GlobeNewswire Inc | Oct 25, 2021 08:00AM EDT

October 25, 2021

WARSAW, Ind., Oct. 25, 2021 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record third quarter net income of $24.1 million for the three months ended September30, 2021, an increase of 6%, versus $22.8 million for the third quarter of 2020. Diluted earnings per share increased 6% to $0.94 for the third quarter of 2021, versus $0.89 for the third quarter of 2020. On a linked quarter basis, net income decreased $229,000, or 1%, from the second quarter of 2021, in which the company had net income of $24.3 million, or $0.95, diluted earnings per share. Pretax pre-provision earnings1 were $30.9 million for the third quarter of 2021, an increase of 3%, or $1.0 million, from $29.9 million for the third quarter of 2020. On a linked quarter basis, pretax pre-provision earnings increased 9%, or $2.5 million, from $28.4 million for the second quarter of 2021.

The company further reported record net income of $71.5 million for the nine months ended September30, 2021 versus $59.7 million for the comparable period of 2020, an increase of 20%. Diluted earnings per share also increased 20% to $2.79 for the nine months ended September30, 2021 versus $2.33 for the comparable period of 2020. Pretax pre-provision earnings1 were $88.7 million for the nine months ended September30, 2021, versus $87.1 million for the comparable period of 2020, an increase of 2%, or $1.7 million.

David M. Findlay, President and Chief Executive Officer commented, The Lake City Bank team continues to produce quality earnings in a unique and challenging operating environment. As we move into the last quarter of 2021, our disciplined and execution-focused strategies continue to deliver consistent revenue growth despite the difficult interest rate environment.

Financial Performance Third Quarter 2021

Third Quarter 2021 versus Third Quarter 2020 highlights:

-- Return on average equity of 13.90%, compared to 14.36% -- Return on average assets of 1.56%, compared to 1.64% -- Average loan growth, excluding PPP loans, of $211.7 million, or 5% -- Core deposit growth of $665.4 million, or 14% -- Noninterest bearing demand deposit account growth of $341.2 million, or 24% -- Net interest income increase of $5.8 million, or 15% -- Net interest margin of 3.13% compared to 3.05% -- Revenue growth of $3.8 million, or 7% -- Noninterest expense increase of $2.8 million, or 12% -- Provision expense of $1.3 million compared to provision expense of $1.8 million, a decrease of $0.5 million -- Nonperforming loans of $31.0 million, an increase of $17.5 million -- Dividend per share increase of 13% to $0.34 from $0.30 -- Average total equity increase of $57.3 million, or 9% -- Total risk-based capital ratio improved to 15.44% compared to 14.90% -- Tangible capital ratio of 10.92% compared to 11.41%

____________________________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.

Third Quarter 2021 versus Second Quarter 2021 highlights:

-- Return on average equity of 13.90%, compared to 14.71% -- Return on average assets of 1.56% compared to 1.58% -- Average loan growth, excluding PPP loans, of $71.5 million, or 2% -- Core deposit growth of $19.0 million -- Noninterest bearing demand deposit account growth of $19.0 million, or 1% -- Net interest income increase of $2.1million, or 5% -- Net interest margin of 3.13% compared to 3.01% -- Revenue growth of $1.9 million, or 3% -- Noninterest expense decrease of $681,000, or 3% -- Provision expense of $1.3 million compared to a reversal of provision expense of $1.7 million, an increase of $3.0 million -- Nonperforming loans of $31.0 million, an increase of $20.3 million -- Average total equity increase of $24.3 million, or 4% -- Total risk-based capital increased to 15.44% compared to 15.04% -- Tangible capital ratio was 10.92% compared to 10.81%

As announced on October12, 2021, the board of directors approved a cash dividend for the third quarter of $0.34 per share, payable on November5, 2021, to shareholders of record as of October25, 2021. The third quarter dividend per share of $0.34 is unchanged from the dividend per share paid for the second quarter of 2021 and reflects a 13% increase from the dividend rate a year ago.

Average loans, excluding PPP loans, were $4.21 billion compared to $4.00 billion for the third quarter of 2020, an increase of $211.7 million, or 5%. On a linked quarter basis, average loans excluding PPP loans increased by $71.5 million, or 2%. Average total loans including PPP loans decreased $133.6 million, or 3%, from $4.49 billion for the second quarter of 2021. Average total loans for the third quarter of 2021 were $4.35 billion, a decrease of $202.7 million, or 4%, versus $4.56 billion for the third quarter 2020. Average PPP loans were $142.9 million during the third quarter 2021.

Total loans, excluding PPP loans, increased by $115.5 million, or 3%, as of September30, 2021 as compared to September30, 2020. On a linked quarter basis, total loans, excluding PPP loans, were $4.15 billion as of September30, 2021, a decrease of $11.9 million, as compared to June 30, 2021. Total loans outstanding, including PPP loans, decreased by $350.5 million, or 8%, from $4.59 billion as of September 30, 2020 to $4.24 billion as of September 30, 2021. PPP loans outstanding were $91.9 million as of September 30, 2021, which reflects PPP forgiveness of $624.9 million since the program's inception.

Findlay stated, We are proud of our commercial loan originations during the third quarter, as commercial origination activityexceeded $400 million. We continue to experience high levels of commercial and retail loan payoffs with PPP loan forgiveness being the most significant contributor. We also continue to experience reduced usage under commercial lines of credit and loan payoffs driven by the sale of commercial clients. As we plan for the balance of 2021, the loan pipeline is encouraging, and we continue to see an increase in both client and prospect in-person business development meetings that we are confident will lead to loan growth in the future.

Average total deposits were $5.34 billion for the third quarter of 2021, an increase of $606.6 million, or 13%, versus $4.74 billion for the third quarter of 2020. On a linked quarter basis, average total deposits decreased by $42.9 million, or 1%. Total deposits increased $646.7 million, or 14%, from $4.77 billion as of September30, 2020 to $5.41 billion as of September30, 2021. On a linked quarter basis, total deposits increased by $20.0 million from $5.39 billion as of June30, 2021.

Core deposits, which exclude brokered deposits, increased by $665.4 million, or 14%, from $4.74 billion at September30, 2020 to $5.40 billion at September30, 2021. This increase was due to growth in commercial deposits of $339.7 million, or 19%; growth in retail deposits of $248.2 million, or 14%; and growth in public fund deposits of $77.5 million, or 6%. On a linked quarter basis, core deposits increased by $19.0 million at September30, 2021 as compared to June30, 2021. The linked quarter growth resulted from commercial deposit growth of $21.6 million, a 1% increase; public fund growth of $14.2 million, a 1% increase; and retail contraction of $16.8 million, a 1% decrease. Proceeds from the sale of customer businesses as well as first round of stimulus payments to municipalities contributed to the increase in deposits during the third quarter.

____________________________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.

Investment securities were $1.2 billion at September 30, 2021, reflecting an increase of $595.7 million, or 92%, as compared to $644.0 million at September 30, 2020. Investment securities increased $115.5 million, or 10%, on a linked quarter basis as the remaining balance of funds deployed to our investment subsidiary were fully invested during the third quarter. Investment securities represent 20% of total assets on September 30, 2021 compared to 12% on September 30, 2020 and 18% on June 30, 2021. The increase in investment securities reflects the deployment of excess liquidity from deposit increases that resulted from PPP and economic stimulus.

Findlay added, We continue to experience significant levels of liquidity on our balance sheet as retail and commercial deposits remain at highly elevated levels. Given the combination of modest commercial loan growth and the increased liquidity position, we have continued to smartly grow our investment portfolio. While we are comfortable with the deployment of additional funds into the investment portfolio, we understand that our primary role is to be a lender in our Indiana communities, and we remain focused on developing strategies to ensure we return to our historical loan growth performance. Our commercial line utilization remained stable at 41% in September, unchanged from mid-year line utilization and continues to be lower than in the past. Loan demand by our borrowers continues to be impacted by labor workforce availability, supply chain disruption and elevated liquidity from governmental programs.

The companys net interest margin increased 8 basis points to 3.13% for the third quarter of 2021 compared to 3.05% for the third quarter of 2020. The higher margin in the third quarter of 2021 as compared to the prior year period was due to accelerated PPP forgiveness, which resulted in the accretion of outstanding deferred fees at the time of forgiveness. Total PPP fee income recognized for the third quarter of 2021 was $3.57 million compared to $1.87 million for the third quarter of 2020. PPP interest and fees added 18 basis points to third quarter 2021 net interest margincompared to a decrease of 12 basis points for the third quarter 2020 net interest margin. This fee income recognition was partially offset by the decrease in earning asset yield of 14 basis points from 3.51% for the third quarter of 2020 compared to 3.37% for the third quarter of 2021. As a result of the excess liquidity on the company's balance sheet, the mix of earning assets included lower yielding earning assets consisting of balances at the Federal Reserve Bank and the investment securities portfolio. Offsetting the lower yield on earning assets, the company has been able to reduce its cost of funds 32 basis points from 0.70% for the third quarter of 2020 compared to 0.38% for the third quarter of 2021.

The companys net interest margin excluding PPP loans1 was 18 basis points lower at 2.95% for the third quarter of 2021 compared to actual net interest margin of 3.13% and reflects a 22 basis point decline from net interest margin excluding PPP loans of 3.17% in the third quarter of 2020. Linked quarter net interest margin excluding PPP was the same for the second and third quarters of 2021 at 2.95%. Interest expense as a percentage of earning assets decreased to a historical low of 0.24% for the three-month period ended September 30, 2021, down from 0.27% for the three-month period ended June 30, 2021.

Net interest income increased by $5.8 million, or 15%, for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. On a linked quarter basis, net interest income increased $2.1 million, or 5%, from the second quarter of 2021. PPP loan income, including interest and fees, was $3.9 million for the three months ended September 30, 2021, compared to $3.7 million during the second quarter of 2021. Net interest income increased by $14.8 million, or 12%, for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 due primarily to a decrease in interest expense of $13.1 million and an increase in investment securities income of $3.7 million, offset by a $2.1 million decline in loan interest income.

The company recorded a provision for credit losses2 of $1.3 million in the third quarter of 2021, compared to $1.8 million of provision expense in the third quarter of 2020, a decrease of $0.5 million. On a linked quarter basis, the provision2 increased by $3.0 million from a provision expense reversal of $1.7 million in the second quarter of 2021 due to a one-time recovery of $1.7 million in the second quarter. 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 provision expense in the third quarter of 2021 was driven primarily by the downgrading of two commercial loan borrowers to nonaccrual status. The companys credit loss reserve to total loans2 was 1.72% at September 30, 2021 versus 1.32% at September 30, 2020 and 1.65% at June 30, 2021. The companys credit loss reserve2 to total loans excluding PPP loans1 was 1.76% at September 30, 2021 versus 1.51% at September 30, 2020 and 1.72% at June 30, 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.

____________________________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.

Net recoveries in the third quarter of 2021 were $35,000 versus net charge offs of $22,000 in the third quarter of 2020 and net recoveries of $1.6 million during the linked second quarter of 2021. Annualized net charge offs (recoveries) to average loans were 0.00% for the third quarter of 2021 and 2020, and (0.14%) for the linked second quarter of 2021.

Nonperforming assets increased $17.5 million, or 127%, to $31.3 million as of September 30, 2021 versus $13.8 million as of September 30, 2020. On a linked quarter basis, nonperforming assets increased $19.5 million, or 165%, versus the $11.8 million reported as of June 30, 2021. The ratio of nonperforming assets to total assets at September 30, 2021 increased to 0.50% from 0.25% at September 30, 2020 and increased from 0.19% at June 30, 2021. The increases were driven primarily by the downgrading of two commercial loan relationships, which totaled $21.2 million. The first credit relationship of $12.0 million was downgraded due to the severe impact on the business caused by the economic conditions resulting from the COVID-19 pandemic. The borrower is a retailer of party and special event supplies. During the third quarter of 2021, the borrowers challenges significantly worsened. As a result, loans to the borrower were downgraded and placed on nonaccrual status. Loans to this borrower are secured by a blanket lien on all assets, including buildings, inventory, accounts receivable and equipment. In addition, the exposure is supported by a partial personal guarantee. The second downgrade relates to a shared national credit participation of $9.2 million to a commercial borrower that operates grain elevators and handles feed processing and merchandising of agriculture products. Loans to this borrower are secured by a blanket lien on all assets, including buildings, inventory, accounts receivable and equipment.These downgrades resulted in an increase to thespecific credit loss allocations for each credit as they are now individuallyanalyzed credits. The loans to both borrowers are current on interest and principal payments through September 2021. The bank believes that the allocations areadequate to cover any potential losses. Each of these downgrades resulted from a unique business challenge and management does not believe these downgrades are systemic as it relates to the bank's broader loan portfolio. Total individually analyzed and watch list loans increased by $37.2 million, or 17%, to $258.5 million at September 30, 2021 versus $221.3 million as of September 30, 2020. On a linked quarter basis, total individually analyzed and watch list loans decreased by $2.0 million, or 1%, from $260.5 million at June 30, 2021.

Overall, asset quality remains stable, and our credit loss reserve is strong. Yet we are disappointed in the increase in nonperforming loans during the quarter. While the great majority of clients have managed through the crisis well, we have experienced isolated cases of impact and we are managing those situations to ensure the most favorable outcome for the bank, commented Findlay.

The companys noninterest income decreased $2.0 million, or 15%, to $11.1 million for the third quarter of 2021, compared to $13.1 million for the third quarter of 2020. Noninterest income was positively impacted by elevated wealth and investment brokerage fees which increased by $347,000, or 15%, for these comparable periods. In addition, service charges on deposit accounts were up $265,000, or 11%, and loan and service fees were up $368,000, or 14%, for these comparable periods due to an increase in economic activity within the company's operating footprint. Offsetting these increases were decreases of $2.0 million, or 92%, in interest rate swap fee income and $1.0 million in mortgage banking income. Both interest rate swap arrangements and mortgage banking have seen a decrease in demand during the third quarter of 2021 compared to the third 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.

Our healthy growth in the core business lines driving noninterest income is a reaffirming indicator of success developing broad relationships with our clients. Revenue growth is critical to our ability to continue to produce quality earnings and the strength and stability of the wealth advisory, investment brokerage and commercial treasury management business lines continue to be a positive contributor, added Findlay.

Noninterest income decreased by $226,000, or 2%, on a linked quarter from $11.3 million. The linked quarter decrease resulted primarily from a decrease in mortgage banking income of $447,000. Offsetting this decrease was an increase in other income of $340,000. This was driven primarily by appreciation in limited partnership investments.

____________________________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.

The companys noninterest expense increased $2.8 million, or 12%, to $26.0 million in the third quarter of 2021, compared to $23.1 million in the third quarter of 2020. Salaries and employee benefits increased $1.5 million, or 12%, driven by higher performance-based incentive compensation expense and higher employee health insurance expense. Corporate and business development expenses increased $414,000, or 71%, due to the timing of planned advertising campaigns and increased business development costs, as in-person meetings with clients and prospects have resumed. FDIC insurance and other regulatory fees increased $194,000, or 35%, driven by the company's rapid balance sheet growth year-over-year.

On a linked quarter basis, noninterest expense decreased by $681,000, or 3%, from $26.6 million. Salaries and employee benefits decreased by $1.5 million, or 10%, driven by fluctuations in performance-based incentive compensation expense. Offsetting this decrease was an increase in other expense of $790,000, or 41%. This was driven primarily by share-based payments to board members of $421,000, which are paid semi-annually in January and July.

The companys efficiency ratio was 45.7% for the third quarter of 2021, compared to 43.6% for the third quarter of 2020 and 48.5% for the linked second quarter of 2021. The company's efficiency ratio was 47.2% for the nine months ended September 30, 2021 compared to 43.2% in the prior period.

COVID-19 Related Loan Deferrals

As of October 20, 2021, one commercial borrower in the amount of $8 million represented a second deferral action and was the only outstanding commercial loan deferral attributed to COVID-19. In accordance with Section 4013 of the CARES Act, this deferral was not considered to be a troubled debt restructuring. This provision was extended to January 1, 2022 under the Consolidated Appropriations Act, 2021.

Paycheck Protection Program

During the first half 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 September 30, 2021, Lake City Bank had $91.9 million in PPP loans outstanding, net of deferred fees, consisting of $15.5 million from PPP round one and $76.4 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 September 30, 2021, the SBA has approved forgiveness for $538.9 million in PPP loans originated during round one and $86.0 million in PPP loans originated during round two. The company has submitted forgiveness applications on behalf of customers in the amount of $14.6 million for PPP round one and $5.9 million for PPP round two that are awaiting SBA approval.

September 30, 2021 Originated Forgiven Outstanding^ (1) Number Amount Number Amount Number AmountPPP Round 2,409 $ 570,500 2,368 $ 538,910 54 $ 15,522 1PPP Round 1,192 165,142 822 86,009 370 76,375 2Total 3,601 $ 735,642 3,190 $ 624,919 424 $ 91,897

(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 CORPORATIONTHIRD QUARTER 2021 FINANCIAL HIGHLIGHTS

Three Months Ended Nine Months Ended(Unaudited ?Dollars in Sep 30, Jun. 30, Sep 30, Sep 30, Sep 30,thousands, exceptper share data)END OF PERIOD 2021 2021 2020 2021 2020BALANCESAssets $ 6,222,916 $ 6,232,914 $ 5,551,108 $ 6,222,916 $ 5,551,108 Deposits 5,414,638 5,394,664 4,767,954 5,414,638 4,767,954 Brokered Deposits 11,012 10,004 29,703 11,012 29,703 Core Deposits (1) 5,403,626 5,384,660 4,738,251 5,403,626 4,738,251 Loans 4,239,453 4,353,709 4,589,924 4,239,453 4,589,924 PaycheckProtection Program 91,897 194,212 557,851 91,897 557,851 (PPP) LoansAllowance for 73,048 71,713 60,747 73,048 60,747 Credit Losses (2)Total Equity 683,202 677,471 636,839 683,202 636,839 Goodwill net ofdeferred tax 3,794 3,794 3,794 3,794 3,794 assetsTangible Common 679,408 673,677 633,045 679,408 633,045 Equity (3)AVERAGE BALANCES Total Assets $ 6,153,334 $ 6,171,427 $ 5,520,861 $ 6,071,682 $ 5,314,956 Earning Assets 5,909,834 5,924,801 5,282,569 5,825,275 5,078,509 Investments - 1,201,657 955,242 637,523 977,955 625,887 available-for-saleLoans 4,354,104 4,487,683 4,556,812 4,468,891 4,359,522 PaycheckProtection Program 142,917 348,026 557,290 296,938 339,149 (PPP) LoansTotal Deposits 5,344,272 5,387,185 4,737,671 5,280,361 4,546,897 Interest Bearing 3,662,707 3,753,499 3,336,268 3,652,839 3,294,785 DepositsInterest Bearing 3,737,707 3,828,499 3,433,326 3,728,339 3,393,274 LiabilitiesTotal Equity 688,252 663,993 630,978 668,652 615,910 INCOME STATEMENT DATANet Interest $ 45,741 $ 43,661 $ 39,913 $ 133,081 $ 118,295 IncomeNet InterestIncome-Fully Tax 46,717 44,452 40,523 135,535 120,091 EquivalentProvision for 1,300 (1,700 ) 1,750 1,077 13,850 Credit Losses (2)Noninterest Income 11,114 11,340 13,115 35,011 35,061 Noninterest 25,967 26,648 23,125 79,361 66,293 ExpenseNet Income 24,119 24,348 22,776 71,450 59,745 PretaxPre-Provision 30,888 28,353 29,903 88,731 87,063 Earnings (3)PER SHARE DATA Basic Net Income $ 0.95 $ 0.96 $ 0.89 $ 2.81 $ 2.34 Per Common ShareDiluted Net Income 0.94 0.95 0.89 2.79 2.33 Per Common ShareCash DividendsDeclared Per 0.34 0.34 0.30 1.02 0.90 Common ShareDividend Payout 36.17 % 35.79 % 33.71 % 36.56 % 38.63 %Book Value PerCommon Share 26.80 26.59 25.05 26.80 25.05 (equity per shareissued)Tangible BookValue Per Common 26.66 26.45 24.90 26.66 24.90 Share (3)Market Value ? 73.04 70.25 53.00 77.05 53.00 HighMarket Value ? Low 56.06 57.02 39.38 53.03 30.49 Three Months Ended Nine Months Ended Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30, 2021 2021 2020 2021 2020Basic WeightedAverage Common 25,479,654 25,473,497 25,418,712 25,472,185 25,484,329 Shares OutstandingDiluted WeightedAverage Common 25,635,288 25,602,063 25,487,302 25,608,655 25,618,401 Shares OutstandingKEY RATIOS Return on Average 1.56 % 1.58 % 1.64 % 1.57 % 1.50 %AssetsReturn on Average 13.90 14.71 14.36 14.29 12.96 Total EquityAverage Equity to 11.19 10.76 11.43 11.01 11.59 Average AssetsNet Interest 3.13 3.01 3.05 3.11 3.16 MarginNet InterestMargin, Excluding 2.95 2.95 3.17 2.98 3.22 PPP Loans (3)Efficiency(NoninterestExpense / Net 45.67 48.45 43.61 47.21 43.23 Interest Incomeplus NoninterestIncome)Tier 1 Leverage 10.91 10.59 11.07 10.91 11.07 (4)Tier 1 Risk-Based 14.18 13.79 13.65 14.18 13.65 Capital (4)Common Equity Tier 14.18 13.79 13.65 14.18 13.65 1 (CET1) (4)Total Capital (4) 15.44 15.04 14.90 15.44 14.90 Tangible Capital 10.92 10.81 11.41 10.92 11.41 (3) (4)ASSET QUALITY Loans Past Due 30 $ 1,245 $ 673 $ 1,106 $ 1,245 $ 1,106 - 89 DaysLoans Past Due 90 18 18 19 18 19 Days or MoreNon-accrual Loans 30,978 10,709 13,478 30,978 13,478 NonperformingLoans (includes 30,996 10,727 13,497 30,996 13,497 nonperformingTDRs)Other Real Estate 316 1,079 316 316 316 OwnedOtherNonperforming 20 0 0 20 0 AssetsTotalNonperforming 31,332 11,806 13,813 31,332 13,813 AssetsPerformingTroubled Debt 4,973 5,040 5,658 4,973 5,658 RestructuringsNonperformingTroubled DebtRestructurings 6,093 5,938 6,547 6,093 6,547 (included innonperformingloans)Total TroubledDebt 11,066 10,978 12,205 11,066 12,205 RestructuringsIndividually 41,148 19,277 22,484 41,148 22,484 Analyzed LoansNon-IndividuallyAnalyzed Watch 217,386 241,265 198,851 217,386 198,851 List LoansTotal IndividuallyAnalyzed and Watch 258,534 260,542 221,335 258,534 221,335 List LoansGross Charge Offs 90 267 305 593 4,565 Recoveries 125 1,836 283 2,106 810 Net Charge Offs/ (35 ) (1,569 ) 22 (1,513 ) 3,755 (Recoveries)Net Charge Offs/(Recoveries) to 0.00 % (0.14 %) 0.00 % (0.05 %) 0.12 %Average LoansCredit LossReserve to Loans 1.72 % 1.65 % 1.32 % 1.72 % 1.32 %(2)Credit LossReserve to Loans, 1.76 % 1.72 % 1.51 % 1.76 % 1.51 %Excluding PPPLoans (2) (3)Credit LossReserve to 235.67 % 668.51 % 450.09 % 235.67 % 450.09 %NonperformingLoans (2) Three Months Ended Nine Months Ended Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30, 2021 2021 2020 2021 2020Credit LossReserve toNonperforming 203.08 % 454.82 % 317.13 % 203.08 % 317.13 %Loans andPerforming TDRs(2)Nonperforming 0.73 % 0.25 % 0.29 % 0.73 % 0.29 %Loans to LoansNonperforming 0.50 % 0.19 % 0.25 % 0.50 % 0.25 %Assets to AssetsTotal IndividuallyAnalyzed and Watch 6.10 % 5.98 % 4.82 % 6.10 % 4.82 %List Loans toTotal LoansTotal IndividuallyAnalyzed and WatchList Loans to 6.23 % 6.26 % 5.49 % 6.23 % 5.49 %Total Loans,Excluding PPPLoans (3)OTHER DATA Full TimeEquivalent 592 600 571 592 571 EmployeesOffices 51 50 50 51 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 September30, 2021 are preliminary until the Call Report is filed.

CONSOLIDATED BALANCE SHEETS (in thousands, except share data)? September 30, December 31, 2021 2020? (Unaudited) ?ASSETS Cash and due from banks $ 78,523 $ 74,457 Short-term investments 478,710 175,470 Total cash and cash equivalents 557,233 249,927 ? Securities available-for-sale (carried at fair 1,239,715 734,845 value)Real estate mortgage loans held-for-sale 7,969 11,218 ? Loans, net of allowance for credit losses* of 4,166,405 4,587,748 $73,048 and $61,408? Land, premises and equipment, net 59,998 59,298 Bank owned life insurance 97,224 95,227 Federal Reserve and Federal Home Loan Bank stock 13,772 13,772 Accrued interest receivable 17,780 18,761 Goodwill 4,970 4,970 Other assets 57,850 54,669 Total assets $ 6,222,916 $ 5,830,435 ? ? LIABILITIES Noninterest bearing deposits $ 1,762,021 $ 1,538,331 Interest bearing deposits 3,652,617 3,498,474 Total deposits 5,414,638 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 2,916 5,959 Other liabilities 47,160 44,987 Total liabilities 5,539,714 5,173,251 ? STOCKHOLDERS? EQUITY Common stock: 90,000,000 shares authorized, no par value25,775,133 shares issued and 25,299,178 outstanding as of September 30, 202125,713,408 shares issued and 25,239,748 119,625 114,927 outstanding as of December31, 2020Retained earnings 567,518 529,005 Accumulated other comprehensive income 10,932 27,744 Treasury stock at cost (475,955 shares as ofSeptember 30, 2021, 473,660 shares as of (14,962 ) (14,581 )December31, 2020)Total stockholders? equity 683,113 657,095 Noncontrolling interest 89 89 Total equity 683,202 657,184 Total liabilities and equity $ 6,222,916 $ 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 Nine Months Ended September 30, September 30,? 2021 2020 2021 2020NET INTEREST INCOMEInterest and fees on loansTaxable $ 43,025 $ 42,056 $ 128,828 $ 130,759 Tax exempt 119 104 324 542 Interest anddividends on ? ? securitiesTaxable 2,470 1,577 6,482 5,419 Tax exempt 3,556 2,198 8,915 6,237 Other interest 125 44 348 292 incomeTotal interest 49,295 45,979 144,897 143,249 income? ? ? ? ?Interest on 3,479 5,941 11,587 24,324 depositsInterest on ? ? borrowingsShort-term 0 51 7 458 Long-term 75 74 222 172 Total interest 3,554 6,066 11,816 24,954 expense? ? ? ? ?NET INTEREST 45,741 39,913 133,081 118,295 INCOME? ? ? ? ?Provision for 1,300 1,750 1,077 13,850 credit losses*? ? ? ? ?NET INTERESTINCOME AFTER 44,441 38,163 132,004 104,445 PROVISION FORCREDIT LOSSES? ? ? ? ?NONINTEREST INCOMEWealth advisory 2,177 1,930 6,433 5,594 feesInvestment 521 421 1,560 1,148 brokerage feesService chargeson deposit 2,756 2,491 7,768 7,452 accountsLoan and service 3,005 2,637 8,823 7,470 feesMerchant card fee 838 670 2,226 1,933 incomeBank owned life 640 932 2,101 1,476 insurance incomeInterest rate 180 2,143 934 4,105 swap fee incomeMortgage banking (32 ) 1,005 1,756 2,945 income (loss)Net securities 0 314 797 363 gainsOther income 1,029 572 2,613 2,575 Total noninterest 11,114 13,115 35,011 35,061 income? ? ? ? ?NONINTEREST EXPENSESalaries and 14,230 12,706 44,377 35,696 employee benefitsNet occupancy 1,413 1,404 4,343 4,336 expenseEquipment costs 1,371 1,369 4,134 4,216 Data processing 3,169 3,025 9,692 8,736 fees and suppliesCorporate andbusiness 1,000 586 3,208 2,324 developmentFDIC insuranceand other 748 554 1,707 1,224 regulatory feesProfessional fees 1,342 1,306 5,058 3,506 Other expense 2,694 2,175 6,842 6,255 Total noninterest 25,967 23,125 79,361 66,293 expense? ? ? ? ?INCOME BEFOREINCOME TAX 29,588 28,153 87,654 73,213 EXPENSEIncome tax 5,469 5,377 16,204 13,468 expenseNET INCOME $ 24,119 $ 22,776 $ 71,450 $ 59,745 ? ? ? ? ? Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 BASIC WEIGHTEDAVERAGE COMMON 25,479,654 25,418,712 25,472,185 25,484,329 SHARES? ? ? BASIC EARNINGS $ 0.95 $ 0.89 $ 2.81 $ 2.34 PER COMMON SHARE? ? ? DILUTED WEIGHTEDAVERAGE COMMON 25,635,288 25,487,302 25,608,655 25,618,401 SHARES? DILUTED EARNINGS $ 0.94 $ 0.89 $ 2.79 $ 2.33 PER 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)

September 30, June 30, September 30, 2021 2021 2020Commercialand industrialloans:Workingcapital lines $ 659,166 15.5 % $ 616,401 14.1 % $ 592,560 12.9 %of creditloansNon-working 782,618 18.5 886,284 20.3 1,256,853 27.3 capital loansTotalcommercialand 1,441,784 34.0 1,502,685 34.4 1,849,413 40.2 industrialloans Commercialreal estateand multi-familyresidentialloans:Constructionand land 378,716 8.9 402,583 9.2 393,101 8.5 developmentloansOwneroccupied 740,836 17.4 672,903 15.5 619,820 13.5 loansNonowneroccupied 582,019 13.7 606,096 13.9 567,674 12.3 loansMultifamily 252,983 6.0 300,449 6.9 279,713 6.1 loansTotalcommercialreal estateand 1,954,554 46.0 1,982,031 45.5 1,860,308 40.4 multi-familyresidentialloans Agri-businessand agriculturalloans:Loans secured 152,099 3.5 167,314 3.8 150,503 3.2 by farmlandLoans foragricultural 171,981 4.1 179,338 4.1 187,651 4.1 productionTotalagri-businessand 324,080 7.6 346,652 7.9 338,154 7.3 agriculturalloans Othercommercial 83,595 2.0 85,356 2.0 97,533 2.1 loansTotalcommercial 3,804,013 89.6 3,916,724 89.8 4,145,408 90.0 loans Consumer 1-4family mortgageloans:Closed endfirst 173,689 4.1 169,653 3.9 170,671 3.7 mortgageloansOpen end andjunior lien 161,941 3.8 162,327 3.7 170,867 3.7 loansResidentialconstructionand land 12,542 0.3 12,505 0.3 11,012 0.3 developmentloansTotalconsumer 1-4family 348,172 8.2 344,485 7.9 352,550 7.7 mortgageloans Otherconsumer 92,169 2.2 100,771 2.3 105,285 2.3 loansTotalconsumer 440,341 10.4 445,256 10.2 457,835 10.0 loansSubtotal 4,244,354 100.0 % 4,361,980 100.0 % 4,603,243 100.0 %Less:Allowance for (73,048 ) (71,713 ) (60,747 ) credit losses(1)Net deferred (4,901 ) (8,271 ) (13,319 ) loan feesLoans, net $ 4,166,405 $ 4,281,996 $ 4,529,177

(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)

September 30, June 30, September 30, 2021 2021 2020Noninterest bearing $ 1,762,021 $ 1,743,000 $ 1,420,853 demand depositsSavings and transaction accounts:Savings deposits 375,993 358,568 289,500 Interest bearing demand 2,411,722 2,333,758 1,844,211 depositsTime deposits: Deposits of $100,000 or 658,050 740,484 965,709 moreOther time deposits 206,852 218,854 247,681 Total deposits $ 5,414,638 $ 5,394,664 $ 4,767,954 FHLB advances and other 75,000 75,000 85,500 borrowingsTotal funding sources $ 5,489,638 $ 5,469,664 $ 4,853,454

LAKELAND FINANCIAL CORPORATIONAVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS(UNAUDITED)

Three Months Ended Three Months Ended Three Months Ended September 30, 2021 June 30, 2021 September 30, 2020(fully tax Yield (1) Yield Yieldequivalent basis, Average Interest / Average Interest (1)/ Average Interest (1)/dollars in Balance Income Rate Balance Income Rate Balance Income Ratethousands)Earning Assets Loans: Taxable (2)(3) $ 4,339,792 $ 43,025 3.93 % $ 4,474,844 $ 42,342 3.80 % $ 4,541,608 $ 42,056 3.68 %Tax exempt (1) 14,312 150 4.16 12,839 128 4.00 15,204 130 3.40 Investments: (1) Available-for-sale 1,201,657 6,971 2.30 955,242 5,811 2.44 637,523 4,359 2.72 Short-term 2,304 0 0.00 2,305 0 0.00 8,865 3 0.13 investmentsInterest bearing 351,769 125 0.14 479,571 135 0.11 79,369 41 0.21 depositsTotal earning $ 5,909,834 $ 50,271 3.37 % $ 5,924,801 $ 48,416 3.28 % $ 5,282,569 $ 46,589 3.51 %assetsLess: Allowancefor credit losses (72,157 ) (72,222 ) (59,519 ) (4)Nonearning Assets Cash and due from 67,715 68,798 61,656 banksPremises and 59,824 59,848 60,554 equipmentOther nonearning 188,118 190,202 175,601 assetsTotal assets $ 6,153,334 $ 6,171,427 $ 5,520,861 Interest Bearing LiabilitiesSavings deposits $ 369,191 $ 71 0.08 % $ 359,484 $ 71 0.08 % $ 282,456 $ 53 0.07 %Interest bearing 2,390,462 1,712 0.28 2,428,524 1,700 0.28 1,827,061 1,405 0.31 checking accountsTime deposits: In denominations 211,911 457 0.86 224,025 545 0.98 254,315 982 1.54 under $100,000In denominations 691,143 1,239 0.71 741,466 1,574 0.85 972,436 3,501 1.43 over $100,000Miscellaneousshort-term 0 0 0.00 0 0 0.00 22,058 51 0.92 borrowingsLong-termborrowings and 75,000 75 0.40 75,000 74 0.40 75,000 74 0.39 subordinateddebenturesTotal interestbearing $ 3,737,707 $ 3,554 0.38 % $ 3,828,499 $ 3,964 0.42 % $ 3,433,326 $ 6,066 0.70 %liabilitiesNoninterestBearing LiabilitiesDemand deposits 1,681,565 1,633,686 1,401,403 Other liabilities 45,810 45,249 55,154 Stockholders' 688,252 663,993 630,978 EquityTotal liabilitiesand stockholders' $ 6,153,334 $ 6,171,427 $ 5,520,861 equityInterest Margin RecapInterest income/average earning 50,271 3.37 48,416 3.28 46,589 3.51 assetsInterest expense/average earning 3,554 0.24 3,964 0.27 6,066 0.46 assetsNet interest $ 46,717 3.13 % $ 44,452 3.01 % $ 40,523 3.05 %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 $976,000, $791,000 and $610,000 in the three-month periods ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.(2) Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $3.57 million, $2.76 million, and $1.87 million for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020, 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).

September 30, June 30, September 30, 2021 2021 2020Total Loans $ 4,239,453 $ 4,353,709 $ 4,589,924 Less: PPP Loans 91,897 194,212 557,851 Total Loans, Excluding 4,147,556 4,159,497 4,032,073 PPP Loans Allowance for Credit $ 73,048 $ 71,713 $ 60,747 Losses (1) Credit Loss Reserve to 1.72 % 1.65 % 1.32 %Total Loans (1)Credit Loss Reserve toTotal Loans, Excluding 1.76 % 1.72 % 1.51 %PPP Loans (1) Total IndividuallyAnalyzed and Watch $ 258,534 $ 260,542 $ 221,335 List Loans Total IndividuallyAnalyzed and Watch 6.10 % 5.98 % 4.82 %List Loans to TotalLoansTotal IndividuallyAnalyzed and WatchList Loans to Total 6.23 % 6.26 % 5.49 %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 Nine Months Ended Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30, 2021 2021 2020 2021 2020Total Equity $ 683,202 $ 677,471 $ 636,839 $ 683,202 $ 636,839 Less: (4,970 ) (4,970 ) (4,970 ) (4,970 ) (4,970 )GoodwillPlus:Deferred taxassets 1,176 1,176 1,176 1,176 1,176 related togoodwillTangible 679,408 673,677 633,045 679,408 633,045 Common Equity Assets $ 6,222,916 $ 6,232,914 $ 5,551,108 $ 6,222,916 $ 5,551,108 Less: (4,970 ) (4,970 ) (4,970 ) (4,970 ) (4,970 )GoodwillPlus:Deferred taxassets 1,176 1,176 1,176 1,176 1,176 related togoodwillTangible 6,219,122 6,229,120 5,547,314 6,219,122 5,547,314 Assets Ending common 25,486,032 25,473,437 25,419,814 25,486,032 25,419,814 shares issued Tangible BookValue Per $ 26.66 $ 26.45 $ 24.90 $ 26.66 $ 24.90 Common Share TangibleCommon Equity 10.92 % 10.81 % 11.41 % 10.92 % 11.41 %/TangibleAssets Net Interest $ 45,741 $ 43,661 $ 39,913 $ 133,081 $ 118,295 IncomePlus:Noninterest 11,114 11,340 13,115 35,011 35,061 incomeMinus:Noninterest (25,967 ) (26,648 ) (23,125 ) (79,361 ) (66,293 )expense PretaxPre-Provision $ 30,888 $ 28,353 $ 29,903 $ 88,731 $ 87,063 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 Nine Months Ended Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30, 2021 2021 2020 2021 2020TotalAverage $ 5,909,834 $ 5,924,801 $ 5,282,569 $ 5,825,275 $ 5,078,509 EarningsAssetsLess:Average (142,917 ) (348,026 ) (557,290 ) (296,938 ) (339,149 )Balance ofPPP LoansTotalAdjusted 5,766,917 5,576,775 4,725,279 5,528,337 4,739,360 EarningAssets TotalInterest $ 50,271 $ 48,416 $ 46,589 $ 147,351 $ 145,045 Income FTELess: PPP (3,946 ) (3,652 ) (3,294 ) (12,764 ) (6,323 )Loan IncomeTotalAdjusted 46,325 44,764 43,295 134,587 138,722 InterestIncome FTE AdjustedEarningAsset 3.19 % 3.22 % 3.65 % 3.25 % 3.91 %Yield, netof PPPImpact TotalAverageInterest $ 3,737,707 $ 3,828,499 $ 3,433,326 $ 3,728,339 $ 3,393,274 BearingLiabilitiesLess:Average (142,917 ) (348,026 ) (557,290 ) (296,938 ) (339,149 )Balance ofPPP LoansTotalAdjustedInterest 3,594,790 3,480,473 2,876,036 3,431,401 3,054,125 BearingLiabilities TotalInterest $ 3,554 $ 3,964 $ 6,066 $ 11,816 $ 24,954 Expense FTELess: PPPCost of (90 ) (162 ) (350 ) (555 ) (635 )FundsTotalAdjusted 3,464 3,802 5,716 11,261 24,319 InterestExpense FTE AdjustedCost ofFunds, net 0.24 % 0.27 % 0.48 % 0.27 % 0.69 %of PPPImpact NetInterestMargin FTE, 2.95 % 2.95 % 3.17 % 2.98 % 3.22 %net of PPPImpact

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