Lakeland Financial Income Climbs 45% to Record Level

WARSAW, Ind., April 25, 2012 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $8.6 million for the first quarter of 2012, an increase of 45% versus $6.0 million in the first quarter of 2011. Diluted net income per share increased 41% to $0.52 in the first quarter versus $0.37 for the comparable period of 2011 and also represented a record performance. On a linked quarter basis, net income increased 4% compared to net income of $8.3 million, or $0.50 per diluted share, for the fourth quarter of 2011.

The Company also announced that the Board of Directors approved a cash dividend for the first quarter of $0.17 per share, payable on May 7, 2012 to shareholders of record as of April 25, 2012. The quarterly dividend represents a 10% increase over the quarterly dividends paid in 2011.

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "We entered 2012 with strong earnings momentum and delivered an excellent first quarter for our shareholders. We're excited by the growth we've experienced in the Indianapolis market and our Northern Indiana markets continue to provide good potential for expanded market share opportunities as our regional economy continues to rebound."

Kubacki continued, "We're especially pleased to increase our dividend by 10%. During the economic downturn, our consistent earnings strength and strong capital position permitted us to pay a healthy and uninterrupted dividend. This dividend increase is further evidence of the strength of our balance sheet and our positive outlook for the future."

Average total loans for the first quarter of 2012 were $2.22 billion versus $2.10 billion for the first quarter of 2011, an increase of 6%. On a linked quarter basis, average loans grew by $19 million, or 1%, to $2.22 billion versus $2.20 billion in the fourth quarter of 2011. Total loans outstanding grew $121 million, or 6%, from $2.10 billion as of March 31, 2011 to $2.23 billion as of March 31, 2012.  

David M. Findlay, President and Chief Financial Officer, observed, "Overall, loan demand continues to be good, as demonstrated by the growth in average loans in the first quarter. During the quarter, we experienced a high level of reductions in agri-business loans as favorable commodity prices resulted in strong results for these borrowers. These seasonal reductions impacted our overall loan totals and offset the positive organic growth in the quarter. We expect loan growth to continue to be moderate as the economic recovery in our markets moves along."

The Company's net interest margin was 3.41% in the first quarter of 2012 versus 3.78% for the first quarter of 2011 and 3.38% in the linked fourth 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.

The Company's provision for loan losses in the first quarter of 2012 was $799,000 versus $5.6 million in the same period of 2011. In the fourth quarter of 2011, the provision was $2.9 million. The provision decrease on a year-over-year basis was generally driven by the stabilization and improvement in key loan quality metrics, including lower net charge offs, adequate 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 March 31, 2012 was $52.8 million compared to $48.5 million as of March 31, 2011 and $53.4 million as of December 31, 2011. The allowance for loan losses represented 2.37% of total loans as of March 31, 2012 versus 2.30% at March 31, 2011 and 2.39% as of December 31, 2011.

Net charge-offs totaled $1.4 million in the first quarter of 2012 versus $2.1 million during the first quarter of 2011 and $1.6 million during the fourth quarter of 2011.  The largest net charge off attributable to a single commercial credit during the quarter was $601,000. Nonperforming assets were $38.6 million as of March 31, 2012 versus $39.9 million as of March 31, 2011 and $41.6 million as of December 31, 2011. The decrease in nonperforming loans during the quarter primarily resulted from the aforementioned net charge-offs as well as a $989,000 payoff of an impaired commercial credit. The ratio of nonperforming assets to total assets at March 31, 2012 was 1.31% versus 1.45% at March 31, 2011 and 1.44% at December 31, 2011. The allowance for loan losses represented 144% of nonperforming loans as of March 31, 2012 versus 135% at December 31, 2011 and 132% at March 31, 2011. Total watch list loans were $151.8 million at March 31, 2012 versus $158.5 million at March 31, 2011, a decrease of 4%. On a linked quarter basis, total watch list loans decreased 9% from $166.7 million as of December 31, 2011. 

Findlay added, "We're encouraged by the stability of our loan portfolio and the generally positive trends in overall loan quality. While we continue to experience some challenges in our regional economy, conditions are generally improving and our overall outlook is favorable. We've built the allowance to a level that provides strong coverage for our troubled loan situations. Our history proves that we understand the importance of a strong balance sheet, which has allowed us to navigate the past several years and we will continue to diligently monitor our borrower's condition to ensure that we maintain this strong coverage."

The Company's noninterest income increased 21% to $5.9 million for the first quarter of 2012, versus $4.8 million for the first quarter of 2011. On a linked quarter basis, noninterest income increased by 6% from $5.5 million in the fourth quarter of 2011. On a year-over-year basis, noninterest income was positively impacted by a $641,000 increase in mortgage banking income. The increase was driven by a larger pipeline of refinanced mortgage loans due to the continued low interest rate environment. In addition, noninterest income was positively impacted by a $96,000 increase in wealth advisory fees and a $69,000 increase in investment brokerage fees. Noninterest income was negatively impacted by a $389,000 increase in other than temporary impairment on three non-agency mortgage backed securities in the Company's investment portfolio. Other than temporary impairment, which is a non-cash item, was $510,000 in the first quarter of 2012, versus $121,000 in the first quarter of 2011.

The Company's noninterest expense increased $512,000, or 4%, to $14.7 million in the first quarter of 2012 versus $14.2 million in the comparable quarter of 2011. On a linked quarter basis, non-interest expense was $13.5 million in the fourth quarter of 2011. On a year-over-year basis, data processing fees decreased $271,000 due to the Company's conversion to a new core processor during the second quarter of 2011. Other expense decreased $192,000 primarily due to lower FDIC deposit insurance premiums. Salaries and employee benefits increased by $902,000 in the three-month period ended March 31, 2012 versus the same period of 2011.  These increases were driven by staff additions and normal merit increases. In addition, the Company's performance based incentive compensation expense increased due to our strong performance and the resulting increased recognition levels.   On a linked quarter basis, the increase in noninterest expense of $1.2 million was driven by a $1.1 million increase in salaries and employee benefits. Salary and payroll tax expense increased by $413,000, or 6%, as a result of annual merit increases and staff additions, which were driven by the recent opening of two regional headquarter offices. Performance based employee incentive compensation expense, which includes the Company's 401(k) plan and various incentive programs, increased from $872,000 to $1.3 million as a result of the Company's strong results for the quarter versus internal objectives and higher participation levels. In addition, the fourth quarter of 2011 expense was lower than previous quarters in 2011 due to a final reconciliation of these expenses in the fourth quarter. Stock compensation expenses in the first quarter increased by $178,000 versus the linked fourth quarter primarily due to the annual director stock compensation expense, which was not present in the fourth quarter of 2011. The Company's efficiency ratio for the first quarter of 2012 was 52%, compared to a ratio of 50% for the comparable quarter of 2011 and 48% for the linked fourth quarter of 2011.

The Company's tangible common equity to tangible assets ratio was 9.41% at March 31, 2012 compared to 9.02% at March 31, 2011 and 9.36% at December 31, 2011. Average total deposits for the quarter ended March 31, 2012 were $2.43 billion versus $2.42 billion for the fourth quarter of 2011 and $2.22 billion for the first quarter of 2011.

Lakeland Financial Corporation is a $3.0 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.