Lakeland Financial Reports Record Performance

WARSAW, Ind., Jan. 26, 2015 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record high net income of $43.8 million for 2014. Net income increased 13% from $38.8 million for 2013. Diluted net income per common share increased 12% to $2.61 for 2014 versus $2.33 for 2013. This per share performance also represents a record level for the company and its shareholders since the company's founding in 1872.

The company further reported quarterly net income of $11.1 million for the fourth quarter of 2014, an increase of 5%, versus $10.6 million for the fourth quarter of 2013. Diluted net income per share was $0.66 for the fourth quarter of 2014, an increase of 5%, versus $0.63 for the comparable period of 2013.

David M. Findlay, President and CEO, commented, "Our success in 2014 was clearly driven by our ability to grow the loan portfolio and increase our market share of deposits. The most effective way for us to contribute to the economic strength of our communities is through this loan growth. Our record results reflect the efforts of the entire Lake City Bank team as we were able to successfully grow our balance sheet and significantly increase profitability. Our organic growth strategy is focused on building client relationships one at a time in our Indiana communities, and it is clearly working."  

Return on average total equity for 2014 improved to 12.77% from 12.50% in 2013.  Return on average assets for 2014 increased to 1.32% up from 1.29% in 2013.  The company's tangible common equity to tangible assets ratio was 10.41% at December 31, 2014, compared to 10.05% at December 31, 2013 and 10.40% at September 30, 2014.

As previously announced, the board of directors approved a cash dividend for the fourth quarter of $0.21 per share, payable on February 5, 2015, to shareholders of record as of January 25, 2015. The quarterly dividend represents an 11% increase over the $0.19 quarterly dividends paid for each quarter of 2013 and for the first quarter of 2014.

The company experienced strong loan growth during the year as average total loans increased $307.3 million, or 13%, to $2.65 billion from $2.34 billion in 2013. Total loans outstanding grew $227.2 million, or 9%, from $2.54 billion as of December 31, 2013 to $2.76 billion as of December 31, 2014. On a linked quarter basis, total loans grew $60.4 million or 2% from $2.70 billion as of September 30, 2014. Average total loans for the fourth quarter of 2014 were $2.73 billion, an increase of $270.9 million, or 11%, versus $2.46 billion for the comparable period in 2013. On a linked quarter basis, average total loans increased $46.6 million, or 2%, from $2.68 billion for the third quarter of 2014 to $2.73 billion for the fourth quarter of 2014.

Total average deposits also experienced strong growth during the year and increased by $292.6 million, or 12% to $2.80 billion from $2.51 billion. Total deposits grew $327.1 million, or 13%, from $2.55 billion as of December 31, 2013 to $2.87 billion as of December 31, 2014. Average total deposits for the fourth quarter of 2014 were $2.94 billion versus $2.58 billion for the fourth quarter of 2013, an increase of 14%. On a linked quarter basis, average total deposits increased $119.1 million, or 4%.

Findlay added, "We're particularly proud that our robust loan growth was significantly funded by great core deposit growth in 2014. Our retail and commercial banking teams worked well together as this organic deposit growth was generated throughout our footprint and highlights our focus on growing relationships."   

The company's net interest margin expanded by six basis points during 2014 to 3.32% for 2014 compared to 3.26% in 2013, although the net interest margin did decline sequentially in each quarter during 2014. The net interest margin improved for the year despite downward pressure on loan yields and the prolonged low interest rate environment. The net interest margin expansion was attributable primarily to declines in deposit rates and overall funding costs and improvement in the investment portfolio yields, which more than offset declining loan yields.  The company's net interest margin was 3.28% in the fourth quarter of 2014, compared to 3.33% for the fourth quarter of 2013. The net interest margin was 3.31% in the linked third quarter of 2014, down three basis points due to declining loan yields and a one basis point increase in cost of funds.

Nonperforming assets decreased $10.4 million, or 43%, to $14.0 million as of December 31, 2014 versus $24.4 million as of December 31, 2013. On a linked quarter basis, nonperforming assets were $1.0 million, or 6%, lower than the $15.0 million reported as of September 30, 2014. The decrease in nonperforming assets during the fourth quarter of 2014 primarily resulted from payments received as well as charge-offs recognized on nonperforming loans.  The ratio of nonperforming assets to total assets at December 31, 2014, was 0.41% versus 0.77% at December 31, 2013 and 0.45% at September 30, 2014.  Net charge-offs to average loans were 0.10% for 2014 compared to 0.11% for 2013. Net charge offs totaled $2.6 million in 2014 compared to $2.5 million in 2013. Net charge-offs totaled $125,000 in the fourth quarter of 2014 versus net charge-offs of $1.0 million during the fourth quarter of 2013 and net recoveries of $782,000 during the linked third quarter of 2014.

For the second consecutive year, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by continued stabilization and improvement in key loan quality metrics, including lower levels of nonperforming loans, appropriate reserve coverage of nonperforming loans, continuing signs of stabilization of the economic conditions of the company's markets and sustained signs of improvement in its borrowers' performance and future prospects. The company's allowance for loan losses as of December 31, 2014 was $46.3 million compared to $48.8 million as of December 31, 2013 and $46.4 million as of September 30, 2014. The allowance for loan losses represented 1.67% of total loans as of December 31, 2014 versus 1.92% at December 31, 2013 and 1.72% as of September 30, 2014. As a result of improved asset quality during 2014, the allowance for loan losses as a percentage of nonperforming loans increased to 338% as of December 31, 2014, versus 204% as of December 31, 2013, and 314% as of September 30, 2014.

The company's noninterest income was $30.1 million in 2014, compared to $30.7 million in 2013. Declines in mortgage banking income and investment brokerage fees, more than offset growth in deposit fees, loan fees and other income during 2014. Noninterest income was $7.2 million for the fourth quarter of 2014 versus $7.9 million in the comparable quarter of 2013 and the linked quarter of 2014. Year-over-year, quarterly noninterest income was positively impacted by a $264,000 increase in service charges on deposit accounts driven by higher deposit fees.  Offsetting the increase was a $656,000 decrease in investment brokerage fees due to lower production volumes.

The company's noninterest expense increased by $3.4 million, to $66.2 million in 2014 compared to $62.8 million in 2013. During 2014, the increase in noninterest expense was driven primarily by increases in salary and employee benefit costs and data processing fees. Noninterest expense increased $104,000, or 1%, to $16.6 million in the fourth quarter of 2014 versus $16.5 million in the comparable quarter of 2013. On a linked quarter basis, noninterest expense decreased by $28,000 from $16.7 million in the third quarter of 2014. Salaries and employee benefits decreased by $345,000 in the three month period ended December 31, 2014 versus the same period of 2013. The decrease in salary and employee benefits was driven by lower employee benefit costs and lower commissions paid on investment brokerage fees.  Corporate and business development expense increased during the quarter by $207,000 due to higher advertising and marketing expenses. Data processing fees increased by $110,000 due to technology related expenditures with the company's core processor and other technology based providers to enhance the delivery of electronic banking  alternatives and improve commercial product solutions.  The company's efficiency ratio was 50% for the fourth quarter of 2014, compared to 51% for the fourth quarter of 2013 and 49% for the linked third quarter of 2014. For 2014, the efficiency ratio was 50% compared to 52% in 2013, and consistently ranks in the top quartile of peer financial institutions in the country. Revenue growth in 2014 outpaced expense growth for the same period, resulting in an improvement in the efficiency ratio for 2014 compared to 2013.

Findlay concluded, "Our strong capital structure provides a solid foundation for our continued growth in 2015. The Lake City Bank team has produced record net income in 26 of the last 27 years and the strength and consistency of this performance has provided healthy dividend increases for our shareholders. We are very well positioned for future growth and expansion in our Indiana communities and are particularly excited about Indianapolis, where we opened our third office in late 2014."   

Lakeland Financial Corporation is a $3.4 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 46 offices in Northern and Central Indiana, delivering technology driven and client-centric financial services solutions to individuals and businesses.

Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at www.lakecitybank.com. The company's common stock is traded on the Nasdaq Global Select Market under "LKFN." In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press 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. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables where the non-GAAP measure is presented.

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