Market Overview

Lakeland Financial Reports Record Performance

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WARSAW, Indiana, July 25, 2018 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record quarterly net income of $20.1 million for the three months ended June 30, an increase of 31% versus $15.4 million for the second quarter of 2017. Diluted earnings per share increased 30% to $0.78 for the second quarter of 2018, versus $0.60 for the second quarter of 2017, also representing a record quarter for the company and its shareholders. On a linked quarter basis, net income and diluted earnings per share both increased 10%. Net income increased $1.8 million from $18.3 million in the first quarter ended March 31, 2018 and diluted earnings per share increased from $0.71.

The company further reported record net income of $38.5 million for the six months ended June 30, 2018 versus $29.9 million for the comparable period of 2017, an increase of 29%. Diluted net income per common share was also a record for the period and increased 28% to $1.50 for the six months ended June 30, 2018 versus $1.17 for the comparable period of 2017.

David M. Findlay, President and CEO commented, "The record first half results of 2018 reflect strong core profitability with revenue growth of 13% year over year. This revenue growth was driven by our continued organic loan growth, a healthy increase in client driven noninterest income and an overall expansion of net interest margin."

Highlights for the quarter are noted below.

2nd Quarter 2018 versus 2nd Quarter 2017 highlights:

  • Return on average equity of 16.9% up from 13.8% a year ago
  • Organic average loan growth of $253 million or 7%
  • Average deposit growth of $410 million or 11%
  • Net interest income increase of $3.7 million or 11%
  • Net interest margin increase of 8 basis points to 3.42%
  • Noninterest income increase of $902,000, or 10%
  • Revenue growth of $4.6 million or 11%
  • Tangible common equity1 increase of $35 million or 8%

2nd Quarter 2018 versus 1st Quarter 2018 highlights:

  • Return on average equity of 16.9% versus 15.8%
  • Net interest income increase of $1.3 million or 4%
  • Net interest margin increase of 6 basis points to 3.42%
  • Revenue growth of $1.1 million or 2%
  • Noninterest expense decrease of $928,000, or 4%
  • Efficiency ratio of 42.9% versus 46.0%
  • Net recoveries to average loans of (0.04%) compared to net charge offs to average loans of 0.51%
  • Tangible common equity1 increase of $13 million or 3%

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

As announced on July 10, 2018, the board of directors approved a cash dividend for the second quarter of $0.26 per share, payable on August 6, 2018, to shareholders of record as of July 25, 2018. The second quarter dividend per share represents an 18% increase over the second quarter dividend of 2017 in the amount of $0.22 per share.

Return on average total equity for the second quarter of 2018 was 16.86%, compared to 13.84% in the second quarter of 2017 and 15.82% in the linked first quarter of 2018. Return on average total equity for the first six months of 2018 was 16.35%, compared to 13.74% in the same period of 2017. Return on average assets for the second quarter of 2018 was 1.70%, compared to 1.40% in the second quarter of 2017 and 1.58% in the linked first quarter of 2018. Return on average assets for the first six months of 2018 was 1.64% compared to 1.38% in the same period of 2017. The company's total capital as a percent of risk-weighted assets was 13.76% at June 30, 2018, compared to 13.30% at June 30, 2017 and 13.41% at March 31, 2018. The company's tangible common equity to tangible assets ratio1 was 10.15% at June 30, 2018, compared to 10.19% at June 30, 2017 and 9.94% at March 31, 2018.

Average total loans for the second quarter of 2018 were $3.84 billion, an increase of $253.0 million, or 7%, versus $3.59 billion for the second quarter 2017. On a linked quarter basis, total average loans grew $47.5 million, or 1%, from $3.79 billion at March 31, 2018. Total loans outstanding grew $281.7 million, or 8%, from $3.58 billion as of June 30, 2017 to $3.86 billion as of June 30, 2018.

Findlay noted, "We continued to experience healthy organic loan growth in the quarter that was consistent with our pipeline expectations. At the same time, we had a significant amount of large loan repayments during the quarter in our commercial portfolio. Unanticipated factors affecting loan repayment activity during the quarter included the sale of client companies and long-term non-bank financing in the agricultural and commercial real estate portfolios. Our pipeline for the third quarter and balance of 2018 remains encouraging."

Average total deposits for the second quarter of 2018 were $4.09 billion, an increase of $409.8 million, or 11%, versus $3.68 billion for the second quarter of 2017. Total deposits grew $319.0 million, or 9%, from $3.62 billion as of June 30, 2017 to $3.93 billion as of June 30, 2018. In addition, total core deposits, which exclude brokered deposits, increased $212.4 million, or 6%, from $3.50 billion at June 30, 2017 to $3.71 billion at June 30, 2018 due to growth in commercial deposits of $128.5 million or 16%, growth in retail deposits of $83.9 million or 6% and no change in public fund deposits.

The company's net interest margin increased eight basis points to 3.42% for the second quarter of 2018 compared to 3.34% for the second quarter of 2017. On a linked quarter basis, the net interest margin improved by six basis points from 3.36% in the first quarter of 2018. The higher margin in the second quarter of 2018 was due to higher yields on loans, partially offset by a higher cost of funds, which was driven by the Federal Reserve Bank increasing the target Federal Funds Rate in mid-March 2018 and mid-June 2018. Net interest income increased $3.7 million, or 11%, to $37.5 million for the second quarter of 2018, versus $33.8 million in the second quarter of 2017 due to both growth in loans and deposits as well as expanding net interest margin. Net interest income increased by $7.9 million or 12% for the six months ended June 30, 2018 as compared to the first half of 2017 due to both net interest margin expansion and volume growth. The company's net interest margin for the six months ended June 30, 2018 was 3.39% compared to 3.31% in the prior year six month period.

Findlay added, "The increases in short-term interest rates contributed to a strong increase in net interest margin due to our asset sensitive balance sheet as our loans continue to reprice more quickly than deposits. The interest rate environment also provides us with the ability to continue to be aggressive on the deposit pricing front and we are pleased with our overall deposit growth."

The company recorded a provision for loan losses of $1.7 million in the second quarter of 2018 compared to $500,000 for the second quarter 2017 and down from $3.3 million during the linked first quarter of 2018. The company's allowance for loan losses as of June 30, 2018 was $47.7 million compared to $44.6 million as of June 30, 2017 and $45.6 million as of March 31, 2018. The allowance for loan losses represented 1.24% of total loans as of June 30, 2018 versus 1.25% at June 30, 2017 and 1.19% as of March 31, 2018.

Net recoveries for the quarter were $379,000 versus net recoveries of $289,000 in the second quarter of 2017 and net charge offs of $4.8 million during the linked first quarter 2018. Annualized net recoveries to average loans were 0.04% for the second quarter of 2018 compared to net recoveries of 0.03% for the second quarter of 2017 and net charge-offs of 0.51% for the first quarter of 2018. On a year-to-date basis, net charge offs to average loans were 0.23% compared to net recoveries of 0.01% for the first six months of 2017.

Nonperforming assets increased $2.8 million, or 28%, to $12.9 million as of June 30, 2018 versus $10.1 million as of June 30, 2017 due to an increase in nonaccrual loans. On a linked quarter basis, nonperforming assets were $1.7 million higher than the $11.2 million reported as of March 31, 2018 primarily due to placing one commercial relationship in nonaccrual status. The ratio of nonperforming assets to total assets at June 30, 2018 increased to 0.27% from 0.23% at June 30, 2017 and increased from 0.24% at March 31, 2018.  

"Overall economic conditions in our Indiana communities remain favorable. As a result, our asset quality concerns remain at very manageable levels and reflect the continued operating performance of our client base. While the agricultural sector will likely continue to face challenges in 2018, we are comfortably managing that exposure," commented Findlay.

The company's noninterest income increased $902,000, or 10%, to $9.7 million for the second quarter of 2018, compared to $8.8 million for the second quarter of 2017. Wealth advisory and brokerage fees increased by 21% compared to the second quarter of 2017 due to continued growth of client relationships. In addition, noninterest income was positively impacted by a 17% increase over the prior year second quarter in fee income from service charges on deposit accounts, primarily due to growth in fees from business accounts. Loan and service fees increased by 28% over the prior year second quarter and mortgage banking income increased by 16% as well.

The company's noninterest income increased 15% to $19.6 million for the six months ended June 30, 2018 compared to $17.1 million in the prior year period. Noninterest income was positively impacted by an 18% increase in wealth advisory and brokerage fees, as well as a 21% increase in loan and service fees, a 16% increase in service charges on deposit accounts and a 33% improvement in mortgage banking income.

The company's noninterest expense increased $922,000, or 5%, to $20.3 million in the second quarter of 2018, compared to $19.4 million in the second quarter of 2017. Salaries and employee benefits increased primarily due to an increase to the company's minimum hiring wage and normal merit increases. Data processing fees increased primarily due to the company's continued investment in technology-based solutions. Corporate and business development expense decreased primarily due to a reduction in contributions as well as lower advertising expenses.

The company's noninterest expense increased by $2.1 million or 5% to $41.5 million in the first six months of 2018 compared to $39.4 million in the prior year period. The increase was driven by salaries and employee benefits, which increased by 5% or $1.1 million, primarily due to an increase to the company's minimum hiring wage, special bonuses paid to non-officer employees, normal merit increases and increased health insurance cost. Data processing fees increased primarily due to the company's continued investment in technology-based solutions. Corporate and business development expense decreased primarily due to a reduction in contributions as well as lower advertising expenses.

The company's efficiency ratio was 42.9% for the second quarter of 2018, compared to 45.4% for the second quarter of 2017 and 46.0% for the linked first quarter of 2018. The company's efficiency ratio was 44.4% for the six months ended June 30, 2018 down from 47.5% in the prior year period due to revenue growth outpacing expense growth.

The effective tax rate for the second quarter 2018 was 20.2%, compared to 32.5% for the second quarter 2017 and reflects the effect of the Tax Cuts and Jobs Act, which lowered the company's federal tax rate to 21% from 35% effective January 1, 2018. The effective tax rate for the six months ended June 30, 2018 was 17.9% compared with 30.2% in the prior year period.

Lakeland Financial Corporation is a $4.8 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, 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 are included in the attached financial tables where the non-GAAP measures are presented. 

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

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. Numerous factors could cause the company's actual results to differ from those reflected in forward-looking statements, including trade policy and those identified in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K.

                     
LAKELAND FINANCIAL CORPORATION
SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS
 
  Three Months Ended   Six Months Ended  
(Unaudited – Dollars in thousands, except per share data) Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,  
END OF PERIOD BALANCES   2018       2018       2017       2018       2017    
Assets $ 4,760,869     $ 4,726,948     $ 4,392,999     $ 4,760,869     $ 4,392,999    
Deposits   3,934,953       4,099,488       3,615,939       3,934,953       3,615,939    
Brokered Deposits   223,058       227,260       116,435       223,058       116,435    
Core Deposits   3,711,895       3,872,228       3,499,504       3,711,895       3,499,504    
Loans   3,858,713       3,845,668       3,577,004       3,858,713       3,577,004    
Allowance for Loan Losses   47,706       45,627       44,563       47,706       44,563    
Total Equity   486,484       473,333       450,460       486,484       450,460    
Goodwill net of deferred tax assets   3,793       3,796       3,126       3,793       3,126    
Tangible Common Equity (1)   482,691       469,537       447,334       482,691       447,334    
AVERAGE BALANCES                    
Total Assets $ 4,739,163     $ 4,706,726     $ 4,395,495     $ 4,723,034     $ 4,353,056    
Earning Assets   4,448,240       4,421,461       4,150,234       4,434,924       4,105,309    
Investments   560,484       546,042       531,262       553,303       523,317    
Loans   3,839,441       3,791,922       3,586,407       3,815,813       3,547,995    
Total Deposits   4,092,145       4,094,917       3,682,348       4,093,523       3,659,885    
Interest Bearing Deposits   3,266,808       3,253,309       2,926,086       3,260,095       2,897,540    
Interest Bearing Liabilities   3,409,138       3,367,104       3,171,565       3,388,236       3,128,315    
Total Equity   479,291       469,998       445,287       474,670       438,627    
INCOME STATEMENT DATA                    
Net Interest Income $ 37,533     $ 36,223     $ 33,819     $ 73,756     $ 65,880    
Net Interest Income-Fully Tax Equivalent   37,973       36,632       34,550       74,604       67,281    
Provision for Loan Losses   1,700       3,300       500       5,000       700    
Noninterest Income   9,693       9,879       8,791       19,572       17,050    
Noninterest Expense   20,274       21,202       19,352       41,476       39,400    
Net Income   20,142       18,336       15,364       38,478       29,878    
PER SHARE DATA                    
Basic Net Income Per Common Share $ 0.80     $ 0.73     $ 0.61     $ 1.52     $ 1.19    
Diluted Net Income Per Common Share   0.78       0.71       0.60       1.50       1.17    
Cash Dividends Declared Per Common Share   0.26       0.22       0.22       0.48       0.41    
Dividend Payout   33.33   %   30.99   %   36.67   %   32.00   %   35.04   %
Book Value Per Common Share (equity per share issued)   19.23       18.71       17.88       19.23       17.88    
Tangible Book Value Per Common Share (1)   19.08       18.56       17.76       19.08       17.76    
Market Value – High   51.15       51.76       48.70       51.76       48.70    
Market Value – Low   45.15       45.01       41.38       45.01       39.68    
Basic Weighted Average Common Shares Outstanding   25,293,329       25,257,414       25,183,186       25,275,471       25,167,799    
Diluted Weighted Average Common Shares Outstanding   25,709,216       25,696,864       25,619,977       25,704,505       25,618,552    
KEY RATIOS                    
Return on Average Assets   1.70   %   1.58   %   1.40   %   1.64   %   1.38   %
Return on Average Total Equity   16.86       15.82       13.84       16.35       13.74    
Average Equity to Average Assets   10.11       9.99       10.13       10.05       10.08    
Net Interest Margin   3.42       3.36       3.34       3.39       3.31    
Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)   42.93       45.99       45.42       44.44       47.51    
Tier 1 Leverage (2)   11.01       10.77       10.82       11.01       10.82    
Tier 1 Risk-Based Capital (2)   12.61       12.30       12.15       12.61       12.15    
Common Equity Tier 1 (CET1) (2)   11.88       11.57       11.39       11.88       11.39    
Total Capital (2)   13.76       13.41       13.30       13.76       13.30    
Tangible Capital (1) (2)   10.15       9.94       10.19       10.15       10.19    
ASSET QUALITY                     
Loans Past Due 30 - 89 Days $ 1,612     $ 2,168     $ 1,562     $ 1,612     $ 1,562    
Loans Past Due 90 Days or More   0       26       0       0       0    
Non-accrual Loans   12,773       11,002       9,884       12,773       9,884    
Nonperforming Loans (includes nonperforming TDR's)   12,773       11,028       9,884       12,773       9,884    
Other Real Estate Owned   10       10       194       10       194    
Other Nonperforming Assets   108       114       0       108       0    
Total Nonperforming Assets   12,891       11,151       10,078       12,891       10,078    
Performing Troubled Debt Restructurings   3,402       4,085       8,425       3,402       8,425    
Nonperforming Troubled Debt Restructurings (included in nonperforming loans)   7,666       7,945       6,852       7,666       6,852    
Total Troubled Debt Restructurings   11,068       12,029       15,277       11,068       15,277    
Impaired Loans   16,931       15,824       19,580       16,931       19,580    
Non-Impaired Watch List Loans   196,880       166,205       133,526       196,880       133,526    
Total Impaired and Watch List Loans   213,811       182,029       153,109       213,811       153,109    
Gross Charge Offs   128       4,977       261       5,105       764    
Recoveries   507       183       550       690       909    
Net Charge Offs/(Recoveries)   (379 )     4,794       (289 )     4,415       (145 )  
Net Charge Offs/(Recoveries)  to Average Loans   (0.04 ) %   0.51   %   (0.03 ) %   0.23   %   (0.01 ) %
Loan Loss Reserve to Loans   1.24   %   1.19   %   1.25   %   1.24   %   1.25   %
Loan Loss Reserve to Nonperforming Loans   373.49   %   413.75   %   450.75   %   373.49   %   450.75   %
Loan Loss Reserve to Nonperforming Loans and Performing TDR's   294.94   %   301.92   %   243.37   %   294.94   %   243.37   %
Nonperforming Loans to Loans   0.33   %   0.29   %   0.28   %   0.33   %   0.28   %
Nonperforming Assets to Assets   0.27   %   0.24   %   0.23   %   0.27   %   0.23   %
Total Impaired and Watch List Loans to Total Loans   5.54   %   4.73   %   4.28   %   5.54   %   4.28   %
OTHER DATA                    
Full Time Equivalent Employees   553       539       540       553       540    
Offices   49       49       49       49       49    
                     
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"                    
(2) Capital ratios for June 30, 2018 are preliminary until the Call Report is filed.                    
                     
                     


       
CONSOLIDATED BALANCE SHEETS (in thousands except share data)
  June 30,   December 31,
    2018       2017  
  (Unaudited)    
ASSETS      
Cash and due from banks $    147,439     $ 140,402  
Short-term investments   32,786       35,778  
Total cash and cash equivalents   180,225       176,180  
       
Securities available for sale (carried at fair value)   563,227       538,493  
Real estate mortgage loans held for sale   6,097       3,346  
       
Loans, net of allowance for loan losses of $47,706 and $47,121   3,811,007       3,771,338  
       
Land, premises and equipment, net   57,242       56,466  
Bank owned life insurance   76,501       75,879  
Federal Reserve and Federal Home Loan Bank stock   13,772       13,772  
Accrued interest receivable   15,223       14,093  
Goodwill   4,970       4,970  
Other assets   32,605       28,439  
Total assets $    4,760,869     $ 4,682,976  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
LIABILITIES      
Noninterest bearing deposits $    839,784     $ 885,622  
Interest bearing deposits   3,095,169       3,123,033  
Total deposits   3,934,953       4,008,655  
       
Borrowings      
Securities sold under agreements to repurchase   106,239       70,652  
Federal Home Loan Bank advances   175,000       80,030  
Subordinated debentures   30,928       30,928  
Total borrowings   312,167       181,610  
       
Accrued interest payable   7,328       6,311  
Other liabilities   19,937       17,733  
Total liabilities   4,274,385       4,214,309  
       
STOCKHOLDERS' EQUITY      
Common stock:  90,000,000 shares authorized, no par value      
25,294,582 shares issued and 25,126,537 outstanding as of June 30, 2018      
25,194,903 shares issued and 25,025,933 outstanding as of December 31, 2017   109,223       108,862  
Retained earnings   390,404       363,794  
Accumulated other comprehensive income/(loss)   (9,710 )     (670 )
Treasury stock, at cost (2018 - 168,045 shares, 2017 - 168,970 shares)   (3,522 )     (3,408 )
Total stockholders' equity   486,395       468,578  
Noncontrolling interest   89       89  
Total equity   486,484       468,667  
Total liabilities and equity $    4,760,869     $ 4,682,976  
       
       


                 
CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)          
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
  2018   2017   2018   2017  
NET INTEREST INCOME                
Interest and fees on loans                
Taxable $    44,439   $ 36,967   $    86,233     $ 71,414  
Tax exempt     202     162       419       312  
Interest and dividends on securities                
Taxable     2,492     2,364       4,926       4,684  
Tax exempt     1,466     1,274       2,797       2,436  
Other interest income     196     54       488       102  
Total interest income     48,795     40,821       94,863       78,948  
                 
Interest on deposits     10,648     6,243       20,015       11,685  
Interest on borrowings                
Short-term     195     431       306       741  
Long-term     419     328       786       642  
Total interest expense     11,262     7,002       21,107       13,068  
                 
NET INTEREST INCOME     37,533     33,819       73,756       65,880  
                 
Provision for loan losses     1,700     500       5,000       700  
                 
NET INTEREST INCOME AFTER PROVISION FOR                
  LOAN LOSSES     35,833     33,319       68,756       65,180  
                 
NONINTEREST INCOME                
Wealth advisory fees     1,544     1,284       3,049       2,534  
Investment brokerage fees     377     299       667       620  
Service charges on deposit accounts     3,800     3,253       7,428       6,396  
Loan and service fees     2,421     1,897       4,598       3,790  
Merchant card fee income     549     570       1,191       1,108  
Bank owned life insurance income     348     402       711       873  
Other income     216     659       1,255       1,168  
Mortgage banking income     438     378       679       509  
Net securities gains/(losses)     0     49       (6 )     52  
Total noninterest income     9,693     8,791       19,572       17,050  
                 
NONINTEREST EXPENSE                
Salaries and employee benefits     11,493     11,014       23,512       22,384  
Net occupancy expense     1,237     1,154       2,663       2,274  
Equipment costs     1,250     1,156       2,524       2,231  
Data processing fees and supplies     2,290     1,974       4,803       3,990  
Corporate and business development     1,046     1,196       2,179       2,698  
FDIC insurance and other regulatory fees     409     419       870       853  
Professional fees     910     801       1,782       1,755  
Other expense     1,639     1,638       3,143       3,215  
Total noninterest expense     20,274     19,352       41,476       39,400  
                 
INCOME BEFORE INCOME TAX EXPENSE     25,252     22,758       46,852       42,830  
Income tax expense     5,110     7,394       8,374       12,952  
NET INCOME $    20,142   $ 15,364   $    38,478     $ 29,878  
                 
BASIC WEIGHTED AVERAGE COMMON SHARES     25,293,329     25,183,186       25,275,471       25,167,799  
BASIC EARNINGS PER COMMON SHARE $    0.80   $ 0.61   $    1.52     $ 1.19  
DILUTED WEIGHTED AVERAGE COMMON SHARES     25,709,216     25,619,977       25,704,505       25,618,552  
DILUTED EARNINGS PER COMMON SHARE $    0.78   $ 0.60   $    1.50     $ 1.17  
                 
                 


 
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
SECOND QUARTER 2018
(unaudited in thousands)
                         
  June 30, March 31, December 31, June 30,
  2018 2018 2017 2017
Commercial and industrial loans:                        
Working capital lines of credit loans $ 780,910   20.2 % $ 778,779   20.2 % $ 743,609   19.4 % $ 717,875   20.0 %
Non-working capital loans   691,118   17.9     706,228   18.4     675,072   17.7     646,517   18.1  
Total commercial and industrial loans   1,472,028   38.1     1,485,007   38.6     1,418,681   37.1     1,364,392   38.1  
                         
Commercial real estate and multi-family residential loans:                        
Construction and land development loans   200,438   5.2     237,887   6.2     224,474   5.9     209,772   5.8  
Owner occupied loans   569,453   14.8     543,192   14.1     538,603   14.1     511,425   14.3  
Nonowner occupied loans   518,840   13.4     507,041   13.2     508,121   13.3     450,907   12.6  
Multifamily loans   221,579   5.7     193,956   5.0     173,715   4.5     170,902   4.8  
Total commercial real estate and multi-family residential loans   1,510,310   39.1     1,482,076   38.5     1,444,913   37.8     1,343,006   37.5  
                         
Agri-business and agricultural loans:                        
Loans secured by farmland   148,396   3.9     145,363   3.8     186,437   4.9     156,053   4.4  
Loans for agricultural production   155,826   4.0     171,607   4.5     196,404   5.1     175,334   4.9  
Total agri-business and agricultural loans   304,222   7.9     316,970   8.3     382,841   10.0     331,387   9.3  
                         
Other commercial loans   120,541   3.1     116,657   3.0     124,076   3.3     116,651   3.3  
Total commercial loans   3,407,101   88.2     3,400,710   88.4     3,370,511   88.2     3,155,436   88.2  
                         
Consumer 1-4 family mortgage loans:                        
Closed end first mortgage loans   180,099   4.7     180,542   4.7     179,302   4.7     171,495   4.8  
Open end and junior lien loans   179,622   4.7     179,065   4.7     181,865   4.8     172,530   4.8  
Residential construction and land development loans   13,226   0.3     13,342   0.3     13,478   0.3     10,118   0.3  
Total consumer 1-4 family mortgage loans   372,947   9.7     372,949   9.7     374,645   9.8     354,143   9.9  
                         
Other consumer loans   80,097   2.1     73,277   1.9     74,369   2.0     68,646   1.9  
Total consumer loans   453,044   11.8     446,226   11.6     449,014   11.8     422,789   11.8  
Subtotal   3,860,145   100.0 %   3,846,936   100.0 %   3,819,525   100.0 %   3,578,225   100.0 %
Less:  Allowance for loan losses   (47,706 )       (45,627 )       (47,121 )       (44,563 )    
Net deferred loan fees   (1,432 )       (1,268 )       (1,066 )       (1,221 )    
Loans, net $ 3,811,007       $ 3,800,041       $ 3,771,338       $ 3,532,441      
                         
                         
                         
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
SECOND QUARTER 2018
(unaudited in thousands)
                         
  June 30,     March 31,     December 31,     June 30,    
    2018         2018         2017         2017      
Non-interest bearing demand deposits $ 839,784       $ 858,950       $ 885,622       $ 762,965      
Savings and transaction accounts:                        
Savings deposits   255,594         272,472         263,570         275,151      
Interest bearing demand deposits   1,422,840         1,491,220         1,446,880         1,322,847      
Time deposits:                        
Deposits of $100,000 or more   1,149,197         1,216,802         1,161,365         1,015,741      
Other time deposits   267,538         260,044         251,218         239,235      
Total deposits $ 3,934,953       $ 4,099,488       $ 4,008,655       $ 3,615,939      
FHLB advances and other borrowings   312,167         125,644         181,610         275,188      
Total funding sources $ 4,247,120       $ 4,225,132       $ 4,190,265       $ 3,891,127      
                         
                         


 
LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
 
                                           
  Three Months Ended     Three Months Ended     Three Months Ended    
  June 30, 2018     March 31, 2018     June 30, 2017    
  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) $ 3,816,879     $ 44,439   4.67 %   $ 3,767,300     $ 41,794   4.50 %   $ 3,566,504     $ 36,967   4.16 %  
Tax exempt (1)   22,562       253   4.50       24,622       272   4.48       19,903       240   4.82    
Investments: (1)                                          
Available for sale   560,484       4,347   3.11       546,042       4,119   3.06       531,262       4,291   3.24    
Short-term investments   4,079       11   1.08       4,579       9   0.80       6,124       8   0.52    
Interest bearing deposits   44,236       185   1.68       78,918       283   1.45       26,441       46   0.70    
Total earning assets $ 4,448,240     $ 49,235   4.44 %   $ 4,421,461     $ 46,477   4.26 %   $ 4,150,234     $ 41,552   4.02 %  
Less:  Allowance for loan losses   (46,494 )               (47,189 )               (44,090 )            
Nonearning Assets                                          
Cash and due from banks   139,677                 137,738                 101,446              
Premises and equipment   56,093                 56,192                 54,341              
Other nonearning assets   141,647                 138,524                 133,564              
Total assets $ 4,739,163               $ 4,706,726               $ 4,395,495              
                                           
Interest Bearing Liabilities                                          
Savings deposits $ 259,989     $ 86   0.13 %   $ 268,091     $ 89   0.13 %   $ 274,645     $ 105   0.15 %  
Interest bearing checking accounts   1,528,733       4,412   1.16       1,491,820       3,575   0.97       1,403,560       2,387   0.68    
Time deposits:                                          
In denominations under $100,000   264,294       946   1.44       255,209       848   1.35       237,917       700   1.18    
In denominations over $100,000   1,213,792       5,204   1.72       1,238,189       4,855   1.59       1,009,964       3,051   1.21    
Miscellaneous short-term borrowings   111,402       195   0.70       82,862       111   0.54       214,520       431   0.81    
Long-term borrowings and                                          
subordinated debentures   30,928       419   5.43       30,933       367   4.81       30,959       328   4.25    
Total interest bearing liabilities $ 3,409,138     $ 11,262   1.33 %   $ 3,367,104     $ 9,845   1.19 %   $ 3,171,565     $ 7,002   0.89 %  
Noninterest Bearing Liabilities                                          
Demand deposits   825,337                 841,608                 756,262              
Other liabilities   25,397                 28,016                 22,381              
Stockholders' Equity   479,291                 469,998                 445,287              
Total liabilities and stockholders' equity $ 4,739,163               $ 4,706,726               $ 4,395,495              
                                           
Interest Margin Recap                                          
Interest income/average earning assets       49,235   4.44           46,477   4.26           41,552   4.02    
Interest expense/average earning assets       11,262   1.02           9,845   0.90           7,002   0.68    
Net interest income and margin     $ 37,973   3.42 %       $ 36,632   3.36 %       $ 34,550   3.34 %  
                                           


(1)   Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate for 2018 and a 35 percent tax rate for 2017. 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 $440,000, $409,000 and $731,000 in the three-month periods ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively.
(2)   Loan fees, which are immaterial in relation to total taxable loan interest income for 2018 and 2017, 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, tangible book value per share and the tangible common equity to tangible assets ratio 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, net of deferred tax. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets, net of deferred tax. 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   Six Months Ended  
  Jun. 30,   Mar. 31,   Jun. 30,   Jun. 30,   Jun. 30,  
    2018       2018       2017       2018       2017    
Total Equity $ 486,484     $ 473,333     $ 450,460     $ 486,484     $ 450,460    
Less: Goodwill   (4,970 )     (4,970 )     (4,970 )     (4,970 )     (4,970 )  
Plus: Deferred tax assets related to goodwill   1,177       1,174       1,844       1,177       1,844    
Tangible Common Equity   482,691       469,537       447,334       482,691       447,334    
                     
Assets $ 4,760,869     $ 4,726,948     $ 4,392,999     $ 4,760,869     $ 4,392,999    
Less: Goodwill   (4,970 )     (4,970 )     (4,970 )     (4,970 )     (4,970 )  
Plus: Deferred tax assets related to goodwill   1,177       1,174       1,844       1,177       1,844    
Tangible Assets   4,757,076       4,723,152       4,389,873       4,757,076       4,389,873    
                     
Ending common shares issued   25,294,582       25,291,582       25,185,619       25,294,582       25,185,619    
                     
Tangible Book Value Per Common Share $ 19.08     $ 18.56     $ 17.76     $ 19.08     $ 17.76    
                     
Tangible Common Equity/Tangible Assets   10.15   %   9.94   %   10.19   %   10.15   %   10.19   %
                     

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

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