Lake City Bank Concludes 140th Year With Record Performance

Strong Loan Growth Highlights 4th Quarter Results

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| Source: Lake City Bank

WARSAW, Ind., Jan. 25, 2013 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $35.4 million for 2012. This performance represents a 15%, or $4.7 million, increase in net income versus $30.7 million for 2011. Diluted net income per share increased 14% to $2.15 for 2012, versus $1.88 in 2011, and also represents a Company record.

The Company further reported net income of $8.6 million for the fourth quarter of 2012, which represented a 4% increase over $8.3 million in the fourth quarter of 2011. Diluted net income per share for the quarter increased 4% to $0.52 versus $0.50 for the comparable period of 2011. Net income for the linked third quarter of 2012 was $9.3 million.

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "In the last quarter century, we've produced record net income for our shareholders in 24 of those 25 years and 2012 represents our third consecutive year of record performance. We believe that these consistent results are a reflection of our relentless focus on taking care of our customers every day in every office."

Kubacki continued, "2012 represented Lake City Bank's 140th year of continuous service under the same name in our Indiana communities. Since our 1872 opening as the fourth bank in the small town of Warsaw, we've grown to become the fourth largest bank headquartered in Indiana. As we have grown, we've successfully maintained our commitment to the Hoosier communities we serve. We're proud that we have preserved the principles and ideals of a community bank while at the same time delivering strong shareholder value."

The Company previously announced that its normal quarterly dividend of $0.17 for the fourth quarter would be paid in December of 2012 instead of the first quarter of 2013. This dividend was paid early due to the uncertainty, which existed at that time, regarding the future taxation of dividends. The quarterly dividends paid for each quarter of 2012 represents a 10% increase over those paid in 2011. The Company expects to return to its normal schedule for paying quarterly dividends during 2013.

Total loans outstanding increased by $54 million during the quarter, growing from $2.20 billion at September 30, 2012 to $2.26 billion at December 31, 2012. This represents a linked quarter increase of 2.5%. Average total loans for the fourth quarter of 2012 were $2.21 billion versus $2.20 billion for the fourth quarter of 2011, an increase of 1%. Total loans outstanding grew $24 million, or 1%, from $2.23 billion as of December 31, 2011 to $2.26 billion as of December 31, 2012.

David M. Findlay, President and Chief Financial Officer, stated, "We were pleased with the level of loan growth in the quarter. Despite organic loan demand continuing to be lower when compared to our historical levels, we have seen some improvement and believe that this kind of growth is reflective of our strong market position. While our pipeline indicates that there are encouraging signs of improving loan demand in the near future, the overall competitive environment will continue to temper market share gains."

The Company's net interest margin was 3.10% in the fourth quarter of 2012 versus 3.38% for the fourth quarter of 2011 and 3.30% in the linked third 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. 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. For the year ended December 31, 2012, the Company's net interest margin was 3.28% versus 3.54% for the comparable period in 2011.

Findlay observed, "As with most financial institutions, the unprecedented and prolonged low interest rate environment has continued to negatively impact our net interest margin performance. While we have some ability to further lower deposit costs, which we will pursue in 2013, the continued pressure on loan and investment yields will make it challenging for us to improve our net interest margin for the foreseeable future."   

The Company's tangible common equity to tangible assets ratio was 9.63% at December 31, 2012 compared to 9.36% at December 31, 2011 and 9.90% at September 30, 2012. Average total deposits for the quarter ended December 31, 2012 were $2.55 billion versus $2.49 billion for the third quarter of 2012 and $2.42 billion for the fourth quarter of 2011.

The Company's provision for loan losses in the fourth quarter of 2012 was $1.3 million versus $2.9 million in the same period of 2011. In the third quarter of 2012, the provision was $0. For the year ended December 31, 2012, the Company's provision for loan losses was $2.5 million versus $13.8 million for the comparable period in 2011. The provision decrease on a year-over-year basis was generally driven by the stabilization and improvement in key loan quality metrics, 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 December 31, 2012 was $51.4 million compared to $53.4 million as of December 31, 2011 and $51.9 million as of September 30, 2012. The allowance for loan losses represented 2.28% of total loans as of December 31, 2012 versus 2.39% at December 31, 2011 and 2.36% as of September 30, 2012. Further, the allowance for loan losses represented 167% of nonperforming loans as of December 31, 2012 versus 135% at December 31, 2011 and 156% as of September 30, 2012.

Net charge-offs totaled $1.7 million in the fourth quarter of 2012 versus net charge-offs of $1.6 million during the fourth quarter of 2011 and net recoveries of $96,000 during the linked third quarter of 2012. The largest charge-off attributable to a single commercial credit during the quarter was $947,000. For the year ended December 31, 2012, net charge-offs were $4.5 million versus $5.4 million for the comparable period in 2011. Nonperforming assets decreased 24% to $31.6 million as of December 31, 2012 versus $41.6 million as of December 31, 2011. On a linked quarter basis, nonperforming assets were 7% lower than the $34.0 million reported as of September 30, 2012. The decrease in nonperforming assets during the quarter primarily resulted from charge-offs as well as payments received on nonperforming loans. The ratio of nonperforming assets to total assets at December 31, 2012 was 1.03% versus 1.44% at December 31, 2011 and 1.15% at September 30, 2012. Total watch list loans were $181.9 million at December 31, 2012 versus $166.7 million at December 31, 2011 and $150.7 million at September 30, 2012. The quarter over quarter increase in the watch list primarily resulted from the addition of four related loan relationships totaling $35.7 million.

Findlay added, "We're cautiously optimistic with the consistent improvements we have seen in our loan quality measures during 2012. Generally, our borrowers' balance sheet strength and financial performance have stabilized or improved. Yet, there continues to be uncertainty regarding the sustainability of this recovery, and we continue to monitor the impact on our borrowers closely."

For the year ended December 31, 2012, the Company's noninterest income increased 13% from $22.2 million in 2011 to $25.2 million. For the fourth quarter of 2012, noninterest income increased 32% to $7.3 million versus $5.5 million for the fourth quarter of 2011. On a linked quarter basis, noninterest income increased by $1.1 million from $6.2 million in the third quarter of 2012. On a year-over-year basis, quarterly noninterest income was positively impacted by a $506,000 increase in loan, insurance and service fees and a $566,000 increase in mortgage banking income. In addition, noninterest income was positively impacted by an increase of $204,000 in wealth advisory fees and increases of $159,000 in investment brokerage fees.

Kubacki concluded, "We experienced good growth in fee based businesses in 2012 as a result of our continuing focus on cross selling both retail and commercial services. These efforts have resulted in broader relationships with our clients and an increase in every line item category of fee based services in 2012. This will be key as we continue to develop and expand our technology driven solutions for our clients."

For the year ended December 31, 2012, noninterest expense increased 5% from $55.1 million in 2011 to $57.7 million. The Company's noninterest expense increased 8% to $14.5 million in the fourth quarter of 2012, versus $13.5 million in the comparable quarter of 2011.  On a linked quarter basis, noninterest expense increased by $209,000 versus $14.3 million in the third quarter of 2012. On a year-over-year basis, quarterly salaries and employee benefits increased $527,000, driven by staff additions and normal merit increases. In addition, salaries and employee benefits were impacted by higher pension expense related to participants taking lump-sum distributions. Data processing fees increased by $499,000 driven by a larger customer base as well as greater utilization of services from the Company's core processor. In addition, equipment costs increased $114,000 in the three month period ended December 31, 2012 versus the same period of 2011 driven by higher depreciation expense. The Company's efficiency ratio for the fourth quarter of 2012 was 52%, compared to a ratio of 48% for the comparable quarter of 2011 and 50% for the linked third quarter of 2012.

Lakeland Financial Corporation is a $3.1 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
FOURTH QUARTER 2012 FINANCIAL HIGHLIGHTS
(Unaudited – Dollars in thousands except share and per share data)
           
  Three Months Ended Twelve Months Ended
  Dec. 31,
2012
Sep. 30,
2012
Dec. 31,
2011
Dec. 31,
2012
Dec. 31,
2011
END OF PERIOD BALANCES          
Assets $3,064,144 $2,952,208 $2,889,688 $3,064,144 $2,889,688
Deposits 2,581,756 2,476,097 2,412,696 2,581,756 2,412,696
Loans 2,257,520 2,203,388 2,233,709 2,257,520 2,233,709
Allowance for Loan Losses 51,445 51,912 53,400 51,445 53,400
Total Equity 297,828 294,990 273,289 297,828 273,289
Tangible Common Equity 294,821 291,946 270,078 294,821 270,078
AVERAGE BALANCES          
Total Assets $3,035,160 $2,960,363 $2,896,422 $2,976,239 $2,792,715
Earning Assets 2,731,083 2,718,318 2,718,707 2,720,783 2,642,158
Investments 482,912 475,899 464,975 477,010 447,620
Loans 2,212,867 2,215,456 2,196,356 2,216,131 2,148,046
Total Deposits 2,546,704 2,492,042 2,424,444 2,505,195 2,325,963
Interest Bearing Deposits 2,175,268 2,127,463 2,089,130 2,151,094 2,015,439
Interest Bearing Liabilities 2,347,434 2,286,151 2,274,381 2,316,375 2,206,658
Total Equity 297,982 291,513 270,740 287,866 260,335
INCOME STATEMENT DATA          
Net Interest Income $20,866 $22,160 $22,780 $87,671 $92,080
Net Interest Income-Fully Tax Equivalent 21,272 22,561 23,166 89,290 93,611
Provision for Loan Losses 1,250 0 2,900 2,549 13,800
Noninterest Income 7,305 6,229 5,538 25,196 22,205
Noninterest Expense 14,511 14,302 13,485 57,742 55,105
Net Income 8,602 9,347 8,261 35,394 30,662
PER SHARE DATA          
Basic Net Income Per Common Share $0.53 $0.57 $0.51 $2.17 $1.89
Diluted Net Income Per Common Share 0.52 0.57 0.50 2.15 1.88
Cash Dividends Declared Per Common Share 0.34 0.17 0.155 0.835 0.62
Book Value Per Common Share (equity per share issued) 18.18 18.04 16.85 18.18 16.85
Market Value – High 27.89 28.82 26.48 28.82 26.48
Market Value – Low 23.47 25.09 19.67 23.47 19.40
Basic Weighted Average Common Shares Outstanding 16,356,551 16,340,425 16,214,006 16,323,870 16,204,952
Diluted Weighted Average Common Shares Outstanding 16,502,313 16,490,390 16,361,607 16,482,937 16,324,644
KEY RATIOS          
Return on Average Assets 1.13% 1.26% 1.13% 1.19% 1.10%
Return on Average Total Equity 11.48 12.76 12.11 12.30 11.78
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 51.51 50.38 47.62 51.16 48.22
Average Equity to Average Assets 9.82 9.85 9.35 9.67 9.32
Net Interest Margin 3.10 3.30 3.38 3.28 3.54
Net Charge Offs to Average Loans 0.31  (0.02) 0.28 0.20 0.25
Loan Loss Reserve to Loans 2.28 2.36 2.39 2.28 2.39
Loan Loss Reserve to Nonperforming Loans 166.60 155.73 135.27 166.60 135.27
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 96.68 83.31 86.61 96.68 86.61
Nonperforming Loans to Loans 1.37 1.51 1.77 1.37 1.77
Nonperforming Assets to Assets 1.03 1.15 1.44 1.03 1.44
Tier 1 Leverage 10.46 10.59 10.13 10.46 10.13
Tier 1 Risk-Based Capital 13.01 13.32 12.31 13.01 12.31
Total Capital 14.27 14.59 13.57 14.27 13.57
Tangible Capital 9.63 9.90 9.36 9.63 9.36
ASSET QUALITY          
Loans Past Due 30 - 89 Days $4,253 $4,028 $4,230 $4,253 $4,230
Loans Past Due 90 Days or More 50 109 52 50 52
Non-accrual Loans 30,829 33,226 39,425 30,829 39,425
Nonperforming Loans (includes nonperforming TDR's) 30,879 33,335 39,477 30,879 39,477
Other Real Estate Owned 667 681 2,075 667 2,075
Other Nonperforming Assets 23 5 33 23 33
Total Nonperforming Assets 31,569 34,021 41,584 31,569 41,584
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 28,506 28,979 34,272 28,506 34,272
Performing Troubled Debt Restructurings 22,332 26,106 22,177 22,332 22,177
Total Troubled Debt Restructurings 50,838 55,085 56,449 50,838 56,449
Impaired Loans 58,935 61,294 63,518 58,935 63,518
Total Watch List Loans 181,878 150,709 166,701 181,878 166,701
Gross Charge Offs 1,855 482 1,781 5,922 6,829
Recoveries 138 578 208 1,418 1,422
Net Charge Offs/(Recoveries) 1,717  (96) 1,573 4,504 5,407
 
 
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of December 31, 2012 and 2011
(in thousands, except share data)
     
  December 31,
2012
December 31,
2011
  (Unaudited)  
ASSETS    
Cash and due from banks $156,666 $56,909
Short-term investments 75,571 47,675
Total cash and cash equivalents 232,237 104,584
     
Securities available for sale (carried at fair value) 467,021 467,391
Real estate mortgage loans held for sale 9,452 2,953
     
Loans, net of allowance for loan losses of $51,445 and $53,400 2,206,075 2,180,309
     
Land, premises and equipment, net 34,840 34,736
Bank owned life insurance 61,112 39,959
Accrued income receivable 8,491 9,612
Goodwill 4,970 4,970
Other intangible assets 47 99
Other assets 39,899 45,075
Total assets $3,064,144 $2,889,688
     
LIABILITIES AND EQUITY    
     
LIABILITIES    
Noninterest bearing deposits $407,926 $356,682
Interest bearing deposits 2,173,830 2,056,014
Total deposits 2,581,756 2,412,696
     
Short-term borrowings    
Federal funds purchased 0 10,000
Securities sold under agreements to repurchase 121,883 131,990
Total short-term borrowings 121,883 141,990
     
Accrued expenses payable 15,321 13,550
Other liabilities 1,390 2,195
Long-term borrowings 15,038 15,040
Subordinated debentures 30,928 30,928
Total liabilities 2,766,316 2,616,399
     
EQUITY    
Common stock: 90,000,000 shares authorized, no par value 16,377,247 shares issued and 16,290,136 outstanding as of December 31, 2012 16,217,019 shares issued and 16,145,772 outstanding as of December 31, 2011 90,039 87,380
Retained earnings 203,654 181,903
Accumulated other comprehensive income 5,689 5,139
Treasury stock, at cost (2012 - 87,111 shares, 2011 - 71,247 shares)  (1,643)  (1,222)
Total stockholders' equity 297,739 273,200
     
Noncontrolling interest 89 89
Total equity 297,828 273,289
Total liabilities and equity $3,064,144 $2,889,688
 
 
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Twelve Months Ended December 31, 2012 and 2011
(in thousands except for share and per share data)
(unaudited)
         
  Three Months Ended
December 31,
Twelve Months Ended
December 31,
  2012 2011 2012 2011
NET INTEREST INCOME        
Interest and fees on loans        
Taxable $24,960 $26,381 $102,749 $104,936
Tax exempt 108 114 441 471
Interest and dividends on securities        
Taxable 886 2,940 8,311 13,575
Tax exempt 706 688 2,800 2,756
Interest on short-term investments 25 40 68 154
Total interest income 26,685 30,163 114,369 121,892
         
Interest on deposits 5,315 6,867 24,667 27,735
Interest on borrowings        
Short-term 112 135 441 612
Long-term 392 381 1,590 1,465
Total interest expense 5,819 7,383 26,698 29,812
         
NET INTEREST INCOME 20,866 22,780 87,671 92,080
         
Provision for loan losses 1,250 2,900 2,549 13,800
         
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 19,616 19,880 85,122 78,280
         
NONINTEREST INCOME        
Wealth advisory fees 1,053 849 3,823 3,462
Investment brokerage fees 626 467 3,061 2,560
Service charges on deposit accounts 2,078 2,012 8,015 7,950
Loan, insurance and service fees 1,760 1,254 5,822 4,849
Merchant card fee income 282 245 1,184 1,020
Other income 533 437 2,147 1,817
Mortgage banking income 972 406 2,546 1,000
Net securities gains (losses)  1 0  (376)  (167)
Other than temporary impairment loss on available-for-sale securities:        
Total impairment losses recognized on securities 0  (132)  (1,026)  (286)
Loss recognized in other comprehensive income 0 0 0 0
Net impairment loss recognized in earnings  0  (132)  (1,026)  (286)
Total noninterest income 7,305 5,538 25,196 22,205
         
NONINTEREST EXPENSE        
Salaries and employee benefits 8,532 8,005 34,539 32,807
Net occupancy expense 777 733 3,296 3,106
Equipment costs 718 604 2,572 2,204
Data processing fees and supplies 1,334 835 4,378 3,655
Other expense 3,150 3,308 12,957 13,333
Total noninterest expense 14,511 13,485 57,742 55,105
         
INCOME BEFORE INCOME TAX EXPENSE 12,410 11,933 52,576 45,380
         
Income tax expense 3,808 3,672 17,182 14,718
         
NET INCOME $8,602 $8,261 $35,394 $30,662
         
BASIC WEIGHTED AVERAGE COMMON SHARES 16,356,551 16,214,006 16,323,870 16,204,952
BASIC EARNINGS PER COMMON SHARE $0.53 $0.51 $2.17 $1.89
DILUTED WEIGHTED AVERAGE COMMON SHARES 16,502,313 16,361,607 16,482,937 16,324,644
DILUTED EARNINGS PER COMMON SHARE $0.52 $0.50 $2.15 $1.88
 
 
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
FOURTH QUARTER 2012
(unaudited in thousands)
             
  December 31,
2012
September 30,
2012
December 31,
2011
Commercial and industrial loans:            
Working capital lines of credit loans $439,638 19.5% $445,981 20.2% $373,768 16.7%
Non-working capital loans 407,184  18.0 382,850 17.4 377,388 16.9
Total commercial and industrial loans 846,822 37.5 828,831 37.6 751,156 33.6
             
Commercial real estate and multi-family residential loans:            
Construction and land development loans 82,494 3.7 87,949  4.0 82,284 3.7
Owner occupied loans 358,617 15.9 363,673 16.5 346,669 15.5
Nonowner occupied loans 314,889 13.9 308,146  14.0 385,090 17.2
Multifamily loans 45,011  2.0 25,482 1.2 38,477 1.7
Total commercial real estate and multi-family residential loans 801,011 35.5 785,250 35.6 852,520 38.2
             
Agri-business and agricultural loans:            
Loans secured by farmland 109,147 4.8 119,524 5.4 118,224 5.3
Loans for agricultural production 115,572 5.1 94,563 4.3 119,705 5.4
Total agri-business and agricultural loans 224,719  10.0 214,087 9.7 237,929 10.7
             
Other commercial loans 56,807 2.5 44,982  2.0 58,278 2.6
Total commercial loans 1,929,359 85.5 1,873,150 85.0 1,899,883 85.0
             
Consumer 1-4 family mortgage loans:            
Closed end first mortgage loans 109,823 4.9 106,147 4.8 106,999 4.8
Open end and junior lien loans 161,366 7.1 168,507 7.6 175,694 7.9
Residential construction and land development loans 11,541 0.5 11,303 0.5 5,462 0.2
Total consumer 1-4 family mortgage loans 282,730 12.5 285,957  13.0 288,155 12.9
             
Other consumer loans 45,755  2.0 44,691  2.0 45,999 2.1
Total consumer loans 328,485 14.5 330,648  15.0 334,154  15.0
Subtotal 2,257,844  100.0% 2,203,798  100.0% 2,234,037  100.0%
Less: Allowance for loan losses  (51,445)    (51,912)    (53,400)  
 Net deferred loan fees  (324)    (410)    (328)  
Loans, net $2,206,075   $2,151,476   $2,180,309  
David M. Findlay
President and
Chief Financial Officer
(574) 267-9197