Lakeland Financial Reports Record First Quarter Performance

Net Income Increases 26% and Dividend Increases 18%

WARSAW, Ind., April 25, 2018 (GLOBE NEWSWIRE) --

Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record first quarter net income of $18.3 million for the three months ended March 31, an increase of 26% versus $14.5 million for the first quarter of 2017.   Diluted earnings per share increased 25% to $0.71 for the first quarter of 2018, versus $0.57 for the first quarter of 2017, representing a record quarter for the company and its shareholders. On a linked quarter basis, net income increased 58% or $6.7 million from the fourth quarter ended December 31, 2017, which had net income of $11.6 million and $0.45 diluted earnings per share. Results for the fourth quarter of 2017 included a $4.1 million income tax provision related to revaluing the company’s net deferred tax asset position as a result of the tax bill enacted at the end of the year.

David M. Findlay, President and CEO commented, “Lake City Bank’s strong first quarter performance was highlighted by the record net income for the quarter, but we are particularly proud of the healthy loan and deposit growth in the quarter. Our ability to consistently produce performance for our shareholders begins with balance sheet growth and this represents a good start to 2018.”

Highlights for the quarter are noted below.

1st Quarter 2018 versus 1st Quarter 2017 highlights:

• Organic average loan growth of $283 million or 8%
• Average deposit growth of $458 million or 13%
• Net interest income increase of $4.2 million or 13%
• Net interest margin increase of 9 basis points to 3.36%
• Revenue growth of $5.8 million or 14%
• Tangible common equity¹ increase of $35.5 million or 8%

1st Quarter 2018 versus 4th Quarter 2017 highlights:

• Organic average loan growth of $64 million or 2%
• Average deposit growth of $105 million or 3%
• Net interest income increase of $831,000 or 2%
• Revenue growth of $1.2 million or 3%
• Tangible common equity¹ increase of $4.7 million or 1%

As announced on April 10, 2018, the board of directors approved a cash dividend for the first quarter of $0.26 per share, payable on May 7, 2018, to shareholders of record as of April 25, 2018. The first quarter dividend per share represents an 18% increase over the dividend rate paid in the prior four quarters of $0.22 per share.

Findlay added, “Dividends represent a critical component of our shareholder value equation, and this 18% increase is made possible by our consistent long-term ability to produce quality earnings that contribute to a strong capital base.”

Return on average total equity for the first quarter of 2018 was 15.82%, compared to 13.63% in the first quarter of 2017 and 9.87% in the linked fourth quarter of 2017. Return on average assets for the first quarter of 2018 was 1.58%, compared to 1.37% in the first quarter of 2017 and 1.00% in the linked fourth quarter of 2017. The company’s total capital as a percent of risk-weighted assets was 13.41% at March 31, 2018, compared to 13.31% at March 31, 2017 and 13.26% at December 31, 2017. The company’s tangible common equity to tangible assets ratio¹ was 9.94% at March 31, 2018, compared to 10.06% at March 31, 2017 and 9.93% at December 31, 2017.

Average total loans for the first quarter of 2018 were $3.79 billion, an increase of $282.8 million, or 8%, versus $3.51 billion for the first quarter 2017. On a linked quarter basis, total average loans grew $64.0 million, or 2%, from $3.73 billion at December 31, 2017. Total loans outstanding grew $313.4 million, or 9%, from $3.53 billion as of March 31, 2017 to $3.85 billion as of March 31, 2018.

Average total deposits for the first quarter of 2018 were $4.09 billion, an increase of $457.7 million, or 13%, versus $3.64 billion for the first quarter of 2017. On a linked quarter basis, total average deposits grew $105.3 million or 3% from $3.99 billion at December 31, 2017. Total deposits grew $420.1 million, or 11%, from $3.68 billion as of March 31, 2017 to $4.10 billion as of March 31, 2018. In addition, total core deposits, which exclude brokered deposits, increased $328.4 million, or 9%, from $3.54 billion at March 31, 2017 to $3.87 billion at March 31, 2018 due to growth in retail deposits of $165.6 million or 11%, growth in commercial deposits of $105.3 million or 12% and growth in public fund deposits of $57.6 million or 5%.

“We’re committed to a deposit growth strategy over all deposit categories and are particularly pleased that our non-interest bearing demand deposits increased 13% on a year over year basis. In addition, our focus on core deposit growth has translated into double digit growth in both our retail and commercial deposit client bases on a year over year basis,” Findlay observed.

The company’s net interest margin increased nine basis points to 3.36% for the first quarter of 2018 compared to 3.27% for the first quarter of 2017. The higher margin in the first quarter of 2018 was due to higher yields on loans, partially offset by a higher cost of funds. On a linked quarter basis, the net interest margin improved by three basis points from 3.33% in the fourth quarter of 2017 due to the positive impact of Federal Reserve Bank increases in the target Federal Funds Rate in mid-December 2017 and mid-March 2018. Net interest income increased $4.1 million, or 13%, to $36.2 million for the first quarter of 2018, versus $32.1 million in the first quarter of 2017.

The company recorded a provision for loan losses of $3.3 million in the first quarter of 2018, driven by strong loan growth and net charge offs during the quarter. Net charge offs in the quarter were $4.8 million versus net charge offs of $144,000 in the first quarter of 2017 and net charge offs of $226,000 during the linked fourth quarter 2017. Net charge offs included a $4.6 million charge off related to a single commercial borrower. At December 31, 2017, loans to the borrower were current and performing. Late in the first quarter of 2018, the borrower encountered working capital challenges and it became clear to the bank that the borrower was not able to generate sufficient cash flow from operations to fully support its business. As a result, it was determined that full collection of the outstanding loan balance of $6.8 million was not probable and would likely not be repaid. The remaining loan exposure of $2.2 million to this borrower, which is on nonaccrual status, is secured by a blanket lien on all assets, including accounts receivable, land, buildings and equipment. In addition the exposure is supported by personal guarantees and a security interest in undeveloped commercial real estate.

The company’s allowance for loan losses as of March 31, 2018 was $45.6 million compared to $43.8 million as of March 31, 2017 and $47.1 million as of December 31, 2017. The allowance for loan losses represented 1.19% of total loans as of March 31, 2018 versus 1.24% at March 31, 2017 and 1.23% as of December 31, 2017.

Nonperforming assets decreased $797,000, or 7%, to $11.2 million as of March 31, 2018 versus $12.0 million as of March 31, 2017 due to a decrease in loans past due 90 days or more. On a linked quarter basis, nonperforming assets were $1.6 million higher than the $9.5 million reported as of December 31, 2017 primarily due to placing one commercial relationship in nonaccrual status. The ratio of nonperforming assets to total assets at March 31, 2018 decreased to 0.24% from 0.28% at March 31, 2017 and increased from 0.20% at December 31, 2017.  Annualized net charge-offs to average loans were 0.51% for the first quarter of 2018 compared to 0.02% for the first quarter of 2017 and 0.02% for the fourth quarter of 2017.

Findlay noted, “We continue to be encouraged by the strength of the general economic conditions in our markets and the bank’s overall credit quality remains stable.  While we are disappointed with the notable charge off in the quarter, the factors impacting this borrower’s situation were unique and we believe are not reflective of any broader asset quality concerns.”

The company’s noninterest income increased $1.6 million, or 20%, to $9.9 million for the first quarter of 2018, compared to $8.3 million for the first quarter of 2017. Noninterest income was positively impacted by a 15% increase over the prior year first quarter in recurring fee income for service charges on deposit accounts, primarily due to growth in fees from business accounts. In addition, wealth advisory fees increased by 20% compared to the year ago period due to continued growth of client relationships.

Findlay added, “Effectively expanding our relationships with new and existing clients has contributed to this positive growth in fee-based services of 20%. These value-add products reflect both the adoption of technology by our clients and our ability to build upon existing client relationships with investment and treasury management products and services.”

The company adopted the new revenue recognition accounting standard effective on January 1, 2018 that requires the evaluation of all contracts and the related recognition of revenue. Although the adoption of this standard did not have a significant impact to net income, the evaluation of recording revenue gross versus net did cause some reclassifications of expenses associated with various revenue streams.  Adoption of this standard resulted in an increase of $194,000 to the loans and service fee line item and a $70,000 increase to the merchant card fee line item, both due to reclassifications of data processing expenses to non-interest income based on interchange revenue related transactions.

The company’s noninterest expense increased $1.2 million, or 6%, to $21.2 million in the first quarter of 2018, compared to $20.0 million in the first quarter of 2017.  Salaries and employee benefits increased primarily due to higher employee health insurance expense, an increase to the company’s minimum hiring wage, special bonuses paid to non-officer employees, and normal merit increases. Data processing fees increased due to the company’s continued investment in technology-based solutions as well as the adoption of the new FASB revenue recognition accounting standard. Corporate and business development expense decreased primarily due to a reduction in contributions as well as lower advertising expenses. The company’s efficiency ratio was 46.0% for the first quarter of 2018, compared to 49.7% for the first quarter of 2017 and 43.7% for the linked fourth quarter of 2017.

The effective tax rate for the first quarter 2018 was 15.1%, compared to 27.7% for the first quarter 2017 and reflects the effect of the Tax Cuts and Jobs Act, which lowered the company’s federal tax rate to 21% from 35%.

Lakeland Financial Corporation is a $4.7 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 49 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 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, 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 are included in the attached financial tables where the non-GAAP measures are 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. The company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain and, accordingly, the reader is cautioned not to place undue reliance on any forward-looking statements made by the company. 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
FIRST QUARTER 2018 FINANCIAL HIGHLIGHTS
	Three Months Ended
(Unaudited – Dollars in thousands, except per share data)		Mar. 31,			Dec. 31,			Mar. 31,
END OF PERIOD BALANCES		2018			2017			2017
Assets	$	4,726,948		$	4,682,976		$	4,319,103
Deposits		4,099,488			4,008,655			3,679,397
Brokered Deposits		227,260			268,976			135,595
Core Deposits		3,872,228			3,739,679			3,543,802
Loans		3,845,668			3,818,459			3,532,279
Allowance for Loan Losses		45,627			47,121			43,774
Total Equity		473,333			468,667			437,202
Goodwill net of deferred tax assets		3,796			3,799			3,130
Tangible Common Equity (1)		469,537			464,868			434,072
AVERAGE BALANCES
Total Assets	$	4,706,726		$	4,598,809		$	4,310,145
Earning Assets		4,421,461			4,323,249			4,059,885
Investments		546,042			537,796			515,283
Loans		3,791,922			3,727,967			3,509,155
Total Deposits		4,094,917			3,989,592			3,637,170
Interest Bearing Deposits		3,253,309			3,151,116			2,868,675
Interest Bearing Liabilities		3,367,104			3,266,206			3,084,584
Total Equity		469,998			467,459			431,894
INCOME STATEMENT DATA
Net Interest Income	$	36,223		$	35,392		$	32,061
Net Interest Income-Fully Tax Equivalent		36,632			36,231			32,733
Provision for Loan Losses		3,300			1,850			200
Noninterest Income		9,879			9,462			8,259
Noninterest Expense		21,202			19,598			20,048
Net Income		18,336			11,627			14,514
PER SHARE DATA
Basic Net Income Per Common Share	$	0.73		$	0.46		$	0.58
Diluted Net Income Per Common Share		0.71			0.45			0.57
Cash Dividends Declared Per Common Share		0.22			0.22			0.19
Dividend Payout		30.99	%		48.89	%		33.33	%
Book Value Per Common Share (equity per share issued)		18.71			18.6			17.36
Tangible Book Value Per Common Share (1)		18.56			18.45			17.24
Market Value – High		51.76			52.43			48.32
Market Value – Low		45.01			45.26			39.68
Basic Weighted Average Common Shares Outstanding		25,257,414			25,194,903			25,152,242
Diluted Weighted Average Common Shares Outstanding		25,696,864			25,701,337			25,596,136
KEY RATIOS
Return on Average Assets		1.58	%		1.00	%		1.37	%
Return on Average Total Equity		15.82			9.87			13.63
Average Equity to Average Assets		9.99			10.16			10.02
Net Interest Margin		3.36			3.33			3.27
Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)		45.99			43.69			49.72
Tier 1 Leverage (2)		10.77			10.76			10.78
Tier 1 Risk-Based Capital (2)		12.30			12.10			12.16
Common Equity Tier 1 (CET1) (2)		11.57			11.37			11.38
Total Capital (2)		13.41			13.26			13.31
Tangible Capital (1) (2)		9.94			9.93			10.06
ASSET QUALITY
Loans Past Due 30 - 89 Days	$	2,168		$	9,613		$	1,490
Loans Past Due 90 Days or More		26			6			1,633
Non-accrual Loans		11,002			9,401			10,185
Nonperforming Loans (includes nonperforming TDR's)		11,028			9,407			11,818
Other Real Estate Owned		10			40			115
Other Nonperforming Assets		114			55			15
Total Nonperforming Assets		11,151			9,502			11,948
Performing Troubled Debt Restructurings		4,085			2,893			10,234
Nonperforming Troubled Debt Restructurings (included in nonperforming loans)		7,945			7,750			7,180
Total Troubled Debt Restructurings		12,029			10,643			17,414
Impaired Loans		15,824			13,869			21,670
Non-Impaired Watch List Loans		166,205			157,834			130,551
Total Impaired and Watch List Loans		182,029			171,703			152,221
Gross Charge Offs		4,977			625			503
Recoveries		183			399			359
Net Charge Offs/(Recoveries)		4,794			226			144
Net Charge Offs/(Recoveries) to Average Loans		0.51	%		0.02	%		0.02	%
Loan Loss Reserve to Loans		1.19	%		1.23	%		1.24	%
Loan Loss Reserve to Nonperforming Loans		413.75	%		500.91	%		370.31	%
Loan Loss Reserve to Nonperforming Loans and Performing TDR's		301.92	%		383.1	%		198.48	%
Nonperforming Loans to Loans		0.29	%		0.25	%		0.33	%
Nonperforming Assets to Assets		0.24	%		0.20	%		0.28	%
Total Impaired and Watch List Loans to Total Loans		4.73	%		4.5	%		4.31	%
OTHER DATA
Full Time Equivalent Employees		539			539			528
Offices		49			49			49
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
(2) Capital ratios for March 31, 2018 are preliminary until the Call Report is filed.

CONSOLIDATED BALANCE SHEETS (in thousands except share data)
	March 31,				December 31,
		2018				2017
	(Unaudited)
ASSETS
Cash and due from banks	$	113,509			$	140,402
Short-term investments		54,042				35,778
Total cash and cash equivalents		167,551				176,180
Securities available for sale (carried at fair value)		560,664				538,493
Real estate mortgage loans held for sale		1,511				3,346
Loans, net of allowance for loan losses of $45,627 and $47,121		3,800,041				3,771,338
Land, premises and equipment, net		55,737				56,466
Bank owned life insurance		76,109				75,879
Federal Reserve and Federal Home Loan Bank stock		13,772				13,772
Accrued interest receivable		14,616				14,093
Goodwill		4,970				4,970
Other assets		31,977				28,439
Total assets	$	4,726,948			$	4,682,976
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits	$	858,950			$	885,622
Interest bearing deposits		3,240,538				3,123,033
Total deposits		4,099,488				4,008,655
Borrowings
Securities sold under agreements to repurchase		94,716				70,652
Federal Home Loan Bank advances		0				80,030
Subordinated debentures		30,928				30,928
Total borrowings		125,644				181,610
Accrued interest payable		7,484				6,311
Other liabilities		20,999				17,733
Total liabilities		4,253,615				4,214,309
STOCKHOLDERS' EQUITY
Common stock:  90,000,000 shares authorized, no par value
25,291,582 shares issued and 25,124,441 outstanding as of March 31, 2018
25,194,903 shares issued and 25,025,933 outstanding as of December 31, 2017		107,860				108,862
Retained earnings		376,782				363,794
Accumulated other comprehensive income/(loss)		(7,920	)			(670	)
Treasury stock, at cost (2018 - 167,141 shares, 2017 - 168,970 shares)		(3,478	)			(3,408	)
Total stockholders' equity		473,244				468,578
Noncontrolling interest		89				89
Total equity		473,333				468,667
Total liabilities and equity	$	4,726,948			$	4,682,976

CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)
	Three Months Ended
	March 31,
		2018				2017
NET INTEREST INCOME
Interest and fees on loans
Taxable	$	41,794			$	34,447
Tax exempt		217				150
Interest and dividends on securities
Taxable		2,434				2,320
Tax exempt		1,331				1,162
Interest on short-term investments		292				48
Total interest income		46,068				38,127
Interest on deposits		9,367				5,442
Interest on borrowings
Short-term		111				310
Long-term		367				314
Total interest expense		9,845				6,066
NET INTEREST INCOME		36,223				32,061
Provision for loan losses		3,300				200
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES		32,923				31,861
NONINTEREST INCOME
Wealth advisory fees		1,505				1,250
Investment brokerage fees		290				321
Service charges on deposit accounts		3,628				3,143
Loan and service fees		2,177				1,893
Merchant card fee income		642				538
Bank owned life insurance income		363				471
Other income		1,039				509
Mortgage banking income		241				131
Net securities gains/(losses)		(6	)			3
Total noninterest income		9,879				8,259
NONINTEREST EXPENSE
Salaries and employee benefits		12,019				11,370
Other components of net periodic pension cost		49				51
Net occupancy expense		1,426				1,120
Equipment costs		1,274				1,075
Data processing fees and supplies		2,513				2,016
Corporate and business development		1,133				1,502
FDIC insurance and other regulatory fees		461				434
Professional fees		872				954
Other expense		1,455				1,526
Total noninterest expense		21,202				20,048
INCOME BEFORE INCOME TAX EXPENSE		21,600				20,072
Income tax expense		3,264				5,558
NET INCOME	$	18,336			$	14,514
BASIC WEIGHTED AVERAGE COMMON SHARES		25,257,414				25,152,242
BASIC EARNINGS PER COMMON SHARE	$	0.73			$	0.58
DILUTED WEIGHTED AVERAGE COMMON SHARES		25,696,864				25,596,136
DILUTED EARNINGS PER COMMON SHARE	$	0.71			$	0.57

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
FIRST QUARTER 2018
(unaudited in thousands)
	March 31,					December 31,					March 31,
		2018					2017					2017
Commercial and industrial loans:
Working capital lines of credit loans	$	778,779		20.2	%	$	743,609		19.4	%	$	650,691		18.4	%
Non-working capital loans		706,228		18.4			675,072		17.7			673,374		19.1
Total commercial and industrial loans		1,485,007		38.6			1,418,681		37.1			1,324,065		37.5
Commercial real estate and multi-family residential loans:
Construction and land development loans		237,887		6.2			224,474		5.9			238,018		6.7
Owner occupied loans		543,192		14.1			538,603		14.1			468,621		13.3
Nonowner occupied loans		507,041		13.2			508,121		13.3			463,186		13.1
Multifamily loans		193,956		5.0			173,715		4.5			201,147		5.7
Total commercial real estate and multi-family residential loans		1,482,076		38.5			1,444,913		37.8			1,370,972		38.8
Agri-business and agricultural loans:
Loans secured by farmland		145,363		3.8			186,437		4.9			138,071		3.9
Loans for agricultural production		171,607		4.5			196,404		5.1			189,516		5.4
Total agri-business and agricultural loans		316,970		8.3			382,841		10.0			327,587		9.3
Other commercial loans		116,657		3.0			124,076		3.3			105,684		3.0
Total commercial loans		3,400,710		88.4			3,370,511		88.2			3,128,308		88.6
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans		180,542		4.7			179,302		4.7			166,158		4.7
Open end and junior lien loans		179,065		4.7			181,865		4.8			167,517		4.7
Residential construction and land development loans		13,342		0.3			13,478		0.3			10,274		0.3
Total consumer 1-4 family mortgage loans		372,949		9.7			374,645		9.8			343,949		9.7
Other consumer loans		73,277		1.9			74,369		2.0			60,881		1.7
Total consumer loans		446,226		11.6			449,014		11.8			404,830		11.4
Subtotal		3,846,936		100.0	%		3,819,525		100.0	%		3,533,138		100.0	%
Less:  Allowance for loan losses		(45,627	)				(47,121	)				(43,774	)
Net deferred loan fees		(1,268	)				(1,066	)				(859	)
Loans, net	$	3,800,041				$	3,771,338				$	3,488,505
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
FIRST QUARTER 2018
(unaudited in thousands)
	March 31,					December 31,					March 31,
		2018					2017					2017
Non-interest bearing demand deposits	$	858,950				$	885,622				$	762,575
Savings and transaction accounts:
Savings deposits		272,472					263,570					277,148
Interest bearing demand deposits		1,491,220					1,446,880					1,346,651
Time deposits:
Deposits of $100,000 or more		1,216,802					1,161,365					1,056,025
Other time deposits		260,044					251,218					236,998
Total deposits	$	4,099,488				$	4,008,655				$	3,679,397
FHLB advances and other borrowings		125,644					181,610					175,734
Total funding sources	$	4,225,132				$	4,190,265				$	3,855,131

LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
			Three Months Ended										Three Months Ended										Three Months Ended
			March 31, 2018										December 31, 2017										March 31, 2017
			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)	$	3,767,300			$	41,794		4.50	%		$	3,703,260			$	40,251		4.31	%		$	3,491,018			$	34,447		4.00	%
		Tax exempt (1)		24,622				272		4.48				24,707				321		5.15				18,137				221		4.94
		Investments: (1)
		Available for sale		546,042				4,119		3.06				537,796				4,272		3.15				515,283				4,083		3.21
		Short-term investments		4,579				9		0.80				4,377				7		0.63				5,121				5		0.40
		Interest bearing deposits		78,918				283		1.45				53,109				149		1.11				30,326				43		0.58
		Total earning assets	$	4,421,461			$	46,477		4.26	%		$	4,323,249			$	45,000		4.13	%		$	4,059,885			$	38,799		3.88	%
		Less:  Allowance for loan losses		(47,189	)									(46,281	)									(43,981	)
		Nonearning Assets
		Cash and due from banks		137,738										127,028										108,682
		Premises and equipment		56,192										56,719										52,729
		Other nonearning assets		138,524										138,094										132,830
		Total assets	$	4,706,726									$	4,598,809									$	4,310,145
		Interest Bearing Liabilities
		Savings deposits	$	268,091			$	89		0.13	%		$	270,978			$	95		0.14	%		$	271,087			$	99		0.15	%
		Interest bearing checking accounts		1,491,820				3,575		0.97				1,451,544				3,024		0.83				1,383,791				1,952		0.57
		Time deposits:
		In denominations under $100,000		255,209				848		1.35				247,875				811		1.30				238,347				670		1.14
		In denominations over $100,000		1,238,189				4,855		1.59				1,180,719				4,374		1.47				975,450				2,721		1.13
		Miscellaneous short-term borrowings		82,862				111		0.54				84,132				118		0.56				184,950				310		0.68
		Long-term borrowings and
		subordinated debentures		30,933				367		4.81				30,958				347		4.45				30,959				314		4.11
		Total interest bearing liabilities	$	3,367,104			$	9,845		1.19	%		$	3,266,206			$	8,769		1.07	%		$	3,084,584			$	6,066		0.80	%
		Noninterest Bearing Liabilities
		Demand deposits		841,608										838,476										768,495
		Other liabilities		28,016										26,668										25,172
		Stockholders' Equity		469,998										467,459										431,894
		Total liabilities and stockholders' equity	$	4,706,726									$	4,598,809									$	4,310,145
		Interest Margin Recap
		Interest income/average earning assets						46,477		4.26								45,000		4.13								38,799		3.88
		Interest expense/average earning assets						9,845		0.90								8,769		0.80								6,066		0.61
		Net interest income and margin					$	36,632		3.36	%						$	36,231		3.33	%						$	32,733		3.27	%
(1)		Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate for 2018 and a 35 percent tax rate for 2017. 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.  Taxable equivalent basis adjustments were $409,000, $839,000 and $672,000 in the three-month periods ended March 31, 2018, December 31, 2017 and March 31, 2017, respectively.
(2)		Loan fees, which are immaterial in relation to total taxable loan interest income for 2018 and 2017, are included as taxable loan interest income.
(3)		Nonaccrual loans are included in the average balance of taxable loans.

(1)		Reconciliation of Non-GAAP Financial Measures
		Tangible common equity, tangible assets, tangible book value per share and the tangible common equity to tangible assets ratio are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of stockholders’ equity, net of deferred tax. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets, net of deferred tax. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding.  Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. However, management considers these measures of the company’s value including only earning assets as meaningful to an understanding of the company’s financial information.
		Net income applicable to Lakeland Financial Corporation and earnings per diluted share, excluding the income tax expense adjustment for the deferred tax asset revaluation, are non-GAAP financial measures that the company considers useful for investors to allow better comparability of operating performance. The income tax expense adjustment consists of a $4.1 million, or $0.16 per diluted common share, revaluation of the company’s net deferred tax asset as a result of the enactment of the Tax Cuts and Jobs Act in 2017.
		A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).

	Three Months Ended
	Mar. 31,				Dec. 31,				Mar. 31,
		2018				2017				2017
Total Equity	$	473,333			$	468,667			$	437,202
Less: Goodwill		(4,970	)			(4,970	)			(4,970	)
Plus: Deferred tax assets related to goodwill		1,174				1,171				1,840
Tangible Common Equity		469,537				464,868				434,072
Assets	$	4,726,948			$	4,682,976			$	4,319,103
Less: Goodwill		(4,970	)			(4,970	)			(4,970	)
Plus: Deferred tax assets related to goodwill		1,174				1,171				1,840
Tangible Assets		4,723,152				4,679,177				4,315,973
Ending common shares issued		25,291,582				25,194,903				25,180,759
Tangible Book Value Per Common Share	$	18.56			$	18.45			$	17.24
Tangible Common Equity/Tangible Assets		9.94		%		9.93		%		10.06		%
Net Income	$	18,336			$	11,627			$	14,514
Plus:  Additional tax expense due to adjusting deferred tax asset		0				4,137				0
Net income excluding effect of deferred tax adjustment	$	18,336			$	15,764			$	14,514
Diluted Weighted Average Common Shares Outstanding		25,696,864				25,701,337				25,596,136
Diluted net income per share excluding effect of
of deferred tax adjustment	$	0.71			$	0.61			$	0.57

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

_____________________________

¹ Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”