Market Overview

Lakeland Financial Reports Record Quarterly Performance

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WARSAW, Ind., April 25, 2019 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record quarterly net income of $21.7 million for the three months ended March 31, 2019, an increase of 18% versus $18.3 million for the first quarter of 2018.   Diluted earnings per share also increased 18% to $0.84 for the first quarter of 2019, versus $0.71 for the first quarter of 2018, also representing a record quarter for the company and its shareholders. On a linked quarter basis, net income increased $319,000, or 1% from the fourth quarter ended December 31, 2018, which had net income of $21.4 million and $0.83 diluted earnings per share.

David M. Findlay, President & CEO commented, "Our record results reflect our continued strong revenue growth, a healthy asset quality environment and stable economic trends in our Lake City Bank footprint. The opening of our 50th office in downtown Indianapolis this quarter highlights our continued organic growth strategy."

Highlights for the quarter are noted below.

1st Quarter 2019 versus 1st Quarter 2018 highlights:

  • Return on average equity of 16.6%, up from 15.8%
  • Return on average assets of 1.80%, up from 1.58%
  • Organic average loan growth of $126 million, or 3%
  • Core deposit growth of $129 million, or 3%
  • Net interest income increase of $2.0 million, or 5%
  • Net interest margin increase of 9 basis points to 3.45%
  • Noninterest income increase of $1.6 million, or 17%
  • Revenue growth of $3.6 million, or 8%
  • Nonperforming assets to total assets of 0.14% versus 0.24% a year ago
  • Total equity and tangible common equity1 increase of $70 million,  or 15%

1st Quarter 2019 versus 4th Quarter 2018 highlights:

  • Return on average assets of 1.80%, up from 1.75%
  • Return on average equity of 16.6% compared to 16.8%
  • Organic loan growth of $24 million or 1%
  • Core deposit growth of $128 million, or 3%
  • Net interest income decrease of $1.4 million, or 3%
  • Net interest margin decrease of 7 basis points to 3.45%
  • Noninterest income increase of $1.4 million, or 14%
  • Nonperforming assets to total assets of 0.14% versus 0.16%
  • Total equity and tangible common equity1 increase of $22 million,  or 4%

As announced on April 9, 2019, the board of directors approved a cash dividend for the first quarter of $0.30 per share, payable on May 6, 2019, to shareholders of record as of April 25, 2019. The 2019 dividend rate per share approved in April represents a 16% increase over the accumulated quarterly dividends paid in 2018.

Return on average total equity for the first quarter of 2019 was 16.59%, compared to 15.82% in the first quarter of 2018 and 16.76% in the linked fourth quarter of 2018. Return on average assets for the first quarter of 2018 was 1.80%, compared to 1.58% in the first quarter of 2018 and 1.75% in the linked fourth quarter of 2018. The company's total capital as a percent of risk-weighted assets was 14.38% at March 31, 2019, compared to 13.41% at March 31, 2018 and 14.20% at December 31, 2018. The company's tangible common equity to tangible assets ratio1 was 11.04% at March 31, 2019, compared to 9.94% at March 31, 2018 and 10.63% at December 31, 2018.

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

Findlay added, "The strength of our balance sheet is demonstrated by our strong capital position. We are pleased to continue our history of double digit dividend increases for our shareholders. The dividend increase is the outcome of consistent long-term growth in earnings and its positive impact to our capital base. Over the last five years, we have increased our dividend by 21% annually on a compound annual growth basis."

Average total loans for the first quarter of 2019 were $3.92 billion, an increase of $126.1 million, or 3%, versus $3.79 billion for the first quarter 2018. On a linked quarter basis, total average loans grew $12.5 million from $3.91 billion at December 31, 2018. Total loans outstanding grew $93.3 million, or 2%, from $3.85 billion as of March 31, 2018 to $3.94 billion as of March 31, 2019.

Average total deposits were $4.09 billion for the first quarters of 2019 and 2018. Total deposits grew $47.9 million, or 1%, from $4.10 billion as of March 31, 2018 to $4.15 billion as of March 31, 2019. In addition, total core deposits, which exclude brokered deposits, increased $128.8 million, or 3%, from $3.88 billion at March 31, 2018 to $4.01 billion at March 31, 2019 due to growth in commercial deposits of $238.1 million or 25%, offset by decreases in public fund deposits of $80.0 million or 6%, and decreases in retail deposits of $29.3 million, or 2%.

Findlay noted, "We are pleased with the growth momentum reflected in the increase in commercial deposits. We are particularly pleased that the total number of commercial noninterest bearing checking accounts have increased by 11% over a two-year period. This increase in accounts has been accompanied by a 23% increase in balances over the same timeframe."

The company's net interest margin increased nine basis points to 3.45% for the first quarter of 2019 compared to 3.36% for the first quarter of 2018. The higher margin in the first quarter of 2019 was due to higher yields on loans, partially offset by a higher cost of funds, driven by the Federal Reserve Bank increasing the target Federal Funds Rate in March, June, September and December of 2018.

Linked quarter net interest margin declined by seven basis points due to an increase of five basis points in earning asset yields and an offsetting increase in cost of funds of twelve basis points. The net interest margin was 3.52% for the linked fourth quarter of 2018, and was positively impacted by four basis points due to the payoff of a nonaccrual loan and other nonaccrual loan adjustments. Thus, the net interest margin run rate for the fourth quarter excluding those adjustments was 3.48%. As a result, net interest margin in the first quarter declined by three basis points when compared to the fourth quarter core run rate net interest margin.

Earning asset yields were negatively impacted by a decline in investment security yields during the first quarter 2019 due to the combined effect of the flattening yield curve and the corresponding increase in the fair value of the investment securities portfolio, as well as the impact of the adoption of the FASB accounting standard update, which amended the amortization period for certain purchased callable debt securities held at a premium. The decline in investment security portfolio yields reduced net interest margin by two basis points during the quarter. In addition, loan yields were elevated by four basis points in the fourth quarter of 2018 as previously noted.  On a linked fourth quarter basis, cost of funds increased by twelve basis points versus a thirteen basis point increase in the prior third linked quarter of 2018.

"With the widening expectation that the Federal Reserve may be in a holding pattern with respect to future rates changes, we have taken steps to maintain our net interest margin. Deposit rates have remained generally unchanged during the quarter in our markets and we believe that our net interest margin will be stable moving into the second quarter," commented Findlay.

The company recorded a provision for loan losses of $1.2 million in the first quarter of 2019, compared to $3.3 million in the first quarter of 2018 and $300,000 in the linked fourth quarter of 2018. The lower provision in the first quarter of 2019 was primarily due to lower net charge offs compared to the first quarter of 2018. Net charge offs in the first quarter of 2019 were $91,000 versus net charge offs of $4.8 million in the first quarter of 2018 and net charge offs of $189,000 during the linked fourth quarter of 2018. Annualized net charge offs to average loans were 0.01% for the first quarter of 2019 versus 0.51% for the first quarter of 2018. Annualized net charge offs to average loans were 0.02% for the linked fourth quarter of 2018.

Nonperforming assets decreased $4.2 million, or 37%, to $7.0 million as of March 31, 2019 versus $11.2 million as of March 31, 2018 due to a decrease in nonaccrual loans. On a linked quarter basis, nonperforming assets were $604,000 or 8% lower than the $7.6 million reported as of December 31, 2018. The ratio of nonperforming assets to total assets at March 31, 2019 decreased to 0.14% from 0.24% at March 31, 2018 and 0.16% at December 31, 2018. Loan loss reserve to total loans increased to 1.26% as of March 31, 2019 as compared with 1.19% as of March 31, 2018 and up from 1.24% as of December 31, 2018.

The company's noninterest income increased $1.6 million, or 17%, to $11.5 million for the first quarter of 2019, compared to $9.9 million for the first quarter of 2018. Noninterest income was positively impacted by an 18% increase over the prior year first quarter in recurring fee income for service charges on deposit accounts, primarily due to growth in treasury management fees from business accounts. In addition, loan and service fees increased 10% and wealth advisory fees increased by 8% compared to the first quarter 2018 due to continued growth of client relationships. Noninterest income increased by $1.4 million or 14% on a linked quarter basis to $11.5 million due to increases in bank owned life insurance income, swap fees generated from commercial lending transactions and improvement in mortgage banking income.

The company's noninterest expense increased $1.3 million, or 6%, to $22.5 million in the first quarter of 2019, compared to $21.2 million in the first quarter of 2018 and decreased by $79,000 on a linked quarter basis. Salaries and employee benefits increased on a year over year basis primarily due to higher employee health insurance expense, staffing increases in revenue producing areas and normal merit increases.

Findlay commented, "Continued investment in our people and our technology-driven financial services solutions for clients is a critical part of our long term success. The Lake City Bank team is our defining difference, but we must remain committed to delivering innovative technology solutions as well. We continue to invest heavily in technology to ensure that we can deliver innovative, technology-driven solutions to our customers." 

The company's efficiency ratio was 45.2% for the first quarter of 2019, compared to 46.0% for the first quarter of 2018 and 45.4% for the linked fourth quarter of 2018.

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 "total equity" excluding intangible assets, net of deferred tax, and "tangible assets" which is "total assets" excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalents is 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.

 
LAKELAND FINANCIAL CORPORATION
FIRST QUARTER 2019 FINANCIAL HIGHLIGHTS
  Three Months Ended  
(Unaudited – Dollars in thousands, except per share data) Mar. 31,   Dec. 31,   Mar. 31,  
END OF PERIOD BALANCES   2019     2018     2018  
  Assets $  4,891,885   $  4,875,254   $  4,726,948  
  Deposits     4,147,437       4,044,065       4,099,488  
  Brokered Deposits     140,078       164,888       220,906  
  Core Deposits (3)     4,007,359       3,879,177       3,878,582  
  Loans     3,939,010       3,914,745       3,845,668  
  Allowance for Loan Losses     49,562       48,453       45,627  
  Total Equity     543,267       521,704       473,333  
  Goodwill net of deferred tax assets     3,779       3,779       3,796  
  Tangible Common Equity (1)     539,488       517,925       469,537  
AVERAGE BALANCES          
  Total Assets $  4,881,572   $  4,837,604   $  4,706,726  
  Earning Assets     4,550,950       4,523,304       4,421,461  
  Investments - available for sale     587,026       573,073       546,042  
  Loans     3,918,024       3,905,511       3,791,922  
  Total Deposits     4,090,330       4,163,118       4,094,917  
  Interest Bearing Deposits     3,205,204       3,256,930       3,253,309  
  Interest Bearing Liabilities     3,426,250       3,390,159       3,367,104  
  Total Equity     529,989       505,570       469,998  
INCOME STATEMENT DATA          
  Net Interest Income $    38,209   $   39,590   $   36,223  
  Net Interest Income-Fully Tax Equivalent     38,708       40,089       36,632  
  Provision for Loan Losses     1,200       300       3,300  
  Noninterest Income     11,525       10,105       9,879  
  Noninterest Expense     22,473       22,552       21,202  
  Net Income     21,682       21,363       18,336  
PER SHARE DATA          
  Basic Net Income Per Common Share $    0.85   $   0.84   $   0.73  
  Diluted Net Income Per Common Share     0.84       0.83       0.71  
  Cash Dividends Declared Per Common Share     0.26       0.26       0.22  
  Dividend Payout     30.95 %     31.33 %     30.99 %
  Book Value Per Common Share (equity per share issued)     21.21       20.62       18.71  
  Tangible Book Value Per Common Share (1)     21.06       20.47       18.56  
  Market Value – High     48.99       47.41       51.76  
  Market Value – Low     39.78       37.79       45.01  
  Basic Weighted Average Common Shares Outstanding    25,491,093      25,301,732      25,257,414  
  Diluted Weighted Average Common Shares Outstanding    25,665,287      25,746,490      25,696,864  
KEY RATIOS            
  Return on Average Assets     1.80 %     1.75 %     1.58 %
  Return on Average Total Equity     16.59       16.76       15.82  
  Average Equity to Average Assets     10.86       10.45       9.99  
  Net Interest Margin     3.45       3.52       3.36  
  Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)     45.19       45.38       45.99  
  Tier 1 Leverage (2)     11.59       11.44       10.77  
  Tier 1 Risk-Based Capital (2)     13.22       13.05       12.30  
  Common Equity Tier 1 (CET1) (2)     12.52       12.35       11.57  
  Total Capital (2)     14.38       14.20       13.41  
  Tangible Capital (1) (2)     11.04       10.63       9.94  
ASSET QUALITY           
  Loans Past Due 30 - 89 Days $    9,694   $   10,020   $   2,168  
  Loans Past Due 90 Days or More     481       0       26  
  Non-accrual Loans     6,093       7,260       11,002  
  Nonperforming Loans (includes nonperforming TDR's)     6,574       7,260       11,028  
  Other Real Estate Owned     316       316       10  
  Other Nonperforming Assets     83       0       114  
  Total Nonperforming Assets     6,973       7,576       11,152  
  Performing Troubled Debt Restructurings     6,196       8,016       4,085  
  Nonperforming Troubled Debt Restructurings (included in nonperforming loans)     3,812       4,384       7,945  
  Total Troubled Debt Restructurings     10,008       12,400       12,030  
  Impaired Loans     24,501       26,661       15,824  
  Non-Impaired Watch List Loans     179,636       159,938       166,205  
  Total Impaired and Watch List Loans     204,137       186,599       182,029  
  Gross Charge Offs     284       424       4,977  
  Recoveries     193       235       183  
  Net Charge Offs/(Recoveries)     91       189       4,794  
  Net Charge Offs/(Recoveries)  to Average Loans     0.01 %     0.02 %     0.51 %
  Loan Loss Reserve to Loans     1.26 %     1.24 %     1.19 %
  Loan Loss Reserve to Nonperforming Loans     753.91 %     667.40 %     413.75 %
  Loan Loss Reserve to Nonperforming Loans and Performing TDR's     388.11 %     317.17 %     301.92 %
  Nonperforming Loans to Loans     0.17 %     0.19 %     0.29 %
  Nonperforming Assets to Assets     0.14 %     0.16 %     0.24 %
  Total Impaired and Watch List Loans to Total Loans     5.18 %     4.77 %     4.73 %
OTHER DATA            
  Full Time Equivalent Employees     556       553       539  
  Offices     50       49       49  
             
  (1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures" 
  (2) Capital ratios for March 31, 2019 are preliminary until the Call Report is filed.  
  (3) Core deposits equals deposits less brokered deposits    
             

 

 
CONSOLIDATED BALANCE SHEETS (in thousands, except share data)  
  March 31,   December 31,  
    2019       2018    
  (Unaudited)      
ASSETS        
Cash and due from banks $    143,081     $   192,290    
Short-term investments   45,672       24,632    
  Total cash and cash equivalents   188,753       216,922    
         
Securities available for sale (carried at fair value)   595,553       585,549    
Real estate mortgage loans held for sale   3,047       2,293    
         
Loans, net of allowance for loan losses of $49,562 and $48,453   3,889,448       3,866,292    
         
Land, premises and equipment, net    58,760       58,097    
Bank owned life insurance   82,253       77,106    
Federal Reserve and Federal Home Loan Bank stock   13,772       13,772    
Accrued interest receivable   17,387       15,518    
Goodwill   4,970       4,970    
Other assets   37,942       34,735    
  Total assets $ 4,891,885     $ 4,875,254    
         
LIABILITIES AND STOCKHOLDERS' EQUITY  
         
LIABILITIES        
Noninterest bearing deposits $    931,832     $   946,838    
Interest bearing deposits    3,215,605       3,097,227    
  Total deposits   4,147,437       4,044,065    
         
Borrowings      
  Federal funds purchased   122,000       0    
  Securities sold under agreements to repurchase    0       75,555    
  Federal Home Loan Bank advances   0       170,000    
  Subordinated debentures   30,928       30,928    
  Total borrowings   152,928       276,483    
         
Accrued interest payable   11,794       10,404    
Other liabilities   36,459       22,598    
  Total liabilities   4,348,618       4,353,550    
         
STOCKHOLDERS' EQUITY      
Common stock:  90,000,000 shares authorized, no par value  
 25,614,665 shares issued and 25,442,827 outstanding as of March 31, 2019
 25,301,732 shares issued and 25,128,773 outstanding as of December 31, 2018   111,571       112,383    
Retained earnings   432,953       419,179    
Accumulated other comprehensive income (loss)   2,487       (6,191 )  
Treasury stock, at cost (2019 - 171,838 shares, 2018 - 172,959 shares)   (3,833 )     (3,756 )  
  Total stockholders' equity   543,178       521,615    
  Noncontrolling interest   89       89    
  Total equity   543,267       521,704    
  Total liabilities and equity $ 4,891,885     $ 4,875,254    
         

 

 

           
CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)    
  Three Months Ended    
  March 31,    
    2019     2018      
NET INTEREST INCOME          
Interest and fees on loans          
  Taxable $    48,866   $   41,794      
  Tax exempt     251       217      
Interest and dividends on securities          
  Taxable     2,497       2,434      
  Tax exempt     1,642       1,331      
Other interest income     238       292      
  Total interest income     53,494       46,068      
           
Interest on deposits     13,883       9,367      
Interest on borrowings          
  Short-term     950       111      
  Long-term     452       367      
  Total interest expense     15,285       9,845      
           
NET INTEREST INCOME     38,209       36,223      
           
Provision for loan losses     1,200       3,300      
           
NET INTEREST INCOME AFTER PROVISION FOR          
  LOAN LOSSES     37,009       32,923      
           
NONINTEREST INCOME          
Wealth advisory fees     1,620       1,505      
Investment brokerage fees     386       290      
Service charges on deposit accounts     4,287       3,628      
Loan and service fees     2,404       2,177      
Merchant card fee income     622       642      
Bank owned life insurance income     444       363      
Mortgage banking income     222       241      
Net securities gains (losses)     23       (6 )    
Other income     1,517       1,039      
  Total noninterest income     11,525       9,879      
           
NONINTEREST EXPENSE          
Salaries and employee benefits     12,559       12,019      
Net occupancy expense     1,366       1,426      
Equipment costs     1,349       1,274      
Data processing fees and supplies     2,425       2,513      
Corporate and business development     1,206       1,133      
FDIC insurance and other regulatory fees     406       461      
Professional fees     937       872      
Other expense      2,225       1,504      
  Total noninterest expense     22,473       21,202      
           
INCOME BEFORE INCOME TAX EXPENSE     26,061       21,600      
Income tax expense      4,379       3,264      
NET INCOME $    21,682   $   18,336      
           
BASIC WEIGHTED AVERAGE COMMON SHARES     25,491,093       25,257,414      
BASIC EARNINGS PER COMMON SHARE $    0.85   $   0.73      
DILUTED WEIGHTED AVERAGE COMMON SHARES     25,665,287       25,696,864      
DILUTED EARNINGS PER COMMON SHARE $    0.84   $   0.71      
           

 

 

 

LAKELAND FINANCIAL CORPORATION  
LOAN DETAIL  
FIRST QUARTER 2019  
(unaudited, in thousands)  
                     
  March 31, December 31, March 31,  
    2019   2018   2018  
Commercial and industrial loans:                    
  Working capital lines of credit loans $   726,895     18.4  %  $   690,620     17.6  %  $   778,779     20.2  %   
  Non-working capital loans     700,447     17.8       714,759     18.3       706,228     18.4    
  Total commercial and industrial loans     1,427,342     36.2       1,405,379     35.9       1,485,007     38.6    
                     
Commercial real estate and multi-family residential loans:                    
  Construction and land development loans     293,818     7.5       266,805     6.8       237,887     6.2    
  Owner occupied loans     557,296     14.1       586,325     15.0       543,192     14.1    
  Nonowner occupied loans     537,569     13.7       520,901     13.3       507,041     13.2    
  Multifamily loans     240,939     6.1       195,604     5.0       193,956     5.0    
  Total commercial real estate and multi-family residential loans     1,629,622     41.4       1,569,635     40.1       1,482,076     38.5    
                     
Agri-business and agricultural loans:                    
  Loans secured by farmland   139,645     3.6     177,503     4.6     145,363     3.8    
  Loans for agricultural production   162,662     4.1     193,010     4.9     171,607     4.5    
  Total agri-business and agricultural loans   302,307     7.7     370,513     9.5     316,970     8.3    
                     
Other commercial loans     112,021     2.8       95,657     2.4       116,657     3.0    
  Total commercial loans     3,471,292     88.1       3,441,184     87.9       3,400,710     88.4    
                     
Consumer 1-4 family mortgage loans:                    
  Closed end first mortgage loans     188,777     4.8       185,822     4.7       180,542     4.7    
  Open end and junior lien loans     182,791     4.7       187,030     4.8       179,065     4.7    
  Residential construction and land development loans     13,142     0.3       16,226     0.4       13,342     0.3    
  Total consumer 1-4 family mortgage loans     384,710     9.8       389,078     9.9       372,949     9.7    
                     
Other consumer loans     84,650     2.1       86,064     2.2       73,277     1.9    
  Total consumer loans     469,360     11.9       475,142     12.1       446,226     11.6    
  Subtotal     3,940,652     100.0  %      3,916,326     100.0  %      3,846,936     100.0  %   
Less:  Allowance for loan losses     (49,562 )         (48,453 )         (45,627 )      
  Net deferred loan fees     (1,642 )         (1,581 )         (1,268 )      
Loans, net $   3,889,448       $   3,866,292       $   3,800,041        
                     
                     
                     
LAKELAND FINANCIAL CORPORATION    
DEPOSITS AND BORROWINGS  
FIRST QUARTER 2019    
(unaudited, in thousands)    
                     
  March 31,     December 31,     March 31,      
    2019         2018         2018        
Non-interest bearing demand deposits $   931,832       $   946,838       $   858,950        
Savings and transaction accounts:                    
  Savings deposits     246,936           247,903           272,472        
  Interest bearing demand deposits     1,562,089           1,429,570           1,491,220        
Time deposits:                    
  Deposits of $100,000 or more     1,131,326           1,146,221           1,216,802        
  Other time deposits     275,254           273,533           260,044        
Total deposits $   4,147,437       $   4,044,065       $   4,099,488        
FHLB advances and other borrowings     152,928           276,483           125,644        
Total funding sources $   4,300,365       $   4,320,548       $   4,225,132        
                     

 

 

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

                                           
  Three Months Ended     Three Months Ended     Three Months Ended    
  March 31, 2019     December 31, 2018     March 31, 2018    
  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) $    3,893,035     $    48,866     5.09 %   $   3,884,500     $   49,091     5.01 %   $   3,767,300     $   41,794     4.50 %  
  Tax exempt (1)     24,989         314     5.10         21,011         234     4.42         24,622         272     4.48    
  Investments: (1)                                          
  Available for sale     587,026         4,575     3.16         573,073         4,682     3.24         546,042         4,119     3.06    
  Short-term investments     4,696         26     2.25         3,350         15     1.78         4,579         9     0.80    
  Interest bearing deposits     41,204         212     2.09         41,370         207     1.99         78,918         283     1.45    
Total earning assets $    4,550,950     $    53,993     4.81 %   $   4,523,304     $   54,229     4.76 %   $   4,421,461     $   46,477     4.26 %  
Less:  Allowance for loan losses     (48,768 )                 (49,045 )                 (47,189 )            
Nonearning Assets                                          
  Cash and due from banks     164,820                   156,681                   137,738              
  Premises and equipment     58,599                   57,516                   56,192              
  Other nonearning assets     155,971                   149,148                   138,524              
Total assets $    4,881,572               $   4,837,604               $   4,706,726              
                                           
Interest Bearing Liabilities                                          
  Savings deposits $    247,309     $    71     0.12 %   $   250,755     $   76     0.12 %   $   268,091     $   89     0.13 %  
  Interest bearing checking accounts     1,496,893         5,954     1.61         1,476,013         5,498     1.48         1,491,820         3,575     0.97    
  Time deposits:                                          
  In denominations under $100,000     276,006         1,232     1.81         272,192         1,168     1.70         255,209         848     1.35    
  In denominations over $100,000     1,184,996         6,626     2.27         1,257,970         6,683     2.11         1,238,189         4,855     1.59    
  Miscellaneous short-term borrowings     190,118         950     2.03         102,301         282     1.09         82,862         111     0.54    
  Long-term borrowings and                                          
  subordinated debentures     30,928         452     5.93         30,928         431     5.53         30,933         367     4.81    
Total interest bearing liabilities $    3,426,250     $    15,285     1.81 %   $   3,390,159     $   14,138     1.65 %   $   3,367,104     $   9,845     1.19 %  
Noninterest Bearing Liabilities                                          
  Demand deposits     885,126                   906,188                   841,608              
  Other liabilities     40,207                   35,687                   28,016              
Stockholders' Equity     529,989                   505,570                   469,998              
Total liabilities and stockholders' equity $    4,881,572               $   4,837,604               $   4,706,726              
                                           
Interest Margin Recap                                          
Interest income/average earning assets       53,993     4.81           54,229     4.76           46,477     4.26    
Interest expense/average earning assets       15,285     1.36           14,138     1.24           9,845     0.90    
Net interest income and margin     $    38,708     3.45 %       $   40,091     3.52 %       $   36,632     3.36 %  
                                           


(1 ) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. 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 $499,000, $501,000 and $409,000 in the three-month periods ended March 31, 2019, December 31, 2018 and March 31, 2018, respectively.
(2 ) Loan fees, which are immaterial in relation to total taxable loan interest income for 2019 and 2018, are included as taxable loan interest income.
(3 ) Nonaccrual loans are included in the average balance of taxable loans.

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  
  Mar. 31,   Dec. 31,   Mar. 31,  
    2019       2018       2018    
  Total Equity $   543,267     $   521,704     $   473,333    
  Less: Goodwill     (4,970 )       (4,970 )       (4,970 )  
  Plus: Deferred tax assets related to goodwill     1,191         1,191         1,174    
  Tangible Common Equity     539,488         517,925         469,537    
             
  Assets $   4,891,885     $   4,875,254     $   4,726,948    
  Less: Goodwill     (4,970 )       (4,970 )       (4,970 )  
  Plus: Deferred tax assets related to goodwill     1,191         1,191         1,174    
  Tangible Assets     4,888,106         4,871,475         4,723,152    
             
  Ending common shares issued     25,614,665         25,301,732         25,291,582    
             
  Tangible Book Value Per Common Share $   21.06     $   20.47     $   18.56    
             
  Tangible Common Equity/Tangible Assets     11.04   %     10.63   %     9.94   %
             

Contact

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

 

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