Lakeland Financial Corporation (NASDAQ: LKFN)

1. Lakeland Financial Corporation (NASDAQ: LKFN) Jingyuan Xia VigneshMurali OlamideEsan KuralaySeitalina Date Presented: April 29th 2010

2. Lakeland Financial Corporation • Holding company for Lake City Bank • Founded in 1872 in Warsaw, Indiana, $ 2.5 billion in assets(50% market share) • Third-oldest financial institution headquartered in Indiana. • Serves area business customers and individuals through 43branches • The bank offers • retail services as checking and savings accounts • money market accounts, and CDs.

3. Company Overview • Market Cap: $339.8M • Stock Price: $21.11 (as of April 29, 2010) • Expansion strategy: Organic Growth • Feb 09: Participated in TARP - $56.0 million • Nov 09: Raised $57.9 million in a public offering of common stock to strengthen capital position

4. Financial Highlights http://www.snl.com/

5. Financial Highlights

6. Loan Breakdown

7. Average Deposits

8. Deposit Breakdown As of December 31, 2009

9. Regulatory Requirements • Minimum regulatory capital requirements for bank holding companies established by Federal Reserves: • (i) a risk−based requirement expressed as a percentage of total assets weighted according to risk • (ii) a leverage requirement expressed as a percentage of total assets. • Risk−based requirement: minimum ratio of total capital to total risk−weighted assets of 8% and a minimum ratio of Tier 1 capital to total risk−weighted assets of 4%. • Leverage requirement: minimum ratio of Tier 1 capital to total assets of 3% for the most highly rated companies, with a minimum requirement of 4% for all others.

10. Capital Structure As of December 31, 2009

11. Capital Definitions • Tier 1 capital: permanent stockholders equity less intangible assets (other than certain loan servicing rights and purchased credit card relationships). • Tier 2 Capital: other non-permanent capital items that do not qualify for Tier 1 Capital and a portion of the allowance for loan and lease losses. • Total capital = Tier 1 capital plus Tier 2 capital

12. Capital Requirements

13. Industry and Macroeconomic Analysis

14. Industry: Commercial Banking • NAICS code: 522110 • Industry comprises of firms primarily engaged in accepting deposits and making commercial, industrial and consumer loans • According to the FDIC, there are 7928 lending institutions • Primary players : Bank of America, JP Morgan Chase and Citigroup • Regional banks are smaller than money centers and are bigger than community banks. They usually carry between $100 million to $2 billion in assets .

15. Industry Trends • 8012 FDIC insured Institutions in the United States • In 2009, 140 regional banks closed down. This number is projected to peak in second quarter 2010 and then slow down • Those who are surviving, are beginning to recover and looking to expand • Significant M&A Activity: Bigger banks looking to expand by buying smaller banks to enhance market reach • Brick & Mortar banking branches becoming less popular as online banking services provide a cheaper alternative • Small business lending has gone up past quarters, mortgage and home equity loans projected to pick up in 2011 Blair, Sheila. Banks still struggling with Problem loans... National Mortgage News. March 10th 2010

16. Macroeconomic Factors • A continued downturn in Northern Indiana has resulted in home prices being driven low, industries closing and high unemployment. Some of these factors have shown slight improvement but needs more. • Commercial banks such as Lake City depend on high business activity in the vicinity, home buying and consumer spending to thrive. • Regional banks also depend on success of small business entrepreneurship. Small business lending is an integral part of their portfolio • Inflation: Banks are hurt by increasing inflation as unexpected changes in anticipated inflation

17. SWOT

18. LKFN vs. Industry Leaders

19. Key Ratios

20. ROE Break Down

21. Competitors • 1st Source Corporation (NASDAQ:SRCE) • Commercial and Consumer banking, Trust and Investment Management, Insurance . • 76 banking centers in 17 counties in Indiana and Michigan. • 2009 Revenue=$285.8M • First Financial Corporation(NASDAQ:THFF) • First Financial Bank, Morris Plan and Forrest Sherer Inc. • Commercial, Mortgage and Consumer Lending, Lease financing, insurance. • 54 branches in West-Central Indiana and East-Central Illinois. • 2009 Revenue=$154.8M

22. Competitors • German American Bancorp, Inc. (NASDAQ: GABC) • Commercial and Consumer banking, Financial Planning, Brokerage and Trust Administration, Insurance Services. • 28 retail banking offices in Southern Indiana counties. • 2009 Revenue=$79.6M • MainSource Financial Group, Inc. (NASDAQ:MSFG) • Deposits, Mortgage loans, Insurance Services, trust services and others. • 85 branch banking offices in Indiana, Illinois, Ohio, and Kentucky, 12 insurance offices in Indiana and 1 in Illinois. • 2009 Revenue=$183.8M

23. Valuation Methods • Multiple Valuation • Equity Cash Flow Method • Forecast Free Cash Flows to Equity • Discount at Cost of Equity • Spread or Income Model • Spread model: Forecast difference between the rate paid on borrowings and the rate received on loans and investments. • Income model: Forecast the balance sheet accounts and use as drivers for income statement forecast

24. Multiple Valuation

25. Income Model Valuation: Measuring and Managing the Value of Companies - Mckinsey & Company

26. Spread Model Valuation: Measuring and Managing the Value of Companies - Mckinsey & Company

27. Equity Cash Flow Method

28. Cost of Equity • Market ROE 16% • CAPM discount rate 10.1% • Weight 60% of CAPM discount rate • Weight 40% of Market ROE • Discount Rate used 12%