April 25, 2013 at 08:00 AM EDT
Lakeland Financial Reports Record First Quarter Performance
Company Increases Dividend 12%

WARSAW, Ind., April 25, 2013 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $9.2 million for the first quarter of 2013, an increase of 7% versus $8.6 million in the first quarter of 2012. Diluted net income per share was also a record for the first quarter and increased 8% to $0.56 versus $0.52 for the comparable period of 2012. On a linked quarter basis, net income increased 7% compared to net income of $8.6 million, or $0.52 per diluted share, for the fourth quarter of 2012.

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "This record performance represents a very good start to 2013. As we recently noted at our annual meeting of shareholders, we believe that consistent day-to-day performance and superior client service are critical to the success of our mission to be the acknowledged and recognized leader in Indiana community banking. As our results demonstrate, this client-centered strategy has proven to be good for our shareholders as well."

As previously announced, the Board of Directors approved a cash dividend for the first quarter of $0.19 per share, payable on May 6, 2013, to shareholders of record as of April 25, 2013. The quarterly dividend represents a 12% increase over the quarterly dividends paid for each quarter of 2012.

Kubacki continued, "We are very proud of the robust capital structure that we have built, and this significant increase in our shareholder dividend is reflective of our strong performance in the first quarter and our positive outlook for the future. For decades, our shareholders have benefited from our consistent ability to grow the balance sheet and produce quality earnings."

Average total loans for the first quarter of 2013 were $2.26 billion versus $2.22 billion for the first quarter of 2012, an increase of 2%. Total loans outstanding grew $37 million, or 2%, from $2.23 billion as of March 31, 2012 to $2.26 billion as of March 31, 2013. On a linked quarter basis, average total loans increased $42.6 million, or 2%, from $2.21 billion for the fourth quarter of 2012.

David M. Findlay, President and Chief Financial Officer, observed, "Loan demand continues to be a challenge throughout the banking industry, thus we are encouraged by the growth we experienced in the first quarter. As an Indiana bank serving Indiana clients, we believe it's critical that we use our balance sheet to support the economic recovery in the state."

The Company's net interest margin was 3.17% in the first quarter of 2013 versus 3.41% for the first quarter of 2012. The net interest margin improved from 3.10% in the fourth quarter of 2012. 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, including the Company having to reinvest in lower yielding securities and the acceleration of premium amortization.

Findlay stated, "We were very focused on our net interest margin in the first quarter and were pleased that it resulted in an improvement versus 2012's fourth quarter. We're now in the fifth year of an unprecedented monetary policy position by the Federal Reserve Bank, and there is no expectation that this will change in the foreseeable future. As a result, we will continue to actively manage our funding costs while at the same time working hard to retain and grow client relationships."

The Company's tangible common equity to tangible assets ratio was 10.38% at March 31, 2013 compared to 9.41% at March 31, 2012 and 9.63% at December 31, 2012. Average total deposits for the quarter ended March 31, 2013 were $2.47 billion versus $2.55 billion for the fourth quarter of 2012 and $2.43 billion for the first quarter of 2012.

The Company's provision for loan losses in the first quarter of 2013 was $0 versus $799,000 in the same period of 2012. In the fourth quarter of 2012, the provision was $1.3 million. 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 March 31, 2013 was $50.8 million compared to $52.8 million as of March 31, 2012 and $51.4 million as of December 31, 2012. The allowance for loan losses represented 2.25% of total loans as of March 31, 2013 versus 2.37% at March 31, 2012 and 2.28% as of December 31, 2012. Further, the allowance for loan losses represented 234% of nonperforming loans as of March 31, 2013 versus 144% at March 31, 2012 and 167% as of December 31, 2012.

Net charge-offs totaled $626,000 in the first quarter of 2013 versus net charge-offs of $1.4 million during the first quarter of 2012 and net charge-offs of $1.7 million during the linked fourth quarter of 2012. The largest charge-off attributable to a single commercial credit during the quarter was $365,000. Nonperforming assets decreased 42% to $22.4 million as of March 31, 2013 versus $38.6 million as of March 31, 2012. On a linked quarter basis, nonperforming assets were 29% lower than the $31.6 million reported as of December 31, 2012. The decrease in nonperforming assets during the quarter primarily resulted from the removal of two commercial credits totaling $8.4 million from the impaired category, as well as charge-offs taken and payments received on nonperforming loans. The ratio of nonperforming assets to total assets at March 31, 2013 was 0.77% versus 1.31% at March 31, 2012 and 1.03% at December 31, 2012.

Findlay noted, "We're encouraged by the material improvement in nonperforming loans. Throughout the economic downturn and the slow recovery that has followed, we have continued to work with our clients that have encountered financial difficulty. We are very proud that we work with our clients, not against them during these challenging times. This significant reduction in nonperforming loans was driven by the sustained improved performance of two commercial clients who we worked closely with to return to stable financial performance."

The Company's noninterest income increased $1.6 million, or 28%, to $7.5 million for the first quarter of 2013, versus $5.9 million for the first quarter of 2012. On a year-over-year basis, quarterly noninterest income was positively impacted by a $710,000 increase in other income, which was driven by $590,000 in fees related to the execution of interest rate swaps with clients. Loan, insurance and service fees increased by $267,000 and investment brokerage fees increased by $149,000. In addition, noninterest income in the first quarter of 2012 was negatively impacted by $510,000 in other than temporary impairment on several non-agency mortgage backed securities. On a linked quarter basis, noninterest income increased by $176,000 from $7.3 million in the fourth quarter of 2012. 

The Company's noninterest expense increased $213,000, or 1%, to $14.9 million in the first quarter of 2013 versus $14.7 million in the comparable quarter of 2012. On a year-over-year basis, quarterly data processing fees increased by $452,000 driven by 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 52% for the first quarters of 2013 and 2012, as well as the fourth quarter of 2012, which consistently ranks in the top quartile of peer financial institutions in the country. On a linked quarter basis, noninterest expense increased by $382,000 versus $14.5 million in the fourth quarter of 2012.

Lakeland Financial Corporation is a $2.9 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
FIRST QUARTER 2013 FINANCIAL HIGHLIGHTS
(Unaudited – Dollars in thousands except per share data)
Three Months Ended
Mar. 31,Dec. 31,Mar. 31,
201320122012
END OF PERIOD BALANCES
Assets $2,927,702 $3,064,144 $2,954,616
Deposits 2,451,188 2,581,756 2,483,870
Loans 2,262,460 2,257,520 2,225,462
Allowance for Loan Losses 50,818 51,445 52,757
Total Equity 306,674 297,828 280,960
Tangible Common Equity 303,655 294,821 277,797
AVERAGE BALANCES
Total Assets $2,943,767 $3,035,160 $2,893,320
Earning Assets 2,767,928 2,731,083 2,703,225
Investments 478,098 482,912 469,979
Loans 2,255,505 2,212,867 2,215,604
Total Deposits 2,473,152 2,546,704 2,427,710
Interest Bearing Deposits 2,092,394 2,175,268 2,093,348
Interest Bearing Liabilities 2,243,297 2,347,434 2,265,943
Total Equity 303,227 297,982 277,181
INCOME STATEMENT DATA
Net Interest Income $21,257 $20,866 $22,497
Net Interest Income-Fully Tax Equivalent 21,678 21,272 22,899
Provision for Loan Losses 0 1,250 799
Noninterest Income 7,481 7,305 5,850
Noninterest Expense 14,893 14,511 14,680
Net Income 9,246 8,602 8,626
PER SHARE DATA
Basic Net Income Per Common Share $0.56 $0.53 $0.53
Diluted Net Income Per Common Share 0.56 0.52 0.52
Cash Dividends Declared Per Common Share 0.19 0.34 0.155
Book Value Per Common Share (equity per share issued) 18.67 18.18 17.21
Market Value – High 27.02 27.89 27.5
Market Value – Low 23.92 23.47 23.91
Basic Weighted Average Common Shares Outstanding 16,408,710 16,356,551 16,280,416
Diluted Weighted Average Common Shares Outstanding 16,527,171 16,502,313 16,439,243
KEY RATIOS
Return on Average Assets 1.27% 1.13% 1.20%
Return on Average Total Equity 12.37 11.48 12.52
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 51.82 51.51 51.79
Average Equity to Average Assets 10.3 9.82 9.58
Net Interest Margin 3.17 3.1 3.41
Net Charge Offs to Average Loans 0.11 0.31 0.26
Loan Loss Reserve to Loans 2.25 2.28 2.37
Loan Loss Reserve to Nonperforming Loans 233.86 166.6 144.46
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 112.1 96.68 92.12
Nonperforming Loans to Loans 0.96 1.37 1.64
Nonperforming Assets to Assets 0.77 1.03 1.31
Total Impaired and Watch List Loans to Total Loans 8.17 8.15 6.94
Tier 1 Leverage 11.11 10.46 10.37
Tier 1 Risk-Based Capital 13.51 13.01 12.55
Total Capital 14.77 14.27 13.81
Tangible Capital 10.38 9.63 9.41
ASSET QUALITY 
Loans Past Due 30 - 89 Days $2,852 $4,253 $3,573
Loans Past Due 90 Days or More 0 50 54
Non-accrual Loans 21,730 30,829 36,466
Nonperforming Loans (includes nonperforming TDR's) 21,730 30,879 36,520
Other Real Estate Owned 667 667 2,067
Other Nonperforming Assets 13 23 40
Total Nonperforming Assets 22,410 31,569 38,627
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 19,607 28,506 31,940
Performing Troubled Debt Restructurings 23,605 22,332 22,735
Total Troubled Debt Restructurings 43,211 50,838 54,675
Impaired Loans 47,685 58,935 60,995
Non-Impaired Watch List Loans 137,242 125,158 93,460
Total Impaired and Watch List Loans 184,927 184,093 154,455
Gross Charge Offs 1,206 1,855 1,733
Recoveries 580 138 291
Net Charge Offs/(Recoveries) 626 1,717 1,442
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of March 31, 2013 and December 31, 2012
(in thousands, except share data)
March 31, December 31,
2013 2012
(Unaudited)
ASSETS
Cash and due from banks$66,776 $156,666
Short-term investments8,891 75,571
Total cash and cash equivalents75,667 232,237
Securities available for sale (carried at fair value)482,704 467,021
Real estate mortgage loans held for sale6,629 9,452
Loans, net of allowance for loan losses of $50,818 and $51,4452,211,642 2,206,075
Land, premises and equipment, net 34,502 34,840
Bank owned life insurance61,574 61,112
Accrued income receivable9,235 8,491
Goodwill4,970 4,970
Other intangible assets35 47
Other assets40,744 39,899
Total assets$2,927,702 $3,064,144
LIABILITIES AND EQUITY
LIABILITIES
Noninterest bearing deposits$386,509 $407,926
Interest bearing deposits 2,064,679 2,173,830
Total deposits2,451,188 2,581,756
Short-term borrowings
Securities sold under agreements to repurchase 113,515 121,883
Total short-term borrowings113,515 121,883
Accrued expenses payable18,116 15,321
Other liabilities7,244 1,390
Long-term borrowings37 15,038
Subordinated debentures30,928 30,928
Total liabilities2,621,028 2,766,316
EQUITY
Common stock: 90,000,000 shares authorized, no par value 16,424,481 shares issued and 16,333,922 outstanding as of March 31, 2013 16,377,247 shares issued and 16,290,136 outstanding as of December 31, 201290,459 90,039
Retained earnings212,900 203,654
Accumulated other comprehensive income4,988 5,689
Treasury stock, at cost (2013 - 90,559 shares, 2012 - 87,111 shares)(1,762) (1,643)
Total stockholders' equity306,585 297,739
Noncontrolling interest89 89
Total equity306,674 297,828
Total liabilities and equity$2,927,702 $3,064,144
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2013 and 2012
(in thousands except for share and per share data)
(unaudited)
Three Months Ended
 March 31,
2013 2012
NET INTEREST INCOME
Interest and fees on loans
Taxable$24,486 $26,191
Tax exempt102 112
Interest and dividends on securities
Taxable945 2,764
Tax exempt735 697
Interest on short-term investments24 11
Total interest income26,292 29,775
Interest on deposits4,637 6,761
Interest on borrowings
Short-term91 113
Long-term307 404
Total interest expense5,035 7,278
NET INTEREST INCOME21,257 22,497
Provision for loan losses0 799
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES21,257 21,698
NONINTEREST INCOME
Wealth advisory fees944 914
Investment brokerage fees949 800
Service charges on deposit accounts1,971 1,881
Loan, insurance and service fees1,456 1,189
Merchant card fee income276 316
Other income1,375 665
Mortgage banking income509 592
Net securities gains 1 3
Other than temporary impairment loss on available-for-sale securities:
Total impairment losses recognized on securities0 (510)
Loss recognized in other comprehensive income0 0
Net impairment loss recognized in earnings0 (510)
Total noninterest income7,481 5,850
NONINTEREST EXPENSE
Salaries and employee benefits9,165 9,075
Net occupancy expense846 885
Equipment costs609 617
Data processing fees and supplies1,293 841
Other expense 2,980 3,262
Total noninterest expense14,893 14,680
INCOME BEFORE INCOME TAX EXPENSE13,845 12,868
Income tax expense 4,599 4,242
NET INCOME$9,246 $8,626
BASIC WEIGHTED AVERAGE COMMON SHARES16,408,710 16,280,416
BASIC EARNINGS PER COMMON SHARE$0.56 $0.53
DILUTED WEIGHTED AVERAGE COMMON SHARES16,527,171 16,439,243
DILUTED EARNINGS PER COMMON SHARE$0.56 $0.52
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
FIRST QUARTER 2013
(unaudited in thousands)
March 31, December 31, March 31,
2013 2012 2012
Commercial and industrial loans:
Working capital lines of credit loans $437,295 19.3% $439,638 19.5% $402,703 18.1%
Non-working capital loans 404,934 17.9 407,184 18.0 378,000 17.0
Total commercial and industrial loans 842,229 37.2 846,822 37.5 780,703 35.1
Commercial real estate and multi-family residential loans:
Construction and land development loans 97,263 4.3 82,494 3.7 89,356 4.0
Owner occupied loans 365,619 16.2 358,617 15.9 353,186 15.9
Nonowner occupied loans 339,030 15.0 314,889 13.9 357,781 16.1
Multifamily loans 46,270 2.0 45,011 2.0 35,178 1.6
Total commercial real estate and multi-family residential loans 848,182 37.5 801,011 35.5 835,501 37.5
Agri-business and agricultural loans:
Loans secured by farmland 99,537 4.4 109,147 4.8 104,090 4.7
Loans for agricultural production 105,312 4.7 115,572 5.1 113,014 5.1
Total agri-business and agricultural loans 204,849 9.1 224,719 10.0 217,104 9.8
Other commercial loans: 48,867 2.2 56,807 2.5 58,718 2.6
Total commercial loans 1,944,127 85.9 1,929,359 85.5 1,892,026 85.0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 116,164 5.1 109,823 4.9 107,910 4.8
Open end and junior lien loans 154,773 6.8 161,366 7.1 174,029 7.8
Residential construction and land development loans 6,110 0.3 11,541 0.5 6,929 0.3
Total consumer 1-4 family mortgage loans 277,047 12.2 282,730 12.5 288,868 13.0
Other consumer loans: 41,891 1.9 45,755 2.0 44,977 2.0
Total consumer loans 318,938 14.1 328,485 14.5 333,845 15.0
Subtotal 2,263,065 100.0% 2,257,844 100.0% 2,225,871 100.00%
Less: Allowance for loan losses (50,818) (51,445) (52,757)
Net deferred loan fees (605) (324) (409)
Loans, net $2,211,642 $2,206,075 $2,172,705
CONTACT: David M. Findlay
         President and
         Chief Financial Officer
         (574) 267-9197
         david.findlay@lakecitybank.com
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