WARSAW, Ind., Oct. 27, 2008 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported quarterly net income of $5.2 million for the third quarter of 2008 versus $4.4 million for the third quarter of 2007, an increase of 19%. Diluted net income per share for the quarter was $0.42 versus $0.35 for the comparable period of 2007. In the second quarter of 2008, net income and diluted earnings per share were $4.8 million and $0.39, respectively.
The Company further reported net income of $15.3 million for the nine months ended September 30, 2008, an increase of 6% over the $14.4 million reported for the nine months ended September 30, 2007. Diluted net income per common share was $1.23 for the nine months ended September 30, 2008, versus $1.16 for the nine months ended September 30, 2007.
Michael L. Kubacki, Chairman, President and Chief Executive Officer, commented, "Lake City Bank's stable performance in a turbulent environment is reflective of our disciplined and long-standing strategies in managing our balance sheet and business. While the economic conditions in our region are producing some real challenges, we've been able to work through them and achieve consistently stable results."
Kubacki further stated, "We are managing through an unprecedented series of issues that have impacted the banking industry. At Lake City Bank, we're in a great position to continue to serve our clients and build our business. We've had 20 consecutive years of record earnings performance, have a capital structure that defines us as 'well capitalized' and have experienced deposit growth during this challenging year."
The Company also announced that the Board of Directors approved a cash dividend for the third quarter of $0.155 per share, payable on November 5, 2008 to shareholders of record as of October 25, 2008. The quarterly dividend represents an 11% increase over the quarterly dividends paid in 2007.
"We've consistently increased our dividends to shareholders for many years. Our ability to increase dividends has been a function of the strength and consistency of our earnings growth and our strong capital structure. As many of our peers have decreased or eliminated dividends, our performance and strong balance sheet have provided us with the ability to continue to share our financial success with shareholders through a healthy dividend", commented Kubacki.
The Company's non-interest income was $6.2 million for the third quarter of 2008, an increase of $1.1 million, or 21%, compared to $5.1 million for the same period in 2007. The improvement was driven by increases in every client-driven revenue category. The largest increase came from service charges on deposit accounts, which grew by $441,000, or 23%. On a linked quarter basis, noninterest income increased by $230,000, or 4%, versus the second quarter of 2008.
Kubacki added, "As a result of our strategy to develop fee-based services that we believe rival any offered by our local, regional and national competitors, we're experiencing great growth in our non-interest income categories. These revenues tend to represent the expansion of existing relationships and demonstrate the effectiveness and importance of our cross-selling efforts. They also reaffirm our belief that we can compete effectively with anyone in our footprint and provide services and products that handle our client's needs."
The Company's net interest margin was 3.35% in the third quarter versus 3.18% for the third quarter of 2007 and 3.15% in the second quarter of 2008. The margin improvement in the quarter resulted primarily from the recognition of $1.2 million in interest income from the payoff of a loan that had been on nonaccrual. The loan was paid in full and nonaccrual interest was therefore recognized. Excluding the impact of this event, the net interest margin would have been 3.12% for the third quarter. This higher margin, in conjunction with strong growth in earning assets, contributed to an increase of 26% in the Company's net interest income to $17.3 million in the third quarter of 2008 versus $13.7 million in the third quarter of 2007. On a linked quarter basis, net interest income increased by 11% versus the second quarter of 2008. The Company's provision for loan losses increased by $2.0 million, or 119%, to $3.7 million for the third quarter of 2008 versus $1.7 million in the same period of 2007. In the second quarter of 2008, the provision was $3.0 million. The provision increase was primarily driven by a higher level of charge offs and strong loan growth and the overall weaker economic conditions in the Company's markets.
The Company's noninterest expense was $11.9 million for the third quarter of 2008 compared to $10.9 million for the same period in 2007, an increase of 10%. This increase was driven primarily by increased payroll and benefit expenses, general increases in operating and technology expenses and increased regulatory expenses. Salaries and employee benefits increased by $379,000, or 6%, when compared to the same period in 2007 as a result of a combination of increases in health insurance and performance-based incentive expense, staff additions in administrative and commercial lending positions, normal merit increases and new office staff costs. Other expense increased by $423,000, or 18%, in the quarter driven primarily by higher regulatory expenses of $246,000 due to the Company's resumption of regular FDIC insurance premiums and $97,000 of legal expenses. The Company's efficiency ratio was 50.9% compared to 57.8% for the same period a year ago.
Average total loans for the third quarter of 2008 were $1.69 billion versus $1.41 billion for the third quarter of 2007 and $1.64 billion for the linked second quarter of 2008. The year-over-year increase for the third quarter represented an increase of 19%, or $274 million. On a linked quarter basis, average loans increased by $46 million versus the second quarter of 2008. Total gross loans as of September 30, 2008 were $1.72 billion compared to $1.45 billion as of September 30, 2007 and $1.67 billion as of June 30, 2008.
Net charge offs totaled $3.6 million in the third quarter of 2008, versus $2.0 million during the third quarter of 2007 and $1.8 million during the second quarter of 2008. Two commercial relationships, both of which are involved in the recreational vehicle industry, accounted for $3.3 million of the net charge-offs. Lakeland Financial's allowance for loan losses as of September 30, 2008 was $18.1 million, compared to $15.1 million as of September 30, 2007 and $18.0 million as of June 30, 2008.
Kubacki observed, "The increased level of charge-offs, in conjunction with healthy loan growth, required an increased loan loss provision for the quarter. As we have historically done, we're realistically managing troubled relationships and appropriately recognizing losses. While the regional economy that we operate in is extremely diverse and we don't have any significant industry concentrations, traditional manufacturing and industrial customers are experiencing some weakness within our footprint. This environment will continue to require diligent loan oversight."
Kubacki continued, "We were pleased that total nonperforming assets decreased from $26.4 million at the end of the second quarter to $21.1 million. Our nonperforming loans to total loans ratio of 1.18% declined from 1.49% at June 30th and is at a manageable level."
Nonperforming assets totaled $21.1 million as of September 30, 2008 compared to $26.4 million as of June 30, 2008 and $14.1 million on September 30, 2007. The ratio of nonperforming assets to assets was 0.94% on September 30, 2008 compared to 1.17% at June 30, 2008 and 0.75% at September 30, 2007. The allowance for loan losses represented 90% of nonperforming loans as of September 30, 2008 versus 72% at June 30, 2008 and 162% at September 30, 2007.
The decrease in nonperforming assets versus the second quarter of 2008, resulted primarily from the payoff of a $3.8 million impaired nonaccrual commercial credit, a $3.2 million paydown in another impaired nonaccrual commercial credit and charge-offs.
For the three months ended September 30, 2008, Lakeland Financial's average equity to average assets ratio was 6.88% compared to 7.08% for the second quarter of 2008 and 7.49% for the third quarter of 2007. Average stockholders' equity for the quarter ended September 30, 2008 was $152.0 million versus $151.5 million for the second quarter of 2008 and $138.8 million for the third quarter of 2007. Average total deposits for the quarter ended September 30, 2008 were $1.64 billion versus $1.55 billion for the second quarter of 2008 and $1.48 billion for the third quarter of 2007.
Earnings for the nine months ended September 30, 2008 were positively impacted by the pre-tax benefit of $642,000, or $382,000 after tax, realized from the first quarter initial public offering of Visa, Inc. common shares. Excluding the effect of the Visa transaction, net income for the nine months would have been $14.9 million and diluted earnings per share would have been $1.20.
Lakeland Financial Corporation is a $2.3 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank serves Northern Indiana with 43 branches located in the following Indiana counties: Kosciusko, Elkhart, Allen, St. Joseph, DeKalb, Fulton, Huntington, LaGrange, Marshall, Noble, Pulaski and Whitley. The Company also has a Loan Production Office in Indianapolis, Indiana.
Lakeland Financial Corporation may be accessed on its home page at www.lakecitybank.com. The Company's common stock is traded on the Nasdaq Global Select Market under "LKFN". Market makers in Lakeland Financial Corporation common shares include Automated Trading Desk Financial Services, LLC, B-Trade Services, LLC, Citadel Derivatives Group, LLC, Citigroup Global Markets Holdings, Inc., Domestic Securities, Inc., E*TRADE Capital Markets LLC, FTN Financial Securities Corp., FTN Midwest Securities Corp., Goldman Sachs & Company, Howe Barnes Hoefer & Arnett, Inc., Keefe, Bruyette & Woods, Inc., Knight Equity Markets, L.P., Lehman Brothers Inc., Morgan Stanley & Co., Inc., Stifel Nicolaus & Company, Inc., Susquehanna Capital Group and UBS Securities LLC.
In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. Lakeland Financial believes that providing non-GAAP financial measures provides investors with information useful to understanding Lakeland Financial's financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on "tangible equity" which is "common stockholders' equity" excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables where the non-GAAP measure is presented.
Visa Initial Public Offering Adjustments
Lake City Bank, as a member bank of Visa U.S.A. Inc., holds shares of restricted common stock in Visa. In connection with Visa's initial public offering in March 2008, a portion of our Visa shares were redeemed pursuant to a mandatory redemption. The after-tax benefit to the year-to-date net income from these Visa adjustments totaled $382,000, or $0.03 per diluted common share. This adjustment represents the net impact of the gain from the proceeds of the sale of these shares and the Company's portion of the settlement expenses related to litigation involving Visa, which Lake City Bank was subject to as a member bank. Lake City Bank's remaining shares of Visa stock are recorded at their original cost basis of zero. These shares have restrictions as to their sale or transfer and the ultimate realization of their value is subject to future adjustments based on the resolution of outstanding indemnified litigation.
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," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. Additional information concerning the Company and its business, including factors that could materially affect the Company's financial results, is included in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on form 10-K.
LAKELAND FINANCIAL CORPORATION THIRD QUARTER 2008 FINANCIAL HIGHLIGHTS (Unaudited - Dollars in thousands except share and Per Share Data) Three Months Ended ----------------------------------------- Sep. 30, Jun. 30, Sep. 30, 2008 2008 2007 ----------- ----------- ----------- END OF PERIOD BALANCES Assets $ 2,254,471 $ 2,249,128 $ 1,884,680 Deposits 1,707,930 1,605,035 1,462,984 Loans 1,717,345 1,674,742 1,448,706 Allowance for Loan Losses 18,124 18,014 15,074 Common Stockholders' Equity 153,358 150,982 142,033 Tangible Equity 148,984 146,525 137,285 AVERAGE BALANCES Assets Total Assets $ 2,208,067 $ 2,140,275 $ 1,852,514 Earning Assets 2,085,042 2,018,081 1,745,358 Investments 389,817 366,294 304,479 Loans 1,685,963 1,640,405 1,412,286 Liabilities and Stockholders' Equity Total Deposits 1,641,525 1,552,889 1,484,965 Interest Bearing Deposits 1,420,367 1,334,415 1,255,881 Interest Bearing Liabilities 1,817,981 1,751,947 1,467,701 Common Stockholders' Equity 151,992 151,486 138,807 INCOME STATEMENT DATA Net Interest Income $ 17,272 $ 15,498 $ 13,719 Net Interest Income-Fully Tax Equivalent 17,549 15,792 13,972 Provision for Loan Losses 3,710 3,021 1,697 Noninterest Income 6,202 5,972 5,134 Noninterest Expense 11,942 11,613 10,892 Net Income 5,225 4,796 4,374 PER SHARE DATA Basic Net Income Per Common Share $ 0.43 $ 0.39 $ 0.36 Diluted Net Income Per Common Share 0.42 0.39 0.35 Cash Dividends Declared Per Common Share 0.155 0.155 0.14 Book Value Per Common Share (equity per share issued) 12.47 12.29 11.64 Market Value - High 30.09 25.00 25.98 Market Value - Low 18.52 19.00 20.05 Basic Weighted Average Common Shares Outstanding 12,290,055 12,262,926 12,197,790 Diluted Weighted Average Common Shares Outstanding 12,468,446 12,468,486 12,433,701 KEY RATIOS Return on Average Assets 0.94% 0.90% 0.94% Return on Average Common Stockholders' Equity 13.68 12.75 12.50 Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 50.88 54.06 57.78 Average Equity to Average Assets 6.88 7.08 7.49 Net Interest Margin 3.35 3.15 3.18 Net Charge Offs to Average Loans 0.85 0.43 0.55 Loan Loss Reserve to Loans 1.06 1.08 1.04 Nonperforming Loans to Loans 1.18 1.49 0.64 Nonperforming Assets to Assets 0.94 1.17 0.75 Tier 1 Leverage 8.30 8.40 9.04 Tier 1 Risk-Based Capital 9.79 9.84 10.83 Total Capital 10.76 10.83 11.81 Tangible Capital 6.62 6.53 7.30 ASSET QUALITY Loans Past Due 90 Days or More $ 1,669 $ 972 $ 317 Non-accrual Loans 18,516 23,987 9,001 Nonperforming Loans 20,185 24,959 9,318 Other Real Estate Owned 879 1,357 4,771 Other Nonperforming Assets 30 45 51 Total Nonperforming Assets 21,094 26,361 14,140 Impaired Loans 19,464 23,718 8,575 Net Charge Offs/ (Recoveries) 3,600 1,765 1,974 Nine Months Ended ------------------------------- Sep. 30, Sep.30, 2008 2007 ----------- ----------- END OF PERIOD BALANCES Assets $ 2,254,471 $ 1,884,680 Deposits 1,707,930 1,462,984 Loans 1,717,345 1,448,706 Allowance for Loan Losses 18,124 15,074 Common Stockholders' Equity 153,358 142,033 Tangible Equity 148,984 137,285 AVERAGE BALANCES Assets Total Assets $ 2,125,305 $ 1,809,342 Earning Assets 2,005,027 1,701,501 Investments 363,367 299,912 Loans 1,630,510 1,384,180 Liabilities and Stockholders' Equity Total Deposits 1,569,995 1,462,073 Interest Bearing Deposits 1,350,832 1,237,733 Interest Bearing Liabilities 1,737,806 1,433,549 Common Stockholders' Equity 150,984 135,685 INCOME STATEMENT DATA Net Interest Income $ 47,276 $ 40,498 Net Interest Income-Fully Tax Equivalent 48,141 41,255 Provision for Loan Losses 7,884 3,244 Noninterest Income 17,943 15,041 Noninterest Expense 34,937 31,554 Net Income 15,262 14,387 PER SHARE DATA Basic Net Income Per Common Share $ 1.25 $ 1.18 Diluted Net Income Per Common Share 1.23 1.16 Cash Dividends Declared Per Common Share 0.45 0.405 Book Value Per Common Share (equity per share issued) 12.47 11.64 Market Value - High 30.09 25.98 Market Value - Low 16.87 20.05 Basic Weighted Average Common Shares Outstanding 12,256,389 12,182,658 Diluted Weighted Average Common Shares Outstanding 12,454,426 12,425,238 KEY RATIOS Return on Average Assets 0.96% 1.06% Return on Average Common Stockholders' Equity 13.50 14.18 Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 53.57 56.81 Average Equity to Average Assets 7.10 7.50 Net Interest Margin 3.20 3.24 Net Charge Offs to Average Loans 0.46 0.25 Loan Loss Reserve to Loans 1.06 1.04 Nonperforming Loans to Loans 1.18 0.64 Nonperforming Assets to Assets 0.94 0.75 Tier 1 Leverage 8.30 9.04 Tier 1 Risk-Based Capital 9.79 10.83 Total Capital 10.76 11.81 Tangible Capital 6.62 7.30 ASSET QUALITY Loans Past Due 90 Days or More $ 1,669 $ 317 Non-accrual Loans 18,516 9,001 Nonperforming Loans 20,185 9,318 Other Real Estate Owned 879 4,771 Other Nonperforming Assets 30 51 Total Nonperforming Assets 21,094 14,140 Impaired Loans 19,464 8,575 Net Charge Offs/(Recoveries) 5,561 2,634 LAKELAND FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS As of September 30, 2008 and December 31, 2007 (in thousands, except per share data) September 30, December 31, 2008 2007 ----------- ----------- (Unaudited) ASSETS Cash and due from banks $ 44,751 $ 56,278 Short-term investments 17,710 11,413 ----------- ----------- Total cash and cash equivalents 62,461 67,691 Securities available for sale (carried at fair value) 386,671 327,757 Real estate mortgage loans held for sale 2,591 537 Loans, net of allowance for loan losses of $18,124 and $15,801 1,699,221 1,507,919 Land, premises and equipment, net 27,498 27,525 Bank owned life insurance 33,860 21,543 Accrued income receivable 8,597 9,126 Goodwill 4,970 4,970 Other intangible assets 465 619 Other assets 28,137 21,446 ----------- ----------- Total assets $ 2,254,471 $ 1,989,133 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Noninterest bearing deposits $ 235,808 $ 255,348 Interest bearing deposits 1,472,122 1,223,570 ----------- ----------- Total deposits 1,707,930 1,478,918 Short-term borrowings Federal funds purchased 0 70,010 Securities sold under agreements to repurchase 175,427 154,913 U.S. Treasury demand notes 1,864 1,242 Other short-term borrowings 80,000 90,000 ----------- ----------- Total short-term borrowings 257,291 316,165 Accrued expenses payable 13,592 15,497 Other liabilities 1,329 1,311 Long-term borrowings 90,043 44 Subordinated debentures 30,928 30,928 ----------- ----------- Total liabilities 2,101,113 1,842,863 STOCKHOLDERS' EQUITY Common stock: 180,000,000 shares authorized, no par value 12,302,648 shares issued and 12,197,175 outstanding as of September 30, 2008 12,207,723 shares issued and 12,111,703 outstanding as of December 31, 2007 1,453 1,453 Additional paid-in capital 19,760 18,078 Retained earnings 138,842 129,090 Accumulated other comprehensive loss (5,162) (1,010) Treasury stock, at cost (2008 - 105,473 shares, 2007 - 96,020 shares) (1,535) (1,341) ----------- ----------- Total stockholders' equity 153,358 146,270 ----------- ----------- Total liabilities and stockholders' equity $ 2,254,471 $ 1,989,133 =========== =========== LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME For the Three Months and Nine Months Ended September 30, 2008 and 2007 (in thousands except for share and per share data) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- NET INTEREST INCOME Interest and fees on loans Taxable $ 25,872 $ 26,176 $ 75,673 $ 76,623 Tax exempt 28 30 87 110 Interest and dividends on securities Taxable 4,437 2,902 11,793 8,366 Tax exempt 583 618 1,820 1,838 Interest on short-term investments 46 365 197 671 ---------- ---------- ---------- ---------- Total interest income 30,966 30,091 89,570 87,608 Interest on deposits 10,854 13,773 33,592 40,071 Interest on borrowings Short-term 1,435 1,956 5,164 5,130 Long-term 1,405 643 3,538 1,909 ---------- ---------- ---------- ---------- Total interest expense 13,694 16,372 42,294 47,110 ---------- ---------- ---------- ---------- NET INTEREST INCOME 17,272 13,719 47,276 40,498 Provision for loan losses 3,710 1,697 7,884 3,244 ---------- ---------- ---------- ---------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 13,562 12,022 39,392 37,254 NONINTEREST INCOME Wealth advisory fees 869 761 2,541 2,306 Investment brokerage fees 582 386 1,479 1,145 Service charges on deposit accounts 2,331 1,890 6,355 5,355 Loan, insurance and service fees 729 620 2,122 1,864 Merchant card fee income 949 906 2,646 2,462 Other income 585 455 1,453 1,393 Net gains on sales of real estate mortgage loans held for sale 146 116 666 480 Net securities gains (losses) 11 0 39 36 Gain on redemption of Visa shares 0 0 642 0 ---------- ---------- ---------- ---------- Total noninterest income 6,202 5,134 17,943 15,041 NONINTEREST EXPENSE Salaries and employee benefits 6,411 6,032 19,113 17,706 Net occupancy expense 741 680 2,226 1,992 Equipment costs 426 459 1,344 1,372 Data processing fees and supplies 954 772 2,662 2,246 Credit card interchange 651 613 1,765 1,643 Other expense 2,759 2,336 7,827 6,595 ---------- ---------- ---------- ---------- Total noninterest expense 11,942 10,892 34,937 31,554 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAX EXPENSE 7,822 6,264 22,398 20,741 Income tax expense 2,597 1,890 7,136 6,354 ---------- ---------- ---------- ---------- NET INCOME $ 5,225 $ 4,374 $ 15,262 $ 14,387 ========== ========== ========== ========== BASIC WEIGHTED AVERAGE COMMON SHARES 12,290,055 12,197,790 12,256,389 12,182,658 ========== ========== ========== ========== BASIC EARNINGS PER COMMON SHARE $ 0.43 $ 0.36 $ 1.25 $ 1.18 ========== ========== ========== ========== DILUTED WEIGHTED AVERAGE COMMON 12,468,446 12,433,701 12,454,426 12,425,238 ========== ========== ========== ========== DILUTED EARNINGS PER COMMON SHARE $ 0.42 $ 0.35 $ 1.23 $ 1.16 ========== ========== ========== ========== LAKELAND FINANCIAL CORPORATION LOAN DETAIL THIRD QUARTER 2008 (unaudited in thousands) September 30, June 30, September 30, 2008 2008 2007 ---------------- ---------------- ---------------- Commercial and industrial loans $1,129,960 65.8% $1,087,457 63.3% $ 923,168 63.7% Commercial real estate - multifamily loans 23,674 1.4 23,282 1.4 15,385 1.1 Commercial real estate construction loans 96,004 5.6 94,403 5.5 75,765 5.2 Agri-business and agricultural loans 174,462 10.2 188,107 11.0 149,976 10.4 Residential real estate mortgage loans 114,900 6.7 116,520 6.8 122,063 8.4 Home equity loans 124,016 7.2 115,040 6.7 109,096 7.5 Installment loans and other consumer loans 54,504 3.1 50,189 2.9 53,075 3.7 ---------------- ---------------- ---------------- Subtotal 1,717,520 100.0% 1,674,998 97.6% 1,448,528 100.0% Less: Allowance for loan losses (18,124) (18,014) (15,074) Net deferred loan (fees)/ costs (175) (256) 178 ---------- ---------- ---------- Loans, net $1,699,221 $1,656,728 $1,433,632 ========== ========== ==========