NEWS FROM LAKELAND FINANCIAL CORPORATION
FOR IMMEDIATE RELEASE

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

Lakeland Financial Reports Record Performance
Third Quarter Net Income of $20.6 million, Increases 30% From a Year Ago

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

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

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

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

·
Return on average equity of 16.6%, up from 13.7% a year ago
·
Organic average loan growth of $220 million or 6%
·
Average deposit growth of $309 million or 8%
·
Net interest income increase of $3.3 million or 10%
·
Net interest margin increase of 7 basis points to 3.42%
·
Noninterest income increase of $936,000, or 10%
·
Revenue growth of $4.2 million, or 10%
·
Total equity and tangible common equity1 increase of $36 million and $35 million, respectively,  or 8%
 
1 Non-GAAP financial measure – see "Reconciliation of Non-GAAP Financial Measures."

 
1

 
 
3rd Quarter 2018 versus 2nd Quarter 2018 highlights:

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

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

Return on average total equity for the third quarter of 2018 was 16.55%, compared to 13.71% in the third quarter of 2017 and 16.86% in the linked second quarter of 2018. Return on average total equity for the first nine months of 2018 was 16.42%, compared to 13.73% in the same period of 2017. Return on average assets for the third quarter of 2018 was 1.72%, compared to 1.41% in the third quarter of 2017 and 1.70% in the linked second quarter of 2018. Return on average assets for the first nine months of 2018 was 1.67% compared to 1.39% in the same period of 2017. The company's total capital as a percent of risk-weighted assets was 14.14% at September 30, 2018, compared to 13.58% at September 30, 2017 and 13.76% at June 30, 2018. The company's tangible common equity to tangible assets ratio1 was 10.41% at September 30, 2018, compared to 10.32% at September 30, 2017 and 10.15% at June 30, 2018.

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

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

Average total deposits for the third quarter of 2018 were $4.03 billion, an increase of $309.1 million, or 8%, versus $3.72 billion for the third quarter of 2017. Total deposits grew $141.9 million, or 4%, from $3.87 billion as of September 30, 2017 to $4.02 billion as of September 30, 2018. In addition, total core deposits, which exclude brokered deposits, increased $255.0 million, or 7%, from $3.58 billion at September 30, 2017 to $3.84 billion at September 30, 2018 due to growth in commercial deposits of $115.8 million or 13%, growth in public fund deposits of $100.8 million or 9% and growth in retail deposits of $38.4 million or 3%. On a linked quarter basis, core deposits increased by $123.9 million or 3% due to growth in commercial deposits of $89.0 million, growth in public funds deposits of $25.6 million and retail deposit growth of $9.6 million.
 
1 Non-GAAP financial measure – see "Reconciliation of Non-GAAP Financial Measures."
 
2

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

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

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

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

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

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

 
3

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

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

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

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

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

Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at lakecitybank.com. The company's common stock is traded on the Nasdaq Global Select Market under "LKFN." In addition to the results presented in accordance with generally accepted accounting principles in the United States, this earnings release contains certain non-GAAP financial measures. The company believes that providing non-GAAP financial measures provides investors with information useful to understanding the company's financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on "tangible common equity" which is "common stockholders' equity" excluding intangible assets, net of deferred tax and "tangible assets" which is "assets" excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent are included in the attached financial tables where the non-GAAP measures are presented.


4

 
 
This document contains, and future oral and written statements of the company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the company's management and on information currently available to management, are generally identifiable by the use of words such as "believe," "expect," "anticipate," "continue," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. The company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain and, accordingly, the reader is cautioned not to place undue reliance on any forward-looking statements made by the company. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the company undertakes no obligation to update any statement in light of new information or future events. Numerous factors could cause the company's actual results to differ from those reflected in forward-looking statements, including trade policy and those identified in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K.


5





LAKELAND FINANCIAL CORPORATION
THIRD QUARTER 2018 FINANCIAL HIGHLIGHTS
 
Three Months Ended
 
Nine Months Ended
 
(Unaudited – Dollars in thousands, except per share data)
Sep. 30,
 
Jun. 30,
 
Sep. 30,
 
Sep. 30,
 
Sep. 30,
 
END OF PERIOD BALANCES
2018
 
2018
 
2017
 
2018
 
2017
 
  Assets
 $4,757,619
 
 $4,760,869
 
 $4,454,236
 
 $4,757,619
 
 $4,454,236
 
  Deposits
 4,015,924
 
 3,934,953
 
 3,873,990
 
 4,015,924
 
 3,873,990
 
  Brokered Deposits
 176,927
 
 219,901
 
 289,991
 
 176,927
 
 289,991
 
  Core Deposits
 3,838,997
 
 3,715,052
 
 3,583,999
 
 3,838,997
 
 3,583,999
 
  Loans
 3,843,125
 
 3,858,713
 
 3,635,252
 
 3,843,125
 
 3,635,252
 
  Allowance for Loan Losses
 48,343
 
 47,706
 
 45,497
 
 48,343
 
 45,497
 
  Total Equity
 498,541
 
 486,484
 
 462,516
 
 498,541
 
 462,516
 
  Goodwill net of deferred tax assets
 3,790
 
 3,793
 
 3,110
 
 3,790
 
 3,110
 
  Tangible Common Equity (1)
 494,751
 
 482,691
 
 459,406
 
 494,751
 
 459,406
 
AVERAGE BALANCES
                   
  Total Assets
 $4,748,953
 
 $4,739,163
 
 $4,464,568
 
 $4,731,769
 
 $4,390,635
 
  Earning Assets
 4,451,449
 
 4,448,240
 
 4,196,041
 
 4,440,493
 
 4,135,885
 
  Investments
 569,567
 
 560,484
 
 536,444
 
 558,784
 
 527,740
 
  Loans
 3,837,595
 
 3,839,441
 
 3,617,624
 
 3,823,153
 
 3,571,459
 
  Total Deposits
 4,025,398
 
 4,092,145
 
 3,716,303
 
 4,070,565
 
 3,678,897
 
  Interest Bearing Deposits
 3,167,135
 
 3,266,808
 
 2,923,118
 
 3,228,768
 
 2,906,159
 
  Interest Bearing Liabilities
 3,363,583
 
 3,409,138
 
 3,189,288
 
 3,379,929
 
 3,148,862
 
  Total Equity
 493,145
 
 479,291
 
 458,074
 
 480,896
 
 445,181
 
INCOME STATEMENT DATA
                   
  Net Interest Income
 $37,925
 
 $37,533
 
 $34,620
 
 $111,681
 
 $100,500
 
  Net Interest Income-Fully Tax Equivalent
 38,397
 
 37,973
 
 35,433
 
 112,998
 
 102,785
 
  Provision for Loan Losses
 1,100
 
 1,700
 
 450
 
 6,100
 
 1,150
 
  Noninterest Income
 10,433
 
 9,693
 
 9,497
 
 30,005
 
 26,547
 
  Noninterest Expense
 22,009
 
 20,274
 
 20,269
 
 63,485
 
 59,669
 
  Net Income
 20,570
 
 20,142
 
 15,825
 
 59,048
 
 45,703
 
PER SHARE DATA
                   
  Basic Net Income Per Common Share
 $0.81
 
 $0.80
 
 $0.63
 
 $2.33
 
 $1.82
 
  Diluted Net Income Per Common Share
 0.80
 
 0.78
 
 0.62
 
 2.30
 
 1.78
 
  Cash Dividends Declared Per Common Share
 0.26
 
 0.26
 
 0.22
 
 0.74
 
 0.63
 
  Dividend Payout
 32.50
%
 33.33
%
 35.48
%
 32.17
%
 35.39
%
  Book Value Per Common Share (equity per share issued)
 19.70
 
 19.23
 
 18.36
 
 19.70
 
 18.36
 
  Tangible Book Value Per Common Share (1)
 19.55
 
 19.08
 
 18.23
 
 19.55
 
 18.23
 
  Market Value – High
 51.25
 
 51.15
 
 49.22
 
 51.76
 
 49.22
 
  Market Value – Low
 46.35
 
 45.15
 
 41.30
 
 45.01
 
 39.68
 
  Basic Weighted Average Common Shares Outstanding
 25,301,033
 
 25,293,329
 
 25,193,894
 
 25,284,085
 
 25,176,593
 
  Diluted Weighted Average Common Shares Outstanding
 25,745,151
 
 25,709,216
 
 25,656,403
 
 25,719,693
 
 25,640,742
 
KEY RATIOS
                   
  Return on Average Assets
 1.72
%
 1.70
%
 1.41
%
 1.67
%
 1.39
%
  Return on Average Total Equity
 16.55
 
 16.86
 
 13.71
 
 16.42
 
 13.73
 
  Average Equity to Average Assets
 10.38
 
 10.11
 
 10.26
 
 10.16
 
 10.14
 
  Net Interest Margin
 3.42
 
 3.42
 
 3.35
 
 3.40
 
 3.32
 
  Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)
 45.51
 
 42.93
 
 45.94
 
 44.81
 
 46.97
 
  Tier 1 Leverage (2)
 11.31
 
 11.01
 
 10.92
 
 11.31
 
 10.92
 
  Tier 1 Risk-Based Capital (2)
 12.97
 
 12.61
 
 12.42
 
 12.97
 
 12.42
 
  Common Equity Tier 1 (CET1) (2)
 12.24
 
 11.88
 
 11.65
 
 12.24
 
 11.65
 
  Total Capital (2)
 14.14
 
 13.76
 
 13.58
 
 14.14
 
 13.58
 
  Tangible Capital (1) (2)
 10.41
 
 10.15
 
 10.32
 
 10.41
 
 10.32
 
ASSET QUALITY
                   
  Loans Past Due 30 - 89 Days
 $13,476
 
 $1,612
 
 $1,935
 
 $13,476
 
 $1,935
 
  Loans Past Due 90 Days or More
 0
 
 0
 
 73
 
 0
 
 73
 
  Non-accrual Loans
 12,337
 
 12,773
 
 10,279
 
 12,337
 
 10,279
 
  Nonperforming Loans (includes nonperforming TDR's)
 12,337
 
 12,773
 
 10,352
 
 12,337
 
 10,352
 
  Other Real Estate Owned
 316
 
 10
 
 115
 
 316
 
 115
 
  Other Nonperforming Assets
 111
 
 108
 
 40
 
 111
 
 40
 
  Total Nonperforming Assets
 12,763
 
 12,891
 
 10,507
 
 12,763
 
 10,507
 
  Performing Troubled Debt Restructurings
 3,512
 
 3,402
 
 5,601
 
 3,512
 
 5,601
 
  Nonperforming Troubled Debt Restructurings (included in nonperforming loans)
 7,313
 
 7,666
 
 7,946
 
 7,313
 
 7,946
 
  Total Troubled Debt Restructurings
 10,825
 
 11,068
 
 13,547
 
 10,825
 
 13,547
 
  Impaired Loans
 20,906
 
 16,931
 
 16,679
 
 20,906
 
 16,679
 
  Non-Impaired Watch List Loans
 175,400
 
 196,880
 
 145,655
 
 175,400
 
 145,655
 
  Total Impaired and Watch List Loans
 196,306
 
 213,811
 
 162,334
 
 196,306
 
 162,334
 
  Gross Charge Offs
 581
 
 128
 
 170
 
 5,686
 
 935
 
  Recoveries
 118
 
 507
 
 654
 
 808
 
 1,564
 
  Net Charge Offs/(Recoveries)
 463
 
 (379)
 
 (484)
 
 4,878
 
 (629)
 
  Net Charge Offs/(Recoveries)  to Average Loans
 0.05
%
 (0.04)
%
 (0.05)
%
 0.17
%
 (0.02)
%
  Loan Loss Reserve to Loans
 1.26
%
 1.24
%
 1.25
%
 1.26
%
 1.25
%
  Loan Loss Reserve to Nonperforming Loans
 391.92
%
 373.49
%
 439.51
%
 391.92
%
 439.51
%
  Loan Loss Reserve to Nonperforming Loans and Performing TDR's
 305.03
%
 294.94
%
 285.20
%
 305.03
%
 285.20
%
  Nonperforming Loans to Loans
 0.32
%
 0.33
%
 0.28
%
 0.32
%
 0.28
%
  Nonperforming Assets to Assets
 0.27
%
 0.27
%
 0.24
%
 0.27
%
 0.24
%
  Total Impaired and Watch List Loans to Total Loans
 5.11
%
 5.54
%
 4.47
%
 5.11
%
 4.47
%
OTHER DATA
                   
  Full Time Equivalent Employees
 549
 
 553
 
 537
 
 549
 
 537
 
  Offices
 49
 
 49
 
 49
 
 49
 
 49
 
                     
  (1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
                 
  (2) Capital ratios for September 30, 2018 are preliminary until the Call Report is filed.
                   
 
 

 
6



CONSOLIDATED BALANCE SHEETS (in thousands except share data)
 
September 30,
 
December 31,
 
2018
 
2017
 
(Unaudited)
 
 
ASSETS
 
 
 
Cash and due from banks
 $151,127
 
 $140,402
Short-term investments
31,193
 
35,778
  Total cash and cash equivalents
182,320
 
176,180
 
 
 
 
Securities available for sale (carried at fair value)
570,568
 
538,493
Real estate mortgage loans held for sale
3,488
 
3,346
 
 
 
 
Loans, net of allowance for loan losses of $48,343 and $47,121
3,794,782
 
3,771,338
 
 
 
 
Land, premises and equipment, net
57,644
 
56,466
Bank owned life insurance
76,998
 
75,879
Federal Reserve and Federal Home Loan Bank stock
13,772
 
13,772
Accrued interest receivable
15,802
 
14,093
Goodwill
4,970
 
4,970
Other assets
37,275
 
28,439
  Total assets
 $4,757,619
 
 $4,682,976
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
LIABILITIES
 
 
 
Noninterest bearing deposits
 $880,363
 
 $885,622
Interest bearing deposits
3,135,561
 
3,123,033
  Total deposits
4,015,924
 
4,008,655
 
 
 
 
Borrowings
 
 
 
  Federal funds purchased
20,000
 
0
  Securities sold under agreements to repurchase
77,352
 
70,652
  Federal Home Loan Bank advances
80,000
 
80,030
  Subordinated debentures
30,928
 
30,928
    Total borrowings
208,280
 
181,610
 
 
 
 
Accrued interest payable
8,742
 
6,311
Other liabilities
26,132
 
17,733
    Total liabilities
4,259,078
 
4,214,309
 
 
 
 
STOCKHOLDERS' EQUITY
 
 
 
Common stock:  90,000,000 shares authorized, no par value
 
 
 
 25,301,732 shares issued and 25,129,796 outstanding as of September 30, 2018
 
 
 
 25,194,903 shares issued and 25,025,933 outstanding as of December 31, 2017
111,045
 
108,862
Retained earnings
404,394
 
363,794
Accumulated other comprehensive income/(loss)
(13,276)
 
(670)
Treasury stock, at cost (2018 - 171,936 shares, 2017 - 168,970 shares)
(3,711)
 
(3,408)
  Total stockholders' equity
498,452
 
468,578
  Noncontrolling interest
89
 
89
  Total equity
498,541
 
468,667
    Total liabilities and equity
 $4,757,619
 
 $4,682,976

 

 
7

 
 
 


 
CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands except share and per share data)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
NET INTEREST INCOME
             
Interest and fees on loans
             
  Taxable
 $                       46,127
 
 $                         38,630
 
 $           132,360
 
 $             110,044
  Tax exempt
                                208
 
                                 205
 
                      627
 
                       517
Interest and dividends on securities
             
  Taxable
                             2,275
 
                              2,349
 
                   7,201
 
                    7,033
  Tax exempt
                             1,570
 
                              1,309
 
                   4,367
 
                    3,745
Other interest income
                                199
 
                                   96
 
                      687
 
                       198
    Total interest income
                           50,379
 
                            42,589
 
              145,242
 
                121,537
               
Interest on deposits
                           11,473
 
                              7,037
 
                 31,488
 
                  18,722
Interest on borrowings
             
  Short-term
                                555
 
                                 588
 
                      861
 
                    1,329
  Long-term
                                426
 
                                 344
 
                   1,212
 
                       986
    Total interest expense
                           12,454
 
                              7,969
 
                 33,561
 
                  21,037
               
NET INTEREST INCOME
                           37,925
 
                            34,620
 
              111,681
 
                100,500
               
Provision for loan losses
                             1,100
 
                                 450
 
                   6,100
 
                    1,150
               
NET INTEREST INCOME AFTER PROVISION FOR
           
  LOAN LOSSES
                           36,825
 
                            34,170
 
              105,581
 
                  99,350
               
NONINTEREST INCOME
             
Wealth advisory fees
                             1,627
 
                              1,471
 
                   4,676
 
                    4,005
Investment brokerage fees
                                376
 
                                 330
 
                   1,043
 
                       950
Service charges on deposit accounts
                             4,114
 
                              3,631
 
                 11,542
 
                  10,027
Loan and service fees
                             2,327
 
                              2,060
 
                   6,925
 
                    5,850
Merchant card fee income
                                643
 
                                 588
 
                   1,834
 
                    1,696
Bank owned life insurance income
                                466
 
                                 397
 
                   1,177
 
                    1,270
Other income
                                561
 
                                 718
 
                   1,816
 
                    1,886
Mortgage banking income
                                319
 
                                 302
 
                      998
 
                       811
Net securities gains/(losses)
                                     0
 
                                     0
 
                         (6)
 
                         52
  Total noninterest income
                           10,433
 
                              9,497
 
                 30,005
 
                  26,547
               
NONINTEREST EXPENSE
             
Salaries and employee benefits
                           12,755
 
                            11,678
 
                 36,267
 
                  34,062
Net occupancy expense
                             1,229
 
                              1,131
 
                   3,892
 
                    3,405
Equipment costs
                             1,316
 
                              1,182
 
                   3,840
 
                    3,413
Data processing fees and supplies
                             2,489
 
                              2,032
 
                   7,292
 
                    6,022
Corporate and business development
                                891
 
                              1,245
 
                   3,070
 
                    3,943
FDIC insurance and other regulatory fees
                                412
 
                                 443
 
                   1,282
 
                    1,296
Professional fees
                                934
 
                                 962
 
                   2,716
 
                    2,717
Other expense
                             1,983
 
                              1,596
 
                   5,126
 
                    4,811
  Total noninterest expense
                           22,009
 
                            20,269
 
                 63,485
 
                  59,669
               
INCOME BEFORE INCOME TAX EXPENSE
                           25,249
 
                            23,398
 
                 72,101
 
                  66,228
Income tax expense
                             4,679
 
                              7,573
 
                 13,053
 
                  20,525
NET INCOME
 $                       20,570
 
 $                         15,825
 
 $             59,048
 
 $               45,703
               
BASIC WEIGHTED AVERAGE COMMON SHARES
                   25,301,033
 
                     25,193,894
 
         25,284,085
 
           25,176,593
BASIC EARNINGS PER COMMON SHARE
 $                            0.81
 
 $                             0.63
 
 $                  2.33
 
 $                   1.82
DILUTED WEIGHTED AVERAGE COMMON SHARES
                   25,745,151
 
                     25,656,403
 
         25,719,693
 
           25,640,742
DILUTED EARNINGS PER COMMON SHARE
 $                            0.80
 
 $                             0.62
 
 $                  2.30
 
 $                   1.78
               



 
 
8


 
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
THIRD QUARTER 2018
(unaudited in thousands)
                         
 
September 30,
June 30,
December 31,
September 30,
 
2018
2018
2017
2017
Commercial and industrial loans:
                       
  Working capital lines of credit loans
 $757,004
 19.7
 %
 $780,910
 20.2
 %
 $743,609
 19.4
 %
 $703,953
 19.4
 %
  Non-working capital loans
 693,402
 18.0
 
 691,118
 17.9
 
 675,072
 17.7
 
 658,167
 18.1
 
    Total commercial and industrial loans
 1,450,406
 37.7
 
 1,472,028
 38.1
 
 1,418,681
 37.1
 
 1,362,120
 37.5
 
                         
Commercial real estate and multi-family residential loans:
                       
  Construction and land development loans
 231,795
 6.0
 
 200,438
 5.2
 
 224,474
 5.9
 
 287,778
 7.9
 
  Owner occupied loans
 571,998
 14.9
 
 569,453
 14.8
 
 538,603
 14.1
 
 499,651
 13.7
 
  Nonowner occupied loans
 520,414
 13.5
 
 518,840
 13.4
 
 508,121
 13.3
 
 456,930
 12.6
 
  Multifamily loans
 192,218
 5.0
 
 221,579
 5.7
 
 173,715
 4.5
 
 165,855
 4.6
 
    Total commercial real estate and multi-family residential loans
 1,516,425
 39.4
 
 1,510,310
 39.1
 
 1,444,913
 37.8
 
 1,410,214
 38.8
 
                         
Agri-business and agricultural loans:
                       
  Loans secured by farmland
159,256
 4.2
 
148,396
 3.9
 
186,437
 4.9
 
161,553
 4.4
 
  Loans for agricultural production
134,773
 3.5
 
155,826
 4.0
 
196,404
 5.1
 
156,327
 4.3
 
    Total agri-business and agricultural loans
294,029
 7.7
 
304,222
 7.9
 
382,841
 10.0
 
317,880
 8.7
 
                         
Other commercial loans
 114,350
 3.0
 
 120,541
 3.1
 
 124,076
 3.3
 
 114,858
 3.1
 
  Total commercial loans
 3,375,210
 87.8
 
 3,407,101
 88.2
 
 3,370,511
 88.2
 
 3,205,072
 88.1
 
                         
Consumer 1-4 family mortgage loans:
                       
  Closed end first mortgage loans
 185,212
 4.8
 
 180,099
 4.7
 
 179,302
 4.7
 
 171,946
 4.7
 
  Open end and junior lien loans
 185,869
 4.8
 
 179,622
 4.7
 
 181,865
 4.8
 
 181,338
 5.0
 
  Residential construction and land development loans
 15,128
 0.4
 
 13,226
 0.3
 
 13,478
 0.3
 
 10,530
 0.3
 
  Total consumer 1-4 family mortgage loans
 386,209
 10.0
 
 372,947
 9.7
 
 374,645
 9.8
 
 363,814
 10.0
 
                         
Other consumer loans
 83,203
 2.2
 
 80,097
 2.1
 
 74,369
 2.0
 
 67,545
 1.9
 
  Total consumer loans
 469,412
 12.2
 
 453,044
 11.8
 
 449,014
 11.8
 
 431,359
 11.9
 
  Subtotal
 3,844,622
 100.0
 %
 3,860,145
 100.0
 %
 3,819,525
 100.0
 %
 3,636,431
 100.0
 %
Less:  Allowance for loan losses
 (48,343)
   
 (47,706)
   
 (47,121)
   
 (45,497)
   
           Net deferred loan fees
 (1,497)
   
 (1,432)
   
 (1,066)
   
 (1,179)
   
Loans, net
 $3,794,782
   
 $3,811,007
   
 $3,771,338
   
 $3,589,755
   
                         
                         
                         
LAKELAND FINANCIAL CORPORATION
       
DEPOSITS AND BORROWINGS
     
THIRD QUARTER 2018
       
(unaudited in thousands)
       
                         
 
September 30,
   
June 30,
   
December 31,
   
September 30,
   
 
2018
   
2018
   
2017
   
2017
   
Non-interest bearing demand deposits
 $880,363
   
 $839,784
   
 $885,622
   
 $821,589
   
Savings and transaction accounts:
                       
  Savings deposits
 251,748
   
 255,594
   
 263,570
   
 269,977
   
  Interest bearing demand deposits
 1,388,934
   
 1,422,840
   
 1,446,880
   
 1,390,335
   
Time deposits:
                       
  Deposits of $100,000 or more
 1,223,457
   
 1,149,197
   
 1,161,365
   
 1,149,152
   
  Other time deposits
 271,422
   
 267,538
   
 251,218
   
 242,937
   
Total deposits
 $4,015,924
   
 $3,934,953
   
 $4,008,655
   
 $3,873,990
   
FHLB advances and other borrowings
 208,280
   
 312,167
   
 181,610
   
 94,846
   
Total funding sources
 $4,224,204
   
 $4,247,120
   
 $4,190,265
   
 $3,968,836
   





9



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

 
Three Months Ended
   
Three Months Ended
   
Three Months Ended
 
 
September 30, 2018
   
June 30, 2018
   
September 30, 2017
 
 
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)
 $3,814,831
 
 $46,127
 
 4.80
%
 
 $3,816,879
 
 $44,439
 
 4.67
%
 
 $3,595,753
 
 $38,630
 
 4.26
%
    Tax exempt (1)
 22,764
 
 257
 
 4.48
   
 22,562
 
 253
 
 4.50
   
 21,871
 
 312
 
 5.66
 
  Investments: (1)
                                       
    Available for sale
 569,567
 
 4,263
 
 2.97
   
 560,484
 
 4,347
 
 3.11
   
 536,444
 
 4,364
 
 3.23
 
  Short-term investments
 3,480
 
 14
 
 1.60
   
 4,079
 
 11
 
 1.08
   
 6,633
 
 8
 
 0.48
 
  Interest bearing deposits
 40,807
 
 185
 
 1.80
   
 44,236
 
 185
 
 1.68
   
 35,340
 
 88
 
 0.99
 
Total earning assets
 $4,451,449
 
 $50,846
 
 4.53
%
 
 $4,448,240
 
 $49,235
 
 4.44
%
 
 $4,196,041
 
 $43,402
 
 4.10
%
Less:  Allowance for loan losses
 (48,137)
           
 (46,494)
           
 (45,018)
         
Nonearning Assets
                                       
  Cash and due from banks
 144,605
           
 139,677
           
 122,429
         
  Premises and equipment
 57,545
           
 56,093
           
 56,716
         
  Other nonearning assets
 143,491
           
 141,647
           
 134,400
         
Total assets
 $4,748,953
           
 $4,739,163
           
 $4,464,568
         
                                         
Interest Bearing Liabilities
                                       
  Savings deposits
 $253,244
 
 $79
 
 0.12
%
 
 $259,989
 
 $86
 
 0.13
%
 
 $274,514
 
 $103
 
 0.15
%
  Interest bearing checking accounts
 1,407,460
 
 4,455
 
 1.26
   
 1,528,733
 
 4,412
 
 1.16
   
 1,365,617
 
 2,636
 
 0.77
 
  Time deposits:
                                       
    In denominations under $100,000
 270,480
 
 1,055
 
 1.55
   
 264,294
 
 946
 
 1.44
   
 240,444
 
 746
 
 1.23
 
    In denominations over $100,000
 1,235,951
 
 5,884
 
 1.89
   
 1,213,792
 
 5,204
 
 1.72
   
 1,042,543
 
 3,552
 
 1.35
 
  Miscellaneous short-term borrowings
 165,520
 
 555
 
 1.33
   
 111,402
 
 195
 
 0.70
   
 235,212
 
 588
 
 0.99
 
  Long-term borrowings and
                                       
    subordinated debentures
 30,928
 
 426
 
 5.46
   
 30,928
 
 419
 
 5.43
   
 30,958
 
 344
 
 4.41
 
Total interest bearing liabilities
 $3,363,583
 
 $12,454
 
 1.47
%
 
 $3,409,138
 
 $11,262
 
 1.33
%
 
 $3,189,288
 
 $7,969
 
 0.99
%
Noninterest Bearing Liabilities
                                       
  Demand deposits
 858,263
           
 825,337
           
 793,185
         
  Other liabilities
 33,962
           
 25,397
           
 24,021
         
Stockholders' Equity
 493,145
           
 479,291
           
 458,074
         
Total liabilities and stockholders' equity
 $4,748,953
           
 $4,739,163
           
 $4,464,568
         
                                         
Interest Margin Recap
                                       
Interest income/average earning assets
   
50,846
 
 4.53
       
49,235
 
 4.44
       
43,402
 
 4.10
 
Interest expense/average earning assets
   
12,454
 
 1.11
       
11,262
 
 1.02
       
7,969
 
 0.75
 
Net interest income and margin
   
 $38,392
 
 3.42
%
     
 $37,973
 
 3.42
%
     
 $35,433
 
 3.35
%


(1)
Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate for 2018 and a 35 percent tax rate for 2017. 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 $467,000, $440,000 and $813,000 in the three-month periods ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively.
(2)
Loan fees, which are immaterial in relation to total taxable loan interest income for 2018 and 2017, are included as taxable loan interest income.
(3)
Nonaccrual loans are included in the average balance of taxable loans.





10

 

(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. 
 
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,
 
 
2018
 
2018
 
2017
 
2018
 
2017
 
  Total Equity
 $       498,541
 
 $       486,484
 
 $       462,516
 
 $       498,541
 
 $       462,516
 
  Less: Goodwill
               (4,970)
 
               (4,970)
 
               (4,970)
 
               (4,970)
 
               (4,970)
 
  Plus: Deferred tax assets related to goodwill
                 1,180
 
                 1,177
 
                 1,860
 
                 1,180
 
                 1,860
 
  Tangible Common Equity
           494,751
 
           482,691
 
           459,406
 
           494,751
 
           459,406
 
                     
  Assets
 $  4,757,619
 
 $  4,760,869
 
 $  4,454,236
 
 $  4,757,619
 
 $  4,454,236
 
  Less: Goodwill
               (4,970)
 
               (4,970)
 
               (4,970)
 
               (4,970)
 
               (4,970)
 
  Plus: Deferred tax assets related to goodwill
                 1,180
 
                 1,177
 
                 1,860
 
                 1,180
 
                 1,860
 
  Tangible Assets
      4,753,829
 
      4,757,076
 
      4,451,126
 
      4,753,829
 
      4,451,126
 
                     
  Ending common shares issued
   25,301,732
 
   25,294,582
 
   25,194,903
 
   25,301,732
 
   25,194,903
 
                     
  Tangible Book Value Per Common Share
 $             19.55
 
 $             19.08
 
 $             18.23
 
 $             19.55
 
 $             18.23
 
                     
  Tangible Common Equity/Tangible Assets
                 10.41
%
                 10.15
%
                 10.32
%
                 10.41
%
                 10.32
%
                     



###


 
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