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Lakeland Financial Reports Record Performance

WARSAW, Ind., Oct. 25, 2016 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record quarterly net income of $13.5 million for the third quarter of 2016, an increase of 17%, versus $11.6 million for the third quarter of 2015. Diluted net income per common share of $0.53 for the third quarter of 2016 also represents a quarterly record and an increase of 15%, versus $0.46 for the comparable period of 2015. On a linked quarter basis net income increased by 5%, or $677,000 from $12.8 million for the second quarter ended June 30, 2016.

The company further reported record net income of $38.6 million for the nine months ended September 30, 2016 versus $34.1 million for the comparable period of 2015, an increase of 13%. Diluted net income per common share was also a record for the period and increased 13% to $1.52 for the nine months ended September 30, 2016 versus $1.35 for the comparable period of 2015. All share and per share data presented in this press release has been adjusted for a 3-for-2 stock split paid in the form of a stock dividend on August 5, 2016.

David M. Findlay, President and CEO, commented, “This strong performance reflects the continued growth of our balance sheet and our disciplined approach to operating the business. We are particularly proud of our consistent loan and deposit growth in 2016. This growth and the accompanying overall revenue increases were the drivers of this record income performance.”

Highlights for the quarter are noted below:

3rd Quarter 2016 versus 3rd Quarter 2015 highlights:

  • Organic average loan growth of $322 million or 11%
  • Average deposit growth of $485 million or 16%
  • Net interest income increase of $3.0 million or 11%
  • Continued strong asset quality with nonperforming assets to total assets at 0.18%
  • Tangible common equity increase of 11%

3rd Quarter 2016 versus 2nd Quarter 2016 highlights:

  • Organic average loan growth of $52 million or 2%
  • Core deposit growth of $255 million or 8%
  • Net interest income increase of $446,000 or 2%
  • Noninterest income increase of $951,000 or 12%

Findlay added, “Our stable and controlled approach to managing the business, combined with a constant focus on taking care of our clients, leads to this type of results. As we continue to operate in a challenging interest rate environment, we’ve maintained our focus on the clients and communities we serve. The resulting balance sheet and income statement growth are very gratifying to the Lake City Bank team.”

As previously announced, the board of directors approved a cash dividend for the third quarter of $0.19 per share, payable on November 7, 2016, to shareholders of record as of October 25, 2016. The third quarter dividend per share represents a 16% increase over the dividend rate paid in the last three quarters of 2015 and in the first quarter of 2016 of $0.163 per share on a split adjusted basis.

Return on average total equity for the first nine months of 2016 was 12.51% compared to 12.18% in the prior year period. Return on average assets for the first nine months of 2016 and 2015 was 1.29%. The company’s total capital as a percent of risk-weighted assets was 13.52% at September 30, 2016, compared to 13.79% at September 30, 2015 and 13.65% at June 30, 2016. The company’s tangible common equity to tangible assets ratio was 10.11% at September 30, 2016, compared to 10.47% at September 30, 2015 and 10.57% at June 30, 2016.

Average total loans for the third quarter of 2016 were $3.24 billion, an increase of $321.8 million, or 11%, versus $2.92 billion for the comparable period of 2015. Total loans outstanding grew $307.9 million, or 10%, from $2.97 billion as of September 30, 2015 to $3.28 billion as of September 30, 2016. On a linked quarter basis, average total loans increased by $52.4 million, or 2%, from $3.19 billion for the second quarter of 2016 to $3.24 billion for the third quarter of 2016.

Average total deposits for the third quarter of 2016 were $3.61 billion, an increase of $484.6 million, or 16%, versus $3.13 billion for the corresponding period of 2015. Total deposits grew $504.4 million, or 16%, from $3.15 billion as of September 30, 2015 to $3.65 billion as of September 30, 2016. In addition, total core deposits, which exclude brokered deposits, increased $531.5 million, or 18%, from $3.01 billion at September 30, 2015 to $3.55 billion at September 30, 2016. This increase in core deposits was driven by growth of public funds which increased by $363 million on a year over year basis.

The company’s net interest margin was 3.20% in the third quarter of 2016, compared to 3.16% for the third quarter of 2015. The higher margin in the third quarter of 2016 was due to higher yields on both loans and securities, partially offset by a higher cost of funds. The net interest margin was 3.24% in the linked second quarter of 2016. On a linked quarter basis, earning asset yields decreased by 3 basis points and cost of funds, measured as interest expense divided by average earning assets, increased by one basis point. The company’s net interest margin for the nine months ended September 30, 2016 was 3.22% compared to 3.21% in the prior year nine month period.

Net interest income increased $3.0 million, or 11%, to $29.7 million for the third quarter of 2016, versus $26.7 million in the third quarter of 2015. Net interest income for the nine months ended September 30, 2016 increased $9.1 million, or 12%, to $87.6 million, versus $78.5 million for the nine months ended September 30, 2015.

For the 15th consecutive quarter, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by continued stability in key loan quality metrics, including appropriate reserve coverage of nonperforming loans, a decrease in historical loss percentages and stable economic conditions in the company’s markets. The company’s allowance for loan losses as of September 30, 2016 was $42.9 million compared to $44.7 million as of September 30, 2015 and $43.2 million as of June 30, 2016. The allowance for loan losses represented 1.31% of total loans as of September 30, 2016 versus 1.50% at September 30, 2015 and 1.35% as of June 30, 2016. The allowance for loan losses as a percentage of nonperforming loans was 590% as of September 30, 2016, versus 312% as of September 30, 2015, and 464% as of June 30, 2016.

Nonperforming assets decreased $7.1 million, or 49%, to $7.4 million as of September 30, 2016 versus $14.5 million as of September 30, 2015. On a linked quarter basis, nonperforming assets were $2.2 million lower than the $9.6 million reported as of June 30, 2016. The decrease in nonperforming assets from the linked quarter was primarily due to the payoff of a $2.0 million impaired commercial credit. The ratio of nonperforming assets to total assets at September 30, 2016 declined to 0.18% from 0.40% at September 30, 2015 and 0.24% at June 30, 2016. Net charge-offs totaled $394,000 in the third quarter of 2016 versus net charge-offs of $122,000 during the third quarter of 2015 and net charge-offs of $36,000 during the linked second quarter of 2016.

Findlay observed, “Our organic loan and deposit growth focus has generated double digit revenue growth for the quarter and year-to-date periods. We are proud of our stable asset quality trends, as they make an important contribution to our ability to produce the consistent earnings performance we have posted over a long period of time.”

The company’s noninterest income increased $1.1 million or 14% to $9.0 million for the third quarter of 2016 versus $7.9 million for the third quarter of 2015. Noninterest income was positively impacted during the quarter by increases in recurring fee income for service charges on deposit accounts, wealth advisory fees and mortgage banking income. The company’s noninterest income increased 3% to $24.1 million for the nine months ended September 30, 2016 compared to $23.4 million in the prior year period. Noninterest income was positively impacted by increases in recurring fee income for service charges on deposit accounts, merchant card fee income, loan fees and wealth advisory fees. Other income decreased primarily due to market related fluctuations in the fair value of the company’s swap arrangements totaling $605,000, which are expected to recover upon maturity of the swaps., as well as a $226,000 write down to a property formerly used as a Lake City Bank branch that is held for sale.

The company’s noninterest expense increased by $1.6 million or 9% to $18.8 million in the third quarter of 2016 compared to $17.2 million in the third quarter of 2015. Salaries and employee benefits increased by $978,000 in the three month period ended September 30, 2016 versus the same period of 2015. These increases in salary and employee benefits were driven by higher performance incentive-based compensation costs and normal merit increases. Corporate and business development expense increased due to increased advertising expense. The company's efficiency ratio was 48% for the third quarter of 2016, compared to 50% for the third quarter of 2015 and 49% for the linked second quarter of 2016. The company’s noninterest expense increased by 7% to $54.6 million for the nine months ended September 30, 2016 compared to $50.8 million in the prior year period primarily due to increases in salaries and employee benefits, data processing fees, professional fees and corporate and business development.

Lakeland Financial Corporation is a $4.2 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 48 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 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 earnings release contains certain non-GAAP financial measures. Lakeland Financial 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 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,” “continue,” “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 2016 FINANCIAL HIGHLIGHTS
Three Months Ended Nine Months Ended
(Unaudited – Dollars in thousands)Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30,
END OF PERIOD BALANCES 2016 2016 2015 2016 2015
Assets$ 4,197,320 $ 3,937,304 $ 3,666,250 $ 4,197,320 $ 3,666,250
Deposits 3,651,942 3,403,455 3,147,534 3,651,942 3,147,534
Brokered Deposits 106,752 112,884 133,836 106,752 133,836
Core Deposits 3,545,190 3,290,571 3,013,698 3,545,190 3,013,698
Loans 3,280,161 3,197,997 2,972,280 3,280,161 2,972,280
Allowance for Loan Losses 42,853 43,247 44,694 42,853 44,694
Total Equity 427,380 418,893 386,700 427,380 386,700
Goodwill net of deferred tax assets 3,138 3,137 3,171 3,138 3,171
Tangible Common Equity 424,242 415,756 383,529 424,242 383,529
AVERAGE BALANCES
Total Assets$ 4,152,333 $ 4,003,633 $ 3,640,769 $ 3,990,022 $ 3,545,357
Earning Assets 3,773,650 3,705,666 3,409,445 3,690,351 3,333,410
Investments 500,384 488,762 471,641 489,269 474,876
Loans 3,244,994 3,192,545 2,923,159 3,175,882 2,844,079
Total Deposits 3,611,111 3,437,493 3,126,472 3,427,307 3,044,069
Interest Bearing Deposits 2,843,015 2,759,696 2,491,490 2,724,572 2,454,039
Interest Bearing Liabilities 2,933,109 2,887,534 2,605,467 2,849,661 2,562,723
Total Equity 423,358 411,986 380,865 411,797 374,017
INCOME STATEMENT DATA
Net Interest Income$ 29,719 $ 29,273 $ 26,711 $ 87,574 $ 78,475
Net Interest Income-Fully Tax Equivalent 30,274 29,818 27,181 89,194 79,926
Provision for Loan Losses 0 0 0 0 0
Noninterest Income 9,018 8,067 7,902 24,128 23,410
Noninterest Expense 18,759 18,446 17,207 54,589 50,849
Net Income 13,480 12,803 11,565 38,562 34,081
PER SHARE DATA
Basic Net Income Per Common Share *$ 0.54 $ 0.51 $ 0.46 $ 1.54 $ 1.37
Diluted Net Income Per Common Share * 0.53 0.50 0.46 1.52 1.35
Cash Dividends Declared Per Common Share * 0.19 0.19 0.16 0.54 0.47
Dividend Payout 35.85 % 36.84 % 35.51 % 35.53 % 34.48 %
Book Value Per Common Share (equity per share issued) * 17.04 16.72 15.49 17.04 15.49
Tangible Book Value Per Common Share * 16.91 16.60 15.37 16.91 15.37
Market Value – High * 37.74 33.27 30.27 37.74 30.27
Market Value – Low * 30.21 28.94 26.01 26.53 24.95
Basic Weighted Average Common Shares Outstanding * 25,069,434 25,045,251 24,944,067 25,044,596 24,916,033
Diluted Weighted Average Common Shares Outstanding * 25,457,892 25,395,770 25,271,975 25,418,884 25,213,249
KEY RATIOS
Return on Average Assets 1.29 % 1.29 % 1.26 % 1.29 % 1.29 %
Return on Average Total Equity 12.67 12.50 12.05 12.51 12.18
Average Equity to Average Assets 10.20 10.29 10.46 10.32 10.55
Net Interest Margin 3.20 3.24 3.16 3.22 3.21
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 48.43 49.40 49.71 48.87 49.91
Tier 1 Leverage (1) 10.71 10.85 11.18 10.71 11.18
Tier 1 Risk-Based Capital (1) 12.33 12.41 12.53 12.33 12.53
Common Equity Tier 1 (CET1) (1) 11.50 11.55 11.61 11.50 11.61
Total Capital (1) 13.52 13.65 13.79 13.52 13.79
Tangible Capital (1) 10.11 10.57 10.47 10.11 10.47
ASSET QUALITY
Loans Past Due 30 - 89 Days$ 1,734 $ 1,795 $ 1,984 $ 1,734 $ 1,984
Loans Past Due 90 Days or More 6 0 0 6 0
Non-accrual Loans 7,256 9,329 14,308 7,256 14,308
Nonperforming Loans (includes nonperforming TDR's) 7,262 9,329 14,308 7,262 14,308
Other Real Estate Owned 146 238 231 146 231
Other Nonperforming Assets 7 0 0 7 0
Total Nonperforming Assets 7,414 9,567 14,539 7,414 14,539
Performing Troubled Debt Restructurings 10,579 8,647 7,605 10,579 7,605
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 5,885 6,040 10,934 5,885 10,934
Total Troubled Debt Restructurings 16,464 14,688 18,539 16,464 18,539
Impaired Loans 18,605 19,267 22,660 18,605 22,660
Non-Impaired Watch List Loans 134,330 139,706 122,116 134,330 122,116
Total Impaired and Watch List Loans 152,935 158,973 144,776 152,935 144,776
Gross Charge Offs 773 296 228 1,535 1,931
Recoveries 379 260 106 778 364
Net Charge Offs/(Recoveries) 394 36 122 757 1,567
Net Charge Offs/(Recoveries) to Average Loans 0.05 % 0.00 % 0.02 % 0.03 % 0.07 %
Loan Loss Reserve to Loans 1.31 % 1.35 % 1.50 % 1.31 % 1.50 %
Loan Loss Reserve to Nonperforming Loans 590.10 % 463.58 % 312.36 % 590.10 % 312.36 %
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 240.20 % 240.58 % 203.96 % 240.20 % 203.96 %
Nonperforming Loans to Loans 0.22 % 0.29 % 0.48 % 0.22 % 0.48 %
Nonperforming Assets to Assets 0.18 % 0.24 % 0.40 % 0.18 % 0.40 %
Total Impaired and Watch List Loans to Total Loans 4.66 % 4.97 % 4.87 % 4.66 % 4.87 %
OTHER DATA
Full Time Equivalent Employees 518 531 518 518 518
Offices 48 48 46 48 46
(1) Capital ratios for September 30, 2016 are preliminary until the Call Report is filed.
* Share and per share data has been adjusted for a 3-for-2 stock split in the form of a stock dividend on August 5, 2016.


LAKELAND FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS
September 30, 2016 and December 31, 2015
(in thousands, except share data)

CONSOLIDATED BALANCE SHEETS (in thousands except share data)
September 30, December 31,
2016 2015
(Unaudited)
ASSETS
Cash and due from banks$ 252,978 $ 67,484
Short-term investments 25,400 13,190
Total cash and cash equivalents 278,378 80,674
Securities available for sale (carried at fair value) 502,223 478,071
Real estate mortgage loans held for sale 5,447 3,294
Loans, net of allowance for loan losses of $42,853 and $43,610 3,237,308 3,037,319
Land, premises and equipment, net 52,167 46,684
Bank owned life insurance 70,712 69,698
Federal Reserve and Federal Home Loan Bank stock 8,373 7,668
Accrued interest receivable 10,548 9,462
Goodwill 4,970 4,970
Other assets 27,194 28,446
Total assets$ 4,197,320 $ 3,766,286
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits$ 770,079 $ 715,093
Interest bearing deposits 2,881,863 2,468,328
Total deposits 3,651,942 3,183,421
Short-term borrowings
Securities sold under agreements to repurchase 60,198 69,622
Other short-term borrowings 0 70,000
Total short-term borrowings 60,198 139,622
Long-term borrowings 32 34
Subordinated debentures 30,928 30,928
Accrued interest payable 5,142 3,773
Other liabilities 21,698 15,607
Total liabilities 3,769,940 3,373,385
STOCKHOLDERS' EQUITY
Common stock: 90,000,000 shares authorized, no par value
25,081,087 shares issued and 24,923,694 outstanding as of September 30, 2016
24,962,477 shares issued and 24,819,066 outstanding as of December 31, 2015 103,064 99,123
Retained earnings 319,118 294,002
Accumulated other comprehensive income 7,992 2,142
Treasury stock, at cost (2016 - 157,393 shares, 2015 - 143,411 shares) (2,883) (2,455)
Total stockholders' equity 427,291 392,812
Noncontrolling interest 89 89
Total equity 427,380 392,901
Total liabilities and equity$ 4,197,320 $ 3,766,286

LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Nine Months Ended September 30, 2016 and 2015
(unaudited in thousands except for share and per share data)

CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
NET INTEREST INCOME
Interest and fees on loans
Taxable$ 31,538 $ 27,981 $ 92,086 $ 81,553
Tax exempt 110 116 332 350
Interest and dividends on securities
Taxable 2,277 2,009 7,120 6,459
Tax exempt 969 844 2,811 2,515
Interest on short-term investments 185 16 295 43
Total interest income 35,079 30,966 102,644 90,920
Interest on deposits 5,032 3,973 13,921 11,551
Interest on borrowings
Short-term 37 43 283 138
Long-term 291 239 866 756
Total interest expense 5,360 4,255 15,070 12,445
NET INTEREST INCOME 29,719 26,711 87,574 78,475
Provision for loan losses 0 0 0 0
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 29,719 26,711 87,574 78,475
NONINTEREST INCOME
Wealth advisory fees 1,307 1,103 3,600 3,393
Investment brokerage fees 252 405 752 1,208
Service charges on deposit accounts 3,153 2,806 8,776 7,753
Loan, insurance and service fees 2,105 2,147 5,835 5,616
Merchant card fee income 552 485 1,576 1,332
Bank owned life insurance income 392 221 1,054 956
Other income 763 455 1,278 2,090
Mortgage banking income 494 280 1,205 1,020
Net securities gains/(losses) 0 0 52 42
Total noninterest income 9,018 7,902 24,128 23,410
NONINTEREST EXPENSE
Salaries and employee benefits 10,832 9,854 31,029 29,021
Net occupancy expense 1,068 919 3,205 2,918
Equipment costs 1,018 870 2,828 2,699
Data processing fees and supplies 1,983 1,950 6,135 5,655
Corporate and business development 1,021 780 2,641 2,284
FDIC insurance and other regulatory fees 458 521 1,538 1,518
Professional fees 819 694 2,505 2,111
Other expense 1,560 1,619 4,708 4,643
Total noninterest expense 18,759 17,207 54,589 50,849
INCOME BEFORE INCOME TAX EXPENSE 19,978 17,406 57,113 51,036
Income tax expense 6,498 5,841 18,551 16,955
NET INCOME$ 13,480 $ 11,565 $ 38,562 $ 34,081
BASIC WEIGHTED AVERAGE COMMON SHARES 25,069,434 24,944,067 25,044,596 24,916,033
BASIC EARNINGS PER COMMON SHARE$ 0.54 $ 0.46 $ 1.54 $ 1.37
DILUTED WEIGHTED AVERAGE COMMON SHARES 25,457,892 25,271,975 25,418,884 25,213,249
DILUTED EARNINGS PER COMMON SHARE$ 0.53 $ 0.46 $ 1.52 $ 1.35


LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
THIRD QUARTER 2016
(unaudited in thousands)
September 30,June 30,December 31,September 30,
2016201620152015
Commercial and industrial loans:
Working capital lines of credit loans$ 609,382 18.6 %$ 598,531 18.7 %$ 581,025 18.9 %$ 593,780 20.0 %
Non-working capital loans 641,599 19.6 628,119 19.6 598,487 19.4 577,536 19.4
Total commercial and industrial loans 1,250,981 38.1 1,226,650 38.4 1,179,512 38.3 1,171,316 39.4
Commercial real estate and multi-family residential loans:
Construction and land development loans 221,436 6.7 221,027 6.9 230,719 7.5 176,945 6.0
Owner occupied loans 468,582 14.3 457,461 14.3 412,026 13.4 409,004 13.8
Nonowner occupied loans 408,620 12.5 395,597 12.4 407,883 13.2 417,790 14.1
Multifamily loans 127,784 3.9 114,618 3.6 79,425 2.6 93,075 3.1
Total commercial real estate and multi-family residential loans 1,226,422 37.4 1,188,703 37.2 1,130,053 36.7 1,096,814 36.9
Agri-business and agricultural loans:
Loans secured by farmland 152,719 4.7 146,519 4.6 164,375 5.3 155,106 5.2
Loans for agricultural production 156,770 4.8 162,240 5.1 141,719 4.6 93,964 3.2
Total agri-business and agricultural loans 309,489 9.4 308,759 9.7 306,094 9.9 249,070 8.4
Other commercial loans 89,850 2.7 82,786 2.6 85,075 2.8 82,976 2.8
Total commercial loans 2,876,742 87.7 2,806,898 87.8 2,700,734 87.7 2,600,176 87.5
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 161,907 4.9 164,564 5.1 158,062 5.1 154,019 5.2
Open end and junior lien loans 170,140 5.2 164,645 5.1 163,700 5.3 160,485 5.4
Residential construction and land development loans 12,801 0.4 9,570 0.3 9,341 0.3 8,445 0.3
Total consumer 1-4 family mortgage loans 344,848 10.5 338,779 10.6 331,103 10.7 322,949 10.9
Other consumer loans 58,957 1.8 52,492 1.6 49,113 1.6 49,169 1.7
Total consumer loans 403,805 12.3 391,271 12.2 380,216 12.3 372,118 12.5
Subtotal 3,280,547 100.0 % 3,198,169 100.0 % 3,080,950 100.0 % 2,972,294 100.0 %
Less: Allowance for loan losses (42,853) (43,247) (43,610) (44,694)
Net deferred loan fees (386) (172) (21) (14)
Loans, net$ 3,237,308 $ 3,154,750 $ 3,037,319 $ 2,927,586
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
THIRD QUARTER 2016
(unaudited in thousands)
September 30, June 30, December 31, September 30,
2016 2016 2015 2015
Non-interest bearing demand deposits$ 770,079 $ 727,308 $ 715,093 $ 630,789
Interest bearing demand, savings & money market accounts 1,562,252 1,500,720 1,470,814 1,460,261
Time deposits under $100,000 241,527 247,271 259,260 273,378
Time deposits of $100,000 or more 1,078,084 928,156 738,254 783,106
Total deposits 3,651,942 3,403,455 3,183,421 3,147,534
Short-term borrowings 60,198 56,368 139,622 80,414
Long-term borrowings 32 32 34 34
Subordinated debentures 30,928 30,928 30,928 30,928
Total borrowings 91,158 87,328 170,584 111,376
Total funding sources$ 3,743,100 $ 3,490,783 $ 3,354,005 $ 3,258,910

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

Three Months Ended Three Months Ended Three Months Ended
September 30, 2016 June 30, 2016 September 30, 2015
Average Interest Yield (1)/ Average Interest Yield (1)/ Average Interest Yield (1)/
(fully tax equivalent basis, dollars in thousands)Balance Income Rate Balance Income Rate Balance Income Rate
Earning Assets
Loans:
Taxable (2)(3)$ 3,233,394 $ 31,538 3.88% $ 3,180,783 $ 30,918 3.91% $ 2,910,663 $ 27,981 3.81%
Tax exempt (1) 11,600 164 5.62 11,763 164 5.62 12,496 170 5.40
Investments: (1)
Available for sale 500,384 3,746 2.98 488,762 3,736 3.07 471,641 3,269 2.75
Short-term investments 6,885 4 0.23 5,805 3 0.21 5,836 1 0.07
Interest bearing deposits 21,387 181 3.37 18,553 79 1.71 8,809 15 0.68
Total earning assets$ 3,773,650 $ 35,633 3.76% $ 3,705,666 $ 34,900 3.79% $ 3,409,445 $ 31,436 3.66%
Less: Allowance for loan losses (43,402) (43,228) (44,751)
Nonearning Assets
Cash and due from banks 249,812 167,099 117,986
Premises and equipment 50,921 48,921 44,240
Other nonearning assets 121,352 125,175 113,849
Total assets$ 4,152,333 $ 4,003,633 $ 3,640,769
Interest Bearing Liabilities
Savings deposits$ 270,136 $ 103 0.15% $ 263,331 $ 115 0.18% $ 234,360 $ 115 0.19%
Interest bearing checking accounts 1,261,390 1,362 0.43 1,309,443 1,455 0.45 1,221,190 1,225 0.40
Time deposits:
In denominations under $100,000 243,148 696 1.14 249,452 719 1.16 279,734 846 1.20
In denominations over $100,000 1,068,341 2,870 1.07 937,470 2,405 1.03 756,206 1,787 0.94
Miscellaneous short-term borrowings 59,133 37 0.25 96,878 99 0.41 83,015 43 0.21
Long-term borrowings and subordinated debentures (4) 30,960 291 3.74 30,960 289 3.75 30,962 239 3.06
Total interest bearing liabilities$ 2,933,108 $ 5,359 0.73% $ 2,887,534 $ 5,082 0.71% $ 2,605,467 $ 4,255 0.65%
Noninterest Bearing Liabilities
Demand deposits 768,095 677,797 634,982
Other liabilities 27,772 26,316 19,455
Stockholders' Equity 423,358 411,986 380,865
Total liabilities and stockholders' equity$ 4,152,333 $ 4,003,633 $ 3,640,769
Interest Margin Recap
Interest income/average earning assets 35,633 3.76 34,900 3.79 31,436 3.66
Interest expense/average earning assets 5,359 0.56 5,082 0.55 4,255 0.50
Net interest income and margin $ 30,274 3.20% $ 29,818 3.24% $ 27,181 3.16%


(1)Tax exempt income was converted to a fully taxable equivalent basis at a 35 percent tax rate for 2016 and 2015. 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.
(2)Loan fees, which are immaterial in relation to total taxable loan interest income for 2016 and 2015, are included as taxable loan interest income.
(3)Nonaccrual loans are included in the average balance of taxable loans.
(4)Long-term borrowings and subordinated debentures interest expense was reduced by interest capitalized on construction in process for 2015.

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

Source:Lake City Bank