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Lakeland Financial Reports Record Performance

WARSAW, Ind., July 25, 2013 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported net income of $9.2 million for the second quarter of 2013, an increase of 5% versus $8.8 million in the second quarter of 2012. Diluted net income per share increased 4% to $0.56 versus $0.54 for the comparable period of 2012.

The Company further reported net income of $18.5 million for the six months ended June 30, 2013 versus $17.4 million for the comparable period of 2012, an increase of 6% and a record performance for the Company over a six month period. Diluted net income per common share also increased 6% to $1.12 for the six months ended June 30, 2013 versus $1.06 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, commented, "We are extremely pleased with this record performance and continue to be encouraged by the quality and consistency of our earnings. As the largest bank in the state dedicated to serving Indiana, these results are a further affirmation of our Indiana-focused strategy and reflect the commitment we have to our communities."

Earnings for the three-month and six-month periods ended June 30, 2013 were negatively impacted by a one-time non-cash provision for state income tax expense of $465,000, which resulted from a revaluation of the Company's state deferred tax items. During the second quarter of 2013, the Indiana legislature approved new tax rates for financial institutions which will lower their state income tax rate from 8.5% to 6.5%. The decrease will be phased in over four years, beginning in 2014. This lower state tax rate going forward will reduce the benefit provided by the Company's existing deferred tax items. As a result, the Company recorded this one-time non-cash adjustment.

Excluding the effect of the one-time non-cash adjustment, net income for the three months and six months ended June 30, 2013 would have been $9.7 million and $18.9 million, respectively, representing increases of 10% and 9% over the comparable periods of 2012. Diluted net income per share would have been $0.59 and $1.15, respectively for the three and six month periods ended June 30, 2013, representing increases of 9% and 8% over the comparable periods in 2012.

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

Commenting on the dividend, Kubacki added, "Lakeland Financial's shareholders continue to benefit from our strong performance. This dividend represents a healthy dividend payout ratio of 34%, which is reflective of our strong capital structure and our consistently good results."

Average total loans for the second quarter of 2013 were $2.30 billion versus $2.22 billion for the second quarter of 2012, an increase of 4%. Total loans outstanding grew $120.3 million, or 5%, from $2.21 billion as of June 30, 2012 to $2.33 billion as of June 30, 2013. On a linked quarter basis, average total loans increased $49.0 million, or 2%, from $2.26 billion for the first quarter of 2013.

David M. Findlay, President and Chief Financial Officer, observed, "Total loan growth of $72 million during the quarter is the highest quarterly loan growth since the fourth quarter of 2008. The loan growth was geographically and industry diverse, which we believe is indicative of both a strengthening Indiana economy and good market penetration by Lake City Bank."

The Company's net interest margin was 3.20% in the second quarter of 2013 versus 3.32% for the second quarter of 2012. The net interest margin improved from 3.17% in the first 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. The reduced yields in the investment portfolio were driven by prepayments in the Company's agency mortgage-backed securities portfolio, which were also affected by the low interest rate environment. The prepayments generally have a negative impact on investment portfolio yields because they cause the Company to reinvest in lower yielding securities and the acceleration of premium amortization.

Findlay emphasized, "We're very pleased with the stability and improvement in our net interest margin during the quarter. Despite a challenging interest rate environment, we were able to improve our margin and generally maintain deposit levels. The margin improvement was driven by a reduction in funding costs, which we will continue to manage as interest rates remain at historic lows."

The Company's tangible common equity to tangible assets ratio was 10.25% at June 30, 2013 compared to 9.58% at June 30, 2012 and 10.38% at March 31, 2013. Average total deposits for the quarter ended June 30, 2013 were $2.49 billion versus $2.47 billion for the first quarter of 2013 and $2.55 billion for the second quarter of 2012.

The Company's provision for loan losses in the six months ended June 30, 2013 was $0 versus $1.3 million in the same period of 2012. The provision decrease on a year-over-year basis 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 June 30, 2013 was $50.6 million compared to $51.8 million as of June 30, 2012 and $50.8 million as of March 31, 2013. The allowance for loan losses represented 2.17% of total loans as of June 30, 2013 versus 2.34% at June 30, 2012 and 2.25% as of March 31, 2013. Further, the allowance for loan losses represented 234% of nonperforming loans as of June 30, 2013 versus 150% at June 30, 2012 and 234% as of March 31, 2013.

Net charge-offs totaled $183,000 in the second quarter of 2013 versus net charge-offs of $1.4 million during the second quarter of 2012 and net charge-offs of $626,000 during the linked first quarter of 2013. Nonperforming assets decreased 40% to $21.8 million as of June 30, 2013 versus $36.4 million as of June 30, 2012. As of June 30, 2013, the Company's other real estate consisted of two properties and totaled only $171,000. On a linked quarter basis, nonperforming assets were 3% lower than the $22.4 million reported as of March 31, 2013. 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 June 30, 2013 was 0.73% versus 1.22% at June 30, 2012 and 0.77% at March 31, 2013.

Kubacki concluded, "We believe Lake City Bank's credit quality is in good shape. Since the fourth quarter of 2010, we have reduced nonperforming assets by $18.8 million, or 46%. During that same time period, net charge offs have totaled $10.7 million, significantly less than this reduction in nonperforming assets. We also have an allowance for loan losses that is appropriately strong, with coverage of nonperforming loans at 234%."

The Company's noninterest income increased $1.8 million, or 30%, to $7.6 million for the second quarter of 2013, versus $5.8 million for the second quarter of 2012. On a year-over-year basis, quarterly noninterest income was positively impacted by a $426,000 increase in other income, which was driven by a $268,000 increase in income from bank owned life insurance. Loan, insurance and service fees increased by $360,000 and service charges on deposit accounts increased by $241,000. In addition, noninterest income in the second quarter of 2012 was negatively impacted by $449,000 in other than temporary impairment on several non-agency mortgage backed securities. On a linked quarter basis, noninterest income increased by $88,000 from $7.5 million in the first quarter of 2013.

The Company's noninterest expense increased $842,000, or 6%, to $15.1 million in the second quarter of 2013 versus $14.2 million in the comparable quarter of 2012. On a linked quarter basis, noninterest expense increased by $198,000 from $14.9 million in the first quarter of 2013. On a year-over-year basis, salaries and employee benefits increased by $528,000 in the three month period ended June 30, 2013 versus the same period of 2012. These increases in salary and employee benefits were driven by normal merit increases and higher performance incentive-based compensation costs. Quarterly data processing fees increased by $319,000 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. The Company's efficiency ratio was 51% for the second quarters of 2013 and 2012, and 52% for the linked first 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.

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
SECOND QUARTER 2013 FINANCIAL HIGHLIGHTS
(Unaudited – Dollars in thousands except per share data)
Three Months Ended Six Months Ended
END OF PERIOD BALANCES Jun. 30,
2013
Mar. 31,
2013
Jun. 30,
2012
Jun. 30,
2013
Jun. 30,
2012
Assets $2,975,462 $2,927,702 $2,974,438 $2,975,462 $2,974,438
Deposits 2,483,492 2,451,188 2,525,485 2,483,492 2,525,485
Loans 2,334,700 2,262,460 2,214,400 2,334,700 2,214,400
Allowance for Loan Losses 50,635 50,818 51,817 50,635 51,817
Total Equity 307,608 306,674 287,658 307,608 287,658
Tangible Common Equity 304,576 303,655 284,543 304,576 284,543
AVERAGE BALANCES
Total Assets $2,982,150 $2,943,767 $3,015,641 $2,963,065 $2,954,484
Earning Assets 2,795,925 2,767,928 2,730,356 2,782,004 2,716,790
Investments 482,628 478,098 479,131 480,376 474,555
Loans 2,304,471 2,255,505 2,220,641 2,280,123 2,218,122
Total Deposits 2,490,115 2,473,152 2,554,013 2,481,681 2,490,861
Interest Bearing Deposits 2,102,924 2,092,394 2,208,292 2,097,688 2,150,820
Interest Bearing Liabilities 2,268,230 2,243,297 2,365,962 2,255,832 2,315,952
Total Equity 309,417 303,227 284,638 306,339 280,913
INCOME STATEMENT DATA
Net Interest Income $21,912 $21,257 $22,148 $43,169 $44,645
Net Interest Income-Fully Tax Equivalent 22,351 21,678 22,550 44,031 45,450
Provision for Loan Losses 0 0 500 0 1,299
Noninterest Income 7,569 7,481 5,812 15,050 11,662
Noninterest Expense 15,091 14,893 14,249 29,984 28,929
Net Income 9,236 9,246 8,819 18,482 17,445
PER SHARE DATA
Basic Net Income Per Common Share $0.56 $0.56 $0.54 $1.13 $1.07
Diluted Net Income Per Common Share 0.56 0.56 0.54 1.12 1.06
Cash Dividends Declared Per Common Share 0.19 0.19 0.17 0.38 0.325
Book Value Per Common Share (equity per share issued) 18.71 18.67 17.61 18.71 17.61
Market Value – High 28.5 27.02 26.83 28.5 27.5
Market Value – Low 25.26 23.92 24.07 23.92 23.91
Basic Weighted Average Common Shares Outstanding 16,425,382 16,408,710 16,324,928 16,411,695 16,298,981
Diluted Weighted Average Common Shares Outstanding 16,546,547 16,527,171 16,453,561 16,524,250 16,450,832
KEY RATIOS
Return on Average Assets 1.24% 1.27% 1.18% 1.26% 1.19%
Return on Average Total Equity 11.97 12.37 12.46 12.17 12.49
Efficiency (Noninterest Expense / Net Interest Income
plus Noninterest Income) 51.19 51.82 50.96 51.5 51.38
Average Equity to Average Assets 10.38 10.3 9.44 10.34 9.51
Net Interest Margin 3.2 3.17 3.32 3.19 3.37
Net Charge Offs to Average Loans 0.03 0.11 0.26 0.07 0.26
Loan Loss Reserve to Loans 2.17 2.25 2.34 2.17 2.34
Loan Loss Reserve to Nonperforming Loans 233.92 233.86 149.67 233.92 149.67
Loan Loss Reserve to Nonperforming Loans
and Performing TDR's 113.37 112.1 90.29 113.37 90.29
Nonperforming Loans to Loans 0.93 0.96 1.56 0.93 1.56
Nonperforming Assets to Assets 0.73 0.77 1.22 0.73 1.22
Total Impaired and Watch List Loans to Total Loans 7.71 8.17 6.93 7.71 6.93
Tier 1 Leverage 11.01 11.11 10.16 11.01 10.16
Tier 1 Risk-Based Capital 13.39 13.51 12.85 13.39 12.85
Total Capital 14.65 14.77 14.11 14.65 14.11
Tangible Capital 10.25 10.38 9.58 10.25 9.58
ASSET QUALITY
Loans Past Due 30 - 89 Days $5,348 $2,852 $6,744 $5,348 $6,744
Loans Past Due 90 Days or More 104 0 106 104 106
Non-accrual Loans 21,542 21,730 34,514 21,542 34,514
Nonperforming Loans (includes nonperforming TDR's) 21,646 21,730 34,620 21,646 34,620
Other Real Estate Owned 171 667 1,737 171 1,737
Other Nonperforming Assets 5 13 13 5 13
Total Nonperforming Assets 21,822 22,410 36,370 21,822 36,370
Nonperforming Troubled Debt Restructurings (included in
nonperforming loans) 19,398 19,607 32,129 19,398 32,129
Performing Troubled Debt Restructurings 23,017 23,605 22,767 23,017 22,767
Total Troubled Debt Restructurings 42,415 43,211 54,896 42,415 54,896
Impaired Loans 46,906 47,685 59,256 46,906 59,256
Non-Impaired Watch List Loans 133,139 137,242 94,149 133,139 94,149
Total Impaired and Watch List Loans 180,045 184,927 153,405 180,045 153,405
Gross Charge Offs 368 1,206 1,852 1,574 3,584
Recoveries 185 580 412 765 702
Net Charge Offs/(Recoveries) 183 626 1,440 810 2,882
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of June 30, 2013 and December 31, 2012
(in thousands, except share data)
June 30,
2013
December 31,
2012
(Unaudited)
ASSETS
Cash and due from banks $55,814 $156,666
Short-term investments 7,741 75,571
Total cash and cash equivalents 63,555 232,237
Securities available for sale (carried at fair value) 472,976 467,021
Real estate mortgage loans held for sale 5,486 9,452
Loans, net of allowance for loan losses of $50,635 and $51,445 2,284,065 2,206,075
Land, premises and equipment, net 35,346 34,840
Bank owned life insurance 62,008 61,112
Accrued income receivable 9,214 8,491
Goodwill 4,970 4,970
Other intangible assets 24 47
Other assets 37,818 39,899
Total assets $2,975,462 $3,064,144
LIABILITIES AND EQUITY
LIABILITIES
Noninterest bearing deposits $397,610 $407,926
Interest bearing deposits 2,085,882 2,173,830
Total deposits 2,483,492 2,581,756
Short-term borrowings
Federal funds purchased 37,000 0
Securities sold under agreements to repurchase 102,655 121,883
Total short-term borrowings 139,655 121,883
Accrued expenses payable 11,685 15,321
Other liabilities 2,057 1,390
Long-term borrowings 37 15,038
Subordinated debentures 30,928 30,928
Total liabilities 2,667,854 2,766,316
EQUITY
Common stock: 90,000,000 shares authorized, no par value 16,431,881 shares issued and 16,340,697 outstanding as of June 30, 2013 16,377,247 shares issued and 16,290,136 outstanding as of December 31, 2012 90,921 90,039
Retained earnings 219,002 203,654
Accumulated other comprehensive income (loss) (625) 5,689
Treasury stock, at cost (2013 - 91,184 shares, 2012 - 87,111 shares) (1,779) (1,643)
Total stockholders' equity 307,519 297,739
Noncontrolling interest 89 89
Total equity 307,608 297,828
Total liabilities and equity $2,975,462 $3,064,144
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Six Months Ended June 30, 2013 and 2012
(in thousands except for share and per share data)
(unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2013 2012 2013 2012
NET INTEREST INCOME
Interest and fees on loans
Taxable $24,388 $25,795 $48,874 $51,986
Tax exempt 102 112 204 224
Interest and dividends on securities
Taxable 1,152 2,627 2,097 5,391
Tax exempt 770 699 1,505 1,396
Interest on short-term investments 12 16 36 27
Total interest income 26,424 29,249 52,716 59,024
Interest on deposits 4,139 6,602 8,776 13,363
Interest on borrowings
Short-term 112 104 203 217
Long-term 261 395 568 799
Total interest expense 4,512 7,101 9,547 14,379
NET INTEREST INCOME 21,912 22,148 43,169 44,645
Provision for loan losses 0 500 0 1,299
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 21,912 21,648 43,169 43,346
NONINTEREST INCOME
Wealth advisory fees 971 897 1,915 1,811
Investment brokerage fees 997 940 1,946 1,740
Service charges on deposit accounts 2,252 2,011 4,223 3,892
Loan, insurance and service fees 1,812 1,452 3,268 2,641
Merchant card fee income 293 289 569 605
Other income 706 280 2,081 945
Mortgage banking income 538 392 1,047 984
Net securities gains 0 0 1 3
Other than temporary impairment loss on available-for-sale securities:
Total impairment losses recognized on securities 0 (475) 0 (985)
Loss recognized in other comprehensive income 0 26 0 26
Net impairment loss recognized in earnings 0 (449) 0 (959)
Total noninterest income 7,569 5,812 15,050 11,662
NONINTEREST EXPENSE
Salaries and employee benefits 8,891 8,363 18,056 17,438
Net occupancy expense 873 831 1,719 1,716
Equipment costs 654 596 1,263 1,213
Data processing fees and supplies 1,379 1,060 2,672 1,901
Other expense 3,294 3,399 6,274 6,661
Total noninterest expense 15,091 14,249 29,984 28,929
INCOME BEFORE INCOME TAX EXPENSE 14,390 13,211 28,235 26,079
Income tax expense 5,154 4,392 9,753 8,634
NET INCOME $9,236 $8,819 $18,482 $17,445
BASIC WEIGHTED AVERAGE COMMON SHARES 16,425,382 16,324,928 16,411,695 16,298,981
BASIC EARNINGS PER COMMON SHARE $0.56 $0.54 $1.13 $1.07
DILUTED WEIGHTED AVERAGE COMMON SHARES 16,546,547 16,453,561 16,524,250 16,450,832
DILUTED EARNINGS PER COMMON SHARE $0.56 $0.54 $1.12 $1.06
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
SECOND QUARTER 2013
(unaudited in thousands)
June 30,
2013
March 31,
2013
December 31,
2012
June 30,
2012
Commercial and industrial loans:
Working capital lines of credit loans $462,137 19.8% $437,295 19.3% $439,638 19.5% $413,394 18.7%
Non-working capital loans 425,958 18.2 404,934 17.9 407,184 18.0 375,677 17.0
Total commercial and industrial loans 888,095 38.0 842,229 37.2 846,822 37.5 789,071 35.6
Commercial real estate and multi-family residential loans:
Construction and land development loans 108,695 4.7 97,263 4.3 82,494 3.7 84,416 3.8
Owner occupied loans 365,071 15.6 365,619 16.2 358,617 15.9 356,889 16.1
Nonowner occupied loans 373,696 16.0 339,030 15.0 314,889 13.9 333,237 15.0
Multifamily loans 37,422 1.6 46,270 2.0 45,011 2.0 35,587 1.6
Total commercial real estate and multi-family residential loans 884,884 37.9 848,182 37.5 801,011 35.5 810,129 36.6
Agri-business and agricultural loans:
Loans secured by farmland 100,571 4.3 99,537 4.4 109,147 4.8 112,431 5.1
Loans for agricultural production 97,729 4.2 105,312 4.7 115,572 5.1 108,514 4.9
Total agri-business and agricultural loans 198,300 8.5 204,849 9.1 224,719 10.0 220,945 10.0
Other commercial loans 46,501 2.0 48,867 2.2 56,807 2.5 63,681 2.9
Total commercial loans 2,017,780 86.4 1,944,127 85.9 1,929,359 85.5 1,883,826 85.1
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 116,247 5.0 116,164 5.1 109,823 4.9 105,057 4.7
Open end and junior lien loans 152,571 6.5 154,773 6.8 161,366 7.1 171,063 7.7
Residential construction and land development loans 5,263 0.2 6,110 0.3 11,541 0.5 9,190 0.4
Total consumer 1-4 family mortgage loans 274,081 11.7 277,047 12.2 282,730 12.5 285,310 12.9
Other consumer loans 43,470 1.9 41,891 1.9 45,755 2.0 45,726 2.1
Total consumer loans 317,551 13.6 318,938 14.1 328,485 14.5 331,036 14.9
Subtotal 2,335,331 100.0% 2,263,065 100.0% 2,257,844 100.0% 2,214,862 100.0%
Less: Allowance for loan losses (50,635) (50,818) (51,445) (51,817)
Net deferred loan fees (631) (605) (324) (462)
Loans, net $2,284,065 $2,211,642 $2,206,075 $2,162,583

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