Second Quarter Net Income Increases 13 percent

WARSAW, Ind., July 25, 2016 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record quarterly net income of $12.8 million for the second quarter of 2016, an increase of 13%, versus $11.4 million for the second quarter of 2015. Diluted net income per common share of $0.76 for the second quarter of 2016 also represents a quarterly record and an increase of 12%, versus $0.68 for the comparable period of 2015. On a linked-quarter basis net income increased by 4% or $524,000 from $12.3 million for the first quarter ended March 31, 2016.

The company further reported record net income of $25.1 million for the six months ended June 30, 2016 versus $22.5 million for the comparable period of 2015, an increase of 11%. Diluted net income per common share was also a record for the period and increased 10% to $1.48 for the six months ended June 30, 2016 versus $1.34 for the comparable period of 2015.

David M. Findlay, President and CEO, commented, “The Lake City Bank team is very proud of this record quarterly and year-to-date performance. We continue to be focused on the healthy growth of our balance sheet and taking care of clients in our communities each and every day. It’s a combination that has produced disciplined and strategic growth in our Indiana markets over a long period of time.”  

Highlights for the quarter are noted below:

2^nd Quarter 2016 versus 2^nd Quarter 2015 Highlights:

• Organic average loan growth of $340 million or 12%
• Average deposit growth of $371 million or 12%
• Net interest income increase of $3.2 million or 12%
• Continued strong asset quality with nonperforming assets to total assets at 0.24%
• Tangible common equity increase of 12%

2^nd Quarter 2016 versus 1^st Quarter 2016 Highlights:

• Organic average loan growth of $103 million or 3%
• Core deposit growth of $160 million or 5%
• Net interest income increase of $691,000 or 2%
• Noninterest income increase of $1.0 million or 15%
• Continued strong asset quality with loan loss reserve to nonperforming loans at 464%

Findlay noted, “We are particularly pleased with the continued loan and deposit growth that our retail and commercial banking teams are producing. At our core, we understand that an important part of our mission is to provide our clients with competitively priced and structured products and this overall growth is reflective of our success in delivering on this front.”

As previously announced, the board of directors approved a cash dividend for the second quarter of $0.28 per share, payable on August 5, 2016, to shareholders of record as of July 25, 2016. The quarterly dividend represents a 14% increase over the $0.245 quarterly dividends paid in the last three quarters of 2015 and in the first quarter of 2016.

On July 13, 2016, the company further announced that the board of directors approved a three-for-two common stock split that will be paid on August 5, 2016 in the form of a stock dividend to shareholders of record as of July 25, 2016. All per share data presented in this press release is prepared on a pre-split basis.

Findlay observed, “We’ve built a strong balance sheet with a conservative capital position that also has allowed us to pay a consistently healthy dividend. We further believe that the stock split is a reflection of our long-term value creation for shareholders. Over the past 10 years, our total return for shareholders, which reflects stock price performance and dividends, has increased by approximately 175%.”

Return on average total equity for the first six months of 2016 was 12.43% compared to 12.25% in the prior year period. Return on average assets for the first six months of 2016 was 1.29% compared to 1.30% in the same period of 2015. Total capital as a percent of assets was 13.65% at June 30, 2016, compared to 13.83% at June 30, 2015 and 13.72% at March 31, 2016. The company’s tangible common equity to tangible assets ratio was 10.57% at June 30, 2016, compared to 10.44% at June 30, 2015 and 10.61% at March 31, 2016.

Average total loans for the second quarter of 2016 were $3.19 billion, an increase of $340.2 million, or 12%, versus $2.85 billion for the comparable period of 2015. Total loans outstanding grew $304.5 million, or 11%, from $2.89 billion as of June 30, 2015 to $3.20 billion as of June 30, 2016. On a linked quarter basis, average total loans increased by $103.2 million, or 3%, from $3.09 billion for the first quarter of 2016 to $3.19 billion for the second quarter of 2016.

Average total deposits for the second quarter of 2016 were $3.44 billion, an increase of $371.0 million, or 12%, versus $3.07 billion for the corresponding period of 2015. Total deposits grew $383.3 million, or 13%, from $3.02 billion as of June 30, 2015 to $3.40 billion as of June 30, 2016. In addition, total core deposits, which exclude brokered deposits, increased $391.3 million, or 13%, from $2.90 billion at June 30, 2015 to $3.29 billion at June 30, 2016.

The company’s net interest margin was 3.24% in the second quarter of 2016, compared to 3.18% for the second quarter of 2015. The higher margin in the second quarter of 2016 was due to higher yields on both loans and securities, partially offset by a higher cost of funds. The net interest margin was 3.26% in the linked first quarter of 2016. On a quarter-linked basis, cost of funds increased by 3 basis points but was offset by improved earning asset yields of 1 basis point. The company’s net interest margin for the six months ended June 30, 2016 was 3.24% compared to 3.23% in the prior year six month period. 

Findlay further commented, “The absence of any action by the Federal Reserve Bank will continue to create challenges for the industry, and for Lake City Bank. While we are pleased with our net interest margin performance in 2016, we believe, pressure will continue until we see some relief in the form of rate action by the Federal Reserve Bank.”

Net interest income increased $3.2 million, or 12%, to $29.3 million for the second quarter of 2016, versus $26.1 million in the second quarter of 2015. Net interest income for the six months ended June 30, 2016 increased $6.1 million, or 12%, to $57.9 million, versus $51.8 million for the six months ended June 30, 2015.

For the fourteenth consecutive quarter, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by continued stability in key loan quality metrics, including appropriate reserve coverage of nonperforming loans, a decrease in historical loss percentages, stable economic conditions in the company’s markets and sustained signs of improvement in its borrowers’ performance and future prospects. The company’s allowance for loan losses as of June 30, 2016 was $43.2 million compared to $44.8 million as of June 30, 2015 and $43.3 million as of March 31, 2016. The allowance for loan losses represented 1.35% of total loans as of June 30, 2016 versus 1.55% at June 30, 2015 and 1.39% as of March 31, 2016. The allowance for loan losses as a percentage of nonperforming loans was 464% as of June 30, 2016, versus 312% as of June 30, 2015, and 571% as of March 31, 2016.

Nonperforming assets decreased $5.0 million, or 35%, to $9.6 million as of June 30, 2016 versus $14.6 million as of June 30, 2015. On a linked quarter basis, nonperforming assets were $1.7 million higher than the $7.8 million reported as of March 31, 2016. The increase in nonperforming assets from the linked quarter was primarily due to placing a single $2.0 million commercial credit in nonaccrual status. The ratio of nonperforming assets to total assets at June 30, 2016 declined to 0.24% from 0.41% at June 30, 2015 and was 0.21% at March 31, 2016. Net charge-offs totaled $36,000 in the second quarter of 2016 versus net charge-offs of $861,000 during the second quarter of 2015 and net charge-offs of $326,000 during the linked first quarter of 2016.

The company’s noninterest income increased 5% to $8.1 million for the second quarter of 2016 versus $7.7 million for the second quarter of 2015. Noninterest income was positively impacted by increases in recurring fee income for service charges on deposit accounts, merchant card fee income and mortgage banking income. The company’s noninterest income decreased 3% to $15.1 million for the six months ended June 30, 2016 compared to $15.5 million in the prior year period. Noninterest income was negatively impacted by decreases in other income due primarily to credit valuation adjustment losses related to the company’s swap arrangements of $605,000, as well as a $226,000 write down to a property formerly used as a Lake City Bank branch that is held for sale.

The company’s noninterest expense increased by 10% to $18.4 million in the second quarter of 2016 compared to $16.7 million in the second quarter of 2015. Salaries and employee benefits increased by $1.1 million in the three month period ended June 30, 2016 versus the same period of 2015. These increases in salary and employee benefits were driven by higher performance incentive-based compensation costs, staff additions and normal merit increases. Data processing fees increased primarily due to increased technology and software related expenditures with the company’s core processor, which are volume and product driven and represent digital solutions and forward technology for clients. The company's efficiency ratio was 49% for the second quarter of 2016, compared to 50% for the second quarter of 2015 and 49% for the linked first quarter of 2016. The company’s noninterest expense increased by 7% to $35.8 million for the six months ended June 30, 2016 compared to $33.6 million in the prior year period primarily due to increases in salaries and employee benefits, data processing fees and professional fees.

Lakeland Financial Corporation is a $3.9 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank headquartered in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 48 offices in Northern and Central Indiana, delivering technology driven and client-centric financial services solutions to individuals and businesses.

Information regarding 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 earnings release contains certain non-GAAP financial measures. Lakeland Financial believes that providing non-GAAP financial measures provides investors with information useful to understanding the company’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 and “tangible assets” which is “assets” 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,” “continue,” “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.   

LAKELAND FINANCIAL CORPORATION
SECOND QUARTER 2016 FINANCIAL HIGHLIGHTS
	Three Months Ended												Six Months Ended
(Unaudited – Dollars in thousands)	Jun. 30,				Mar. 31,				Jun. 30,				Jun. 30,				Jun. 30,
END OF PERIOD BALANCES		2016				2016				2015				2016				2015
Assets	$	3,937,304			$	3,808,907			$	3,572,106			$	3,937,304			$	3,572,106
Deposits		3,403,455				3,250,735				3,020,151				3,403,455				3,020,151
Brokered Deposits		112,884				120,125				120,861				112,884				120,861
Core Deposits		3,290,571				3,130,610				2,899,290				3,290,571				2,899,290
Loans		3,197,997				3,113,300				2,893,462				3,197,997				2,893,462
Allowance for Loan Losses		43,247				43,284				44,816				43,247				44,816
Total Equity		418,893				406,963				375,764				418,893				375,764
Goodwill net of deferred tax assets		3,137				3,140				3,176				3,137				3,176
Tangible Common Equity		415,756				403,823				372,588				415,756				372,588
AVERAGE BALANCES
Total Assets	$	4,003,633			$	3,812,316			$	3,552,029			$	3,907,974			$	3,496,860
Earning Assets		3,705,666				3,590,822				3,342,275				3,648,244				3,294,762
Investments		488,762				478,537				475,803				483,650				476,520
Loans		3,192,545				3,089,348				2,852,382				3,140,947				2,803,884
Total Deposits		3,437,493				3,231,298				3,066,483				3,334,395				3,002,184
Interest Bearing Deposits		2,759,696				2,569,704				2,488,227				2,664,700				2,435,003
Interest Bearing Liabilities		2,887,534				2,727,422				2,581,664				2,807,478				2,540,996
Total Equity		411,986				399,921				374,339				405,953				370,536
INCOME STATEMENT DATA
Net Interest Income	$	29,273			$	28,582			$	26,064			$	57,855			$	51,764
Net Interest Income-Fully Tax Equivalent		29,818				29,102				26,559				58,920				52,745
Provision for Loan Losses		0				0				0				0				0
Noninterest Income		8,067				7,043				7,713				15,110				15,508
Noninterest Expense		18,446				17,384				16,741				35,830				33,642
Net Income		12,803				12,279				11,380				25,082				22,516
PER SHARE DATA
Basic Net Income Per Common Share	$	0.77			$	0.74			$	0.69			$	1.50			$	1.36
Diluted Net Income Per Common Share		0.76				0.73				0.68				1.48				1.34
Cash Dividends Declared Per Common Share		0.28				0.245				0.245				0.525				0.455
Dividend Payout		36.84		%		33.56		%		36.03		%		35.47		%		33.96		%
Book Value Per Common Share (equity per share issued)		25.08				24.37				22.61				25.08				22.61
Tangible Book Value Per Common Share		24.90				24.19				22.42				24.90				22.42
Market Value – High		49.91				46.55				44.27				49.91				44.27
Market Value – Low		43.41				39.80				38.71				39.80				37.42
Basic Weighted Average Common Shares Outstanding		16,696,834				16,679,835				16,611,974				16,688,335				16,601,189
Diluted Weighted Average Common Shares Outstanding		16,930,513				16,885,204				16,820,052				16,913,738				16,795,907
KEY RATIOS
Return on Average Assets		1.29		%		1.30		%		1.29		%		1.29		%		1.30		%
Return on Average Total Equity		12.50				12.35				12.19				12.43				12.25
Average Equity to Average Assets		10.29				10.49				10.54				10.39				10.60
Net Interest Margin		3.24				3.26				3.18				3.24				3.23
Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)		49.40				48.80				49.57				49.11				50.01
Tier 1 Leverage (1)		10.85				11.15				11.22				10.85				11.22
Tier 1 Risk-Based Capital (1)		12.41				12.46				12.58				12.41				12.58
Common Equity Tier 1 (CET1) (1)		11.55				11.58				11.63				11.55				11.63
Total Capital (1)		13.65				13.72				13.83				13.65				13.83
Tangible Capital (1)		10.57				10.61				10.44				10.57				10.44
ASSET QUALITY
Loans Past Due 30 - 89 Days	$	1,795			$	4,024				4,580			$	1,795			$	4,580
Loans Past Due 90 Days or More		0				0				284				0				284
Non-accrual Loans		9,329				7,579				14,089				9,329				14,089
Nonperforming Loans (includes nonperforming TDR's)		9,329				7,579				14,373				9,329				14,373
Other Real Estate Owned		238				243				231				238				231
Other Nonperforming Assets		0				0				7				0				7
Total Nonperforming Assets		9,567				7,822				14,611				9,567				14,611
Performing Troubled Debt Restructurings		8,647				8,590				7,606				8,647				7,606
Nonperforming Troubled Debt Restructurings (included in nonperforming loans)		6,040				5,519				11,176				6,040				11,176
Total Troubled Debt Restructurings		14,688				14,109				18,783				14,688				18,783
Impaired Loans		19,267				17,418				22,328				19,267				22,328
Non-Impaired Watch List Loans		139,706				123,984				130,735				139,706				130,735
Total Impaired and Watch List Loans		158,973				141,402				153,063				158,973				153,063
Gross Charge Offs		296				466				995				762				1,703
Recoveries		260				140				134				400				257
Net Charge Offs/(Recoveries)		36				326				861				362				1,446
Net Charge Offs/(Recoveries)  to Average Loans		0.00		%		0.04		%		0.12		%		0.02		%		0.10		%
Loan Loss Reserve to Loans		1.35		%		1.39		%		1.55		%		1.35		%		1.55		%
Loan Loss Reserve to Nonperforming Loans		463.58		%		571.11		%		311.80		%		463.58		%		311.80		%
Loan Loss Reserve to Nonperforming Loans and Performing TDR's		240.58		%		267.70		%		203.90		%		240.58		%		203.90		%
Nonperforming Loans to Loans		0.29		%		0.24		%		0.50		%		0.29		%		0.50		%
Nonperforming Assets to Assets		0.24		%		0.21		%		0.41		%		0.24		%		0.41		%
Total Impaired and Watch List Loans to Total Loans		4.97		%		4.54		%		5.29		%		4.97		%		5.29		%
OTHER DATA
Full Time Equivalent Employees		531				521				514				531				514
Offices		48				48				46				48				46
(1) Capital ratios for June 30, 2016 are preliminary until the Call Report is filed.

 

LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2016 and December 31, 2015
(in thousands, except share data)
	June 30,				December 31,
		2016				2015
	(Unaudited)
ASSETS
Cash and due from banks	$	77,361			$	67,484
Short-term investments		31,502				13,190
Total cash and cash equivalents		108,863				80,674
Securities available for sale (carried at fair value)		499,600				478,071
Real estate mortgage loans held for sale		4,009				3,294
Loans, net of allowance for loan losses of $43,247 and $43,610		3,154,750				3,037,319
Land, premises and equipment, net		49,144				46,684
Bank owned life insurance		70,610				69,698
Federal Reserve and Federal Home Loan Bank stock		8,373				7,668
Accrued interest receivable		10,294				9,462
Goodwill		4,970				4,970
Other assets		26,691				28,446
Total assets	$	3,937,304			$	3,766,286
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits	$	727,308			$	715,093
Interest bearing deposits		2,676,147				2,468,328
Total deposits		3,403,455				3,183,421
Short-term borrowings
Securities sold under agreements to repurchase		56,368				69,622
Other short-term borrowings		0				70,000
Total short-term borrowings		56,368				139,622
Long-term borrowings		32				34
Subordinated debentures		30,928				30,928
Accrued interest payable		4,403				3,773
Other liabilities		23,225				15,607
Total liabilities		3,518,411				3,373,385
STOCKHOLDERS' EQUITY
Common stock:  90,000,000 shares authorized, no par value
16,696,834 shares issued and 16,596,152 outstanding as of June 30, 2016
16,641,651 shares issued and 16,546,044 outstanding as of December 31, 2015		101,002				99,123
Retained earnings		310,317				294,002
Accumulated other comprehensive income		10,166				2,142
Treasury stock, at cost (2016 - 100,682 shares, 2015 - 95,607 shares)		(2,681	)			(2,455	)
Total stockholders' equity		418,804				392,812
Noncontrolling interest		89				89
Total equity		418,893				392,901
Total liabilities and equity	$	3,937,304			$	3,766,286

LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Six Months Ended June 30, 2016 and 2015
(unaudited in thousands except for share and per share data)
	Three Months Ended								Six Months Ended
	June 30,								June 30,
		2016				2015				2016				2015
NET INTEREST INCOME
Interest and fees on loans
Taxable	$	30,918			$	27,315			$	60,548			$	53,572
Tax exempt		111				117				222				234
Interest and dividends on securities
Taxable		2,297				2,002				4,843				4,450
Tax exempt		947				842				1,842				1,671
Interest on short-term investments		82				14				110				27
Total interest income		34,355				30,290				67,565				59,954
Interest on deposits		4,694				3,930				8,889				7,578
Interest on borrowings
Short-term		99				35				246				95
Long-term		289				261				575				517
Total interest expense		5,082				4,226				9,710				8,190
NET INTEREST INCOME		29,273				26,064				57,855				51,764
Provision for loan losses		0				0				0				0
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES		29,273				26,064				57,855				51,764
NONINTEREST INCOME
Wealth advisory fees		1,133				1,106				2,293				2,290
Investment brokerage fees		212				311				500				803
Service charges on deposit accounts		2,843				2,573				5,623				4,947
Loan, insurance and service fees		1,892				1,900				3,730				3,469
Merchant card fee income		527				431				1,024				847
Bank owned life insurance income		489				360				662				735
Other income		587				681				515				1,635
Mortgage banking income		384				351				711				740
Net securities gains/(losses)		0				0				52				42
Total noninterest income		8,067				7,713				15,110				15,508
NONINTEREST EXPENSE
Salaries and employee benefits		10,592				9,444				20,197				19,167
Net occupancy expense		1,041				915				2,137				1,999
Equipment costs		909				913				1,810				1,829
Data processing fees and supplies		2,120				1,938				4,152				3,705
Corporate and business development		763				714				1,620				1,504
FDIC insurance and other regulatory fees		557				511				1,080				997
Professional fees		859				728				1,686				1,417
Other expense		1,605				1,578				3,148				3,024
Total noninterest expense		18,446				16,741				35,830				33,642
INCOME BEFORE INCOME TAX EXPENSE		18,894				17,036				37,135				33,630
Income tax expense		6,091				5,656				12,053				11,114
NET INCOME	$	12,803			$	11,380			$	25,082			$	22,516
BASIC WEIGHTED AVERAGE COMMON SHARES		16,696,834				16,611,974				16,688,335				16,601,189
BASIC EARNINGS PER COMMON SHARE	$	0.77			$	0.69			$	1.50			$	1.36
DILUTED WEIGHTED AVERAGE COMMON SHARES		16,930,513				16,820,052				16,913,738				16,795,907
DILUTED EARNINGS PER COMMON SHARE	$	0.76			$	0.68			$	1.48			$	1.34

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
SECOND QUARTER 2016
(unaudited in thousands)
	June 30,					March 31,					December 31,					June 30,
	2016					2016					2015					2015
Commercial and industrial loans:
Working capital lines of credit loans	$	598,531		18.7	%	$	591,136		19.0	%	$	581,025		18.9	%	$	606,169		20.9	%
Non-working capital loans		628,119		19.6			614,619		19.7			598,487		19.4			537,708		18.6
Total commercial and industrial loans		1,226,650		38.4			1,205,755		38.7			1,179,512		38.3			1,143,877		39.5
Commercial real estate and multi-family residential loans:
Construction and land development loans		221,027		6.9			206,378		6.6			230,719		7.5			152,292		5.3
Owner occupied loans		457,461		14.3			447,620		14.4			412,026		13.4			409,650		14.2
Nonowner occupied loans		395,597		12.4			408,273		13.1			407,883		13.2			399,583		13.8
Multifamily loans		114,618		3.6			104,303		3.4			79,425		2.6			90,175		3.1
Total commercial real estate and multi-family residential loans		1,188,703		37.2			1,166,574		37.5			1,130,053		36.7			1,051,700		36.3
Agri-business and agricultural loans:
Loans secured by farmland		146,519		4.6			144,687		4.6			164,375		5.3			156,001		5.4
Loans for agricultural production		162,240		5.1			128,456		4.1			141,719		4.6			95,327		3.3
Total agri-business and agricultural loans		308,759		9.7			273,143		8.8			306,094		9.9			251,328		8.7
Other commercial loans		82,786		2.6			83,617		2.7			85,075		2.8			82,247		2.8
Total commercial loans		2,806,898		87.8			2,729,089		87.7			2,700,734		87.7			2,529,152		87.4
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		164,564		5.1			161,701		5.2			158,062		5.1			148,977		5.1
Open end and junior lien loans		164,645		5.1			160,734		5.2			163,700		5.3			155,902		5.4
Residential construction and land development loans		9,570		0.3			8,488		0.3			9,341		0.3			8,821		0.3
Total consumer 1-4 family mortgage loans		338,779		10.6			330,923		10.6			331,103		10.7			313,700		10.8
Other consumer loans		52,492		1.6			53,327		1.7			49,113		1.6			50,813		1.8
Total consumer loans		391,271		12.2			384,250		12.3			380,216		12.3			364,513		12.6
Subtotal		3,198,169		100.0	%		3,113,339		100.0	%		3,080,950		100.0	%		2,893,665		100.0	%
Less:  Allowance for loan losses		(43,247	)				(43,284	)				(43,610	)				(44,816	)
Net deferred loan fees		(172	)				(39	)				(21	)				(203	)
Loans, net	$	3,154,750				$	3,070,016				$	3,037,319				$	2,848,646
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
SECOND QUARTER 2016
(unaudited in thousands)
	June 30,					March 31,					December 31,					June 30,
		2016					2016					2015					2015
Non-interest bearing demand deposits	$	727,308				$	660,318				$	715,093				$	602,898
Interest bearing demand, savings & money market accounts		1,500,720					1,475,291					1,470,814					1,422,200
Time deposits under $100,000		247,271					250,998					259,260					283,138
Time deposits of $100,000 or more		928,156					864,128					738,254					711,915
Total deposits		3,403,455					3,250,735					3,183,421					3,020,151
Short-term borrowings		56,368					94,504					139,622					126,615
Long-term borrowings		32					32					34					34
Subordinated debentures		30,928					30,928					30,928					30,928
Total borrowings		87,328					125,464					170,584					157,577
Total funding sources	$	3,490,783				$	3,376,199				$	3,354,005				$	3,177,728

LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
	Three Months Ended											Three Months Ended											Three Months Ended
	June 30, 2016											March 31, 2016											June 30, 2015
	Average				Interest				Yield (1)/			Average				Interest				Yield (1)/			Average				Interest				Yield (1)/
(fully tax equivalent basis, dollars in thousands)	Balance				Income				Rate			Balance				Income				Rate			Balance				Income				Rate
Earning Assets
Loans:
Taxable (2)(3)	$	3,180,783			$	30,918			3.91	%		$	3,077,441			$	29,630			3.87	%		$	2,839,605			$	27,315			3.86	%
Tax exempt (1)		11,763				164			5.62				11,907				166			5.61				12,777				174			5.47
Investments: (1)
Available for sale		488,762				3,736			3.07				478,537				3,906			3.28				475,803				3,282			2.77
Short-term investments		5,805				3			0.21				6,210				4			0.26				5,154				1			0.08
Interest bearing deposits		18,553				79			1.71				16,727				24			0.58				8,936				13			0.58
Total earning assets	$	3,705,666			$	34,900			3.79	%		$	3,590,822			$	33,730			3.78	%		$	3,342,275			$	30,785			3.69	%
Less:  Allowance for loan losses		(43,228	)										(43,394	)										(45,693	)
Nonearning Assets
Cash and due from banks		167,099											97,093											98,133
Premises and equipment		48,921											47,237											42,919
Other nonearning assets		125,175											120,558											114,395
Total assets	$	4,003,633										$	3,812,316										$	3,552,029
Interest Bearing Liabilities
Savings deposits	$	263,331			$	115			0.18	%		$	253,313			$	123			0.20	%		$	231,505			$	116			0.20	%
Interest bearing checking accounts		1,309,443				1,455			0.45				1,240,226				1,324			0.43				1,255,838				1,250			0.40
Time deposits:
In denominations under $100,000		249,452				719			1.16				254,605				737			1.16				286,266				855			1.20
In denominations over $100,000		937,470				2,405			1.03				821,560				2,011			0.98				714,618				1,709			0.96
Miscellaneous short-term borrowings		96,878				99			0.41				126,758				147			0.47				62,475				35			0.22
Long-term borrowings and
subordinated debentures (4)		30,960				289			3.75				30,960				286			3.72				30,962				261			3.38
Total interest bearing liabilities	$	2,887,534			$	5,082			0.71	%		$	2,727,422			$	4,628			0.68	%		$	2,581,664			$	4,226			0.66	%
Noninterest Bearing Liabilities
Demand deposits		677,797											661,594											578,255
Other liabilities		26,316											23,379											17,772
Stockholders' Equity		411,986											399,921											374,338
Total liabilities and stockholders' equity	$	4,003,633										$	3,812,316										$	3,552,029
Interest Margin Recap
Interest income/average earning assets						34,900			3.79								33,730			3.78								30,785			3.69
Interest expense/average earning assets						5,082			0.55								4,628			0.52								4,226			0.51
Net interest income and margin					$	29,818			3.24	%						$	29,102			3.26	%						$	26,559			3.18	%
(1) Tax exempt income was converted to a fully taxable equivalent basis at a 35 percent tax rate for 2016 and 2015. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses.
(2) Loan fees, which are immaterial in relation to total taxable loan interest income for 2016 and 2015, are included as taxable loan interest income.
(3) Nonaccrual loans are included in the average balance of taxable loans.
(4) Long-term borrowings and subordinated debentures interest expense was reduced by interest capitalized on construction in process for 2015.

Contact:
Lisa M. O’Neill
Executive Vice President and Chief Financial Officer
(574) 267-9125
lisa.oneill@lakecitybank.com

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