-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BD2LfEvsSzKvxP+mwrfBZrlnK6nfktt8NjS1nlWE2f0eX6QSTR1L4PfGzT1lm3P9 Zzt7gKZHoBxNX47pS02XBA== 0000721994-02-000069.txt : 20021113 0000721994-02-000069.hdr.sgml : 20021113 20021113140645 ACCESSION NUMBER: 0000721994-02-000069 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAKELAND FINANCIAL CORP CENTRAL INDEX KEY: 0000721994 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 351559596 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11487 FILM NUMBER: 02819426 BUSINESS ADDRESS: STREET 1: 202 E CENTER ST STREET 2: P O BOX 1387 CITY: WARSAW STATE: IN ZIP: 46581-1387 BUSINESS PHONE: 5742676144 MAIL ADDRESS: STREET 1: 202 E CENTER ST STREET 2: PO BOX 1387 CITY: WARSAW STATE: IN ZIP: 46581 10-Q 1 lkfn090210q.txt LAKELAND FINANCIAL CORPORATION 9/30/02 10Q Microsoft Word 10.0.4219; UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File Number 0-11487 LAKELAND FINANCIAL CORPORATION (Exact name of registrant as specified in its charter) INDIANA 35-1559596 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 202 East Center Street P.O. Box 1387, Warsaw, Indiana 46581-1387 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (574)267-6144 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [x] NO [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Class Outstanding at October 31, 2002 Common Stock, No Par Value 5,768,806 LAKELAND FINANCIAL CORPORATION Form 10-Q Quarterly Report Table of Contents PART I. Page Number Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . 1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 20 Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . 21 PART II. Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 24 Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . 24 Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . 24 Item 4. Submission of Matters to a Vote of Security Holders . . . 24 Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 24 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 24 Form 10-Q Signature Page . . . . . . . . . . . . . . . . . . . . . . 25 Form 10-Q Certifications . . . . . . . . . . . . . . . . . . . . . . 26 LAKELAND FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS As of September 30, 2002 and December 31, 2001 (in thousands) (Page 1 of 2)
September 30, December 31, 2002 2001 ------------ ------------ (Unaudited) ASSETS Cash and cash equivalents: Cash and due from banks $ 48,333 $ 70,219 Short-term investments 11,910 8,904 ------------ ------------ Total cash and cash equivalents 60,243 79,123 Securities available-for-sale: U. S. Treasury and government agency securities 17,359 19,440 Mortgage-backed securities 226,916 216,654 State and municipal securities 33,861 29,663 Other debt securities 0 5,882 ------------ ------------ Total securities available-for-sale (carried at fair value) 278,136 271,639 Real estate mortgages held-for-sale 1,149 8,493 Loans: Total loans 792,552 738,223 Less: Allowance for loan losses 9,082 7,946 ------------ ------------ Net loans 783,470 730,277 Land, premises and equipment, net 24,404 24,252 Accrued income receivable 5,063 5,441 Intangible assets 5,709 6,161 Other assets 13,535 12,326 ------------ ------------ Total assets $ 1,171,709 $ 1,137,712 ============ ============ (Continued)
1 LAKELAND FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS As of September 30, 2002 and December 31, 2001 (in thousands except for share and per share data) (Page 2 of 2)
September 30, December 31, 2002 2001 ------------ ------------ (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing deposits $ 162,707 $ 169,549 Interest bearing deposits 715,107 623,831 ------------ ------------ Total deposits 877,814 793,380 Short-term borrowings: Federal funds purchased 0 49,000 U.S. Treasury demand notes 3,532 4,000 Securities sold under agreements to repurchase 108,405 149,117 Other borrowings 35,000 30,000 ------------ ------------ Total short-term borrowings 146,937 232,117 Accrued expenses payable 11,801 6,131 Other liabilities 2,374 1,843 Long-term borrowings 31,355 11,389 Guaranteed preferred beneficial interests in Company's subordinated debentures 19,338 19,318 ------------ ------------ Total liabilities 1,089,619 1,064,178 SHAREHOLDERS' EQUITY Common stock: No par value, 90,000,000 shares authorized, 5,813,984 shares issued and 5,768,806 outstanding as of September 30, 2002, and 5,813,984 shares issued and 5,775,632 outstanding at December 31, 2001 1,453 1,453 Additional paid-in capital 8,537 8,537 Retained earnings 68,265 62,378 Accumulated other comprehensive income 4,658 1,835 Treasury stock, at cost (823) (669) ------------ ------------ Total shareholders' equity 82,090 73,534 ------------ ------------ Total liabilities and shareholders' equity $ 1,171,709 $ 1,137,712 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
2 LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHANSIVE INCOME For the Three Months and Nine Months Ended September 30, 2002, and 2001 (in thousands except for share and per share data) (Unaudited) (Page 1 of 2)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ INTEREST AND DIVIDEND INCOME - ---------------------------- Interest and fees on loans: Taxable $ 12,309 $ 14,721 $ 36,960 $ 45,363 Tax exempt 58 33 125 100 ------------ ------------ ------------ ------------ Total loan income 12,367 14,754 37,085 45,463 Short-term investments 73 140 165 416 Securities: U.S. Treasury and government agency securities 340 715 1,077 2,141 Mortgage-backed securities 3,028 3,120 8,825 9,664 State and municipal securities 402 442 1,202 1,331 Other debt securities 6 112 208 341 ------------ ------------ ------------ ------------ Total interest and dividend income 16,216 19,283 48,562 59,356 INTEREST EXPENSE - ---------------- Interest on deposits 4,277 7,127 12,855 24,493 Interest on short-term borrowings 536 1,647 2,091 5,583 Interest on long-term debt 778 613 2,105 1,834 ------------ ------------ ------------ ------------ Total interest expense 5,591 9,387 17,051 31,910 ------------ ------------ ------------ ------------ NET INTEREST INCOME 10,625 9,896 31,511 27,446 - ------------------- Provision for loan losses 1,041 970 2,290 1,490 ------------ ------------ ------------ ------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,584 8,926 29,221 25,956 - ------------------------- ------------ ------------ ------------ ------------ NONINTEREST INCOME - ------------------ Trust and brokerage fees 590 600 1,889 2,023 Service charges on deposit accounts 1,786 1,385 4,922 4,002 Other income (net) 727 864 2,470 2,486 Net gains on the sale of branches 0 753 0 753 Net gains on the sale of real estate mortgages held-for-sale 493 348 1,204 792 Net securities gains (losses) 39 50 55 52 ------------ ------------ ------------ ------------ Total noninterest income 3,635 4,000 10,540 10,108 NONINTEREST EXPENSE - ------------------- Salaries and employee benefits 4,803 4,616 13,937 13,202 Occupancy and equipment expense 1,171 1,158 3,352 3,668 Other expense 2,733 3,040 9,013 8,628 ------------ ------------ ------------ ------------ Total noninterest expense 8,707 8,814 26,302 25,498 (Continued)
3 LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME For the Three Months and Nine Months Ended September 30, 2002, and 2001 (in thousands except for share and per share data) (Unaudited) (Page 2 of 2)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAX EXPENSE 4,512 4,112 13,459 10,566 - -------------------------------- Income tax expense 1,559 1,345 4,628 3,299 ------------ ------------ ------------ ------------ NET INCOME $ 2,953 $ 2,767 $ 8,831 $ 7,267 - ---------- ============ ============ ============ ============ Other comprehensive income, net of tax: Unrealized gain/(loss) on available- for-sale securities 386 2,526 2,823 4,431 ------------ ------------ ------------ ------------ TOTAL COMPREHENSIVE INCOME $ 3,339 $ 5,293 $ 11,654 $ 11,698 ============ ============ ============ ============ AVERAGE COMMON SHARES OUTSTANDING FOR BASIC EPS 5,813,984 5,813,984 5,813,984 5,813,984 BASIC EARNINGS PER COMMON SHARE $ 0.51 $ 0.48 $ 1.52 $ 1.25 - ------------------------------- ============ ============ ============ ============ AVERAGE COMMON SHARES OUTSTANDING FOR DILUTED EPS 5,992,824 5,853,748 5,957,792 5,836,549 DILUTED EARNINGS PER COMMON SHARE $ 0.49 $ 0.47 $ 1.48 $ 1.25 - --------------------------------- ============ ============ ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
4 LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 2002 and 2001 (in thousands) (Unaudited) (Page 1 of 2)
2002 2001 ------------ ------------ Cash flows from operating activities: Net income $ 8,831 $ 7,267 ------------ ------------ Adjustments to reconcile net income to net cash from operating activities: Depreciation 1,755 1,775 Provision for loan losses 2,290 1,490 Amortization of intangible assets 472 666 Amortization of mortgage servicing rights 296 205 Impairment of mortgage servicing rights 461 471 Loans originated for sale (56,724) (43,467) Net gain on sale of loans (1,204) (792) Proceeds from sale of loans 64,894 42,672 Net (gain) loss on sale of premises and equipment 24 (23) Net gain on sale of branches 0 (753) Net gain on sale of securities available-for-sale (55) (52) Net securities amortization 1,271 791 Increase (decrease) in taxes payable (760) 904 Decrease in income receivable 378 467 Increase (decrease) in accrued expenses payable 925 (580) (Increase) decrease in other assets 2,225 (1,984) Increase in other liabilities 531 332 ------------ ------------ Total adjustments 16,779 2,122 ------------ ------------ Net cash from operating activities 25,610 9,389 ------------ ------------ Cash flows from investing activities: Proceeds from maturities, sales and calls of securities available-for-sale 59,321 39,700 Purchases of securities available-for-sale (62,519) (34,469) Net increase in total loans (55,483) (30,520) Proceeds from sales of land, premises and equipment 11 0 Purchases of land, premises and equipment (1,942) (1,361) Net payments from branch divestitures 0 (40,325) ------------ ------------ Net cash from investing activities (60,612) (66,975) ------------ ------------ (Continued)
5 LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (in thousands) (Unaudited) (Page 2 of 2)
2002 2001 ------------ ------------ Cash flows from financing activities: Net increase in total deposits $ 84,434 $ 36,773 Proceeds from short-term borrowings 21,709,394 23,303,700 Payments on short-term borrowings (21,794,574) (23,306,611) Proceeds from long-term borrowings 20,000 0 Payments on long-term borrowings (34) (33) Dividends paid (2,945) (2,486) Purchase of treasury stock (153) (126) ------------ ------------ Net cash from financing activities 16,122 31,217 ------------ ------------ Net decrease in cash and cash equivalents (18,880) (26,369) Cash and cash equivalents at beginning of the period 79,123 88,993 ------------ ------------ Cash and cash equivalents at end of the period $ 60,243 $ 62,624 ============ ============ Cash paid during the period for: Interest $ 17,275 $ 32,646 ============ ============ Income taxes $ 5,569 $ 2,395 ============ ============ Loans transferred to other real estate $ 0 $ 1,435 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
6 LAKELAND FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2002 (Unaudited) NOTE 1. BASIS OF PRESENTATION This report is filed for Lakeland Financial Corporation (the "Company") and its wholly owned subsidiaries, Lake City Bank (the "Bank") and Lakeland Capital Trust ("Lakeland Trust"). All significant inter-company balances and transactions have been eliminated in consolidation. Also included is the Bank's wholly-owned subsidiary, LCB Investments Limited ("LCB Investments"). The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ending September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. The 2001 Lakeland Financial Corporation Annual Report on Form 10-K should be read in conjunction with these statements. NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS On January 1, 2002, the Company adopted a new accounting standard, Statement of Financial Accounting Standard No. 142, which addresses accounting for goodwill and intangible assets arising from business combinations. Identifiable intangible assets must be separated from goodwill. Identifiable intangible assets with finite useful lives are amortized under the new standard, whereas unidentified intangible assets resulting from business combinations, both amounts previously recorded and future amounts purchased, cease being amortized. Annual impairment testing is required for goodwill with impairment being recorded if the carrying amount of goodwill exceeds its implied fair value. Adoption of this standard on January 1, 2002 did not have a material effect on the Company's financial statements. 7 Intangible assets subject to amortization are as follows: As of September 30, 2002 ---------------------------- Gross Carrying Accumulated Amount Amortization -------------- ------------ (in thousands) Core deposit intangible $ 2,032 $ 953 Other unidentified intangible 6,812 2,182 -------------- ------------ Total $ 8,844 $ 3,135 ============== ============ Amortization expense for the three-month and nine-month periods ended September 30, 2002 was $151,000 and $452,000, respectively. Estimated amortization expense for the next five years is: Before SFAS No. 147 After SFAS No. 147 For year ended 12/31/02 $603,000 $149,000 For year ended 12/31/03 $584,000 $130,000 For year ended 12/31/04 $568,000 $114,000 For year ended 12/31/05 $554,000 $100,000 For year ended 12/31/06 $541,000 $ 87,000 On October 1, 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 147, "Acquisitions of Certain Financial Institutions." SFAS No. 147 is effective October 1, 2002, and may be early applied. SFAS No. 147 supersedes SFAS No. 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions." SFAS No. 147 provides guidance on the accounting for the acquisition of a financial institution, and applies to all such acquisitions except those between two or more mutual enterprises. Under SFAS No. 147, the excess of the fair value of liabilities assumed over the fair value of tangible and identifiable intangible assets acquired in a financial institution business combination represents goodwill that should be accounted for under SFAS No. 142, "Goodwill and Other Intangible Assets." If certain criteria are met, the amount of the unidentifiable intangible asset resulting from prior financial institutions acquisitions is to be reclassified to goodwill upon adoption of this Statement. Financial institutions meeting conditions outlined in SFAS No. 147 are required to restate previously issued financial statements. The objective of the restatement is to present the balance sheet and income statement as if the amount accounted for under SFAS No. 72 as an unidentifiable intangible asset had been reclassified to goodwill as of the date the Company adopted SFAS No. 142. Adoption of SFAS No. 147 on October 1, 2002 resulted in the reclassification of $5.0 million of previously recognized 8 unidentifiable intangible assets to goodwill. Additionally, prior period amortization expense was reversed totaling $114,000 and $0 for the three months ended September 30, 2002 and 2001, and $341,000 and $0 for the nine months ended September 30, 2002 and 2001. The effect of the restatement was to increase net income by $68,000 and $0 for the three months ended September 30, 2002 and 2001, and $203,000 and $0 for the nine months ended September 30, 2002 and 2001. NOTE 3. EARNINGS PER SHARE Basic earnings per common share is based upon weighted-average common shares outstanding. Diluted earnings per common share shows the dilutive effect of additional common shares issueable. The common shares outstanding for the shareholders' equity section of the consolidated balance sheet at September 30, 2002 reflects the acquisition of 45,178 shares of Company common stock to offset a liability for a directors' deferred compensation plan. These shares are treated as outstanding when computing the weighted-average common shares outstanding for the calculation of both basic and diluted earnings per share. For the three-month periods ended September 30, 2002 and 2001, stock options for 486,995 shares and 330,575 shares were considered dilutive for purposes of computing diluted earnings per share. For the nine-month periods ended September 30, 2002 and 2001, stock options for 402,726 and 247,225 were considered dilutive for purposes of computing diluted earnings per share. NOTE 4. LOANS September 30, December 31, 2002 2001 ------------ ------------ (in thousands) Commercial and industrial loans $ 530,199 $ 478,288 Agri-business and agricultural loans 64,488 58,901 Real estate mortgage loans 43,614 44,898 Real estate construction loans 2,276 2,354 Installment loans and credit cards 151,975 153,782 ------------ ------------ Total loans $ 792,552 $ 738,223 ============ ============ Impaired loans $ 13,299 $ 10,008 Non-performing loans $ 7,600 $ 2,498 9 NOTE 5. RECLASSIFICATIONS Certain amounts appearing in the financial statements and notes thereto for prior periods have been reclassified to conform with the current presentation. The reclassification had no effect on net income or stockholders' equity as previously reported. 10 Part 1 LAKELAND FINANCIAL CORPORATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION and RESULTS OF OPERATION September 30, 2002 OVERVIEW Lakeland Financial Corporation is the holding company for Lake City Bank. The Company is headquartered in Warsaw, Indiana and operates 40 offices in 11 counties in northern Indiana. The Company earned $8.8 million for the first nine months of 2002 versus $7.3 million in the same period of 2001, an increase of 21.5%. The increase was driven by a $4.1 million increase in net interest income and a $432,000 increase in non-interest income. Offsetting these positive impacts were increases of $800,000 in the provision for loan losses, and $804,000 in non-interest expense. Basic earnings per share for the first nine months of 2002 was $1.52 per share versus $1.25 per share for the first nine months of 2001. Diluted earnings per share reflect the potential dilutive impact of stock options granted under an employee stock option plan. Diluted earnings per share for the first nine months of 2002 was $1.48 per share, versus $1.25 per share for the first nine months of 2001. Net income for the third quarter of 2002 was $3.0 million, an increase of 6.7% versus $2.8 million for the comparable period of 2001. Basic earnings per share for the third quarter of 2002 was $0.51 per share versus $0.48 per share for the third quarter of 2001. Diluted earnings per share for the third quarter of 2002 was $0.49 per share versus $0.47 per share for the third quarter of 2001. RESULTS OF OPERATIONS Net Interest Income For the nine-month period ended September 30, 2002, net interest income totaled $31.5 million, an increase of 14.8%, or $4.1 million versus the first nine months of 2001. For the three-month period ended September 30, 2002, net interest income totaled $10.6 million, an increase of 7.4%, or $729,000, over the same period of 2001. Net interest income increased in both the nine and three month periods of 2002 versus the comparable periods of 2001, primarily due to the implementation of a liability pricing strategy which has resulted in an improved net interest margin. In addition, average interest bearing assets and average non-interest bearing demand deposits increased in both the nine and three month periods ending September 30, 2002. The effect of these changes was to increase the Company's net interest margin to 4.11% and 4.05%, respectively, for the nine and three month periods ended September 30, 2002, versus 3.63% and 3.81% for the comparable periods of 2001. 11 During the first nine months of 2002, total interest and dividend income decreased by $10.8 million, or 18.2% to $48.6 million, versus $59.4 million during the same nine months of 2001. During the third quarter of 2002, interest and dividend income decreased $3.1 million, or 15.9%, to $16.2 million, versus $19.3 million during the same quarter of 2001. Daily average earning assets for the first nine months of 2002 increased 1.00% to $1.045 billion versus the same period in 2001. For the third quarter, daily average earning assets increased 0.8% to $1.061 billion versus the same period in 2001. The tax equivalent yield on average earning assets decreased by 146 basis points to 6.2% for the nine-month period ended September 30, 2002 versus the same period of 2001. For the three-month period ended September 30, 2002, the yield decreased by 119 basis points to 6.1% from the yield for the three-month period ended September 30, 2001. The decrease in the yield on average earning assets reflected decreases in the yields on both loans and securities caused by the falling interest rate environment. The yield on securities is historically lower than the yield on loans, and decreasing the ratio of securities to total earning assets will normally improve the yield on earning assets. The ratio of average daily securities to average earning assets for the nine-month and three-month periods ended September 30, 2002 were 26.2% and 25.9% compared to 28.4% and 27.8% for the same periods of 2001. The average daily loan balances for the first nine months of 2002 increased 3.9% to $757.4 million, over the average daily loan balances of $728.7 million for the same period of 2001. During the same period, loan interest income declined by $8.4 million, or 18.4%, to $37.1 million. The decrease was the result of a 180 basis point decrease in the tax equivalent yield on loans to 6.4% from 8.2% in the first nine months of 2001. The average daily loan balances for the third quarter of 2002 increased $24.9 million, or 3.3%, to $769.0 million, versus $744.1 million for the same period of 2001. During the same period, loan interest income declined by $2.4 million, or 16.2%, to $12.4 million versus $14.8 million during the third quarter of 2001. The decrease was the result of a 147 basis point decrease in the tax equivalent yield on loans, to 6.3%, versus 7.7% in the third quarter of 2001. In both the nine and three month periods ended September 30, 2002, increases in the average daily loan balances occurred despite the impact of the Company's September, 2001 branch divestiture, which included $24.4 million in loans. Income from short-term investments was $165,000 for the nine-month period and $73,000 for the three-month period ended September 30, 2002. This compares to $416,000 and $140,000 for the same periods of 2001. The $251,000 decrease between the nine-month periods was primarily the result of a 298 basis point decrease in yields. The $67,000 decrease between the three-month periods resulted primarily from a 187 basis point decrease in yields. 12 The average daily securities balances for the first nine months of 2002 decreased $19.9 million, or 6.8%, to $274.1 million, versus $294.0 million for the same period of 2001. During the same periods, income from securities declined by $2.2 million, or 16.1%, to $11.3 million versus $13.5 million during the first nine months of 2001. The decrease was the result of the decrease in average daily balances of securities combined with a 59 basis point decline in the tax equivalent yields on securities, to 5.8% versus 6.4% in the first nine months of 2001. The average daily securities balances for the third quarter of 2002 decreased $18.1 million, or 6.2%, to $274.6 million, versus $292.7 million for the same period of 2001. During the same periods, income from securities declined by $613,000, or 14.0%, to $3.8 million versus $4.4 million during the third quarter of 2001. The decrease was the result of a 47 basis point decrease in the tax equivalent yield on securities, to 5.7%, versus 6.2% in the third quarter of 2001, combined with the decline in average daily securities balances. Total interest expense decreased $14.9 million, or 46.6%, to $17.1 million for the nine-month period ended September 30, 2002, from $31.9 million for the comparable period in 2001. The decrease was primarily the result of a 188 basis point decrease in the Company's daily cost of funds to 2.19%, versus 4.07% for the same period of 2001. Total interest expense decreased $3.8 million, or 40.4%, to $5.6 million for the three-month period ended September 30, 2002, from $9.4 million for the comparable period of 2001. The decrease was primarily the result of a 139 basis point decrease in the Company's daily cost of funds to 2.11%, versus 3.50%, for the same period of 2001. On an average daily basis, total deposits (including demand deposits) increased $1.8 million, or 0.2%, to $846.8 million for the nine-month period ended September 30, 2002, versus $845.0 million in the same period in 2001. The average daily deposit balances for the third quarter of 2002 increased $15.2 million, or 1.8%, to $869.3 million versus $854.1 million during the third quarter of 2001. In both the nine and three month periods ended September 30, 2002, increases in average daily total deposits occurred despite the impact of the Company's September, 2001 branch divestiture, which included $70.3 million in deposits. On an average daily basis, noninterest bearing demand deposits increased $10.0 million, or 7.3% and 7.0%, respectively, for both the nine and three-month periods ended September 30, 2002, versus the same periods in 2001. When comparing the nine months ended September 30, 2002 with the same period of 2001, the average daily balance of time deposits, which pay a higher rate of interest compared to demand deposit and transaction accounts, decreased $8.1 million and the rate paid on such accounts declined by 247 basis points versus the same period in 2001. In the third quarter of 2002, the average daily balance of time deposits increased by $8.3 million and the rate paid on such accounts decreased by 189 basis points. During the remainder of 2002, 13 management plans to continue efforts to grow relationship type accounts such as demand deposit and Investors' Weekly accounts, which pay a lower rate of interest compared to time deposit accounts and are generally viewed by management as stable and reliable funding sources. Average daily balances of borrowings decreased $8.4 million, or 4.2%, to $193.8 million for the nine months ended September 30, 2002 versus $202.2 million for the same period in 2001, and decreased $27.4 million, or 13.1%, for the three months ended September 30, 2002. The rate on borrowings decreased 201 basis points and 142 basis points, respectively, when comparing the nine and three month periods of 2002 with the same periods of 2001. On an average daily basis, total deposits (including demand deposits) and purchased funds decreased 0.6% and 1.2%, respectively, for the nine-month and three-month periods ended September 30, 2002 versus the same periods in 2001. Provision for Loan Losses Based on management's review of the adequacy of the allowance for loan losses, provisions for losses on loans of $2.3 million and $1.0 million were recorded during the nine-month and three-month periods ended September 30, 2002, versus provisions of $1.5 million and $970,000 recorded during the same periods of 2001. The increase in the provision for loan losses for the nine month period reflected a number of factors, including the increase in the size of the loan portfolio, the amount of impaired loans, the amount of past due accruing loans (90 days or more), and management's overall view on current credit quality, as discussed in more detail below. Noninterest Income Noninterest income categories for the nine and three-month periods ended September 30, 2002 and 2001 are shown in the following table: Nine Months ended September 30, ---------------------------------- Percent 2002 2001 Change ---------- ---------- ---------- (in thousands) Trust and brokerage fees $ 1,889 $ 2,023 (6.6)% Service charges on deposits 4,922 4,002 23.0 Other income (net) 2,470 2,486 (0.6) Net gains on the sale of branches 0 753 (100.0) Net gains on the sale of real estate mortgages held-for-sale 1,204 792 52.0 Net securities gains 55 52 5.8 ---------- ---------- ---------- Total noninterest income $ 10,540 $ 10,108 4.3 % ========== ========== ========== 14 Three Months ended September 30, ---------------------------------- Percent 2002 2001 Change ---------- ---------- ---------- (in thousands) Trust and brokerage fees $ 590 $ 600 (1.7)% Service charges on deposits 1,786 1,385 29.0 Other income (net) 727 864 (15.9) Net gain on the sale of branches 0 753 (100.0) Net gains on the sale of real estate mortgages held-for-sale 493 348 41.7 Net securities gains 39 50 (22.0) ---------- ---------- ---------- Total noninterest income $ 3,635 $ 4,000 (9.1)% ========== ========== ========== Trust fees increased 16.9%, from $1.2 million to $1.4 million, in the first nine months of 2002 versus the same period in 2001. This increase was primarily in employee benefit plan, executorship, living trust and testamentary trust fees. Brokerage fees decreased 39.5%, from $846,000 to $512,000, in the first nine months of 2002 versus the same period in 2001, driven by nonrecurring fees received in 2001 of approximately $156,000 related to the sale of several annuity accounts, and reduced trading volume during 2002. The primary sources of the increase in service charges on deposit accounts were fees related to business checking accounts as well as fees related to new deposit services which were implemented in the first quarter of 2002. Other income consists of normal recurring fee income such as mortgage service fees, credit card fees, insurance fees, and safe deposit box rent, as well as other income that management classifies as non-recurring. Other fee income decreased $16,000 in the first nine months of 2002 versus the same period in 2001, and decreased $137,000 in the third quarter versus the same period in 2001. The primary driver behind the third quarter decrease was a $258,000 charge for non-cash impairment of the Bank's mortgage servicing rights versus a $175,000 charge in the third quarter of 2001. During the third quarter of 2001, the Company sold five non-strategic branches resulting in a gain of $753,000. Excluding this one-time gain, total non-interest income increased by 12.7% and 11.9%, respectively, in the first nine months and third quarter of 2002, versus the same periods in 2001. 15 The increase in profits from the sale of mortgages reflected an increase in the volume of mortgages sold during the first nine months of 2002 versus sales during the first nine months of 2001. During the first nine months of 2002, the Company sold $64.1 million in mortgages versus $42.1 million in the comparable period of 2001. This increase in volume was the result of the low interest rate environment during 2002, which has resulted in increased mortgage refinance activity and increased demand for home mortgages. Noninterest Expense Noninterest expense categories for the nine and three-month periods ended September 30, 2002, and 2001 are shown in the following table: Nine Months ended September 30, ---------------------------------- Percent 2002 2001 Change ---------- ---------- ---------- (in thousands) Salaries and employee benefits $ 13,937 $ 13,202 5.6 % Occupancy and equipment expense 3,352 3,668 (8.6) Other expense 9,013 8,628 4.5 ---------- ---------- ---------- Total noninterest expense $ 26,302 $ 25,498 3.2 % ========== ========== ========== Three Months ended September 30, ---------------------------------- Percent 2002 2001 Change ---------- ---------- ---------- (in thousands) Salaries and employee benefits $ 4,803 $ 4,616 4.1 % Occupancy and equipment expense 1,171 1,158 1.1 Other expense 2,733 3,040 (10.1) ---------- ---------- ---------- Total noninterest expense $ 8,707 $ 8,814 (1.2)% ========== ========== ========== The increase in salaries and employee benefits reflected normal salary increases and increases related to the employee 401(k) plan and incentive compensation plan. Total employees decreased to 460 at September 30, 2002, from 476 at September 30, 2001. This decrease resulted primarily from the reduction in staff in connection with the sale of the five bank branches in September, 2001. 16 The decrease in occupancy and equipment expense was also primarily related to the sale of the five branch offices in the third quarter of 2001. Other expense includes corporate and business development, data processing fees, telecommunications, postage, and professional fees such as legal, accounting, and directors' fees. Other expense increased primarily due to increased data processing, advertising and public relations expenses incurred during the first nine-months of 2002 versus the same period of 2001. Other expense declined in the third quarter of 2002 versus the same period of 2001 primarily due to reduced professional fees. Income Tax Expense Income tax expense increased $1.3 million, or 40.3%, for the first nine months of 2002, compared to the same period in 2001. Income tax expense for the third quarter of 2002 increased $214,000, or 15.9%, compared to the third quarter of 2001. The combined state franchise tax expense and the federal income tax expense as a percentage of income before income tax expense increased to 34.4% during the first nine months of 2002 compared to 31.2% during the same period in 2001. It increased to 34.6% for the third quarter of 2002 versus 32.7% for the third quarter of 2001. The increases were primarily due to greater profitability which resulted in a higher percentage of income being subject to the state franchise tax combined with the Company being taxed at the 35% federal tax rate in 2002 versus the 34% rate in 2001. FINANCIAL CONDITION Total assets of the Company were $1.172 billion as of September 30, 2002, an increase of $34.0 million, or 3.0%, when compared to $1.138 billion as of December 31, 2001. Total cash and cash equivalents decreased by $18.9 million, or 23.9%, to $60.2 million at September 30, 2002 from $79.1 million at December 31, 2001. The decrease was attributable to funding needs associated with corresponding increases in the Company's securities and loans portfolios. Total securities available-for-sale increased by $6.5 million, or 2.4%, to $278.1 million at September 30, 2002 from $271.6 million at December 31, 2001. The increase was a result of a number of transactions in the securities portfolio. Paydowns of $46.8 million were received, and the amortization of premiums, net of the accretion of discounts, was $1.3 million. Maturities, calls and sales of securities totaled $12.4 million. These 17 portfolio decreases were offset by securities purchases totaling $62.5 million, and an increase of $4.5 million in the fair value of the securities. The investment portfolio is managed to limit the Company's exposure to risk by containing mostly CMO's and other securities which are either directly or indirectly backed by the federal government or a local municipal government. Real estate mortgages held-for-sale decreased by $7.4 million, or 86.5%, to $1.1 million at September 30, 2002 from $8.5 million at December 31, 2001. The balance of this asset category is subject to a high degree of variability depending on, among other things, recent mortgage loan rates and the timing of loan sales into the secondary market. During the nine months ended September 30, 2002, $56.7 million in real estate mortgages were originated for sale and $64.1 million in mortgages were sold. Total loans, excluding real estate mortgages held-for-sale, increased by $54.3 million or 7.4% to $792.6 million at September 30, 2002 from $738.2 million at December 31, 2001. The mix of loan types within the Company's portfolio remained relatively unchanged, reflecting 75% commercial, 6% real estate and 19% consumer loans compared to 73% commercial, 6% real estate and 21% consumer loans at December 31, 2001. The allowance for loan losses increased $1.1 million, or 14.3%, to $9.1 million at September 30, 2002 from $7.9 million at December 31, 2001. Net charge-offs for the nine months ended September 30, were $1.2 million in 2002 and $1.0 million in 2001. The allowance for loan losses at September 30, 2002 was 1.15% of total loans, net of residential mortgage loans held for sale on the secondary market, versus 1.08% at December 31, 2001. The Company has a relatively high percentage of commercial and commercial real estate loans, most of which are extended to small or medium-sized businesses. Commercial loans represent higher dollar loans to fewer customers and therefore higher credit risk. Pricing is adjusted to manage the higher credit risk associated with these types of loans. The majority of fixed rate mortgage loans, which represent increased interest rate risk, are sold in the secondary market, as well as some variable rate mortgage loans. The remainder of the variable rate mortgage loans and a small number of fixed rate mortgage loans are retained. Management believes the allowance for loan losses is at a level commensurate with the overall risk exposure of the loan portfolio. However, as a result of the difficult economic climate, certain borrowers may experience difficulty and the level of non-performing loans, charge-offs, and delinquencies could rise and require further increases in the provision. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. The allowance is an amount that management believes will be adequate to absorb probable losses 18 relating to specifically identified loans based on an evaluation as well as other probable incurred losses inherent in the loan portfolio. The evaluations take into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans, and current economic conditions that may affect the borrower's ability to repay. Management also considers trends in adversely classified loans based upon a monthly review of those credits. Since December 31, 2001, the percentage of loans internally adversely classified has increased. In accordance with FASB Statements 5 and 114, the allowance is provided for losses that have been incurred as of the balance sheet date and is based on past events and current economic conditions, and does not include the effects of expected losses on specific loans or groups of loans that are related to future events or expected changes in economic conditions. The majority of the risk in the loan portfolio lies in the commercial loans that include commercial real estate loans. Accordingly, the Company allocated $6.9 million of the allowance to these loans, which comprise approximately 75% of the loan portfolio. At September 30, 2002, total nonperforming loans increased by $5.1 million to $7.6 million from $2.5 million at December 31, 2001. Loans delinquent 90 days or more that were included in the accompanying financial statements as accruing totaled $3.6 million versus $264,000 at December 31, 2001. Total impaired loans increased by $3.3 million to $13.3 million at September 30, 2002 from $10.0 million at December 31, 2001. The increases in the loans delinquent 90 days or more and accruing and impaired loans categories resulted primarily from one commercial credit totaling $3.3 million. The renewal of this loan has been complicated as more than one bank is involved, and therefore it is past maturity. While this loan is current as to principal and interest, there can be no assurance that it will remain current given the circumstances involved. The increase in nonperforming loans resulted from the addition of the aforementioned loan and one additional commercial loan of $1.7 million. The impaired loan total includes $3.9 million in nonaccrual loans. A loan is impaired when full payment under the original loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as residential mortgage, consumer, and credit card loans, and on an individual loan basis for other loans. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Total deposits increased by $84.4 million, or 10.6%, to $877.8 million at September 30, 2002 from $793.4 million at December 31, 2001. The increase resulted from increases of $97.2 million in certificates of deposit and $5.0 million in savings accounts. Offsetting these increases were declines of $6.8 million in demand deposits, $5.5 million in Investors' Weekly accounts, $4.0 million in money market accounts and $1.2 million in NOW accounts. 19 Total short-term borrowings decreased by $85.2 million, or 36.7%, to $146.9 million at June 30, 2002 from $232.1 million at December 31, 2001. The decrease resulted primarily from a $49.0 million decline in federal funds purchases combined with a $40.7 million decline in securities sold under agreements to repurchase. Offsetting these declines was a $5 million increase in other borrowings, primarily short-term advances from the Federal Home Loan Bank of Indianapolis. Total stockholders' equity increased by $8.6 million, or 11.6%, to $82.1 million at September 30, 2002 from $73.5 million at December 31, 2001. Net income of $8.8 million, less dividends of $2.9 million, plus the increase in the accumulated other comprehensive income of $2.8 million, less $154,000 for the cost of treasury stock acquired, comprised this increase. The Federal Deposit Insurance Corporation's (FDIC) risk based capital regulations require that all banking organizations maintain an 8.0% total risk based capital ratio. The FDIC has also established definitions of "well capitalized" as a 5.0% Tier I leverage capital ratio, a 6.0% Tier I risk based capital ratio and a 10.0% total risk based capital ratio. All of the Company's ratios continue to be above "well capitalized" levels. As of September 30, 2002, the Company's Tier 1 leverage capital ratio, Tier 1 risk based capital ratio and total risk based capital ratio were 8.1%, 10.5% and 11.5%, respectively. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest rate risk represents the Company's primary market risk exposure. The Company does not have a material exposure to foreign currency exchange risk, does not have any material amount of derivative financial instruments and does not maintain a trading portfolio. The board of directors annually reviews and approves the policy used to manage interest rate risk. The policy was last reviewed and approved in May 2002. The policy sets guidelines for balance sheet structure, which are designed to protect the Company from the impact that interest rate changes could have on net income, but does not necessarily indicate the effect on future net interest income. The Company, through its Asset/Liability Committee, manages interest rate risk by monitoring the computer simulated earnings impact of various rate scenarios and general market conditions. The Company then modifies its long-term risk parameters by attempting to generate the type of loans, investments, and deposits that currently fit the Company's needs, as determined by the Asset/Liability Committee. This computer simulation analysis measures the net interest income impact of various interest rate scenario changes during the next 12 months. If the change in net interest income is less than 3% of primary capital, the balance sheet structure is considered to be within acceptable risk levels. At September 30, 2002, the Company's potential pretax exposure was within the Company's policy limit, and not significantly different from December 31, 2001. 20 ITEM 4 - CONTROLS AND PROCEDURES Based upon an evaluation within the 90 days prior to the filing date of this report, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect the Company's internal controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. 21 FORWARD-LOOKING STATEMENTS This document (including information incorporated by reference) contains, and future oral and written statements of the Company and its management may contain, forward-looking statements, within the meaning of such term in the Private Securities Litigation Reform Act of 1995, with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the Company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors, which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, the following: o The strength of the United States economy in general and the strength of the local economies in which the Company conducts its operations which may be less favorable than expected and may result in, among other things, a deterioration in the credit quality and value of the Company's assets. o The economic impact of the terrorist attacks that occurred on September 11th, as well as any future threats and attacks, and the response of the United States to any such threats and attacks. o The effects of, and changes in, federal, state and local laws, regulations and policies affecting banking, securities, insurance and monetary and financial matters. o The effects of changes in interest rates (including the effects of changes in the rate of prepayments of the Company's assets) and the policies of the Board of Governors of the Federal Reserve System. o The ability of the Company to compete with other financial institutions as effectively as the Company currently intends due to increases in competitive pressures in the financial services sector. 22 o The inability of the Company to obtain new customers and to retain existing customers. o The timely development and acceptance of products and services, including products and services offered through alternative delivery channels such as the Internet. o Technological changes implemented by the Company and by other parties, including third party vendors, which may be more difficult or more expensive than anticipated or which may have unforeseen consequences to the Company and its customers. o The ability of the Company to develop and maintain secure and reliable electronic systems. o The ability of the Company to retain key executives and employees and the difficulty that the Company may experience in replacing key executives and employees in an effective manner. o Consumer spending and saving habits, which may change in a manner that affects the Company's business adversely. o Business combinations and the integration of acquired businesses, which may be more difficult or expensive than expected. o The costs, effects and outcomes of existing or future litigation. o Changes in accounting policies and practices, as may be adopted by state and federal regulatory agencies and the Financial Accounting Standards Board. o The ability of the Company to manage the risks associated with the foregoing as well as anticipated. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning the Company and its business, including other factors that could materially affect the Company's financial results, is included in the Company's filings with the Securities and Exchange Commission. 23 LAKELAND FINANCIAL CORPORATION FORM 10-Q September 30, 2002 Part II - Other Information Item 1. Legal proceedings There are no material pending legal proceedings to which the Company or its subsidiaries is a party other than ordinary routine litigation incidental to their respective businesses. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a. Exhibits 99.1 - Certificate of Chief Executive Officer 99.2 - Certificate of Chief Financial Officer b. Reports None 24 LAKELAND FINANCIAL CORPORATION FORM 10-Q September 30, 2002 Part II - Other Information Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LAKELAND FINANCIAL CORPORATION (Registrant) Date: November 12, 2002 /s/Michael L. Kubacki Michael L. Kubacki - President and Chief Executive Officer Date: November 12, 2002 /s/David M. Findlay David M. Findlay - Executive Vice President and Chief Financial Officer Date: November 12, 2002 /s/Teresa A. Bartman Teresa A. Bartman - Vice President and Controller 25 Certifications I, Michael L. Kubacki, Chief Executive Officer of the Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lakeland Financial Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal 26 controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/Michael L. Kubacki Michael L. Kubacki - Chief Executive Officer 27 Certifications I, David M. Findlay, Chief Financial Officer of the Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lakeland Financial Corporation; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and 28 b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/David M. Findlay David M. Findlay - Chief Financial Officer 29 EX-99 3 exhibit991.txt CEO CERTIFICATION Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Lakeland Financial Corporation (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report), I, Michael L. Kubacki, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/MichaelL. Kubacki Michael L. Kubacki Chief Executive Officer August 12, 2002 EX-99 4 exhibit992.txt CFO CERTIFICATION Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Lakeland Financial Corporation (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report), I, David M. Findlay, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/David M. Findlay David M. Findlay Chief Financial Officer November 12, 2002 -----END PRIVACY-ENHANCED MESSAGE-----