Market Overview

Lakeland Financial Reports Record Performance

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WARSAW, Ind., Jan. 25, 2019 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record net income of $80.4 million, which represents an increase of $23.1 million or 40% compared with net income of $57.3 million for 2017. Diluted earnings per share also increased 40% to $3.13 compared to $2.23 for 2017. This per share performance also represents a record for the company and its shareholders.

The company further reported record quarterly net income of $21.4 million for the three months ended December 31, 2018 versus $11.6 million for the comparable period of 2017, an increase of 84%. Diluted net income per common share was also a record for the quarter and increased 84% to $0.83 for the three months ended December 31, 2018 versus $0.45 for the comparable period of 2017. Excluding the $4.1 million 2017 income tax provision, net income increased 36% and diluted earnings per share increased 36% for the three months ended December 31, 2018 compared to the comparable period of 2017.

David M. Findlay, President and CEO commented, "2018 represents our ninth consecutive year of record income performance. Our long-term performance is especially gratifying as we have reported record net income in 29 of the last 30 years. We're particularly proud of our ability to consistently produce quality earnings over the last three decades for our shareholders."

Highlights for the year and quarter are noted below.

Full year 2018 versus 2017 highlights:

  • Return on average equity of 16.5%, up from 12.7%
  • Organic average loan growth of $233 million, or 6%
  • Average deposit growth of $337 million, or 9%
  • Net interest income increase of $15.4 million, or 11%
  • Net interest margin increase of 10 basis points to 3.43%
  • Noninterest income increase of $4.1 million, or 11%
  • Revenue growth of $19.5 million, or 11%
  • Pretax net income growth of $9.3 million, or 10%
  • Nonperforming assets to total assets of 0.16%, down from 0.20% a year ago
  • Total equity and tangible common equity1 increase of $53 million,  or 11%

4th Quarter 2018 versus 4th Quarter 2017 highlights:

  • Return on average equity of 16.8%, up from 9.9%
  • Organic average loan growth of $178 million, or 5%
  • Average deposit growth of $174 million, or 4%
  • Net interest income increase of $4.2 million, or 12%
  • Net interest margin increase of 19 basis points to 3.52%
  • Noninterest income increase of $643,000, or 7%
  • Pretax net income growth of $3.4 million, or 15%
  • Revenue growth of $4.8 million, or 11%
  • Total equity and tangible common equity2 increase of $53 million,  or 11%

4th Quarter 2018 versus 3rd Quarter 2018 highlights:

  • Return on average equity of 16.8% up from 16.6%
  • Organic average loan growth of $68 million, or 2%
  • Net interest income growth of $1.7 million, or 4%
  • Revenue growth of $1.3 million, or 3%
  • Reduced nonperforming assets of $5.2 million, or 41%
  • Average equity  increase of $12.4 million, or 3%

As announced on January 8, 2019, the board of directors approved a cash dividend for the fourth quarter of $0.26 per share, payable on February 5, 2019, to shareholders of record as of January 25, 2019. The fourth quarter dividend per share represents an 18% increase over the fourth quarter 2017 dividend of $0.22 per share.

In addition, on January 8, 2019, the Board of Directors authorized the purchase of up to $30,000,000 shares of the company's common stock, representing approximately 3.0% of the company's issued and outstanding shares of common stock as of December 31, 2018. The Board of Directors authorized this stock repurchase plan based on the strength of the company's balance sheet and capital position. The Board believes that a stock repurchase plan is an important tool that can be utilized to enhance long term shareholder value. Share repurchases may be made periodically as permitted by securities laws and other legal and regulatory requirements and will be subject to market conditions as well as other factors. The timing, price and quantity of purchases will be at the discretion of the corporation and the program may be discontinued or suspended at any time. Repurchases may be made in the open market, through block trades or otherwise, and in privately negotiated transactions. If any share purchases are made, they will be made on or prior to December 31, 2019.

Findlay continued, "Revenue growth was once again a critical driver of our ability to generate strong earnings growth. We experienced healthy double digit increases in fee-based services in all three of our core business units, commercial, retail, and wealth advisory. In addition, our asset sensitive balance sheet contributed to an expansion of our net interest margin."

Return on average total equity for the year ended December 31, 2018 was 16.51%, compared to 12.72% in 2017. Return on average assets was 1.69% in 2018 compared to 1.29% in 2017. The company's total capital as a percent of risk-weighted assets was 14.20% at December 31, 2018, compared to 13.26% at December 31, 2017 and 14.14% at September 30, 2018. The company's tangible common equity3 to tangible assets ratio was 10.63% at December 31, 2018, compared to 9.93% at December 31, 2017 and 10.41% at September 30, 2018.

Average total loans for 2018 were $3.84 billion, an increase of $233.0 million, or 6%, versus $3.61 billion for 2017. Total loans outstanding grew $96.3 million, or 3%, from $3.82 billion as of December 31, 2017 to $3.91 billion as of December 31, 2018. On a linked quarter basis, total loans grew $71.6 million, or 2%, from $3.84 billion at September 30, 2018. Average total loans for the fourth quarter of 2018 was $3.91 billion, an increase of $177.5 million, or 5%, versus $3.73 billion for the comparable period of 2017. On a linked quarter basis, total average loans increased by $67.9 million, or 2%, from $3.84 billion for the third quarter of 2018 to $3.91 billion for the fourth quarter of 2018.

Average total deposits for 2018 were $4.09 billion, an increase of $336.7 million, or 9%, versus $3.76 billion for 2017. Total deposits grew $35.4 million, or 1%, from $4.01 billion as of December 31, 2017 to $4.04 billion as of December 31, 2018. In addition, total core deposits, which exclude brokered deposits, increased $135.5 million, or 4%, from $3.74 billion at December 31, 2017 to $3.88 billion at December 31, 2018 due to growth in commercial deposits of $112.4, million or 12%, growth in retail deposits of $57.8 million, or 4%, offset by declines in public fund deposits of $34.7 million or 3%.

Findlay added, "Our commercial and retail banking teams delivered good core deposit growth in 2018, which provided deposit-driven funding for our loan growth. We are pleased that net loan growth returned to the balance sheet in the fourth quarter. We continued to experience strong organic growth in the quarter and did not incur the elevated level of loan pay downs that occurred in the second and third quarters."

The company's net interest margin increased 10 basis points to 3.43% for 2018 compared to 3.33% for 2017. The company's net interest margin was 3.52% in the fourth quarter of 2018 versus 3.33% for the fourth quarter of 2017 and 3.42% during the third quarter 2018. The higher margin in 2018 was due to higher yields and growth in loans, and was partially offset by a higher cost of funds, which was driven by the Federal Reserve Bank increasing the target Federal Funds Rate in March, June, September and December of 2018. The company estimates that net interest margin benefited by four basis points during the fourth quarter 2018 from the payoff of a nonaccrual loan and other nonaccrual adjustments.

Net interest income increased $15.4 million, or 11%, to $151.3 million in 2018, versus $135.9 million in 2017 due to net interest margin expansion and growth in loans and deposits during the year. Net interest income increased $4.2 million, or 12%, to $39.6 million in the fourth quarter of 2018, versus $35.4 million in the fourth quarter of 2017. On a linked quarter basis, net interest income increased by $1.7 million from $37.9 million or 4%.

The company recorded a provision for loan losses of $6.4 million in 2018 compared to $3.0 million in 2017, primarily resulting from a charge off of $5.1 million from a single commercial loan relationship in addition to growth in the loan portfolio. The company recorded a provision for loan losses of $300,000 in the fourth quarter of 2018, versus $1.9 million in the fourth quarter of 2017 and $1.1 million in the third quarter of 2018. The company's allowance for loan losses as of December 31, 2018 was $48.5 million compared to $47.1 million as of December 31, 2017 and $48.3 million as of September 30, 2018. The allowance for loan losses represented 1.24% of total loans as of December 31, 2018 versus 1.23% at December 31, 2017 and 1.26% as of September 30, 2018.

Net charge offs were $5.1 million in 2018 versus net recoveries of $403,000 in 2017. Net charge offs for the fourth quarter of 2018 were $189,000 versus net charge offs of $226,000 in the fourth quarter of 2017 and net charge offs of $463,000 during the linked third quarter 2018. Net charge offs to average loans were 0.13% in 2018 compared to net recoveries of 0.01% for 2017. Annualized net charge offs to average loans were 0.02% for the fourth quarters of 2018 and 2017. Annualized net charge offs to average loans were 0.05% for the linked third quarter of 2018.

Nonperforming assets decreased $1.9 million, or 20%, to $7.6 million as of December 31, 2018 versus $9.5 million as of December 31, 2017 due to a decrease in nonaccrual loans. On a linked quarter basis, nonperforming assets were $5.2 million lower than the $12.8 million reported as of September 30, 2018. The ratio of nonperforming assets to total assets at December 31, 2018 decreased to 0.16% from 0.20% at December 31, 2017 and 0.27% at September 30, 2018.  

Findlay stated, "We ended 2018 with stable asset quality and believe it's reflective of broader economic conditions in our markets."

The company's noninterest income increased $4.1 million, or 11%, to $40.1 million in 2018, compared to $36.0 million in 2017. The company's noninterest income increased by $643,000, or 7%, to $10.1 million for the fourth quarter of 2018, compared to $9.5 million for the fourth quarter of 2017. Noninterest income decreased by $328,000 from $10.4 million during the third quarter due to reduced mortgage banking income and reduced bank owned life equity based income. During 2018, noninterest income was positively impacted by increases in service charges on deposit accounts primarily related to business accounts, loan and service fees, and wealth advisory and brokerage fees due to continued growth of client relationships.

The company's noninterest expense increased $6.8 million, or 9%, to $86.0 million in 2018 compared to $79.3 million in 2017. The company's noninterest expense increased $3.0 million, or 15%, to $22.6 million in the fourth quarter of 2018, compared to $19.6 million in the fourth quarter of 2017 and was higher by $543,000, or 2% on a linked quarter basis. Salaries and employee benefits increased during 2018 primarily due to an increase to the company's minimum hiring wage, normal merit increases and increased health insurance cost. Data processing fees also increased during 2018 primarily due to the company's continued investment in technology-based solutions and ongoing transition to cloud-based technology. In addition, corporate and business development expense increased primarily due to higher community support and donation expense.

Findlay noted, "We continue to invest in our growing branch presence in our Indiana footprint with the opening of our 50th office in downtown Indianapolis. Importantly, we will stay focused on providing innovative and technology-based solutions for our customers. It is critical that we maintain and increase our investment in our technology platform as we continue to work with key technology and Fintech partners in this long-term strategy."

The company's efficiency ratio was 45.0% for 2018 compared to 46.1% for 2017. The company's efficiency ratio was 45.4% for the fourth quarter of 2018, compared to 43.7% for the fourth quarter of 2017 and 45.5% for the linked third quarter of 2018.

The effective tax rate for 2018 was 18.7%, compared to 36.0% for 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. Results for 2017 included a non-cash, non-operating and non-recurring income tax provision of $4.1 million or $0.16 per diluted share. Excluding this tax item, and calculating both periods at the 2017 effective tax rate of 31.3%, net income increased 10.4% for 2018 compared to 2017.

Lakeland Financial Corporation is a $4.9 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 50 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. The company 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. 

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.

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

LAKELAND FINANCIAL CORPORATION
FOURTH QUARTER 2018 FINANCIAL HIGHLIGHTS
 
  Three Months Ended   Twelve Months Ended  
(Unaudited – Dollars in thousands, except per share data) Dec. 31,   Sep. 30,   Dec. 31,   Dec. 31,   Dec. 31,  
END OF PERIOD BALANCES 2018   2018   2017   2018   2017
 
Assets $ 4,875,254   $ 4,757,619   $ 4,682,976   $ 4,875,254   $ 4,682,976    
Deposits   4,044,065     4,015,924     4,008,655     4,044,065     4,008,655    
Brokered Deposits   164,888     176,927     264,980     164,888     264,980    
Core Deposits   3,879,177     3,838,997     3,743,675     3,879,177     3,743,675    
Loans   3,914,745     3,843,125     3,818,459     3,914,745     3,818,459    
Allowance for Loan Losses   48,453     48,343     47,121     48,453     47,121    
Total Equity   521,704     498,541     468,667     521,704     468,667    
Goodwill net of deferred tax assets   3,779     3,790     3,799     3,779     3,799    
Tangible Common Equity (1)   517,925     494,751     464,868     517,925     464,868    
AVERAGE BALANCES                    
Total Assets $ 4,837,604   $ 4,748,953   $ 4,598,809   $ 4,758,392   $ 4,443,106    
Earning Assets   4,523,304     4,451,449     4,323,249     4,461,366     4,183,112    
Investments   573,073     569,567     537,796     562,385     530,275    
Loans   3,905,511     3,837,595     3,727,967     3,843,912     3,610,908    
Total Deposits   4,163,118     4,025,398     3,989,592     4,093,894     3,757,209    
Interest Bearing Deposits   3,256,930     3,167,135     3,151,116     3,235,867     2,967,902    
Interest Bearing Liabilities   3,390,159     3,363,583     3,266,206     3,382,507     3,178,439    
Total Equity   505,570     493,145     467,459     487,062     450,796    
INCOME STATEMENT DATA                    
Net Interest Income $ 39,590   $ 37,925   $ 35,392   $ 151,271   $ 135,892    
Net Interest Income-Fully Tax Equivalent   40,089     38,392     36,231     153,088     139,015    
Provision for Loan Losses   300     1,100     1,850     6,400     3,000    
Noninterest Income   10,105     10,433     9,462     40,110     36,009    
Noninterest Expense   22,552     22,009     19,598     86,037     79,267    
Net Income   21,363     20,570     11,627     80,411     57,330    
PER SHARE DATA                    
Basic Net Income Per Common Share $ 0.84   $ 0.81   $ 0.46   $ 3.18   $ 2.28    
Diluted Net Income Per Common Share   0.83     0.80     0.45     3.13     2.23    
Cash Dividends Declared Per Common Share   0.26     0.26     0.22     1.00     0.85    
Dividend Payout   31.33 %   32.50 %   48.89 %   31.95 %   38.12   %
Book Value Per Common Share (equity per share issued)   20.62     19.70     18.60     20.62     18.60    
Tangible Book Value Per Common Share (1)   20.47     19.55     18.45     20.47     18.45    
Market Value – High   47.41     51.25     52.43     51.76     52.43    
Market Value – Low   37.79     46.35     45.26     37.79     39.68    
Basic Weighted Average Common Shares Outstanding   25,301,732     25,301,033     25,194,903     25,288,533     25,181,208    
Diluted Weighted Average Common Shares Outstanding   25,746,490     25,745,151     25,701,337     25,727,831     25,663,381    
KEY RATIOS                    
Return on Average Assets   1.75 %   1.72 %   1.00 %   1.69 %   1.29   %
Return on Average Total Equity   16.76     16.55     9.87     16.51     12.72    
Average Equity to Average Assets   10.45     10.38     10.16     10.24     10.15    
Net Interest Margin   3.52     3.42     3.33     3.43     3.33    
Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)   45.38     45.51     43.69     44.96     46.11    
Tier 1 Leverage (2)   11.44     11.31     10.76     11.44     10.76    
Tier 1 Risk-Based Capital (2)   13.05     12.97     12.10     13.05     12.10    
Common Equity Tier 1 (CET1) (2)   12.35     12.24     11.37     12.35     11.37    
Total Capital (2)   14.20     14.14     13.26     14.20     13.26    
Tangible Capital (1) (2)   10.63     10.41     9.93     10.63     9.93    
ASSET QUALITY                    
Loans Past Due 30 - 89 Days $ 10,020   $ 13,476   $ 9,613   $ 10,020   $ 9,613    
Loans Past Due 90 Days or More   0     0     6     0     6    
Non-accrual Loans   7,260     12,337     9,401     7,260     9,401    
Nonperforming Loans (includes nonperforming TDR's)   7,260     12,337     9,407     7,260     9,407    
Other Real Estate Owned   316     316     40     316     40    
Other Nonperforming Assets   0     111     55     0     55    
Total Nonperforming Assets   7,577     12,764     9,502     7,577     9,502    
Performing Troubled Debt Restructurings   8,016     3,512     2,893     8,016     2,893    
Nonperforming Troubled Debt Restructurings (included in nonperforming loans)   4,384     7,313     7,750     4,384     7,750    
Total Troubled Debt Restructurings   12,400     10,825     10,643     12,400     10,643    
Impaired Loans   26,661     20,906     13,869     26,661     13,869    
Non-Impaired Watch List Loans   159,938     175,400     157,834     159,938     157,834    
Total Impaired and Watch List Loans   186,599     196,306     171,703     186,599     171,703    
Gross Charge Offs   424     581     625     6,110     1,560    
Recoveries   235     118     399     1,043     1,963    
Net Charge Offs/(Recoveries)   189     463     226     5,067     (403 )  
Net Charge Offs/(Recoveries)  to Average Loans   0.02 %   0.05 %   0.02 %   0.13 %   (0.01 ) %
Loan Loss Reserve to Loans   1.24 %   1.26 %   1.23 %   1.24 %   1.23   %
Loan Loss Reserve to Nonperforming Loans   667.40 %   391.92 %   500.91 %   667.40 %   500.91   %
Loan Loss Reserve to Nonperforming Loans and Performing TDR's   317.17 %   305.03 %   383.10 %   317.17 %   383.10   %
Nonperforming Loans to Loans   0.19 %   0.32 %   0.25 %   0.19 %   0.25   %
Nonperforming Assets to Assets   0.16 %   0.27 %   0.20 %   0.16 %   0.20   %
Total Impaired and Watch List Loans to Total Loans   4.77 %   5.11 %   4.50 %   4.77 %   4.50   %
OTHER DATA                    
Full Time Equivalent Employees   553     549     539     553     539    
Offices   49     49     49     49     49    
                     
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"                    
(2) Capital ratios for December 31, 2018 are preliminary until the Call Report is filed.                    
                     


CONSOLIDATED BALANCE SHEETS (in thousands except share data)
  December 31,   December 31,
    2018       2017  
  (Unaudited)    
ASSETS      
Cash and due from banks $ 192,290     $ 140,402  
Short-term investments   24,632       35,778  
Total cash and cash equivalents   216,922       176,180  
       
Securities available for sale (carried at fair value)   585,549       538,493  
Real estate mortgage loans held for sale   2,293       3,346  
       
Loans, net of allowance for loan losses of $48,453 and $47,121   3,866,292       3,771,338  
       
Land, premises and equipment, net   58,097       56,466  
Bank owned life insurance   77,106       75,879  
Federal Reserve and Federal Home Loan Bank stock   13,772       13,772  
Accrued interest receivable   15,518       14,093  
Goodwill   4,970       4,970  
Other assets   34,735       28,439  
Total assets $ 4,875,254     $ 4,682,976  
       
LIABILITIES AND STOCKHOLDERS' EQUITY      
       
LIABILITIES      
Noninterest bearing deposits $ 946,838     $ 885,622  
Interest bearing deposits   3,097,227       3,123,033  
Total deposits   4,044,065       4,008,655  
       
Borrowings      
Securities sold under agreements to repurchase   75,555       70,652  
Federal Home Loan Bank advances   170,000       80,030  
Subordinated debentures   30,928       30,928  
Total borrowings   276,483       181,610  
       
Accrued interest payable   10,404       6,311  
Other liabilities   22,598       17,733  
Total liabilities   4,353,550       4,214,309  
       
STOCKHOLDERS' EQUITY      
Common stock:  90,000,000 shares authorized, no par value      
25,301,732 shares issued and 25,128,773 outstanding as of December 31, 2018      
25,194,903 shares issued and 25,025,933 outstanding as of December 31, 2017   112,383       108,862  
Retained earnings   419,179       363,794  
Accumulated other comprehensive loss   (6,191 )     (670 )
Treasury stock, at cost (2018 - 172,959 shares, 2017 - 168,970 shares)   (3,756 )     (3,408 )
Total stockholders' equity   521,615       468,578  
Noncontrolling interest   89       89  
Total equity   521,704       468,667  
Total liabilities and equity $ 4,875,254     $ 4,682,976  
       


CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)        
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
    2018       2017       2018       2017
NET INTEREST INCOME              
Interest and fees on loans              
Taxable $ 49,091     $ 40,251     $ 181,451     $ 150,295
Tax exempt   187       212       814       729
Interest and dividends on securities              
Taxable   2,516       2,185       9,717       9,218
Tax exempt   1,712       1,357       6,079       5,102
Other interest income   222       156       909       354
Total interest income   53,728       44,161       198,970       165,698
               
Interest on deposits   13,425       8,304       44,913       27,026
Interest on borrowings              
Short-term   282       117       1,143       1,446
Long-term   431       348       1,643       1,334
Total interest expense   14,138       8,769       47,699       29,806
               
NET INTEREST INCOME   39,590       35,392       151,271       135,892
               
Provision for loan losses   300       1,850       6,400       3,000
               
NET INTEREST INCOME AFTER PROVISION FOR              
  LOAN LOSSES   39,290       33,542       144,871       132,892
               
NONINTEREST INCOME              
Wealth advisory fees   1,668       1,476       6,344       5,481
Investment brokerage fees   415       323       1,458       1,273
Service charges on deposit accounts   4,289       3,669       15,831       13,696
Loan and service fees   2,366       2,050       9,291       7,900
Merchant card fee income   627       583       2,461       2,279
Bank owned life insurance income   67       498       1,244       1,768
Other income   565       712       2,381       2,598
Mortgage banking income   152       171       1,150       982
Net securities gains/(losses)   (44 )     (20 )     (50 )     32
Total noninterest income   10,105       9,462       40,110       36,009
               
NONINTEREST EXPENSE              
Salaries and employee benefits   12,086       11,244       48,353       45,306
Net occupancy expense   1,257       1,190       5,149       4,595
Equipment costs   1,403       1,216       5,243       4,629
Data processing fees and supplies   2,393       2,211       9,685       8,233
Corporate and business development   1,996       801       5,066       4,744
FDIC insurance and other regulatory fees   419       502       1,701       1,798
Professional fees   1,082       857       3,798       3,574
Other expense   1,916       1,577       7,042       6,388
Total noninterest expense   22,552       19,598       86,037       79,267
               
INCOME BEFORE INCOME TAX EXPENSE   26,843       23,406       98,944       89,634
Income tax expense   5,480       11,779       18,533       32,304
NET INCOME $ 21,363     $ 11,627     $ 80,411     $ 57,330
               
BASIC WEIGHTED AVERAGE COMMON SHARES   25,301,732       25,194,903       25,288,533       25,181,208
BASIC EARNINGS PER COMMON SHARE $ 0.84     $ 0.46     $ 3.18     $ 2.28
DILUTED WEIGHTED AVERAGE COMMON SHARES   25,746,490       25,701,337       25,727,831       25,663,381
DILUTED EARNINGS PER COMMON SHARE $ 0.83     $ 0.45     $ 3.13     $ 2.23
               


LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
FOURTH QUARTER 2018
(unaudited in thousands)
                   
  December 31, September 30, December 31,
    2018   2018   2017
Commercial and industrial loans:                  
Working capital lines of credit loans $ 690,620   17.6  % $ 757,004   19.7 % $ 743,609   19.4 %
Non-working capital loans   714,759   18.3     693,402   18.0     675,072   17.7  
Total commercial and industrial loans   1,405,379   35.9     1,450,406   37.7     1,418,681   37.1  
                   
Commercial real estate and multi-family residential loans:                  
Construction and land development loans   266,805   6.8     231,795   6.0     224,474   5.9  
Owner occupied loans   586,325   15.0     571,998   14.9     538,603   14.1  
Nonowner occupied loans   520,901   13.3     520,414   13.5     508,121   13.3  
Multifamily loans   195,604   5.0     192,218   5.0     173,715   4.5  
Total commercial real estate and multi-family residential loans   1,569,635   40.1     1,516,425   39.4     1,444,913   37.8  
                   
Agri-business and agricultural loans:                  
Loans secured by farmland   177,503   4.6     159,256   4.2     186,437   4.9  
Loans for agricultural production   193,010   4.9     134,773   3.5     196,404   5.1  
Total agri-business and agricultural loans   370,513   9.5     294,029   7.7     382,841   10.0  
                   
Other commercial loans   95,657   2.4     114,350   3.0     124,076   3.3  
Total commercial loans   3,441,184   87.9     3,375,210   87.8     3,370,511   88.2  
                   
Consumer 1-4 family mortgage loans:                  
Closed end first mortgage loans   185,822   4.7     185,212   4.8     179,302   4.7  
Open end and junior lien loans   187,030   4.8     185,869   4.8     181,865   4.8  
Residential construction and land development loans   16,226   0.4     15,128   0.4     13,478   0.3  
Total consumer 1-4 family mortgage loans   389,078   9.9     386,209   10.0     374,645   9.8  
                   
Other consumer loans   86,064   2.2     83,203   2.2     74,369   2.0  
Total consumer loans   475,142   12.1     469,412   12.2     449,014   11.8  
Subtotal   3,916,326   100.0  %   3,844,622   100.0 %   3,819,525   100.0 %
Less:  Allowance for loan losses   (48,453 )       (48,343 )       (47,121 )    
Net deferred loan fees   (1,581 )       (1,497 )       (1,066 )    
Loans, net $ 3,866,292       $ 3,794,782       $ 3,771,338      
                   


LAKELAND FINANCIAL CORPORATION  
DEPOSITS AND BORROWINGS
FOURTH QUARTER 2018  
(unaudited in thousands)  
                   
  December 31,     September 30,     December 31,    
  2018     2018     2017    
Non-interest bearing demand deposits $ 946,838     $ 880,363     $ 885,622    
Savings and transaction accounts:                  
Savings deposits   247,903       251,748       263,570    
Interest bearing demand deposits   1,429,570       1,388,934       1,446,880    
Time deposits:                  
Deposits of $100,000 or more   1,146,221       1,223,457       1,161,365    
Other time deposits   273,533       271,422       251,218    
Total deposits $ 4,044,065     $ 4,015,924     $ 4,008,655    
FHLB advances and other borrowings   276,483       208,280       181,610    
Total funding sources $ 4,320,548     $ 4,224,204     $ 4,190,265    
                   

LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)

  Three Months Ended     Three Months Ended     Three Months Ended  
  December 31, 2018     September 30, 2018     December 31, 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) $ 3,884,500     $ 49,091   5.01 %   $ 3,814,831     $ 46,127   4.80 %   $ 3,703,260     $ 40,251   4.31 %
Tax exempt (1)   21,011       234   4.42       22,764       257   4.48       24,707       321   5.15  
Investments: (1)                                        
Available for sale   573,073       4,682   3.24       569,567       4,263   2.97       537,796       4,272   3.15  
Short-term investments   3,350       15   1.78       3,480       14   1.60       4,377       7   0.63  
Interest bearing deposits   41,370       207   1.99       40,807       185   1.80       53,109       149   1.11  
Total earning assets $ 4,523,304     $ 54,229   4.76 %   $ 4,451,449     $ 50,846   4.53 %   $ 4,323,249     $ 45,000   4.13 %
Less:  Allowance for loan losses   (49,045 )               (48,137 )               (46,281 )          
Nonearning Assets                                        
Cash and due from banks   156,681                 144,605                 127,028            
Premises and equipment   57,516                 57,545                 56,719            
Other nonearning assets   149,148                 143,491                 138,094            
Total assets $ 4,837,604               $ 4,748,953               $ 4,598,809            
                                         
Interest Bearing Liabilities                                        
Savings deposits $ 250,755     $ 76   0.12 %   $ 253,244     $ 79   0.12 %   $ 270,978     $ 95   0.14 %
Interest bearing checking accounts   1,476,013       5,498   1.48       1,407,460       4,455   1.26       1,451,544       3,024   0.83  
Time deposits:                                        
In denominations under $100,000   272,192       1,168   1.70       270,480       1,055   1.55       247,875       811   1.30  
In denominations over $100,000   1,257,970       6,683   2.11       1,235,951       5,884   1.89       1,180,719       4,374   1.47  
Miscellaneous short-term borrowings   102,301       282   1.09       165,520       555   1.33       84,132       118   0.56  
Long-term borrowings and                                        
subordinated debentures   30,928       431   5.53       30,928       426   5.46       30,958       347   4.45  
Total interest bearing liabilities $ 3,390,159     $ 14,138   1.65 %   $ 3,363,583     $ 12,454   1.47 %   $ 3,266,206     $ 8,769   1.07 %
Noninterest Bearing Liabilities                                        
Demand deposits   906,188                 858,263                 838,476            
Other liabilities   35,687                 33,962                 26,668            
Stockholders' Equity   505,570                 493,145                 467,459            
Total liabilities and stockholders' equity $ 4,837,604               $ 4,748,953               $ 4,598,809            
                                         
Interest Margin Recap                                        
Interest income/average earning assets       54,229   4.76           50,846   4.53           45,000   4.13  
Interest expense/average earning assets       14,138   1.24           12,454   1.11           8,769   0.80  
Net interest income and margin     $ 40,091   3.52 %       $ 38,392   3.42 %       $ 36,231   3.33 %


(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 $501,000, $467,000 and $839,000 in the three-month periods ended December 31, 2018, September 30, 2018 and December 31, 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.
       
      Net income applicable to Lakeland Financial Corporation and earnings per diluted share, excluding the income tax expense adjustment for the deferred tax asset revaluation, are non-GAAP financial measures that the company considers useful for investors to allow better comparability of operating performance. The income tax expense adjustment for 2017 consists of a $4.1 million, or $0.16 per diluted common share, revaluation of the company's net deferred tax asset as a result of the enactment of the Tax Cuts and Jobs Act in 2017.
       
      A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).


  Three Months Ended   Twelve Months Ended  
  Dec. 31,   Sep. 30,   Dec. 31,   Dec. 31,   Dec. 31,  
    2018       2018       2017       2018       2017    
Total Equity $ 521,704     $ 498,541     $ 468,667     $ 521,704     $ 468,667    
Less: Goodwill   (4,970 )     (4,970 )     (4,970 )     (4,970 )     (4,970 )  
Plus: Deferred tax assets related to goodwill   1,191       1,180       1,171       1,191       1,171    
Tangible Common Equity   517,925       494,751       464,868       517,925       464,868    
                     
Assets $ 4,875,254     $ 4,757,619     $ 4,682,976     $ 4,875,254     $ 4,682,976    
Less: Goodwill   (4,970 )     (4,970 )     (4,970 )     (4,970 )     (4,970 )  
Plus: Deferred tax assets related to goodwill   1,191       1,180       1,171       1,191       1,171    
Tangible Assets   4,871,475       4,753,829       4,679,177       4,871,475       4,679,177    
                     
Ending common shares issued   25,301,732       25,301,732       25,194,903       25,301,732       25,194,903    
                     
Tangible Book Value Per Common Share $ 20.47     $ 19.55     $ 18.45     $ 20.47     $ 18.45    
                     
Tangible Common Equity/Tangible Assets   10.63   %   10.41   %   9.93   %   10.63   %   9.93   %
                     
                     
                     
Net Income $ 21,363     $ 20,570     $ 11,627     $ 80,411     $ 57,330    
Plus:  Additional tax expense due to adjusting deferred tax asset   0       0       4,137       0       4,137    
Net income excluding effect of deferred tax adjustment $ 21,363     $ 20,570     $ 15,764     $ 80,411     $ 61,467    
                     
Diluted Weighted Average Common Shares Outstanding   25,746,490       25,745,151       25,701,337       25,727,831       25,663,381    
                     
Diluted net income per share excluding effect of                    
of deferred tax adjustment $ 0.83     $ 0.80     $ 0.61     $ 3.13     $ 2.40    
                     

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

 

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