Lake City Bank Net Income and Earnings Per Share Set New Records

WARSAW, Ind., Jan. 25, 2012 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $30.7 million for 2011. This performance represents a $6.1 million, or 25%, increase in net income versus $24.5 million for 2010. Diluted earnings per common share increased 42% to $1.88 for 2011, versus $1.32 in 2010.

The Company further reported net income of $8.3 million for the fourth quarter of 2011, which represented a 43% increase over $5.8 million in the fourth quarter of 2010. Diluted net income per share for the quarter increased 39% to $0.50 versus $0.36 for the comparable period of 2010. Net income for the linked third quarter of 2011 was $8.4 million.

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "As we reflect on 2011, we're very pleased with the Bank's growth and performance. With the recent opening of regional headquarters in Indianapolis and South Bend, Lake City Bank is positioned to continue its growth in our Indiana communities. Equally as gratifying is our performance for shareholders. We've continued to report strong earnings and experience good balance sheet growth during a period of economic uncertainty. We're proud to have the capital, balance sheet strength and asset quality to support this solid growth."

The Company also announced that the Board of Directors approved a cash dividend for the fourth quarter of $0.155 per share, payable on February 6, 2012 to shareholders of record as of January 25, 2012.

Kubacki continued, "We have not wavered from our mission to be the acknowledged leader in community banking in Indiana. We believe that we are in a great position to continue our expansion and further strengthen our reputation as an organization committed to serving its clients and communities. It's an exciting time of growth for the Lake City Bank Team." 

Average total loans for the fourth quarter of 2011 were $2.20 billion versus $2.08 billion for the fourth quarter of 2010 and $2.16 billion for the linked third quarter of 2011. Total loans outstanding grew $144 million, or 7%, from $2.09 billion as of December 31, 2010 to $2.23 billion as of December 31, 2011. Total loans increased by $53 million, or 2%, during the fourth quarter of 2011.

David M. Findlay, President and Chief Financial Officer stated, "In the past five years, loans have grown by $880 million, or 65%.   This loan growth has not been the result of acquisition or entry into new markets. Rather, it's resulted from targeted growth in our core Indiana markets by great client relationship teams. We've remained committed to contributing to Indiana's economic stability throughout this challenging period and look forward to continuing to play a role in our state's future economic growth."

The Company's net interest margin was 3.38% in the fourth quarter of 2011 versus 3.62% for the fourth quarter of 2010 and 3.48% in the linked third quarter of 2011. 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.  For the year ended December 31, 2011, the Company's net interest margin was 3.54% versus 3.73% for the comparable period in 2010.

The Company's provision for loan losses in the fourth quarter of 2011 was $2.9 million versus $6.5 million in the same period of 2010. In the third quarter of 2011, the provision was $2.4 million.  For the year ended December 31, 2011, the Company's provision for loan losses was $13.8 million versus $23.9 million for the comparable period in 2010. The provision decrease on a year-over-year basis was generally driven by the stabilization and improvement in key loan quality metrics, including significantly lower year-to-date net charge offs, adequate 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 December 31, 2011 was $53.4 million compared to $45.0 million as of December 31, 2010 and $52.1 million as of September 30, 2011. The allowance for loan losses represented 2.39% of total loans as of December 31, 2011 versus 2.15% at December 31, 2010 and 2.39% as of September 30, 2011.

Net charge-offs totaled $1.6 million in the fourth quarter of 2011 versus $3.5 million during the fourth quarter of 2010 and $1.6 million during the third quarter of 2011.  The largest net charge off attributable to a single commercial credit during the quarter was $379,000. For the year ended December 31, 2011, net charge-offs were $5.4 million versus $11.0 million in 2010.    Nonperforming assets were $41.6 million as of December 31, 2011 versus $40.7 million as of December 31, 2010 and $36.2 million as of September 30, 2011. The increase in nonperforming loans during the quarter primarily resulted from the addition of three related commercial real estate loans totaling $7.3 million. The ratio of nonperforming assets to total assets at December 31, 2011 was 1.44% versus 1.52% at December 31, 2010 and 1.28% at September 30, 2011. The allowance for loan losses represented 135% of nonperforming loans as of December 31, 2011 versus 157% at September 30, 2011 and 122% at December 31, 2010.

Findlay added, "Our economy remains fragile, as demonstrated by current unemployment levels and a relative absence of economic expansion in our markets. As a result, we continue to closely monitor our borrowers' strength and maintain a strong loan loss reserve. Clearly, many of our clients are experiencing improved financial performance, but the lingering effects of the recent recession continue to negatively impact some borrowers' performance. We believe that we have strong loan loss reserve coverage of nonperforming loans and look forward to continued improvements in economic conditions."

The Company's noninterest income increased 9% to $5.5 million for the fourth quarter of 2011, versus $5.1 million for the fourth quarter of 2010 but decreased from $5.9 million for the third quarter of 2011. On a year-over-year basis, noninterest income was positively impacted by a $1.1 million decrease in other than temporary impairment on several non-agency mortgage backed securities in the Company's investment portfolio. Other than temporary impairment, which is a non-cash item, was $132,000 in the fourth quarter of 2011, versus $1.3 million in the fourth quarter of 2010. Non-interest income was negatively impacted by a $242,000 decrease in mortgage banking income. In addition service charges on deposit accounts decreased by $159,000. This decline resulted from lower nonsufficient fund charges of $212,000 versus the fourth quarter of 2010. 

The Company's noninterest expense increased $152,000, or 1%, to $13.5 million in the fourth quarter of 2011 versus $13.3 million in the comparable quarter of 2010. On a linked quarter basis, non-interest expense was $13.5 million in the third quarter of 2011. On a year-over-year basis, data processing fees decreased $166,000 due to the Company's conversion to a new core processor during the second quarter of 2011. Other expense decreased $142,000 primarily due to lower FDIC deposit insurance premiums. Salaries and employee benefits increased by $359,000 in the three-month period ended December 31, 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 the resulting increased recognition levels. The Company's efficiency ratio for the fourth quarter of 2011 was 48%, compared to a ratio of 47% for the comparable quarter of 2010 and 47% for the linked third quarter period. 

The Company's tangible common equity to tangible assets ratio was 9.36% at December 31, 2011 compared to 9.10% at December 31, 2010 and 9.40% at September 30, 2011. Average total deposits for the quarter ended December 31, 2011 were $2.42 billion versus $2.32 billion for the third quarter of 2011 and $2.27 billion for the fourth quarter of 2010.

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". 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.

Note: As a result of FASB ASU 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, the Company has revised this table in order to present the data with greater granularity. This disaggregation will be substantially the same as those used in disclosures of credit quality.