The parent company of Warsaw-based Lake City Bank is reporting first quarter net income of $11.1 million, compared to $9.9 million a year earlier. Lakeland Financial Corp. (Nasdaq: LKFN) Chief Executive Officer David Findlay says the performance represents a record for the first quarter. April 27, 2015

News Release

WARSAW, Ind. – Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported net income of $11.1 million for the first quarter of 2015, an increase of 12% versus $9.9 million for the first quarter of 2014. Diluted net income per common share also increased 12% to $0.66 versus $0.59 for 2014.

“Our net income and earnings per share performance represents a record for the first quarter and are an excellent start to 2015. The Lake City Bank team continues to make inroads in the Indiana communities we serve and we are well positioned for continued future growth,” commented David M. Findlay, President and Chief Executive Officer. “We remain 100% committed to our clients, shareholders, communities and team members and these results continue to benefit all of these constituencies.”

Return on average total equity for the first quarter of 2015 improved to 12.32% from 12.25% in the first quarter of 2014 and 12.27% for the linked fourth quarter of 2014. Return on average assets for the first quarter of 2015 increased to 1.31% up from 1.26% in the first quarter of 2014. The company's tangible common equity to tangible assets ratio was 10.58% at March 31, 2015, compared to 10.18% at March 31, 2014 and 10.41% at December 31, 2014.

As previously announced, the board of directors approved a cash dividend for the first quarter of $0.245 per share, payable on May 5, 2015, to shareholders of record as of April 25, 2015. The quarterly dividend represents a 17% increase over the $0.21 quarterly dividends paid in the last three quarters of 2014 and in the first quarter of 2015.

“This significant increase in our dividend is a reflection of the strength of our balance sheet and our positive outlook for the future. Through consistently strong earnings momentum over a long period of time, we have built a fortress balance sheet that supports this 17% increase in our dividend to shareholders,” observed Findlay.

Average total loans for the first quarter of 2015 were $2.75 billion, an increase of $216.2 million, or 9%, versus $2.54 billion for the comparable period of 2014. Total loans outstanding grew $198.0 million, or 8%, from $2.57 billion as of March 31, 2014 to $2.77 billion as of March 31, 2015. On a linked quarter basis, average total loans increased by $23.6 million, or 1%, from $2.73 billion for the fourth quarter of 2014 to $2.75 billion for the first quarter of 2015.

“We grew our commercial and industrial and our commercial real estate loan portfolios by $59.6 million during the quarter. While this healthy growth was offset by seasonal reduction in borrowings in our agribusiness sector, it was a great start to the year and we are pleased with the growth in our core commercial lending business. The greatest impact we can have on our Indiana communities and our regional economy is to stay focused on growing the loan portfolio.” observed Findlay. “Importantly, our loan growth has been funded with core deposit growth.”

Average total deposits for the first quarter of 2015 were $2.94 billion, an increase of $294.6 million, or 11%, versus $2.64 billion for the corresponding period of 2014. Total deposits grew $255.5 million, or 9%, from $2.74 billion as of March 31, 2014 to $2.99 billion as of March 31, 2015. In addition, total core deposits increased $275.0 million, or 11% from $2.60 billion at March 31, 2014 to $2.87 billion at March 31, 2015.

Despite the prolonged low interest rate environment including downward pressure on loan yields, the company's net interest margin was virtually unchanged at 3.27% for the first quarter of 2015, versus 3.28% for the linked fourth quarter of 2014. Net interest income increased $1.0 million or 4% to $25.7 million for the first quarter of 2015, versus $24.7 million in the first quarter of 2014. Net interest margin was 3.38% in the first quarter of 2014. The decline in net interest margin in the first quarter of 2015 compared to the first quarter 2014 resulted from a 9 basis point decline in earning asset yields and a 2 basis point increase in cost of funds.

For the ninth 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 stabilization and improvement in key loan quality metrics, including appropriate reserve coverage of nonperforming loans, continuing signs of stabilization of the economic conditions of 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 March 31, 2015 was $45.7 million compared to $46.1 million as of March 31, 2014 and $46.3 million as of December 31, 2014. The allowance for loan losses represented 1.65% of total loans as of March 31, 2015 versus 1.79% at March 31, 2014 and 1.67% as of December 31, 2014. The allowance for loan losses as a percentage of nonperforming loans was 293% as of March 31, 2015, versus 306% as of March 31, 2014, and 338% as of December 31, 2014.

Nonperforming assets decreased $191,000, or 1%, to $16.1 million as of March 31, 2015 versus $16.3 million as of March 31, 2014. On a linked quarter basis, nonperforming assets were $2.1 million, or 15%, higher than the $14.0 million reported as of December 31, 2014. The increase in nonperforming assets during the first quarter of 2015 primarily resulted from placing three commercial credits on nonaccrual status. The ratio of nonperforming assets to total assets at March 31, 2015, was 0.46% versus 0.50% at March 31, 2014 and 0.41% at December 31, 2014. Net charge-offs to average loans were 0.09% for the first quarter of 2015 compared to 0.42% for the first quarter of 2014 and 0.02% for the fourth quarter of 2014. Net charge-offs totaled $585,000 in the first quarter of 2015 versus net charge-offs of $2.7 million during the first quarter of 2014 and net charge-offs of $125,000 during the linked fourth quarter of 2014.

The company's noninterest income increased 5% to $7.8 million for the first quarter of 2015 versus $7.4 million for the first quarter of 2014. Noninterest income was positively impacted by increases in mortgage banking income due to higher production volumes, as well as increases in service charges on deposit accounts, wealth advisory fees and loan, insurance and service fees. Offsetting these increases was a decrease in investment brokerage fees driven by lower production volumes.

The company's noninterest expense increased by 1% to $16.9 million in the first quarter of 2015 compared to $16.8 million in the first quarter of 2014. Salaries and employee benefits decreased by $264,000 in the first quarter of 2015 versus the same period of 2014. The decrease in salary and employee benefits was driven by lower employee benefit costs and lower commissions paid on investment brokerage fees. Professional fees decreased by $111,000 driven by lower legal fees. Data processing fees increased by $276,000 due to technology related expenditures with the company's core processor and other technology based providers to enhance the delivery of electronic banking alternatives and improve commercial product solutions. Equipment costs increased due to higher depreciation expense. Corporate and business development expense increased during the quarter due to higher advertising and marketing expenses. The company's efficiency ratio was 50% for the first quarter of 2015, compared to 52% for the first quarter of 2014 and 50% for the linked fourth quarter of 2014.

Lakeland Financial Corporation is a $3.5 billion bank holding company headquartered in Warsaw, Indiana. La

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