Lake City Bank Reports Record Results

Wed Jul 25, 2012 8:00am EDT

* Reuters is not responsible for the content in this press release.

WARSAW, Ind., July 25, 2012 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported the highest quarterly and six month net income and earnings per share in its history. The Company achieved record net income of $8.8 million for the second quarter of 2012, an increase of 10% versus $8.0 million in the second quarter of 2011. Diluted net income per share also increased 10% to a record level of $0.54 in the second quarter versus $0.49 for the comparable period of 2011.

The Company also announced that the Board of Directors approved a cash dividend for the second quarter of $0.17 per share, payable on August 6, 2012 to shareholders of record as of July 25, 2012. The quarterly dividend represents a 10% increase over the quarterly dividends paid in 2011.

The Company further reported record net income of $17.4 million for the six months ended June 30, 2012 versus $14.0 million for the comparable period of 2011, an increase of 25%. Diluted net income per common share also set a new record and increased 23% to $1.06 for the six months ended June 30, 2012 versus $0.86 for the comparable period of 2011.

Michael L. Kubacki, Chairman and Chief Executive Officer, commented, "With strong earnings momentum and a robust balance sheet, Lake City Bank is well positioned to capitalize on our reputation as one of the leading commercial banks in Indiana. Our shareholders continue to be rewarded by these good results through a healthy dividend, as well as the performance of our stock, which has increased more than 30% in the last two years."   

Average total loans for the second quarter of 2012 were $2.22 billion versus $2.14 billion for the second quarter of 2011, an increase of 4%. On a linked quarter basis, average loans grew by $5 million compared to the first quarter of 2012. Total loans outstanding grew $66 million, or 3%, from $2.15 billion as of June 30, 2011 to $2.21 billion as of June 30, 2012.  Net loans outstanding at June 30, 2012 represented a decrease of $19 million versus $2.23 billion as of December 31, 2011. Driving this $19 million decrease in net loans outstanding were anticipated reductions in nonowner occupied commercial real estate loans of $52 million and seasonal reductions in total agribusiness loans of $17 million.  

Kubacki added, "Overall, loan demand has been good in 2012. Yet, quarter end loan totals reflect the impact of payoffs of existing credit facilities, particularly in our commercial real estate portfolio. This portfolio has been significantly reduced through the anticipated and successful placement of these interim project financings with long-term, non-bank institutional lenders." 

The Company's net interest margin was 3.32% in the second quarter of 2012 versus 3.53% for the second quarter of 2011 and 3.41% in the linked first quarter of 2012. The year-over-year margin decline resulted primarily from reduced yields in the investment portfolio and slightly lower commercial loan yields as interest rates continue to be at historic lows. For the six months ended June 30, 2012, the Company's net interest margin was 3.37% versus 3.66% for the comparable period in 2011.

David M. Findlay, President and Chief Financial Officer, stated, "With the prolonged and unprecedented period of low interest rates continuing, we're experiencing net interest margin compression as the rates we earn on loans and investments continue to decline. Absent any material change in the Federal Reserve's stance on rates, we expect to continue to see a tightening margin."

The Company's tangible common equity to tangible assets ratio was 9.58% at June 30, 2012 compared to 9.37% at June 30, 2011 and 9.41% at March 31, 2012. Average total deposits for the quarter ended June 30, 2012 were $2.55 billion versus $2.43 billion for the first quarter of 2012 and $2.34 billion for the second quarter of 2011.

Findlay added, "We've done an exceptional job of building a capital structure that provides us with a solid base for future loan growth. This capital strength will be critical to our competitive position as the inevitable rebound in our economy continues and, as a result, loan demand picks up. We believe that an important use of our capital is to lend money to our clients and contribute to the commercial recovery and expansion of our Indiana communities."

The Company's provision for loan losses in the second quarter of 2012 was $500,000 versus $2.9 million in the same period of 2011. In the first quarter of 2012, the provision was $799,000. For the six months ended June 30, 2012, the Company's provision for loan losses was $1.3 million versus $8.5 million for the comparable period in 2011. The provision decrease on a year-over-year basis was generally driven by the stabilization and improvement in key loan quality metrics, adequate reserve coverage of nonperforming loans, continuing signs of stabilization in the economic conditions of the Company's markets and general signs of improvement in our borrowers' performance and future prospects. The Company's allowance for loan losses as of June 30, 2012 was $51.8 million compared to $51.3 million as of June 30, 2011 and $53.4 million as of December 31, 2011. The allowance for loan losses represented 2.34% of total loans as of June 30, 2012 versus 2.39% at June 30, 2011 and 2.37% as of March 31, 2012. The Company improved its coverage of troubled loans as the allowance for loan losses represented 150% of nonperforming loans as of June 30, 2012 versus 137% at June 30, 2011 and 144% as of March 31, 2012.  

Net charge-offs totaled $1.4 million in the second quarter of 2012 versus $136,000 during the second quarter of 2011 and $1.4 million during the linked first quarter of 2012. The largest charge off attributable to a single commercial credit during the quarter was $1.7 million. For the six months ended June 30, 2012, net charge-offs were $2.9 million versus $2.2 million for the comparable period in 2011. Nonperforming assets decreased 10% to $36.4 million as of June 30, 2012 versus $40.1 million as of June 30, 2011. On a linked quarter basis, nonperforming assets were 6% lower than the $38.6 million reported as of March 31, 2012. The decrease in nonperforming loans during the quarter primarily resulted from the aforementioned net charge-offs. The ratio of nonperforming assets to total assets at June 30, 2012 was 1.22% versus 1.47% at June 30, 2011 and 1.31% at March 31, 2012. Total watch list loans were $151.0 million at June 30, 2012 versus $160.5 million at June 30, 2011, a decrease of 6%.

The Company's noninterest income decreased 2% to $5.8 million for the second quarter of 2012, versus $5.9 million for the second quarter of 2011. On a linked quarter basis, noninterest income decreased by $38,000 from $5.9 million in the first quarter of 2012. On a year-over-year basis, noninterest income was positively impacted by a $319,000 increase in investment brokerage fees, a $192,000 increase in loan, insurance and service fees and an $189,000 increase in mortgage banking income.  Noninterest income was negatively impacted by a $449,000 increase in other than temporary impairment on three non-agency mortgage backed securities in the Company's investment portfolio. Other than temporary impairment, which is a non-cash item, was $449,000 in the second quarter of 2012, versus $510,000 in the linked first quarter of 2012. There was no other than temporary impairment recognized in the second quarter of 2011. Excluding the non-cash other than temporary impairment charges, noninterest income increased 6%, or $343,000, from $5.9 million in the second quarter of 2011 to $6.3 million for the comparable period in 2012. 

The Company's noninterest expense increased by only 2%, or $276,000, to $14.2 million in the second quarter of 2012 versus $14.0 million in the comparable quarter of 2011. On a linked quarter basis, non-interest expense decreased by 3% versus $14.7 million in the first quarter of 2012. On a year-over-year basis, salaries and employee benefits increased by $345,000 in the three-month period ended June 30, 2012 versus the same period of 2011.  These increases were driven by staff additions, normal merit increases and employee health insurance expense increases. The Company's efficiency ratio for the second quarter of 2012 was 51%, compared to a ratio of 48% for the comparable quarter of 2011 and 52% for the linked first quarter of 2012.

Lakeland Financial Corporation is a $3.0 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank serves Indiana with 45 branches located in the following Indiana counties: Kosciusko, Elkhart, Allen, St. Joseph, DeKalb, Fulton, Hamilton, Huntington, LaGrange, Marshall, Noble, Pulaski and Whitley.

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 Lakeland Financial'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.

LAKELAND FINANCIAL CORPORATION
SECOND QUARTER 2012 FINANCIAL HIGHLIGHTS
(Unaudited – Dollars in thousands except share and per share data)
           
  Three Months Ended Six Months Ended
  Jun. 30,
2012
Mar. 31,
2012
Jun. 30,
2011
Jun. 30,
2012
Jun. 30,
2011
END OF PERIOD BALANCES          
Assets $2,974,438 $2,954,616 $2,735,018 $2,974,438 $2,735,018
Deposits 2,525,485 2,483,870 2,276,499 2,525,485 2,276,499
Loans 2,214,400 2,225,462 2,148,432 2,214,400 2,148,432
Allowance for Loan Losses 51,817 52,757 51,260 51,817 51,260
Total Equity 287,658 280,960 259,400 287,658 259,400
Tangible Common Equity 284,543 277,797 256,097 284,543 256,097
AVERAGE BALANCES          
Total Assets $3,015,641 $2,893,320 $2,788,763 $2,954,484 $2,741,285
Earning Assets 2,730,356 2,703,225 2,646,059 2,716,790 2,604,194
Investments 479,131 469,979 429,276 474,555 433,848
Loans 2,220,641 2,215,604 2,137,343 2,218,122 2,117,410
Total Deposits 2,554,013 2,427,710 2,336,234 2,490,861 2,280,807
Interest Bearing Deposits 2,208,292 2,093,348 2,042,063 2,150,820 1,986,642
Interest Bearing Liabilities 2,365,962 2,265,943 2,224,449 2,315,952 2,179,615
Total Equity 284,638 277,181 255,843 280,913 252,950
INCOME STATEMENT DATA          
Net Interest Income $22,148 $22,497 $22,945 $44,645 $46,479
Net Interest Income-Fully Tax Equivalent 22,550 22,899 23,328 45,450 47,245
Provision for Loan Losses 500 799 2,900 1,299 8,500
Noninterest Income 5,812 5,850 5,918 11,662 10,744
Noninterest Expense 14,249 14,680 13,973 28,929 28,141
Net Income 8,819 8,626 7,989 17,445 13,954
PER SHARE DATA          
Basic Net Income Per Common Share $0.54 $0.53 $0.49 $1.07 $0.86
Diluted Net Income Per Common Share 0.54 0.52 0.49 1.06 0.86
Cash Dividends Declared Per Common Share 0.170 0.155 0.155 0.325 0.31
Book Value Per Common Share (equity per share issued) 17.61 17.21 16.00 17.61 16.00
Market Value – High 26.83 27.50 23.05 27.50 23.65
Market Value – Low 24.07 23.91 20.68 23.91 20.50
Basic Weighted Average Common Shares Outstanding 16,324,928 16,280,416 16,201,311 16,298,981 16,198,348
Diluted Weighted Average Common Shares Outstanding 16,453,561 16,439,243 16,300,229 16,450,832 16,296,684
KEY RATIOS          
Return on Average Assets 1.18 % 1.20 % 1.15 % 1.19 % 1.03 %
Return on Average Total Equity 12.46 12.52 12.52 12.49 11.12
Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 50.96 51.79 48.41 51.38 49.18
Average Equity to Average Assets 9.44 9.58 9.17 9.51 9.23
Net Interest Margin 3.32 3.41 3.53 3.37 3.66
Net Charge Offs to Average Loans 0.26 0.26 0.03 0.26 0.21
Loan Loss Reserve to Loans 2.34 2.37 2.39 2.34 2.39
Loan Loss Reserve to Nonperforming Loans 149.67 144.46 137.17 149.67 137.17
Loan Loss Reserve to Nonperforming Loans and Performing TDR's 90.29 89.03 104.84 90.29 104.84
Nonperforming Loans to Loans 1.56 1.64 1.74 1.56 1.74
Nonperforming Assets to Assets 1.22 1.31 1.47 1.22 1.47
Tier 1 Leverage 10.16 10.37 10.07 10.16 10.07
Tier 1 Risk-Based Capital 12.85 12.55 12.31 12.85 12.31
Total Capital 14.11 13.81 13.57 14.11 13.57
Tangible Capital 9.58 9.41 9.37 9.58 9.37
ASSET QUALITY           
Loans Past Due 30 - 89 Days $6,744 $3,573 $2,379 $6,744 $2,379
Loans Past Due 90 Days or More 106 54 134 106 134
Non-accrual Loans 34,514 36,466 37,235 34,514 37,235
Nonperforming Loans (includes nonperforming TDR's) 34,620 36,520 37,369 34,620 37,369
Other Real Estate Owned 1,737 2,067 2,753 1,737 2,753
Other Nonperforming Assets 13 40 8 13 8
Total Nonperforming Assets 36,370 38,627 40,130 36,370 40,130
Nonperforming Troubled Debt Restructurings (included in nonperforming loans) 32,129 31,940 8,550 32,129 8,550
Performing Troubled Debt Restructurings 22,767 22,735 11,526 22,767 11,526
Total Troubled Debt Restructurings 54,896 54,675 20,076 54,896 20,076
Impaired Loans 59,256 60,995 51,423 59,256 51,423
Total Watch List Loans 151,047 151,831 160,475 151,047 160,475
Gross Charge Offs 1,852 1,733 651 3,584 2,949
Recoveries 412 291 515 702 702
Net Charge Offs/(Recoveries) 1,440 1,442 136 2,882 2,247
 
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
As of June 30, 2012 and December 31, 2011
(in thousands, except share data)
     
  June 30,
2012
December 31, 2011
  (Unaudited)  
ASSETS    
Cash and due from banks $162,669 $56,909
Short-term investments 32,280 47,675
Total cash and cash equivalents 194,949 104,584
     
Securities available for sale (carried at fair value) 478,440 467,391
Real estate mortgage loans held for sale 5,124 2,953
     
Loans, net of allowance for loan losses of $51,817 and $53,400 2,162,583 2,180,309
     
Land, premises and equipment, net  34,962 34,736
Bank owned life insurance 40,502 39,959
Accrued income receivable 9,446 9,612
Goodwill 4,970 4,970
Other intangible assets 73 99
Other assets 43,389 45,075
Total assets $2,974,438 $2,889,688
     
LIABILITIES AND EQUITY    
     
LIABILITIES    
Noninterest bearing deposits $376,928 $356,682
Interest bearing deposits  2,148,557 2,056,014
Total deposits 2,525,485 2,412,696
     
Short-term borrowings    
Federal funds purchased 0 10,000
Securities sold under agreements to repurchase  98,696 131,990
Total short-term borrowings 98,696 141,990
     
Accrued expenses payable 14,802 13,550
Other liabilities 1,831 2,195
Long-term borrowings 15,038 15,040
Subordinated debentures 30,928 30,928
Total liabilities 2,686,780 2,616,399
     
EQUITY    
Common stock: 90,000,000 shares authorized, no par value 16,331,947 shares issued and 16,253,496 outstanding as of June 30, 2012 16,217,019 shares issued and 16,145,772 outstanding as of December 31, 2011 88,440 87,380
Retained earnings 194,046 181,903
Accumulated other comprehensive loss 6,491 5,139
Treasury stock, at cost (2012 - 78,451 shares, 2011 - 71,247 shares) (1,408) (1,222)
Total stockholders' equity 287,569 273,200
     
Noncontrolling interest 89 89
Total equity 287,658 273,289
Total liabilities and equity $2,974,438 $2,889,688
 
LAKELAND FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months and Six Months Ended June 30, 2012 and 2011
(in thousands except for share and per share data)
(unaudited)
     
  Three Months Ended
June 30,
Six Months Ended
June 30,
  2012 2011 2012 2011
NET INTEREST INCOME        
Interest and fees on loans        
Taxable $25,795 $26,300 $51,986 $52,165
Tax exempt 112 122 224 243
Interest and dividends on securities        
Taxable 2,627 3,361 5,391 7,418
Tax exempt 699 687 1,396 1,376
Interest on short-term investments 16 78 27 96
Total interest income 29,249 30,548 59,024 61,298
         
Interest on deposits 6,602 7,093 13,363 13,778
Interest on borrowings        
Short-term 104 147 217 318
Long-term 395 363 799 723
Total interest expense 7,101 7,603 14,379 14,819
         
NET INTEREST INCOME 22,148 22,945 44,645 46,479
         
Provision for loan losses 500 2,900 1,299 8,500
         
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 21,648 20,045 43,346 37,979
         
NONINTEREST INCOME        
Wealth advisory fees 897 929 1,811 1,747
Investment brokerage fees 940 621 1,740 1,352
Service charges on deposit accounts 2,011 1,939 3,892 3,902
Loan, insurance and service fees 1,452 1,260 2,641 2,336
Merchant card fee income 289 288 605 522
Other income 280 646 945 1,018
Mortgage banking income 392 203 984 154
Net securities gains (losses) 0 32 3 (166)
Other than temporary impairment loss on available-for-sale securities:        
Total impairment losses recognized on securities (475) 0 (985) (121)
Loss recognized in other comprehensive income 26 0 26 0
Net impairment loss recognized in earnings (449) 0 (959) (121)
Total noninterest income 5,812 5,918 11,662 10,744
         
NONINTEREST EXPENSE        
Salaries and employee benefits 8,363 8,018 17,438 16,191
Net occupancy expense 831 752 1,716 1,627
Equipment costs 596 510 1,213 1,064
Data processing fees and supplies 1,060 979 1,901 2,091
Other expense  3,399 3,714 6,661 7,168
Total noninterest expense 14,249 13,973 28,929 28,141
         
INCOME BEFORE INCOME TAX EXPENSE 13,211 11,990 26,079 20,582
         
Income tax expense  4,392 4,001 8,634 6,628
         
NET INCOME $8,819 $7,989 $17,445 $13,954
         
BASIC WEIGHTED AVERAGE COMMON SHARES 16,324,928 16,201,311 16,298,981 16,198,348
         
BASIC EARNINGS PER COMMON SHARE $0.54 $0.49 $1.07 $0.86
         
DILUTED WEIGHTED AVERAGE COMMON SHARES 16,453,561 16,300,229 16,450,832 16,296,684
         
DILUTED EARNINGS PER COMMON SHARE $0.54 $0.49 $1.06 $0.86
 
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
SECOND QUARTER 2012
(unaudited in thousands)
             
  June 30,
2012
December 31,
2011
June 30,
2011
Commercial and industrial loans:            
Working capital lines of credit loans $413,394 18.7 % $373,768 16.7 % $360,813 16.8 %
Non-working capital loans 375,677 17.0 377,388 16.9 371,001 17.3
Total commercial and industrial loans 789,071 35.6 751,156 33.6 731,814 34.1
             
Commercial real estate and multi-family residential loans:            
Construction and land development loans 84,416 3.8 82,284 3.7 133,194 6.2
Owner occupied loans 356,889 16.1 346,669 15.5 333,236 15.5
Nonowner occupied loans 333,237 15.0 385,090 17.2 336,496 15.7
Multifamily loans 35,587 1.6 38,477 1.7 22,557 1.0
Total commercial real estate and multi-family residential loans 810,129 36.6 852,520 38.2 825,483 38.4
             
Agri-business and agricultural loans:            
Loans secured by farmland 112,431 5.1 118,224 5.3 95,526 4.4
Loans for agricultural production 108,514 4.9 119,705 5.4 103,052 4.8
Total agri-business and agricultural loans 220,945 10.0 237,929 10.7 198,578 9.2
             
Other commercial loans 63,681 2.9 58,278 2.6 53,702 2.5
Total commercial loans 1,883,826 85.1 1,899,883 85.0 1,809,577 84.2
             
Consumer 1-4 family mortgage loans:            
Closed end first mortgage loans 105,057 4.7 106,999 4.8 107,471 5.0
Open end and junior lien loans 171,063 7.7 175,694 7.9 178,274 8.3
Residential construction and land development loans 9,190 0.4 5,462 0.2 3,273 0.2
Total consumer 1-4 family mortgage loans 285,310 12.9 288,155 12.9 289,018 13.5
             
Other consumer loans 45,726 2.1 45,999 2.1 50,176 2.3
Total consumer loans 331,036 14.9 334,154 15.0 339,194 15.8
Subtotal 2,214,862 100.0 % 2,234,037 100.0 % 2,148,771 100.0 %
Less: Allowance for loan losses (51,817)   (53,400)   (51,260)  
     Net deferred loan fees (462)   (328)   (339)  
Loans, net $2,162,583   $2,180,309   $2,097,172  
CONTACT: David M. Findlay
         President and
         Chief Financial Officer
         (574) 267-9197
         david.findlay@lakecitybank.com
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