Net Income and Earnings Per Share Set Performance Records

WARSAW, Ind., Oct. 25, 2011 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $8.4 million for the third quarter of 2011. This net income performance represents a 30% increase over $6.5 million for the third quarter of 2010. On a linked quarter basis, net income increased 6% compared to net income of $8.0 million for the second quarter of 2011.

Diluted earnings per common share also increased 30% for the quarter to $0.52 versus $0.40 for the comparable period of 2010. Diluted earnings per common share increased 6% versus $0.49 in the second quarter of 2011.

The Company further reported record net income of $22.4 million for the nine months ended September 30, 2011 versus $18.8 million for the comparable period of 2010, an increase of 19%. Diluted net income per common share increased 43% to $1.37 for the nine months ended September 30, 2011 versus $0.96 for the comparable period of 2010.

The Company also announced that the Board of Directors approved a cash dividend for the third quarter of $0.155 per share, payable on November 7, 2011 to shareholders of record as of October 25, 2011. 

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "During 2011, we've maintained our focus on serving Indiana communities and Indiana clients and this performance is a direct result of our disciplined adherence to this strategy. Our shareholders, communities and clients have all benefitted from our drive to be the leading community bank in Indiana."

"We're continuing our Indiana growth and expansion with the opening of regional headquarter offices in the Indianapolis and South Bend markets in the fourth quarter. We're excited about the strong local response we've received in both of these markets and look forward to the growth that will come with the opening of these offices," added Kubacki. 

Average total loans for the third quarter of 2011 were $2.16 billion versus $2.06 billion for the third quarter of 2010 and $2.14 billion for the linked second quarter of 2011. Total loans outstanding grew $127 million, or 6%, from $2.05 billion as of September 30, 2010 to $2.18 billion as of September 30, 2011. Total loans increased by $33 million, or 2%, during the third quarter of 2011.

David M. Findlay, President and Chief Financial Officer commented, "There's not a more effective way for a commercial bank to contribute to economic recovery than to make loans in the communities it serves and we're pretty proud of our lending performance. Since year-end 2010, we've increased loans by $91 million and have experienced loan growth in every Indiana market we serve. During the economic challenges of the past few years, our good financial performance has really allowed us to focus on serving clients and our loan growth of $348 million, or nearly 20%, since 2008 demonstrates that commitment."

The Company's net interest margin was 3.48% in the third quarter of 2011 versus 3.70% for the third quarter of 2010 and 3.53% in the linked second 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 nine months ended September 30, 2011, the Company's net interest margin was 3.60% versus 3.77% for the comparable period in 2010.

The Company's provision for loan losses in the third quarter of 2011 was $2.4 million versus $6.2 million in the same period of 2010. In the second quarter of 2011, the provision was $2.9 million.  For the nine months ended September 30, 2011, the Company's provision for loan losses was $10.9 million versus $17.4 million for the comparable period in 2010. The provision decrease on a year-over-year basis was generally driven by stabilization or improvement in key loan quality metrics, including lower year-to-date net charge offs, decreased levels of nonperforming loans on a linked quarter basis and strong reserve coverage of nonperforming loans, continuing signs of stabilization in economic conditions in 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 September 30, 2011 was $52.1 million compared to $42.0 million as of September 30, 2010 and $51.3 million as of June 30, 2011. The allowance for loan losses represented 2.39% of total loans as of September 30, 2011 versus 2.05% at September 30, 2010 and 2.39% as of June 30, 2011.

Net charge-offs totaled $1.6 million in the third quarter of 2011 versus $1.5 million during the third quarter of 2010 and $136,000 during the second quarter of 2011.  The largest net charge off attributable to a single commercial credit during the quarter was $600,000. For the nine months ended September 30, 2011, net charge-offs were $3.8 million versus $7.5 million for the comparable period in 2010.   Nonperforming assets were $36.2 million as of September 30, 2011 versus $29.5 million as of September 30, 2010 and $40.1 million as of June 30, 2011. The ratio of nonperforming assets to total assets at September 30, 2011 was 1.28% versus 1.09% at September 30, 2010 and 1.47% at June 30, 2011. The allowance for loan losses represented 157% of nonperforming loans as of September 30, 2011 versus 137% at June 30, 2011 and 162% at September 30, 2010.

Findlay added, "While we're pleased with the reduction in nonperforming loans and the resulting increase in loan loss reserve coverage in the quarter, our outlook remains cautious. The economic recovery in our markets, while evident, is neither robust nor widespread. Therefore, we remain concerned about the risk to our borrowers' financial strength and will continue to closely monitor our loan portfolio and the adequacy of our loan loss reserve."

The Company's noninterest income decreased 5% to $5.9 million for the third quarter of 2011, versus $6.2 million for the third quarter of 2010. Noninterest income was also $5.9 million for the second quarter of 2011. On a year-over-year basis, noninterest income was positively impacted by a $65,000 increase in investment brokerage income and a $159,000 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 $82,000.   Non-interest income was negatively impacted by a $334,000 decrease in mortgage banking income. In addition service charges on deposit accounts decreased by $169,000. This decline resulted from lower nonsufficient fund charges of $217,000 versus the third quarter of 2010. Overall, total revenue for the third quarter of 2011 decreased to $28.7 million versus $29.4 million for the comparable period of 2010 and $28.9 million in the second quarter of 2011.

Kubacki commented, "Our cross-selling of fee-based services in the commercial and retail banking businesses has been strong. Yet, as the entire industry absorbs the impact of the numerous regulatory changes, it will be increasingly difficult to generate comparable levels of noninterest income in the retail banking business. We're focused on continuing to emphasize the effective cross-selling of relationship enhancing revenue sources to offset these declines."

The Company's noninterest expense decreased $150,000, or 1%, to $13.5 million in the third quarter of 2011 versus $13.6 million in the comparable quarter of 2010. On a linked quarter basis, non-interest expense decreased 4% from $14.0 million in the second quarter of 2011. On a year-over-year basis, data processing fees decreased $275,000 due to the Company's completion of the conversion to a new core processor during the second quarter of 2011. Other expense decreased $850,000 primarily due to lower FDIC deposit insurance premiums as well as lower professional fees and other costs associated with borrowers who are experiencing difficulties. Salaries and employee benefits increased by $952,000 in the three-month period ended September 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 our strong performance and increased recognition levels. The Company's efficiency ratio for the third quarter of 2011 was 47%, compared to a ratio of 46% for the comparable quarter of 2010 and 48% for the linked second quarter period. 

The Company's tangible common equity to tangible assets ratio was 9.40% at September 30, 2011 compared to 8.93% at September 30, 2010 and 9.37% at June 30, 2011. Average total deposits for the quarter ended September 30, 2011 were $2.32 billion versus $2.34 billion for the second quarter of 2011 and $2.20 billion for the third quarter of 2010.

Lakeland Financial Corporation is a $2.8 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 full service offices in Indianapolis and South Bend 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.