EX-99.1 3 tm2023222d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

LAKELAND FINANCIAL CORPORATION

401(K) PLAN

FINANCIAL STATEMENTS

December 31, 2019 and 2018

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

Warsaw, Indiana

FINANCIAL STATEMENTS

December 31, 2019 and 2018

	CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		1

FINANCIAL STATEMENTS

	STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS	3

	STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS	4

	NOTES TO FINANCIAL STATEMENTS	5

SUPPLEMENTAL SCHEDULE

	SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)	10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Administrative Oversight Committee, Plan Administrators

and Plan Participants

Lakeland Financial Corporation

401(k) Plan

Warsaw, Indiana

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for benefits of Lakeland Financial Corporation 401(k) Plan (the "Plan") as of December 31, 2019 and 2018, the related statement of changes in net assets available for benefits for the year ended December 31, 2019, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2019 and 2018, and the changes in net assets available for benefits for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on the Plan's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

(Continued)

Supplemental Information

The supplemental Schedule H, Line 4i – Schedule of Assets (Held at End of Year) as of December 31, 2019, has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental schedule is the responsibility of the Plan’s management. Our audit procedures included determining whether the information presented in the supplemental schedule reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the supplemental schedule, we evaluated whether the supplemental schedule, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental schedule is fairly stated in all material respects in relation to the financial statements as a whole.

/s/ Crowe LLP

We have served as the Plan's auditor since 1983.

South Bend, Indiana

June 26, 2020

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

December 31, 2019 and 2018

	2019		2018
Assets

Investments, at fair value	$	97,652,467	$	77,492,558

Receivables
Employer contributions		1,006,593		998,564
Participant contributions		103,834		95,255
Other receivables		0		66,504
		1,110,427		1,160,323

Net assets available for benefits	$	98,762,894	$	78,652,881

See accompanying notes to financial statements.

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

Year ended December 31, 2019

Additions to net assets attributed to:
Investment income
Interest and dividends income	$	3,559,136
Net appreciation in fair value of investments		15,308,805
Total investment income		18,867,941

Contributions
Employer		1,850,906
Participants		2,712,124
Rollover		1,210,435
Total contributions		5,773,465

Total additions		24,641,406

Deductions from net assets attributed to:
Benefits paid directly to participants		4,528,794
Administrative expenses		2,599
Total deductions		4,531,393

Net increase		20,110,013

Net assets available for benefits
Beginning of year		78,652,881

End of year	$	98,762,894

See accompanying notes to financial statements.

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

December 31, 2019 and 2018

NOTE 1 - DESCRIPTION OF PLAN

The following description of the Lakeland Financial Corporation 401(k) Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.

General: The Plan is a defined contribution 401(k) profit sharing plan covering substantially all employees of Lakeland Financial Corporation (“LFC”) and its subsidiary, Lake City Bank (collectively, “employer”). An employee becomes eligible to enter the Plan on January 1, April 1, July 1, and October 1 following attainment of age 18 and completion of one month of service.

The Plan was originally adopted December 13, 1983 and has been amended. Participants should refer to the amended and restated Plan agreement for a more complete description of the Plan’s provisions. The Plan provides for retirement, death, disability and termination benefits, and it is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

Investment Funds: The Plan consists of 29 funds, or investment options, one of which is invested in LFC common stock. Fourteen of the funds are “Fidelity Freedom” funds that are targeted retirement funds consisting of blends of equities and fixed income securities. The “Artisan Mid Cap Fund”, “Victory Sycamore Established Value Fund”, “MFS Value R3 Fund”, “Fidelity Contrafund”, “T. Rowe Price QM Small Cap Fund”, “MFS New Discovery Value Fund” and “Fidelity Spartan 500 Index Advantage Fund” are invested primarily in common and preferred stock. The “Fidelity Spartan US Bond Index Fund” and “Baird Short-Term Bond Fund” are invested primarily in fixed income securities. The “Fidelity Retirement Money Market Fund” is invested primarily in short-term fixed income investments having maturities of one year or less, and the “Fidelity Diversified International Fund”, “Templeton Global Bond A Fund” and “Fidelity Spartan Emerging Markets Index Advantage Fund” are invested primarily in foreign common stocks. The “PIMCO All Asset Fund” is invested primarily in mutual funds. A participant’s salary redirection is invested in any of the funds offered at the participant’s discretion. Employer matching contributions are invested in the same funds as the participant’s salary redirection, and in the same proportions.

Participant Accounts: Each participant’s account is credited with the participant’s contribution and allocation of (a) the employer’s contributions, (b) Plan earnings and (c) forfeitures of non-vested balances of account of participants who have left the Plan and charged with his or her withdrawals. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant, or beneficiary, is entitled is the benefit that can be provided from the participant’s vested account.

Contributions: The Plan provides that participants may make voluntary pre-tax or Roth contributions to the Plan in amounts up to 80% of eligible compensation or to the maximum amount allowable under the Internal Revenue Code ($19,000 in 2019). Catch up contributions are permitted for those eligible employees over the age of 50 years and are limited to $6,000 in 2019. Each year the employer may set a matching percentage of a participant’s compensation, as well as make discretionary contributions. For 2019, the matching percentage was set at 99% of the first 6% of compensation an employee contributes to the Plan as a voluntary contribution. In addition, no discretionary contributions were made. All contributions were cash contributions.

Death, Disability or Retirement Benefits: Under the Plan, participants, or their beneficiaries, are entitled to 100% of their account balance upon death, disability, or retirement.

Vesting: Participants are 100% vested in salary deferral contributions. Employer contributions vest according to a five-year graded schedule.

(Continued)

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

December 31, 2019 and 2018

NOTE 1 - DESCRIPTION OF PLAN (Continued)

Forfeitures: Upon termination of employment, participants with less than five years of credited service will forfeit their non-vested balances. Forfeitures of non-vested terminated participants’ accounts are used to pay Plan expenses and/or offset employer contributions. Unallocated forfeitures amounted to $76,366 and $59,976 as of December 31, 2019 and 2018, respectively. Forfeitures of $82,520 were used to pay Plan expenses and to offset employer contributions for 2019.

Payments of Benefits: On termination of service, a participant may elect to receive either a lump sum or direct rollover amount equal to the value of his or her vested interest in the account. The Plan also permits in-serve withdrawals for participants upon attainment of age 59 ½ years or for participants with a hardship, subject to certain criteria and a $500 minimum amount. For distributions of LFC stock, distributions are made in stock or cash at the participant’s option, with the exception of fractional shares which are paid out in cash. Distributions out of the other funds are made in cash.

Administrative and Investment Management Expenses: Substantially all administrative expenses are paid by the employer. Investment management fees are charged to the Plan as a reduction of investment return and included in the investment income reported by the Plan.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The policies and principles, which significantly affect the determination of net assets and changes in net assets, are summarized below.

Basis of Accounting: The accounting practices and principles followed by the Plan and the methods of applying those principles conform to U.S. generally accepted accounting principles. The financial statements of the Plan are prepared under the accrual basis of accounting.

Investment Valuation and Income Recognition: The Plan’s investments are reported at fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Fair value is the price that would be received by the Plan for an asset or paid by the Plan to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date in the Plan’s principal or most advantageous market for the asset or liability. Fair value measurements are determined by maximizing the use of observable inputs and minimizing the use of unobservable inputs. The hierarchy places the highest priority on unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1 measurements) and gives the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs within the fair value hierarchy are defined as follows:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Plan has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect the Plan’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In some cases, a valuation technique used to measure fair value may include inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.

(Continued)

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

December 31, 2019 and 2018

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The fair values of LFC common stock and mutual fund investments are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs). There were no transfers from or into Level 1, Level 2, or Level 3 during 2019. Investments measured at fair value on a recurring basis are summarized below:

Fair Value Measurements

at December 31, 2019 Using

Quoted Prices in

Significant

Active Markets

Other

Significant

for Identical

Observable

Unobservable

Assets

Inputs

(Level 1)

(Level 2)

(Level 3)

Lakeland Financial Corp Common Stock

43,686,424

Mutual Funds

53,966,043

Fair Value Measurements

at December 31, 2018 Using

Quoted Prices in

Significant

Active Markets

Other

Significant

for Identical

Observable

Unobservable

Assets

Inputs

(Level 1)

(Level 2)

(Level 3)

Lakeland Financial Corp Common Stock

37,530,956

Mutual Funds

39,961,602

Net Appreciation (Depreciation) in Fair Value of Investments: in accordance with the policy of stating investments at fair value, net unrealized appreciation (depreciation) for the year along with gains and losses on sales of investments are reflected in the statement of changes in net assets available for benefits as net appreciation (depreciation) in fair value of investments. Unrealized appreciation (depreciation) for investments held as of the end of the current fiscal year is the difference between the current value of those investments and the value of those investments as of the end of the prior fiscal year or the purchase date for investments purchased during the year.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the plan administrator to make estimates and assumptions that affect certain reported amounts and disclosures, and actual results may differ from these estimates.

Payment of Benefits: Benefits are recorded when paid.

(Continued)

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

December 31, 2019 and 2018

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentration of Credit Risk: At December 31, 2019 and 2018, 45% and 48% of the Plan’s investments were in LFC common stock, respectively.

Risks and Uncertainties: The Plan provides for various investment options including any combination of certain mutual funds and stocks. The investments are exposed to various risks, such as interest rate, market, liquidity and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the value of investments, it is at least reasonably possible that changes in the values of investments will occur in the near term and that such changes could materially affect the amounts reported in the statements of net assets available for benefits, and future statements of changes in net assets available for benefits and participants’ account balances.

NOTE 3 – PLAN TERMINATION

Although it has not expressed any intent to do so, LFC has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA and its related regulations. In the event of termination, participants will become 100% vested in their accounts.

NOTE 4 - PARTIES-IN-INTEREST TRANSACTIONS

Parties-in-interest are defined under Department of Labor Regulations as any fiduciary of the Plan, any party rendering service to the Plan, the employer, and certain others. At December 31, 2019 and 2018, certain investments of the Plan are shares of mutual funds offered by Fidelity Investments. Fidelity Management Trust Company is the Plan trustee and, therefore, these transactions qualify as party-in-interest transactions.

Fees paid by the Plan to Fidelity for accounting services amounted to $2,599 for the year ended December 31, 2019. The Plan also invests in shares of common stock issued by Lakeland Financial Corporation, which qualifies as a party-in-interest investment.

During 2019, the Plan purchased 59,641 shares of Lakeland Financial Corporation common stock at a cost ranging from $42.02 to $49.93 per share. In 2019, the Plan sold 65,695 shares of Lakeland Financial Corporation common stock at a sales price ranging from $42.35 to $49.00 per share and distributed 35,647 shares of common stock to employees due to termination or retirement. Lakeland Financial Corporation paid cash dividends of $1,073,650 to the Plan for 2019.

At December 31, 2019 and 2018, the Plan held the following related party investments (at estimated fair value):

2019:
Lakeland Financial Corporation common stock – 892,835 shares	$	43,686,424

2018:
Lakeland Financial Corporation common stock – 934,536 shares	$	37,530,956

(Continued)

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

NOTES TO FINANCIAL STATEMENTS

December 31, 2019 and 2018

NOTE 5 - TAX STATUS

The Plan was established using a prototype plan document sponsored by Fidelity Management & Research Company. The Internal Revenue Service issued an opinion letter dated March 31, 2014, indicating that the prototype adopted by the Plan, as then designed, was in accordance with applicable sections of the Internal Revenue Code (“IRC”). Although the Plan has been amended, plan management believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC.

Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2019 and 2018, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2016.

NOTE 6 – COVID-19 AND CURRENT ECONOMIC CONDITIONS

On March 11, 2020, the World Health Organization announced that the COVID-19 outbreak was deemed a pandemic, and on March 13, 2020, the President declared the ongoing COVID-19 pandemic of sufficient magnitude to warrant an emergency declaration. The extent of COVID-19’s effect on the Plan’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and when state and local economies will return to operational norms, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. As a result, it is not currently possible to ascertain the overall impact of COVID-19 on the Plan.

SUPPLEMENTAL SCHEDULE

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)

December 31, 2019

Name of Plan Sponsor

Lakeland Financial Corporation

Employer Identification Number:

35-1559596

Three Digit Plan Number:

004

		(c)
		Description of Investment
	(b)	Including Maturity Date,		(e)
	Identity of Issue, Borrower,	Rate of Interest, Collateral,	(d)	Current
(a)	Lessor, or Similar Party	Par or Maturity Value	Cost	Value

		Mutual Funds
*	Fidelity Investments	Fidelity Retirement Money Market Fund 3,396,526 shares	#	$	3,396,526

	Victory Sycamore	Victory Sycamore Estb Value Fund 48,975 shares	#		1,962,445

	Artisan Partners	Artisan Mid Cap Fund 64,561 shares	#		2,268,678

	Templeton Fund	Templeton Global Bond A Fund 23,554 shares	#		251,318

	T. Rowe Price	T. Rowe Price QM Small-Cap Fund 42,352 shares	#		1,672,070

	Pacific Investment Management	PIMCO All Asset Fund 20,417 shares	#		242,558

	Massachusetts Financial Services	MFS Value R3 Fund 30,474 shares	#		1,348,483

	Massachusetts Financial Services	MFS New Discovery Value Fund 100,148 shares	#		1,671,477

	Baird Services	Baird Short-Term Bond Fund 106,285 shares	#		1,038,400

*	Fidelity Investments	Fidelity Contrafund 470,212 shares	#		6,446,604

*	Fidelity Investments	Fidelity Diversified International Fund 43,501 shares	#		1,761,797

*	Fidelity Investments	Fidelity Spartan 500 Index Advantage Fund 50,765 shares	#		5,686,743

*	Fidelity Investments	Fidelity Spartan US Bond Index Fund 262,952 shares	#		3,131,757

*	Fidelity Investments	Fidelity Spartan Emerging Markets Fund 63,881 shares	#		701,412

(Continued)

10.

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)

December 31, 2019

Name of Plan Sponsor

Lakeland Financial Corporation

Employer Identification Number:

35-1559596

Three Digit Plan Number:

004

		(c)
		Description of Investment
	(b)	Including Maturity Date,		(e)
	Identity of Issue, Borrower,	Rate of Interest, Collateral,	(d)	Current
(a)	Lessor, or Similar Party	Par or Maturity Value	Cost	Value

*	Fidelity Investments	Fidelity Freedom Income Fund K 55,344 shares	#	647,530

*	Fidelity Investments	Fidelity Freedom 2005 K 733 shares	#	9,114

*	Fidelity Investments	Fidelity Freedom 2010 K 5,306 shares	#	82,719

*	Fidelity Investments	Fidelity Freedom 2015 K 34,295 shares	#	441,036

*	Fidelity Investments	Fidelity Freedom 2020 K 175,159 shares	#	2,837,576

*	Fidelity Investments	Fidelity Freedom 2025 K 286,649 shares	#	4,099,076

*	Fidelity Investments	Fidelity Freedom 2030 K 205,200 shares	#	3,652,567

*	Fidelity Investments	Fidelity Freedom 2035 K 197,503 shares	#	2,976,371

*	Fidelity Investments	Fidelity Freedom 2040 K 279,077 shares	#	2,952,635

*	Fidelity Investments	Fidelity Freedom 2045 K 119,415 shares	#	1,435,363

*	Fidelity Investments	Fidelity Freedom 2050 K 117,847 shares	#	1,425,951

*	Fidelity Investments	Fidelity Freedom 2055 K 93,639 shares	#	1,293,151

*	Fidelity Investments	Fidelity Freedom 2060 K 41,986 shares	#	521,887

*	Fidelity Investments	Fidelity Freedom 2065 K 784 shares	#	8,431

(Continued)

11.

LAKELAND FINANCIAL CORPORATION 401(K) PLAN

SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)

December 31, 2019

Name of Plan Sponsor

Lakeland Financial Corporation

Employer Identification Number:

35-1559596

Three Digit Plan Number:

004

		(c)
		Description of Investment
	(b)	Including Maturity Date,		(e)
	Identity of Issue, Borrower,	Rate of Interest, Collateral,	(d)	Current
(a)	Lessor, or Similar Party	Par or Maturity Value	Cost	Value

*	Fidelity Investments	Fidelity Cash Reserves Fund 2,368 shares	#		2,368

					53,966,043
Common Stock
*	Lakeland Financial Corporation	Common Stock 892,835 shares	#		43,686,424

				$	97,652,467

* Denotes party-in-interest

# Investments are participant directed, therefore, historical cost information is not required

12.