Lakeland Financial Reports Record Performance

Second Quarter Net Income Increases 22%

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| Source: Lake City Bank

WARSAW, Ind., July 25, 2014 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $11.3 million for the second quarter of 2014, an increase of 22% versus $9.2 million for the second quarter of 2013. Diluted net income per common share increased 21% to $0.68 versus $0.56 for the comparable period of 2013. This per share performance also represents a record level for the company.

The company further reported net income of $21.2 million for the six months ended June 30, 2014 versus $18.5 million for the comparable period of 2013, an increase of 15% and a record performance for the company over a six-month period. Diluted net income per common share increased 13% to $1.27 for the six months ended June 30, 2014 versus $1.12 for the comparable period of 2013. This per share performance also represents a record level for the company.

David M. Findlay, President and Chief Executive Officer, commented, "We continue to deliver strong operating results for shareholders while at the same time taking care of clients. Our disciplined business model remains focused on strategically growing the bank in our existing Indiana communities. We are extremely pleased with this record performance and believe we are in a strong position to continue this growth strategy in our Indiana footprint."

Return on average total equity for the first six months of 2014 improved to 12.85% from 12.17% in the prior year period. Return on average assets for the first six months of 2014 increased to 1.32% up from 1.26% in the same period of 2013. The company's tangible common equity to tangible assets ratio was 9.96% at June 30, 2014, compared to 10.25% at June 30, 2013 and 10.18% at March 31, 2014. As previously announced, the board of directors approved a cash dividend for the second quarter of $0.21 per share, payable on August 5, 2014, to shareholders of record as of July 25, 2014. The quarterly dividend represents an 11% increase over the quarterly dividends paid for each quarter of 2013 and from the first quarter of 2014.The dividend yield is currently 2.15% based on the closing price of our common stock on June 30, 2014.

Total loans outstanding grew $338.6 million, or 15%, from $2.33 billion as of June 30, 2013 to $2.67 billion as of June 30, 2014. Average total loans for the second quarter of 2014 were $2.65 billion, an increase of $341.2 million, or 15% versus $2.30 billion for the comparable period in 2013. On a linked quarter basis, average total loans increased $107.1 million, or 4%, from $2.54 billion for the first quarter of 2014 to $2.65 billion for the second quarter of 2014.

Findlay observed, "The best way for Lake City Bank to support economic expansion in our Indiana markets is to continue to make loans to local businesses. We've grown loans by $138 million through the first six months of 2014 and are encouraged by the improving strength of the economy in our markets. This loan growth continues to be geographically diverse as we have experienced ongoing growth in both mature and newer markets in Indiana."

Total deposits grew $344 million, or 14%, from $2.48 billion as of June 30, 2013 to $2.83 billion as of June 30, 2014. Average total deposits for the quarter ended June 30, 2014 were $2.79 billion versus $2.49 billion for the second quarter of 2013, an increase of 12%. On a linked quarter basis, average total deposits increased $145.6 million, or 6%.

The company's net interest margin was 3.34% in the second quarter of 2014, up from 3.20% for the second quarter of 2013. The net interest margin was 3.38% in the linked first quarter of 2014. The net interest margin for the six months ended June 30, 2014 was 3.35% compared to 3.19% in the prior year six month period. Despite downward pressure on loan yields and the prolonged low interest rate environment, the company improved its net interest margin during the six months ended June 30, 2014 compared to the same period in 2013. The net interest margin expansion is attributable to declines in deposit rates and overall funding costs and improvement in the investment portfolio yields which have more than offset declining loan yields.  

Nonperforming assets decreased 31% to $15.2 million as of June 30, 2014 versus $21.8 million as of June 30, 2013. On a linked quarter basis, nonperforming assets were 7% lower than the $16.3 million reported on March 31, 2014. The decrease in nonperforming assets during the second quarter of 2014 primarily resulted from payments including payoffs received on a number of nonperforming loans. The ratio of nonperforming assets to total assets at June 30, 2014, was 0.45% versus 0.73% at both June 30, 2013 and 0.50% at March 31, 2014. Net charge-offs totaled $532,000 in the second quarter of 2014 versus $183,000 during the second quarter of 2013 and $2.7 million during the linked first quarter of 2014. Net charge-offs to average loans were 0.25% for the six months ended June 30, 2014 compared to 0.07% for the same period in 2013.

For the sixth consecutive quarter, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by the stabilization and improvement in key loan quality metrics, including lower levels of nonperforming loans, appropriate reserve coverage of nonperforming loans, continuing signs of stabilization in the economic conditions of the company's markets and sustained signs of improvement in its borrowers' performance and future prospects. The company's allowance for loan losses as of June 30, 2014 was $45.6 million compared to $50.6 million as of June 30, 2013 and $46.1 million as of March 31, 2014. The allowance for loan losses represented 1.71% of total loans as of June 30, 2014 versus 2.17% at June 30, 2013 and 1.79% as of March 31, 2014. Further, the allowance for loan losses as a percentage of nonperforming loans increased to 324% as of June 30, 2014, versus 234% as of June 30, 2013, and 306% as of March 31, 2014.

Findlay noted, "The growth of our commercial loan portfolio, coupled with our continued stable asset quality metrics, is having a positive contribution to our profitability. As a result, our net interest income grew by 16% during the first half of 2014. While the low interest rate environment will continue to pressure net interest margin, we believe that we are well positioned to continue our profitable growth for our shareholders."

 The company's noninterest income was unchanged at $7.6 million for the second quarter of each of 2014 and 2013. Year-over-year, quarterly noninterest income was positively impacted by a $398,000 increase in other income, driven primarily by $304,000 in swap fees. Offsetting the increase was a $359,000 decrease in mortgage banking income during the quarter, which was driven by lower mortgage production volumes due to higher mortgage rates. Noninterest income was $15.0 million for the six months ended June 30, 2014, also unchanged from the same period in 2013. Growth in swap fees, deposit fees and wealth management income offset the decline in mortgage banking income which declined by $803,000 for the first half of the year compared to the prior period.

The company's noninterest expense increased $993,000, or 7%, to $16.1 million in the second quarter of 2014 versus $15.1 million in the comparable quarter of 2013. On a linked quarter basis, noninterest expense decreased by $706,000 from $16.8 million in the first quarter of 2014. Salaries and employee benefits increased by $576,000 in the three month period ended June 30, 2014 versus the same period of 2013. These increases in salary and employee benefits were driven by higher performance incentive-based compensation costs, staff additions and normal merit increases. Data processing fees increased by $114,000 due to a larger customer base as well as greater utilization of services from the company's core processor, which the company expects will improve marketing and cross-selling initiatives. In addition, equipment costs increased $107,000 during the second quarter of 2014, driven by higher depreciation expenses. The company's efficiency ratio was 49% for the second quarter of 2014, compared to 51% for the second quarter of 2013 and 52% for the linked first quarter of 2014, which consistently ranks in the top quartile of peer financial institutions in the country. For the six months ended June 30, 2014, the efficiency ratio was 50% compared to 51% in the prior year period.

Findlay added, "Our stable efficiency ratio reflects of our ability to grow total revenue while at the same time prudently managing operating expenses. We continue to invest in market expansion, staff growth and technology-driven retail, wealth advisory and commercial banking product lines. In early 2014, we opened a second office in the Indianapolis market and continue to be pleased with our growth in the market. "

Lakeland Financial Corporation is a $3.4 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 46 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 www.lakecitybank.com. The company's common stock is traded on the Nasdaq Global Select Market under "LKFN." In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this 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 common 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.

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
SECOND QUARTER 2014 FINANCIAL HIGHLIGHTS
(Unaudited – Dollars in thousands except per share data)
           
  Three Months Ended Six Months Ended
  Jun. 30, Mar. 31, Jun. 30, Jun. 30 Jun. 30
END OF PERIOD BALANCES 2014 2014 2013 2014 2013
 Assets $3,419,111 $3,233,724 $2,975,462 $3,419,111 $2,975,462
 Deposits 2,827,745 2,738,774 2,483,492 2,827,745 2,483,492
 Brokered Deposits 141,420 143,760 16,311 141,420 16,311
 Core Deposits 2,686,325 2,595,014 2,467,181 2,686,325 2,467,181
 Loans 2,673,327 2,574,190 2,334,700 2,673,327 2,334,700
 Allowance for Loan Losses 45,605 46,137 50,635 45,605 50,635
 Total Equity 343,575 332,091 307,608 343,575 307,608
 Tangible Common Equity 340,382 329,024 304,576 340,382 304,576
AVERAGE BALANCES          
 Total Assets $3,319,795 $3,187,133 $2,982,150 $3,253,830 $2,963,065
 Earning Assets 3,129,928 3,021,440 2,795,925 3,075,984 2,782,004
 Investments 474,561 473,184 482,628 473,876 480,376
 Loans 2,645,673 2,538,622 2,304,471 2,592,443 2,280,123
 Total Deposits 2,788,142 2,642,562 2,490,115 2,715,754 2,481,681
 Interest Bearing Deposits 2,312,748 2,178,898 2,102,924 2,246,193 2,097,688
 Interest Bearing Liabilities 2,491,332 2,380,595 2,268,230 2,436,269 2,255,832
 Total Equity 337,919 328,058 309,417 333,016 306,339
INCOME STATEMENT DATA          
 Net Interest Income $25,554 $24,680 $21,912 $50,234 $43,169
 Net Interest Income-Fully Tax Equivalent 26,038 25,151 22,352 51,194 44,030
 Provision for Loan Losses 0 0 0 0 0
 Noninterest Income 7,592 7,427 7,569 15,019 15,050
 Noninterest Expense 16,084 16,790 15,091 32,874 29,984
 Net Income 11,312 9,912 9,236 21,224 18,482
PER SHARE DATA          
 Basic Net Income Per Common Share $0.68 $0.60 $0.56 $1.28 $1.13
 Diluted Net Income Per Common Share 0.68 0.59 0.56 1.27 1.12
 Cash Dividends Declared Per Common Share 0.21 0.19 0.19 0.40 0.19
 Book Value Per Common Share (equity per share issued) 20.77 20.08 18.71 20.77 18.71
 Tangible Book Value Per Common Share 20.58 19.90 18.54 20.58 18.54
 Market Value – High 41.26 41.46 28.50 41.46 28.50
 Market Value – Low 34.96 35.31 25.26 34.96 23.92
 Basic Weighted Average Common Shares Outstanding 16,536,112 16,513,645 16,425,382 16,524,079 16,411,695
 Diluted Weighted Average Common Shares Outstanding 16,739,069 16,713,853 16,546,547 16,729,479 16,524,250
KEY RATIOS          
 Return on Average Assets 1.37% 1.26% 1.24% 1.32% 1.26%
 Return on Average Total Equity 13.43 12.25 11.97 12.85 12.17
 Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 48.53 52.29 51.19 50.38 51.5
 Average Equity to Average Assets 10.18 10.29 10.38 10.23 10.34
 Net Interest Margin 3.34 3.38 3.20 3.35 3.19
 Net Charge Offs to Average Loans 0.08 0.42 0.03 0.25 0.07
 Loan Loss Reserve to Loans 1.71 1.79 2.17 1.71 2.17
 Loan Loss Reserve to Nonperforming Loans 323.99 305.50 233.92 323.99 233.92
 Loan Loss Reserve to Nonperforming Loans and Performing TDR's 153.01 147.29 113.37 153.01 113.37
 Nonperforming Loans to Loans 0.53 0.59 0.93 0.53 0.93
 Nonperforming Assets to Assets 0.45 0.50 0.73 0.45 0.73
 Total Impaired and Watch List Loans to Total Loans 5.72 6.56 7.71 5.72 7.71
 Tier 1 Leverage 11.01 11.20 11.01 11.01 11.01
 Tier 1 Risk-Based Capital 12.86 13.08 13.39 12.86 13.39
 Total Capital 14.12 14.34 14.65 14.12 14.65
 Tangible Capital 9.96 10.18 10.25 9.96 10.25
ASSET QUALITY           
 Loans Past Due 30 - 89 Days $3,042 $1,802 $5,348 $3,042 $5,348
 Loans Past Due 90 Days or More 4 20 104 4 104
 Non-accrual Loans 14,071 15,082 21,542 14,071 21,542
 Nonperforming Loans (includes nonperforming TDR's) 14,075 15,102 21,646 14,075 21,646
 Other Real Estate Owned 1,136 1,192 171 1,136 171
 Other Nonperforming Assets 5 9 5 5 5
 Total Nonperforming Assets 15,216 16,303 21,822 15,216 21,822
 Performing Troubled Debt Restructurings 15,607 16,222 23,017 15,607 19,398
 Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 10,349 10,721 19,398 10,349 23,017
 Total Troubled Debt Restructurings 25,956 26,943 42,415 25,956 42,415
 Impaired Loans 32,049 34,101 46,906 32,049 46,906
 Non-Impaired Watch List Loans 120,690 134,680 133,139 120,690 133,139
 Total Impaired and Watch List Loans 152,739 168,781 180,045 152,739 180,045
 Gross Charge offs 655 2,751 368 3,406 1,574  
 Recoveries 123 91 185 214 765  
 Net Charge Offs (Recoveries) 532 2,659 183 3,191 810  
 
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2014 and December 31, 2013
(in thousands, except share data)
     
  June 30, December 31,
  2014 2013
  (Unaudited)  
ASSETS    
Cash and due from banks $150,448 $55,727
Short-term investments 9,954 7,378
 Total cash and cash equivalents 160,402 63,105
     
Securities available for sale (carried at fair value) 475,862 468,967
Real estate mortgage loans held for sale 1,069 1,778
     
Loans, net of allowance for loan losses of $45,605 and $48,797 2,627,722 2,486,301
     
Land, premises and equipment, net  39,867 39,335
Bank owned life insurance 63,363 62,883
Federal Reserve and Federal Home Loan Bank stock 10,732 10,732
Accrued interest receivable 8,970 8,577
Goodwill 4,970 4,970
Other assets 26,154 29,116
 Total assets $3,419,111 $3,175,764
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
LIABILITIES    
Noninterest bearing deposits $506,771 $479,606
Interest bearing deposits  2,320,974 2,066,462
 Total deposits 2,827,745 2,546,068
     
Short-term borrowings    
 Federal funds purchased 0 11,000
 Securities sold under agreements to repurchase  92,961 104,876
 Other short-term borrowings 110,000 146,000
 Total short-term borrowings 202,961 261,876
     
Long-term borrowings 35 37
Subordinated debentures 30,928 30,928
Accrued interest payable 2,996 2,918
Other liabilities 10,871 11,973
 Total liabilities 3,075,536 2,853,800
     
STOCKHOLDERS' EQUITY    
 Common stock: 90,000,000 shares authorized, no par value 16,538,617 shares issued and 16,459,359 outstanding as of June 30, 2014 16,475,716 shares issued and 16,377,449 outstanding as of December 31, 2013 94,205 93,249
Retained earnings 247,715 233,108
Accumulated other comprehensive income/(loss) 3,352 (2,494)
Treasury stock, at cost (2014 - 79,258 shares, 2013 - 98,267 shares) (1,786) (1,988)
 Total stockholders' equity 343,486 321,875
 Noncontrolling interest 89 89
 Total equity 343,575 321,964
 Total liabilities and equity $3,419,111 $3,175,764
 
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Six Months Ended June 30, 2014 and 2013
(in thousands except for share and per share data)
(unaudited)
         
  Three Months Ended Six Months Ended
  June 30, June 30,
  2014 2013 2014 2013
NET INTEREST INCOME        
Interest and fees on loans        
 Taxable $26,270 $24,388 $51,604 $48,874
 Tax exempt 125 102 223 204
Interest and dividends on securities        
 Taxable 2,028 1,152 4,039 2,097
 Tax exempt 816 770 1,635 1,505
Interest on short-term investments 11 12 19 36
 Total interest income 29,250 26,424 57,520 52,716
         
Interest on deposits 3,335 4,139 6,522 8,776
Interest on borrowings        
 Short-term 104 112 255 203
 Long-term 257 261 509 568
 Total interest expense 3,696 4,512 7,286 9,547
         
NET INTEREST INCOME 25,554 21,912 50,234 43,169
         
Provision for loan losses 0 0 0 0
         
NET INTEREST INCOME AFTER PROVISION FOR        
 LOAN LOSSES 25,554 21,912 50,234 43,169
         
NONINTEREST INCOME        
Wealth advisory fees 977 971 2,016 1,915
Investment brokerage fees 923 997 2,040 1,946
Service charges on deposit accounts 2,348 2,252 4,499 4,223
Loan, insurance and service fees 1,757 1,812 3,215 3,268
Merchant card fee income 380 293 730 569
Bank owned life insurance income 338 418 710 811
Other income 686 288 1,561 1,270
Mortgage banking income 179 538 244 1,047
Net securities gains 4 0 4 1
 Total noninterest income 7,592 7,569 15,019 15,050
         
NONINTEREST EXPENSE        
Salaries and employee benefits 9,467 8,891 19,454 18,056
Net occupancy expense 903 873 2,013 1,719
Equipment costs 761 654 1,534 1,263
Data processing fees and supplies 1,493 1,379 2,984 2,672
Corporate and business development 481 443 897 849
FDIC insurance and other regulatory fees 488 458 965 921
Professional fees 736 753 1,536 1,348
Other expense  1,755 1,640 3,491 3,156
 Total noninterest expense 16,084 15,091 32,874 29,984
         
INCOME BEFORE INCOME TAX EXPENSE 17,062 14,390 32,379 28,235
Income tax expense  5,750 5,154 11,155 9,753
NET INCOME $11,312 $9,236 $21,224 $18,482
         
BASIC WEIGHTED AVERAGE COMMON SHARES 16,536,112 16,425,382 16,524,079 16,411,695
BASIC EARNINGS PER COMMON SHARE $0.68 $0.56 $1.28 $1.13
DILUTED WEIGHTED AVERAGE COMMON SHARES 16,739,069 16,546,547 16,729,479 16,524,250
DILUTED EARNINGS PER COMMON SHARE $0.68 $0.56 $1.27 $1.12
 
 
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
SECOND QUARTER 2014
(unaudited in thousands)
                 
  June 30, March 31, December 31, June 30,
  2014 2014 2013 2013
Commercial and industrial loans:                
 Working capital lines of credit loans $509,725 19.1% $476,818 18.5% $457,690 18.0% $462,137 19.8%
 Non-working capital loans 526,221 19.7 467,679 18.2 443,877 17.5 425,958 18.2
 Total commercial and industrial loans 1,035,946 38.7 944,497 36.7 901,567 35.6 888,095 38.0
                 
Commercial real estate and multi-family residential loans:                
 Construction and land development loans 166,671 6.2 144,978 5.6 157,630 6.2 108,695 4.7
 Owner occupied loans 385,706 14.4 388,052 15.1 370,386 14.6 365,071 15.6
 Nonowner occupied loans 406,691 15.2 424,143 16.5 394,748 15.6 373,696 16.0
 Multifamily loans 58,955 2.2 57,882 2.2 63,443 2.5 37,422 1.6
 Total commercial real estate and multi-family residential loans 1,018,023 38.1 1,015,055 39.4 986,207 38.9 884,884 37.9
                 
Agri-business and agricultural loans:                
 Loans secured by farmland 122,515 4.6 109,260 4.2 133,458 5.3 100,571 4.3
 Loans for agricultural production 90,164 3.4 104,384 4.1 120,571 4.8 97,729 4.2
 Total agri-business and agricultural loans 212,679 8.0 213,644 8.3 254,029 10.0 198,300 8.5
                 
Other commercial loans 72,097 2.7 77,324 3.0 70,770 2.8 46,501 2.0
 Total commercial loans 2,338,745 87.5 2,250,520 87.4 2,212,573 87.3 2,017,780 86.4
                 
Consumer 1-4 family mortgage loans:                
 Closed end first mortgage loans 138,773 5.2 135,111 5.2 125,444 4.9 116,247  $ 5.0
 Open end and junior lien loans 145,330 5.4 139,185 5.4 146,946 5.8 152,571 6.5
 Residential construction and land development loans 7,114 0.3 5,658 0.2 4,640 0.2 5,263 0.2
 Total consumer 1-4 family mortgage loans 291,217 10.9 279,954 10.9 277,030 10.9 274,081 11.7
                 
Other consumer loans 43,907 1.6 44,319 1.7 46,125 1.8 43,470 1.9
 Total consumer loans 335,124 12.5 324,273 12.6 323,155 12.7 317,551 13.6
 Subtotal 2,673,869 100.0% 2,574,793 100.0% 2,535,728 100.0% 2,335,331 100.0%
Less: Allowance for loan losses (45,605)   (46,137)   (48,797)   (50,635)  
 Net deferred loan fees (542)   (603)   (630)   (631)  
Loans, net $2,627,722   $2,528,053   $2,486,301   $2,284,065  
Lisa M. O'Neill
Executive Vice President and Chief Financial Officer
(574) 267-9125