Lake City Bank Reports Record High Quarterly and Annual Net Income

WARSAW, Ind., Jan. 27, 2014 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record high net income of $38.8 million for 2013. Net income increased 10% from $35.4 million for 2012. Diluted net income per common share increased 8% to $2.33 for 2013 versus $2.15 for 2012. This per share performance also represents a record level for the company and its shareholders.

The company further reported record quarterly net income of $10.6 million for the fourth quarter of 2013, an increase of 23%, versus $8.6 million in the fourth quarter of 2012. Diluted net income per share was $0.63 for the fourth quarter of 2013, an increase of 21%, versus $0.52 for the comparable period of 2012. This performance represents the highest quarterly and annual net income and earnings per share in the company's 141 year history.

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "We've always believed that by adhering to our long term strategy of consistently taking care of clients each and every day, we would create value for our shareholders. The entire Lake City Bank team is proud of the strong earnings performance in the fourth quarter and for the full year. And our shareholders have benefitted as well, as they were rewarded with a healthy dividend and a 50% increase in our stock price in 2013."

The company also announced that the board of directors approved a cash dividend for the fourth quarter of $0.19 per share, payable on February 5, 2014, to shareholders of record as of January 25, 2014. The quarterly dividend represents a 12% increase over the quarterly dividends paid for each quarter of 2012.

Kubacki further observed, "With the January 2014 opening of our second office in the Indianapolis market, we are continuing to expand the business organically. While Indianapolis represents our newest market, we're getting great traction in that market and are pleased with the growth we've experienced there. Overall, it was a positive year as we experienced good loan growth in every market we serve."

David M. Findlay, President and Chief Financial Officer, stated, "In the fourth quarter, we grew our loan portfolio by $142 million, or 6%, versus the third quarter. This represents the largest quarterly loan growth in our history. For the full year, total loans grew by 12%, or $278 million. We believe that this lending growth is reflective of the strengthening regional economy and of our further market share expansion. We are clearly focused on growing our balance sheet through lending more money in our Northern and Central Indiana markets. This robust loan growth is further evidence of our mission to be the acknowledged and recognized leader in Indiana community banking."

For the year ended December 31, 2013, the company's average total loans increased 6% from $2.22 billion to $2.34 billion. Average total loans for the fourth quarter of 2013 were $2.46 billion versus $2.21 billion for the fourth quarter of 2012, an increase of 11%. Total loans outstanding grew $277.6 million, or 12%, from $2.26 billion as of December 31, 2012 to $2.54 billion as of December 31, 2013. On a linked quarter basis, average total loans increased $109.4 million, or 5%, from $2.35 billion for the third quarter of 2013 to $2.46 billion for the fourth quarter of 2013.

The company's net interest margin was 3.33% in the fourth quarter of 2013, up from 3.10% for the fourth quarter of 2012. Further, the net interest margin improved from 3.29% in the third quarter of 2013. Despite downward pressure on loan and investment portfolio yields, the company improved its net interest margin in each quarter of 2013 as a result of declines in deposit rates and overall funding costs.

The company's tangible book value per common share increased 7% in 2013 from $18.00 to $19.36. As a result, the company's tangible common equity to tangible assets ratio was 10.05% at December 31, 2013 compared to 9.63% at December 31, 2012 and 10.25% at September 30, 2013. Average total deposits for the quarter ended December 31, 2013 were $2.58 billion versus $2.48 billion for the third quarter of 2013 and $2.55 billion for the fourth quarter of 2012.

For the fourth consecutive quarter, the company did not record a provision for loan losses. As a result, the provision for loan losses for 2013 was $0 versus $2.5 million in 2012. The absence of a provision for loan losses was generally driven by the stabilization and improvement in key loan quality metrics, including lower levels of net charge offs, appropriate reserve coverage of nonperforming loans, continuing signs of stabilization in the economic conditions of the company's markets and general signs of improvement in its borrowers' performance and future prospects. The company's allowance for loan losses as of December 31, 2013 was $48.8 million compared to $51.4 million as of December 31, 2012 and $49.8 million as of September 30, 2013. The allowance for loan losses represented 1.92% of total loans as of December 31, 2013 versus 2.28% at December 31, 2012 and 2.08% as of September 30, 2013. Further, the allowance for loan losses as a percentage of nonperforming loans increased to 204% as of December 31, 2013 versus 167% at December 31, 2012 and 215% as of September 30, 2013.

For the year ended December 31, 2013, net charge-offs totaled $2.6 million versus $4.5 million in 2012, a decline of 41%. Net charge-offs totaled $1.0 million in the fourth quarter of 2013 versus $1.7 million during the fourth quarter of 2012 and $831,000 during the linked third quarter of 2013. Nonperforming assets decreased 23% to $24.4 million as of December 31, 2013 versus $31.6 million as of December 31, 2012. The decrease in nonperforming assets during 2013 primarily resulted from the removal of two commercial credits totaling $8.4 million from the impaired category, as well as charge-offs taken and payments received on nonperforming loans. The ratio of nonperforming assets to total assets at December 31, 2013 was 0.77% versus 1.03% at December 31, 2012 and 0.77% at September 30, 2013.

Findlay observed, "The strength of our balance sheet is critical to our ability to continue to lend money to growing businesses and retail banking clients in our Indiana markets. Our consistent earnings performance, combined with a prudent capital structure, has put us in a position of strength as a lender and we will continue to target quality loan growth throughout 2014."

For the year ended December 31, 2013, the company's noninterest income increased 22% from $25.2 million to $30.7 million. The company's noninterest income increased $573,000, or 8%, to $7.9 million for the fourth quarter of 2013, versus $7.3 million for the fourth quarter of 2012. On a year-over-year basis, quarterly noninterest income was positively impacted by a $661,000 increase in investment brokerage fees, driven by higher trading volumes and improvements in product mix. Income from bank owned life insurance increased $216,000, and other income increased by $455,000, driven by a $151,000 increase in income from leases. On a linked quarter basis, noninterest income increased by $69,000 from $7.8 million in the third quarter of 2013.

Kubacki concluded, "We experienced great growth in fee-based services in 2013 as we continued to expand relationships with our existing clients. We are very focused on establishing broader relationships with our clients and will remain committed to this in 2014. We have the technology-driven solutions that clients benefit from and we'll continue to grow existing relationships and add more."

For the year ended December 31, 2013, noninterest expense increased 9% from $57.7 million in 2012 to $62.8 million. The company's noninterest expense increased $2.0 million, or 14%, to $16.5 million in the fourth quarter of 2013 versus $14.5 million in the comparable quarter of 2012. On a linked quarter basis, noninterest expense increased by $262,000 from $16.3 million in the third quarter of 2013. On a year-over-year basis, salaries and employee benefits increased by $1.2 million in the three month period ended December 31, 2013 versus the same period of 2012. These increases in salary and employee benefits were driven by staff additions, normal merit increases, increased health insurance costs and higher performance incentive-based compensation costs. Quarterly data processing fees increased by $186,000 due to a larger customer base as well as greater utilization of services from the company's core processor, which the company expects will improve marketing and cross-selling initiatives. In addition, other expense increased $302,000 during the fourth quarter of 2013, driven by higher advertising expenses. The company's efficiency ratio was 51% for the fourth quarter of 2013 compared to 52% for the fourth quarter of 2012, and 53% for the linked third quarter of 2013, which consistently ranks in the top quartile of peer financial institutions in the country.

Lakeland Financial Corporation is a $3.2 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 46 offices in Northern and Central Indiana, delivering technology driven and client-centric financial services solutions to individuals and businesses.

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.

CONTACT: David M. Findlay
         President and
         Chief Financial Officer
         (574) 267-9197
         david.findlay@lakecitybank.com