Lakeland Financial Reports Record Performance

WARSAW, Ind., July 25, 2017 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record second quarter net income of $15.4 million for the three months ended June 30, an increase of 20% versus $12.8 million for the second quarter of 2016. Diluted net income per common share also increased 20% to $0.60 for the second quarter of 2017, versus $0.50 for the second quarter of 2016, representing a record quarter for the company and its shareholders. On a linked quarter basis net income increased 6% or $850,000 from the first quarter ended March 31, 2017, which had net income of $14.5 million and $0.57 diluted net income per common share. All share and per share data presented in this press release has been adjusted for a 3-for-2 stock split paid in the form of a stock dividend on August 5, 2016.

The company further reported record net income of $29.9 million for the six months ended June 30, 2017 versus $25.1 million for the comparable period of 2016, an increase of 19%. Diluted net income per common share was also a record for the period and increased 18% to $1.17 for the six months ended June 30, 2017 versus $0.99 for the comparable period of 2016.

David M. Findlay, President and CEO commented, “The entire Lake City Bank team has contributed to these record results and we are very proud of the continued strength of the bank’s overall performance. These strong results reflect the overall economic vitality of our Indiana footprint and the continued growth of our commercial and consumer loan businesses. The best way for Lake City Bank to contribute to our markets is through the business of lending, and we are very pleased with our overall growth.”

Highlights for the quarter are noted below:

2nd Quarter 2017 versus 2nd Quarter 2016 highlights:

Organic average loan growth of $394 million or 12%
Average deposit growth of $245 million or 7%
Net interest income increase of $4.5 million or 16%
Net interest margin increase of 15 basis points to 3.34%
Revenue growth of $5.3 million or 14%
Continued strong asset quality with nonperforming assets to total assets at 0.23% compared to 0.24%
Tangible common equity¹ increase of $31.6 million or 8%

2nd Quarter 2017 versus 1st Quarter 2017 highlights:

Organic average loan growth of $77 million or 2%
Average deposit growth of $45 million or 1%
Net interest income increase of $1.8 million or 5%
Net interest margin increase of 7 basis points to 3.34%
Revenue growth of $2.3 million or 6%
Continued strong asset quality with nonperforming assets to total assets at 0.23% compared to 0.28%
Tangible common equity¹ increase of $13.3 million or 3%

As previously announced, the board of directors approved a cash dividend for the second quarter of $0.22 per share, payable on August 7, 2017, to shareholders of record as of July 25, 2017. The second quarter dividend per share represents a 16% increase over the dividend rate paid in the last three quarters of 2016 and in the first quarter of 2017 of $0.19 per share.

Findlay added, “Continued loan growth, stable asset quality and net interest margin expansion have positively impacted our profitability in the first half of 2017. As a result, our capital position remains solid and is supportive of this significant increase in our dividend and the continued growth in Lake City Bank.”

Return on average total equity for the second quarter of 2017 was 13.84%, compared to 12.50% in the second quarter of 2016 and 13.63% in the linked first quarter of 2017. Return on average total equity for the first six months of 2017 was 13.74%, compared to 12.43% in the same period of 2016. Return on average assets for the second quarter of 2017 was 1.40%, compared to 1.29% in the second quarter of 2016 and 1.37% in the linked first quarter of 2017. Return on average assets for the first six months of 2017 was 1.38% compared to 1.29% in the same period of 2016. The company’s total capital as a percent of risk-weighted assets was 13.30% at June 30, 2017, compared to 13.65% at June 30, 2016 and 13.16% at March 31, 2017. The company’s tangible common equity to tangible assets ratio¹ was 10.19% at June 30, 2017, compared to 10.57% at June 30, 2016 and 10.06% at March 31, 2017.

Average total loans for the second quarter of 2017 were $3.59 billion, an increase of $393.9 million, or 12%, versus $3.19 billion for the second quarter of 2016. Total loans outstanding grew $379.0 million, or 12%, from $3.20 billion as of June 30, 2016 to $3.58 billion as of June 30, 2017. On a linked quarter basis, total loans grew $44.7 million, or 1%, from $3.53 billion at March 31, 2017.

Average total deposits for the second quarter of 2017 were $3.68 billion, an increase of $244.9 million, or 7%, versus $3.44 billion for the second quarter of 2016. Total deposits grew $212.5 million, or 6%, from $3.40 billion as of June 30, 2016 to $3.62 billion as of June 30, 2017. In addition, total core deposits, which exclude brokered deposits, increased $208.9 million, or 6%, from $3.29 billion at June 30, 2016 to $3.50 billion at June 30, 2017. The year over year core deposit growth was generated by retail deposit, public funds deposit, and commercial deposit growth in the amounts of $104.0 million, $75.4 million and $29.6 million, respectively. On a linked quarter basis, total average deposits grew $45.2 million, or 1%, from $3.64 billion at March 31, 2017.

The company’s net interest margin increased 15 basis points to 3.34% for the second quarter of 2017 compared to 3.19% for the second quarter of 2016. The higher margin in the second quarter of 2017 was due to higher yields on loans and securities, partially offset by a higher cost of funds. On a linked quarter basis, the net interest margin improved by 7 basis points from 3.27% in the first quarter of 2017 due to the positive impact of the Federal Reserve Bank increases in the target Federal Funds Rate in mid-March 2017 and mid-June 2017. Net interest income increased $4.5 million, or 16%, to $33.8 million for the second quarter of 2017, versus $29.3 million in the second quarter of 2016. The company’s net interest margin for the six months ended June 30, 2017 was 3.31% compared to 3.22% in the prior year six month period.

The company recorded a provision for loan losses of $500,000 in the second quarter of 2017, primarily driven by the growth in the loan portfolio. The company’s allowance for loan losses as of June 30, 2017 was $44.6 million compared to $43.2 million as of June 30, 2016 and $43.8 million as of March 31, 2017. The allowance for loan losses represented 1.25% of total loans as of June 30, 2017 versus 1.35% at June 30, 2016 and 1.24% as of March 31, 2017.

Nonperforming assets increased $513,000, or 5%, to $10.1 million as of June 30, 2017 versus $9.6 million as of June 30, 2016. On a linked quarter basis, nonperforming assets were $1.9 million lower than the $12.0 million reported as of March 31, 2017. The ratio of nonperforming assets to total assets at June 30, 2017 decreased to 0.23% from 0.24% at June 30, 2016 and 0.28% at March 31, 2017. The $1.9 million decrease in nonperforming assets during the quarter was primarily due to payments received from an accruing commercial relationship which had become 90 days past due. Net recoveries totaled $289,000 in the second quarter of 2017 versus net charge-offs of $36,000 during the second quarter of 2016 and net charge-offs of $144,000 during the linked first quarter of 2017.

Findlay added, “We are pleased that our asset quality trends continue to be stable. During the second quarter, nonperforming assets to total assets improved as compared to last quarter and we recorded net recoveries. The economic conditions in our Indiana markets are reflected in our asset quality performance and we remain optimistic about the future.”

The company’s noninterest income increased $724,000 or 9% to $8.8 million for the second quarter of 2017 versus $8.1 million for the second quarter of 2016. Noninterest income was positively impacted by a $410,000 increase in service charges on deposit accounts primarily due to growth in fees from business accounts. In addition, wealth advisory fees increased $151,000 or 13%.

The company’s noninterest income increased 13% to $17.1 million for the six months ended June 30, 2017 compared to $15.1 million in the prior year period. Noninterest income was positively impacted by a $773,000 or 14% increase in service charges on deposit accounts. In addition, wealth advisory fees increased by $241,000 or 11% and investment brokerage fees increased by $120,000 or 24%. Bank owned life insurance income increased $211,000 or 32% from first six months of 2016 to the first six months of 2017 primarily due to increased revenue from variable life insurance contracts owned by the company. In addition, other income increased $653,000 or 127% compared to the first six months of 2016. During the first quarter of 2016, other income was negatively impacted by credit valuation adjustment losses related to the company’s swap arrangements, which account for $295,000 of the increase in other income from the first six months of 2016 to the first six months of 2017. In addition, a write down in the first quarter of 2016 of $226,000 to a property formerly used as a Lake City Bank branch negatively impacted other income in 2016. Noninterest income during the first six months of 2017 was negatively impacted by a decrease of $202,000 or 28% in mortgage banking income resulting from lower mortgage loan originations as compared to the prior year period.

The company’s noninterest expense increased by 5% to $19.4 million in the second quarter of 2017 compared to $18.4 million in the second quarter of 2016. Salaries and employee benefits increased by 4% or $473,000 primarily due to incentive-based compensation costs, increased health insurance cost, normal merit increases and staff additions related to the company’s branch expansion. Corporate and business development expense increased by $433,000 or 57%, primarily due to an increase in the second quarter of 2017 of community support and donation expense. Equipment costs and net occupancy expense increased by $247,000 and $113,000 or 27% and 11%, respectively, driven by the company’s branch expansion as well as remodeling of existing branches. Noninterest expense was positively impacted by decreases of $146,000 or 7% in data processing fees and supplies and $138,000 or 25% in FDIC insurance and other regulatory fees.

The company’s noninterest expense increased by $3.6 million or 10% to $39.4 million in the first six months of 2017 compared to $35.8 million in the prior year period. The increase was driven by salaries and employee benefits, which increased by 11% or $2.3 million, primarily due to incentive-based compensation costs, increased health insurance cost, normal merit increases and staff additions related to the company’s branch expansion. In addition, corporate and business development increased by 67%, or $1.1 million, primarily due to community support and donation expense of $750,000 and $283,000 of increased advertising expense. The company's efficiency ratio was 45.4% for the second quarter of 2017, compared to 49.4% for the second quarter of 2016 and 49.7% for the linked first quarter of 2017.

Lakeland Financial Corporation is a $4.4 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank headquartered in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 49 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 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 and “tangible assets” which is “assets” 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,” “continue,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. The company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain and, accordingly, the reader is cautioned not to place undue reliance on any forward-looking statements made by the company. 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.

_________________________
¹ Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”

LAKELAND FINANCIAL CORPORATION
SECOND QUARTER 2017 FINANCIAL HIGHLIGHTS

		Three Months Ended										Six Months Ended
(Unaudited – Dollars in thousands, except per share data)		Jun. 30,				Mar. 31,			Jun. 30,			Jun. 30,				Jun. 30,
END OF PERIOD BALANCES			2017			2017			2016				2017			2016
	Assets	$	4,392,999			$	4,319,103		$	3,937,304		$	4,392,999			$	3,937,304
	Deposits		3,615,939				3,679,397			3,403,455			3,615,939				3,403,455
	Brokered Deposits		116,435				135,595			112,884			116,435				112,884
	Core Deposits		3,499,504				3,543,802			3,290,571			3,499,504				3,290,571
	Loans		3,577,004				3,532,279			3,197,997			3,577,004				3,197,997
	Allowance for Loan Losses		44,563				43,774			43,247			44,563				43,247
	Total Equity		450,460				437,202			418,893			450,460				418,893
	Goodwill net of deferred tax assets		3,126				3,130			3,137			3,126				3,137
	Tangible Common Equity (1)		447,334				434,072			415,756			447,334				415,756
AVERAGE BALANCES
	Total Assets	$	4,395,495			$	4,310,145		$	4,003,633		$	4,353,056			$	3,907,974
	Earning Assets		4,150,234				4,059,885			3,763,022			4,105,309				3,681,747
	Investments		531,262				515,283			488,762			523,317				483,650
	Loans		3,586,408				3,509,155			3,192,545			3,547,995				3,140,947
	Total Deposits		3,682,349				3,637,171			3,437,493			3,659,884				3,334,395
	Interest Bearing Deposits		2,926,086				2,868,676			2,759,696			2,897,539				2,664,700
	Interest Bearing Liabilities		3,171,565				3,084,584			2,887,534			3,128,315				2,807,478
	Total Equity		445,287				431,895			411,986			438,628				405,953
INCOME STATEMENT DATA
	Net Interest Income	$	33,819			$	32,061		$	29,273		$	65,880			$	57,855
	Net Interest Income-Fully Tax Equivalent		34,550				32,733			29,818			67,281				58,920
	Provision for Loan Losses		500				200			0			700				0
	Noninterest Income		8,791				8,259			8,067			17,050				15,110
	Noninterest Expense		19,352				20,048			18,446			39,400				35,830
	Net Income		15,364				14,514			12,803			29,878				25,082
PER SHARE DATA
	Basic Net Income Per Common Share *	$	0.61			$	0.58		$	0.51		$	1.19			$	1.00
	Diluted Net Income Per Common Share *		0.60				0.57			0.51			1.17				0.99
	Cash Dividends Declared Per Common Share *		0.22				0.19			0.19			0.41				0.35
	Dividend Payout		36.67		%		33.33	%		36.84	%		35.04		%		35.47	%
	Book Value Per Common Share (equity per share issued) *		17.88				17.36			16.72			17.88				16.72
	Tangible Book Value Per Common Share * (1)		17.76				17.24			16.60			17.76				16.60
	Market Value – High *		48.70				48.32			33.27			48.70				33.27
	Market Value – Low *		41.38				39.68			28.94			39.68				26.53
	Basic Weighted Average Common Shares Outstanding *		25,183,186				25,152,242			25,045,251			25,167,799				25,032,502
	Diluted Weighted Average Common Shares Outstanding *		25,619,977				25,596,136			25,395,770			25,618,552				25,370,607
KEY RATIOS
	Return on Average Assets		1.40		%		1.37	%		1.29	%		1.38		%		1.29	%
	Return on Average Total Equity		13.84				13.63			12.50			13.74				12.43
	Average Equity to Average Assets		10.13				10.02			10.29			10.08				10.39
	Net Interest Margin		3.34				3.27			3.19			3.31				3.22
	Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income)		45.42				49.72			49.40			47.51				49.11
	Tier 1 Leverage (2)		10.82				10.78			10.85			10.82				10.85
	Tier 1 Risk-Based Capital (2)		12.15				12.02			12.41			12.15				12.41
	Common Equity Tier 1 (CET1) (2)		11.39				11.25			11.55			11.39				11.55
	Total Capital (2)		13.30				13.16			13.65			13.30				13.65
	Tangible Capital (1) (2)		10.19				10.06			10.57			10.19				10.57
ASSET QUALITY
	Loans Past Due 30 - 89 Days	$	1,559			$	1,490		$	1,795		$	1,559			$	1,795
	Loans Past Due 90 Days or More		0				1,633			0			0				0
	Non-accrual Loans		9,886				10,188			9,329			9,886				9,329
	Nonperforming Loans (includes nonperforming TDR's)		9,886				11,821			9,329			9,886				9,329
	Other Real Estate Owned		194				115			238			194				238
	Other Nonperforming Assets		0				15			0			0				0
	Total Nonperforming Assets		10,080				11,951			9,567			10,080				9,567
	Performing Troubled Debt Restructurings		8,425				10,234			8,647			8,425				8,647
	Nonperforming Troubled Debt Restructurings (included in nonperforming loans)		6,852				7,180			6,040			6,852				6,040
	Total Troubled Debt Restructurings		15,277				17,414			14,688			15,277				14,688
	Impaired Loans		19,583				21,670			19,267			19,583				19,267
	Non-Impaired Watch List Loans		133,526				130,551			139,706			133,526				139,706
	Total Impaired and Watch List Loans		153,109				152,221			158,973			153,109				158,973
	Gross Charge Offs		261				503			296			765				762
	Recoveries		550				359			260			909				400
	Net Charge Offs/(Recoveries)		(289	)			144			36			(145	)			362
	Net Charge Offs/(Recoveries) to Average Loans		(0.03	)	%		0.02	%		0.00	%		(0.01	)	%		0.02	%
	Loan Loss Reserve to Loans		1.25		%		1.24	%		1.35	%		1.25		%		1.35	%
	Loan Loss Reserve to Nonperforming Loans		450.75		%		370.31	%		463.58	%		450.75		%		463.58	%
	Loan Loss Reserve to Nonperforming Loans and Performing TDR's		243.37		%		198.48	%		240.58	%		243.37		%		240.58	%
	Nonperforming Loans to Loans		0.28		%		0.33	%		0.29	%		0.28		%		0.29	%
	Nonperforming Assets to Assets		0.23		%		0.28	%		0.24	%		0.23		%		0.24	%
	Total Impaired and Watch List Loans to Total Loans		4.28		%		4.31	%		4.97	%		4.28		%		4.97	%
OTHER DATA
	Full Time Equivalent Employees		540				528			531			540				531
	Offices		49				49			48			49				48

	(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
	(2) Capital ratios for June 30, 2017 are preliminary until the Call Report is filed.
	* Share and per share data has been adjusted for a 3-for-2 stock split in the form of a stock dividend on August 5, 2016.

CONSOLIDATED BALANCE SHEETS (in thousands except share data)
	June 30,			December 31,
		2017			2016
	(Unaudited)
ASSETS
Cash and due from banks	$	111,406		$	142,408
Short-term investments		25,930			24,872
Total cash and cash equivalents		137,336			167,280

Securities available for sale (carried at fair value)		530,312			504,191
Real estate mortgage loans held for sale		4,221			5,915

Loans, net of allowance for loan losses of $44,563 and $43,718		3,532,441			3,427,209

Land, premises and equipment, net		56,492			52,092
Bank owned life insurance		74,929			74,006
Federal Reserve and Federal Home Loan Bank stock		11,522			11,522
Accrued interest receivable		12,028			11,687
Goodwill		4,970			4,970
Other assets		28,748			31,153
Total assets	$	4,392,999		$	4,290,025

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Noninterest bearing deposits	$	762,965		$	819,803
Interest bearing deposits		2,852,974			2,758,109
Total deposits		3,615,939			3,577,912

Short-term borrowings
Securities sold under agreements to repurchase		60,188			50,045
Other short-term borrowings		215,000			180,000
Total short-term borrowings		275,188			230,045

Long-term borrowings		30			32
Subordinated debentures		30,928			30,928
Accrued interest payable		4,809			5,676
Other liabilities		15,645			18,365
Total liabilities		3,942,539			3,862,958

STOCKHOLDERS' EQUITY
Common stock: 90,000,000 shares authorized, no par value
25,185,619 shares issued and 25,021,759 outstanding as of June 30, 2017
25,096,087 shares issued and 24,937,865 outstanding as of December 31, 2016		105,744			104,405
Retained earnings		347,427			327,873
Accumulated other comprehensive income/(loss)		369			(2,387	)
Treasury stock, at cost (2017 - 163,860 shares, 2016 - 158,222 shares)		(3,169	)		(2,913	)
Total stockholders' equity		450,371			426,978
Noncontrolling interest		89			89
Total equity		450,460			427,067
Total liabilities and equity	$	4,392,999		$	4,290,025

CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
NET INTEREST INCOME
Interest and fees on loans
Taxable	$	36,967	$	30,918	$	71,414	$	60,548
Tax exempt		162		111		312		222
Interest and dividends on securities
Taxable		2,364		2,297		4,684		4,843
Tax exempt		1,274		947		2,436		1,842
Interest on short-term investments		54		82		102		110
Total interest income		40,821		34,355		78,948		67,565

Interest on deposits		6,243		4,694		11,685		8,889
Interest on borrowings
Short-term		431		99		741		246
Long-term		328		289		642		575
Total interest expense		7,002		5,082		13,068		9,710

NET INTEREST INCOME		33,819		29,273		65,880		57,855

Provision for loan losses		500		0		700		0

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		33,319		29,273		65,180		57,855

NONINTEREST INCOME
Wealth advisory fees		1,284		1,133		2,534		2,293
Investment brokerage fees		299		212		620		500
Service charges on deposit accounts		3,253		2,843		6,396		5,623
Loan, insurance and service fees		1,897		1,892		3,790		3,730
Merchant card fee income		570		527		1,108		1,024
Bank owned life insurance income		402		489		873		662
Other income		659		587		1,168		515
Mortgage banking income		378		384		509		711
Net securities gains		49		0		52		52
Total noninterest income		8,791		8,067		17,050		15,110

NONINTEREST EXPENSE
Salaries and employee benefits		11,065		10,592		22,486		20,197
Net occupancy expense		1,154		1,041		2,274		2,137
Equipment costs		1,156		909		2,231		1,810
Data processing fees and supplies		1,974		2,120		3,990		4,152
Corporate and business development		1,196		763		2,698		1,620
FDIC insurance and other regulatory fees		419		557		853		1,080
Professional fees		801		859		1,755		1,686
Other expense		1,587		1,605		3,113		3,148
Total noninterest expense		19,352		18,446		39,400		35,830

INCOME BEFORE INCOME TAX EXPENSE		22,758		18,894		42,830		37,135
Income tax expense		7,394		6,091		12,952		12,053
NET INCOME	$	15,364	$	12,803	$	29,878	$	25,082

BASIC WEIGHTED AVERAGE COMMON SHARES		25,183,186		25,045,251		25,167,799		25,032,502
BASIC EARNINGS PER COMMON SHARE	$	0.61	$	0.51	$	1.19	$	1.00
DILUTED WEIGHTED AVERAGE COMMON SHARES		25,619,977		25,395,770		25,618,552		25,370,607
DILUTED EARNINGS PER COMMON SHARE	$	0.60	$	0.50	$	1.17	$	0.99

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
SECOND QUARTER 2017
(unaudited in thousands)

	June 30,					March 31,					December 31,					June 30,
	2017					2017					2016					2016
Commercial and industrial loans:
Working capital lines of credit loans	$	717,875		20.0	%	$	650,691		18.4	%	$	624,404		18.0	%	$	598,531		18.7	%
Non-working capital loans		646,517		18.1			673,374		19.1			644,086		18.6			628,119		19.7
Total commercial and industrial loans		1,364,392		38.1			1,324,065		37.5			1,268,490		36.5			1,226,650		38.4

Commercial real estate and multi-family residential loans:
Construction and land development loans		209,772		5.8			238,018		6.7			245,182		7.1			221,027		6.9
Owner occupied loans		511,425		14.3			468,621		13.3			469,705		13.5			457,461		14.3
Nonowner occupied loans		450,907		12.6			463,186		13.1			458,404		13.2			395,597		12.4
Multifamily loans		170,902		4.8			201,147		5.7			127,632		3.7			114,618		3.6
Total commercial real estate and multi-family residential loans		1,343,006		37.5			1,370,972		38.8			1,300,923		37.5			1,188,703		37.2

Agri-business and agricultural loans:
Loans secured by farmland		156,053		4.4			138,071		3.9			172,633		5.0			146,519		4.6
Loans for agricultural production		175,334		4.9			189,516		5.4			222,210		6.4			162,240		5.1
Total agri-business and agricultural loans		331,387		9.3			327,587		9.3			394,843		11.4			308,759		9.7

Other commercial loans		116,651		3.3			105,684		3.0			98,270		2.8			82,786		2.5
Total commercial loans		3,155,436		88.2			3,128,308		88.6			3,062,526		88.2			2,806,898		87.8

Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		171,495		4.8			166,158		4.7			163,155		4.7			164,564		5.1
Open end and junior lien loans		172,530		4.8			167,517		4.7			169,664		4.9			164,645		5.2
Residential construction and land development loans		10,118		0.3			10,274		0.3			15,015		0.4			9,570		0.3
Total consumer 1-4 family mortgage loans		354,143		9.9			343,949		9.7			347,834		10.0			338,779		10.6

Other consumer loans		68,646		1.9			60,881		1.7			61,308		1.8			52,492		1.6
Total consumer loans		422,789		11.8			404,830		11.4			409,142		11.8			391,271		12.2
Subtotal		3,578,225		100.0	%		3,533,138		100.0	%		3,471,668		100.0	%		3,198,169		100.0	%
Less: Allowance for loan losses		(44,563	)				(43,774	)				(43,718	)				(43,247	)
Net deferred loan fees		(1,221	)				(859	)				(741	)				(172	)
Loans, net	$	3,532,441				$	3,488,505				$	3,427,209				$	3,154,750



LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
SECOND QUARTER 2017
(unaudited in thousands)

	June 30,					March 31,					December 31,					June 30,
		2017					2017					2016					2016
Non-interest bearing demand deposits	$	762,965				$	762,575				$	819,803				$	727,308
Savings and transaction accounts:
Savings deposits		275,151					277,148					268,970					265,415
Interest bearing demand deposits		1,322,847					1,346,651					1,325,320					1,235,305
Time deposits:
Deposits of $100,000 or more		1,015,741					1,056,025					924,825					928,156
Other time deposits		239,235					236,998					238,994					247,271
Total deposits	$	3,615,939				$	3,679,397				$	3,577,912				$	3,403,455
FHLB advances and other borrowings		275,188					175,734					261,005					87,328
Total funding sources	$	3,891,127				$	3,855,131				$	3,838,917				$	3,490,783

		LAKELAND FINANCIAL CORPORATION
		AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
		(UNAUDITED)

			Three Months Ended							Three Months Ended							Three Months Ended
			June 30, 2017							March 31, 2017							June 30, 2016
			Average			Interest		Yield (1)/		Average			Interest		Yield (1)/		Average			Interest		Yield (1)/
		(fully tax equivalent basis, dollars in thousands)	Balance			Income		Rate		Balance			Income		Rate		Balance			Income		Rate
		Earning Assets
		Loans:
		Taxable (2)(3)	$	3,566,504		$	36,967	4.16	%	$	3,491,018		$	34,447	4.00	%	$	3,180,783		$	30,918	3.91	%
		Tax exempt (1)		19,903			240	4.82			18,137			221	4.94			11,763			164	5.62
		Investments: (1)
		Available for sale		531,262			4,291	3.24			515,283			4,083	3.21			488,762			3,736	3.07
		Short-term investments		6,124			8	0.52			5,121			5	0.40			5,805			3	0.21
		Interest bearing deposits		26,441			46	0.70			30,326			43	0.58			75,908			79	0.42
		Total earning assets	$	4,150,234		$	41,552	4.02	%	$	4,059,885		$	38,799	3.88	%	$	3,763,021		$	34,900	3.73	%
		Less: Allowance for loan losses		(44,090	)						(43,981	)						(43,228	)
		Nonearning Assets
		Cash and due from banks		101,446							108,682							109,744
		Premises and equipment		54,341							52,729							48,921
		Other nonearning assets		133,564							132,830							125,175
		Total assets	$	4,395,495						$	4,310,145						$	4,003,633

		Interest Bearing Liabilities
		Savings deposits	$	274,645		$	105	0.15	%	$	271,087		$	99	0.15	%	$	263,331		$	115	0.18	%
		Interest bearing checking accounts		1,403,560			2,387	0.68			1,383,791			1,952	0.57			1,309,443			1,455	0.45
		Time deposits:
		In denominations under $100,000		237,917			700	1.18			238,347			670	1.14			249,452			719	1.16
		In denominations over $100,000		1,009,964			3,051	1.21			975,450			2,721	1.13			937,470			2,405	1.03
		Miscellaneous short-term borrowings		214,520			431	0.81			184,950			310	0.68			96,878			99	0.41
		Long-term borrowings and subordinated debentures (4)		30,959			328	4.25			30,959			314	4.11			30,960			289	3.75
		Total interest bearing liabilities	$	3,171,565		$	7,002	0.89	%	$	3,084,584		$	6,066	0.80	%	$	2,887,534		$	5,082	0.71	%
		Noninterest Bearing Liabilities
		Demand deposits		756,262							768,495							677,797
		Other liabilities		22,381							25,172							26,316
		Stockholders' Equity		445,287							431,894							411,986
		Total liabilities and stockholders' equity	$	4,395,495						$	4,310,145						$	4,003,633

		Interest Margin Recap
		Interest income/average earning assets					41,552	4.02						38,799	3.88						34,900	3.73
		Interest expense/average earning assets					7,002	0.68						6,066	0.61						5,082	0.54
		Net interest income and margin				$	34,550	3.34	%				$	32,733	3.27	%				$	29,818	3.19	%

(1	)	Tax exempt income was converted to a fully taxable equivalent basis at a 35 percent tax rate for 2017 and 2016. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $731,000, $672,000 and $545,000 in the three-month periods ended June 30, 2017, March 31, 2017 and June 30, 2016, respectively.
(2	)	Loan fees, which are immaterial in relation to total taxable loan interest income for 2017 and 2016, are included as taxable loan interest income.
(3	)	Nonaccrual loans are included in the average balance of taxable loans.

(1) Reconciliation of Non-GAAP Financial Measures

Tangible common equity, tangible assets and tangible book value per share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of stockholders’ equity. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. However, management considers these measures of the company’s value including only earning assets as meaningful to an understanding of the company’s financial information. A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).

	Three Months Ended									Six Months Ended
	Jun. 30,			Mar. 31,			Jun. 30,			Jun. 30,			Jun. 30,
		2017			2017			2016			2017			2016
Total Equity	$	450,460		$	437,202		$	418,893		$	450,460		$	418,893
Less: Goodwill		(4,970	)		(4,970	)		(4,970	)		(4,970	)		(4,970	)
Plus: Deferred tax assets related to goodwill		1,844			1,840			1,833			1,844			1,833
Tangible Common Equity		447,334			434,072			415,756			447,334			415,756

Assets	$	4,392,999		$	4,319,103		$	3,937,304		$	4,392,999		$	3,937,304
Less: Goodwill		(4,970	)		(4,970	)		(4,970	)		(4,970	)		(4,970	)
Plus: Deferred tax assets related to goodwill		1,844			1,840			1,833			1,844			1,833
Tangible Assets		4,389,873			4,315,973			3,934,167			4,389,873			3,934,167

Ending common shares issued		25,185,619			25,180,759			25,045,251			25,185,619			25,045,251

Tangible Book Value Per Common Share *	$	17.76		$	17.24		$	16.60		$	17.76		$	16.60

Tangible Common Equity/Tangible Assets		10.19	%		10.06	%		10.57	%		10.19	%		10.57	%

*Share and per share data has been adjusted for a 3-for-2stock split in the form of a stock dividend on August 5, 2016.

Lakeland Financial Reports Record Performance

Second Quarter Net Income Increases 20%

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