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Lakeland Financial Reports Record Performance

WARSAW, Ind., Jan. 25, 2018 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $61.5 million, excluding the impact of a non-cash, non-operating and non-recurring tax adjustment described below, which represents an increase of 18% compared with net income of $52.1 million for 2016.1 Diluted earnings per share were $2.40, excluding this tax item, representing an increase of 17% compared with diluted earnings per share of $2.05 for 2016.1 This per share performance also represents a record for the company and its shareholders.



Results for 2017 include a non-cash, non-operating and non-recurring income tax provision of $4.1 million or $0.16 per diluted share. Including this tax item, net income for Lakeland Financial Corporation was a record $57.3 million for 2017, versus $52.1 million for 2016. Diluted net income per common share increased to $2.23 for 2017, versus $2.05 for 2016. This per share performance also represents a record for the company and its shareholders.

David M. Findlay, President and CEO commented, “We are pleased that 2017 marks our eighth consecutive year of record income performance. We are particularly proud of our performance over a long period of time as we have reported record net income in 28 of the last 29 years. Our performance-based culture is the result of Lake City Bank’s unwavering focus on serving customers in our Indiana footprint each and every day with financial services solutions that help our Indiana communities prosper.”

Excluding the effect of the non-cash, non-operating and non-recurring income tax provision, net income for the three months ended December 31, 2017 was $15.8 million representing an increase of 17% over the fourth quarter of 2016. Diluted net income per common share, excluding the effect of the tax item was $0.61 for the three months and year ended December 31, 2017, representing an increase of 15% over the fourth quarter in 2016.1

Including the non-cash, non-operating and non-recurring tax adjustment, the company reported quarterly net income of $11.6 million for the fourth quarter of 2017, versus $13.5 million for the fourth quarter of 2016. Diluted net income per common share was $0.45 for the fourth quarter of 2017 versus $0.53 for the comparable period of 2016. Net income was $15.8 million and $0.62 per diluted common share for the third quarter 2017.

As a result of the Tax Cuts and Jobs Act that was enacted into law on December 22, 2017, the company revalued its net deferred tax asset position to reflect the reduction in its federal corporate income tax rate from 35% to 21%. This revaluation resulted in a non-cash, non-operating and non-recurring income tax expense adjustment of approximately $4.1 million, or $0.16 per diluted share, for the fourth quarter of 2017. The company’s revaluation of its net deferred asset and other relevant details remain subject to modifications as the company finalizes its financial results for the year ended December 31, 2017 and as information and analysis regarding the Act and other relevant factors emerge.

Highlights for the quarter are noted below:

4th Quarter 2017 versus 4th Quarter 2016 highlights:

  • Organic average loan growth of $354 million or 10%
  • Average deposit growth of $361 million or 10%
  • Net interest income increase of $4.5 million or 15%
  • Net interest margin increase of 15 basis points to 3.33%
  • Revenue growth of $5.2 million or 13%
  • Continued strong asset quality with nonperforming assets to total assets at 0.20% compared to 0.16%
  • Net charge-offs of $226,000 versus $285,000 a year ago
  • Tangible common equity1 increase of $40.9 million or 10%

4th Quarter 2017 versus 3rd Quarter 2017 highlights:

  • Organic average loan growth of $110 million or 3%
  • Average deposit growth of $273 million or 7%
  • Net interest income increase of $772,000 or 2%
  • Revenue growth of $737,000 or 2%
  • Continued strong asset quality with nonperforming assets to total assets at 0.20% compared to 0.24%
  • Net charge-offs of $226,000 versus net recoveries of $484,000 in the prior quarter
  • Tangible common equity1 increase of $5.5 million or 1%

Findlay added, “Our double digit loan and deposit growth in 2017 was the foundation of our continued growth in profitability. We experienced loan growth in every region of the bank and it was well-distributed in both new and mature markets. Similarly, each of our regions grew deposits in 2017.”

As previously announced on January 9, 2018, the board of directors approved a cash dividend for the fourth quarter of $0.22 per share, payable on February 5, 2018, to shareholders of record as of January 25, 2018. The fourth 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 year ended December 31, 2017 was 12.72% compared to 12.52% in 2016. Return on average assets for 2017 and 2016 was 1.29%. The company’s total capital as a percent of risk-weighted assets was 13.26% at December 31, 2017, compared to 13.23% at December 31, 2016 and 13.58% at September 30, 2017. The company’s tangible common equity1 to tangible assets ratio was 9.93% at December 31, 2017, compared to 9.89% at December 31, 2016 and 10.32% at September 30, 2017.

Average total loans for 2017 was $3.61 billion, an increase of $385.3 million, or 12%, versus $3.23 billion for 2016. Total loans outstanding grew $347.5 million, or 10%, from $3.47 billion as of December 31, 2016 to $3.82 billion as of December 31, 2017. On a linked quarter basis, total loans grew $183.2 million, or 5%, from $3.64 billion at September 30, 2017. Average total loans for the fourth quarter of 2017 was $3.73 billion, an increase of $354.2 million, or 10% versus $3.37 billion for the comparable period of 2016. On a linked quarter basis, average total loans increased by $110.3 million, or 3%, from $3.62 billion for the third quarter of 2017 to $3.73 billion for the fourth quarter of 2017.

Average total deposits for 2017 was $3.76 billion, an increase of $279.4 million, or 8%, versus $3.48 billion for 2016. Total deposits grew $430.7 million, or 12%, from $3.58 billion as of December 31, 2016 to $4.01 billion as of December 31, 2017. In addition, total core deposits, which exclude brokered deposits, increased $259.9 million, or 7%, from $3.48 billion at December 31, 2016 to $3.74 billion at December 31, 2017. This increase in core deposits was driven by growth of retail deposits, commercial deposits and public fund deposits, which increased by $118.1 million to $1.507 billion, $85.1 million to $969 million and $56.7 million to $1.264 billion, respectively, on a year over year basis.

The company’s net interest margin increased 15 basis points to 3.33% for 2017 compared to 3.18% for 2016. The company’s net interest margin was also 3.33% in the fourth quarter of 2017 versus 3.18% for the fourth quarter of 2016. The higher margin in the fourth quarter of 2017 was due to higher yields on both loans and securities, partially offset by a higher cost of funds. On a linked quarter basis, the net interest margin decreased two basis points from 3.35% in the third quarter of 2017 due to increased deposit costs which exceeded the increase in earning asset yields. Net interest income increased $17.4 million, or 15%, to $135.9 million in 2017 versus $118.5 million in 2016. Net interest income increased $4.5 million, or 15%, to $35.4 million for the fourth quarter of 2017, versus $30.9 million in the fourth quarter of 2016.

Findlay observed, “The three Federal Reserve Bank fed fund increases in 2017 positively impacted our asset sensitive balance sheet and resulted in net interest margin expansion of 15 basis points during the year. The positive impact of the rate increases enabled us to be more aggressive with deposit pricing, which clearly benefits our clients with higher earnings on their deposits with Lake City Bank.”

The company recorded a provision for loan losses of $3.0 million in 2017, versus $1.2 million in 2016, primarily resulting from growth in the loan portfolio. On a linked quarter basis, provision for loan losses increased by $1.4 million from $450,000 in the third quarter 2017 to $1.9 million in the fourth quarter 2017. The company’s allowance for loan losses as of December 31, 2017 was $47.1 million compared to $43.7 million as of December 31, 2016 and $45.5 million as of September 30, 2017. The allowance for loan losses represented 1.23% of total loans as of December 31, 2017 versus 1.26% at December 31, 2016 and 1.25% as of September 30, 2017.

Nonperforming assets increased $2.6 million, or 39%, to $9.5 million as of December 31, 2017 versus $6.9 million as of December 31, 2016 due to an increase in nonaccrual loans. On a linked quarter basis, nonperforming assets were $1.0 million lower than the $10.5 million reported as of September 30, 2017 due to a reduction in nonaccrual loans resulting primarily from loan pay downs. The ratio of nonperforming assets to total assets at December 31, 2017 increased to 0.20% from 0.16% at December 31, 2016 and decreased from 0.24% at September 30, 2017. Net recoveries to average loans were 0.01% in 2017 compared to net charge-offs of 0.03% in 2016 and represent net recoveries of $403,000 in 2017 versus net charge-offs of $1.0 million in 2016.

Findlay noted, “We were pleased to report net recoveries for 2017. We believe that this reflects the general operating strength of our client base, as well as the overall healthy economic conditions in our Indiana markets. Our increased provision expense for the year is the direct result of our strong loan growth.”

The company’s noninterest income increased $3.1 million, or 10%, to $36.0 million in 2017, compared to $32.9 million in 2016. The company’s noninterest income increased $726,000 or 8%, to $9.5 million for the fourth quarter of 2017 versus $8.7 million for the fourth quarter of 2016. During 2017, noninterest income was positively impacted by increases in recurring fee income for service charges on deposit accounts, primarily due to growth in fees from business accounts, and wealth advisory fees. Offsetting these increases were decreases in other income driven by lower mortgage banking income due to lower mortgage originations. Increases in noninterest income in the fourth quarter of 2017 compared to the fourth quarter of 2016 resulted from service charges on deposit accounts as well as higher wealth advisory fees, offset by lower mortgage banking income.

The company’s noninterest expense increased $6.3 million, or 9%, to $79.3 million in 2017, compared to $73.0 million in 2016. The company’s noninterest expense increased by $1.2 million, or 7% to $19.6 million in the fourth quarter of 2017 compared to $18.4 million in the fourth quarter of 2016. Salaries and employee benefits increased primarily due to incentive-based compensation costs, normal merit increases and staff additions related to the company’s continued growth and expansion. Corporate and business development expense increased primarily due to higher community support and donation expense as well as higher advertising expenses. Equipment costs increased driven by the company’s branch expansion, continued investment in technology based equipment and remodeling of existing branches and other offices. The company's efficiency ratio was 46.1% for 2017 compared to 48.2% for 2016. The company’s efficiency ratio was 43.7% for the fourth quarter of 2017, compared to 46.4% for the fourth quarter of 2016 and 45.9% for the linked third quarter of 2017.

Findlay added, “During 2017, we continued to expand our presence in Indianapolis with the opening of a new office in Greenwood. In addition, we continue to prioritize investments in technology to enhance consumer banking solutions as well as to protect customer information.”

Lakeland Financial Corporation is a $4.7 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. 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 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. 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 measures – see “Reconciliation of Non-GAAP Financial Measures.”

LAKELAND FINANCIAL CORPORATION
FOURTH QUARTER 2017 FINANCIAL HIGHLIGHTS
Three Months Ended Twelve Months Ended
(Unaudited – Dollars in thousands, except per share data)Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
END OF PERIOD BALANCES2017 2017
2016 2017
2016
Assets$4,682,976 $4,454,236 $4,290,025 $4,682,976 $4,290,025
Deposits 4,008,655 3,873,990 3,577,912 4,008,655 3,577,912
Brokered Deposits 268,976 296,431 98,177 268,976 98,177
Core Deposits 3,739,679 3,577,559 3,479,735 3,739,679 3,479,735
Loans 3,818,459 3,635,252 3,470,927 3,818,459 3,470,927
Allowance for Loan Losses 47,121 45,497 43,718 47,121 43,718
Total Equity 468,667 462,516 427,067 468,667 427,067
Goodwill net of deferred tax assets 3,799 3,110 3,134 3,799 3,134
Tangible Common Equity (1) 464,868 459,406 423,933 464,868 423,933
AVERAGE BALANCES
Total Assets$4,598,809 $4,464,568 $4,187,730 $4,443,106 $4,039,719
Earning Assets 4,323,249 4,196,041 3,933,136 4,183,112 3,799,963
Investments 537,796 536,444 506,722 530,275 493,656
Loans 3,727,967 3,617,624 3,373,814 3,610,908 3,225,635
Total Deposits 3,989,592 3,716,303 3,628,244 3,757,209 3,477,816
Interest Bearing Deposits 3,151,116 2,923,118 2,839,518 2,967,902 2,753,466
Interest Bearing Liabilities 3,266,206 3,189,288 2,941,281 3,178,439 2,872,691
Total Equity 467,459 458,074 428,665 450,796 416,034
INCOME STATEMENT DATA
Net Interest Income$35,392 $34,620 $30,907 $135,892 $118,481
Net Interest Income-Fully Tax Equivalent 36,231 35,433 31,526 139,015 120,719
Provision for Loan Losses 1,850 450 1,150 3,000 1,150
Noninterest Income 9,462 9,497 8,736 36,009 32,864
Noninterest Expense 19,598 20,269 18,389 79,267 72,978
Net Income 11,627 15,825 13,522 57,330 52,084
PER SHARE DATA
Basic Net Income Per Common Share$0.46 $0.63 $0.54 $2.28 $2.08
Diluted Net Income Per Common Share 0.45 0.61 0.53 2.23 2.05
Cash Dividends Declared Per Common Share 0.22 0.22 0.19 0.85 0.73
Dividend Payout 48.89% 36.07% 35.85% 38.12% 35.61%
Book Value Per Common Share (equity per share issued) 18.60 18.36 17.01 18.60 17.01
Tangible Book Value Per Common Share (1) 18.45 18.23 16.89 18.45 16.89
Market Value – High 52.43 49.22 48.88 52.43 48.88
Market Value – Low 45.26 41.30 33.98 39.68 26.53
Basic Weighted Average Common Shares Outstanding 25,194,903 25,193,894 25,091,685 25,181,208 25,056,095
Diluted Weighted Average Common Shares Outstanding 25,701,337 25,656,403 25,518,069 25,663,381 25,460,727
KEY RATIOS
Return on Average Assets 1.00% 1.41% 1.28% 1.29% 1.29%
Return on Average Total Equity 9.87 13.71 12.55 12.72 12.52
Average Equity to Average Assets 10.16 10.26 10.24 10.15 10.30
Net Interest Margin 3.33 3.35 3.18 3.33 3.18
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 43.69 45.94 46.38 46.11 48.22
Tier 1 Leverage (2) 10.76 10.92 10.86 10.76 10.86
Tier 1 Risk-Based Capital (2) 12.10 12.42 12.07 12.10 12.07
Common Equity Tier 1 (CET1) (2) 11.37 11.65 11.27 11.37 11.27
Total Capital (2) 13.26 13.58 13.23 13.26 13.23
Tangible Capital (1) (2) 9.93 10.32 9.89 9.93 9.89
ASSET QUALITY
Loans Past Due 30 - 89 Days$9,613 $1,939 $1,593 $9,613 $1,593
Loans Past Due 90 Days or More 6 73 53 6 53
Non-accrual Loans 9,401 10,279 6,633 9,401 6,633
Nonperforming Loans (includes nonperforming TDR's) 9,407 10,352 6,686 9,407 6,686
Other Real Estate Owned 40 115 153 40 153
Other Nonperforming Assets 55 40 11 55 11
Total Nonperforming Assets 9,502 10,507 6,850 9,502 6,850
Performing Troubled Debt Restructurings 2,893 5,601 10,351 2,893 10,351
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 7,750 7,946 5,633 7,750 5,633
Total Troubled Debt Restructurings 10,643 13,547 15,984 10,643 15,984
Impaired Loans 13,869 16,679 20,692 13,869 20,692
Non-Impaired Watch List Loans 157,834 145,655 127,933 157,834 127,933
Total Impaired and Watch List Loans 171,703 162,334 148,631 171,703 148,631
Gross Charge Offs 625 170 520 1,560 2,055
Recoveries 399 654 235 1,963 1,013
Net Charge Offs/(Recoveries) 226 (484) 285 (403) 1,042
Net Charge Offs/(Recoveries) to Average Loans 0.02% (0.05)% 0.03% (0.01)% 0.03%
Loan Loss Reserve to Loans 1.23% 1.25% 1.26% 1.23% 1.26%
Loan Loss Reserve to Nonperforming Loans 500.91% 439.51% 653.31% 500.91% 653.31%
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 383.10% 285.20% 256.52% 383.10% 256.52%
Nonperforming Loans to Loans 0.25% 0.28% 0.19% 0.25% 0.19%
Nonperforming Assets to Assets 0.20% 0.24% 0.16% 0.20% 0.16%
Total Impaired and Watch List Loans to Total Loans 4.50% 4.47% 4.28% 4.50% 4.28%
OTHER DATA
Full Time Equivalent Employees 539 537 524 539 524
Offices 49 49 48 49 48
(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
(2) Capital ratios for December 31, 2017 are preliminary until the Call Report is filed.

CONSOLIDATED BALANCE SHEETS (in thousands except share data)
December 31, December 31,
2017 2016
(Unaudited)
ASSETS
Cash and due from banks$ 156,679 $ 142,408
Short-term investments 19,501 24,872
Total cash and cash equivalents 176,180 167,280
Securities available for sale (carried at fair value) 538,493 504,191
Real estate mortgage loans held for sale 3,346 5,915
Loans, net of allowance for loan losses of $47,121 and $43,718 3,771,338 3,427,209
Land, premises and equipment, net 56,466 52,092
Bank owned life insurance 75,879 74,006
Federal Reserve and Federal Home Loan Bank stock 13,772 11,522
Accrued interest receivable 14,093 11,687
Goodwill 4,970 4,970
Other assets 28,439 31,153
Total assets$ 4,682,976 $ 4,290,025
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Noninterest bearing deposits$ 885,622 $ 819,803
Interest bearing deposits 3,123,033 2,758,109
Total deposits 4,008,655 3,577,912
Short-term borrowings
Securities sold under agreements to repurchase 70,652 50,045
Other short-term borrowings 80,000 180,000
Total short-term borrowings 150,652 230,045
Long-term borrowings 30 32
Subordinated debentures 30,928 30,928
Accrued interest payable 6,311 5,676
Other liabilities 17,733 18,365
Total liabilities 4,214,309 3,862,958
STOCKHOLDERS' EQUITY
Common stock: 90,000,000 shares authorized, no par value
25,194,903 shares issued and 25,025,933 outstanding as of December 31, 2017
25,096,087 shares issued and 24,937,865 outstanding as of December 31, 2016 108,862 104,405
Retained earnings 363,794 327,873
Accumulated other comprehensive loss (670) (2,387)
Treasury stock, at cost (2017 - 168,970 shares, 2016 - 158,222 shares) (3,408) (2,913)
Total stockholders' equity 468,578 426,978
Noncontrolling interest 89 89
Total equity 468,667 427,067
Total liabilities and equity$ 4,682,976 $ 4,290,025


CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
NET INTEREST INCOME
Interest and fees on loans
Taxable$ 40,251 $32,744 $ 150,295 $124,830
Tax exempt 212 130 729 462
Interest and dividends on securities
Taxable 2,185 2,301 9,218 9,421
Tax exempt 1,357 1,074 5,102 3,885
Interest on short-term investments 156 58 354 353
Total interest income 44,161 36,307 165,698 138,951
Interest on deposits 8,304 5,023 27,026 18,944
Interest on borrowings
Short-term 117 69 1,446 352
Long-term 348 308 1,334 1,174
Total interest expense 8,769 5,400 29,806 20,470
NET INTEREST INCOME 35,392 30,907 135,892 118,481
Provision for loan losses 1,850 1,150 3,000 1,150
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 33,542 29,757 132,892 117,331
NONINTEREST INCOME
Wealth advisory fees 1,476 1,205 5,481 4,805
Investment brokerage fees 323 258 1,273 1,010
Service charges on deposit accounts 3,669 3,237 13,696 12,013
Loan and service fees 2,050 1,846 7,900 7,681
Merchant card fee income 583 522 2,279 2,098
Bank owned life insurance income 498 338 1,768 1,392
Other income 712 935 2,598 2,213
Mortgage banking income 171 381 982 1,586
Net securities gains/(losses) (20) 14 32 66
Total noninterest income 9,462 8,736 36,009 32,864
NONINTEREST EXPENSE
Salaries and employee benefits 11,296 10,905 45,510 41,934
Net occupancy expense 1,190 1,061 4,595 4,266
Equipment costs 1,216 1,022 4,629 3,850
Data processing fees and supplies 2,211 2,013 8,233 8,148
Corporate and business development 801 687 4,744 3,328
FDIC insurance and other regulatory fees 502 463 1,798 2,001
Professional fees 857 703 3,574 3,208
Other expense 1,525 1,535 6,184 6,243
Total noninterest expense 19,598 18,389 79,267 72,978
INCOME BEFORE INCOME TAX EXPENSE 23,406 20,104 89,634 77,217
Income tax expense 11,779 6,582 32,304 25,133
NET INCOME$ 11,627 $13,522 $ 57,330 $52,084
BASIC WEIGHTED AVERAGE COMMON SHARES 25,194,903 25,091,685 25,181,208 25,056,095
BASIC EARNINGS PER COMMON SHARE$ 0.46 $0.54 $ 2.28 $2.08
DILUTED WEIGHTED AVERAGE COMMON SHARES 25,701,337 25,518,069 25,663,381 25,460,727
DILUTED EARNINGS PER COMMON SHARE$ 0.45 $0.53 $ 2.23 $2.05

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
FOURTH QUARTER 2017
(unaudited in thousands)
December 31,September 30,December 31,
201720172016
Commercial and industrial loans:
Working capital lines of credit loans$743,609 19.4%$703,953 19.4%$624,404 18.0%
Non-working capital loans 675,072 17.7 658,167 18.1 644,086 18.5
Total commercial and industrial loans 1,418,681 37.1 1,362,120 37.5 1,268,490 36.5
Commercial real estate and multi-family residential loans:
Construction and land development loans 224,474 5.9 287,778 7.9 245,182 7.1
Owner occupied loans 538,603 14.1 499,651 13.7 469,705 13.5
Nonowner occupied loans 508,121 13.3 456,930 12.6 458,404 13.2
Multifamily loans 173,715 4.5 165,855 4.6 127,632 3.7
Total commercial real estate and multi-family residential loans 1,444,913 37.8 1,410,214 38.8 1,300,923 37.5
Agri-business and agricultural loans:
Loans secured by farmland 186,437 4.9 161,553 4.4 172,633 5.0
Loans for agricultural production 196,404 5.1 156,327 4.3 222,210 6.4
Total agri-business and agricultural loans 382,841 10.0 317,880 8.7 394,843 11.4
Other commercial loans 124,076 3.3 114,858 3.1 98,270 2.8
Total commercial loans 3,370,511 88.2 3,205,072 88.1 3,062,526 88.2
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans 179,302 4.7 171,946 4.7 163,155 4.7
Open end and junior lien loans 181,865 4.8 181,338 5.0 169,664 4.9
Residential construction and land development loans 13,478 0.3 10,530 0.3 15,015 0.4
Total consumer 1-4 family mortgage loans 374,645 9.8 363,814 10.0 347,834 10.0
Other consumer loans 74,369 2.0 67,545 1.9 61,308 1.8
Total consumer loans 449,014 11.8 431,359 11.9 409,142 11.8
Subtotal 3,819,525 100.0% 3,636,431 100.0% 3,471,668 100.0%
Less: Allowance for loan losses (47,121) (45,497) (43,718)
Net deferred loan fees (1,066) (1,179) (741)
Loans, net$3,771,338 $3,589,755 $3,427,209
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
FOURTH QUARTER 2017
(unaudited in thousands)
December 31, September 30, December 31,
2017
2017
2016
Non-interest bearing demand deposits$885,622 $821,589 $819,803
Savings and transaction accounts:
Savings deposits 263,570 269,977 268,970
Interest bearing demand deposits 1,446,880 1,390,335 1,325,320
Time deposits:
Deposits of $100,000 or more 1,161,365 1,149,152 924,825
Other time deposits 251,218 242,937 238,994
Total deposits$4,008,655 $3,873,990 $3,577,912
FHLB advances and other borrowings 181,610 94,846 261,005
Total funding sources$4,190,265 $3,968,836 $3,838,917

LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
Three Months Ended Three Months Ended Three Months Ended
December 31, 2017 September 30, 2017 December 31, 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)$3,703,260 $40,251 4.31% $3,595,753 $38,630 4.26% $3,359,305 $32,744 3.87%
Tax exempt (1) 24,707 321 5.15 21,871 312 5.66 14,508 194 5.30
Investments: (1)
Available for sale 537,796 4,272 3.15 536,444 4,364 3.23 506,722 3,940 3.09
Short-term investments 4,377 7 0.63 6,633 8 0.48 5,128 17 1.32
Interest bearing deposits 53,109 149 1.11 35,340 88 0.99 47,473 41 0.34
Total earning assets$4,323,249 $45,000 4.13% $4,196,041 $43,402 4.10% $3,933,136 $36,936 3.73%
Less: Allowance for loan losses (46,281) (45,018) (43,072)
Nonearning Assets
Cash and due from banks 127,028 122,429 120,170
Premises and equipment 56,719 56,716 52,013
Other nonearning assets 138,094 134,400 125,483
Total assets$4,598,809 $4,464,568 $4,187,730
Interest Bearing Liabilities
Savings deposits$270,978 $95 0.14% $274,514 $103 0.15% $271,758 $101 0.15%
Interest bearing checking accounts 1,451,544 3,024 0.83 1,365,617 2,636 0.77 1,317,805 1,512 0.46
Time deposits:
In denominations under $100,000 247,875 811 1.30 240,444 746 1.23 240,790 681 1.12
In denominations over $100,000 1,180,719 4,374 1.47 1,042,543 3,552 1.35 1,009,166 2,729 1.07
Miscellaneous short-term borrowings 84,132 118 0.56 235,212 588 0.99 70,802 69 0.39
Long-term borrowings and
subordinated debentures 30,958 347 4.45 30,958 344 4.41 30,960 308 3.95
Total interest bearing liabilities$3,266,206 $8,769 1.07% $3,189,288 $7,969 0.99% $2,941,281 $5,400 0.73%
Noninterest Bearing Liabilities
Demand deposits 838,476 793,185 788,726
Other liabilities 26,668 24,021 29,058
Stockholders' Equity 467,459 458,074 428,665
Total liabilities and stockholders' equity$4,598,809 $4,464,568 $4,187,730
Interest Margin Recap
Interest income/average earning assets 45,000 4.13 43,402 4.10 36,936 3.73
Interest expense/average earning assets 8,769 0.80 7,969 0.75 5,400 0.55
Net interest income and margin $36,231 3.33% $35,433 3.35% $31,536 3.18%

(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 $839,000, $813,000 and $619,000 in the three-month periods ended December 31, 2017, September 30, 2017 and December 31, 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, tangible book value per share and the tangible common equity to tangible assets ratio 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, net of deferred tax. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets, net of deferred tax. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding. 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.

Net income applicable to Lakeland Financial Corporation and earnings per diluted share, excluding the income tax expense adjustment for the deferred tax asset revaluation, are non-GAAP financial measures that the company considers useful for investors to allow better comparability of operating performance. The income tax expense adjustment consists of a $4.1 million, or $0.16 per diluted common share, revaluation of the company’s net deferred tax asset as a result of the enactment of the Tax Cuts and Jobs Act in 2017.

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

Three Months Ended Twelve Months Ended
Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31,
2017
2017
2016
2017
2016
Total Equity$ 468,667 $ 462,516 $ 427,067 $ 468,667 $ 427,067
Less: Goodwill (4,970) (4,970) (4,970) (4,970) (4,970)
Plus: Deferred tax assets related to goodwill 1,171 1,860 1,836 1,171 1,836
Tangible Common Equity 464,868 459,406 423,933 464,868 423,933
Assets$ 4,682,976 $ 4,454,236 $ 4,290,025 $ 4,682,976 $ 4,290,025
Less: Goodwill (4,970) (4,970) (4,970) (4,970) (4,970)
Plus: Deferred tax assets related to goodwill 1,171 1,860 1,836 1,171 1,836
Tangible Assets 4,679,177 4,451,126 4,286,891 4,679,177 4,286,891
Ending common shares issued 25,194,903 25,194,903 25,096,087 25,194,903 25,096,087
Tangible Book Value Per Common Share$ 18.45 $ 18.23 $ 16.89 $ 18.45 $ 16.89
Tangible Common Equity/Tangible Assets 9.93 % 10.32 % 9.89 % 9.93 % 9.89 %
Net Income$ 11,627 $ 15,825 $ 13,522 $ 57,330 $ 52,084
Plus: Additional tax expense due to adjusting deferred tax asset 4,137 0 0 4,137 0
Net income excluding effect of deferred tax adjustment$ 15,764 $ 15,825 $ 13,522 $ 61,467 $ 52,084
Diluted Weighted Average Common Shares Outstanding 25,701,337 25,656,403 25,518,069 25,663,381 25,460,727
Diluted net income per share excluding effect of
of deferred tax adjustment$ 0.61 $ 0.62 $ 0.53 $ 2.40 $ 2.05


Contact

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

Source:Lake City Bank