Skip to main content

Press Release

Press Release

Lakeland Financial Reports Record Performance

Company Release - 10/25/2018 8:00 AM ET

Third Quarter Net Income of $20.6 million, Increases 30% From a Year Ago

WARSAW, Ind., Oct. 25, 2018 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record quarterly net income of $20.6 million for the three months ended September 30, an increase of 30% versus $15.8 million for the third quarter of 2017. Diluted earnings per share increased 29% to $0.80 for the third quarter of 2018, versus $0.62 for the third quarter of 2017, also representing a record quarter for the company and its shareholders. On a linked quarter basis, net income increased by 2% and diluted earnings per share increased 3%. Net income increased $428,000 from $20.1 million in the second quarter ended June 30, 2018 and diluted earnings per share increased $0.02 from $0.78.

The company further reported record net income of $59.0 million for the nine months ended September 30, 2018 versus $45.7 million for the comparable period of 2017, an increase of 29%. Diluted net income per common share was also a record for the period and increased 29% to $2.30 for the nine months ended September 30, 2018 versus $1.78 for the comparable period of 2017.

David M. Findlay, President and CEO commented, “With record net income for the quarter and the first nine months of 2018, the Lake City Bank team continues a strong 2018. We are particularly pleased with the strong revenue growth in the quarter. With a 12% growth in revenue, it’s clear that our relationship driven business model is working. We benefited from a significant increase in fee-based services within our Commercial and Wealth Advisory business units, which complimented our healthy expansion in the net interest margin.”

Highlights for the quarter are noted below.
3rd Quarter 2018 versus 3rd Quarter 2017 highlights:

  • Return on average equity of 16.6%, up from 13.7% a year ago
  • Organic average loan growth of $220 million or 6%
  • Average deposit growth of $309 million or 8%
  • Net interest income increase of $3.3 million or 10%
  • Net interest margin increase of 7 basis points to 3.42%
  • Noninterest income increase of $936,000, or 10%
  • Revenue growth of $4.2 million, or 10%
  • Total equity and tangible common equity1 increase of $36 million and $35 million, respectively, or 8%

3rd Quarter 2018 versus 2nd Quarter 2018 highlights:

  • Return on average assets of 1.72%, up from 1.70%
  • Core deposit growth of $124 million or 3%
  • Net interest income growth of $392,000 or 1%
  • Noninterest income increase of $740,000 or 8%
  • Revenue growth of $1.1 million or 2%
  • Reduced provision expense of $600,000 or down by 35%
  • Reduced watch list loans of $17.5 million or 8%
  • Average equity  increase of $13.9 million or 3%

As announced on October 9, 2018, the board of directors approved a cash dividend for the third quarter of $0.26 per share, payable on November 5, 2018, to shareholders of record as of October 25, 2018. The third quarter dividend per share represents an 18% increase over the third quarter 2017 dividend of $0.22 per share.

Return on average total equity for the third quarter of 2018 was 16.55%, compared to 13.71% in the third quarter of 2017 and 16.86% in the linked second quarter of 2018. Return on average total equity for the first nine months of 2018 was 16.42%, compared to 13.73% in the same period of 2017. Return on average assets for the third quarter of 2018 was 1.72%, compared to 1.41% in the third quarter of 2017 and 1.70% in the linked second quarter of 2018. Return on average assets for the first nine months of 2018 was 1.67% compared to 1.39% in the same period of 2017. The company’s total capital as a percent of risk-weighted assets was 14.14% at September 30, 2018, compared to 13.58% at September 30, 2017 and 13.76% at June 30, 2018. The company’s tangible common equity to tangible assets ratio2 was 10.41% at September 30, 2018, compared to 10.32% at September 30, 2017 and 10.15% at June 30, 2018.

Average total loans for the third quarter of 2018 were $3.84 billion, an increase of $220.0 million, or 6%, versus $3.62 billion for the third quarter 2017. On a linked quarter basis, total average loans were unchanged at $3.8 billion. Total loans outstanding grew $207.9 million, or 6%, from $3.64 billion as of September 30, 2017 to $3.84 billion as of September 30, 2018.

Findlay noted, “The overall strength of economic conditions in our markets is reflected in the 6% loan growth we experienced over the last year. We are pleased with our gross originations, which have been strong this year. We continue to experience higher than normal levels of loan payoffs in the agricultural and commercial real estate portfolios as long term, non-bank financing alternatives have emerged for these segments. In addition, the commercial and industrial portfolio has been impacted by large payoffs due to consolidations and business sales.”

Average total deposits for the third quarter of 2018 were $4.03 billion, an increase of $309.1 million, or 8%, versus $3.72 billion for the third quarter of 2017. Total deposits grew $141.9 million, or 4%, from $3.87 billion as of September 30, 2017 to $4.02 billion as of September 30, 2018. In addition, total core deposits, which exclude brokered deposits, increased $255.0 million, or 7%, from $3.58 billion at September 30, 2017 to $3.84 billion at September 30, 2018 due to growth in commercial deposits of $115.8 million or 13%, growth in public fund deposits of $100.8 million or 9% and growth in retail deposits of $38.4 million or 3%. On a linked quarter basis, core deposits increased by $123.9 million or 3% due to growth in commercial deposits of $89.0 million, growth in public funds deposits of $25.6 million and retail deposit growth of $9.6 million.

The company’s net interest margin increased seven basis points to 3.42% for the third quarter of 2018 compared to 3.35% for the third quarter of 2017 and was unchanged from the second quarter of 2018.  The higher margin in the third quarter of 2018 was due to higher yields on loans, partially offset by a higher cost of funds, which was driven by the Federal Reserve Bank increasing the target Federal Funds Rate in mid-March 2018, mid-June 2018 and late September 2018. Net interest income increased $3.3 million, or 10%, to $37.9 million for the third quarter of 2018, versus $34.6 million in the third quarter of 2017 due to both growth in loans and deposits as well as expanding net interest margin. Net interest income increased by $11.2 million or 11% for the nine months ended September 30, 2018 as compared to the first nine months of 2017 due to both net interest margin expansion and volume growth. The company’s net interest margin for the nine months ended September 30, 2018 was 3.40% compared to 3.32% in the prior year nine-month period.

The company recorded a provision for loan losses of $1.1 million in the third quarter of 2018 compared to $450,000 for the third quarter 2017 and down from $1.7 million during the linked second quarter of 2018. The company’s allowance for loan losses as of September 30, 2018 was $48.3 million compared to $45.5 million as of September 30, 2017 and $47.7 million as of June 30, 2018. The allowance for loan losses represented 1.26% of total loans as of September 30, 2018 versus 1.25% at September 30, 2017 and 1.24% as of June 30, 2018.

Net charge offs for the quarter were $463,000 versus net recoveries of $484,000 in the third quarter of 2017 and net recoveries of $379,000 during the linked second quarter 2018. Annualized net charge offs to average loans were 0.05% for the third quarter of 2018 compared to net recoveries of 0.05% for the third quarter of 2017 and net recoveries of 0.04% for the second quarter of 2018. On a year-to-date basis, net charge offs to average loans were 0.17% compared to net recoveries of 0.02% for the first nine months of 2017.

Nonperforming assets increased $2.3 million, or 22%, to $12.8 million as of September 30, 2018 versus $10.5 million as of September 30, 2017 due to an increase in nonaccrual loans. On a linked quarter basis, nonperforming assets were $128,000 lower than the $12.9 million reported as of June 30, 2018. The ratio of nonperforming assets to total assets at September 30, 2018 increased to 0.27% from 0.24% at September 30, 2017.  

“Asset quality trends remain stable with continued healthy economic performance in our Lake City Bank footprint. We are pleased with the reduction in watch list loans during the quarter as compared to the second quarter 2018,” noted Findlay.

The company’s noninterest income increased $936,000, or 10%, to $10.4 million for the third quarter of 2018, compared to $9.5 million for the third quarter of 2017. On a linked quarter basis, noninterest income increased by $740,000 or 8%. For the nine months ended September 30, 2018, the company’s noninterest income increased 13% to $30.0 million compared to $26.5 million in the prior year period. Noninterest income was positively impacted for both the three- and nine-month periods ended September 30, 2018 by increases in service charges on deposit accounts primarily related to business accounts, loan and service fees, and wealth advisory and brokerage fees due to continued growth of client relationships.

Findlay commented, “We are pleased with the double digit growth in noninterest income on a quarter and year to date basis as compared to the same periods for 2017. This performance reflects strong growth in commercial deposit service charge income, loan and service fee income and wealth advisory fee income.”

The company’s noninterest expense increased $1.7 million, or 9%, to $22.0 million in the third quarter of 2018, compared to $20.3 million in the third quarter of 2017. On a linked quarter basis, noninterest expense increased by $1.7 million or 9%. For the nine months ended September 30, 2018, the company’s noninterest expense increased by $3.8 million or 6% to $63.5 million compared to $59.7 million in the prior year period. Salaries and employee benefits increased during 2018 primarily due to an increase to the company’s minimum hiring wage, normal merit increases and increased health insurance cost. Data processing fees also increased during 2018 primarily due to the company’s continued investment in technology-based solutions. Corporate and business development expense decreased during 2018 primarily due to a reduction in charitable contributions as well as lower advertising expenses.

The company’s efficiency ratio was 45.5% for the third quarter of 2018, compared to 45.9% for the third quarter of 2017 and 42.9% for the linked second quarter of 2018. The company’s efficiency ratio was 44.8% for the nine months ended September 30, 2018 down from 47.0% in the prior year period due to revenue growth outpacing expense growth.

The effective tax rate for the third quarter 2018 was 18.5%, compared to 32.4% for the third quarter 2017 and reflects the effect of the Tax Cuts and Jobs Act, which lowered the company’s federal tax rate to 21% from 35% effective January 1, 2018. The effective tax rate for the nine months ended September 30, 2018 was 18.1% compared with 31.0% in the prior year period. Through the preparation of the Company’s 2017 corporate tax return and the completion of cost segregation studies on new construction projects, the Company was able to recognize a permanent tax savings of approximately $400,000, which was finalized and recognized during the third quarter of 2018.

Lakeland Financial Corporation is a $4.8 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank headquartered in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 49 offices in Northern and Central Indiana, delivering technology-driven and client-centric financial services solutions to individuals and businesses.

Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at 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 measures based on “tangible common equity” which is “common stockholders’ equity” excluding intangible assets, net of deferred tax and “tangible assets” which is “assets” excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent are 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 trade policy and those identified 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 2018 FINANCIAL HIGHLIGHTS
 Three Months Ended Nine Months Ended 
(Unaudited – Dollars in thousands, except per share data)Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30, 
END OF PERIOD BALANCES2018 2018 2017 2018 2017 
Assets$  4,757,619  $  4,760,869  $  4,454,236  $  4,757,619  $  4,454,236  
Deposits   4,015,924     3,934,953     3,873,990     4,015,924     3,873,990  
Brokered Deposits   176,927     219,901     289,991     176,927     289,991  
Core Deposits   3,838,997     3,715,052     3,583,999     3,838,997     3,583,999  
Loans   3,843,125     3,858,713     3,635,252     3,843,125     3,635,252  
Allowance for Loan Losses   48,343     47,706     45,497     48,343     45,497  
Total Equity   498,541     486,484     462,516     498,541     462,516  
Goodwill net of deferred tax assets   3,790     3,793     3,110     3,790     3,110  
Tangible Common Equity (1)   494,751     482,691     459,406     494,751     459,406  
AVERAGE BALANCES          
Total Assets$  4,748,953  $  4,739,163  $  4,464,568  $  4,731,769  $  4,390,635  
Earning Assets   4,451,449     4,448,240     4,196,041     4,440,493     4,135,885  
Investments   569,567     560,484     536,444     558,784     527,740  
Loans   3,837,595     3,839,441     3,617,624     3,823,153     3,571,459  
Total Deposits   4,025,398     4,092,145     3,716,303     4,070,565     3,678,897  
Interest Bearing Deposits   3,167,135     3,266,808     2,923,118     3,228,768     2,906,159  
Interest Bearing Liabilities   3,363,583     3,409,138     3,189,288     3,379,929     3,148,862  
Total Equity   493,145     479,291     458,074     480,896     445,181  
INCOME STATEMENT DATA          
Net Interest Income$  37,925  $  37,533  $  34,620  $  111,681  $  100,500  
Net Interest Income-Fully Tax Equivalent   38,397     37,973     35,433     112,998     102,785  
Provision for Loan Losses   1,100     1,700     450     6,100     1,150  
Noninterest Income   10,433     9,693     9,497     30,005     26,547  
Noninterest Expense   22,009     20,274     20,269     63,485     59,669  
Net Income   20,570     20,142     15,825     59,048     45,703  
PER SHARE DATA          
Basic Net Income Per Common Share$  0.81  $  0.80  $  0.63  $  2.33  $  1.82  
Diluted Net Income Per Common Share   0.80     0.78     0.62     2.30     1.78  
Cash Dividends Declared Per Common Share   0.26     0.26     0.22     0.74     0.63  
Dividend Payout   32.50 %   33.33 %   35.48 %   32.17 %   35.39 %
Book Value Per Common Share (equity per share issued)   19.70     19.23     18.36     19.70     18.36  
Tangible Book Value Per Common Share (1)   19.55     19.08     18.23     19.55     18.23  
Market Value – High   51.25     51.15     49.22     51.76     49.22  
Market Value – Low   46.35     45.15     41.30     45.01     39.68  
Basic Weighted Average Common Shares Outstanding   25,301,033     25,293,329     25,193,894     25,284,085     25,176,593  
Diluted Weighted Average Common Shares Outstanding   25,745,151     25,709,216     25,656,403     25,719,693     25,640,742  
KEY RATIOS          
Return on Average Assets   1.72 %   1.70 %   1.41 %   1.67 %   1.39 %
Return on Average Total Equity   16.55     16.86     13.71     16.42     13.73  
Average Equity to Average Assets   10.38     10.11     10.26     10.16     10.14  
Net Interest Margin   3.42     3.42     3.35     3.40     3.32  
Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)   45.51     42.93     45.94     44.81     46.97  
Tier 1 Leverage (2)   11.31     11.01     10.92     11.31     10.92  
Tier 1 Risk-Based Capital (2)   12.97     12.61     12.42     12.97     12.42  
Common Equity Tier 1 (CET1) (2)   12.24     11.88     11.65     12.24     11.65  
Total Capital (2)   14.14     13.76     13.58     14.14     13.58  
Tangible Capital (1) (2)   10.41     10.15     10.32     10.41     10.32  
ASSET QUALITY           
Loans Past Due 30 - 89 Days$  13,476  $  1,612  $  1,935  $  13,476  $  1,935  
Loans Past Due 90 Days or More   0     0     73     0     73  
Non-accrual Loans   12,337     12,773     10,279     12,337     10,279  
Nonperforming Loans (includes nonperforming TDR's)   12,337     12,773     10,352     12,337     10,352  
Other Real Estate Owned   316     10     115     316     115  
Other Nonperforming Assets   111     108     40     111     40  
Total Nonperforming Assets   12,763     12,891     10,507     12,763     10,507  
Performing Troubled Debt Restructurings   3,512     3,402     5,601     3,512     5,601  
Nonperforming Troubled Debt Restructurings (included in nonperforming loans)   7,313     7,666     7,946     7,313     7,946  
Total Troubled Debt Restructurings   10,825     11,068     13,547     10,825     13,547  
Impaired Loans   20,906     16,931     16,679     20,906     16,679  
Non-Impaired Watch List Loans   175,400     196,880     145,655     175,400     145,655  
Total Impaired and Watch List Loans   196,306     213,811     162,334     196,306     162,334  
Gross Charge Offs   581     128     170     5,686     935  
Recoveries   118     507     654     808     1,564  
Net Charge Offs/(Recoveries)   463     (379)    (484)    4,878     (629) 
Net Charge Offs/(Recoveries)  to Average Loans   0.05 %   (0.04)%   (0.05)%   0.17 %   (0.02)%
Loan Loss Reserve to Loans   1.26 %   1.24 %   1.25 %   1.26 %   1.25 %
Loan Loss Reserve to Nonperforming Loans   391.92 %   373.49 %   439.51 %   391.92 %   439.51 %
Loan Loss Reserve to Nonperforming Loans and Performing TDR's   305.03 %   294.94 %   285.20 %   305.03 %   285.20 %
Nonperforming Loans to Loans   0.32 %   0.33 %   0.28 %   0.32 %   0.28 %
Nonperforming Assets to Assets   0.27