WARSAW, Ind., July 23, 2008 (PRIME NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported quarterly net income of $4.8 million for the second quarter of 2008 versus $5.3 million for the second quarter of 2007. Diluted net income per share for the quarter was $0.39 versus $0.42 for the comparable period of 2007. In the first quarter of 2008, net income and diluted earnings per share were $5.2 million and $0.42, respectively.
The Company further reported net income of $10.0 million for the six months ended June 30, 2008, unchanged from the comparable period of 2007. Diluted net income per common share was unchanged at $0.81 for the six months period ended June 30, 2008 versus the comparable period of 2007.
"In a turbulent environment for the banking industry, we are very pleased with the results for the second quarter. While net income was down slightly from the first quarter, the core business momentum was strong and many key drivers of our overall profitability improved during the quarter. We successfully expanded our net interest margin, significantly grew fee-based income and experienced solid loan growth when compared to the first quarter. Driven by these critical measures, it was a successful quarter," commented Michael L. Kubacki, Chairman, President and Chief Executive Officer.
"The strength of our ongoing performance in an extremely challenging banking environment reaffirms the core value of the Lake City Bank franchise. With over $180 million of regulatory capital, we fit the regulatory definition of a well-capitalized bank and are in a great position to continue to expand our presence throughout the Indiana communities we serve. In a time when many of our peers are under intense scrutiny, Lake City Bank continues to perform well and our client base continues to grow throughout our footprint. Our success is a testament to the discipline of our entire team," added Kubacki.
Earnings for the six months ended June 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 six months would have been $9.7 million and diluted earnings per share would have been $0.78.
The Company also announced that the Board of Directors approved a cash dividend for the second quarter of $0.155 per share, payable on August 5, 2008 to shareholders of record as of July 25, 2008. The quarterly dividend represents an 11% increase over the quarterly dividends paid in 2007.
The Company's net interest margin was 3.15% in the second quarter versus 3.12% in the first quarter and 3.30% for the second quarter of 2007. This margin improvement, in conjunction with strong growth in earning assets, contributed to an increase of 13% in the Company's net interest income to $15.5 million in the second quarter of 2008 versus $13.7 million in the second quarter of 2007. On a linked quarter basis, net interest income increased by 7% versus the first quarter of 2008. The Company's provision for loan losses increased by $2.1 million, or 233%, to $3.0 million for the second quarter of 2008 versus $906,000 in the same period of 2007. In the first quarter of 2008, the provision was $1.2 million. The provision increase was driven by a higher level of charge offs, strong loan growth and overall weaker economic conditions in the Company's markets.
The Company's non-interest income was $6.0 million for the second quarter of 2008, an increase of $668,000, or 13%, compared to $5.3 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 $422,000, or 23%. On a linked quarter basis, noninterest income increased by $845,000, or 16%, versus the first quarter of 2008 (excluding the impact of the VISA gain). An increase of $486,000 in retail and commercial service charges on deposit accounts and an increase of $331,000 in investment brokerage fees were the primary contributors to this improvement.
The Company's non-interest expense was $11.6 million for the second quarter of 2008 compared to $10.4 million for the same period in 2007, an increase of 12%. 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 $630,000, or 11%, 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 $393,000, or 18%, in the quarter driven primarily by higher regulatory expenses of $213,000 due to the Company's resumption of regular FDIC insurance premiums and $86,000 of legal expenses. The Company's efficiency ratio was 54.1% compared to 54.7% for the same period a year ago.
Average total loans for the second quarter of 2008 were $1.64 billion versus $1.39 billion for the second quarter of 2007 and $1.56 billion for the linked first quarter of 2008. The year-over-year increase for the second quarter represented an increase of 18%, or $254 million. On a linked quarter basis, average loans increased by $76 million versus the first quarter of 2008. Total gross loans as of June 30, 2008 were $1.67 billion compared to $1.40 billion as of June 30, 2007 and $1.60 billion as of March 31, 2008.
Net charge offs totaled $1.8 million in the second quarter of 2008, versus $196,000 during the first quarter of 2008, and $313,000 during the second quarter of 2007. Lakeland Financial's allowance for loan losses as of June 30, 2008 was $18.0 million, compared to $16.8 million as of March 31, 2008 and $15.4 million as of June 30, 2007.
Kubacki commented, "While a higher provision for loan losses was necessary in the quarter, the positive contributors of loan growth and fee income increases provided for an overall good performance during the quarter. The ongoing economic challenges we face have created some real challenges for the banking sector and have generally resulted in higher levels of loan losses within the industry. While we are not immune to this trend, net charge offs during the quarter of $1.8 million were well-provided for with a provision for loan losses of $3.0 million. As a result of this level of provisioning, we were able to grow our allowance for loan losses by $1.3 million, or 7.5%, during the quarter and by $2.2 million, or 14% since year end 2007."
Kubacki added, "During the quarter, we've continued to focus on identifying and addressing credit related matters and maintaining adequate reserves to absorb any inherent losses. As a result, we increased the ratio of our loan loss reserve to total loans to 1.08% as of June 30, 2008 as compared to 1.05% and 1.04% at March 31, 2008 and December 31, 2007, respectively."
Nonperforming assets totaled $26.4 million as of June 30, 2008 compared to $9.6 million as of March 31, 2008 and $15.3 million on June 30, 2007. The ratio of nonperforming assets to assets was 1.17% on June 30, 2008 compared to 0.43% at March 31, 2008 and 0.84% at June 30, 2007. The allowance for loan losses represented 72% of nonperforming loans as of June 30, 2008 versus 228% at March 31, 2008 and 101% at June 30, 2007.
The increase in nonperforming assets resulted primarily from the addition of three borrowing relationships, all located in the Bank's Northern Indiana region, with aggregate loans totaling $16.4 million. The largest addition is a $9.2 million loan relationship with a recreational vehicle manufacturer. Borrower collateral and personal guarantees of its principals support this credit. There have been no charge offs related to this borrower to date. The second addition represents current exposure totaling $6.6 million to a manufacturer of commercial and residential building supplies. Borrower collateral supports this credit. The Bank charged off $906,000 related to this borrower in the second quarter. The third loan represents current exposure of $564,000 to a commercial development. Borrower collateral, primarily real estate, and the personal guarantee of a principal support this credit. The Bank charged off $888,000 related to this borrower in the second quarter. In all cases, there can be no assurances that full repayment of the loans will result.
For the three months ended June 30, 2008, Lakeland Financial's average equity to average assets ratio was 7.08% compared to 7.38% for the first quarter of 2008 and 7.56% for the second quarter of 2007. Average stockholders' equity for the quarter ended June 30, 2008 was $151.5 million versus $149.5 million for the first quarter of 2008 and $136.3 million for the second quarter of 2007. Average total deposits for the quarter ended June 30, 2008 were $1.55 billion versus $1.51 billion for the first quarter of 2008 and $1.45 billion for the second quarter of 2007.
Lakeland Financial Corporation is a $2.2 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 SECOND QUARTER 2008 FINANCIAL HIGHLIGHTS (Unaudited - Dollars in thousands except share and Per Share Data) Three Months Ended --------------------------------------- Jun. 30, Mar. 31, Jun. 30, 2008 2008 2007 ----------- ----------- ----------- END OF PERIOD BALANCES Assets $ 2,249,128 $ 2,204,995 $ 1,822,818 Deposits 1,605,035 1,576,598 1,408,753 Loans 1,674,742 1,602,416 1,400,973 Allowance for Loan Losses 18,014 16,758 15,351 Common Stockholders' Equity 150,982 151,046 136,618 Tangible Equity 146,525 146,492 131,773 AVERAGE BALANCES Assets Total Assets $ 2,140,275 $ 2,026,664 $ 1,803,071 Earning Assets 2,018,081 1,911,079 1,693,322 Investments 366,294 333,699 299,455 Loans 1,640,405 1,564,552 1,386,229 Liabilities and Stockholders' Equity Total Deposits 1,552,889 1,514,784 1,446,833 Interest Bearing Deposits 1,334,415 1,296,949 1,219,574 Interest Bearing Liabilities 1,751,947 1,642,609 1,423,894 Common Stockholders' Equity 151,486 149,533 136,264 INCOME STATEMENT DATA Net Interest Income $ 15,498 $ 14,506 $ 13,681 Net Interest Income-Fully Tax Equivalent 15,792 14,791 13,934 Provision for Loan Losses 3,021 1,153 906 Noninterest Income 5,972 5,769 5,304 Noninterest Expense 11,607 11,382 10,392 Net Income 4,802 5,241 5,255 PER SHARE DATA Basic Net Income Per Common Share $ 0.39 $ 0.43 $ 0.43 Diluted Net Income Per Common Share 0.39 0.42 0.42 Cash Dividends Declared Per Common Share 0.155 0.14 0.14 Book Value Per Common Share (equity per share issued) 12.29 12.35 11.20 Market Value - High 25.00 23.97 23.81 Market Value - Low 19.00 16.87 20.71 Basic Weighted Average Common Shares Outstanding 12,262,926 12,215,561 12,189,997 Diluted Weighted Average Common Shares Outstanding 12,468,486 12,424,643 12,421,178 KEY RATIOS Return on Average Assets 0.90% 1.04% 1.17% Return on Average Common Stockholders' Equity 12.75 14.10 15.47 Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 54.06 56.14 54.73 Average Equity to Average Assets 7.08 7.38 7.56 Net Interest Margin 3.15 3.12 3.30 Net Charge Offs to Average Loans 0.43 0.05 0.09 Loan Loss Reserve to Loans 1.08 1.05 1.10 Nonperforming Loans to Loans 1.49 0.46 1.09 Nonperforming Assets to Assets 1.17 0.43 0.84 Tier 1 Leverage 8.40 8.68 9.12 Tier 1 Risk-Based Capital 9.84 10.01 11.06 Total Capital 10.83 10.96 12.10 Tangible Capital 6.53 6.66 7.25 ASSET QUALITY Loans Past Due 90 Days or More $ 972 $ 508 $ 214 Non-accrual Loans 23,987 6,852 15,053 Nonperforming Loans 24,959 7,360 15,267 Other Real Estate Owned 1,357 2,167 71 Other Nonperforming Assets 45 30 0 Total Nonperforming Assets 26,361 9,557 15,338 Impaired Loans 23,718 6,591 14,807 Net Charge Offs/ (Recoveries) 1,765 196 313 Six Months Ended ------------------------ Jun. 30, Jun. 30, 2008 2007 ----------- ----------- END OF PERIOD BALANCES Assets $ 2,249,128 $ 1,822,818 Deposits 1,605,035 1,408,753 Loans 1,674,742 1,400,973 Allowance for Loan Losses 18,014 15,351 Common Stockholders' Equity 150,982 136,618 Tangible Equity 146,525 131,773 AVERAGE BALANCES Assets Total Assets $ 2,083,470 $ 1,787,398 Earning Assets 1,964,580 1,679,208 Investments 349,997 297,591 Loans 1,602,479 1,369,894 Liabilities and Stockholders' Equity Total Deposits 1,533,836 1,450,438 Interest Bearing Deposits 1,315,682 1,228,508 Interest Bearing Liabilities 1,697,278 1,416,190 Common Stockholders' Equity 150,475 134,097 INCOME STATEMENT DATA Net Interest Income $ 30,004 $ 26,779 Net Interest Income-Fully Tax Equivalent 30,588 27,283 Provision for Loan Losses 4,174 1,547 Noninterest Income 11,741 9,907 Noninterest Expense 22,989 20,662 Net Income 10,043 10,013 PER SHARE DATA Basic Net Income Per Common Share $ 0.82 $ 0.82 Diluted Net Income Per Common Share 0.81 0.81 Cash Dividends Declared Per Common Share 0.295 0.265 Book Value Per Common Share (equity per share issued) 12.29 11.20 Market Value - High 25.00 25.92 Market Value - Low 16.87 20.71 Basic Weighted Average Common Shares Outstanding 12,239,972 12,174,966 Diluted Weighted Average Common Shares Outstanding 12,447,473 12,420,834 KEY RATIOS Return on Average Assets 0.97% 1.13% Return on Average Common Stockholders' Equity 13.42 15.06 Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 55.07 56.32 Average Equity to Average Assets 7.22 7.50 Net Interest Margin 3.13 3.27 Net Charge Offs to Average Loans 0.25 0.10 Loan Loss Reserve to Loans 1.08 1.10 Nonperforming Loans to Loans 1.49 1.09 Nonperforming Assets to Assets 1.17 0.84 Tier 1 Leverage 8.40 9.12 Tier 1 Risk-Based Capital 9.84 11.06 Total Capital 10.83 12.10 Tangible Capital 6.53 7.25 ASSET QUALITY Loans Past Due 90 Days or More $ 972 $ 214 Non-accrual Loans 23,987 15,053 Nonperforming Loans 24,959 15,267 Other Real Estate Owned 1,357 71 Other Nonperforming Assets 45 0 Total Nonperforming Assets 26,361 15,338 Impaired Loans 23,718 14,807 Net Charge Offs/ (Recoveries) 1,961 659 LAKELAND FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS As of June 30, 2008 and December 31, 2007 (in thousands, except per share data) June 30, December 31, 2008 2007 ----------- ----------- (Unaudited) ASSETS Cash and due from banks $ 93,128 $ 56,278 Short-term investments 6,521 11,413 ---------- ---------- Total cash and cash equivalents 99,649 67,691 Securities available for sale (carried at fair value) 389,187 327,757 Real estate mortgage loans held for sale 1,567 537 Loans, net of allowance for loan losses of $18,014 and $15,801 1,656,728 1,507,919 Land, premises and equipment, net 27,351 27,525 Bank owned life insurance 33,562 21,543 Accrued income receivable 8,830 9,126 Goodwill 4,970 4,970 Other intangible assets 516 619 Other assets 26,768 21,446 ---------- ---------- Total assets $2,249,128 $1,989,133 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Noninterest bearing deposits $ 247,540 $ 255,348 Interest bearing deposits 1,357,495 1,223,570 ---------- ---------- Total deposits 1,605,035 1,478,918 Short-term borrowings Federal funds purchased 91,000 70,010 Securities sold under agreements to repurchase 158,610 154,913 U.S. Treasury demand notes 630 1,242 Other short-term borrowings 106,000 90,000 ---------- ---------- Total short-term borrowings 356,240 316,165 Accrued expenses payable 15,056 15,497 Other liabilities 844 1,311 Long-term borrowings 90,043 44 Subordinated debentures 30,928 30,928 ---------- ---------- Total liabilities 2,098,146 1,842,863 STOCKHOLDERS' EQUITY Common stock: 180,000,000 shares authorized, no par value 12,287,248 shares issued and 12,186,302 outstanding as of June 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 19,383 18,078 Retained earnings 135,522 129,090 Accumulated other comprehensive loss (3,934) (1,010) Treasury stock, at cost (2008 - 100,946 shares, 2007 - 96,020 shares) (1,442) (1,341) ---------- ---------- Total stockholders' equity 150,982 146,270 ---------- ---------- Total liabilities and stockholders' equity $2,249,128 $1,989,133 ========== ========== LAKELAND FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF INCOME For the Three Months and Six months Ended June 30, 2008 and 2007 (in thousands except for share and per share data) (unaudited) Three Months Ended Six Months Ended ------------------------ ------------------------ 2008 2007 2008 2007 ----------- ----------- ----------- ----------- NET INTEREST INCOME Interest and fees on loans Taxable $ 24,326 $ 25,727 $ 49,801 $ 50,447 Tax exempt 27 30 59 80 Interest and dividends on securities Taxable 3,976 2,786 7,356 5,464 Tax exempt 623 618 1,237 1,220 Interest on short-term investments 60 98 151 306 ----------- ----------- ----------- ----------- Total interest income 29,012 29,259 58,604 57,517 Interest on deposits 10,691 13,200 22,738 26,298 Interest on borrowings Short-term 1,305 1,744 3,729 3,174 Long-term 1,518 634 2,133 1,266 ----------- ----------- ----------- ----------- Total interest expense 13,514 15,578 28,600 30,738 ----------- ----------- ----------- ----------- NET INTEREST INCOME 15,498 13,681 30,004 26,779 Provision for loan losses 3,021 906 4,174 1,547 ----------- ----------- ----------- ----------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 12,477 12,775 25,830 25,232 NONINTEREST INCOME Wealth advisory fees 863 856 1,672 1,545 Investment brokerage fees 614 516 897 759 Service charges on deposit accounts 2,255 1,833 4,024 3,465 Loan, insurance and service fees 738 663 1,393 1,244 Merchant card fee income 887 792 1,697 1,556 Other income 410 445 868 938 Net gains on sales of real estate mortgage loans held for sale 205 199 520 364 Net securities gains (losses) 0 0 28 36 Gain on redemption of Visa shares 0 0 642 0 ----------- ----------- ----------- ----------- Total noninterest income 5,972 5,304 11,741 9,907 NONINTEREST EXPENSE Salaries and employee benefits 6,449 5,819 12,702 11,674 Net occupancy expense 689 638 1,485 1,312 Equipment costs 477 468 918 913 Data processing fees and supplies 867 773 1,707 1,474 Credit card interchange 579 541 1,114 1,030 Other expense 2,546 2,153 5,063 4,259 ----------- ----------- ----------- ----------- Total noninterest expense 11,607 10,392 22,989 20,662 ----------- ----------- ----------- ----------- INCOME BEFORE INCOME TAX EXPENSE 6,842 7,687 14,582 14,477 Income tax expense 2,040 2,432 4,539 4,464 ----------- ----------- ----------- ----------- NET INCOME $ 4,802 $ 5,255 $ 10,043 $ 10,013 =========== =========== =========== =========== BASIC WEIGHTED AVERAGE COMMON SHARES 12,262,926 12,189,997 12,239,972 12,174,966 =========== =========== =========== =========== BASIC EARNINGS PER COMMON SHARE $ 0.39 $ 0.43 $ 0.82 $ 0.82 =========== =========== =========== =========== DILUTED WEIGHTED AVERAGE COMMON SHARES 12,468,486 12,421,178 12,447,473 12,420,834 =========== =========== =========== =========== DILUTED EARNINGS PER COMMON SHARE $ 0.39 $ 0.42 $ 0.81 $ 0.81 =========== =========== =========== =========== LAKELAND FINANCIAL CORPORATION LOAN DETAIL SECOND QUARTER 2008 (unaudited in thousands) June 30, March 31, June 30, 2008 2008 2007 ----------------- ----------------- ------------------ Commercial and industrial loans $1,087,457 64.9% $1,047,367 65.4% $ 896,399 64.0% Commercial real estate - multifamily loans 23,282 1.4 16,660 1.0 15,395 1.1 Commercial real estate construction loans 94,403 5.6 83,378 5.2 78,940 5.6 Agri- business and agricultural loans 188,107 11.2 180,344 11.3 132,803 9.5 Residential real estate mortgage loans 116,520 7.0 115,953 7.2 118,564 8.5 Home equity loans 115,040 6.9 108,558 6.8 105,942 7.5 Installment loans and other consumer loans 50,189 3.0 50,250 3.1 52,911 3.8 ---------- ----- ---------- ----- --------- ----- Subtotal 1,674,998 100.0% 1,602,510 100.0% 1,400,954 100.0% Less: Allowance for loan losses (18,014) (16,758) (15,351) Net deferred loan (fees)/ costs (256) (94) 19 ---------- ---------- ---------- Loans, net $1,656,728 $1,585,658 $1,385,622 ========== ========== ==========