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Lakeland Financial Reports Record Performance

WARSAW, Ind., Oct. 25, 2017 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record third quarter net income of $15.8 million for the three months ended September 30, an increase of 17% versus $13.5 million for the third quarter of 2016. Diluted net income per common share also increased 17% to $0.62 for the third quarter of 2017, versus $0.53 for the third quarter of 2016, representing a record quarter for the company and its shareholders. On a linked quarter basis, net income increased 3% or $461,000 from the second quarter ended June 30, 2017, which had net income of $15.4 million and $0.60 diluted net income per common share.

The company further reported record net income of $45.7 million for the nine months ended September 30, 2017 versus $38.6 million for the comparable period of 2016, an increase of 19%. Diluted net income per common share was also a record for the period and increased 17% to $1.78 for the nine months ended September 30, 2017 versus $1.52 for the comparable period of 2016.

David M. Findlay, President and CEO, commented, “The record quarter and year-to-date results reflect the continued geographic and balance sheet expansion of Lake City Bank. Healthy economic conditions in our Hoosier communities have provided a strong foundation for the Lake City Bank team to continue growing loans and deposits.”

Highlights for the quarter are noted below:

3rd Quarter 2017 versus 3rd Quarter 2016 highlights:

  • Organic average loan growth of $373 million or 11%
  • Average deposit growth of $105 million or 3%
  • Net interest income increase of $4.9 million or 16%
  • Net interest margin increase of 27 basis points to 3.35%
  • Revenue growth of $5.4 million or 14%
  • Continued strong asset quality with nonperforming assets to total assets at 0.24% compared to 0.18%
  • Net recoveries of $484,000 versus net charge offs of $394,000 a year ago
  • Tangible common equity1 increase of $35.2 million or 8%

3rd Quarter 2017 versus 2nd Quarter 2017 highlights:

  • Organic average loan growth of $31 million or 1%
  • Average deposit growth of $34 million or 1%
  • Net interest income increase of $801,000 or 2%
  • Net interest margin increase of 1 basis point to 3.35%
  • Revenue growth of $1.5 million or 4%
  • Continued strong asset quality with nonperforming assets to total assets at 0.24% compared to 0.23%
  • Net recoveries of $484,000 versus net recoveries of $289,000 in the prior quarter
  • Tangible common equity1 increase of $12.1 million or 3%

As previously announced, the board of directors approved a cash dividend for the third quarter of $0.22 per share, payable on November 6, 2017, to shareholders of record as of October 25, 2017. The third quarter dividend per share represents a 16% increase over the dividend rate paid in the last three quarters of 2016 and in the first quarter of 2017 of $0.19 per share.

Return on average total equity for the third quarter of 2017 was 13.71%, compared to 12.67% in the third quarter of 2016 and 13.84% in the linked second quarter of 2017. Return on average total equity for the first nine months of 2017 was 13.73%, compared to 12.51% in the same period of 2016. Return on average assets for the third quarter of 2017 was 1.41%, compared to 1.29% in the third quarter of 2016 and 1.40% in the linked second quarter of 2017. Return on average assets for the first nine months of 2017 was 1.39% compared to 1.29% in the same period of 2016. The company’s total capital as a percent of risk-weighted assets was 13.58% at September 30, 2017, compared to 13.30% at June 30, 2017. The company’s tangible common equity to tangible assets ratio was 10.32% at September 30, 2017, compared to 10.11% at September 30, 2016 and 10.19% at June 30, 2017.

Findlay noted, “Revenue growth is the greatest driver of our strong performance in 2017 as we have experienced strong loan demand, an expansion in our net interest margin and excellent growth in fee-based services throughout our business units. As a result of our strong income performance in 2017, our capital position has strengthened further and we continue to deploy our capital by reinvesting in our Indiana communities and through our recently increased common stock dividend to our shareholders.”

Average total loans for the third quarter of 2017 were $3.62 billion, an increase of $372.6 million, or 11%, versus $3.24 billion for the third quarter of 2016. Total loans outstanding grew $355.1 million, or 11%, from $3.28 billion as of September 30, 2016 to $3.64 billion as of September 30, 2017. On a linked quarter basis, total loans grew $58.2 million, or 2%, from $3.58 billion at June 30, 2017.

Average total deposits for the third quarter of 2017 were $3.72 billion, an increase of $105.2 million, or 3%, versus $3.61 billion for the third quarter of 2016. On a linked quarter basis, total average deposits grew $34.0 million, or 1%, from $3.68 billion at June 30, 2017. Total deposits grew $222.0 million, or 6%, from $3.65 billion as of September 30, 2016 to $3.87 billion as of September 30, 2017. Core deposits, which exclude brokered deposits, increased $32.4 million, or 1%, from $3.55 billion at September 30, 2016 to $3.58 billion at September 30, 2017. Brokered deposits increased by $189.7 million, from $106.8 million to $296.4 million as of September 30, 2017.

On a linked quarter basis, total deposits increased by $258.1 million to $3.87 billion. During the third quarter of 2017, core deposits increased $78.1 million or 2% from $3.50 billion as of June 30, 2017 to $3.58 billion as of September 30, 2017. The increase in core deposits on a linked quarter basis was generated from commercial deposit growth of $99.9 million, retail deposit growth of $70.4 million and public fund deposit contraction of $92.3 million. During the third quarter of 2017, brokered deposits increased by $180.0 million from $116.4 million at June 30, 2017 and the proceeds were used to reduce short-term borrowings.

The company’s net interest margin increased 27 basis points to 3.35% for the third quarter of 2017 compared to 3.08% for the third quarter of 2016. The higher margin in the third quarter of 2017 was due to higher yields on loans and securities, partially offset by a higher cost of funds. On a linked quarter basis, the net interest margin improved by one basis point from 3.34% in the second quarter of 2017. During the quarter asset yields improved by eight basis points and were offset by an increase in cost of funds of seven basis points. Net interest income increased $4.9 million, or 16%, to $34.6 million for the third quarter of 2017, versus $29.7 million in the third quarter of 2016. The company’s net interest margin for the nine months ended September 30, 2017 was 3.32% compared to 3.17% in the prior year nine-month period.

The company recorded a provision for loan losses of $450,000 in the third quarter of 2017, primarily driven by growth in the loan portfolio. The company’s allowance for loan losses as of September 30, 2017 was $45.5 million compared to $42.9 million as of September 30, 2016 and $44.6 million as of June 30, 2017. The allowance for loan losses represented 1.25% of total loans as of September 30, 2017 versus 1.31% at September 30, 2016 and 1.25% as of June 30, 2017.

Nonperforming assets increased $3.1 million, or 42%, to $10.5 million as of September 30, 2017 versus $7.4 million as of September 30, 2016 due to an increase in nonaccrual loans. On a linked quarter basis, nonperforming assets were $429,000 higher than the $10.1 million reported as of June 30, 2017. The ratio of nonperforming assets to total assets at September 30, 2017 increased to 0.24% from 0.18% at September 30, 2016 and 0.23% at June 30, 2017. The $429,000 increase in nonperforming assets during the quarter was primarily due to placing two commercial relationships in nonaccrual status. Net recoveries totaled $484,000 in the third quarter of 2017 versus net charge-offs of $394,000 during the third quarter of 2016 and net recoveries of $289,000 during the linked second quarter of 2017.

Findlay added, “The stable economic landscape in our Indiana markets continues to sustain the overall quality of our loan portfolio. We continue to be cautiously optimistic and the loan portfolio growth is carefully managed. Economic conditions are as strong as they have been since the recovery began in much of our footprint.”

The company’s noninterest income increased $479,000 or 5% to $9.5 million for the third quarter of 2017 versus $9.0 million for the third quarter of 2016. Noninterest income was positively impacted by a $478,000 increase in service charges on deposit accounts primarily due to growth in fees from business accounts. In addition, wealth advisory fees increased $164,000 or 13%.

The company’s noninterest income increased 10% to $26.5 million for the nine months ended September 30, 2017 compared to $24.1 million in the prior year period. Noninterest income was positively impacted by a $1.3 million or 14% increase in service charges on deposit accounts primarily due to growth in fees from business accounts. In addition, wealth advisory fees increased by $405,000 or 11% and investment brokerage fees increased by $198,000 or 26%. Bank owned life insurance income increased $216,000 or 20% from the first nine months of 2016 to the first nine months of 2017 primarily due to increased revenue from variable life insurance contracts owned by the company. In addition, other income increased $608,000 or 48% compared to the first nine months of 2016. During the first quarter of 2016, other income was negatively impacted by $295,000 of credit valuation adjustment losses related to the company’s swap arrangements and a $226,000 write down in the first quarter of 2016 to a property formerly used as a Lake City Bank branch, which together account for $521,000 of the increase in other income from the first nine months of 2016 to the first nine months of 2017. Noninterest income during the first nine months of 2017 was negatively impacted by a decrease of $394,000, or 33%, in mortgage banking income resulting from lower mortgage loan originations as compared to the prior year period.

The company’s noninterest expense increased by 8% to $20.3 million in the third quarter of 2017 compared to $18.8 million in the third quarter of 2016. Salaries and employee benefits increased by 8% or $896,000 primarily due to incentive-based compensation costs, increased health insurance cost, normal merit increases and staff additions related to the company’s continued growth and expansion. Corporate and business development expense increased by $224,000 or 22%, primarily due to an increase in the third quarter of 2017 of advertising expense. Equipment costs increased by $164,000 or 16%, driven by the company’s branch expansion as well as remodeling of existing branches. Professional fees increased by $143,000, or 17%, primarily due to fees related to the company’s advertising campaign.

The company’s noninterest expense increased by $5.1 million or 9% to $59.7 million in the first nine months of 2017 compared to $54.6 million in the prior year period. The increase was driven by salaries and employee benefits, which increased by 10% or $3.2 million, primarily due to incentive-based compensation costs, increased health insurance cost, normal merit increases and staff additions related to the company’s continued growth and expansion. In addition, corporate and business development increased by 49%, or $1.3 million, primarily due to community support and donation expense of $850,000 and $499,000 of increased advertising expense. The company's efficiency ratio was 45.9% for the third quarter of 2017, compared to 48.4% for the third quarter of 2016 and 45.4% for the linked second quarter of 2017.

Lakeland Financial Corporation is a $4.5 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 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. 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. 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.

_____________________
1 Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures.”

LAKELAND FINANCIAL CORPORATION
THIRD QUARTER 2017 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 BALANCES 2017 2017 2016 2017 2016
Assets $4,454,236 $4,392,999 $4,197,320 $4,454,236 $4,197,320
Deposits 3,873,990 3,615,939 3,651,942 3,873,990 3,651,942
Brokered Deposits 296,431 116,435 106,752 296,431 106,752
Core Deposits 3,577,559 3,499,504 3,545,190 3,577,559 3,545,190
Loans 3,635,252 3,577,004 3,280,161 3,635,252 3,280,161
Allowance for Loan Losses 45,497 44,563 42,853 45,497 42,853
Total Equity 462,516 450,460 427,380 462,516 427,380
Goodwill net of deferred tax assets 3,110 3,126 3,138 3,110 3,138
Tangible Common Equity (1) 459,406 447,334 424,242 459,406 424,242
AVERAGE BALANCES
Total Assets $4,464,568 $4,395,495 $4,152,333 $4,390,635 $3,990,022
Earning Assets 4,196,041 4,150,234 3,900,651 4,135,885 3,755,248
Investments 536,444 531,262 500,384 527,740 489,269
Loans 3,617,624 3,586,407 3,244,994 3,571,459 3,175,882
Total Deposits 3,716,303 3,682,348 3,611,110 3,678,897 3,427,308
Interest Bearing Deposits 2,923,118 2,926,086 2,843,015 2,906,159 2,724,573
Interest Bearing Liabilities 3,189,288 3,171,565 2,933,108 3,148,862 2,849,661
Total Equity 458,074 445,287 423,358 445,181 411,797
INCOME STATEMENT DATA
Net Interest Income $34,620 $33,819 $29,719 $100,500 $87,574
Net Interest Income-Fully Tax Equivalent 35,433 34,550 30,274 102,785 89,193
Provision for Loan Losses 450 500 0 1,150 0
Noninterest Income 9,497 8,791 9,018 26,547 24,128
Noninterest Expense 20,269 19,352 18,759 59,669 54,589
Net Income 15,825 15,364 13,480 45,703 38,562
PER SHARE DATA
Basic Net Income Per Common Share $0.63 $0.61 $0.54 $1.82 $1.54
Diluted Net Income Per Common Share 0.62 0.60 0.53 1.78 1.52
Cash Dividends Declared Per Common Share 0.22 0.22 0.19 0.63 0.54
Dividend Payout 35.48 % 36.67 % 35.85 % 35.39 % 35.53 %
Book Value Per Common Share (equity per share issued) 18.36 17.88 17.04 18.36 17.04
Tangible Book Value Per Common Share (1) 18.23 17.76 16.91 18.23 16.91
Market Value – High 49.22 48.70 37.74 49.22 37.74
Market Value – Low 41.30 41.38 30.21 39.68 26.53
Basic Weighted Average Common Shares Outstanding 25,193,894 25,183,186 25,069,434 25,176,593 25,044,596
Diluted Weighted Average Common Shares Outstanding 25,656,403 25,619,977 25,457,892 25,640,742 25,418,884
KEY RATIOS
Return on Average Assets 1.41 % 1.40 % 1.29 % 1.39 % 1.29 %
Return on Average Total Equity 13.71 13.84 12.67 13.73 12.51
Average Equity to Average Assets 10.26 10.13 10.20 10.14 10.32
Net Interest Margin 3.35 3.34 3.08 3.32 3.17
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 45.94 45.42 48.43 46.97 48.87
Tier 1 Leverage (2) 10.92 10.82 10.71 10.92 10.71
Tier 1 Risk-Based Capital (2) 12.42 12.15 12.33 12.42 12.33
Common Equity Tier 1 (CET1) (2) 11.65 11.39 11.50 11.65 11.50
Total Capital (2) 13.58 13.30 13.52 13.58 13.52
Tangible Capital (1) (2) 10.32 10.19 10.11 10.32 10.11
ASSET QUALITY
Loans Past Due 30 - 89 Days $1,935 $1,562 $1,734 $1,935 $1,734
Loans Past Due 90 Days or More 73 0 6 73 6
Non-accrual Loans 10,279 9,884 7,256 10,279 7,256
Nonperforming Loans (includes nonperforming TDR's) 10,352 9,884 7,262 10,352 7,262
Other Real Estate Owned 115 194 146 115 146
Other Nonperforming Assets 40 0 6 40 6
Total Nonperforming Assets 10,507 10,078 7,414 10,507 7,414
Performing Troubled Debt Restructurings 5,601 8,425 10,579 5,601 10,579
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 7,946 6,852 5,885 7,946 5,885
Total Troubled Debt Restructurings 13,547 15,277 16,464 13,547 16,464
Impaired Loans 16,679 19,580 18,605 16,679 18,605
Non-Impaired Watch List Loans 145,655 133,526 134,330 145,655 134,330
Total Impaired and Watch List Loans 162,334 153,109 152,935 162,334 152,935
Gross Charge Offs 170 261 773 935 1,535
Recoveries 654 550 379 1,564 778
Net Charge Offs/(Recoveries) (484) (289) 394 (629) 757
Net Charge Offs/(Recoveries) to Average Loans (0.05)% (0.03)% 0.05 % (0.02)% 0.03 %
Loan Loss Reserve to Loans 1.25 % 1.25 % 1.31 % 1.25 % 1.31 %
Loan Loss Reserve to Nonperforming Loans 439.51 % 450.75 % 590.10 % 439.51 % 590.10 %
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 285.20 % 243.37 % 240.20 % 285.20 % 240.20 %
Nonperforming Loans to Loans 0.28 % 0.28 % 0.22 % 0.28 % 0.22 %
Nonperforming Assets to Assets 0.24 % 0.23 % 0.18 % 0.24 % 0.18 %
Total Impaired and Watch List Loans to Total Loans 4.47 % 4.28 % 4.66 % 4.47 % 4.66 %
OTHER DATA
Full Time Equivalent Employees 537 540 518 537 518
Offices 49 49 48 49 48
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
(2) Capital ratios for September 30, 2017 are preliminary until the Call Report is filed.

CONSOLIDATED BALANCE SHEETS (in thousands except share data)
September 30, December 31,
2017 2016
(Unaudited)
ASSETS
Cash and due from banks $ 109,647 $142,408
Short-term investments 20,186 24,872
Total cash and cash equivalents 129,833 167,280
Securities available for sale (carried at fair value) 536,547 504,191
Real estate mortgage loans held for sale 4,456 5,915
Loans, net of allowance for loan losses of $45,497 and $43,718 3,589,755 3,427,209
Land, premises and equipment, net 56,389 52,092
Bank owned life insurance 75,350 74,006
Federal Reserve and Federal Home Loan Bank stock 13,772 11,522
Accrued interest receivable 13,123 11,687
Goodwill 4,970 4,970
Other assets 30,041 31,153
Total assets $ 4,454,236 $4,290,025
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits $ 821,589 $819,803
Interest bearing deposits 3,052,401 2,758,109
Total deposits 3,873,990 3,577,912
Short-term borrowings
Securities sold under agreements to repurchase 63,888 50,045
Other short-term borrowings 0 180,000
Total short-term borrowings 63,888 230,045
Long-term borrowings 30 32
Subordinated debentures 30,928 30,928
Accrued interest payable 5,439 5,676
Other liabilities 17,445 18,365
Total liabilities 3,991,720 3,862,958
STOCKHOLDERS' EQUITY
Common stock: 90,000,000 shares authorized, no par value
25,194,903 shares issued and 25,026,689 outstanding as of September 30, 2017
25,096,087 shares issued and 24,937,865 outstanding as of December 31, 2016 107,636 104,405
Retained earnings 357,710 327,873
Accumulated other comprehensive income/(loss) 452 (2,387)
Treasury stock, at cost (2017 - 168,214 shares, 2016 - 158,222 shares) (3,371) (2,913)
Total stockholders' equity 462,427 426,978
Noncontrolling interest 89 89
Total equity 462,516 427,067
Total liabilities and equity $ 4,454,236 $4,290,025

CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
NET INTEREST INCOME
Interest and fees on loans
Taxable$ 38,630 $31,538 $ 110,044 $92,086
Tax exempt 205 110 517 332
Interest and dividends on securities
Taxable 2,349 2,277 7,033 7,120
Tax exempt 1,309 969 3,745 2,811
Interest on short-term investments 96 185 198 295
Total interest income 42,589 35,079 121,537 102,644
Interest on deposits 7,037 5,032 18,722 13,921
Interest on borrowings
Short-term 588 37 1,329 283
Long-term 344 291 986 866
Total interest expense 7,969 5,360 21,037 15,070
NET INTEREST INCOME 34,620 29,719 100,500 87,574
Provision for loan losses 450 0 1,150 0
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 34,170 29,719 99,350 87,574
NONINTEREST INCOME
Wealth advisory fees 1,471 1,307 4,005 3,600
Investment brokerage fees 330 252 950 752
Service charges on deposit accounts 3,631 3,153 10,027 8,776
Loan, insurance and service fees 2,060 2,105 5,850 5,835
Merchant card fee income 588 552 1,696 1,576
Bank owned life insurance income 397 392 1,270 1,054
Other income 718 763 1,886 1,278
Mortgage banking income 302 494 811 1,205
Net securities gains 0 0 52 52
Total noninterest income 9,497 9,018 26,547 24,128
NONINTEREST EXPENSE
Salaries and employee benefits 11,728 10,832 34,214 31,029
Net occupancy expense 1,131 1,068 3,405 3,205
Equipment costs 1,182 1,018 3,413 2,828
Data processing fees and supplies 2,032 1,983 6,022 6,135
Corporate and business development 1,245 1,021 3,943 2,641
FDIC insurance and other regulatory fees 443 458 1,296 1,538
Professional fees 962 819 2,717 2,505
Other expense 1,546 1,560 4,659 4,708
Total noninterest expense 20,269 18,759 59,669 54,589
INCOME BEFORE INCOME TAX EXPENSE 23,398 19,978 66,228 57,113
Income tax expense 7,573 6,498 20,525 18,551
NET INCOME$ 15,825 $13,480 $ 45,703 $38,562
BASIC WEIGHTED AVERAGE COMMON SHARES 25,193,894 25,069,434 25,176,593 25,044,596
BASIC EARNINGS PER COMMON SHARE$ 0.63 $0.54 $ 1.82 $1.54
DILUTED WEIGHTED AVERAGE COMMON SHARES 25,656,403 25,457,892 25,640,742 25,418,884
DILUTED EARNINGS PER COMMON SHARE$ 0.62 $0.53 $ 1.78 $1.52

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
THIRD QUARTER 2017
(unaudited in thousands)
September 30,
June 30,
December 31,
September 30,
2017
2017
2016
2016
Commercial and industrial loans:
Working capital lines of credit loans$703,953 19.4% $717,875 20.0% $624,404 18.0% $609,382 18.6%
Non-working capital loans 658,167 18.1 646,517 18.1 644,086 18.5 641,599 19.5
Total commercial and industrial loans 1,362,120 37.5 1,364,392 38.1 1,268,490 36.5 1,250,981 38.1
Commercial real estate and multi-family residential loans:
Construction and land development loans 287,778 7.9 209,772 5.8 245,182 7.1 221,436 6.7
Owner occupied loans 499,651 13.7 511,425 14.3 469,705 13.5 468,582 14.3
Nonowner occupied loans 456,930 12.6 450,907 12.6 458,404 13.2 408,620 12.5
Multifamily loans 165,855 4.6 170,902 4.8 127,632 3.7 127,784 3.9
Total commercial real estate and multi-family residential loans 1,410,214 38.8 1,343,006 37.5 1,300,923 37.5 1,226,422 37.4
Agri-business and agricultural loans:
Loans secured by farmland 161,553 4.4 156,053 4.4 172,633 5.0 152,719 4.6
Loans for agricultural production 156,327 4.3 175,334 4.9 222,210 6.4 156,770 4.8
Total agri-business and agricultural loans 317,880 8.7 331,387 9.3 394,843 11.4 309,489 9.4
Other commercial loans 114,858 3.1 116,651 3.3 98,270 2.8 89,850 2.8
Total commercial loans 3,205,072 88.1 3,155,436 88.2 3,062,526 88.2 2,876,742 87.7
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 171,946 4.7 171,495 4.8 163,155 4.7 161,907 4.9
Open end and junior lien loans 181,338 5.0 172,530 4.8 169,664 4.9 170,140 5.2
Residential construction and land development loans 10,530 0.3 10,118 0.3 15,015 0.4 12,801 0.4
Total consumer 1-4 family mortgage loans 363,814 10.0 354,143 9.9 347,834 10.0 344,848 10.5
Other consumer loans 67,545 1.9 68,646 1.9 61,308 1.8 58,957 1.8
Total consumer loans 431,359 11.9 422,789 11.8 409,142 11.8 403,805 12.3
Subtotal 3,636,431 100.0% 3,578,225 100.0% 3,471,668 100.0% 3,280,547 100.0%
Less: Allowance for loan losses (45,497) (44,563) (43,718) (42,853)
Net deferred loan fees (1,179) (1,221) (741) (386)
Loans, net$3,589,755 $3,532,441 $3,427,209 $3,237,308
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
THIRD QUARTER 2017
(unaudited in thousands)
September 30, June 30, December 31, September 30,
2017 2017 2016 2016
Non-interest bearing demand deposits$821,589 $762,965 $819,803 $770,079
Savings and transaction accounts:
Savings deposits 269,977 275,151 268,970 272,704
Interest bearing demand deposits 1,390,335 1,322,847 1,325,320 1,289,548
Time deposits:
Deposits of $100,000 or more 1,149,152 1,015,741 924,825 1,078,084
Other time deposits 242,937 239,235 238,994 241,527
Total deposits$3,873,990 $3,615,939 $3,577,912 $3,651,942
FHLB advances and other borrowings 94,846 306,146 261,005 91,158
Total funding sources$3,968,836 $3,922,085 $3,838,917 $3,743,100

LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
Three Months Ended Three Months Ended Three Months Ended
September 30, 2017 June 30, 2017 September 30, 2016
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) $3,595,753 $38,630 4.26% $3,566,504 $36,967 4.16% $3,233,394 $31,538 3.88%
Tax exempt (1) 21,871 312 5.66 19,903 240 4.82 11,600 164 5.62
Investments: (1)
Available for sale 536,444 4,364 3.23 531,262 4,291 3.24 500,384 3,747 2.98
Short-term investments 6,633 8 0.48 6,124 8 0.52 6,885 4 0.23
Interest bearing deposits 35,340 88 0.99 26,441 46 0.70 148,388 181 0.49
Total earning assets $4,196,041 $43,402 4.10% $4,150,234 $41,552 4.02% $3,900,651 $35,634 3.63%
Less: Allowance for loan losses (45,018) (44,090) (43,402)
Nonearning Assets
Cash and due from banks 122,429 101,446 122,811
Premises and equipment 56,716 54,341 50,921
Other nonearning assets 134,400 133,564 121,352
Total assets $4,464,568 $4,395,495 $4,152,333
Interest Bearing Liabilities
Savings deposits $274,514 $103 0.15% $274,645 $105 0.15% $270,136 $103 0.15%
Interest bearing checking accounts 1,365,617 2,636 0.77 1,403,560 2,387 0.68 1,261,390 1,362 0.43
Time deposits:
In denominations under $100,000 240,444 746 1.23 237,917 700 1.18 243,148 696 1.14
In denominations over $100,000 1,042,543 3,552 1.35 1,009,964 3,051 1.21 1,068,341 2,871 1.07
Miscellaneous short-term borrowings 235,212 588 0.99 214,520 431 0.81 59,133 37 0.25
Long-term borrowings and
subordinated debentures (4) 30,958 344 4.41 30,959 328 4.25 30,960 291 3.74
Total interest bearing liabilities $3,189,288 $7,969 0.99% $3,171,565 $7,002 0.89% $2,933,108 $5,360 0.73%
Noninterest Bearing Liabilities
Demand deposits 793,185 756,262 768,095
Other liabilities 24,021 22,381 27,772
Stockholders' Equity 458,074 445,287 423,358
Total liabilities and stockholders' equity $4,464,568 $4,395,495 $4,152,333
Interest Margin Recap
Interest income/average earning assets 43,402 4.10 41,552 4.02 35,634 3.63
Interest expense/average earning assets 7,969 0.75 7,002 0.68 5,360 0.55
Net interest income and margin $35,433 3.35% $34,550 3.34% $30,274 3.08%


(1) Tax exempt income was converted to a fully taxable equivalent basis at a 35 percent tax rate for 2017 and 2016. 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 $813,000, $731,000 and $555,000 in the three-month periods ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively.
(2) Loan fees, which are immaterial in relation to total taxable loan interest income for 2017 and 2016, are included as taxable loan interest income.
(3) Nonaccrual loans are included in the average balance of taxable loans.

(1) Reconciliation of Non-GAAP Financial Measures
Tangible common equity, tangible assets and tangible book value per share 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 stockholders’ equity. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. 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 Nine Months Ended
Sep. 30, Jun. 30, Sep. 30, Sep. 30, Sep. 30,
2017 2017 2016 2017 2016
Total Equity $462,516 $450,460 $427,380 $462,516 $427,380
Less: Goodwill (4,970) (4,970) (4,970) (4,970) (4,970)
Plus: Deferred tax assets related to goodwill 1,860 1,844 1,832 1,860 1,832
Tangible Common Equity 459,406 447,334 424,242 459,406 424,242
Assets $4,454,236 $4,392,999 $4,197,320 $4,454,236 $4,197,320
Less: Goodwill (4,970) (4,970) (4,970) (4,970) (4,970)
Plus: Deferred tax assets related to goodwill 1,860 1,844 1,832 1,860 1,832
Tangible Assets 4,451,126 4,389,873 4,194,182 4,451,126 4,194,182
Ending common shares issued 25,194,903 25,185,619 25,081,087 25,194,903 25,081,087
Tangible Book Value Per Common Share $18.23 $17.76 $16.91 $18.23 $16.91
Tangible Common Equity/Tangible Assets 10.32 % 10.19 % 10.11 % 10.32 % 10.11 %

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

Source:Lake City Bank