36
Loan Loss Reserve to Nonperforming Loans 214.71 233.92 155.73 214.71 155.73
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 108.07 113.37 83.31 108.07 83.31
Nonperforming Loans to Loans 0.97 0.93 1.51 0.97 1.51
Nonperforming Assets to Assets 0.77 0.73 1.15 0.77 1.15
Total Impaired and Watch List Loans to Total Loans 7.16 7.71 6.93 7.16 6.93
Tier 1 Leverage 11.02 11.01 10.59 11.02 10.59
Tier 1 Risk-Based Capital 13.39 13.39 13.32 13.39 13.32
Total Capital 14.65 14.65 14.59 14.65 14.59
Tangible Capital 10.25 10.25 9.90 10.25 9.90
ASSET QUALITY
Loans Past Due 30 - 89 Days $3,262 $5,348 $4,028 $3,262 $4,028
Loans Past Due 90 Days or More 364 104 109 364 109
Non-accrual Loans 22,833 21,542 33,226 22,833 33,226
Nonperforming Loans (includes nonperforming TDR's) 23,197 21,646 33,335 23,197 33,335
Other Real Estate Owned 117 171 681 117 681
Other Nonperforming Assets 10 5 5 10 5
Total Nonperforming Assets 23,324 21,822 34,021 23,324 34,021
Performing Troubled Debt Restructurings 22,888 23,017 26,106 22,888 26,106
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 18,691 19,398 28,979 18,691 28,979
Total Troubled Debt Restructurings 41,579 42,415 55,085 41,579 55,085
Impaired Loans 47,347 46,906 61,294 47,347 61,294
Non-Impaired Watch List Loans 124,075 133,139 91,409 124,075 91,409
Total Impaired and Watch List Loans 171,422 180,045 152,703 171,422 152,703
Gross Charge Offs 1,297 368 482 2,871 4,067
Recoveries 466 185 578 1,231 1,280
Net Charge Offs/(Recoveries) 831 183 (96) 1,640 2,786
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of September 30, 2013 and December 31, 2012
(in thousands, except share data)
September 30, December 31,
2013 2012
(Unaudited)
ASSETS
Cash and due from banks $72,982 $156,666
Short-term investments 8,358 75,571
Total cash and cash equivalents 81,340 232,237
Securities available for sale (carried at fair value) 463,070 467,021
Real estate mortgage loans held for sale 1,047 9,452
Loans, net of allowance for loan losses of $49,804 and $51,445 2,342,911 2,206,075
Land, premises and equipment, net 38,514 34,840
Bank owned life insurance 62,397 61,112
Accrued income receivable 8,333 8,491
Goodwill 4,970 4,970
Other intangible assets 12 47
Other assets 38,643 39,899
Total assets $3,041,237 $3,064,144
LIABILITIES AND EQUITY
LIABILITIES
Noninterest bearing deposits $449,590 $407,926
Interest bearing deposits 1,995,236 2,173,830
Total deposits 2,444,826 2,581,756
Short-term borrowings
Federal funds purchased 57,000 0
Securities sold under agreements to repurchase 103,959 121,883
Other short-term borrowings 75,000 0
Total short-term borrowings 235,959 121,883
Accrued expenses payable 12,766 15,321
Other liabilities 2,177 1,390
Long-term borrowings 37 15,038
Subordinated debentures 30,928 30,928
Total liabilities 2,726,693 2,766,316
EQUITY
Common stock: 90,000,000 shares authorized, no par value
16,459,156 shares issued and 16,361,411 outstanding as of September 30, 2013
16,377,247 shares issued and 16,290,136 outstanding as of December 31, 2012 92,229 90,039
Retained earnings 225,648 203,654
Accumulated other comprehensive income (loss) (1,452) 5,689
Treasury stock, at cost (2013 - 97,745 shares, 2012 - 87,111 shares) (1,970) (1,643)
Total stockholders' equity 314,455 297,739
Noncontrolling interest 89 89
Total equity 314,544 297,828
Total liabilities and equity $3,041,237 $3,064,144
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Nine Months Ended September 30, 2013 and 2012
(in thousands except for share and per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
NET INTEREST INCOME
Interest and fees on loans
Taxable $24,595 $25,803 $73,469 $77,789
Tax exempt 100 109 304 333
Interest and dividends on securities
Taxable 1,463 2,034 3,560 7,425
Tax exempt 802 698 2,307 2,094
Interest on short-term investments 10 16 46 43
Total interest income 26,970 28,660 79,686 87,684
Interest on deposits 3,589 5,989 12,365 19,352
Interest on borrowings
Short-term 146 112 349 329
Long-term 263 399 831 1,198
Total interest expense 3,998 6,500 13,545 20,879
NET INTEREST INCOME 22,972 22,160 66,141 66,805
Provision for loan losses 0 0 0 1,299
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 22,972 22,160 66,141 65,506
NONINTEREST INCOME
Wealth advisory fees 980 959 2,895 2,770
Investment brokerage fees 1,503 695 3,449 2,435
Service charges on deposit accounts 2,325 2,045 6,548 5,937
Loan, insurance and service fees 1,524 1,421 4,792 4,062
Merchant card fee income 356 297 925 902
Other income 856 669 2,937 1,614
Mortgage banking income 159 590 1,206 1,574
Net securities gains (losses) 106 (380) 107 (377)
Other than temporary impairment loss on available-for-sale securities:
Total impairment losses recognized on securities 0 (67) 0 (1,052)
Loss recognized in other comprehensive income 0 0 0 26
Net impairment loss recognized in earnings 0 (67) 0 (1,026)
Total noninterest income 7,809 6,229 22,859 17,891
NONINTEREST EXPENSE
Salaries and employee benefits 9,437 8,569 27,493 26,007
Net occupancy expense 813 803 2,532 2,519
Equipment costs 758 641 2,021 1,854
Data processing fees and supplies 1,443 1,143 4,115 3,044
Other expense 3,815 3,146 10,089 9,807
Total noninterest expense 16,266 14,302 46,250 43,231
INCOME BEFORE INCOME TAX EXPENSE 14,515 14,087 42,750 40,166
Income tax expense 4,746 4,740 14,499 13,374
NET INCOME $9,769 $9,347 $28,251 $26,792
BASIC WEIGHTED AVERAGE COMMON SHARES 16,451,199 16,340,425 16,427,060 16,312,896
BASIC EARNINGS PER COMMON SHARE $0.59 $0.57 $1.72 $1.64
DILUTED WEIGHTED AVERAGE COMMON SHARES 16,634,933 16,490,390 16,581,089 16,470,485
DILUTED EARNINGS PER COMMON SHARE $0.59 $0.57 $1.70 $1.63
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
THIRD QUARTER 2013
(unaudited in thousands)
September 30, June 30, December 31, September 30,
2013 2013 2012 2012
Commercial and industrial loans:
Working capital lines of credit loans $462,098 19.3% $462,137 19.8% $439,638 19.5% $445,981 20.2%
Non-working capital loans 435,968 18.2 425,958 18.2 407,184 18.0 382,850 17.4
Total commercial and industrial loans 898,066 37.5 888,095 38.0 846,822 37.5 828,831 37.6
Commercial real estate and multi-family residential loans:
Construction and land development loans 117,733 4.9 108,695 4.7 82,494 3.7 87,949 4.0
Owner occupied loans 371,500 15.5 365,071 15.6 358,617 15.9 363,673 16.5
Nonowner occupied loans 392,538 16.4 373,696 16.0 314,889 13.9 308,146 14.0
Multifamily loans 37,279 1.6 37,422 1.6 45,011 2.0 25,482 1.2
Total commercial real estate and multi-family residential loans 919,050 38.4 884,884 37.9 801,011 35.5 785,250 35.6
Agri-business and agricultural loans:
Loans secured by farmland 104,807 4.4 100,571 4.3 109,147 4.8 119,524 5.4
Loans for agricultural production 95,330 4.0 97,729 4.2 115,572 5.1 94,563 4.3
Total agri-business and agricultural loans 200,137 8.4 198,300 8.5 224,719 10.0 214,087 9.7
Other commercial loans 55,797 2.3 46,501 2.0 56,807 2.5 44,982 2.0
Total commercial loans 2,073,050 86.6 2,017,780 86.4 1,929,359 85.5 1,873,150 85.0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 119,788 5.0 116,247 5.0 109,823 4.9 106,147 4.8
Open end and junior lien loans 151,726 6.3 152,571 6.5 161,366 7.1 168,507 7.6
Residential construction and land development loans 4,705 0.2 5,263 0.2 11,541 0.5 11,303 0.5
Total consumer 1-4 family mortgage loans 276,219 11.5 274,081 11.7 282,730 12.5 285,957 13.0
Other consumer loans 44,091 1.8 43,470 1.9 45,755 2.0 44,691 2.0
Total consumer loans 320,310 13.4 317,551 13.6 328,485 14.5 330,648 15.0
Subtotal 2,393,360 100.0% 2,335,331 100.0% 2,257,844 100.0% 2,203,798 100.0%
Less: Allowance for loan losses (49,804) (50,635) (51,445) (51,912)
Net deferred loan fees (645) (631) (324) (410)
Loans, net $2,342,911 $2,284,065 $2,206,075 $2,151,476

TABLE

CONTACT: David M. Findlay President and Chief Financial Officer (574) 267-9197 david.findlay@lakecitybank.comSource:Lake City Bank