Lakeland Financial Reports Record Annual Performance

Year-to-Date Record Net Income Improves by 13% to $95.7 Million

Warsaw, Indiana, UNITED STATES


WARSAW, Ind., Jan. 25, 2022 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record full year net income of $95.7 million, which represents an increase of $11.4 million, or 13.5%, compared with net income of $84.3 million for 2020. Diluted earnings per share of $3.74 was also a record for 2021, which increased 13.3% compared to $3.30 for 2020. Net income for 2021 benefited from growth in net interest income and lower provision expense as compared to 2020, offset by an increase in noninterest expense.

The company further reported quarterly net income of $24.3 million for the three months ended December 31, 2021 versus $24.6 million for the comparable period of 2020, a decrease of 1.3%. Diluted net income per common share decreased 2.1% to $0.95 for the three months ended December 31, 2021 versus $0.97 for the comparable period of 2020. On a linked quarter basis, net income increased $164,000, or 0.7%, from the third quarter of 2021, of $24.1 million, or $0.94 diluted earnings per share. Pretax pre-provision earnings were $29.8 million for the fourth quarter of 2021, a decrease of 5.7%, or $1.8 million, from $31.6 million for the fourth quarter of 2020. On a linked quarter basis, pretax pre-provision earnings decreased 3.6%, or $1.1 million, from $30.9 million for the third quarter of 2021. The decreases in net income and pretax pre-provision earnings were driven primarily by lower Paycheck Protection Program (PPP) loan income in the fourth quarter of 2021. PPP loan income, which includes both interest income and fee accretion, was $2.2 million for the fourth quarter of 2021 compared to $6.5 million during the comparable quarter of 2020 and $3.9 million for the third quarter of 2021.

“We enter 2022 with great optimism and confidence in the core relationship businesses within Lake City Bank. During the last two years, we have experienced unprecedented growth that has challenged our management of the balance sheet and necessitated a level of flexibility and adaptability by the entire Lake City Bank team. We end 2021 strongly with record net income and a balance sheet ready for future growth. Our highly asset sensitive balance sheet is well-positioned for the interest rate hikes we expect to see in 2022. Further, we believe the liquidity on our balance sheet will prove valuable as we focus on future organic loan growth opportunities,” commented David M. Findlay, President and Chief Executive Officer.

Highlights for the year and quarter are noted below.

Full year 2021 versus 2020 highlights:

  • Total assets of $6.6 billion, an increase of $726.9 million, or 12%
  • Dividend per share increase of 13% to $1.36 from $1.20
  • Return on average equity of 14.19%, compared to 13.51%
  • Return on average assets of 1.56%, compared to 1.55%
  • Average loan growth, excluding PPP loans, of $135.5 million, or 3%
  • Core deposit growth of $703.6 million, or 14%
  • Noninterest bearing demand deposit account growth of $357.2 million, or 23%
  • Net interest margin of 3.07% compared to 3.19%
  • Net interest income increase of $15.1 million, or 9%
  • Revenue growth of $13.0 million, or 6%
  • Noninterest expense increase of $13.1 million, or 14%
  • Provision expense2 of $1.1 million compared to provision expense of $14.8 million, a decrease of $13.7 million
  • Average total equity increase of $50.5 million, or 8%
  • Total risk-based capital ratio improved to 15.34% compared to 14.65%
  • Tangible capital ratio1 of 10.70% compared to 11.21%

Fourth Quarter 2021 versus Fourth Quarter 2020 highlights:

  • Average loan growth, excluding PPP loans, of $101.5 million, or 2%
  • Core deposit growth of $703.6 million, or 14%
  • Noninterest bearing demand deposit account growth of $357.2 million, or 23%
  • Net interest margin of 2.98% compared to 3.28%
  • Net interest income increase of $294,000, or 1%
  • Noninterest expense increase of $14,000, or 0%
  • Provision expense of $0 compared to provision expense of $920,000
  • Average total equity increase of $47.7 million, or 7%

Fourth Quarter 2021 versus Third Quarter 2021 highlights:

  • Return on average equity of 13.91%, compared to 13.90%
  • Average loan growth, excluding PPP loans, of $5.2 million
  • Core deposit growth of $321.8 million, or 6%
  • Noninterest bearing demand deposit account growth of $133.5 million, or 8%
  • Net interest margin of 2.98% compared to 3.13%
  • Provision expense of $0 compared to a provision expense of $1.3 million
  • Nonperforming loans of $15.1 million, a decrease of $15.9 million
  • Average total equity increase of $4.1 million, or 1%
  • Tangible capital ratio1 was 10.70% compared to 10.92%

Return on average total equity for the year ended December 31, 2021 was 14.19%, compared to 13.51% in 2020. Return on average assets was 1.56% in 2021 compared to 1.55% in 2020. The company's total capital as a percent of risk-weighted assets was 15.34% at December 31, 2021 compared to 14.65% at December 31, 2020 and 15.44% at September 30, 2021. The company's tangible common equity to tangible assets ratio1 was 10.70% at December 31, 2021, compared to 11.21% at December 31, 2020 and 10.92% at September 30, 2021.

As previously announced, the board of directors approved a cash dividend for the fourth quarter of $0.40 per share, payable on February 7, 2022, to shareholders of record as of January 25, 2022. The fourth quarter dividend per share represents an 18% increase from the $0.34 dividend per share paid in the third quarter of 2021.

Findlay added, “Our capital structure is exceptionally strong. As a result, we can comfortably provide our shareholders with an 18% increase in the dividend. We are confident in our future growth and performance, and the strength of our balance sheet is critical to our long-term success.”

Average total loans were $4.28 billion in the fourth quarter of 2021, a decrease of $74.8 million, or 2%, from $4.35 billion for the third quarter of 2021, and a decrease of $338.7 million, or 7%, from $4.62 billion for the fourth quarter 2020, due primarily to PPP loan forgiveness. Average PPP loans were $62.9 million during the fourth quarter of 2021, down from $503.0 million during the fourth quarter of 2020. Average loans, excluding PPP loans, were $4.22 billion in the fourth quarter of 2021, compared to $4.11 billion for the fourth quarter of 2020, an increase of $101.5 million, or 2%. On a linked quarter basis, average loans, excluding PPP loans, increased by $5.2 million.

Total loans outstanding decreased by $361.3 million, or 8%, from $4.65 billion as of December 31, 2020 to $4.29 billion as of December 31, 2021, due primarily to PPP loan forgiveness. PPP loans outstanding were $26.2 million as of December 31, 2021, compared to $412.0 million at December 31, 2020. Total loans, excluding PPP loans, were $4.26 billion as of December 31, 2021, representing an increase of $24.5 million, or 1%, as compared to December 31, 2020. On a linked quarter basis, total loans excluding PPP increased $114.1 million, or 3%. The company received PPP forgiveness proceeds and borrower repayments of $709.5 million since the program's inception through December 31, 2021.

Findlay stated, “Commercial organic loan originations reached an all-time high this quarter. During the fourth quarter we originated more than $650 million of commercial loans, yet also experienced elevated levels of paydowns over $600 million. Commercial line utilization continues to incrementally improve, but is still near historic lows. We continue to expand existing relationships and establish new ones as available commercial lines of credit reached a record high of $4.01 billion and outstanding commercial lines grew by 9% during the fourth quarter. The loan pipeline as we entered 2022 was encouraging as we are beginning to see signs of improved loan demand and borrower activity.”

Average total deposits were $5.59 billion for the fourth quarter of 2021, an increase of $626.1 million, or 13%, versus $4.96 billion for the fourth quarter of 2020. On a linked quarter basis, average total deposits increased by $241.3 million, or 5%. Total deposits increased $698.6 million, or 14%, from $5.04 billion as of December 31, 2020 to $5.74 billion as of December 31, 2021. On a linked quarter basis, total deposits increased by $320.8 million, or 6%, from $5.41 billion as of September 30, 2021.

Core deposits, which exclude brokered deposits, increased by $703.6 million, or 14%, from $5.02 billion as of December 31, 2020 to $5.73 billion at December 31, 2021. This increase was due to growth in commercial deposits of $321.9 million, or 17%; growth in retail deposits of $259.5 million, or 14%; and growth in public fund deposits of $122.2 million, or 11%. On a linked quarter basis, core deposits increased by $321.8 million, or 6%. The linked quarter growth resulted from commercial deposit growth of $118.7 million, a 6% increase; retail growth of $208.1 million, an 11% increase; and offset by public fund contraction of $5.0 million.

Investment securities were $1.40 billion at December 31, 2021, reflecting an increase of $663.7 million, or 90%, as compared to $734.8 million at December 31, 2020. On a linked quarter basis, investment securities increased $158.8 million, or 13%. Investment securities represent 21% of total assets on December 31, 2021 compared to 13% on December 31, 2020 and 20% on September 30, 2021. The increase in investment securities reflects the deployment of $652 million in excess liquidity that resulted from deposit growth. Deposit growth was impacted by PPP and economic stimulus.

“During the last two years, we have seen core deposits grow by $1.7 billion, a portion of the resulting liquidity has been strategically deployed in our investment securities portfolio as an earning asset alternative while our customers’ deposits remain elevated. We remain focused on core organic loan growth as the primary driver of our balance sheet and are optimistic that we are well-positioned to grow market share as we transition to the next economic growth cycle. Additionally, we remain optimistic that the high percentage of variable rate loans on our balance sheet, coupled with cost of funds at historically low levels, position Lake City Bank with the ability to fund organic loan growth and benefit from the anticipated Federal Reserve Bank rising interest rate cycle,” Findlay commented.

Net interest margin was 3.07% for the full year 2021, down 12 basis points from 3.19% in 2020. Earnings assets yields declined by 44 basis points to 3.33%, offset by a decline of 32 basis points in the cost of funds. The strong 2021 deposit growth funded organic loan growth, and generated excess liquidity. Average investment securities increased by $434.4 million during 2021 and average interest-bearing deposits to the bank grew by $313.6 million. The shift in earning assets generated lower average yields. Net interest margin, excluding PPP loans, was 2.95% for the year ended 2021, down 24 basis points from 3.19% during 2020.

The company’s net interest margin decreased 30 basis points to 2.98% for the fourth quarter of 2021 compared to 3.28% for the fourth quarter of 2020. The lower margin in the fourth quarter of 2021 as compared to the prior year period was due to a slowing of PPP forgiveness as the bank's borrowers actively applied for and received forgiveness throughout the second half of 2020 and the first three quarters of 2021. PPP loan income for the fourth quarter of 2021 was $2.2 million, or $4.3 million less than PPP loan income of $6.5 million during the fourth quarter of 2020. PPP interest and fees represented 11 basis points of fourth quarter 2021 net interest margin compared to 16 basis points for the fourth quarter 2020 net interest margin.

Net interest margin was negatively impacted by the decrease in earning asset yields of 46 basis points from 3.65% for the fourth quarter of 2020 compared to 3.19% for the fourth quarter of 2021. As a result of the excess liquidity on the company's balance sheet, the mix of earning assets included lower yielding earning assets in the investment securities portfolio and cash balances at the Federal Reserve Bank. The lower yield on earning assets was offset by lower cost of funds, which decreased by 16 basis points, from 0.37% for the fourth quarter of 2020 to 0.21% for the fourth quarter of 2021. Net interest margin, excluding PPP loan income, was 2.87%, 25 basis points lower than 3.12% in the fourth quarter of 2020.

Fourth quarter net interest margin was 2.98%, a decline of 15 basis points compared to linked third quarter net interest margin of 3.13%. Net interest margin excluding PPP was 11 basis points lower at 2.87% for the fourth quarter of 2021 compared to 2.95% for the linked third quarter of 2021. Earning asset yields declined by 18 basis points offset by a decline in cost of funds of 3 basis points. Interest expense as a percentage of earning assets decreased to a historical low of 0.21% for the three-month period ended December 31, 2021, down from 0.24% for the three-month period ended September 30, 2021.

Net interest income was $178.1 million for the year ended December 31, 2021, representing an increase of $15.1 million, or 9.3%, as compared to the year ended December 31, 2020. The increase was due primarily to a decrease in interest expense of $15.0 million, or 50%, and an increase in investment securities income of $6.6 million, offset by a $6.6 million decline in loan interest income. PPP loan income, including interest and fees, was $14.9 million during the year ended December 31, 2021, compared to $12.8 million during 2020.

Net interest income was $45.0 million for the three months ended December 31, 2021, representing an increase of $294,000, or 1%, as compared to the three months ended December 31, 2020. On a linked quarter basis, net interest income decreased $734,000, or 2%, from the third quarter of 2021. PPP loan income, including interest and fees, was $2.2 million for the three months ended December 31, 2021, compared to $3.9 million during the third quarter of 2021.

Provision expense for 2021 was $1.1 million, down from $14.8 million in 2020. Provision expense for 2020 reflected the increased assessment of risk to the bank’s loan portfolio as a result of the economic downturn that resulted from the pandemic. The company recorded no provision for credit losses2 in the fourth quarter of 2021, compared to $920,000 of provision expense in the fourth quarter of 2020. On a linked quarter basis, the provision expense decreased by $1.3 million from the third quarter of 2021. The company adopted CECL during the first quarter of 2021, effective January 1, 2021. The day one impact of adoption was an increase in the allowance for credit losses2 of $9.1 million, with an offset, net of taxes, to beginning stockholders’ equity.

The credit loss reserve to total loans was 1.58% at December 31, 2021 versus 1.32% at December 31, 2020 and 1.72% at September 30, 2021. The decline in the credit reserve to total loans from September 2021 to December 2021, reflects the impact of charge offs as well as the impact of loan growth during the quarter. The credit loss reserve to total loans excluding PPP loans was 1.59% at December 31, 2021 versus 1.45% at December 31, 2020 and 1.76% at September 30, 2021. PPP loans are guaranteed by the United States Small Business Administration (SBA) and have not been allocated for within the allowance for credit losses2.

Net charge offs in the fourth quarter of 2021 were $5.3 million versus net charge offs of $259,000 in the fourth quarter of 2020 and net recoveries of $35,000 during the linked third quarter of 2021. Annualized net charge offs (recoveries) to average loans were 0.49% for the fourth quarter of 2021 and 0.02% in the fourth quarter of 2020, and 0.00% for the linked third quarter of 2021. Net charge offs to average loans were 0.09% during the full year of 2021 unchanged from 2020.

Nonperforming assets increased $2.9 million, or 23%, to $15.3 million as of December 31, 2021 versus $12.4 million as of December 31, 2020. On a linked quarter basis, nonperforming assets decreased $16.0 million, or 51%, versus $31.3 million as of September 30, 2021. The net decrease in non-performing assets on a linked quarter basis resulted from net charge offs, net upgrades of non-individually analyzed watchlist credits of $3.3 million as well as recurring loan repayments. The company recorded a $5.2 million charge off in the fourth quarter on a commercial borrower that was downgraded to nonperforming status during the third quarter of 2021. The operations of the borrower, a retailer of party and special event supplies, were severely impacted by the economic conditions resulting from the COVID-19 pandemic. There is no remaining credit exposure to this customer. The ratio of nonperforming assets to total assets at December 31, 2021 increased to 0.23% from 0.21% at December 31, 2020 and decreased from 0.50% at September 30, 2021. Total individually analyzed and watch list loans decreased by $51.7 million, or 18%, to $234.5 million at December 31, 2021 versus $286.1 million as of December 31, 2020. On a linked quarter basis, total individually analyzed and watch list loans decreased by $24.1 million, or 9%, from $258.5 million at September 30, 2021.

“We remain cautiously optimistic on the asset quality front. Clearly, our commercial borrowers continue to feel the impact of inflation, supply chain challenges, workforce availability and readiness, and wage pressures. These are widespread and are impacting every sector of our loan portfolio. Yet, borrowers’ balance sheets are generally healthy and while operating margins are being impacted, our clients are managing through the challenges,” commented Findlay.

Noninterest income of $44.7 million decreased by $2.1 million, or 5%, for the year ended December 31, 2021 as compared to $46.8 million in 2020. The decrease was driven by a $4.1 million reduction in interest rate swap fees and a $2.5 million reduction in mortgage banking income, offset by a $1.8 million increase in loan service fees, a $1.6 million increase in wealth advisory fees, and a $615,000 increase in merchant card fee income. Interest rate swap arrangements have seen a decrease in demand during 2021 and the carrying value of mortgage servicing rights has been impacted by increased prepayment speeds, both due to the current interest rate environment. The increases in fee income were driven by higher transaction volumes and increased economic activity.

Noninterest income decreased $2.1 million, or 18%, to $9.7 million for the fourth quarter of 2021, compared to $11.8 million for the fourth quarter of 2020. Noninterest income was affected by a decrease of $1.3 million in mortgage banking income, or 135%, an $883,000 reduction in interest rate swap fee income, or 90%, and a $530,000 reduction in limited partnership income (a component of other income). These reductions were offset by improved loan and service fee income, which increased by $484,000, or 19%, growth in wealth advisory fees of $443,000, or 24%, and growth in merchant and interchange fee income of $322,000, or 68%. These changes were influenced by the same trends summarized in the preceding paragraph.

Noninterest income decreased by $1.4 million, or 13%, on a linked quarter from $11.1 million. The linked quarter decrease resulted primarily from decreases in limited partnership income of $656,000, mortgage banking income of $307,000, bank owned life insurance income of $273,000 and other noninterest income of $128,000. Offsetting these decreases was an increase in wealth advisory fee income of $140,000.

Noninterest expense increased by $13.1 million, or 14%, to $104.3 million for the year ended December 31, 2021 as compared to $91.2 million for 2020. Salaries and employee benefits increased by $8.5 million, or 17%, due primarily to increased performance-based compensation, increased salaries and increased health insurance expense. Additionally, increased legal fees and costs associated with the digital platform conversion contributed to an overall increase of $ 1.8 million, or 33%, in professional fees. Corporate and business development expenses increased as the economy re-opened in 2021, and client events and contributions increased in 2021.

Noninterest expense was $24.9 million in the fourth quarter of 2021, up by $14,000 from the fourth quarter of 2020. Corporate and business development expenses increased $285,000, or 37%, due to elevated business development and business contributions as in-person meetings with clients and prospects have resumed. Professional fees expenses increased $198,000, or 11%, over these periods. Offsetting these increases were decreases in salaries and employee benefits expense of $212,000, or 2%, and equipment costs of $154,000, or 10%.

On a linked quarter basis, noninterest expense decreased by $1.0 million, or 4%, from $26.0 million. Salaries and employee benefits decreased by $725,000, or 5%, driven by fluctuations in performance-based incentive compensation expense. Other expense decreased by $631,000, or 23%, due to board semi- annual share grant expense of $421,000 in the third quarter of 2021. Offsetting these decreases was an increase in professional fees of $664,000, or 49%. This was driven primarily by increased legal fees.

The company’s efficiency ratio was 45.6% for the fourth quarter of 2021, compared to 44.1% for the fourth quarter of 2020 and 45.7% for the linked third quarter of 2021. The company's efficiency ratio was 46.8% for the year ended December 31, 2021 compared to 43.5% in the prior year.

Paycheck Protection Program

During 2020 and the first half of 2021, the company funded PPP loans totaling $735.6 million for its customers through the PPP programs. In addition, the bank processed forgiveness applications for PPP loans representing 97% of loans originated. As of December 31, 2021, PPP loans outstanding, net of deferred fees, totaled $26.2 million; $3.8 million from PPP round one and $22.3 million from PPP round two. As of December 31, 2021, the SBA has approved forgiveness of, or the borrower had repaid, $709.5 million in PPP loans; $566.7 million for PPP loans originated during round one and $142.8 million for PPP loans originated during round two. As of December 31, 2021, the company had submitted additional PPP forgiveness applications on behalf of customers in the amount of $8.3 million that were awaiting SBA approval.

 December 31, 2021
 Originated Forgiven / Repaid Outstanding (1)
 Number Amount Number Amount Number Amount
PPP Round 12,409 $570,500 2,390 $566,682 19 $3,818
PPP Round 21,192  165,142 1,117  142,809 75  22,333
Total3,601 $735,642 3,507 $709,491 94 $26,151

(1) Outstanding balance includes deferred loan origination fees, net of costs, and reflects any loans repaid by borrowers.

Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at lakecitybank.com. The company’s common stock is traded on the Nasdaq Global Select Market under “LKFN.” In addition to the results presented in accordance with generally accepted accounting principles in the United States, this earnings release contains certain non-GAAP financial measures. The company believes that providing non-GAAP financial measures provides investors with information useful to understanding the company’s financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio and pretax pre-provision earnings. A reconciliation of these and other non-GAAP measures to the most comparable GAAP equivalents is included in the attached financial tables where the non-GAAP measures are presented.

This document contains, and future oral and written statements of the company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “continue,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. The company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain and, accordingly, the reader is cautioned not to place undue reliance on any forward-looking statements made by the company. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the company undertakes no obligation to update any statement in light of new information or future events. Numerous factors could cause the company’s actual results to differ from those reflected in forward-looking statements, including the effects of the COVID-19 pandemic, including its effects on our customers, local economic conditions, our operations and vendors, and the responses of federal, state and local governmental authorities, as well as those identified in the company’s filings with the Securities and Exchange Commission, including the company’s Annual Report on Form 10-K and quarterly reports on Form 10-Q.

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

  
  1. Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”
  2. Beginning January 1, 2021 calculation is based on the Current Expected Credit Loss methodology (CECL). Prior to January 1, 2021 calculation was based on the incurred loss methodology. 


LAKELAND FINANCIAL CORPORATION
FOURTH QUARTER 2021 FINANCIAL HIGHLIGHTS

 Three Months Ended Twelve Months Ended
(Unaudited – Dollars in thousands, except per share data)December 31, September 30, December 31, December 31, December 31,
END OF PERIOD BALANCES 2021   2021   2020   2021   2020 
Assets$6,557,323  $6,222,916  $5,830,435  $6,557,323  $5,830,435 
Deposits 5,735,407   5,414,638   5,036,805   5,735,407   5,036,805 
Brokered Deposits 10,003   11,012   15,002   10,003   15,002 
Core Deposits (1) 5,725,404   5,403,626   5,021,803   5,725,404   5,021,803 
Loans 4,287,841   4,239,453   4,649,156   4,287,841   4,649,156 
Paycheck Protection Program (PPP) Loans 26,151   91,897   412,007   26,151   412,007 
Allowance for Credit Losses (2) 67,773   73,048   61,408   67,773   61,408 
Total Equity 704,906   683,202   657,184   704,906   657,184 
Goodwill net of deferred tax assets 3,794   3,794   3,794   3,794   3,794 
Tangible Common Equity (3) 701,112   679,408   653,390   701,112   653,390 
AVERAGE BALANCES         
Total Assets$6,397,397  $6,153,334  $5,747,818  $6,153,780  $5,424,796 
Earning Assets 6,148,085   5,909,834   5,501,505   5,906,640   5,184,836 
Investments - available-for-sale 1,336,492   1,201,657   657,990   1,068,325   633,957 
Loans 4,279,262   4,354,104   4,617,912   4,421,094   4,424,472 
Paycheck Protection Program (PPP) Loans 62,910   142,917   503,041   237,951   376,785 
Total Deposits 5,585,537   5,344,272   4,959,443   5,357,284   4,650,597 
Interest Bearing Deposits 3,784,837   3,662,707   3,477,431   3,686,112   3,340,696 
Interest Bearing Liabilities 3,859,971   3,737,707   3,568,572   3,761,520   3,437,338 
Total Equity 692,396   688,252   644,677   674,637   624,174 
INCOME STATEMENT DATA         
Net Interest Income$45,007  $45,741  $44,713  $178,088  $163,008 
Net Interest Income-Fully Tax Equivalent 46,140   46,717   45,362   181,675   165,454 
Provision for Credit Losses (2) 0   1,300   920   1,077   14,770 
Noninterest Income 9,709   11,114   11,782   44,720   46,843 
Noninterest Expense 24,926   25,967   24,912   104,287   91,205 
Net Income 24,283   24,119   24,592   95,733   84,337 
Pretax Pre-Provision Earnings (3) 29,790   30,888   31,583   118,521   118,646 
PER SHARE DATA         
Basic Net Income Per Common Share$0.95  $0.95  $0.97  $3.76  $3.31 
Diluted Net Income Per Common Share 0.95   0.94   0.97   3.74   3.30 
Cash Dividends Declared Per Common Share 0.34   0.34   0.30   1.36   1.20 
Dividend Payout 35.79%  36.17%  30.93%  36.36%  36.36%
Book Value Per Common Share (equity per share issued) 27.65   26.80   25.85   27.65   25.85 
Tangible Book Value Per Common Share (3) 27.50   26.66   25.70   27.50   25.70 
Market Value – High 80.77   73.04   56.28   80.77   56.28 
Market Value – Low 71.19   56.06   40.57   50.71   30.49 
                    
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31, December 31, December 31,
  2021   2021   2020   2021   2020 
Basic Weighted Average Common Shares Outstanding 25,486,484   25,479,654   25,424,307   25,475,994   25,469,242 
Diluted Weighted Average Common Shares Outstanding 25,669,042   25,635,288   25,519,643   25,620,105   25,573,941 
KEY RATIOS         
Return on Average Assets 1.51%  1.56%  1.70%  1.56%  1.55%
Return on Average Total Equity 13.91   13.90   15.18   14.19   13.51 
Average Equity to Average Assets 10.82   11.19   11.22   10.96   11.51 
Net Interest Margin 2.98   3.13   3.28   3.07   3.19 
Net Interest Margin, Excluding PPP Loans (3) 2.87   2.95   3.12   2.95   3.19 
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 45.56   45.67   44.10   46.81   43.46 
Tier 1 Leverage (4) 10.72   10.91   10.93   10.72   10.93 
Tier 1 Risk-Based Capital (4) 14.09   14.18   13.39   14.09   13.39 
Common Equity Tier 1 (CET1) (4) 14.09   14.18   13.39   14.09   13.39 
Total Capital (4) 15.34   15.44   14.65   15.34   14.65 
Tangible Capital (3) (4) 10.70   10.92   11.21   10.70   11.21 
ASSET QUALITY         
Loans Past Due 30 - 89 Days$729  $1,245  $1,263  $729  $1,263 
Loans Past Due 90 Days or More 117   18   116   117   116 
Non-accrual Loans 14,973   30,978   11,986   14,973   11,986 
Nonperforming Loans (includes nonperforming TDRs) 15,090   30,996   12,102   15,090   12,102 
Other Real Estate Owned 196   316   316   196   316 
Other Nonperforming Assets 0   20   6   0   6 
Total Nonperforming Assets 15,286   31,332   12,424   15,286   12,424 
Performing Troubled Debt Restructurings 5,121   4,973   5,237   5,121   5,237 
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 6,218   6,093   6,476   6,218   6,476 
Total Troubled Debt Restructurings 11,339   11,066   11,713   11,339   11,713 
Individually Analyzed Loans 25,581   41,148   20,177   25,581   20,177 
Non-Individually Analyzed Watch List Loans 208,881   217,386   265,970   208,881   265,970 
Total Individually Analyzed and Watch List Loans 234,462   258,534   286,147   234,462   286,147 
Gross Charge Offs 5,390   90   688   5,983   5,253 
Recoveries 115   125   429   2,221   1,239 
Net Charge Offs/(Recoveries) 5,275   (35)  259   3,762   4,014 
Net Charge Offs/(Recoveries) to Average Loans 0.49%  0.00%  0.02%  0.09%  0.09%
Credit Loss Reserve to Loans (2) 1.58%  1.72%  1.32%  1.58%  1.32%
Credit Loss Reserve to Loans, Excluding PPP Loans (2) (3) 1.59%  1.76%  1.45%  1.59%  1.45%
Credit Loss Reserve to Nonperforming Loans (2) 449.13%  235.67%  507.42%  449.13%  507.42%
                    
 Three Months Ended Twelve Months Ended
 December 31, September 30, December 31, December 31, December 31,
  2021   2021   2020   2021   2020 
Credit Loss Reserve to Nonperforming Loans and Performing TDRs (2) 335.33%  203.08%  354.17%  335.33%  354.17%
Nonperforming Loans to Loans 0.35%  0.73%  0.26%  0.35%  0.26%
Nonperforming Assets to Assets 0.23%  0.50%  0.21%  0.23%  0.21%
Total Individually Analyzed and Watch List Loans to Total Loans 5.47%  6.10%  6.15%  5.47%  6.15%
Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans (3) 5.50%  6.23%  6.75%  5.50%  6.75%
OTHER DATA         
Full Time Equivalent Employees 582   592   585   582   585 
Offices 51   51   50   51   50 
                    

(1) Core deposits equals deposits less brokered deposits
(2) Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.
(3) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
(4) Capital ratios for December 31, 2021 are preliminary until the Call Report is filed.


CONSOLIDATED BALANCE SHEETS (in thousands, except share data)   
December 31,
2021
 December 31,
2020
(Unaudited) 
ASSETS   
Cash and due from banks$51,830  $74,457 
Short-term investments 631,410   175,470 
Total cash and cash equivalents 683,240   249,927 
   
Securities available-for-sale (carried at fair value) 1,398,558   734,845 
Real estate mortgage loans held-for-sale 7,470   11,218 
   
Loans, net of allowance for credit losses* of $67,773 and $61,408 4,220,068   4,587,748 
   
Land, premises and equipment, net 59,309   59,298 
Bank owned life insurance 97,652   95,227 
Federal Reserve and Federal Home Loan Bank stock 13,772   13,772 
Accrued interest receivable 17,674   18,761 
Goodwill 4,970   4,970 
Other assets 54,610   54,669 
Total assets$6,557,323  $5,830,435 
   
   
LIABILITIES   
Noninterest bearing deposits$1,895,481  $1,538,331 
Interest bearing deposits 3,839,926   3,498,474 
Total deposits 5,735,407   5,036,805 
   
Borrowings   
Federal Home Loan Bank advances 75,000   75,000 
Miscellaneous borrowings 0   10,500 
Total borrowings 75,000   85,500 
   
Accrued interest payable 2,619   5,959 
Other liabilities 39,391   44,987 
Total liabilities 5,852,417   5,173,251 
   
STOCKHOLDERS’ EQUITY   
Common stock: 90,000,000 shares authorized, no par value   
25,777,609 shares issued and 25,300,793 outstanding as of December 31, 2021   
25,713,408 shares issued and 25,239,748 outstanding as of December 31, 2020 120,615   114,927 
Retained earnings 583,134   529,005 
Accumulated other comprehensive income 16,093   27,744 
Treasury stock, at cost (476,816 shares and 473,660 shares as of December 31, 2021 and 2020, respectively) (15,025)  (14,581)
Total stockholders’ equity 704,817   657,095 
Noncontrolling interest 89   89 
Total equity 704,906   657,184 
Total liabilities and equity$6,557,323  $5,830,435 


  
  • Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology. 

CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)
Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 2021   2020  2021  2020 
NET INTEREST INCOME        
Interest and fees on loans        
Taxable$41,253  $45,779 $170,081 $176,538 
Tax exempt 146   105  470  647 
Interest and dividends on securities      
Taxable 2,604   1,554  9,086  6,973 
Tax exempt 4,118   2,340  13,033  8,577 
Other interest income 201   76  549  368 
Total interest income 48,322   49,854  193,219  193,103 
    
Interest on deposits 3,240   5,018  14,827  29,342 
Interest on borrowings      
Short-term 0   48  7  506 
Long-term 75   75  297  247 
Total interest expense 3,315   5,141  15,131  30,095 
    
NET INTEREST INCOME 45,007   44,713  178,088  163,008 
    
Provision for credit losses* 0   920  1,077  14,770 
    
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 45,007   43,793  177,011  148,238 
    
NONINTEREST INCOME        
Wealth advisory fees 2,317   1,874  8,750  7,468 
Investment brokerage fees 415   522  1,975  1,670 
Service charges on deposit accounts 2,840   2,658  10,608  10,110 
Loan and service fees 3,099   2,615  11,922  10,085 
Merchant card fee income 797   475  3,023  2,408 
Bank owned life insurance income 366   629  2,467  2,105 
Interest rate swap fee income 101   984  1,035  5,089 
Mortgage banking income (loss) (338)  966  1,418  3,911 
Net securities gains 0   70  797  433 
Other income 112   989  2,725  3,564 
Total noninterest income 9,709   11,782  44,720  46,843 
    
NONINTEREST EXPENSE        
Salaries and employee benefits 13,505   13,717  57,882  49,413 
Net occupancy expense 1,385   1,515  5,728  5,851 
Equipment costs 1,396   1,550  5,530  5,766 
Data processing fees and supplies 2,982   3,128  12,674  11,864 
Corporate and business development 1,054   769  4,262  3,093 
FDIC insurance and other regulatory fees 535   483  2,242  1,707 
Professional fees 2,006   1,808  7,064  5,314 
Other expense 2,063   1,942  8,905  8,197 
Total noninterest expense 24,926   24,912  104,287  91,205 
    
INCOME BEFORE INCOME TAX EXPENSE 29,790   30,663  117,444  103,876 
Income tax expense 5,507   6,071  21,711  19,539 
NET INCOME$24,283  $24,592 $95,733 $84,337 
    
 Three Months Ended
December 31,
 Twelve Months Ended
December 31,
 
  2021   2020  2021  2020 
         
BASIC WEIGHTED AVERAGE COMMON SHARES$25,486,484  $25,424,307 $25,475,994 $25,469,242 
      
BASIC EARNINGS PER COMMON SHARE$0.95  $0.97 $3.76 $3.31 
      
DILUTED WEIGHTED AVERAGE COMMON SHARES$25,669,042   25,519,643 $25,620,105  25,573,941 
        
DILUTED EARNINGS PER COMMON SHARE$0.95  $0.97 $3.74 $3.30 


  
  • Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
(unaudited, in thousands)

 December 31,
2021
 September 30,
2021
 December 31,
2020
Commercial and industrial loans:           
Working capital lines of credit loans$652,861  15.2% $659,166  15.5% $626,023  13.5%
Non-working capital loans 736,608  17.2   782,618  18.5   1,165,355  25.0 
Total commercial and industrial loans 1,389,469  32.4   1,441,784  34.0   1,791,378  38.5 
            
Commercial real estate and multi-family residential loans:           
Construction and land development loans 379,813  8.9   378,716  8.9   362,653  7.8 
Owner occupied loans 739,371  17.2   740,836  17.4   648,019  13.9 
Nonowner occupied loans 588,458  13.7   582,019  13.7   579,625  12.5 
Multifamily loans 247,204  5.8   252,983  6.0   304,717  6.5 
Total commercial real estate and multi-family residential loans 1,954,846  45.6   1,954,554  46.0   1,895,014  40.7 
            
Agri-business and agricultural loans:           
Loans secured by farmland 206,331  4.8   152,099  3.5   195,410  4.2 
Loans for agricultural production 239,494  5.6   171,981  4.1   234,234  5.0 
Total agri-business and agricultural loans 445,825  10.4   324,080  7.6   429,644  9.2 
            
Other commercial loans 73,490  1.7   83,595  2.0   94,013  2.0 
Total commercial loans 3,863,630  90.1   3,804,013  89.6   4,210,049  90.4 
            
Consumer 1-4 family mortgage loans:           
Closed end first mortgage loans 176,561  4.1   173,689  4.1   167,847  3.6 
Open end and junior lien loans 156,238  3.6   161,941  3.8   163,664  3.5 
Residential construction and land development loans 11,921  0.3   12,542  0.3   12,007  0.3 
Total consumer 1-4 family mortgage loans 344,720  8.0   348,172  8.2   343,518  7.4 
            
Other consumer loans 82,755  1.9   92,169  2.2   103,616  2.2 
Total consumer loans 427,475  9.9   440,341  10.4   447,134  9.6 
Subtotal 4,291,105  100.0%  4,244,354  100.0%  4,657,183  100.0%
Less: Allowance for credit losses (1) (67,773)    (73,048)    (61,408)  
Net deferred loan fees (3,264)    (4,901)    (8,027)  
Loans, net$4,220,068    $4,166,405    $4,587,748   

(1) Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
(unaudited, in thousands)

 December 31,
2021
 September 30,
2021
 December 31,
2020
Noninterest bearing demand deposits$1,895,481 $1,762,021 $1,538,331
Savings and transaction accounts:     
Savings deposits 409,343  375,993  312,702
Interest bearing demand deposits 2,601,065  2,411,722  2,160,953
Time deposits:     
Deposits of $100,000 or more 627,123  658,050  785,238
Other time deposits 202,395  206,852  239,581
Total deposits$5,735,407 $5,414,638 $5,036,805
FHLB advances and other borrowings 75,000  75,000  85,500
Total funding sources$5,810,407 $5,489,638 $5,122,305


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

  Three Months Ended December 31, 2021 Three months ended September 30, 2021 Three Months Ended December 31, 2020
(fully tax equivalent basis, dollars in thousands) Average Balance Interest Income Yield (1)/
Rate
 Average Balance Interest Income Yield (1)/
Rate
 Average Balance Interest Income Yield (1)/
Rate
Earning Assets                  
Loans:                  
Taxable (2)(3) $4,260,960  $41,253 3.84% $4,339,792  $43,025 3.93% $4,604,704  $45,779 3.96%
Tax exempt (1)  18,302   184 3.99   14,312   150 4.16   13,208   132 3.97 
Investments: (1)                  
Available-for-sale  1,336,492   7,817 2.32   1,201,657   6,971 2.30   657,990   4,516 2.73 
Short-term investments  2,201   1 0.11   2,304   0 0.00   2,334   1 0.17 
Interest bearing deposits  530,130   200 0.15   351,769   125 0.14   223,269   75 0.13 
Total earning assets $6,148,085  $49,455 3.19% $5,909,834  $50,271 3.37% $5,501,505  $50,503 3.65%
Less: Allowance for credit losses (4)  (72,972)      (72,157)      (61,438)    
Nonearning Assets                  
Cash and due from banks  72,908       67,715       66,851     
Premises and equipment  59,712       59,824       59,942     
Other nonearning assets  189,664       188,118       180,958     
Total assets $6,397,397      $6,153,334      $5,747,818     
                   
Interest Bearing Liabilities                  
Savings deposits $384,229  $74 0.08% $369,191  $71 0.08% $297,832  $57 0.08%
Interest bearing checking accounts  2,563,557   1,854 0.29   2,390,462   1,712 0.28   2,058,069   1,585 0.31 
Time deposits:                  
In denominations under $100,000  203,706   388 0.76   211,911   457 0.86   242,846   792 1.30 
In denominations over $100,000  633,345   924 0.58   691,143   1,239 0.71   878,684   2,584 1.17 
Miscellaneous short-term borrowings  134   0 0.00   0   0 0.00   16,141   48 1.18 
Long-term borrowings and subordinated debentures  75,000   75 0.40   75,000   75 0.40   75,000   75 0.40 
Total interest bearing liabilities $3,859,971  $3,315 0.34% $3,737,707  $3,554 0.38% $3,568,572  $5,141 0.57%
Noninterest Bearing Liabilities                  
Demand deposits  1,800,700       1,681,565       1,482,012     
Other liabilities  44,330       45,810       52,557     
Stockholders' Equity  692,396       688,252       644,677     
Total liabilities and stockholders' equity $6,397,397      $6,153,334      $5,747,818     
Interest Margin Recap                  
Interest income/average earning assets    49,455 3.19     50,271 3.37     50,503 3.65 
Interest expense/average earning assets    3,315 0.21     3,554 0.24     5,141 0.37 
Net interest income and margin   $46,140 2.98%   $46,717 3.13%   $45,362 3.28%

(1) Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $1.13 million, $976,000 and $649,000 in the three-month periods ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.
(2) Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $2.02 million, $3.57 million, and $5.21 million for the three-month periods ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively. All other loan fees were immaterial in relation to total taxable loan interest income for the periods presented.
(3) Nonaccrual loans are included in the average balance of taxable loans.
(4) Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

Reconciliation of Non-GAAP Financial Measures

The allowance for credit losses (1) to total loans, excluding PPP loans, and total individually analyzed and watch list loans to total loans, excluding PPP loans, are non-GAAP ratios that management believes are important because they provide better comparability to prior periods. PPP loans are fully guaranteed by the SBA and have not been allocated for within the allowance for credit losses (1).

A reconciliation of these non-GAAP measures is provided below (dollars in thousands).

 Three Months Ended
 December 31,
2021
 September 30,
2021
 December 31,
2020
Total Loans$4,287,841  $4,239,453  $4,649,156 
Less: PPP Loans 26,151   91,897   412,007 
Total Loans, Excluding PPP Loans 4,261,690   4,147,556   4,237,149 
      
Allowance for Credit Losses (1)$67,773  $73,048  $61,408 
      
Credit Loss Reserve to Total Loans (1) 1.58%  1.72%  1.32%
Credit Loss Reserve to Total Loans, Excluding PPP Loans (1) 1.59%  1.76%  1.45%
      
Total Individually Analyzed and Watch List Loans$234,462  $258,534  $286,147 
      
Total Individually Analyzed and Watch List Loans to Total Loans 5.47%  6.10%  6.15%
Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans 5.50%  6.23%  6.75%

(1) Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

Tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio and pretax pre-provision earnings are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of equity, net of deferred tax. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets, net of deferred tax. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding less true treasury stock. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. However, management considers these measures of the company’s value including only earning assets as meaningful to an understanding of the company’s financial information.

A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).

 Three Months Ended Twelve Months Ended
 Dec. 31, 2021 Sep. 30, 2021 Dec. 31, 2020 Dec. 31, 2021 Dec. 31, 2020
Total Equity$704,906  $683,202  $657,184  $704,906  $657,184 
Less: Goodwill (4,970)  (4,970)  (4,970)  (4,970)  (4,970)
Plus: Deferred tax assets related to goodwill 1,176   1,176   1,176   1,176   1,176 
Tangible Common Equity 701,112   679,408   653,390   701,112   653,390 
          
Assets$6,557,323  $6,222,916  $5,830,435  $6,557,323  $5,830,435 
Less: Goodwill (4,970)  (4,970)  (4,970)  (4,970)  (4,970)
Plus: Deferred tax assets related to goodwill 1,176   1,176   1,176   1,176   1,176 
Tangible Assets 6,553,529   6,219,122   5,826,641   6,553,529   5,826,641 
          
Ending common shares issued 25,488,508   25,486,032   25,424,307   25,488,508   25,424,307 
          
Tangible Book Value Per Common Share$27.50  $26.66  $25.70  $27.50  $25.70 
          
Tangible Common Equity/Tangible Assets 10.70%  10.92%  11.21%  10.70%  11.21%
          
Net Interest Income$45,007  $45,741  $44,713  $178,088  $163,008 
Plus: Noninterest income 9,709   11,114   11,782   44,720   46,843 
Minus: Noninterest expense (24,926)  (25,967)  (24,912)  (104,287)  (91,205)
          
Pretax Pre-Provision Earnings$29,790  $30,888  $31,583  $118,521  $118,646 

Net interest margin on a fully-tax equivalent basis, net of PPP loan impact, is a non-GAAP measure that management believes is important because it provides for better comparability to prior periods. Because PPP loans have a low fixed interest rate of 1.0% and because the accretion of net loan fee income can be accelerated upon borrower forgiveness and repayment by the SBA, management is actively monitoring net interest margin on a fully tax equivalent basis with and without PPP loan impact for the duration of this program.

A reconciliation of this non-GAAP financial measure is provided below (dollars in thousands).

Impact of Paycheck Protection Program on Net Interest Margin FTE

 Three Months Ended  Twelve Months Ended
 Dec. 31, 2021 Sep. 30, 2021 Dec. 31, 2020  Dec. 31, 2021 Dec. 31, 2020
Total Average Earnings Assets$6,148,085  $5,909,834  $5,501,505   $5,906,640  $5,184,836 
Less: Average Balance of PPP Loans (62,910)  (142,917)  (503,041)   (237,951)  (376,785)
Total Adjusted Earning Assets 6,085,175   5,766,917   4,998,464    5,668,689   4,808,051 
           
Total Interest Income FTE$49,455  $50,271  $50,503   $196,806  $195,549 
Less: PPP Loan Income (2,182)  (3,946)  (6,509)   (14,945)  (12,832)
Total Adjusted Interest Income FTE 47,273   46,325   43,994    181,861   182,717 
           
Adjusted Earning Asset Yield, net of PPP Impact 3.08%  3.19%  3.50%   3.21%  3.80%
           
Total Average Interest Bearing Liabilities$3,859,971  $3,737,707  $3,568,572   $3,761,520  $3,437,338 
Less: Average Balance of PPP Loans (62,910)  (142,917)  (503,041)   (237,951)  (376,785)
Total Adjusted Interest Bearing Liabilities 3,797,061   3,594,790   3,065,531    3,523,569   3,060,553 
           
Total Interest Expense FTE$3,315  $3,554  $5,141   $15,131  $30,095 
Less: PPP Cost of Funds (40)  (90)  (320)   (595)  (956)
Total Adjusted Interest Expense FTE 3,275   3,464   4,821    14,536   29,139 
           
Adjusted Cost of Funds, net of PPP Impact 0.21%  0.24%  0.38%   0.26%  0.61%
           
Net Interest Margin FTE, net of PPP Impact 2.87%  2.95%  3.12%   2.95%  3.19%