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Lake City Bank Reports 16% Increase in Earnings Per Share

/ Source: GlobeNewswire

WARSAW, Ind., April 25, 2011 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported net income available to shareholders of $6.0 million for the first quarter of 2011, an increase of 14% versus $5.2 million in the first quarter of 2010. Diluted net income per share for the quarter increased 16% to $0.37 versus $0.32 for the comparable period of 2010. On a linked quarter basis, net income increased 3% to $6.0 million compared to net income of $5.8 million, or $0.36 per diluted share, for the fourth quarter of 2010.

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "We continue to be pleased with the strength of our operating performance, which is reflected in the favorable increase in diluted earnings per share. We also believe that we are in a great competitive position in all of our Indiana markets to take advantage of future growth. Throughout the prolonged economic challenges of the past several years, we have continued to build a balance sheet that is ready for business expansion and the opportunities it will bring." 

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

Kubacki noted, "Our dividend to shareholders represents a further affirmation of the strength of our financial performance. The uninterrupted dividend is reflective of our confidence in the future and our ability to consistently produce quality earnings."

Average total loans for the first quarter of 2011 were $2.10 billion versus $2.01 billion for the first quarter of 2010 and $2.08 billion for the linked fourth quarter of 2010. Total loans outstanding grew $93 million, or 5%, from $2.0 billion as of March 31, 2010 to $2.1 billion as of March 31, 2011. Total loans increased by $14 million, or 1%, during the first quarter of 2011.

Kubacki added, "Quality loan demand remains somewhat muted. While we're observing some signs of borrower strengthening in our markets, it has not translated into substantive business expansion actions by our clients and prospects."

The Company's net interest margin was 3.78% in the first quarter of 2011 versus 3.86% for the first quarter of 2010 and 3.62% in the linked fourth quarter of 2010. The year-over-year margin decline resulted primarily from higher costs of funds as the Company increased its reliance on core deposits as a funding source.

The Company's provision for loan losses in the quarter of $5.6 million represented an increase of $74,000, versus $5.5 million in the same period of 2010. In the fourth quarter of 2010, the provision was $6.5 million. The Company's allowance for loan losses as of March 31, 2011 was $48.5 million, compared to $36.3 million as of March 31, 2010 and $45.0 million as of December 31, 2010. The allowance for loan losses increased to 2.30% of total loans as of March 31, 2011 versus 1.81% at March 31, 2010 and 2.15% as of December 31, 2010.

Net charge-offs totaled $2.1 million in the first quarter of 2011, versus $1.3 million during the first quarter of 2010 and $3.5 million during the fourth quarter of 2010. Losses on three commercial real estate-related credits represented $1.2 million, or 58%, of the net charge-offs for the quarter. In total, there were 11 commercial credits and 28 retail credits that experienced charge-offs during the quarter. Nonperforming assets were $39.9 million as of March 31, 2011 versus $33.0 million as of March 31, 2010 and $40.7 million as of December 31, 2010. The decrease during the first quarter resulted primarily from charge-offs of $1.6 million taken on loans that were on nonaccrual status as of December 31, 2010. As a result, the ratio of nonperforming assets to total assets at March 31, 2011 was 1.45% versus 1.52% at December 31, 2010. The allowance for loan losses increased to 132% of nonperforming loans as of March 31, 2011 versus 122% at December 31, 2010 and 113% at March 31, 2010.

David M. Findlay, President and Chief Financial Officer, stated, "Since 2007, we have increased our allowance for loan losses by over 200% from $15.8 million to $48.5 million. This $32.7 million increase has substantially strengthened our balance sheet and gives us adequate coverage of our nonperforming loans. While we are encouraged by recent trends in watchlist credits and a stabilization in nonperforming asset totals, we continue to be aware of risks inherent in our loan portfolio. As a result, we have been prudent in ensuring appropriate coverage of these risks." 

The Company's noninterest income was $4.8 million for the first quarters of both 2011 and 2010, versus $5.1 million for the fourth quarter of 2010. Non-interest income was positively impacted by a $186,000 increase in investment brokerage income and a $156,000 increase in loan, insurance and service fees, which were driven by increases in several ancillary commercial and retail revenue sources. Non-interest income was negatively impacted by $198,000 in net losses on securities sales related to a strategic realignment in the investment portfolio, which included the sale of eight private label mortgage-backed securities.  As a result of this activity, the Company sold six of the seven private label mortgage-backed securities on which it had previously recognized other than temporary impairment. Further impacting noninterest income was a net loss of $49,000 in mortgage banking income. This loss resulted from a non-cash decrease in the fair value of the mortgage banking derivative of $219,000 during the first quarter of 2011. The decline in the derivative value was due to significantly lower mortgage loan volumes during the quarter in comparison to prior fiscal periods. In addition, other income declined due to a write-down of other real estate owned totaling $194,000. 

Overall, total revenue for the first quarter of 2011 increased 2% to $28.4 million versus $27.8 million for the comparable period of 2010 and $28.4 million in the fourth quarter of 2010.

Findlay added, "Our core fee-based revenue sources had a good quarter, led by a 34% increase in brokerage revenues and a 17% increase in loan, insurance and service fees. In addition, our wealth advisory and service charges on deposit accounts recognized year-over-year increases of 3% and 6%, respectively."

The Company's noninterest expense increased $1.1 million, or 9%, to $14.2 million in the first quarter of 2011, versus $13.0 million in the comparable quarter of 2010. On a linked quarter basis, non-interest expense increased 6% from $13.3 million in the fourth quarter of 2010. Salaries and employee benefits increased by $662,000 in the three-month period ended March 31, 2011 versus the same period of 2010.  These increases were driven by staff additions, normal merit increases and higher health insurance expense. In addition, the Company's performance based compensation expense increased due to performance versus corporate objectives and increased recognition levels. Data processing fees increased by $146,000 due to expenses associated with the Company's conversion to a new core processor. The core conversion was completed during the second quarter of 2011. In addition, other expense increased by $263,000 in the first quarter of 2011 versus the comparable period of 2010, driven by $116,000 of credit related costs and higher advertising expenses of $111,000. The Company's efficiency ratio for the first quarter of 2011 was 50%, compared to a ratio of 47% for the comparable quarter of 2010.

Lakeland Financial's tangible equity to tangible assets ratio was 9.02% at March 31, 2011 compared to 8.74% at March 31, 2010 and 9.10% at December 31, 2010. Average total deposits for the quarter ended March 31, 2011 were $2.22 billion versus $2.27 billion for the fourth quarter of 2010 and $1.93 billion for the first 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.

Lakeland Financial Corporation may be accessed on its home page at . 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, FTN Financial Securities Corp., FTN Equity Capital Markets Corp., Goldman Sachs & Company, Howe Barnes Hoefer & Arnett, Inc., Keefe, Bruyette & Woods, Inc., Knight Equity Markets, L.P., Morgan Stanley & Co., Inc., 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 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.

CONTACT: David M. Findlay President and Chief Financial Officer (574) 267-9197