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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, 2003 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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, 2003 Common Stock, No Par Value 5,780,473

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 . . . . . . 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk 25 Item 4. Controls and Procedures . . . . . . . . . . . . . . . . . 25 PART II. Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 28 Item 2. Changes in Securities and Use of Proceeds . . . . . . . . 28 Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . 28 Item 4. Submission of Matters to a Vote of Security Holders . . . 28 Item 5. Other Information . . . . . . . . . . . . . . . . . . . . 28 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 28 Form 10-Q Signature Page. . . . . . . . . . . . . . . . . . . . . . 30

Part 1 LAKELAND FINANCIAL CORPORATION ITEM 1 - FINANCIAL STATEMENTS LAKELAND FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS As of September 30, 2003 and December 31, 2002 (in thousands) (Page 1 of 2) September 30, December 31, 2003 2002 ------------ ------------ (Unaudited) ASSETS Cash and cash equivalents: Cash and due from banks $ 52,373 $ 74,149 Short-term investments 7,233 13,000 ------------ ------------ Total cash and cash equivalents 59,606 87,149 Securities available-for-sale: U. S. Treasury and government agency securities 13,962 17,284 Mortgage-backed securities 209,683 222,036 State and municipal securities 52,520 34,785 ------------ ------------ Total securities available-for-sale (carried at fair value) 276,165 274,105 Real estate mortgages held-for-sale 9,742 10,395 Loans: Total loans 847,714 822,676 Less: Allowance for loan losses 10,064 9,533 ------------ ------------ Net loans 837,650 813,143 Land, premises and equipment, net 26,444 24,768 Accrued income receivable 4,945 4,999 Goodwill 4,970 4,970 Other intangible assets 930 1,042 Other assets 27,710 27,215 ------------ ------------ Total assets $ 1,248,162 $ 1,247,786 ============ ============ (Continued) 1

LAKELAND FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS As of September 30, 2003 and December 31, 2002 (in thousands except for share and per share data) (Page 2 of 2) September 30, December 31, 2003 2002 ------------ ------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing deposits $ 193,258 $ 192,787 Interest bearing deposits 808,779 720,538 ------------ ------------ Total deposits 1,002,037 913,325 Short-term borrowings: Federal funds purchased 7,000 30,000 Securities sold under agreements to repurchase 78,765 124,968 U.S. Treasury demand notes 3,289 4,000 Other borrowings 10,000 26,000 ------------ ------------ Total short-term borrowings 99,054 184,968 Accrued expenses payable 7,575 12,503 Other liabilities 1,285 2,417 Long-term borrowings 30,047 31,348 Guaranteed preferred beneficial interests in Company's subordinated debentures 19,365 19,345 ------------ ------------ Total liabilities 1,159,363 1,163,906 STOCKHOLDERS' EQUITY Common stock: No par value, 90,000,000 shares authorized, 5,822,429 shares issued and 5,776,202 outstanding as of September 30, 2003, and 5,813,984 shares issued and 5,767,010 outstanding at December 31, 2002 1,453 1,453 Additional paid-in capital 9,924 8,537 Retained earnings 78,358 70,819 Accumulated other comprehensive income (26) 3,937 Treasury stock, at cost (910) (866) ------------ ------------ Total stockholders' equity 88,799 83,880 ------------ ------------ Total liabilities and stockholders' equity $ 1,248,162 $ 1,247,786 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 2

LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME For the Three Months and Nine Months Ended September 30, 2003 and 2002 (in thousands except for share and per share data) (Unaudited) (Page 1 of 2) Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2003 2002 2003 2002 ------------ ------------ ------------ ------------ INTEREST AND DIVIDEND INCOME - ---------------------------- Interest and fees on loans: Taxable $ 11,543 $ 12,309 $ 35,453 $ 36,960 Tax exempt 74 58 203 125 ------------ ------------ ------------ ------------ Total loan income 11,617 12,367 35,656 37,085 Short-term investments 48 73 133 165 Securities: U.S. Treasury and government agency securities 145 340 460 1,077 Mortgage-backed securities 2,473 3,028 8,099 8,825 State and municipal securities 550 402 1,475 1,202 Other debt securities 0 6 0 208 ------------ ------------ ------------ ------------ Total interest and dividend income 14,833 16,216 45,823 48,562 INTEREST EXPENSE - ---------------- Interest on deposits 3,421 4,277 10,909 12,855 Interest on short-term borrowings 244 536 897 2,091 Interest on long-term debt 756 778 2,296 2,105 ------------ ------------ ------------ ------------ Total interest expense 4,421 5,591 14,102 17,051 ------------ ------------ ------------ ------------ NET INTEREST INCOME 10,412 10,625 31,721 31,511 - ------------------- Provision for loan losses 380 1,041 1,764 2,290 ------------ ------------ ------------ ------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,032 9,584 29,957 29,221 - ------------------------- ------------ ------------ ------------ ------------ NONINTEREST INCOME - ------------------ Trust and brokerage fees 627 590 1,802 1,889 Service charges on deposit accounts 1,736 1,785 5,136 4,922 Other income (net) 1,729 728 4,179 2,470 Net gains on the sale of real estate mortgages held-for-sale 383 493 2,655 1,204 Net securities gains/(losses) (8) 39 (8) 55 ------------ ------------ ------------ ------------ Total noninterest income 4,467 3,635 13,764 10,540 NONINTEREST EXPENSE - ------------------- Salaries and employee benefits 5,076 4,803 14,789 13,937 Occupancy and equipment expense 1,192 1,171 3,772 3,352 Other expense 2,821 2,619 8,753 8,672 ------------ ------------ ------------ ------------ Total noninterest expense 9,089 8,593 27,314 25,961 (Continued) 3

LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2003 and 2002 (in thousands) (Unaudited) (Page 1 of 2) 2003 2002 ------------ ------------ Cash flows from operating activities: Net income $ 10,855 $ 9,034 ------------ ------------ Adjustments to reconcile net income to net cash from operating activities: Depreciation 1,675 1,755 Provision for loan losses 1,764 2,290 Amortization of intangible assets 132 132 Amortization of mortgage servicing rights 541 296 Impairment of mortgage servicing rights (107) 461 Loans originated for sale (128,014) (56,724) Net gain on sale of loans (2,655) (1,204) Proceeds from sale of loans 130,401 64,894 Net loss on sale of premises and equipment 1 24 Net (gain) loss on sale of securities available-for-sale 8 (55) Net securities amortization 1,065 1,271 (Decrease) in taxes payable (353) (623) Decrease in income receivable 55 378 Increase (decrease) in accrued expenses payable (151) 925 (Increase) in life insurance cash surrender value (518) 0 (Increase) decrease in other assets (364) 2,225 Increase (decrease) in other liabilities (79) 531 ------------ ------------ Total adjustments 3,401 16,576 ------------ ------------ Net cash from operating activities 14,256 25,610 ------------ ------------ Cash flows from investing activities: Proceeds from maturities, sales and calls of securities available-for-sale 110,508 59,321 Purchases of securities available-for-sale (119,743) (62,519) Net increase in total loans (27,801) (55,483) Proceeds from sales of land, premises and equipment 0 11 Purchase of land, premises and equipment (3,351) (1,942) ------------ ------------ Net cash from investing activities (40,387) (60,612) ------------ ------------ (Continued) 5

LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2003 and 2002 (in thousands) (Unaudited) (Page 2 of 2) 2003 2002 ------------ ------------ Cash flows from financing activities: Net increase in total deposits $ 88,712 $ 84,434 Proceeds from short-term borrowings 18,778,359 21,709,394 Payments on short-term borrowings (18,864,273) (21,794,574) Proceeds from long-term borrowings 0 20,000 Payments on long-term borrowings (1,301) (34) Dividends paid (3,199) (2,945) Proceeds from the sale of common stock 333 0 (Purchase) of treasury stock (43) (153) ------------ ------------ Net cash from financing activities (1,412) 16,122 ------------ ------------ Net decrease in cash and cash equivalents (27,543) (18,880) Cash and cash equivalents at beginning of the period 87,149 79,123 ------------ ------------ Cash and cash equivalents at end of the period $ 59,606 $ 60,243 ============ ============ Cash paid during the period for: Interest $ 14,668 $ 17,275 ============ ============ Income taxes $ 5,881 $ 5,569 ============ ============ Loans transferred to other real estate $ 1,530 $ 0 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 6

LAKELAND FINANCIAL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2003 (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"), Lakeland Capital Trust and Lakeland Statutory Trust II. 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, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. The 2002 Lakeland Financial Corporation Annual Report on Form 10-K should be read in conjunction with these statements. NOTE 2. 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. Employee compensation expense under stock options is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income, as all options granted had an exercise price equal to or greater than the market price of the underlying common stock at date of grant. No additional options were granted in the first nine months of 2003. Had compensation cost for stock options been recorded in the financial statements, net income and earnings per share would have been the pro forma amounts indicated below. The pro forma effect may increase in the future if more options are granted. 7

Nine Months ended September 30, 2003 2002 --------- ---------- Net income (in thousands) as reported $ 10,855 $ 9,034 Deduct: stock-based compensation expense determined under fair value based method 403 500 --------- ---------- Pro forma net income $ 10,452 $ 8,534 ========= ========== Basic earnings per common share as reported $ 1.87 $ 1.55 Pro forma basic earnings per share $ 1.80 $ 1.46 Diluted earnings per common share as reported $ 1.81 $ 1.52 Pro forma diluted earnings per share $ 1.75 $ 1.43 Three Months ended September 30, 2003 2002 --------- ---------- Net income (in thousands) as reported $ 3,591 $ 3,021 Deduct: stock-based compensation expense determined under fair value based method 134 149 --------- ---------- Pro forma net income $ 3,457 $ 2,872 ========= ========== Basic earnings per common share as reported $ 0.62 $ 0.52 Pro forma basic earnings per share $ 0.59 $ 0.49 Diluted earnings per common share as reported $ 0.60 $ 0.50 Pro forma diluted earnings per share $ 0.57 $ 0.48 The common shares outstanding for the stockholders' equity section of the consolidated balance sheet at September 30, 2003 reflects the acquisition of 46,227 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. 8

NOTE 3. LOANS September 30, December 31, 2003 2002 ------------ ------------ (in thousands) Commercial and industrial loans $ 580,501 $ 556,800 Agri-business and agricultural loans 74,217 68,137 Real estate mortgage loans 39,326 44,644 Real estate construction loans 2,820 2,540 Installment loans and credit cards 150,850 150,555 ------------ ------------ Total loans $ 847,714 $ 822,676 ============ ============ Impaired loans $ 3,828 $ 7,298 Non-performing loans $ 4,517 $ 7,603 NOTE 4. SUBSEQUENT EVENTS On October 1, 2003 the Company completed the issuance of $30.0 million (net proceeds of $29.5 million after underwriting fees of $525,000) of floating rate trust preferred securities through Lakeland Statutory Trust II, a subsidiary of the Company. The securities bear a variable interest rate of three-month LIBOR plus 3.05%, have a term of 30 years and were privately issued as part of a pooled trust preferred offering. Proceeds from the issuance were used to redeem the Company's existing $20.0 million, 9.00% fixed rate trust preferred securities that were issued through Lakeland Capital Trust and for general corporate purposes. The redemption of the Company's existing trust preferred securities resulted in a loss on extinguishment of $804,000. 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. 9

Part 1 LAKELAND FINANCIAL CORPORATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION and RESULTS OF OPERATION September 30, 2003 OVERVIEW Lakeland Financial Corporation is the holding company for Lake City Bank. The Company is headquartered in Warsaw, Indiana and operates 42 offices in 12 counties in northern Indiana. The Company earned $10.9 million for the first nine months of 2003 versus $9.0 million in the same period of 2002, an increase of 20.2%. The increase was driven by a $3.2 million increase in non-interest income, a $526,000 decrease in the provision for loan losses and a $210,000 increase in net interest income. Offsetting these positive impacts was a $1.4 million increase in non-interest expense. Basic earnings per share for the first nine months of 2003 were $1.87 per share versus $1.55 per share for the first nine months of 2002. 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 2003 were $1.81 per share, versus $1.52 per share for the first nine months of 2002. Net income for the third quarter of 2003 was $3.6 million, an increase of 18.9% versus $3.0 million for the comparable period of 2002. Basic earnings per share for the third quarter of 2003 were $0.62 per share, versus $0.52 per share for the third quarter of 2002. Diluted earnings per share for the third quarter of 2003 were $0.60 per share, versus $0.50 per share for the third quarter of 2002. RESULTS OF OPERATIONS Net Interest Income For the nine-month period ended September 30, 2003, net interest income totaled $31.7 million, an increase of 0.7%, or $210,000 versus the first nine months of 2002. For the three-month period ended September 30, 2003, net interest income totaled $10.4 million, a decrease of 2.0%, or $213,000, over the same period of 2002. Net interest income increased in the nine-month period of 2003 versus the comparable period of 2002, primarily due to an $84.1 million increase in average interest bearing assets combined with a $22.8 million increase in average non-interest bearing demand deposits. The net interest margin declined by 27 basis points to 3.84% in the nine-month period ended September 30, 2003 versus the comparable period of 2002. Net interest income decreased in the three-month period ended September 30, 2003 versus the 10

comparable period of 2002 primarily due to a 32 basis point decline in the Company's net interest margin from 4.04% to 3.72%. For the three-month period ended September 30, 2003, average earning assets increased by $78.2 million, and average non-interest bearing demand deposits increased by $26.1 million, versus the same period in 2002. During the first nine months of 2003, total interest and dividend income decreased by $2.7 million, or 5.6% to $45.8 million, versus $48.6 million during the same nine months of 2002. During the third quarter of 2003, interest and dividend income decreased $1.4 million, or 8.5%, to $14.8 million, versus $16.2 million during the same quarter of 2002. Daily average earning assets for the first nine months of 2003 increased 8.0% to $1.131 billion versus the same period in 2002. For the third quarter, daily average earning assets increased 7.4% to $1.142 billion versus the same period of 2002. The tax equivalent yield on average earning assets decreased by 77 basis points to 5.5% for the nine-month period ended September 30, 2003 versus the same period of 2002. For the three-month period ended September 30, 2003, the yield decreased 87 basis points to 5.3% from the yield for the three-month period ended September 30, 2002. The average daily loan balances for the first nine months of 2003 increased 11.1% to $843.3 million, over the average daily loan balances of $759.4 million for the same period of 2002. During the same period, loan interest income declined by $1.4 million, or 3.9%, to $25.7 million. The decrease was the result of an 87 basis point decrease in the tax equivalent yield on loans to 5.6% from 6.5% in the first nine months of 2002. The average daily loan balances for the third quarter of 2003 increased $81.9 million, or 10.6%, to $853.4 million, versus $771.5 million for the same period of 2002. During the same period, loan interest income declined by $750,000, or 6.1%, to $11.6 million versus $12.4 million during the third quarter of 2002. The decrease was the result of a 95 basis point decrease in the tax equivalent yield on loans, to 5.4%, versus 6.3% in the third quarter of 2002. The average daily securities balances for the first nine months of 2003 decreased $3.2 million, or 1.2%, to $270.9 million, versus $274.1 million for the same period of 2002. During the same periods, income from securities declined by $1.3 million, or 11.3%, to $10.0 million versus $11.3 million during the first nine months of 2002. The decrease was primarily the result of a 48 basis point decline in the tax equivalent yields on securities, to 5.3% versus 5.8% in the first nine months of 2002. The average daily securities balances for the third quarter of 2003 decreased $6.9 million, or 2.5%, to $267.8 million, versus $274.6 million for the same period of 2002. During the same periods, income from securities declined by $608,000, or 16.1%, to $3.2 million versus $3.8 million during the third quarter of 2002. The decrease was primarily the result of a 63 basis point decrease in the tax equivalent yield on securities, to 5.1%, versus 5.7% in the third quarter of 2002. 11

Total interest expense decreased $2.9 million, or 17.3%, to $14.1 million for the nine-month period ended September 30, 2003, from $17.1 million for the comparable period in 2002. The decrease was primarily the result of a 53 basis point decrease in the Company's daily cost of funds to 1.66%, versus 2.19% for the same period of 2002. Total interest expense decreased $1.2 million, or 20.9%, to $4.4 million for the three-month period ended September 30, 2003, from $5.6 million for the comparable period of 2002. The decrease was primarily the result of a 58 basis point decrease in the Company's daily cost of funds to 1.53%, versus 2.11% for the same period of 2002. On an average daily basis, total deposits (including demand deposits) increased $115.8 million, or 13.7%, to $961.8 million for the nine-month period ended September 30, 2003, versus $846.0 million in the same period in 2002. The average daily deposit balances for the third quarter of 2003 increased $114.2 million, or 13.2%, to $982.6 million versus $868.4 million during the third quarter of 2002. On an average daily basis, noninterest bearing demand deposits increased $22.8 million, or 15.6% and $26.1 million, or 17.1% for the nine and three-month periods ended September 30, 2003, versus the same periods in 2002. When comparing the nine months ended September 30, 2003 with the same period of 2002, the average daily balance of time deposits, which pay a higher rate of interest compared to demand deposit and transaction accounts, increased $32.5 million and the rate paid on such accounts declined by 66 basis points versus the same period in 2002. In the third quarter of 2003, the average daily balance of time deposits decreased by $1.5 million and the rate paid on such accounts declined by 63 basis points versus the same period in 2002. During the remainder of 2003, management plans to continue efforts to grow relationship type accounts such as demand deposit and Investors' Weekly accounts, which traditionally 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 $21.8 million, or 11.3%, to $171.3 million for the nine months ended September 30, 2003 versus $193.2 million for the same period in 2002, and decreased $16.3 million, or 9.0% for the three months ended September 30 2003. The rate on borrowings decreased 41 basis points and 46 basis points, respectively, when comparing the nine and three month periods of 2003 with the same periods of 2002. On an average daily basis, total deposits (including demand deposits) and purchased funds increased 9.0% and 9.3%, respectively for the nine-month and three-month periods ended September 30, 2003 versus the same periods in 2002. The following tables set forth consolidated information regarding average balances and rates. 12

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (in thousands of dollars) Nine Months Ended September 30, ----------------------------------------------------------------------------- 2003 2002 ------------------------------------ ---------------------------------- Average Interest Average Interest Balance Income Yield (1) Balance Income Yield (1) ---------- ---------- ---------- ---------- ---------- ---------- ASSETS Earning assets: Loans: Taxable (2)(3) $ 835,909 $ 35,453 5.67 % $ 755,933 $ 36,960 6.54 % Tax exempt (1) 7,362 203 4.90 3,447 125 6.67 Investments: (1) Available for sale 270,941 10,034 5.32 274,116 11,312 5.80 Short-term investments 10,456 81 1.03 9,030 111 1.65 Interest bearing deposits 6,247 52 1.12 4,266 54 1.69 ---------- ---------- ---------- ---------- Total earning assets 1,130,915 45,823 5.51 % 1,046,792 48,562 6.28 % Nonearning assets: Cash and due from banks 45,558 0 41,418 0 Premises and equipment 25,615 0 24,425 0 Other nonearning assets 38,271 0 25,528 0 Less allowance for loan losses (9,848) 0 (8,467) 0 ---------- ---------- ---------- ---------- Total assets $ 1,230,511 $ 45,823 $ 1,129,696 $ 48,562 ========== ========== ========== ========== (1) Tax exempt income was converted to a fully taxable equivalent basis at a 35 percent tax rate for 2003 and 2002. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the TEFRA adjustment applicable to nondeductible interest expenses. (2) Loan fees, which are immaterial in relation to total taxable loan interest income for the nine months ended September 30, 2003 and 2002, are included as taxable loan interest income. (3) Nonaccrual loans are included in the average balance of taxable loans. 13

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (Cont.) (in thousands of dollars) Nine Months Ended September 30, --------------------------------------------------------------------------- 2003 2002 ----------------------------------- ---------------------------------- Average Interest Average Interest Balance Expense Yield Balance Expense Yield ---------- ---------- ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing liabilities: Savings deposits $ 60,101 $ 193 0.43 % $ 53,380 $ 320 0.80 % Interest bearing checking accounts 281,178 2,366 1.12 227,444 2,738 1.61 Time deposits: In denominations under $100,000 205,472 4,764 3.10 200,693 5,655 3.77 In denominations over $100,000 246,010 3,586 1.95 218,254 4,142 2.54 Miscellaneous short-term borrowings 121,119 897 0.99 150,076 2,091 1.86 Long-term borrowings 50,230 2,296 6.11 43,081 2,105 6.53 ---------- ---------- ---------- ---------- Total interest bearing liabilities 964,110 14,102 1.96 % 892,928 17,051 2.55 % Noninterest bearing liabilities and stockholders' equity: Demand deposits 169,009 0 146,239 0 Other liabilities 10,643 0 12,643 0 Stockholders' equity 86,749 0 77,886 0 Total liabilities and stockholders' ---------- ---------- ---------- ---------- equity $ 1,230,511 $ 14,102 $ 1,129,696 $ 17,051 ========== ========== ========== ========== Net interest differential - yield on average daily earning assets $ 31,721 3.84 % $ 31,511 4.11 % ========== ========== 14

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (in thousands of dollars) Three Months Ended September 30, ---------------------------------------------------------------------------- 2003 2002 ------------------------------------ ---------------------------------- Average Interest Average Interest Balance Income Yield (1) Balance Income Yield (1) ---------- ---------- ---------- ---------- ---------- ---------- ASSETS Earning assets: Loans: Taxable (2)(3) $ 845,388 $ 11,543 5.42 % $ 766,406 $ 12,309 6.37 % Tax exempt (1) 8,037 74 4.78 5,110 58 5.92 Investments: (1) Available for sale 267,757 3,168 5.11 274,626 3,776 5.74 Short-term investments 14,067 31 0.87 12,793 20 1.64 Interest bearing deposits 6,724 17 1.00 4,863 53 1.63 ---------- ---------- ---------- ---------- Total earning assets 1,141,973 14,833 5.25 % 1,063,798 16,216 6.12 % Nonearning assets: Cash and due from banks 46,684 0 41,084 0 Premises and equipment 26,442 0 24,466 0 Other nonearning assets 38,917 0 25,155 0 Less allowance for loan losses (9,984) 0 (8,926) 0 ---------- ---------- ---------- ---------- Total assets $ 1,244,032 $ 14,833 $ 1,145,577 $ 16,216 ========== ========== ========== ========== (1) Tax exempt income was converted to a fully taxable equivalent basis at a 35 percent tax rate for 2003 and 2002. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the TEFRA adjustment applicable to nondeductible interest expenses. (2) Loan fees, which are immaterial in relation to total taxable loan interest income for the three months ended September 30, 2003 and 2002, are included as taxable loan interest income. (3) Nonaccrual loans are included in the average balance of taxable loans. 15

DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL (Cont.) (in thousands of dollars) Three Months Ended September 30, ---------------------------------------------------------------------------- 2003 2002 ----------------------------------- ----------------------------------- Average Interest Average Interest Balance Expense Yield Balance Expense Yield ---------- ---------- ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Interest bearing liabilities: Savings deposits $ 62,757 $ 54 0.34 % $ 54,974 $ 104 0.75 % Interest bearing checking accounts 306,497 770 1.00 224,712 873 1.54 Time deposits: In denominations under $100,000 202,165 1,496 2.94 205,119 1,857 3.59 In denominations over $100,000 232,677 1,101 1.88 231,197 1,443 2.47 Miscellaneous short-term borrowings 116,243 244 0.83 131,305 536 1.62 Long-term borrowings 49,408 756 6.07 50,695 778 6.09 ---------- ---------- ---------- ---------- Total interest bearing liabilities 969,747 4,421 1.81 % 898,002 5,591 2.47 % Noninterest bearing liabilities and stockholders' equity: Demand deposits 178,521 0 152,448 0 Other liabilities 8,504 0 14,405 0 Stockholders' equity 87,260 0 80,722 0 Total liabilities and stockholders' ---------- ---------- ---------- ---------- equity $ 1,244,032 $ 4,421 $ 1,145,577 $ 5,591 ========== ========== ========== ========== Net interest differential - yield on average daily earning assets $ 10,412 3.72 % $ 10,625 4.04 % ========== ========== 16

Provision for Loan Losses Based on management's review of the adequacy of the allowance for loan losses, provisions for losses on loans of $1.8 million and $380,000 were recorded during the nine-month and three-month periods ended September 30, 2003, versus provisions of $2.3 million and $1.0 million recorded during the same periods of 2002. The decrease in the provision for loan losses for the nine and three-month periods reflected a number of factors, including the amount and status of impaired loans, the amount and status of past due accruing loans (90 days or more), and management's overall view on current credit quality, as discussed in more detail below in the analysis relating to the Company's financial condition. Noninterest Income Noninterest income categories for the nine and three-month periods ended September 30, 2003 and 2002 are shown in the following table: Nine Months ended September 30, ---------------------------------- Percent 2003 2002 Change ---------- ---------- ---------- (in thousands) Trust and brokerage fees $ 1,802 $ 1,889 (4.6)% Service charges on deposits 5,136 4,922 4.4 Other income (net) 4,179 2,470 69.2 Net gains on the sale of real estate mortgages held-for-sale 2,655 1,204 120.5 Net securities gains/(losses) (8) 55 (114.6) ---------- ---------- ---------- Total noninterest income $ 13,764 $ 10,540 30.6 % ========== ========== ========== 17

Three Months ended September 30, ---------------------------------- Percent 2003 2002 Change ---------- ---------- ---------- (in thousands) Trust and brokerage fees $ 627 $ 590 6.3 % Service charges on deposits 1,736 1,785 (2.8) Other income (net) 1,729 728 137.5 Net gains on the sale of real estate mortgages held-for-sale 383 493 (22.3) Net securities gains/(losses) (8) 39 (120.5) ---------- ---------- ---------- Total noninterest income $ 4,467 $ 3,635 22.9 % ========== ========== ========== Trust fees decreased $105,000 and increased $68,000, respectively, in the nine-month and three-month periods ended September 30, 2003 versus the same periods in 2002. The decrease in the nine-month period was primarily in employee benefit plan, stock transfer, and living trust fees. The Company exited the stock transfer business in late 2002. Many of the trust fees are determined based upon the dollar amount of the assets held in the various trusts. The overall decline in the stock market has adversely impacted the value of those trust assets, and therefore reduced the trust income based upon it. Brokerage fees increased $18,000 and decreased $31,000, respectively, in the nine-month and three-month periods ended September 30, 2003 versus the same periods in 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 that were implemented in 2002. Other income consists of normal recurring fee income such as mortgage service fees, credit card fees, insurance income and fees, valuation of mortgage servicing rights and safe deposit box rent, as well as other income that management classifies as non-recurring. Other fee income increased $1.7 million and $1.0 million, respectively, in the nine-month and three-month periods ended September 30, 2003 versus the same periods of 2002. The primary drivers behind the increase in the nine-month period were a $568,000 reduction in the charge for non-cash impairment of the Bank's mortgage servicing rights, a $518,000 increase in the cash surrender value of bank owned life insurance, a $243,000 increase in operating lease income and a $191,000 increase in mortgage fees. Offsetting these was a $244,000 increase in the amortization of the Bank's mortgage servicing rights. The primary reasons for the third quarter increase were a $534,000 reduction in the charge for non-cash 18

impairment of the Bank's mortgage servicing rights, a $178,000 increase in the cash surrender value of bank owned life insurance and a $164,000 increase in operating lease income. The increase in profits from the sale of mortgages reflected an increase in the volume of mortgages sold during the nine-month and three-month periods ended September 30, 2003 versus the same periods in 2002. During the first nine months of 2003, the Company sold $128.7 million in mortgages versus $64.1 million in the comparable period of 2002. During the third quarter of 2003, the Company sold $44.5 million in mortgages versus $20.8 million in the third quarter of 2002. Despite the increase in mortgages sold in the third quarter of 2003, profits from the sale of those mortgages were adversely impacted by increases in mortgage interest rates. These increases in volume in the three and nine-month periods ended September 30, 2003 were the result of the low interest rate environment, which has resulted in increased mortgage refinance activity and increased demand for home mortgages. Management does not anticipate that this level of mortgage sales gains will continue during the remainder of the year. Noninterest Expense Noninterest expense categories for the nine and three-month periods ended September 30, 2003, and 2002 are shown in the following table: Nine Months ended September 30, ---------------------------------- Percent 2003 2002 Change ---------- ---------- ---------- (in thousands) Salaries and employee benefits $ 14,789 $ 13,937 6.1 % Occupancy and equipment expense 3,772 3,352 12.5 Other expense 8,753 8,672 0.9 ---------- ---------- ---------- Total noninterest expense $ 27,314 $ 25,961 5.2 % ========== ========== ========== 19

Three Months ended September 30, ---------------------------------- Percent 2003 2002 Change ---------- ---------- ---------- (in thousands) Salaries and employee benefits $ 5,076 $ 4,803 5.7 % Occupancy and equipment expense 1,192 1,171 1.8 Other expense 2,821 2,619 7.7 ---------- ---------- ---------- Total noninterest expense $ 9,089 $ 8,593 5.8 % ========== ========== ========== The increase in salaries and employee benefits reflected normal salary increases, increases related to the employee 401(k) plan and incentive compensation plan and higher health care costs. Total employees remained stable with 455 at September 30, 2003, compared to 460 at September 30, 2002. The increase in occupancy and equipment expense reflected higher property taxes, as well as higher maintenance and repair expense due to an increased commitment to the physical enhancement of offices and higher snow removal costs required during the first quarter of 2003, versus the comparable period of 2002. 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 in the three-month period ended September 30, 2003, primarily as a result of higher professional fees driven by higher legal fees in the third quarter of 2003 versus the comparable period in 2002, as well as by a change in the Company's directors' deferred compensation plan in 2003 which has reduced the quarterly variability in plan expenses in 2003 versus 2002. Income Tax Expense Income tax expense increased $786,000, or 16.5%, for the first nine months of 2003, compared to the same period in 2002. Income tax expense for the third quarter of 2003 increased $214,000, or 13.3%, compared to the same period of 2002. The combined state franchise tax expense and the federal income tax expense as a percentage of income before income tax expense decreased to 33.8% during the first nine months of 2003 compared to 34.5% during the same period in 2002. It decreased to 33.6% for the third quarter of 2003, versus 34.7% for the third quarter of 2002. 20

FINANCIAL CONDITION Certain of the Company's accounting policies are important to the portrayal of the Company's financial condition, since they require management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Estimates associated with these policies are susceptible to material changes as a result of changes in facts and circumstances. Some of the facts and circumstances which could affect these judgments include changes in interest rates, in the performance of the economy or in the financial condition of borrowers. Management believes that its critical accounting policies include determining the allowance for loan losses, determining the fair value of securities and other financial instruments and the valuation of mortgage servicing rights. Total assets of the Company were $1.248 billion at both September 30, 2003, and December 31, 2002. Total cash and cash equivalents decreased by $27.5 million, or 31.6%, to $59.6 million at September 30, 2003 from $87.1 million at December 31, 2002. The decrease was attributable to decreases in the Company's short-term borrowings. Total securities available-for-sale increased by $2.1 million, or 0.8%, to $276.2 million at September 30, 2003 from $274.1 million at December 31, 2002. The increase was a result of securities purchases totaling $119.7 million. This increase was offset by a number of transactions in the securities portfolio. Paydowns of $93.5 million were received, and the amortization of premiums, net of the accretion of discounts, was $1.0 million. Maturities, calls and sales of securities totaled $17.0 million, and the fair market value of the securities declined by $6.1 million. The market value decline was driven by paydowns received in the mortgage-backed portion on the securities portfolio. 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 $653,000, or 6.3%, to $9.7 million at September 30, 2003 from $10.4 million at December 31, 2002. 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, 2003, $128.0 million in real estate mortgages were originated for sale and $128.7 million in mortgages were sold. Total loans, excluding real estate mortgages held-for-sale, increased by $25.0 million or 3.0% to $847.7 million at September 30, 2003 from $822.7 million at December 31, 2002. The mix of loan types within the Company's 21

portfolio remained relatively unchanged, reflecting 77% commercial, 5% real estate and 18% consumer loans at September 30, 2003 compared to 76% commercial, 6% real estate and 18% consumer loans at December 31, 2002. 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 continuing 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 for loan losses. 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 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. An appropriate level of general allowance is determined based on the application of loss percentages to graded loans by categories. Federal regulations require insured institutions to classify their own assets on a regular basis. The regulations provide for three categories of classified loans - substandard, doubtful and loss. The regulations also contain a special mention category. Special mention is defined as loans that do not currently expose an insured institution to a sufficient degree of risk to warrant classification but do possess credit deficiencies or potential weaknesses deserving management's close attention. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified as loss, the insured institution must either establish specified allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge off such amount. At September 30, 2003, on the basis of management's review of the loan portfolio, the Company had $39.5 million of assets classified special mention, $28.0 million classified as substandard, $333,000 classified as doubtful and $0 classified as loss as compared to $47.6 million, $27.0 million, $211,000 and $200,000 at December 31, 2002. 22

Allowance estimates are developed by management in consultation with regulatory authorities, taking into account both actual loss experience and peer group loss experience, and are adjusted for current economic conditions. Allowance estimates are considered a prudent measurement of the risk in the Company's loan portfolio and are applied to individual loans based on loan type. 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 following table summarizes the loan loss reserve and nonperforming assets at September 30, 2003 and December 31, 2002. September 30, December 31, 2003 2002 ------------- -------------- (in thousands) ALLOWANCE FOR LOAN LOSSES: Beginning balance, January 1 $ 9,533 $ 7,946 Provision for loan losses, year-to-date 1,764 3,056 Loans charged-off, year-to-date (1,396) (1,875) Recoveries, year-to-date 163 406 -------------- -------------- Ending balance $ 10,064 $ 9,533 ============== ============== NONPERFORMING ASSETS: Nonaccrual loans $ 1,291 $ 4,216 Loans past due over 90 days and accruing 3,226 3,387 Other real estate 1,530 44 Repossessions 120 94 -------------- -------------- Total nonperforming assets $ 6,167 $ 7,741 ============== ============== Total impaired loans decreased by $3.5 million to $3.8 million at September 30, 2003 from $7.3 million at December 31, 2002. The decrease in the impaired loans category resulted primarily from payments received on three commercial credits totaling $2.8 million. The decrease in nonperforming loans also resulted from the payments on the aforementioned loans. The impaired loan total includes $1.3 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 23

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 $88.7 million, or 9.7%, to $1.002 billion at September 30, 2003 from $913.3 million at December 31, 2002. The increase resulted from increases of $46.7 million in Investors' Weekly accounts, $42.0 million in NOW accounts, $8.0 million in savings accounts and $471,000 in demand deposits. Offsetting these increases were declines of $8.2 million in certificates of deposit and $340,000 in money market accounts. Total short-term borrowings decreased by $85.9 million, or 46.5%, to $99.0 million at September 30, 2003 from $184.9 million at December 31, 2002. The decrease resulted from declines of $46.2 million in securities sold under agreements to repurchase, $23.0 million in federal funds purchased and $16.0 million in other borrowings, primarily short-term advances from the Federal Home Loan Bank of Indianapolis. Total stockholders' equity increased by $4.9 million, or 5.9%, to $88.8 million at September 30, 2003 from $83.9 million at December 31, 2002. Net income of $10.9 million, less dividends of $3.3 million, less the decrease in the accumulated other comprehensive income of $4.0 million, plus $333,000 for stock issued through options exercised, minus $43,000 for the cost of treasury stock purchased comprised most of this increase. In addition, effective January 1, 2003, the Company's directors' deferred compensation plan was amended to no longer permit diversification outside of Company stock and to require that settlement of deferred balances be made in shares of Company stock. In accordance with EITF 97-14: "Accounting for Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi Trust and Invested," on the date of the plan change the $1.1 million current value of the liability for the Company shares was transferred to additional paid-in capital from other liabilities. 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, 2003, the Company's Tier 1 leverage capital ratio, Tier 1 risk based capital ratio and total risk based capital ratio were 8.3%, 10.8% and 11.9%, respectively. 24

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 2003. 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, 2003, the Company's potential pretax exposure was within the Company's policy limit, and not significantly different from December 31, 2002. ITEM 4 - CONTROLS AND PROCEDURES An evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2003. Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls. FORWARD-LOOKING STATEMENTS This document 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, 25

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 past and any future terrorist attacks, acts of war or threats thereof 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. 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, 26

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, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight 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. 27

LAKELAND FINANCIAL CORPORATION FORM 10-Q September 30, 2003 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 and Use of Proceeds ----------------------------------------- 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 31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) 31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 28

b. Reports A report on Form 8-K was filed on October 15, 2003 under Item 12 which reported the Company's third quarter financial information in the form of a press release. A report on Form 8-K was filed on September 8, 2003 under Item 5 which reported the Company's issuance of new trust preferred securities and call of existing securities in the form of a press release. A report on Form 8-K was filed on July 15, 2003 under Item 5 which reported the Company's second quarter financial information in the form of a press release. 29

LAKELAND FINANCIAL CORPORATION FORM 10-Q September 30, 2003 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 3, 2003 /s/Michael L. Kubacki Michael L. Kubacki - President and Chief Executive Officer Date: November 3, 2003 /s/David M. Findlay David M. Findlay - Executive Vice President and Chief Financial Officer Date: November 3, 2003 /s/Teresa A. Bartman Teresa A. Bartman - Vice President and Controller 30

Exhibit 31.1 I, Michael L. Kubacki, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lakeland Financial Corporation; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b) [intentionally omitted] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 3, 2003 /s/Michael L. Kubacki Michael L. Kubacki Chief Executive Officer

Exhibit 31.2 I, David M. Findlay, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Lakeland Financial Corporation; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; b) [intentionally omitted] c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 3, 2003 /s/David M. Findlay David M. Findlay Chief Financial Officer

                                                                 Exhibit 32.1
                           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 September 30, 2003 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/Michael L. Kubacki

Michael L. Kubacki
Chief Executive Officer
November 3, 2003




     A signed original of this written  statement  required by Section 906 has
been  provided  to  Lakeland  Financial  Corporation  and will be  retained by
Lakeland  Financial  Corporation  and furnished to the Securities and Exchange
Commission or its staff upon request.




                                                                 Exhibit 32.2
                           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, 2003 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 3, 2003




     A signed original of this written  statement  required by Section 906 has
been  provided  to  Lakeland  Financial  Corporation  and will be  retained by
Lakeland  Financial  Corporation  and furnished to the Securities and Exchange
Commission or its staff upon request.