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
========== ========== ==========