Lakeland Financial Reports Strong Organic Loan and Deposit Growth

WARSAW, Ind., Oct. 26, 2015 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported net income of $34.1 million for the nine months ended September 30, 2015, versus $32.7 million for the comparable period of 2014, an increase of 4%. Diluted net income per common share also increased 4% to $2.03 for the nine months ended September 30, 2015, versus $1.95 for the comparable period of 2014.

The company further reported net income of $11.6 million for the third quarter of 2015 versus $11.5 million for the third quarter of 2014. Diluted net income per common share was $0.69 for the third quarters of 2015 and 2014. On a quarter-linked basis net income increased by 2% or $185,000 from $11.4 million for the second quarter ended June 30, 2015.

As previously announced, the board of directors approved a cash dividend for the third quarter of $0.245 per share, payable on November 5, 2015, to shareholders of record as of October 25, 2015. The quarterly dividend, which is equal to the dividend paid in the second quarter 2015, represents a 17% increase over the $0.21 quarterly dividends paid in the last three quarters of 2014 and in the first quarter of 2015.

Return on average total equity for the first nine months of 2015 was 12.18% compared to 12.94% in the prior year period. Return on average assets for the first nine months of 2015 was 1.29% compared to 1.33% in the same period of 2014. The company’s tangible common equity to tangible assets ratio was 10.47% at September 30, 2015, compared to 10.40% at September 30, 2014 and 10.44% at June 30, 2015.

“We continue to focus on the growth of our balance sheet as the primary driver of our financial success. Simply put, lending money in our Indiana communities contributes to their ongoing economic growth and recovery. Overall, we are very pleased with our loan growth in 2015,” commented David M. Findlay, President and Chief Executive Officer.

Average total loans for the third quarter of 2015 were $2.92 billion, an increase of $238.5 million, or 9% versus $2.68 billion for the comparable period in 2014. Total loans outstanding grew $270.4 million, or 10%, from $2.70 billion as of September 30, 2014 to $2.97 billion as of September 30, 2015. On a linked quarter basis, average total loans increased $70.8 million, or 2%, from $2.85 billion for the second quarter of 2015 to $2.92 billion for the third quarter of 2015.

Average total deposits for the third quarter of 2015 were $3.13 billion, an increase of $307.2 million, or 11%, versus $2.82 billion for the corresponding period of 2014. Total deposits grew $257.9 million, or 9%, from $2.89 billion as of September 30, 2014 to $3.15 billion as of September 30, 2015. Importantly, total core deposits increased $348.5 million, or 13% from $2.67 billion at September 30, 2014 to $3.01 billion at September 30, 2015. On a linked quarter basis, average total deposits increased $60.0 million, or 2%, from $3.07 billion for the second quarter of 2015 to $3.13 billion for the third quarter of 2015.

“We are particularly proud of our continued organic core deposit growth in our Indiana footprint.  Importantly, the growth is being generated in both our more mature Northern Indiana markets and in our Indianapolis market, which we entered in 2011. The core deposit growth is also coming from both our commercial and retail deposit clients in every market we serve,” added Findlay.

The company’s net interest margin was 3.16% in the third quarter of 2015, compared to  3.31% for the third quarter of 2014. Net interest margin was 3.18% in the linked second quarter of 2015. Net interest margin for the nine months ended September 30, 2015 was 3.21% compared to 3.34% in the prior year nine month period. The decline in net interest margin during the three month and nine month periods ended September 30, 2015 was largely driven by competitive factors in the company’s markets, including more aggressive pricing of new loan opportunities and renewed loans as well as a slightly higher cost of funds. Net interest income increased $746,000, or 3%, to $26.7 million for the third quarter of 2015, versus $26.0 million in the third quarter of 2014. Net interest income for the nine months ended September 30, 2015 increased $2.3 million, or 3%, to $78.5 million, versus $76.2 million for the nine months ended September 30, 2014.

Findlay commented further, “We continue to experience pressure on our net interest margin as a result of the low interest rate environment. We believe that our balance sheet is well positioned to benefit from an increase in overall interest rates, and we will continue to closely manage it until rates start to rise.”

For the eleventh consecutive quarter, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by continued stabilization and improvement in key loan quality metrics, including appropriate reserve coverage of nonperforming loans, a decrease in historical loss percentages, stable economic conditions in 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 September 30, 2015 was $44.7 million compared to $46.4 million as of September 30, 2014 and $44.8 million as of June 30, 2015. The allowance for loan losses represented 1.50% of total loans as of September 30, 2015 versus 1.72% at September 30, 2014 and 1.55% as of June 30, 2015. The allowance for loan losses as a percentage of nonperforming loans was 312% as of September 30, 2015, versus 314% as of September 30, 2014, and 312% as of June 30, 2015.

Nonperforming assets decreased $431,000, or 3%, to $14.5 million as of September 30, 2015 versus $15.0 million as of September 30, 2014. On a linked quarter basis, nonperforming assets were $72,000 lower than the $14.6 million reported as of June 30, 2015. The ratio of nonperforming assets to total assets at September 30, 2015 was 0.40% versus 0.45% at September 30, 2014 and 0.41% at June 30, 2015. Net charge-offs to average loans were 0.02% for the third quarter of 2015 compared to net recoveries of 0.12% for the third quarter of 2014 and net charge-offs of 0.12% for the second quarter of 2015. Net charge-offs totaled $122,000 in the third quarter of 2015 versus net recoveries of $782,000 during the third quarter of 2014 and net charge-offs of $861,000 during the linked second quarter of 2015.

The company’s noninterest income was $7.9 million for both the third quarters of 2015 and 2014. On a linked quarter basis, noninterest income increased by $189,000 from $7.7 million in the second quarter of 2015. Noninterest income increased 2% to $23.4 million in the nine months ended September 30, 2015 versus $22.9 million in the comparable period of 2014. Noninterest income was positively impacted by increases in mortgage banking income due to higher production volumes, as well as increases in service charges on deposit accounts, loan, insurance and service fees and wealth advisory fees. Offsetting these increases was a decrease in investment brokerage fees driven by lower production volumes as well as changes to the product mix designed to provide a more consistent revenue stream.

The company’s noninterest expense increased by 3% to $17.2 million in the third quarter of 2015 compared to $16.7 million in the third quarter of 2014. Noninterest expense increased 3% to $50.8 million in the nine months ended September 30, 2015 versus $49.5 million in the comparable period of 2014. Data processing fees increased by $1.1 million primarily due to increased technology and software related expenditures with the company’s core processor which are volume and product driven to enhance the delivery of electronic banking channels and enhance commercial product solutions. Equipment costs increased due to higher depreciation expense related to branch upgrades and expansion. Salaries and employee benefits decreased by $289,000 in the first nine months of 2015 versus the same period of 2014. The decrease in salary and employee benefits was driven by lower employee benefit costs including lower incentive-based compensation accruals and lower commissions paid on investment brokerage fees as a result of lower production. Professional fees decreased by $130,000 in the first nine months of 2015, driven by lower legal fees. The company's efficiency ratio was 50% for the third quarter of 2015 compared to 49% in the third quarter of  2014, and unchanged from 50% for the linked second quarter of 2015.

Lakeland Financial Corporation is a $3.7 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 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. 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.