GlobeNewswire Inc | Jul 26, 2021 08:00AM EDT

July 26, 2021

WARSAW, Ind., July 26, 2021 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record quarterly net income of $24.3 million for the three months ended June30, 2021, an increase of 24% versus $19.7 million for the second quarter of 2020. Diluted earnings per share increased 23% to $0.95 for the second quarter of 2021, versus $0.77 for the second quarter of 2020. On a linked quarter basis, net income increased $1.4 million, or 6%, from the first quarter of 2021, in which the company had net income of $23.0 million, or $0.90, diluted earnings per share. Pretax pre-provision earnings1 were $28.4 million for the second quarter of 2021, a decrease of 4%, or $1.3 million, from $29.6 million for the second quarter of 2020. On a linked quarter basis, pretax pre-provision earnings decreased 4%, or $1.1 million, from $29.5 million for the first quarter of 2021.

The company further reported record net income of $47.3 million for the six months ended June30, 2021 versus $37.0 million for the comparable period of 2020, an increase of 28%. Diluted earnings per share also increased 28% to $1.85 for the six months ended June30, 2021 versus $1.44 for the comparable period of 2020. Pretax pre-provision earnings1 were $57.8 million for the six months ended June30, 2021, versus $57.2 million for the comparable period of 2020, an increase of 1%, or $0.7 million.

David M. Findlay, President and Chief Executive Officer commented, We are very pleased with our strong performance in 2021 under challenging conditions. Our record net income for the quarter and first six months of the year reflects strong organic loan and deposit growth, exceptional management of the Paycheck Protection Program and prudent overall balance sheet management. As we transition to the second half of 2021, we look forward to expanding our business development efforts and focusing on growing relationships with clients and prospects.

Financial Performance Second Quarter 2021

Second Quarter 2021 versus Second Quarter 2020 highlights:

-- Return on average equity of 14.71%, compared to 12.92% -- Return on average assets of 1.58%, compared to 1.45% -- Organic loan growth, excluding PPP loans, of $223.6 million, or 6% -- Core deposit growth of $769.3 million, or 17% Noninterest bearing demand deposit account growth of $317.1 million, or 22% -- Net interest income increase of $4.1 million, or 10% -- Net interest margin of 3.01% compared to 3.10% -- Noninterest income increase of $171,000, or 2% -- Revenue growth of $4.3 million, or 8% -- Noninterest expense increase of $5.6 million, or 26% -- Recovery of a $1.7 million loan charged off in 2009, resulting in $1.7 million reverse provision compared to provision expense of $5.5 million, a decrease of $7.2 million -- Dividend per share increase of 13% to $0.34 from $0.30 -- Average total equity increase of $51.7 million, or 8% -- Total risk-based capital ratio improved to 15.04% compared to 14.93% -- Tangible capital ratio of 10.81% compared to 11.35%

Second Quarter 2021 versus First Quarter 2021 highlights:

-- Return on average equity of 14.71%, compared to 14.27% -- Return on average assets of 1.58% for both periods -- Organic loan growth, excluding PPP loans, of $81.6 million, or 2% -- Core deposit growth of $164.7 million, or 3% Noninterest bearing demand deposit account growth of $138.9 million, or 9% -- Net interest income decrease of $18,000 -- Net interest margin of 3.01% compared to 3.19% -- Noninterest income decrease of $1.2 million, or 10% -- Recovery of a $1.7 million loan charged off in 2009, resulting in $1.7 million reverse provision compared to provision expense of $1.5 million, a decrease of $3.2 million -- Decrease in watch list loans of $10.8 million, or 4% decline -- Noninterest expense decrease of $98,000 -- Average total equity increase of $10.7 million, or 2% -- Total risk-based capital declined to 15.04% compared to 15.20% -- Tangible capital ratio was 10.81% compared to 10.77%

As announced on July13, 2021, the board of directors approved a cash dividend for the second quarter of $0.34 per share, payable on August5, 2021, to shareholders of record as of July25, 2021. The second quarter dividend per share of $0.34 is unchanged from the dividend per share paid for the first quarter of 2021 and reflects a 13% increase from the dividend rate a year ago.

On April 13, 2021, the companys board of directors reauthorized and extended the share repurchase program through April 30, 2023. Under the program the company is authorized to repurchase, from time to time as the company deems appropriate, shares of the companys common stock with an aggregate purchase price of up to $30 million. No shares were repurchased under the plan during 2021. Under the program, the company repurchased 289,101 shares, with an average purchase price of $34.66, during the first quarter of 2020.

Average total loans for the second quarter of 2021 were $4.49 billion, an increase of $27.3 million, or 1%, versus $4.46 billion for the second quarter 2020. Average PPP loans were $348.0 million during the second quarter 2021. Excluding PPP loans, average loans were $4.14 billion compared to $4.00 billion for the second quarter of 2020, an increase of $137.0 million, or 3%. On a linked quarter basis, average loans excluding PPP loans decreased by $24.8 million, or 1%. Average total loans including PPP loans decreased $79.5 million, or 2%, from $4.57 billion for the first quarter of 2021.

Total loans, excluding PPP loans, increased by $223.6 million, or 6%, as of June30, 2021 as compared to June30, 2020. On a linked quarter basis, total loans excluding PPP loans were $4.16 billion as of June30, 2021, an increase of $81.6 million, or 2%, as compared to the first quarter of 2021. Total loans outstanding, including PPP loans, decreased by $136.8 million, or 3%, from $4.49 billion as of June 30, 2020 to $4.35 billion as of June 30, 2021. PPP loans outstanding were $194.2 million as of June 30, 2021, which reflects PPP forgiveness and repayments of $535.2 million since the programs inception.

Findlay stated, We are pleased to report substantial progress in PPP forgiveness application approvals during the quarter with $228.1 million, or approximately 578 loans, forgiven during the quarter. Approximately 95% of our round one PPP loans have been forgiven by the SBA and 29% of our round two PPP loans have been forgiven as of July 20, 2021. Our lenders look forward to shifting their focus to organic loan growth opportunities in our Lake City Bank footprint. The loan pipeline is healthy and we are optimistic about future loan growth potential.

Average total deposits were $5.39 billion for the second quarter of 2021, an increase of $690.4 million, or 15%, versus $4.70 billion for the second quarter of 2020. On a linked quarter basis, average total deposits increased by $280.2 million, or 5%. Total deposits increased $751.2 million, or 16%, from $4.64 billion as of June30, 2020 to $5.39 billion as of June30, 2021. On a linked quarter basis, total deposits increased by $164.7 million, or 3%, from $5.23 billion as of March31, 2021.

Core deposits, which exclude brokered deposits, increased by $769.3 million, or 17%, from $4.62 billion at June30, 2020 to $5.38 billion at June30, 2021. This increase was due to growth in commercial deposits of $338.9 million, or 19%; growth in retail deposits of $258.1 million, or 15%; and growth in public fund deposits of $172.4 million, or 16%. On a linked quarter basis, core deposits increased by $164.7 million, or 3%, at June30, 2021 as compared to March31, 2021. The linked quarter growth resulted from commercial deposit growth of $114.4 million, a 6% increase; public fund growth of $71.2 million, a 6% increase; and retail contraction of $20.9 million, a 1% decrease. PPP loan forgiveness and the first round of stimulus payments to municipalities contributed to the increase in deposits during the second quarter.

Investment securities were $1.1 billion at June 30, 2021, reflecting an increase of $491.3 million, or 78%, as compared to $632.9 million at June 30, 2020. Investment securities increased $283.8 million, or 34%, on a linked quarter basis. Investment securities represent 18% of total assets compared to 12% on June 30, 2020 and 14% on March 31, 2021. The increase in investment securities reflects the deployment of excess liquidity resulting from deposit increases that resulted from PPP and economic stimulus.

Findlay added, We have deployed $600 million in excess liquidity to our investment securities portfolio since late 2020 in response to the surge in deposit balances that began in 2020 and has continued into 2021. The unprecedented liquidity of our balance sheet has presented some unique challenges and we have judiciously allocated a portion of that liquidity to the investment portfolio without significant impact to our asset sensitive balance sheet. Our commercial line utilization has improved from 39% in March 2021 to 41% in July, however it is considerably lower than in previous years. During the past eight years, we have averaged 49% commercial line utilization, so the trends in 2020 and 2021 have clearly been created by the impact on our clients of the governmental programs designed to strengthen and stabilize the economy.

The companys net interest margin decreased 9 basis points to 3.01% for the second quarter of 2021 compared to 3.10% for the second quarter of 2020. The lower margin in the second quarter of 2021 as compared to the prior year period was due to lower yields on loans and securities, partially offset by a lower cost of funds. As a result of the excess liquidity on the company's balance sheet, the mix of earning assets included lower earning assets consisting of balances at the Federal Reserve Bank and the investment securities portfolio. The decline in earning asset yields, and thereby net interest margin, resulted from the Federal Reserve Bank decreases in the target Federal Funds Rate by 150 basis points during the first quarter of 2020, which brought the Federal Funds Rate back to the zero-bound range of 0.00% to 0.25%. Second quarter loan yields were impacted by the lower yield on the PPP loan portfolio, offset by fees earned as a result of PPP loan forgiveness.

The companys net interest margin excluding PPP loans1 was 6 basis points lower at 2.95% for the second quarter of 2021 compared to actual net interest margin of 3.01%, and reflects a 22 basis point decline from net interest margin excluding PPP loans of 3.17% in the second quarter of 2020. Linked quarter net interest margin excluding PPP loans decreased by 11 basis points compared to 3.06% for the first quarter of 2021 due to declining earning asset yields and excess liquidity on the balance sheet. Cost of funds decreased to a historical low of 0.27% for the three-month period ended June 30, 2021 from 0.56% at June 30, 2020 and 0.31% on a linked quarter basis.

Net interest income increased by $4.1 million, or 10%, for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. On a linked quarter basis, net interest income decreased $18,000 from the first quarter of 2021. PPP loan income was $3.7 million for the three months ended June 30, 2021, compared to $5.2 million during the first quarter of 2021. Net interest income increased by $9.0 million, or 11%, for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 due primarily to a decrease in interest expense of $10.6 million and an increase in investment securities income of $1.5 million, offset by a $3.1 million decline in loan interest income.

The company adopted CECL during the first quarter of 2021, effective January 1, 2021. The day one impact of adoption was an increase in the allowance for credit losses2 of $9.1 million, with an offset, net of taxes, to beginning stockholders equity. The company recorded a provision for credit losses2 reversal of $1.7 million in the second quarter of 2021, compared to $5.5 million provision expense in the second quarter of 2020, a decrease of $7.2 million. On a linked quarter basis, the provision2 decreased by $3.2 million from expense of $1.5 million in the first quarter of 2021. The provision reversal in the second quarter of 2021 was driven primarily by a one-time recovery of $1.7 million from a commercial loan relationship that had been partially charged off in 2009. The companys credit loss reserve to total loans2 was 1.65% at June 30, 2021 versus 1.31% at June 30, 2020 and 1.61% at March 31, 2021. The companys credit loss reserve2 to total loans excluding PPP loans1 was 1.72% at June 30, 2021 versus 1.50% at June 30, 2020 and 1.76% at March 31, 2021. PPP loans are guaranteed by the United States Small Business Administration (SBA) and have not been allocated for within the allowance for credit losses2.

The $1.7 million recovery recorded during the second quarter is a testament to our long-standing approach to working with our borrowers when they encounter challenges. We prudently charged off the loan 12 years ago but continued to do business with the borrower and maintained a meaningful relationship. As a result, the bank was able to work with the borrower to secure this recovery, commented Findlay.

Net recoveries in the second quarter of 2021 were $1.6 million versus net charge offs of $90,000 in the second quarter of 2020 and net charge offs of $91,000 during the linked first quarter of 2021. Annualized net charge offs (recoveries) to average loans were (0.14%) for the second quarter of 2021 versus 0.01% for the second quarter of 2020, and 0.01% for the linked first quarter of 2021.

Nonperforming assets decreased $3.3 million, or 22%, to $11.8 million as of June 30, 2021 versus $15.1 million as of June 30, 2020. On a linked quarter basis, nonperforming assets decreased $383,000, or 3%, versus the $12.2 million reported as of March 31, 2021. The ratio of nonperforming assets to total assets at June 30, 2021 decreased to 0.19% from 0.28% at June 30, 2020 and decreased from 0.20% at March 31, 2021 on a linked quarter basis. Total individually analyzed and watch list loans increased by $57.1 million, or 31%, to $241.3 million at June 30, 2021 versus $184.2 million as of June 30, 2020. On a linked quarter basis, total individually analyzed and watch list loans decreased by $9.9 million, or 4%, from $251.2 million at March 31, 2021. The decrease in total individually analyzed and watch list loans was due primarily to a decrease in non-individually analyzed watch list credits. Individually analyzed watch list loans decreased by $4.7 million, or 20%, to $19.3 million at June 30, 2021 versus $24.0 million at June 30, 2020. On a linked quarter basis, individually analyzed watch list loans decreased by $872,000, or 4%, from $20.1 million at March 31, 2021.

The companys noninterest income increased $171,000, or 2%, to $11.3 million for the second quarter of 2021, compared to $11.2 million for the second quarter of 2020. Noninterest income was positively impacted by elevated wealth and investment brokerage fees which increased by $538,000, or 25%, for these comparable periods. In addition, service charges on deposit accounts were up $332,000, or 15%, and loan and service fees were up $617,000, or 25%, for these comparable periods due to an increase in economic activity within the company's operating footprint. Offsetting these increases were decreases of $804,000, or 61%, in interest rate swap fee income and $939,000, or 69%, in mortgage banking income. Both interest rate swap arrangements and mortgage banking have seen a decrease in demand during the second quarter of 2021 compared to the second quarter of 2020, and the carrying value of mortgage service rights has been impacted by increased prepayment speeds due to the current rate environment and appreciating single-home values.

Noninterest income decreased by $1.2 million, or 10%, on a linked quarter from $12.6 million. The linked quarter decrease resulted primarily from a decrease in net securities gains of $709,000 and mortgage banking income of $958,000. Offsetting these decreases was a $256,000 increase in interest rate swap fee income during the quarter.

The companys noninterest expense increased $5.6 million, or 26%, to $26.6 million in the second quarter of 2021, compared to $21.1 million in the second quarter of 2020. Salaries and employee benefits increased $4.3 million, or 38%, driven by higher performance-based incentive compensation expense and higher employee health insurance expense. Professional fees increased $786,000, or 75%, driven by expenses related to the company's implementation of Lake City Bank Digital, an innovative digital banking platform, in the first quarter of 2021, as well as an increase in legal and regulatory expense. Data processing fees increased $375,000, or 13%, driven by the companys continued investment in customer focused, technology-based solutions, such as the online PPP origination and forgiveness platform, and ongoing cybersecurity and data management enhancements.

On a linked quarter basis, noninterest expense decreased by $98,000 to $26.6 million. Salaries and employee benefits increased by $1.4 million, or 10%, driven by higher performance-based incentive compensation expense. Offsetting this increase was a planned seasonal decrease of $311,000 in advertising spending and a reduction in equipment costs of $127,000. In addition, the company made a $500,000 contribution to its foundation in the first quarter that did not repeat in the second quarter of 2021.

The companys efficiency ratio was 48.5% for the second quarter of 2021, compared to 41.6% for the second quarter of 2020 and 47.6% for the linked first quarter of 2021. The company's efficiency ratio was 48.0% for the six months ended June 30, 2021 compared to 43.0% in the prior period.

_____________________________________________________1 Non-GAAP financial measure see Reconciliation of Non-GAAP Financial Measures2 Beginning January 1, 2021 calculation is based on the Current Expected Credit Loss methodology (CECL). Prior to January 1, 2021 calculation was based on the incurred loss methodology.

Active Management of Credit Risk

The companys Commercial Banking and Credit Administration leadership continues to review and refine the list of industries that the company believes are most likely to be materially impacted by the potential economic impact resulting from the COVID-19 pandemic. The current assessment of impacted industries has narrowed from year end 2020 and includes only one industry, hotel and accommodation, as compared to the initial list of ten potentially affected industries disclosed in the companys earnings release for the first quarter of 2020. The hotel and accommodation industry represents approximately 2.3%, or $96 million, of the companys total loan portfolio. The original ten industries represented a peak of $765 million, or 18.7%, as of March 31, 2020, excluding PPP loans.

Findlay noted, Asset quality metrics have continued to improve during 2021 on nearly every front, and we are cautiously optimistic about overall trends in asset quality. While our borrowers continue to experience supply chain issues and an increase in cost of goods sold, they are generally working through these issues effectively.

The companys commercial loan portfolio is highly diversified, and no industry sector represents more than 8% of the banks loan portfolio, net of PPP, as of June 30, 2021. Agri-business and agricultural loans, along with healthcare loans, represented the highest specific industry concentrations, at 8% of total loans in both cases. The companys Commercial Banking and Credit Administration teams continue to actively work with customers to understand their business challenges and credit needs during this time.

COVID-19 Related Loan Deferrals

Loan deferrals peaked on June 17, 2020, at $737 million, which represented 16% of the total loan portfolio. As of June 30, 2021, total deferrals attributable to COVID-19 were $37 million, representing eight borrowers, or 1% of the total loan portfolio. Total deferrals as of July 20, 2021 represented a decline in deferral balances of 96% from peak levels. Of the $28 million, four were commercial loan borrowers representing $28 million in loans, or 1% of total commercial loans, and there were no retail loan deferrals. All COVID-19 related loan deferrals remain on accrual status, as each deferral is evaluated individually, and management has determined that all contractual cashflows are collectable at this time.

As of July 20, 2021, of the total commercial deferrals attributed to COVID-19, $8 million represented a first deferral action, $250,000 represented a second deferral action and $20 million represented a third deferral action. In accordance with Section 4013 of the CARES Act, these deferrals were not considered to be troubled debt restructurings. This provision was extended to January 1, 2022 under the Consolidated Appropriations Act, 2021. The third deferral actions, which are comprised of two borrowers, have been classified as watchlist credits and are adequately reserved for in the allowance for credit losses as of June 30, 2021.

The companys retail loan portfolio is comprised of 1-4 family mortgage loans, home equity lines of credit and other direct and indirect installment loans. A third-party vendor manages the companys retail and commercial credit card program and the company does not have any balance sheet exposure with respect to this program except for nominal recourse on limited commercial card accounts.

Paycheck Protection Program

During the first and second quarter of 2021, the company funded PPP loans totaling $165.1 million for its customers through the second round of the PPP program. In addition, the bank has continued processing forgiveness applications for PPP loans made during the first and second rounds of the PPP program. As of June 30, 2021, Lake City Bank had $194.2 million in PPP loans outstanding, net of deferred fees, consisting of $40.7 million from PPP round one and $153.5 million from PPP round two. Most of the PPP loans are for existing customers and 55% of the number of PPP loans originated are for amounts less than $50,000. As of June 30, 2021, the SBA has approved forgiveness for $513.6 million in PPP loans originated during round one and $5.7 million in PPP loans originated during round two. The company has submitted forgiveness applications on behalf of customers in the amount of $15.2 million for PPP round one and $1.7 million for PPP round two that are awaiting SBA approval.

June 30, 2021 Originated Forgiven Outstanding^ (1) Number Amount Number Amount Number AmountPPP Round 2,409 $ 570,500 2,256 $ 513,626 133 $ 40,746 1PPP Round 1,192 165,142 180 5,746 1,012 153,466 2Total 3,601 $ 735,642 2,436 $ 519,372 1,145 $ 194,212

(1)Outstanding balance includes deferred loan origination fees, net of costs, and any loans repaid by borrowers.

Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at lakecitybank.com. The companys 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. The company believes that providing non-GAAP financial measures provides investors with information useful to understanding the companys financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio and pretax pre-provision earnings. A reconciliation of these and other non-GAAP measures to the most comparable GAAP equivalents is 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 companys 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 companys 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. Numerous factors could cause the companys actual results to differ from those reflected in forward-looking statements, including the effects of the COVID-19 pandemic, including its effects on our customers, local economic conditions, our operations and vendors, and the responses of federal, state and local governmental authorities, as well as those identified in the companys filings with the Securities and Exchange Commission, including the companys Annual Report on Form 10-K and quarterly reports on Form 10-Q.

LAKELAND FINANCIAL CORPORATIONSECOND QUARTER 2021 FINANCIAL HIGHLIGHTS

Three Months Ended Six Months Ended(Unaudited ?Dollars in Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,thousands, exceptper share data)END OF PERIOD 2021 2021 2020 2021 2020BALANCESAssets $ 6,232,914 $ 6,016,642 $ 5,441,092 $ 6,232,914 $ 5,441,092 Deposits 5,394,664 5,229,970 4,643,427 5,394,664 4,643,427 Brokered Deposits 10,004 10,003 28,052 10,004 28,052 Core Deposits (1) 5,384,660 5,219,967 4,615,375 5,384,660 4,615,375 Loans 4,353,709 4,474,631 4,490,532 4,353,709 4,490,532 PaycheckProtection Program 194,212 396,723 554,636 194,212 554,636 (PPP) LoansAllowance for 71,713 71,844 59,019 71,713 59,019 Credit Losses (2)Total Equity 677,471 651,668 620,892 677,471 620,892 Goodwill net ofdeferred tax 3,794 3,794 3,789 3,794 3,789 assetsTangible Common 673,677 647,874 617,103 673,677 617,103 Equity (3)AVERAGE BALANCES Total Assets $ 6,171,427 $ 5,887,361 $ 5,454,608 $ 6,030,178 $ 5,210,873 Earning Assets 5,924,801 5,638,202 5,212,985 5,782,293 4,975,358 Investments - 955,242 772,247 621,134 864,250 620,005 available-for-saleLoans 4,487,683 4,567,226 4,460,411 4,527,234 4,259,792 PaycheckProtection Program 348,026 402,730 457,757 375,226 228,878 (PPP) LoansTotal Deposits 5,387,185 5,107,019 4,696,832 5,247,878 4,450,463 Interest Bearing 3,753,499 3,540,974 3,335,189 3,647,826 3,273,815 DepositsInterest Bearing 3,828,499 3,617,491 3,421,041 3,723,580 3,373,027 LiabilitiesTotal Equity 663,993 653,329 612,313 658,690 608,293 INCOME STATEMENT DATANet Interest $ 43,661 $ 43,679 $ 39,528 $ 87,340 $ 78,382 IncomeNet InterestIncome-Fully Tax 44,452 44,366 40,124 88,818 79,567 EquivalentProvision for (1,700 ) 1,477 5,500 (223 ) 12,100 Credit Losses (2)Noninterest Income 11,340 12,557 11,169 23,897 21,946 Noninterest 26,648 26,746 21,079 53,394 43,168 ExpenseNet Income 24,348 22,983 19,670 47,331 36,969 PretaxPre-Provision 28,353 29,490 29,618 57,843 57,160 Earnings (3)PER SHARE DATA Basic Net Income $ 0.96 $ 0.90 $ 0.77 $ 1.86 $ 1.45 Per Common ShareDiluted Net Income 0.95 0.90 0.77 1.85 1.44 Per Common ShareCash DividendsDeclared Per 0.34 0.34 0.30 0.68 0.60 Common ShareDividend Payout 35.79 % 37.78 % 38.96 % 36.76 % 41.67 %Book Value PerCommon Share 26.59 25.58 24.43 26.59 24.43 (equity per shareissued)Tangible BookValue Per Common 26.45 25.43 24.28 26.45 24.28 Share (3)Market Value ? 70.25 77.05 47.49 77.05 49.85 HighMarket Value ? Low 57.02 53.03 33.92 53.03 30.49 Three Months Ended Six Months Ended Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30, 2021 2021 2020 2021 2020Basic WeightedAverage Common 25,473,497 25,457,659 25,412,014 25,465,621 25,517,499 Shares OutstandingDiluted WeightedAverage Common 25,602,063 25,550,111 25,469,680 25,596,843 25,594,959 Shares OutstandingKEY RATIOS Return on Average 1.58 % 1.58 % 1.45 % 1.58 % 1.43 %AssetsReturn on Average 14.71 14.27 12.92 14.49 12.22 Total EquityAverage Equity to 10.76 11.10 11.23 10.92 11.67 Average AssetsNet Interest 3.01 3.19 3.10 3.10 3.22 MarginNet InterestMargin, Excluding 2.95 3.06 3.17 3.00 3.25 PPP Loans (3)Efficiency(NoninterestExpense / Net 48.45 47.56 41.58 48.00 43.03 Interest Incomeplus NoninterestIncome)Tier 1 Leverage 10.59 10.79 10.84 10.59 10.84 (4)Tier 1 Risk-Based 13.79 13.95 13.68 13.79 13.68 Capital (4)Common Equity Tier 13.79 13.95 13.68 13.79 13.68 1 (CET1) (4)Total Capital (4) 15.04 15.20 14.93 15.04 14.93 Tangible Capital 10.81 10.77 11.35 10.81 11.35 (3) (4)ASSET QUALITY Loans Past Due 30 $ 673 $ 739 $ 683 $ 673 $ 683 - 89 DaysLoans Past Due 90 18 18 19 18 19 Days or MoreNon-accrual Loans 10,709 11,707 14,779 10,709 14,779 NonperformingLoans (includes 10,727 11,725 14,798 10,727 14,798 nonperformingTDRs)Other Real Estate 1,079 447 316 1,079 316 OwnedOtherNonperforming 0 17 0 0 0 AssetsTotalNonperforming 11,806 12,189 15,114 11,806 15,114 AssetsPerformingTroubled Debt 5,040 5,111 5,772 5,040 5,772 RestructuringsNonperformingTroubled DebtRestructurings 5,938 6,508 7,582 5,938 7,582 (included innonperformingloans)Total TroubledDebt 10,978 11,619 13,354 10,978 13,354 RestructuringsIndividually 19,277 20,149 23,987 19,277 23,987 Analyzed LoansNon-IndividuallyAnalyzed Watch 241,265 251,183 184,203 241,265 184,203 List LoansTotal IndividuallyAnalyzed and Watch 260,542 271,332 208,190 260,542 208,190 List LoansGross Charge Offs 267 236 411 503 4,260 Recoveries 1,836 145 321 1,981 527 Net Charge Offs/ (1,569 ) 91 90 (1,478 ) 3,733 (Recoveries)Net Charge Offs/(Recoveries) to (0.14 %) 0.01 % 0.01 % (0.07 %) 0.18 %Average LoansCredit LossReserve to Loans 1.65 % 1.61 % 1.31 % 1.65 % 1.31 %(2)Credit LossReserve to Loans, 1.72 % 1.76 % 1.50 % 1.72 % 1.50 %Excluding PPPLoans (2) (3) Three Months Ended Six Months Ended Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30, 2021 2021 2020 2021 2020Credit LossReserve to 668.51 % 612.70 % 398.83 % 668.51 % 398.83 %NonperformingLoans (2)Credit LossReserve toNonperforming 454.82 % 426.70 % 286.92 % 454.82 % 286.92 %Loans andPerforming TDRs(2)Nonperforming 0.25 % 0.26 % 0.33 % 0.25 % 0.33 %Loans to LoansNonperforming 0.19 % 0.20 % 0.28 % 0.19 % 0.28 %Assets to AssetsTotal IndividuallyAnalyzed and Watch 5.98 % 6.06 % 4.64 % 5.98 % 4.64 %List Loans toTotal LoansTotal IndividuallyAnalyzed and WatchList Loans to 6.26 % 6.65 % 5.29 % 6.26 % 5.29 %Total Loans,Excluding PPPLoans (3)OTHER DATA Full TimeEquivalent 600 587 574 600 574 EmployeesOffices 50 50 50 50 50

_____________________________________________________________(1)Core deposits equals deposits less brokered deposits(2)Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.(3)Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"(4)Capital ratios for June30, 2021 are preliminary until the Call Report is filed.

CONSOLIDATED BALANCE SHEETS (in thousands, except share data)? June 30, December 31, 2021 2020? (Unaudited) ?ASSETS Cash and due from banks $ 57,412 $ 74,457 Short-term investments 515,398 175,470 Total cash and cash equivalents 572,810 249,927 ? Securities available-for-sale (carried at fair 1,124,235 734,845 value)Real estate mortgage loans held-for-sale 7,005 11,218 ? Loans, net of allowance for credit losses* of 4,281,996 4,587,748 $71,713 and $61,408? Land, premises and equipment, net 59,539 59,298 Bank owned life insurance 96,921 95,227 Federal Reserve and Federal Home Loan Bank stock 13,772 13,772 Accrued interest receivable 17,056 18,761 Goodwill 4,970 4,970 Other assets 54,610 54,669 Total assets $ 6,232,914 $ 5,830,435 ? ? LIABILITIES Noninterest bearing deposits $ 1,743,000 $ 1,538,331 Interest bearing deposits 3,651,664 3,498,474 Total deposits 5,394,664 5,036,805 ? Borrowings Federal Home Loan Bank advances 75,000 75,000 Miscellaneous borrowings 0 10,500 Total borrowings 75,000 85,500 ? Accrued interest payable 3,871 5,959 Other liabilities 81,908 44,987 Total liabilities 5,555,443 5,173,251 ? STOCKHOLDERS? EQUITY Common stock: 90,000,000 shares authorized, no par value25,762,538 shares issued and 25,289,966 outstanding as of June 30, 202125,713,408 shares issued and 25,239,748 117,796 114,927 outstanding as of December31, 2020Retained earnings 552,063 529,005 Accumulated other comprehensive income 22,271 27,744 Treasury stock at cost (472,572 shares as of June (14,748 ) (14,581 )30, 2021, 473,660 shares as of December31, 2020)Total stockholders? equity 677,382 657,095 Noncontrolling interest 89 89 Total equity 677,471 657,184 Total liabilities and equity $ 6,232,914 $ 5,830,435

_______________________________________* Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share andper share data)? Three Months Ended Six Months Ended June 30, June 30,? 2021 2020 2021 2020NET INTEREST INCOME Interest and fees on loansTaxable $ 42,342 $ 42,649 $ 85,803 $ 88,703 Tax exempt 101 216 205 438 Interest anddividends on ? ? securitiesTaxable 2,177 1,869 4,012 3,842 Tax exempt 2,870 2,033 5,359 4,039 Other interest income 135 64 223 248 Total interest income 47,625 46,831 95,602 97,270 ? ? ? ? ?Interest on deposits 3,890 7,184 8,108 18,383 Interest on ? ? borrowingsShort-term 0 45 7 407 Long-term 74 74 147 98 Total interest 3,964 7,303 8,262 18,888 expense? ? ? ? ?NET INTEREST INCOME 43,661 39,528 87,340 78,382 ? ? ? ? ?Provision for credit (1,700 ) 5,500 (223 ) 12,100 losses*? ? ? ? ?NET INTEREST INCOMEAFTER PROVISION FOR 45,361 34,028 87,563 66,282 CREDIT LOSSES? ? ? ? ?NONINTEREST INCOME Wealth advisory fees 2,078 1,805 4,256 3,664 Investment brokerage 575 310 1,039 727 feesService charges on 2,521 2,189 5,012 4,961 deposit accountsLoan and service fees 3,042 2,425 5,818 4,833 Merchant card fee 766 594 1,388 1,263 incomeBank owned life 705 836 1,461 544 insurance incomeInterest rate swap 505 1,309 754 1,962 fee incomeMortgage banking 415 1,354 1,788 1,940 incomeNet securities gains 44 49 797 49 Other income 689 298 1,584 2,003 Total noninterest 11,340 11,169 23,897 21,946 income? ? ? ? ?NONINTEREST EXPENSE Salaries and employee 15,762 11,424 30,147 22,990 benefitsNet occupancy expense 1,427 1,545 2,930 2,932 Equipment costs 1,318 1,430 2,763 2,847 Data processing fees 3,204 2,829 6,523 5,711 and suppliesCorporate and 699 627 2,208 1,738 business developmentFDIC insurance and 495 403 959 670 other regulatory feesProfessional fees 1,839 1,053 3,716 2,200 Other expense 1,904 1,768 4,148 4,080 Total noninterest 26,648 21,079 53,394 43,168 expense? ? ? ? ?INCOME BEFORE INCOME 30,053 24,118 58,066 45,060 TAX EXPENSEIncome tax expense 5,705 4,448 10,735 8,091 NET INCOME $ 24,348 $ 19,670 $ 47,331 $ 36,969 ??

? Three Months Ended ?? Six Months Ended June 30, June 30,? 2021 2020 2021 2020 BASIC WEIGHTED 25,473,497 25,412,014 25,465,621 25,517,499 AVERAGE COMMON SHARES? ? ? BASIC EARNINGS PER $ 0.96 $ 0.77 $ 1.86 $ 1.45 COMMON SHARE? ? ? DILUTED WEIGHTED 25,602,063 25,469,680 25,596,843 25,594,959 AVERAGE COMMON SHARES? DILUTED EARNINGS PER $ 0.95 $ 0.77 $ 1.85 $ 1.44 COMMON SHARE

_______________________________________* Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

LAKELAND FINANCIAL CORPORATIONLOAN DETAIL(unaudited, in thousands) June 30, March 31, June 30, 2021 2021 2020Commercial and industrial loans:Working capitallines of credit $ 616,401 14.1 % $ 574,659 12.8 % $ 568,621 12.6 %loansNon-working 886,284 20.3 1,101,805 24.6 1,238,556 27.5 capital loansTotal commercialand industrial 1,502,685 34.4 1,676,464 37.4 1,807,177 40.1 loans Commercial realestate and multi-familyresidential loans:Construction andland development 402,583 9.2 370,906 8.3 359,948 8.0 loansOwner occupied 672,903 15.5 669,390 14.9 576,213 12.8 loansNonowner occupied 606,096 13.9 605,640 13.5 554,572 12.3 loansMultifamily loans 300,449 6.9 301,385 6.7 290,566 6.4 Total commercialreal estate and 1,982,031 45.5 1,947,321 43.4 1,781,299 39.5 multi-familyresidential loans Agri-business andagricultural loans:Loans secured by 167,314 3.8 154,826 3.5 153,774 3.4 farmlandLoans foragricultural 179,338 4.1 192,341 4.3 198,277 4.4 productionTotalagri-business and 346,652 7.9 347,167 7.8 352,051 7.8 agricultural loans Other commercial 85,356 2.0 86,477 1.9 110,833 2.5 loansTotal commercial 3,916,724 89.8 4,057,429 90.5 4,051,360 89.9 loans Consumer 1-4family mortgage loans:Closed end first 169,653 3.9 161,573 3.6 169,897 3.8 mortgage loansOpen end and 162,327 3.7 157,492 3.5 174,300 3.9 junior lien loansResidentialconstruction and 12,505 0.3 9,221 0.2 11,164 0.2 land developmentloansTotal consumer 1-4family mortgage 344,485 7.9 328,286 7.3 355,361 7.9 loans Other consumer 100,771 2.3 99,052 2.2 98,667 2.2 loansTotal consumer 445,256 10.2 427,338 9.5 454,028 10.1 loansSubtotal 4,361,980 100.0 % 4,484,767 100.0 % 4,505,388 100.0 %Less:Allowancefor credit losses (71,713 ) (71,844 ) (59,019 ) (1)Net deferred loan (8,271 ) (10,136 ) (14,856 ) feesLoans, net $ 4,281,996 $ 4,402,787 $ 4,431,513

(1)Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

LAKELAND FINANCIAL CORPORATIONDEPOSITS AND BORROWINGS(unaudited, in thousands) June 30, March 31, June 30, 2021 2021 2020Noninterest bearing $ 1,743,000 $ 1,604,068 $ 1,425,901 demand depositsSavings and transaction accounts:Savings deposits 358,568 357,791 274,078 Interest bearing demand 2,333,758 2,261,232 1,774,217 depositsTime deposits: Deposits of $100,000 or 740,484 777,460 907,095 moreOther time deposits 218,854 229,419 262,136 Total deposits $ 5,394,664 $ 5,229,970 $ 4,643,427 FHLB advances and other 75,000 75,000 110,500 borrowingsTotal funding sources $ 5,469,664 $ 5,304,970 $ 4,753,927

LAKELAND FINANCIAL CORPORATIONAVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS(UNAUDITED) Three Months Ended Three Months Ended Three Months Ended June 30, 2021 March 31, 2021 June 30, 2020(fully tax Yield Yield Yieldequivalent basis, Average Interest (1)/ Average Interest (1)/ Average Interest (1)/dollars in Balance Income Rate Balance Income Rate Balance Income Ratethousands)Earning Assets Loans: Taxable (2)(3) $ 4,474,844 $ 42,342 3.80 % $ 4,554,183 $ 43,461 3.87 % $ 4,437,843 $ 42,649 3.87 %Tax exempt (1) 12,839 128 4.00 13,043 131 4.07 22,568 272 4.85 Investments: (1) Available-for-sale 955,242 5,811 2.44 772,247 4,984 2.62 621,134 4,442 2.88 Short-term 2,305 0 0.00 2,206 1 0.18 79,446 29 0.15 investmentsInterest bearing 479,571 135 0.11 296,523 87 0.12 51,994 35 0.27 depositsTotal earning $ 5,924,801 $ 48,416 3.28 % $ 5,638,202 $ 48,664 3.50 % $ 5,212,985 $ 47,427 3.66 %assetsLess:Allowancefor credit losses (72,222 ) (70,956 ) (56,005 ) (4)Nonearning Assets Cash and due from 68,798 70,720 57,157 banksPremises and 59,848 59,278 60,815 equipmentOther nonearning 190,202 190,117 179,656 assetsTotal assets $ 6,171,427 $ 5,887,361 $ 5,454,608 Interest Bearing LiabilitiesSavings deposits $ 359,484 $ 71 0.08 % $ 330,069 $ 61 0.07 % $ 264,250 $ 59 0.09 %Interest bearing 2,428,524 1,700 0.28 2,182,164 1,495 0.28 1,842,373 1,544 0.34 checking accountsTime deposits: In denominations 224,025 545 0.98 235,271 648 1.12 271,064 1,216 1.80 under $100,000In denominations 741,466 1,574 0.85 793,470 2,014 1.03 957,502 4,365 1.83 over $100,000Miscellaneousshort-term 0 0 0.00 1,517 7 1.87 10,852 45 1.67 borrowingsLong-termborrowings and 75,000 74 0.40 75,000 73 0.39 75,000 74 0.40 subordinateddebenturesTotal interestbearing $ 3,828,499 $ 3,964 0.42 % $ 3,617,491 $ 4,298 0.48 % $ 3,421,041 $ 7,303 0.86 %liabilitiesNoninterestBearing LiabilitiesDemand deposits 1,633,686 1,566,045 1,361,643 Other liabilities 45,249 50,496 59,611 Stockholders' 663,993 653,329 612,313 EquityTotal liabilitiesand stockholders' $ 6,171,427 $ 5,887,361 $ 5,454,608 equityInterest Margin RecapInterest income/average earning 48,416 3.28 48,664 3.50 47,427 3.66 assetsInterest expense/average earning 3,964 0.27 4,298 0.31 7,303 0.56 assetsNet interest $ 44,452 3.01 % $ 44,366 3.19 % $ 40,124 3.10 %income and margin

(1)Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. 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 $791,000, $687,000 and $596,000 in the three-month periods ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.(2)Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $2.76 million and $4.15 million for the three months ended June 30, 2021 and March 31, 2021, respectively. All other loan fees were immaterial in relation to total taxable loan interest income for the periods presented.(3)Nonaccrual loans are included in the average balance of taxable loans.(4)Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

Reconciliation of Non-GAAP Financial Measures

The allowance for credit losses (1) to loans, excluding PPP loans and total individually analyzed and watch list loans to total loans, excluding PPP loans, are non-GAAP ratios that management believes are important because they provide better comparability to prior periods. PPP loans are fully guaranteed by the SBA and have not been allocated for within the allowance for loan losses (1).

A reconciliation of these non-GAAP measures is provided below (dollars in thousands).

Three Months Ended June 30, March 31, June 30, 2021 2021 2020Total Loans $ 4,353,709 $ 4,474,631 $ 4,490,532 Less: PPP Loans 194,212 396,723 554,636 Total Loans, Excluding PPP 4,159,497 4,077,908 3,935,896 Loans Allowance for Credit Losses $ 71,713 $ 71,844 $ 59,019 (1) Credit Loss Reserve to Total 1.65 % 1.61 % 1.31 %Loans (1)Credit Loss Reserve to TotalLoans, Excluding PPP Loans 1.72 % 1.76 % 1.50 %(1)

Six Months Ended June 30, March 31, June 30, 2021 2021 2020Total Loans $ 4,353,709 $ 4,474,631 $ 4,490,532 Less: PPP Loans 194,212 396,723 554,636 Total Loans, Excluding PPP 4,159,497 4,077,908 3,935,896 Loans Total Individually Analyzed $ 260,542 $ 271,332 $ 208,190 and Watch List Loans Total Individually Analyzedand Watch List Loans to 5.98 % 6.06 % 4.64 %Total LoansTotal Individually Analyzedand Watch List Loans to 6.26 % 6.65 % 5.29 %Total Loans, Excluding PPPLoans

(1)Beginning January 1, 2021 calculation is based on the current expected credit loss methodology.Prior to January 1, 2021 calculation was based on the incurred loss methodology.

Tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio and pretax pre-provision earnings 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 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 less true treasury stock. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. 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 companys value including only earning assets as meaningful to an understanding of the companys financial information.

A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).

Three Months Ended Six Months Ended Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30, 2021 2021 2020 2021 2020Total Equity $ 677,471 $ 651,668 $ 620,892 $ 677,471 $ 620,892 Less: Goodwill (4,970 ) (4,970 ) (4,970 ) (4,970 ) (4,970 )Plus: Deferred taxassets related to 1,176 1,176 1,181 1,176 1,181 goodwillTangible Common 673,677 647,874 617,103 673,677 617,103 Equity Assets $ 6,232,914 $ 6,016,642 $ 5,441,092 $ 6,232,914 $ 5,441,092 Less: Goodwill (4,970 ) (4,970 ) (4,970 ) (4,970 ) (4,970 )Plus: Deferred taxassets related to 1,176 1,176 1,181 1,176 1,181 goodwillTangible Assets 6,229,120 6,012,848 5,437,303 6,229,120 5,437,303 Ending common shares 25,473,437 25,473,437 25,412,014 25,473,437 25,412,014 issued Tangible Book Value $ 26.45 $ 25.43 $ 24.28 $ 26.45 $ 24.28 Per Common Share Tangible CommonEquity/Tangible 10.81 % 10.77 % 11.35 % 10.81 % 11.35 %Assets Net Interest Income $ 43,661 $ 43,679 $ 39,528 $ 87,340 $ 78,382 Plus:Noninterest 11,340 12,557 11,169 23,897 21,946 incomeMinus:Noninterest (26,648 ) (26,746 ) (21,079 ) (53,394 ) (43,168 )expense Pretax Pre-Provision $ 28,353 $ 29,490 $ 29,618 $ 57,843 $ 57,160 Earnings

Net interest margin on a fully-tax equivalent basis, net of PPP loan impact, is a non-GAAP measure that management believes is important because it provides for better comparability to prior periods. Because PPP loans have a low fixed interest rate of 1.0% and because the accretion of net loan fee income can be accelerated upon borrower forgiveness and repayment by the SBA, management is actively monitoring net interest margin on a fully tax equivalent basis with and without PPP loan impact for the duration of this program.

A reconciliation of this non-GAAP financial measure is provided below (dollars in thousands).

Impact of Paycheck Protection Program on Net Interest Margin FTE

Three Months Ended Six Months Ended Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30, 2021 2021 2020 2021 2020TotalAverage $ 5,924,801 $ 5,638,202 $ 5,212,985 $ 5,782,293 $ 4,975,358 EarningsAssetsLess:Average (348,026 ) (402,730 ) (457,757 ) (375,226 ) (228,878 )Balance ofPPP LoansTotalAdjusted 5,576,775 5,235,472 4,755,228 5,407,067 4,746,480 EarningAssets TotalInterest $ 48,416 $ 48,664 $ 47,427 $ 97,080 $ 98,455 Income FTELess: PPP (3,652 ) (5,166 ) (3,029 ) (8,818 ) (3,029 )Loan IncomeTotalAdjusted 44,764 43,498 44,398 88,262 95,426 InterestIncome FTE AdjustedEarningAsset 3.22 % 3.37 % 3.76 % 3.29 % 4.04 %Yield, netof PPPImpact TotalAverageInterest $ 3,828,499 $ 3,617,491 $ 3,421,041 $ 3,617,491 $ 3,373,027 BearingLiabilitiesLess:Average (348,026 ) (402,730 ) (457,757 ) (375,226 ) (228,878 )Balance ofPPP LoansTotalAdjustedInterest 3,480,473 3,214,761 2,963,284 3,242,265 3,144,149 BearingLiabilities TotalInterest $ 3,964 $ 4,298 $ 7,303 $ 8,262 $ 18,888 Expense FTELess: PPPCost of (162 ) (248 ) (285 ) (465 ) (285 )FundsTotalAdjusted 3,802 4,050 7,018 7,797 18,603 InterestExpense FTE AdjustedCost ofFunds, net 0.27 % 0.31 % 0.59 % 0.29 % 0.79 %of PPPImpact NetInterestMargin FTE, 2.95 % 3.06 % 3.17 % 3.00 % 3.25 %net of PPPImpact

ContactLisa M. ONeillExecutive Vice President and Chief Financial Officer (574) 267-9125lisa.oneill@lakecitybank.com