Lake City Bank Earnings Per Share Increase 104% to Set New Record

WARSAW, Ind., July 25, 2011 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $8.0 million for the second quarter of 2011. This net income performance represents a 28% increase over $6.2 million for the second quarter of 2010. On a linked quarter basis, net income increased 34% compared to net income of $6.0 million for the first quarter of 2011.

Diluted earnings per common share increased 104% for the quarter to $0.49 versus $0.24 for the comparable period of 2010. Diluted earnings per common share increased 32% versus $0.37 in the first quarter of 2011.

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "We believe that our shareholders will be pleased with this strong earnings performance. When we accepted a capital investment under the U.S. Treasury's Capital Purchase Program in the first quarter of 2009, we did so with the understanding that it would be dilutive to our existing shareholders. Yet, we felt that it was critical for Lake City Bank to continue its lending and investment activities in Indiana during the economic downturn. The capital infusion under the program, and our subsequent public equity raise in late 2009, established a strong capital base and provided us with the ability to smartly grow our lending activity during some very challenging times for our clients and the economy. Due to our strong capital position, we redeemed the shares held by the U.S. Treasury in the second quarter of 2010 and we are no longer a participant in the Capital Purchase Program. Throughout these capital events, we have been focused on creating shareholder value, while at the same time serving our communities during a very difficult economic cycle. Therefore, it's very gratifying to our Team to produce shareholder earnings at a record level in the second quarter."

The Company further reported record net income of $14.0 million for the six months ended June 30, 2011 versus $12.2 million for the comparable period of 2010, an increase of 14%. Diluted net income per common share increased 53% to $0.86 for the six months ended June 30, 2011 versus $0.56 for the comparable period of 2010.

Kubacki added, "Both the second quarter and year-to-date results represent new records for earnings per share and net income. We recognize that the creation of return for our shareholders is a key measure for a publicly traded company, and we're proud of this performance. Equally as important though, is the fact that we believe that we have produced this return while at the same time contributing to the strength of the Indiana communities we serve. Together, these factors contribute to an environment that our employees, clients and shareholders all benefit from."

The Company also announced that the Board of Directors approved a cash dividend for the second quarter of $0.155 per share, payable on August 5, 2011 to shareholders of record as of July 25, 2011.

Average total loans for the second quarter of 2011 were $2.14 billion versus $2.04 billion for the second quarter of 2010 and $2.10 billion for the linked first quarter of 2011. Total loans outstanding grew $91 million, or 4%, from $2.06 billion as of June 30, 2010 to $2.15 billion as of June 30, 2011. Total loans increased by $44 million, or 2%, during the second quarter of 2011.

David M. Findlay, President and Chief Financial Officer, stated, "As we have throughout the economic downturn, we continued strong loan growth during the first half of 2011. We feel that it's important to provide the capital for business growth and expansion to Hoosier companies, and we've done that with over $50 million of additional lending activity in 2011."

The Company's net interest margin was 3.53% in the second quarter of 2011 versus 3.75% for the second quarter of 2010 and 3.78% in the linked first quarter of 2011. The year-over-year margin decline resulted primarily from reduced yields in the investment portfolio and slightly lower commercial loan yields. For the six months ended June 30, 2011, the Company's net interest margin was 3.66% versus 3.80% for the comparable period in 2010. Total earning asset yields were 4.81% for the six months ended June 30, 2011 versus 5.02% for the comparable period in 2010, while total cost of funds were 1.21% versus 1.30% in 2010 for the same periods.

The Company's provision for loan losses in the second quarter of 2011 was $2.9 million versus $5.8 million in the same period of 2010. In the first quarter of 2011, the provision was $5.6 million. For the six months ended June 30, 2011, the Company's provision for loan losses was $8.5 million versus $11.3 million for the comparable period in 2010. The provision decrease on a year-over-year basis was generally driven by lower levels of net loan charge offs, adequate allowance for loan losses coverage of nonperforming loans, stabilization in economic conditions in the Company's markets and some signs of improvement in our borrowers' performance and future prospects. The Company's allowance for loan losses as of June 30, 2011 was $51.3 million compared to $37.4 million as of June 30, 2010 and $48.5 million as of March 31, 2011. The allowance for loan losses increased to 2.39% of total loans as of June 30, 2011 versus 1.82% at June 30, 2010 and 2.30% as of March 31, 2011.

Net charge-offs totaled $136,000 in the second quarter of 2011 versus $4.7 million during the second quarter of 2010 and $2.1 million during the first quarter of 2011. For the six months ended June 30, 2011, net charge-offs were $2.2 million versus $6.0 million for the comparable period in 2010. Nonperforming assets were $40.1 million as of June 30, 2011 versus $31.1 million as of June 30, 2010 and $39.9 million as of March 31, 2011. The ratio of nonperforming assets to total assets at June 30, 2011 was 1.47% versus 1.18% at June 30, 2010 and 1.45% at March 31, 2011. The allowance for loan losses increased to 137% of nonperforming loans as of June 30, 2011 versus 132% at March 31, 2011 and 122% at June 30, 2010.

Findlay further stated, "While we're pleased with continued loan growth and the low level of charge-offs in the second quarter, we remain concerned about the overall economic conditions in our Indiana markets. It's true that we've seen stabilization in many of our challenged borrowers, but we're hesitant to call this stabilization a general recovery at this point. Clearly, national and regional economic conditions are somewhat fragile and we expect that they will remain so into 2012. Yet, our level of nonperforming assets and watch list loans has remained stable for several consecutive quarters, which we believe is a further indication of economic stabilization in our markets."

The Company's noninterest income increased 11% to $5.9 million for the second quarter of 2011, versus $5.4 million for the second quarter of 2010. Noninterest income increased 23% from $4.8 million for the first quarter of 2011. On a year-over-year basis, noninterest income was positively impacted by a $150,000 increase in investment brokerage income and an $186,000 increase in loan, insurance and service fees, which were driven by increases in several ancillary commercial and retail revenue sources. In addition, wealth advisory fees increased by $96,000. Noninterest income was negatively impacted by a $263,000 decrease in service charges on deposit accounts. This decline resulted from lower nonsufficient fund charges of $255,000 versus the second quarter of 2010. Overall, total revenue for the second quarter of 2011 increased to $28.9 million versus $28.5 million for the comparable period of 2010 and $28.4 million in the first quarter of 2011.

The Company's noninterest expense increased $548,000, or 4%, to $14.0 million in the second quarter of 2011 versus $13.4 million in the comparable quarter of 2010. On a linked quarter basis, noninterest expense decreased 1% from $14.2 million in the first quarter of 2011. Salaries and employee benefits increased by $459,000 in the three-month period ended June 30, 2011 versus the same period of 2010. These increases were driven by staff additions and normal merit increases. In addition, the Company's performance based compensation expense increased due to performance versus corporate objectives and increased recognition levels. The Company's efficiency ratio for the second quarter of 2011 was 48%, compared to a ratio of 47% for the comparable quarter of 2010.

The Company's tangible common equity to tangible assets ratio was 9.37% at June 30, 2011 compared to 8.91% at June 30, 2010 and 9.02% at March 31, 2011. Average total deposits for the quarter ended June 30, 2011 were $2.34 billion versus $2.22 billion for the first quarter of 2011 and $2.13 billion for the second quarter of 2010.

Lakeland Financial Corporation is a $2.7 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank serves Northern Indiana with 43 branches located in the following Indiana counties: Kosciusko, Elkhart, Allen, St. Joseph, DeKalb, Fulton, Huntington, LaGrange, Marshall, Noble, Pulaski and Whitley. The Company also has a Loan Production Office in Indianapolis, Indiana and expects to open a full service office in Indianapolis during the fourth quarter of 2011.

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". Market makers in Lakeland Financial Corporation common shares include Automated Trading Desk Financial Services, LLC, B-Trade Services, LLC, Citadel Securities, LLC, Citigroup Global Markets Holdings, Inc., Domestic Securities, Inc., E*TRADE Capital Markets LLC, Goldman Sachs & Company, Howe Barnes Hoefer & Arnett, Inc., Keefe, Bruyette & Woods, Inc., Knight Capital Americas, L.P., Morgan Stanley & Co., Inc., Sterne Agee & Leach, Stifel Nicolaus & Company, Inc., Susquehanna Capital Group and UBS Securities LLC.

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.