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Lakeland Financial Reports Strong Organic Loan and Deposit Growth

WARSAW, Ind., Oct. 26, 2015 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported net income of $34.1 million for the nine months ended September 30, 2015, versus $32.7 million for the comparable period of 2014, an increase of 4%. Diluted net income per common share also increased 4% to $2.03 for the nine months ended September 30, 2015, versus $1.95 for the comparable period of 2014.

The company further reported net income of $11.6 million for the third quarter of 2015 versus $11.5 million for the third quarter of 2014. Diluted net income per common share was $0.69 for the third quarters of 2015 and 2014. On a quarter-linked basis net income increased by 2% or $185,000 from $11.4 million for the second quarter ended June 30, 2015.

As previously announced, the board of directors approved a cash dividend for the third quarter of $0.245 per share, payable on November 5, 2015, to shareholders of record as of October 25, 2015. The quarterly dividend, which is equal to the dividend paid in the second quarter 2015, represents a 17% increase over the $0.21 quarterly dividends paid in the last three quarters of 2014 and in the first quarter of 2015.

Return on average total equity for the first nine months of 2015 was 12.18% compared to 12.94% in the prior year period. Return on average assets for the first nine months of 2015 was 1.29% compared to 1.33% in the same period of 2014. The company’s tangible common equity to tangible assets ratio was 10.47% at September 30, 2015, compared to 10.40% at September 30, 2014 and 10.44% at June 30, 2015.

“We continue to focus on the growth of our balance sheet as the primary driver of our financial success. Simply put, lending money in our Indiana communities contributes to their ongoing economic growth and recovery. Overall, we are very pleased with our loan growth in 2015,” commented David M. Findlay, President and Chief Executive Officer.

Average total loans for the third quarter of 2015 were $2.92 billion, an increase of $238.5 million, or 9% versus $2.68 billion for the comparable period in 2014. Total loans outstanding grew $270.4 million, or 10%, from $2.70 billion as of September 30, 2014 to $2.97 billion as of September 30, 2015. On a linked quarter basis, average total loans increased $70.8 million, or 2%, from $2.85 billion for the second quarter of 2015 to $2.92 billion for the third quarter of 2015.

Average total deposits for the third quarter of 2015 were $3.13 billion, an increase of $307.2 million, or 11%, versus $2.82 billion for the corresponding period of 2014. Total deposits grew $257.9 million, or 9%, from $2.89 billion as of September 30, 2014 to $3.15 billion as of September 30, 2015. Importantly, total core deposits increased $348.5 million, or 13% from $2.67 billion at September 30, 2014 to $3.01 billion at September 30, 2015. On a linked quarter basis, average total deposits increased $60.0 million, or 2%, from $3.07 billion for the second quarter of 2015 to $3.13 billion for the third quarter of 2015.

“We are particularly proud of our continued organic core deposit growth in our Indiana footprint. Importantly, the growth is being generated in both our more mature Northern Indiana markets and in our Indianapolis market, which we entered in 2011. The core deposit growth is also coming from both our commercial and retail deposit clients in every market we serve,” added Findlay.

The company’s net interest margin was 3.16% in the third quarter of 2015, compared to 3.31% for the third quarter of 2014. Net interest margin was 3.18% in the linked second quarter of 2015. Net interest margin for the nine months ended September 30, 2015 was 3.21% compared to 3.34% in the prior year nine month period. The decline in net interest margin during the three month and nine month periods ended September 30, 2015 was largely driven by competitive factors in the company’s markets, including more aggressive pricing of new loan opportunities and renewed loans as well as a slightly higher cost of funds. Net interest income increased $746,000, or 3%, to $26.7 million for the third quarter of 2015, versus $26.0 million in the third quarter of 2014. Net interest income for the nine months ended September 30, 2015 increased $2.3 million, or 3%, to $78.5 million, versus $76.2 million for the nine months ended September 30, 2014.

Findlay commented further, “We continue to experience pressure on our net interest margin as a result of the low interest rate environment. We believe that our balance sheet is well positioned to benefit from an increase in overall interest rates, and we will continue to closely manage it until rates start to rise.”

For the eleventh consecutive quarter, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by continued stabilization and improvement in key loan quality metrics, including appropriate reserve coverage of nonperforming loans, a decrease in historical loss percentages, stable economic conditions in the company’s markets and sustained signs of improvement in its borrowers’ performance and future prospects. The company’s allowance for loan losses as of September 30, 2015 was $44.7 million compared to $46.4 million as of September 30, 2014 and $44.8 million as of June 30, 2015. The allowance for loan losses represented 1.50% of total loans as of September 30, 2015 versus 1.72% at September 30, 2014 and 1.55% as of June 30, 2015. The allowance for loan losses as a percentage of nonperforming loans was 312% as of September 30, 2015, versus 314% as of September 30, 2014, and 312% as of June 30, 2015.

Nonperforming assets decreased $431,000, or 3%, to $14.5 million as of September 30, 2015 versus $15.0 million as of September 30, 2014. On a linked quarter basis, nonperforming assets were $72,000 lower than the $14.6 million reported as of June 30, 2015. The ratio of nonperforming assets to total assets at September 30, 2015 was 0.40% versus 0.45% at September 30, 2014 and 0.41% at June 30, 2015. Net charge-offs to average loans were 0.02% for the third quarter of 2015 compared to net recoveries of 0.12% for the third quarter of 2014 and net charge-offs of 0.12% for the second quarter of 2015. Net charge-offs totaled $122,000 in the third quarter of 2015 versus net recoveries of $782,000 during the third quarter of 2014 and net charge-offs of $861,000 during the linked second quarter of 2015.

The company’s noninterest income was $7.9 million for both the third quarters of 2015 and 2014. On a linked quarter basis, noninterest income increased by $189,000 from $7.7 million in the second quarter of 2015. Noninterest income increased 2% to $23.4 million in the nine months ended September 30, 2015 versus $22.9 million in the comparable period of 2014. Noninterest income was positively impacted by increases in mortgage banking income due to higher production volumes, as well as increases in service charges on deposit accounts, loan, insurance and service fees and wealth advisory fees. Offsetting these increases was a decrease in investment brokerage fees driven by lower production volumes as well as changes to the product mix designed to provide a more consistent revenue stream.

The company’s noninterest expense increased by 3% to $17.2 million in the third quarter of 2015 compared to $16.7 million in the third quarter of 2014. Noninterest expense increased 3% to $50.8 million in the nine months ended September 30, 2015 versus $49.5 million in the comparable period of 2014. Data processing fees increased by $1.1 million primarily due to increased technology and software related expenditures with the company’s core processor which are volume and product driven to enhance the delivery of electronic banking channels and enhance commercial product solutions. Equipment costs increased due to higher depreciation expense related to branch upgrades and expansion. Salaries and employee benefits decreased by $289,000 in the first nine months of 2015 versus the same period of 2014. The decrease in salary and employee benefits was driven by lower employee benefit costs including lower incentive-based compensation accruals and lower commissions paid on investment brokerage fees as a result of lower production. Professional fees decreased by $130,000 in the first nine months of 2015, driven by lower legal fees. The company's efficiency ratio was 50% for the third quarter of 2015 compared to 49% in the third quarter of 2014, and unchanged from 50% for the linked second quarter of 2015.

Lakeland Financial Corporation is a $3.7 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 46 offices in Northern and Central Indiana, delivering technology driven and client-centric financial services solutions to individuals and businesses.

Information regarding 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 earnings release contains certain non-GAAP financial measures. Lakeland Financial believes that providing non-GAAP financial measures provides investors with information useful to understanding the company’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 2015 FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
(Unaudited – Dollars in thousands except Shares not in dollars)Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30,
END OF PERIOD BALANCES 2015 2015 2014 2015 2014
Assets$3,666,250 $3,572,106 $3,355,903 $3,666,250 $3,355,903
Deposits 3,147,534 3,020,151 2,889,672 3,147,534 2,889,672
Brokered Deposits 133,836 120,861 224,486 133,836 224,486
Core Deposits 3,013,698 2,899,290 2,665,186 3,013,698 2,665,186
Loans 2,972,280 2,893,462 2,701,923 2,972,280 2,701,923
Allowance for Loan Losses 44,694 44,816 46,387 44,694 46,387
Total Equity 386,700 375,764 351,949 386,700 351,949
Tangible Common Equity 383,529 372,588 348,769 383,529 348,769
AVERAGE BALANCES
Total Assets$3,640,769 $3,552,029 $3,351,474 $3,545,357 $3,286,736
Earning Assets 3,409,445 3,342,275 3,172,423 3,333,410 3,108,483
Investments 471,641 475,803 476,643 474,876 474,809
Loans 2,923,159 2,852,382 2,684,667 2,844,079 2,623,522
Total Deposits 3,126,472 3,066,483 2,819,237 3,044,069 2,750,627
Interest Bearing Deposits 2,491,490 2,488,227 2,317,643 2,454,039 2,270,271
Interest Bearing Liabilities 2,605,467 2,581,664 2,485,979 2,562,723 2,453,021
Total Equity 380,865 374,339 348,154 374,017 338,118
INCOME STATEMENT DATA
Net Interest Income$26,711 $26,064 $25,965 $78,475 $76,199
Net Interest Income-Fully Tax Equivalent 27,181 26,559 26,451 79,926 77,641
Provision for Loan Losses 0 0 0 0 0
Noninterest Income 7,902 7,713 7,871 23,410 22,890
Noninterest Expense 17,207 16,741 16,660 50,849 49,534
Net Income 11,565 11,380 11,511 34,081 32,735
PER SHARE DATA
Basic Net Income Per Common Share$0.70 $0.69 $0.70 $2.05 $1.98
Diluted Net Income Per Common Share 0.69 0.68 0.69 2.03 1.95
Cash Dividends Declared Per Common Share 0.245 0.245 0.21 0.70 0.61
Dividend Payout 35.51 % 36.03 % 30.43 % 34.48 % 31.28 %
Book Value Per Common Share (equity per share issued) 23.24 22.61 21.26 23.24 21.26
Tangible Book Value Per Common Share 23.05 22.42 21.08 23.05 21.08
Market Value – High 45.40 44.27 39.93 45.40 41.46
Market Value – Low 39.01 38.71 35.50 37.42 34.96
Basic Weighted Average Common Shares Outstanding 16,629,378 16,611,974 16,547,551 16,610,689 16,531,411
Diluted Weighted Average Common Shares Outstanding 16,847,983 16,820,052 16,775,770 16,808,833 16,769,079
KEY RATIOS
Return on Average Assets 1.26 % 1.29 % 1.36 % 1.29 % 1.33 %
Return on Average Total Equity 12.05 12.19 13.12 12.18 12.94
Average Equity to Average Assets 10.46 10.54 10.39 10.55 10.29
Net Interest Margin 3.16 3.18 3.31 3.21 3.34
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 49.71 49.57 49.24 49.91 49.99
Tier 1 Leverage 11.18 11.22 11.18 11.18 11.18
Tier 1 Risk-Based Capital 12.53 12.58 13.15 12.53 13.15
Common Equity Tier 1 (CET1) 11.61 11.63 NA 11.61 NA
Total Capital 13.79 13.83 14.40 13.79 14.40
Tangible Capital 10.47 10.44 10.40 10.47 10.40
ASSET QUALITY
Loans Past Due 30 - 89 Days$1,984 $4,580 $2,432 $1,984 $2,432
Loans Past Due 90 Days or More 0 284 0 0 0
Non-accrual Loans 14,308 14,089 14,764 14,308 14,764
Nonperforming Loans (includes nonperforming TDR's) 14,308 14,373 14,764 14,308 14,764
Other Real Estate Owned 231 231 200 231 200
Other Nonperforming Assets 0 7 6 0 6
Total Nonperforming Assets 14,539 14,611 14,970 14,539 14,970
Performing Troubled Debt Restructurings 7,605 7,606 17,650 7,605 17,650
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 10,934 11,176 9,841 10,934 9,841
Total Troubled Debt Restructurings 18,539 18,783 27,491 18,539 27,491
Impaired Loans 22,660 22,328 34,137 22,660 34,137
Non-Impaired Watch List Loans 122,116 130,735 130,014 122,116 130,014
Total Impaired and Watch List Loans 144,776 153,063 164,151 144,776 164,151
Gross Charge Offs 228 995 270 1,931 3,675
Recoveries 106 134 1,052 364 1,265
Net Charge Offs/(Recoveries) 122 861 (782) 1,567 2,410
Net Charge Offs/(Recoveries) to Average Loans 0.02 % 0.12 % (0.12)% 0.07 % 0.12 %
Loan Loss Reserve to Loans 1.50 % 1.55 % 1.72 % 1.50 % 1.72 %
Loan Loss Reserve to Nonperforming Loans 312.36 % 311.80 % 314.18 % 312.36 % 314.18 %
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 203.96 % 203.90 % 143.11 % 203.96 % 143.11 %
Nonperforming Loans to Loans 0.48 % 0.50 % 0.55 % 0.48 % 0.55 %
Nonperforming Assets to Assets 0.40 % 0.41 % 0.45 % 0.40 % 0.45 %
Total Impaired and Watch List Loans to Total Loans 4.87 % 5.29 % 6.08 % 4.87 % 6.08 %
OTHER DATA
Full Time Equivalent Employees 518 514 495 518 495
Offices 46 46 46 46 46

LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, 2015 and December 31, 2014
(in thousands, except share data)
September 30, December 31,
2015 2014
(Unaudited)
ASSETS
Cash and due from banks$ 86,586 $75,381
Short-term investments 11,485 15,257
Total cash and cash equivalents 98,071 90,638
Securities available for sale (carried at fair value) 477,699 475,911
Real estate mortgage loans held for sale 3,132 1,585
Loans, net of allowance for loan losses of $44,694 and $46,262 2,927,586 2,716,058
Land, premises and equipment, net 44,013 41,983
Bank owned life insurance 67,693 66,612
Federal Reserve and Federal Home Loan Bank stock 7,668 9,413
Accrued interest receivable 9,330 8,662
Goodwill 4,970 4,970
Other assets 26,088 27,452
Total assets$ 3,666,250 $3,443,284
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits$ 630,789 $579,495
Interest bearing deposits 2,516,745 2,293,625
Total deposits 3,147,534 2,873,120
Short-term borrowings
Federal funds purchased 0 500
Securities sold under agreements to repurchase 80,414 54,907
Other short-term borrowings 0 105,000
Total short-term borrowings 80,414 160,407
Long-term borrowings 34 35
Subordinated debentures 30,928 30,928
Accrued interest payable 3,712 2,946
Other liabilities 16,928 14,463
Total liabilities 3,279,550 3,081,899
STOCKHOLDERS' EQUITY
Common stock: 90,000,000 shares authorized, no par value
16,636,069 shares issued and 16,540,957 outstanding as of September 30, 2015
16,550,324 shares issued and 16,465,621 outstanding as of December 31, 2014 98,216 96,121
Retained earnings 285,792 263,345
Accumulated other comprehensive income 5,035 3,830
Treasury stock, at cost (2015 - 95,112 shares, 2014 - 84,703 shares) (2,432) (2,000)
Total stockholders' equity 386,611 361,296
Noncontrolling interest 89 89
Total equity 386,700 361,385
Total liabilities and equity$ 3,666,250 $3,443,284


LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Nine Months Ended September 30, 2015 and 2014
(in thousands except for share and per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
NET INTEREST INCOME
Interest and fees on loans
Taxable$ 27,981 $26,713 $ 81,553 $78,317
Tax exempt 116 125 350 348
Interest and dividends on securities
Taxable 2,009 2,075 6,459 6,114
Tax exempt 844 820 2,515 2,455
Interest on short-term investments 16 12 43 31
Total interest income 30,966 29,745 90,920 87,265
Interest on deposits 3,973 3,424 11,551 9,946
Interest on borrowings
Short-term 43 96 138 351
Long-term 239 260 756 769
Total interest expense 4,255 3,780 12,445 11,066
NET INTEREST INCOME 26,711 25,965 78,475 76,199
Provision for loan losses 0 0 0 0
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 26,711 25,965 78,475 76,199
NONINTEREST INCOME
Wealth advisory fees 1,103 1,030 3,393 3,046
Investment brokerage fees 405 699 1,208 2,739
Service charges on deposit accounts 2,806 2,474 7,753 6,973
Loan, insurance and service fees 2,147 1,972 5,616 5,187
Merchant card fee income 485 407 1,332 1,137
Bank owned life insurance income 221 372 956 1,082
Other income 455 881 2,090 2,442
Mortgage banking income 280 264 1,020 508
Net securities gains/(losses) 0 (228) 42 (224)
Total noninterest income 7,902 7,871 23,410 22,890
NONINTEREST EXPENSE
Salaries and employee benefits 9,854 9,856 29,021 29,310
Net occupancy expense 919 872 2,918 2,885
Equipment costs 870 812 2,699 2,346
Data processing fees and supplies 1,950 1,557 5,655 4,541
Corporate and business development 780 726 2,284 2,052
FDIC insurance and other regulatory fees 521 481 1,518 1,446
Professional fees 694 705 2,111 2,241
Other expense 1,619 1,651 4,643 4,713
Total noninterest expense 17,207 16,660 50,849 49,534
INCOME BEFORE INCOME TAX EXPENSE 17,406 17,176 51,036 49,555
Income tax expense 5,841 5,665 16,955 16,820
NET INCOME$ 11,565 $11,511 $ 34,081 $32,735
BASIC WEIGHTED AVERAGE COMMON SHARES 16,629,378 16,547,551 16,610,689 16,531,411
BASIC EARNINGS PER COMMON SHARE$ 0.70 $0.70 $ 2.05 $1.98
DILUTED WEIGHTED AVERAGE COMMON SHARES 16,847,983 16,775,770 16,808,833 16,769,079
DILUTED EARNINGS PER COMMON SHARE$ 0.69 $0.69 $ 2.03 $1.95

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
THIRD QUARTER 2015
(unaudited in thousands)
September 30,June 30,December 31,September 30,
2015201520142014
Commercial and industrial loans:
Working capital lines of credit loans$593,780 20.0%$606,169 20.9%$544,043 19.7%$517,916 19.2%
Non-working capital loans 577,536 19.4 537,708 18.6 491,330 17.8 513,525 19.0
Total commercial and industrial loans 1,171,316 39.4 1,143,877 39.5 1,035,373 37.5 1,031,441 38.2
Commercial real estate and multi-family residential loans:
Construction and land development loans 176,945 6.0 152,292 5.3 156,636 5.7 153,118 5.7
Owner occupied loans 409,004 13.8 409,650 14.2 403,154 14.6 396,207 14.7
Nonowner occupied loans 417,790 14.1 399,583 13.8 394,458 14.3 401,454 14.9
Multifamily loans 93,075 3.1 90,175 3.1 71,811 2.6 84,875 3.1
Total commercial real estate and multi-family residential loans 1,096,814 36.9 1,051,700 36.3 1,026,059 37.1 1,035,654 38.3
Agri-business and agricultural loans:
Loans secured by farmland 155,106 5.2 156,001 5.4 137,407 5.0 131,516 4.9
Loans for agricultural production 93,964 3.2 95,327 3.3 136,380 4.9 78,203 2.9
Total agri-business and agricultural loans 249,070 8.4 251,328 8.7 273,787 9.9 209,719 7.8
Other commercial loans 82,976 2.8 82,247 2.8 75,715 2.7 77,076 2.9
Total commercial loans 2,600,176 87.5 2,529,152 87.4 2,410,934 87.3 2,353,890 87.1
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 154,019 5.2 148,977 5.1 145,167 5.3 143,892 5.3
Open end and junior lien loans 160,485 5.4 155,902 5.4 150,220 5.4 150,859 5.6
Residential construction and land development loans 8,445 0.3 8,821 0.3 6,742 0.2 5,726 0.2
Total consumer 1-4 family mortgage loans 322,949 10.9 313,700 10.8 302,129 10.9 300,477 11.1
Other consumer loans 49,169 1.7 50,813 1.8 49,541 1.8 47,967 1.8
Total consumer loans 372,118 12.5 364,513 12.6 351,670 12.7 348,444 12.9
Subtotal 2,972,294 100.0% 2,893,665 100.0% 2,762,604 100.0% 2,702,334 100.0%
Less: Allowance for loan losses (44,694) (44,816) (46,262) (46,387)
Net deferred loan fees (14) (203) (284) (411)
Loans, net$2,927,586 $2,848,646 $2,716,058 $2,655,536



Lisa M. O’Neill Executive Vice President and Chief Financial Officer (574) 267-9125 lisa.oneill@lakecitybank.com

Source:Lake City Bank