Lake City Bank Reports Strong First Quarter Operating Performance

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WARSAW, Ind., April 25, 2014 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported net income of $9.9 million for the first quarter of 2014, an increase of 7% versus $9.2 million for the first quarter of 2013. Diluted net income per common share increased 5% to $0.59 versus $0.56 for the comparable period of 2013.

David M. Findlay, President and Chief Executive Officer, commented, "Led by another quarter of strong loan growth, we are pleased with our operating performance. We're particularly encouraged by the strengthening economic indicators in our Indiana markets as our core lending business in the commercial and industrial sector grew by $43 million in the quarter."

Earnings for the first quarter of 2014 were negatively impacted by a non-cash provision for state income tax expense of $431,000, which resulted from a revaluation of the company's state deferred tax items. During the first quarter of 2014, the Indiana legislature approved new tax rates for financial institutions. The tax rate, currently 8.0%, is scheduled to drop to 6.5% for 2017. The new legislation further reduces the rate to 4.9%, phased-in beginning in 2019. This lower state tax rate going forward will reduce the benefit provided by the company's existing deferred tax items.

Excluding the effect of the non-cash adjustment, net income for the three months ended March 31, 2014 was $10.3 million, representing an increase of 12% over the comparable period of 2013. Diluted net income per share would have been $0.62 for the three month period ended March 31, 2014, representing an increase of 11% over the comparable period in 2013.

As previously announced, the board of directors approved a cash dividend for the first quarter of $0.21 per share, payable on May 5, 2014, to shareholders of record as of April 25, 2014. The quarterly dividend represents an 11% increase over the quarterly dividends paid for each quarter of 2013.

"This double digit increase in our dividend reflects our confidence in the strength and quality of our earnings and the extremely strong capital structure we have built through long-term and consistent performance," observed Findlay.

Average total loans for the first quarter of 2014 were $2.54 billion, an increase of $283.1 million, or 13% versus $2.26 billion for the comparable period in 2013. Total loans outstanding grew $311.7 million, or 14%, from $2.26 billion as of March 31, 2013 to $2.57 billion as of March 31, 2014. On a linked quarter basis, average total loans increased $78.2 million, or 3%, from $2.46 billion for the fourth quarter of 2013 to $2.54 billion for the first quarter of 2014.

The company's net interest margin was 3.38% in the first quarter of 2014, up from 3.17% for the first quarter of 2013. Further, the net interest margin improved from 3.33% in the fourth quarter of 2013. Despite downward pressure on loan yields and the prolonged low interest rate environment, the company improved its net interest margin in each of the past five quarters as a result of declines in deposit rates and overall funding costs and improvement in the investment portfolio yields.

The company's tangible common equity to tangible assets ratio was 10.18% at March 31, 2014, compared to 10.38% at March 31, 2013 and 10.05% at December 31, 2013. Average total deposits for the quarter ended March 31, 2014 were $2.64 billion versus $2.47 billion for the first quarter of 2013, an increase of 7%. On a linked quarter basis, average total deposits increased $64.8 million, or 2.5%.

Findlay added, "As a result of our strong capital structure, we are in a great position to continue our Indiana growth strategy. During the quarter, we experienced loan growth across all of our Indiana markets and believe that our reputation and positioning as a smartly aggressive commercial lender has further strengthened as we start the year."

For the fifth consecutive quarter, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by the stabilization and improvement in key loan quality metrics, including lower levels of nonperforming loans, appropriate reserve coverage of nonperforming loans, continuing signs of stabilization in the economic conditions of the company's markets and general signs of improvement in its borrowers' performance and future prospects. The company's allowance for loan losses as of March 31, 2014 was $46.1 million compared to $50.8 million as of March 31, 2013 and $48.8 million as of December 31, 2013. The allowance for loan losses represented 1.79% of total loans as of March 31, 2014 versus 2.25% at March 31, 2013 and 1.92% as of December 31, 2013. Further, the allowance for loan losses as a percentage of nonperforming loans increased to 306% as of March 31, 2014, versus 234% at March 31, 2013, and 204% as of December 31, 2013.

Nonperforming assets decreased 27% to $16.3 million as of March 31, 2014 versus $22.4 million as of March 31, 2013. On a linked quarter basis, nonperforming assets were 33% lower than the $24.4 million reported on December 31, 2013. The decrease in nonperforming assets during the first quarter of 2014 primarily resulted from payoffs of $4.3 million and charge offs of $2.4 million recognized on a commercial relationship consisting of three loans totaling $6.7 million. In addition, one commercial credit of $1.4 million was removed from the impaired category due to improved performance. The ratio of nonperforming assets to total assets at March 31, 2014, was 0.50% versus 0.77% at both March 31, 2013 and December 31, 2013. Net charge-offs totaled $2.7 million in the first quarter of 2014 versus $626,000 during the first quarter of 2013 and $1.0 million during the linked fourth quarter of 2013.

The company's noninterest income decreased 1% to $7.4 million for the first quarter of 2014 from $7.5 million for the first quarter of 2013. Year-over-year, quarterly noninterest income was negatively impacted by a $444,000 decrease in mortgage banking income, driven by lower production volumes due to higher mortgage rates. Service charges on deposit accounts increased by $180,000 and investment brokerage fees increased by $168,000.

The company's noninterest expense increased $1.9 million, or 13%, to $16.8 million in the first quarter of 2014 versus $14.9 million in the comparable quarter of 2013. On a linked quarter basis, noninterest expense increased by $262,000 from $16.5 million in the fourth quarter of 2013. On a year-over-year basis, salaries and employee benefits increased by $822,000 in the three month period ended March 31, 2014 versus the same period of 2013. These increases in salary and employee benefits were driven by staff additions, normal merit increases and higher performance incentive-based compensation costs. Quarterly net occupancy expense increased $264,000 driven by higher weather-related expenses, including snow removal and utility costs. Professional fees increased $205,000 due to higher legal and placement expenses. Data processing fees increased by $198,000 due to a larger customer base as well as greater utilization of services from the company's core processor, which the company expects will improve marketing and cross-selling initiatives. In addition, equipment costs increased $164,000 during the first quarter of 2014, driven by higher depreciation expenses. The company's efficiency ratio was 52% for the first quarters of 2014 and 2013, compared to 51% for the linked fourth quarter of 2013, which consistently ranks in the top quartile of peer financial institutions in the country.

Lakeland Financial Corporation is a $3.2 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 46 offices in Northern and Central Indiana, delivering technology driven and client-centric financial services solutions to individuals and businesses.

Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at www.lakecitybank.com. The company's common stock is traded on the Nasdaq Global Select Market under "LKFN."

In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. Lakeland Financial believes that providing non-GAAP financial measures provides investors with information useful to understanding Lakeland Financial's financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on "tangible common equity" which is "common stockholders' equity" excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables where the non-GAAP measure is presented.

This document contains, and future oral and written statements of the company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the company undertakes no obligation to update any statement in light of new information or future events. Additional information concerning the company and its business, including factors that could materially affect the company's financial results, is included in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K.

LAKELAND FINANCIAL CORPORATION
FIRST QUARTER 2014 FINANCIAL HIGHLIGHTS
(Unaudited – Dollars in thousands except per share data)
Three Months Ended
Mar. 31, Dec. 31, Mar. 31,
END OF PERIOD BALANCES 2014 2013 2013
Assets $3,233,724 $3,175,764 $2,927,702
Deposits 2,738,774 2,546,068 2,451,188
Loans 2,574,190 2,535,098 2,262,460
Allowance for Loan Losses 46,137 48,797 50,818
Total Equity 332,091 321,964 306,674
Tangible Common Equity 329,024 318,914 303,655
AVERAGE BALANCES
Total Assets $3,187,133 $3,109,027 $2,943,767
Earning Assets 3,021,440 2,942,828 2,767,928
Investments 473,184 473,623 478,098
Loans 2,538,622 2,460,396 2,255,505
Total Deposits 2,642,562 2,577,777 2,473,152
Interest Bearing Deposits 2,178,898 2,111,449 2,092,394
Interest Bearing Liabilities 2,380,595 2,307,167 2,243,297
Total Equity 328,058 319,620 303,227
INCOME STATEMENT DATA
Net Interest Income $24,680 $24,298 $21,257
Net Interest Income-Fully Tax Equivalent 25,151 24,780 21,674
Provision for Loan Losses 0 0 0
Noninterest Income 7,427 7,878 7,481
Noninterest Expense 16,790 16,528 14,893
Net Income 9,912 10,588 9,246
PER SHARE DATA
Basic Net Income Per Common Share $0.60 $0.64 $0.56
Diluted Net Income Per Common Share 0.59 0.63 0.56
Cash Dividends Declared Per Common Share 0.19 0.19 0
Book Value Per Common Share (equity per share issued) 20.08 19.54 18.67
Tangible Book Value Per Common Share 19.90 19.36 18.49
Market Value – High 41.46 39.32 27.02
Market Value – Low 35.31 31.72 23.92
Basic Weighted Average Common Shares Outstanding 16,513,645 16,466,461 16,408,710
Diluted Weighted Average Common Shares Outstanding 16,713,853 16,688,793 16,527,171
KEY RATIOS
Return on Average Assets 1.26% 1.35% 1.27%
Return on Average Total Equity 12.25 13.14 12.37
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 52.29 51.37 51.82
Average Equity to Average Assets 10.29 10.28 10.30
Net Interest Margin 3.38 3.33 3.17
Net Charge Offs to Average Loans 0.42 0.16 0.11
Loan Loss Reserve to Loans 1.79 1.92 2.25
Loan Loss Reserve to Nonperforming Loans 305.5 203.79 233.86
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 147.29 117.13 112.10
Nonperforming Loans to Loans 0.59 0.94 0.96
Nonperforming Assets to Assets 0.50 0.77 0.77
Total Impaired and Watch List Loans to Total Loans 6.56 6.64 8.17
Tier 1 Leverage 11.20 11.25 11.11
Tier 1 Risk-Based Capital 13.08 12.99 13.51
Total Capital 14.34 14.25 14.77
Tangible Capital 10.18 10.05 10.38
ASSET QUALITY
Loans Past Due 30 - 89 Days $1,802 $1,968 $2,852
Loans Past Due 90 Days or More 20 46 0
Non-accrual Loans 15,082 23,899 21,730
Nonperforming Loans (includes nonperforming TDR's) 15,102 23,945 21,730
Other Real Estate Owned 1,192 469 667
Other Nonperforming Assets 9 12 13
Total Nonperforming Assets 16,303 24,426 22,410
Performing Troubled Debt Restructurings 16,222 17,714 23,605
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 10,721 18,531 19,607
Total Troubled Debt Restructurings 26,943 36,245 43,211
Impaired Loans 34,101 43,218 47,685
Non-Impaired Watch List Loans 134,680 125,045 137,242
Total Impaired and Watch List Loans 168,781 168,263 184,927
Gross Charge Offs 2,751 1,182 1,206
Recoveries 91 174 580
Net Charge Offs/(Recoveries) 2,659 1,008 626
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 2014 and December 31, 2013
(in thousands, except share data)
March 31, December 31,
2014 2013
(Unaudited)
ASSETS
Cash and due from banks $67,960 $55,727
Short-term investments 9,179 7,378
Total cash and cash equivalents 77,139 63,105
Securities available for sale (carried at fair value) 471,449 468,967
Real estate mortgage loans held for sale 2,043 1,778
Loans, net of allowance for loan losses of $46,137 and $48,797 2,528,053 2,486,301
Land, premises and equipment, net 39,575 39,335
Bank owned life insurance 62,994 62,883
Federal Reserve and Federal Home Loan Bank stock 10,732 10,732
Accrued interest receivable 8,833 8,577
Goodwill 4,970 4,970
Other assets 27,936 29,116
Total assets $3,233,724 $3,175,764
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits $482,189 $479,606
Interest bearing deposits 2,256,585 2,066,462
Total deposits 2,738,774 2,546,068
Short-term borrowings
Federal funds purchased 8,000 11,000
Securities sold under agreements to repurchase 81,361 104,876
Other short-term borrowings 25,000 146,000
Total short-term borrowings 114,361 261,876
Long-term borrowings 35 37
Subordinated debentures 30,928 30,928
Accrued interest payable 2,938 2,918
Other liabilities 14,597 11,973
Total liabilities 2,901,633 2,853,800
STOCKHOLDERS' EQUITY
Common stock: 90,000,000 shares authorized, no par value
16,533,617 shares issued and 16,433,341 outstanding as of March 31, 2014
16,475,716 shares issued and 16,377,449 outstanding as of December 31, 2013 93,789 93,249
Retained earnings 239,889 233,108
Accumulated other comprehensive income/(loss) 454 (2,494)
Treasury stock, at cost (2014 - 100,276 shares, 2013 - 98,267 shares) (2,130) (1,988)
Total stockholders' equity 332,002 321,875
Noncontrolling interest 89 89
Total equity 332,091 321,964
Total liabilities and equity $3,233,724 $3,175,764
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2014 and 2013
(in thousands except for share and per share data)
(unaudited)
Three Months Ended
March 31,
2014 2013
NET INTEREST INCOME
Interest and fees on loans
Taxable $25,334 $24,486
Tax exempt 98 102
Interest and dividends on securities
Taxable 2,011 945
Tax exempt 819 735
Interest on short-term investments 8 24
Total interest income 28,270 26,292
Interest on deposits 3,187 4,637
Interest on borrowings
Short-term 151 91
Long-term 252 307
Total interest expense 3,590 5,035
NET INTEREST INCOME 24,680 21,257
Provision for loan losses 0 0
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 24,680 21,257
NONINTEREST INCOME
Wealth advisory fees 1,039 944
Investment brokerage fees 1,117 949
Service charges on deposit accounts 2,151 1,971
Loan, insurance and service fees 1,458 1,456
Merchant card fee income 350 276
Bank owned life insurance income 372 393
Other income 875 982
Mortgage banking income 65 509
Net securities gains (losses) 0 1
Total noninterest income 7,427 7,481
NONINTEREST EXPENSE
Salaries and employee benefits 9,987 9,165
Net occupancy expense 1,110 846
Equipment costs 773 609
Data processing fees and supplies 1,491 1,293
Corporate and business development 416 406
FDIC insurance and other regulatory fees 477 463
Professional fees 800 595
Other expense 1,736 1,516
Total noninterest expense 16,790 14,893
INCOME BEFORE INCOME TAX EXPENSE 15,317 13,845
Income tax expense 5,405 4,599
NET INCOME $9,912 $9,246
BASIC WEIGHTED AVERAGE COMMON SHARES 16,513,645 16,408,710
BASIC EARNINGS PER COMMON SHARE $0.60 $0.56
DILUTED WEIGHTED AVERAGE COMMON SHARES 16,713,853 16,527,171
DILUTED EARNINGS PER COMMON SHARE $0.59 $0.56
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
FIRST QUARTER 2014
(unaudited in thousands)
March 31, December 31, March 31,
2014 2013 2013
Commercial and industrial loans:
Working capital lines of credit loans $476,818 18.5% $457,690 18.0% $437,295 19.3%
Non-working capital loans 467,679 18.2 443,877 17.5 404,934 17.9
Total commercial and industrial loans 944,497 36.7 901,567 35.6 842,229 37.2
Commercial real estate and multi-family residential loans:
Construction and land development loans 144,978 5.6 157,630 6.2 97,263 4.3
Owner occupied loans 388,052 15.1 370,386 14.6 365,619 16.2
Nonowner occupied loans 424,143 16.5 394,748 15.6 339,030 15.0
Multifamily loans 57,882 2.2 63,443 2.5 46,270 2.0
Total commercial real estate and multi-family residential loans 1,015,055 39.4 986,207 38.9 848,182 37.5
Agri-business and agricultural loans:
Loans secured by farmland 109,260 4.2 133,458 5.3 99,537 4.4
Loans for agricultural production 104,384 4.1 120,571 4.8 105,312 4.7
Total agri-business and agricultural loans 213,644 8.3 254,029 10.0 204,849 9.1
Other commercial loans 77,324 3.0 70,770 2.8 48,867 2.2
Total commercial loans 2,250,520 87.4 2,212,573 87.3 1,944,127 85.9
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 135,111 5.2 125,444 4.9 116,164 5.1
Open end and junior lien loans 139,185 5.4 146,946 5.8 154,773 6.8
Residential construction and land development loans 5,658 0.2 4,640 0.2 6,110 0.3
Total consumer 1-4 family mortgage loans 279,954 10.9 277,030 10.9 277,047 12.2
Other consumer loans 44,319 1.7 46,125 1.8 41,891 1.9
Total consumer loans 324,273 12.6 323,155 12.7 318,938 14.1
Subtotal 2,574,793 100.0% 2,535,728 100.0% 2,263,065 100.0%
Less: Allowance for loan losses (46,137) (48,797) (50,818)
Net deferred loan fees (603) (630) (605)
Loans, net $2,528,053 $2,486,301 $2,211,642

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

Source:Lake City Bank