Market Overview

Lakeland Financial Reports Record Performance

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WARSAW, Ind., Oct. 25, 2017 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (NASDAQ:LKFN), parent company of Lake City Bank, today reported record third quarter net income of $15.8 million for the three months ended September 30, an increase of 17% versus $13.5 million for the third quarter of 2016. Diluted net income per common share also increased 17% to $0.62 for the third quarter of 2017, versus $0.53 for the third quarter of 2016, representing a record quarter for the company and its shareholders. On a linked quarter basis, net income increased 3% or $461,000 from the second quarter ended June 30, 2017, which had net income of $15.4 million and $0.60 diluted net income per common share.

The company further reported record net income of $45.7 million for the nine months ended September 30, 2017 versus $38.6 million for the comparable period of 2016, an increase of 19%. Diluted net income per common share was also a record for the period and increased 17% to $1.78 for the nine months ended September 30, 2017 versus $1.52 for the comparable period of 2016.

David M. Findlay, President and CEO, commented, "The record quarter and year-to-date results reflect the continued geographic and balance sheet expansion of Lake City Bank. Healthy economic conditions in our Hoosier communities have provided a strong foundation for the Lake City Bank team to continue growing loans and deposits."

Highlights for the quarter are noted below:

3rd Quarter 2017 versus 3rd Quarter 2016 highlights:

  • Organic average loan growth of $373 million or 11%
  • Average deposit growth of $105 million or 3%
  • Net interest income increase of $4.9 million or 16%
  • Net interest margin increase of 27 basis points to 3.35%
  • Revenue growth of $5.4 million or 14%
  • Continued strong asset quality with nonperforming assets to total assets at 0.24% compared to 0.18%
  • Net recoveries of $484,000 versus net charge offs of $394,000 a year ago
  • Tangible common equity1 increase of $35.2 million or 8%

3rd Quarter 2017 versus 2nd Quarter 2017 highlights:

  • Organic average loan growth of $31 million or 1%
  • Average deposit growth of $34 million or 1%
  • Net interest income increase of $801,000 or 2%
  • Net interest margin increase of 1 basis point to 3.35%
  • Revenue growth of $1.5 million or 4%
  • Continued strong asset quality with nonperforming assets to total assets at 0.24% compared to 0.23%
  • Net recoveries of $484,000 versus net recoveries of $289,000 in the prior quarter
  • Tangible common equity1 increase of $12.1 million or 3%

As previously announced, the board of directors approved a cash dividend for the third quarter of $0.22 per share, payable on November 6, 2017, to shareholders of record as of October 25, 2017. The third quarter dividend per share represents a 16% increase over the dividend rate paid in the last three quarters of 2016 and in the first quarter of 2017 of $0.19 per share.

Return on average total equity for the third quarter of 2017 was 13.71%, compared to 12.67% in the third quarter of 2016 and 13.84% in the linked second quarter of 2017. Return on average total equity for the first nine months of 2017 was 13.73%, compared to 12.51% in the same period of 2016. Return on average assets for the third quarter of 2017 was 1.41%, compared to 1.29% in the third quarter of 2016 and 1.40% in the linked second quarter of 2017. Return on average assets for the first nine months of 2017 was 1.39% compared to 1.29% in the same period of 2016. The company's total capital as a percent of risk-weighted assets was 13.58% at September 30, 2017, compared to 13.30% at June 30, 2017. The company's tangible common equity to tangible assets ratio was 10.32% at September 30, 2017, compared to 10.11% at September 30, 2016 and 10.19% at June 30, 2017.

Findlay noted, "Revenue growth is the greatest driver of our strong performance in 2017 as we have experienced strong loan demand, an expansion in our net interest margin and excellent growth in fee-based services throughout our business units. As a result of our strong income performance in 2017, our capital position has strengthened further and we continue to deploy our capital by reinvesting in our Indiana communities and through our recently increased common stock dividend to our shareholders."

Average total loans for the third quarter of 2017 were $3.62 billion, an increase of $372.6 million, or 11%, versus $3.24 billion for the third quarter of 2016. Total loans outstanding grew $355.1 million, or 11%, from $3.28 billion as of September 30, 2016 to $3.64 billion as of September 30, 2017. On a linked quarter basis, total loans grew $58.2 million, or 2%, from $3.58 billion at June 30, 2017.

Average total deposits for the third quarter of 2017 were $3.72 billion, an increase of $105.2 million, or 3%, versus $3.61 billion for the third quarter of 2016. On a linked quarter basis, total average deposits grew $34.0 million, or 1%, from $3.68 billion at June 30, 2017. Total deposits grew $222.0 million, or 6%, from $3.65 billion as of September 30, 2016 to $3.87 billion as of September 30, 2017. Core deposits, which exclude brokered deposits, increased $32.4 million, or 1%, from $3.55 billion at September 30, 2016 to $3.58 billion at September 30, 2017. Brokered deposits increased by $189.7 million, from $106.8 million to $296.4 million as of September 30, 2017.

On a linked quarter basis, total deposits increased by $258.1 million to $3.87 billion. During the third quarter of 2017, core deposits increased $78.1 million or 2% from $3.50 billion as of June 30, 2017 to $3.58 billion as of September 30, 2017.  The increase in core deposits on a linked quarter basis was generated from commercial deposit growth of $99.9 million, retail deposit growth of $70.4 million and public fund deposit contraction of $92.3 million. During the third quarter of 2017, brokered deposits increased by $180.0 million from $116.4 million at June 30, 2017 and the proceeds were used to reduce short-term borrowings.

The company's net interest margin increased 27 basis points to 3.35% for the third quarter of 2017 compared to 3.08% for the third quarter of 2016.  The higher margin in the third quarter of 2017 was due to higher yields on loans and securities, partially offset by a higher cost of funds. On a linked quarter basis, the net interest margin improved by one basis point from 3.34% in the second quarter of 2017. During the quarter asset yields improved by eight basis points and were offset by an increase in cost of funds of seven basis points. Net interest income increased $4.9 million, or 16%, to $34.6 million for the third quarter of 2017, versus $29.7 million in the third quarter of 2016. The company's net interest margin for the nine months ended September 30, 2017 was 3.32% compared to 3.17% in the prior year nine-month period. 

The company recorded a provision for loan losses of $450,000 in the third quarter of 2017, primarily driven by growth in the loan portfolio. The company's allowance for loan losses as of September 30, 2017 was $45.5 million compared to $42.9 million as of September 30, 2016 and $44.6 million as of June 30, 2017. The allowance for loan losses represented 1.25% of total loans as of September 30, 2017 versus 1.31% at September 30, 2016 and 1.25% as of June 30, 2017.

Nonperforming assets increased $3.1 million, or 42%, to $10.5 million as of September 30, 2017 versus $7.4 million as of September 30, 2016 due to an increase in nonaccrual loans. On a linked quarter basis, nonperforming assets were $429,000 higher than the $10.1 million reported as of June 30, 2017. The ratio of nonperforming assets to total assets at September 30, 2017 increased to 0.24% from 0.18% at September 30, 2016 and 0.23% at June 30, 2017. The $429,000 increase in nonperforming assets during the quarter was primarily due to placing two commercial relationships in nonaccrual status. Net recoveries totaled $484,000 in the third quarter of 2017 versus net charge-offs of $394,000 during the third quarter of 2016 and net recoveries of $289,000 during the linked second quarter of 2017.

Findlay added, "The stable economic landscape in our Indiana markets continues to sustain the overall quality of our loan portfolio. We continue to be cautiously optimistic and the loan portfolio growth is carefully managed. Economic conditions are as strong as they have been since the recovery began in much of our footprint." 

The company's noninterest income increased $479,000 or 5% to $9.5 million for the third quarter of 2017 versus $9.0 million for the third quarter of 2016. Noninterest income was positively impacted by a $478,000 increase in service charges on deposit accounts primarily due to growth in fees from business accounts. In addition, wealth advisory fees increased $164,000 or 13%. 

The company's noninterest income increased 10% to $26.5 million for the nine months ended September 30, 2017 compared to $24.1 million in the prior year period. Noninterest income was positively impacted by a $1.3 million or 14% increase in service charges on deposit accounts primarily due to growth in fees from business accounts. In addition, wealth advisory fees increased by $405,000 or 11% and investment brokerage fees increased by $198,000 or 26%. Bank owned life insurance income increased $216,000 or 20% from the first nine months of 2016 to the first nine months of 2017 primarily due to increased revenue from variable life insurance contracts owned by the company. In addition, other income increased $608,000 or 48% compared to the first nine months of 2016. During the first quarter of 2016, other income was negatively impacted by $295,000 of credit valuation adjustment losses related to the company's swap arrangements and a $226,000 write down in the first quarter of 2016 to a property formerly used as a Lake City Bank branch, which together account for $521,000 of the increase in other income from the first nine months of 2016 to the first nine months of 2017. Noninterest income during the first nine months of 2017 was negatively impacted by a decrease of $394,000, or 33%, in mortgage banking income resulting from lower mortgage loan originations as compared to the prior year period.

The company's noninterest expense increased by 8% to $20.3 million in the third quarter of 2017 compared to $18.8 million in the third quarter of 2016. Salaries and employee benefits increased by 8% or $896,000 primarily due to incentive-based compensation costs, increased health insurance cost, normal merit increases and staff additions related to the company's continued growth and expansion. Corporate and business development expense increased by $224,000 or 22%, primarily due to an increase in the third quarter of 2017 of advertising expense. Equipment costs increased by $164,000 or 16%, driven by the company's branch expansion as well as remodeling of existing branches.  Professional fees increased by $143,000, or 17%, primarily due to fees related to the company's advertising campaign.

The company's noninterest expense increased by $5.1 million or 9% to $59.7 million in the first nine months of 2017 compared to $54.6 million in the prior year period. The increase was driven by salaries and employee benefits, which increased by 10% or $3.2 million, primarily due to incentive-based compensation costs, increased health insurance cost, normal merit increases and staff additions related to the company's continued growth and expansion. In addition, corporate and business development increased by 49%, or $1.3 million, primarily due to community support and donation expense of $850,000 and $499,000 of increased advertising expense. The company's efficiency ratio was 45.9% for the third quarter of 2017, compared to 48.4% for the third quarter of 2016 and 45.4% for the linked second quarter of 2017.

Lakeland Financial Corporation is a $4.5 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank headquartered in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 49 offices in Northern and Central Indiana, delivering technology-driven and client-centric financial services solutions to individuals and businesses.

Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at lakecitybank.com. The company's common stock is traded on the Nasdaq Global Select Market under "LKFN." In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this earnings release contains certain non-GAAP financial measures. Lakeland Financial believes that providing non-GAAP financial measures provides investors with information useful to understanding the company's financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on "tangible common equity" which is "common stockholders' equity" excluding intangible assets, net of deferred tax and "tangible assets" which is "assets" excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables where the non-GAAP measure is presented. 

This document contains, and future oral and written statements of the company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "continue," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. The company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain and, accordingly, the reader is cautioned not to place undue reliance on any forward-looking statements made by the company. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the company undertakes no obligation to update any statement in light of new information or future events. Additional information concerning the company and its business, including factors that could materially affect the company's financial results, is included in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K.

_____________________
1 Non-GAAP financial measure – see "Reconciliation of Non-GAAP Financial Measures."

 
LAKELAND FINANCIAL CORPORATION
THIRD QUARTER 2017 FINANCIAL HIGHLIGHTS
    Three Months Ended       Nine Months Ended    
(Unaudited – Dollars in thousands, except per share data)   Sep. 30,     Jun. 30,     Sep. 30,       Sep. 30,     Sep. 30,    
END OF PERIOD BALANCES     2017         2017         2016         2017         2016    
Assets   $ 4,454,236       $ 4,392,999       $ 4,197,320       $ 4,454,236       $ 4,197,320    
Deposits     3,873,990         3,615,939         3,651,942         3,873,990         3,651,942    
Brokered Deposits     296,431         116,435         106,752         296,431         106,752    
Core Deposits     3,577,559         3,499,504         3,545,190         3,577,559         3,545,190    
Loans     3,635,252         3,577,004         3,280,161         3,635,252         3,280,161    
Allowance for Loan Losses     45,497         44,563         42,853         45,497         42,853    
Total Equity     462,516         450,460         427,380         462,516         427,380    
Goodwill net of deferred tax assets     3,110         3,126         3,138         3,110         3,138    
Tangible Common Equity (1)     459,406         447,334         424,242         459,406         424,242    
AVERAGE BALANCES                              
Total Assets   $ 4,464,568       $ 4,395,495       $ 4,152,333       $ 4,390,635       $ 3,990,022    
Earning Assets     4,196,041         4,150,234         3,900,651         4,135,885         3,755,248    
Investments     536,444         531,262         500,384         527,740         489,269    
Loans     3,617,624         3,586,407         3,244,994         3,571,459         3,175,882    
Total Deposits     3,716,303         3,682,348         3,611,110         3,678,897         3,427,308    
Interest Bearing Deposits     2,923,118         2,926,086         2,843,015         2,906,159         2,724,573    
Interest Bearing Liabilities     3,189,288         3,171,565         2,933,108         3,148,862         2,849,661    
Total Equity     458,074         445,287         423,358         445,181         411,797    
INCOME STATEMENT DATA                              
Net Interest Income   $ 34,620       $ 33,819       $ 29,719       $ 100,500       $ 87,574    
Net Interest Income-Fully Tax Equivalent     35,433         34,550         30,274         102,785         89,193    
Provision for Loan Losses     450         500         0         1,150         0    
Noninterest Income     9,497         8,791         9,018         26,547         24,128    
Noninterest Expense     20,269         19,352         18,759         59,669         54,589    
Net Income     15,825         15,364         13,480         45,703         38,562    
PER SHARE DATA                              
Basic Net Income Per Common Share   $ 0.63       $ 0.61       $ 0.54       $ 1.82       $ 1.54    
Diluted Net Income Per Common Share     0.62         0.60         0.53         1.78         1.52    
Cash Dividends Declared Per Common Share     0.22         0.22         0.19         0.63         0.54    
Dividend Payout     35.48   %     36.67   %     35.85   %     35.39   %     35.53   %
Book Value Per Common Share (equity per share issued)     18.36         17.88         17.04         18.36         17.04    
Tangible Book Value Per Common Share (1)     18.23         17.76         16.91         18.23         16.91    
Market Value – High     49.22         48.70         37.74         49.22         37.74    
Market Value – Low     41.30         41.38         30.21         39.68         26.53    
Basic Weighted Average Common Shares Outstanding     25,193,894         25,183,186         25,069,434         25,176,593         25,044,596    
Diluted Weighted Average Common Shares Outstanding     25,656,403         25,619,977         25,457,892         25,640,742         25,418,884    
KEY RATIOS                                  
Return on Average Assets     1.41   %     1.40   %     1.29   %     1.39   %     1.29   %
Return on Average Total Equity     13.71         13.84         12.67         13.73         12.51    
Average Equity to Average Assets     10.26         10.13         10.20         10.14         10.32    
Net Interest Margin     3.35         3.34         3.08         3.32         3.17    
Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)     45.94         45.42         48.43         46.97         48.87    
Tier 1 Leverage (2)     10.92         10.82         10.71         10.92         10.71    
Tier 1 Risk-Based Capital (2)     12.42         12.15         12.33         12.42         12.33    
Common Equity Tier 1 (CET1) (2)     11.65         11.39         11.50         11.65         11.50    
Total Capital (2)     13.58         13.30         13.52         13.58         13.52    
Tangible Capital (1) (2)     10.32         10.19         10.11         10.32         10.11    
ASSET QUALITY                               
Loans Past Due 30 - 89 Days   $ 1,935       $ 1,562       $ 1,734       $ 1,935       $ 1,734    
Loans Past Due 90 Days or More     73         0         6         73         6    
Non-accrual Loans     10,279         9,884         7,256         10,279         7,256    
Nonperforming Loans (includes nonperforming TDR's)     10,352         9,884         7,262         10,352         7,262    
Other Real Estate Owned     115         194         146         115         146    
Other Nonperforming Assets     40         0         6         40         6    
Total Nonperforming Assets     10,507         10,078         7,414         10,507         7,414    
Performing Troubled Debt Restructurings     5,601         8,425         10,579         5,601         10,579    
Nonperforming Troubled Debt Restructurings (included in nonperforming loans)     7,946         6,852         5,885         7,946         5,885    
Total Troubled Debt Restructurings     13,547         15,277         16,464         13,547         16,464    
Impaired Loans     16,679         19,580         18,605         16,679         18,605    
Non-Impaired Watch List Loans     145,655         133,526         134,330         145,655         134,330    
Total Impaired and Watch List Loans     162,334         153,109         152,935         162,334         152,935    
Gross Charge Offs     170         261         773         935         1,535    
Recoveries     654         550         379         1,564         778    
Net Charge Offs/(Recoveries)     (484 )       (289 )       394         (629 )       757    
Net Charge Offs/(Recoveries)  to Average Loans     (0.05 ) %     (0.03 ) %     0.05   %     (0.02 ) %     0.03   %
Loan Loss Reserve to Loans     1.25   %     1.25   %     1.31   %     1.25   %     1.31   %
Loan Loss Reserve to Nonperforming Loans     439.51   %     450.75   %     590.10   %     439.51   %     590.10   %
Loan Loss Reserve to Nonperforming Loans and Performing TDR's     285.20   %     243.37   %     240.20   %     285.20   %     240.20   %
Nonperforming Loans to Loans     0.28   %     0.28   %     0.22   %     0.28   %     0.22   %
Nonperforming Assets to Assets     0.24   %     0.23   %     0.18   %     0.24   %     0.18   %
Total Impaired and Watch List Loans to Total Loans     4.47   %     4.28   %     4.66   %     4.47   %     4.66   %
OTHER DATA                                  
Full Time Equivalent Employees     537         540         518         537         518    
Offices     49         49         48         49         48    
                                   
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"                  
(2) Capital ratios for September 30, 2017 are preliminary until the Call Report is filed.                  
                                   

 

CONSOLIDATED BALANCE SHEETS (in thousands except share data)
      September 30,   December 31,
        2017       2016  
      (Unaudited)    
ASSETS          
Cash and due from banks     $    109,647     $ 142,408  
Short-term investments       20,186       24,872  
Total cash and cash equivalents       129,833       167,280  
           
Securities available for sale (carried at fair value)       536,547       504,191  
Real estate mortgage loans held for sale       4,456       5,915  
           
Loans, net of allowance for loan losses of $45,497 and $43,718       3,589,755       3,427,209  
           
Land, premises and equipment, net       56,389       52,092  
Bank owned life insurance       75,350       74,006  
Federal Reserve and Federal Home Loan Bank stock       13,772       11,522  
Accrued interest receivable       13,123       11,687  
Goodwill       4,970       4,970  
Other assets       30,041       31,153  
Total assets     $    4,454,236     $ 4,290,025  
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
LIABILITIES          
Noninterest bearing deposits     $    821,589     $ 819,803  
Interest bearing deposits       3,052,401       2,758,109  
Total deposits       3,873,990       3,577,912  
           
Short-term borrowings          
Securities sold under agreements to repurchase       63,888       50,045  
Other short-term borrowings       0       180,000  
Total short-term borrowings       63,888       230,045  
           
Long-term borrowings       30       32  
Subordinated debentures       30,928       30,928  
Accrued interest payable       5,439       5,676  
Other liabilities       17,445       18,365  
Total liabilities       3,991,720       3,862,958  
           
STOCKHOLDERS' EQUITY          
Common stock:  90,000,000 shares authorized, no par value              
  25,194,903 shares issued and 25,026,689 outstanding as of September 30, 2017                  
  25,096,087 shares issued and 24,937,865 outstanding as of December 31, 2016       107,636       104,405  
Retained earnings       357,710       327,873  
Accumulated other comprehensive income/(loss)       452       (2,387 )
Treasury stock, at cost (2017 - 168,214 shares, 2016 - 158,222 shares)       (3,371 )     (2,913 )
Total stockholders' equity       462,427       426,978  
Noncontrolling interest       89       89  
Total equity       462,516       427,067  
Total liabilities and equity     $    4,454,236     $ 4,290,025  
           

 

                 
CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)          
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
    2017     2016     2017     2016  
NET INTEREST INCOME                
Interest and fees on loans                
Taxable $    38,630   $ 31,538   $    110,044   $ 92,086  
Tax exempt     205     110       517     332  
Interest and dividends on securities                
Taxable     2,349     2,277       7,033     7,120  
Tax exempt     1,309     969       3,745     2,811  
Interest on short-term investments     96     185       198     295  
Total interest income     42,589     35,079       121,537     102,644  
                 
Interest on deposits     7,037     5,032       18,722     13,921  
Interest on borrowings                
Short-term     588     37       1,329     283  
Long-term     344     291       986     866  
Total interest expense     7,969     5,360       21,037     15,070  
                 
NET INTEREST INCOME     34,620     29,719       100,500     87,574  
                 
Provision for loan losses     450     0       1,150     0  
                 
NET INTEREST INCOME AFTER PROVISION FOR                
  LOAN LOSSES     34,170     29,719       99,350     87,574  
                 
NONINTEREST INCOME                
Wealth advisory fees     1,471     1,307       4,005     3,600  
Investment brokerage fees     330     252       950     752  
Service charges on deposit accounts     3,631     3,153       10,027     8,776  
Loan, insurance and service fees     2,060     2,105       5,850     5,835  
Merchant card fee income     588     552       1,696     1,576  
Bank owned life insurance income     397     392       1,270     1,054  
Other income     718     763       1,886     1,278  
Mortgage banking income     302     494       811     1,205  
Net securities gains     0     0       52     52  
Total noninterest income     9,497     9,018       26,547     24,128  
                 
NONINTEREST EXPENSE                
Salaries and employee benefits     11,728     10,832       34,214     31,029  
Net occupancy expense     1,131     1,068       3,405     3,205  
Equipment costs     1,182     1,018       3,413     2,828  
Data processing fees and supplies     2,032     1,983       6,022     6,135  
Corporate and business development     1,245     1,021       3,943     2,641  
FDIC insurance and other regulatory fees     443     458       1,296     1,538  
Professional fees     962     819       2,717     2,505  
Other expense     1,546     1,560       4,659     4,708  
Total noninterest expense     20,269     18,759       59,669     54,589  
                 
INCOME BEFORE INCOME TAX EXPENSE     23,398     19,978       66,228     57,113  
Income tax expense     7,573     6,498       20,525     18,551  
NET INCOME $    15,825   $ 13,480   $    45,703   $ 38,562  
                 
BASIC WEIGHTED AVERAGE COMMON SHARES     25,193,894     25,069,434       25,176,593     25,044,596  
BASIC EARNINGS PER COMMON SHARE $    0.63   $ 0.54   $    1.82   $ 1.54  
DILUTED WEIGHTED AVERAGE COMMON SHARES     25,656,403     25,457,892       25,640,742     25,418,884  
DILUTED EARNINGS PER COMMON SHARE $    0.62   $ 0.53   $    1.78   $ 1.52  
                 

 

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
THIRD QUARTER 2017
(unaudited in thousands)
                                     
  September 30,
    June 30,
    December 31,
    September 30,
  2017
    2017
    2016
    2016
Commercial and industrial loans:                                        
Working capital lines of credit loans $ 703,953   19.4 %     $ 717,875   20.0 %     $ 624,404   18.0 %     $ 609,382   18.6 %
Non-working capital loans   658,167   18.1         646,517   18.1         644,086   18.5         641,599   19.5  
Total commercial and industrial loans   1,362,120   37.5         1,364,392   38.1         1,268,490   36.5         1,250,981   38.1  
                                     
Commercial real estate and multi-family residential loans:                                        
Construction and land development loans   287,778   7.9         209,772   5.8         245,182   7.1         221,436   6.7  
Owner occupied loans   499,651   13.7         511,425   14.3         469,705   13.5         468,582   14.3  
Nonowner occupied loans   456,930   12.6         450,907   12.6         458,404   13.2         408,620   12.5  
Multifamily loans   165,855   4.6         170,902   4.8         127,632   3.7         127,784   3.9  
Total commercial real estate and multi-family residential loans   1,410,214   38.8         1,343,006   37.5         1,300,923   37.5         1,226,422   37.4  
                                     
Agri-business and agricultural loans:                                        
Loans secured by farmland   161,553   4.4         156,053   4.4         172,633   5.0         152,719   4.6  
Loans for agricultural production   156,327   4.3         175,334   4.9         222,210   6.4         156,770   4.8  
Total agri-business and agricultural loans   317,880   8.7         331,387   9.3         394,843   11.4         309,489   9.4  
                                     
Other commercial loans   114,858   3.1         116,651   3.3         98,270   2.8         89,850   2.8  
Total commercial loans   3,205,072   88.1         3,155,436   88.2         3,062,526   88.2         2,876,742   87.7  
                                     
Consumer 1-4 family mortgage loans:                                        
Closed end first mortgage loans   171,946   4.7         171,495   4.8         163,155   4.7         161,907   4.9  
Open end and junior lien loans   181,338   5.0         172,530   4.8         169,664   4.9         170,140   5.2  
Residential construction and land development loans   10,530   0.3         10,118   0.3         15,015   0.4         12,801   0.4  
Total consumer 1-4 family mortgage loans   363,814   10.0         354,143   9.9         347,834   10.0         344,848   10.5  
                                     
Other consumer loans   67,545   1.9         68,646   1.9         61,308   1.8         58,957   1.8  
Total consumer loans   431,359   11.9         422,789   11.8         409,142   11.8         403,805   12.3  
Subtotal   3,636,431   100.0 %       3,578,225   100.0 %       3,471,668   100.0 %       3,280,547   100.0 %
Less:  Allowance for loan losses   (45,497 )           (44,563 )           (43,718 )           (42,853 )    
Net deferred loan fees   (1,179 )           (1,221 )           (741 )           (386 )    
Loans, net $ 3,589,755           $ 3,532,441           $ 3,427,209           $ 3,237,308      
                                     
                                     
                                     
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
THIRD QUARTER 2017
(unaudited in thousands)
                                     
  September 30,         June 30,         December 31,         September 30,    
    2017             2017             2016             2016      
Non-interest bearing demand deposits $ 821,589           $ 762,965           $ 819,803           $ 770,079      
Savings and transaction accounts:                                  
Savings deposits   269,977             275,151             268,970             272,704      
Interest bearing demand deposits   1,390,335             1,322,847             1,325,320             1,289,548      
Time deposits:                                    
Deposits of $100,000 or more   1,149,152             1,015,741             924,825             1,078,084      
Other time deposits   242,937             239,235             238,994             241,527      
Total deposits $ 3,873,990           $ 3,615,939           $ 3,577,912           $ 3,651,942      
FHLB advances and other borrowings   94,846             306,146             261,005             91,158      
Total funding sources $ 3,968,836           $ 3,922,085           $ 3,838,917           $ 3,743,100      
                                     

 

                       
LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
                       
    Three Months Ended       Three Months Ended       Three Months Ended  
    September 30, 2017       June 30, 2017       September 30, 2016  
    Average     Interest     Yield (1)/       Average     Interest     Yield (1)/       Average     Interest     Yield (1)/  
(fully tax equivalent basis, dollars in thousands)   Balance     Income     Rate       Balance     Income     Rate       Balance     Income     Rate  
Earning Assets                                                          
Loans:                                                          
Taxable (2)(3)   $ 3,595,753       $ 38,630     4.26 %     $ 3,566,504       $ 36,967     4.16 %     $ 3,233,394       $ 31,538     3.88 %
Tax exempt (1)     21,871         312     5.66         19,903         240     4.82         11,600         164     5.62  
Investments: (1)                                                          
Available for sale     536,444         4,364     3.23         531,262         4,291     3.24         500,384         3,747     2.98  
Short-term investments     6,633         8     0.48         6,124         8     0.52         6,885         4     0.23  
Interest bearing deposits     35,340         88     0.99         26,441         46     0.70         148,388         181     0.49  
Total earning assets   $ 4,196,041       $ 43,402     4.10 %     $ 4,150,234       $ 41,552     4.02 %     $ 3,900,651       $ 35,634     3.63 %
Less:  Allowance for loan losses     (45,018 )                     (44,090 )                     (43,402 )              
Nonearning Assets                                                          
Cash and due from banks     122,429                       101,446                       122,811                
Premises and equipment     56,716                       54,341                       50,921                
Other nonearning assets     134,400                       133,564                       121,352                
Total assets   $ 4,464,568                     $ 4,395,495                     $ 4,152,333                
                                                           
Interest Bearing Liabilities                                                          
Savings deposits   $ 274,514       $ 103     0.15 %     $ 274,645       $ 105     0.15 %     $ 270,136       $ 103     0.15 %
Interest bearing checking accounts     1,365,617         2,636     0.77         1,403,560         2,387     0.68         1,261,390         1,362     0.43  
Time deposits:                                                          
In denominations under $100,000     240,444         746     1.23         237,917         700     1.18         243,148         696     1.14  
In denominations over $100,000     1,042,543         3,552     1.35         1,009,964         3,051     1.21         1,068,341         2,871     1.07  
Miscellaneous short-term borrowings     235,212         588     0.99         214,520         431     0.81         59,133         37     0.25  
Long-term borrowings and                                                          
subordinated debentures (4)     30,958         344     4.41         30,959         328     4.25         30,960         291     3.74  
Total interest bearing liabilities   $ 3,189,288       $ 7,969     0.99 %     $ 3,171,565       $ 7,002     0.89 %     $ 2,933,108       $ 5,360     0.73 %
Noninterest Bearing Liabilities                                                          
Demand deposits     793,185                       756,262                       768,095                
Other liabilities     24,021                       22,381                       27,772                
Stockholders' Equity     458,074                       445,287                       423,358                
Total liabilities and stockholders' equity   $ 4,464,568                     $ 4,395,495                     $ 4,152,333                
                                                           
Interest Margin Recap                                                          
Interest income/average earning assets           43,402     4.10               41,552     4.02               35,634     3.63  
Interest expense/average earning assets           7,969     0.75               7,002     0.68               5,360     0.55  
Net interest income and margin         $ 35,433     3.35 %           $ 34,550     3.34 %           $ 30,274     3.08 %


(1)     Tax exempt income was converted to a fully taxable equivalent basis at a 35 percent tax rate for 2017 and 2016. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") adjustment applicable to nondeductible interest expenses.  Taxable equivalent basis adjustments were $813,000, $731,000 and $555,000 in the three-month periods ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
(2)     Loan fees, which are immaterial in relation to total taxable loan interest income for 2017 and 2016, are included as taxable loan interest income.
(3)     Nonaccrual loans are included in the average balance of taxable loans.
       

(1) Reconciliation of Non-GAAP Financial Measures
Tangible common equity, tangible assets and tangible book value per share are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of stockholders' equity. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding.  Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. However, management considers these measures of the company's value including only earning assets as meaningful to an understanding of the company's financial information.  A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).

                 
      Three Months Ended       Nine Months Ended  
      Sep. 30,       Jun. 30,       Sep. 30,       Sep. 30,       Sep. 30,  
        2017           2017           2016           2017           2016    
Total Equity     $ 462,516         $ 450,460         $ 427,380         $ 462,516         $ 427,380    
Less: Goodwill       (4,970 )         (4,970 )         (4,970 )         (4,970 )         (4,970 )  
Plus: Deferred tax assets related to goodwill       1,860           1,844           1,832           1,860           1,832    
Tangible Common Equity       459,406           447,334           424,242           459,406           424,242    
                                         
Assets     $ 4,454,236         $ 4,392,999         $ 4,197,320         $ 4,454,236         $ 4,197,320    
Less: Goodwill       (4,970 )         (4,970 )         (4,970 )         (4,970 )         (4,970 )  
Plus: Deferred tax assets related to goodwill       1,860           1,844           1,832           1,860           1,832    
Tangible Assets       4,451,126           4,389,873           4,194,182           4,451,126           4,194,182    
                                         
Ending common shares issued       25,194,903           25,185,619           25,081,087           25,194,903           25,081,087    
                                         
Tangible Book Value Per Common Share     $ 18.23         $ 17.76         $ 16.91         $ 18.23         $ 16.91    
                                         
Tangible Common Equity/Tangible Assets       10.32   %       10.19   %       10.11   %       10.32   %       10.11   %
                                         

Contact
Lisa M. O'Neill
Executive Vice President and Chief Financial Officer
(574) 267-9125
lisa.oneill@lakecitybank.com   

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