lkfn-20220125
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549  

FORM8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): January 25, 2022  
 
LAKELAND FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter) 
Indiana 0-11487 35-1559596
(State or other jurisdiction
of incorporation)
 (Commission
File Number)
 (IRS Employer
Identification No.)
 
202 East Center Street,
Warsaw,Indiana46580
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (574) 267-6144
 
(Former name or former address if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, no par value LKFN NASDAQ
 
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (s230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (s240.12b-2 of this chapter).




 
Emerging growth company  
 
If an emerging growth company, indicate by check mark if the Registrant has elected not to use extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨




Item 2.02. Results of Operations and Financial Condition
 
On January 25, 2022, Lakeland Financial Corporation (the “Company”) issued a press release announcing its earnings for the twelve months ended December 31, 2021. The press release is furnished herewith as Exhibit 99.1.
 
The disclosure in this Item 2.02 and the related exhibit under Item 9.01 are being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The disclosure in this Item 2.02 and the related exhibit under Item 9.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.
 
Item 9.01. Financial Statements and Exhibits
 
(d)Exhibits

99.1 Press Release dated January 25, 2022
 




SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
LAKELAND FINANCIAL CORPORATION
 
Dated:  January 25, 2022
By:/s/ Lisa M. O’Neill
  Lisa M. O’Neill
  Executive Vice President
  and Chief Financial Officer

Document
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Exhibit 99.1

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 Annual Performance
Year-to-Date Record Net Income Improves by 13% to $95.7 Million
 
Warsaw, Indiana (January 25, 2022) – Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record full year net income of $95.7 million, which represents an increase of $11.4 million, or 13.5%, compared with net income of $84.3 million for 2020. Diluted earnings per share of $3.74 was also a record for 2021, which increased 13.3% compared to $3.30 for 2020. Net income for 2021 benefited from growth in net interest income and lower provision expense as compared to 2020, offset by an increase in noninterest expense.

The company further reported quarterly net income of $24.3 million for the three months ended December 31, 2021 versus $24.6 million for the comparable period of 2020, a decrease of 1.3%. Diluted net income per common share decreased 2.1% to $0.95 for the three months ended December 31, 2021 versus $0.97 for the comparable period of 2020. On a linked quarter basis, net income increased $164,000, or 0.7%, from the third quarter of 2021, of $24.1 million, or $0.94 diluted earnings per share. Pretax pre-provision earnings were $29.8 million for the fourth quarter of 2021, a decrease of 5.7%, or $1.8 million, from $31.6 million for the fourth quarter of 2020. On a linked quarter basis, pretax pre-provision earnings decreased 3.6%, or $1.1 million, from $30.9 million for the third quarter of 2021. The decreases in net income and pretax pre-provision earnings were driven primarily by lower Paycheck Protection Program (PPP) loan income in the fourth quarter of 2021. PPP loan income, which includes both interest income and fee accretion, was $2.2 million for the fourth quarter of 2021 compared to $6.5 million during the comparable quarter of 2020 and $3.9 million for the third quarter of 2021.

“We enter 2022 with great optimism and confidence in the core relationship businesses within Lake City Bank. During the last two years, we have experienced unprecedented growth that has challenged our management of the balance sheet and necessitated a level of flexibility and adaptability by the entire Lake City Bank team. We end 2021 strongly with record net income and a balance sheet ready for future growth. Our highly asset sensitive balance sheet is well-positioned for the interest rate hikes we expect to see in 2022. Further, we believe the liquidity on our balance sheet will prove valuable as we focus on future organic loan growth opportunities,” commented David M. Findlay, President and Chief Executive Officer.
 
Highlights for the year and quarter are noted below.
 
Full year 2021 versus 2020 highlights:
 
Total assets of $6.6 billion, an increase of $726.9 million, or 12%
Dividend per share increase of 13% to $1.36 from $1.20
Return on average equity of 14.19%, compared to 13.51%
Return on average assets of 1.56%, compared to 1.55%
Average loan growth, excluding PPP loans, of $135.5 million, or 3%
Core deposit growth of $703.6 million, or 14%
Noninterest bearing demand deposit account growth of $357.2 million, or 23%
Net interest margin of 3.07% compared to 3.19%
Net interest income increase of $15.1 million, or 9%
Revenue growth of $13.0 million, or 6%
Noninterest expense increase of $13.1 million, or 14%
Provision expense2 of $1.1 million compared to provision expense of $14.8 million, a decrease of $13.7 million
Average total equity increase of $50.5 million, or 8%
Total risk-based capital ratio improved to 15.34% compared to 14.65%
Tangible capital ratio1 of 10.70% compared to 11.21%
1Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”
2Beginning January 1, 2021 calculation is based on the Current Expected Credit Loss methodology (CECL). Prior to January 1, 2021 calculation was based on the incurred loss methodology. 
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Fourth Quarter 2021 versus Fourth Quarter 2020 highlights:
 
Average loan growth, excluding PPP loans, of $101.5 million, or 2%
Core deposit growth of $703.6 million, or 14%
Noninterest bearing demand deposit account growth of $357.2 million, or 23%
Net interest margin of 2.98% compared to 3.28%
Net interest income increase of $294,000, or 1%
Noninterest expense increase of $14,000, or 0%
Provision expense of $0 compared to provision expense of $920,000
Average total equity increase of $47.7 million, or 7%

Fourth Quarter 2021 versus Third Quarter 2021 highlights:
 
Return on average equity of 13.91%, compared to 13.90%
Average loan growth, excluding PPP loans, of $5.2 million
Core deposit growth of $321.8 million, or 6%
Noninterest bearing demand deposit account growth of $133.5 million, or 8%
Net interest margin of 2.98% compared to 3.13%
Provision expense of $0 compared to a provision expense of $1.3 million
Nonperforming loans of $15.1 million, a decrease of $15.9 million
Average total equity increase of $4.1 million, or 1%
Tangible capital ratio1 was 10.70% compared to 10.92%

Return on average total equity for the year ended December 31, 2021 was 14.19%, compared to 13.51% in 2020. Return on average assets was 1.56% in 2021 compared to 1.55% in 2020. The company's total capital as a percent of risk-weighted assets was 15.34% at December 31, 2021 compared to 14.65% at December 31, 2020 and 15.44% at September 30, 2021. The company's tangible common equity to tangible assets ratio1 was 10.70% at December 31, 2021, compared to 11.21% at December 31, 2020 and 10.92% at September 30, 2021.

As previously announced, the board of directors approved a cash dividend for the fourth quarter of $0.40 per share, payable on February 7, 2022, to shareholders of record as of January 25, 2022. The fourth quarter dividend per share represents an 18% increase from the $0.34 dividend per share paid in the third quarter of 2021.

Findlay added, “Our capital structure is exceptionally strong. As a result, we can comfortably provide our shareholders with an 18% increase in the dividend. We are confident in our future growth and performance, and the strength of our balance sheet is critical to our long-term success.”

Average total loans were $4.28 billion in the fourth quarter of 2021, a decrease of $74.8 million, or 2%, from $4.35 billion for the third quarter of 2021, and a decrease of $338.7 million, or 7%, from $4.62 billion for the fourth quarter 2020, due primarily to PPP loan forgiveness. Average PPP loans were $62.9 million during the fourth quarter of 2021, down from $503.0 million during the fourth quarter of 2020. Average loans, excluding PPP loans, were $4.22 billion in the fourth quarter of 2021, compared to $4.11 billion for the fourth quarter of 2020, an increase of $101.5 million, or 2%. On a linked quarter basis, average loans, excluding PPP loans, increased by $5.2 million.

Total loans outstanding decreased by $361.3 million, or 8%, from $4.65 billion as of December 31, 2020 to $4.29 billion as of December 31, 2021, due primarily to PPP loan forgiveness. PPP loans outstanding were $26.2 million as of December 31, 2021, compared to $412.0 million at December 31, 2020. Total loans, excluding PPP loans, were $4.26 billion as of December 31, 2021, representing an increase of $24.5 million, or 1%, as compared to December 31, 2020. On a linked quarter basis, total loans excluding PPP increased $114.1 million, or 3%. The company received PPP forgiveness proceeds and borrower repayments of $709.5 million since the program's inception through December 31, 2021.





1Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”
2Beginning January 1, 2021 calculation is based on the Current Expected Credit Loss methodology (CECL). Prior to January 1, 2021 calculation was based on the incurred loss methodology. 
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Findlay stated, “Commercial organic loan originations reached an all-time high this quarter. During the fourth quarter we originated more than $650 million of commercial loans, yet also experienced elevated levels of paydowns over $600 million. Commercial line utilization continues to incrementally improve, but is still near historic lows. We continue to expand existing relationships and establish new ones as available commercial lines of credit reached a record high of $4.01 billion and outstanding commercial lines grew by 9% during the fourth quarter. The loan pipeline as we entered 2022 was encouraging as we are beginning to see signs of improved loan demand and borrower activity.”

Average total deposits were $5.59 billion for the fourth quarter of 2021, an increase of $626.1 million, or 13%, versus $4.96 billion for the fourth quarter of 2020. On a linked quarter basis, average total deposits increased by $241.3 million, or 5%. Total deposits increased $698.6 million, or 14%, from $5.04 billion as of December 31, 2020 to $5.74 billion as of December 31, 2021. On a linked quarter basis, total deposits increased by $320.8 million, or 6%, from $5.41 billion as of September 30, 2021.

Core deposits, which exclude brokered deposits, increased by $703.6 million, or 14%, from $5.02 billion as of December 31, 2020 to $5.73 billion at December 31, 2021. This increase was due to growth in commercial deposits of $321.9 million, or 17%; growth in retail deposits of $259.5 million, or 14%; and growth in public fund deposits of $122.2 million, or 11%. On a linked quarter basis, core deposits increased by $321.8 million, or 6%. The linked quarter growth resulted from commercial deposit growth of $118.7 million, a 6% increase; retail growth of $208.1 million, an 11% increase; and offset by public fund contraction of $5.0 million.

Investment securities were $1.40 billion at December 31, 2021, reflecting an increase of $663.7 million, or 90%, as compared to $734.8 million at December 31, 2020. On a linked quarter basis, investment securities increased $158.8 million, or 13%. Investment securities represent 21% of total assets on December 31, 2021 compared to 13% on December 31, 2020 and 20% on September 30, 2021. The increase in investment securities reflects the deployment of $652 million in excess liquidity that resulted from deposit growth. Deposit growth was impacted by PPP and economic stimulus.

“During the last two years, we have seen core deposits grow by $1.7 billion, a portion of the resulting liquidity has been strategically deployed in our investment securities portfolio as an earning asset alternative while our customers’ deposits remain elevated. We remain focused on core organic loan growth as the primary driver of our balance sheet and are optimistic that we are well-positioned to grow market share as we transition to the next economic growth cycle. Additionally, we remain optimistic that the high percentage of variable rate loans on our balance sheet, coupled with cost of funds at historically low levels, position Lake City Bank with the ability to fund organic loan growth and benefit from the anticipated Federal Reserve Bank rising interest rate cycle,” Findlay commented.

Net interest margin was 3.07% for the full year 2021, down 12 basis points from 3.19% in 2020. Earnings assets yields declined by 44 basis points to 3.33%, offset by a decline of 32 basis points in the cost of funds. The strong 2021 deposit growth funded organic loan growth, and generated excess liquidity. Average investment securities increased by $434.4 million during 2021 and average interest-bearing deposits to the bank grew by $313.6 million. The shift in earning assets generated lower average yields. Net interest margin, excluding PPP loans, was 2.95% for the year ended 2021, down 24 basis points from 3.19% during 2020.

The company’s net interest margin decreased 30 basis points to 2.98% for the fourth quarter of 2021 compared to 3.28% for the fourth quarter of 2020. The lower margin in the fourth quarter of 2021 as compared to the prior year period was due to a slowing of PPP forgiveness as the bank's borrowers actively applied for and received forgiveness throughout the second half of 2020 and the first three quarters of 2021. PPP loan income for the fourth quarter of 2021 was $2.2 million, or $4.3 million less than PPP loan income of $6.5 million during the fourth quarter of 2020. PPP interest and fees represented 11 basis points of fourth quarter 2021 net interest margin compared to 16 basis points for the fourth quarter 2020 net interest margin.

Net interest margin was negatively impacted by the decrease in earning asset yields of 46 basis points from 3.65% for the fourth quarter of 2020 compared to 3.19% for the fourth quarter of 2021. As a result of the excess liquidity on the company's balance sheet, the mix of earning assets included lower yielding earning assets in the investment securities portfolio and cash balances at the Federal Reserve Bank. The lower yield on earning assets was offset by lower cost of funds, which decreased by 16 basis points, from 0.37% for the fourth quarter of 2020 to 0.21% for the fourth quarter of 2021. Net interest margin, excluding PPP loan income, was 2.87%, 25 basis points lower than 3.12% in the fourth quarter of 2020.
1Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”
2Beginning January 1, 2021 calculation is based on the Current Expected Credit Loss methodology (CECL). Prior to January 1, 2021 calculation was based on the incurred loss methodology. 
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Fourth quarter net interest margin was 2.98%, a decline of 15 basis points compared to linked third quarter net interest margin of 3.13%. Net interest margin excluding PPP was 11 basis points lower at 2.87% for the fourth quarter of 2021 compared to 2.95% for the linked third quarter of 2021. Earning asset yields declined by 18 basis points offset by a decline in cost of funds of 3 basis points. Interest expense as a percentage of earning assets decreased to a historical low of 0.21% for the three-month period ended December 31, 2021, down from 0.24% for the three-month period ended September 30, 2021.

Net interest income was $178.1 million for the year ended December 31, 2021, representing an increase of $15.1 million, or 9.3%, as compared to the year ended December 31, 2020. The increase was due primarily to a decrease in interest expense of $15.0 million, or 50%, and an increase in investment securities income of $6.6 million, offset by a $6.6 million decline in loan interest income. PPP loan income, including interest and fees, was $14.9 million during the year ended December 31, 2021, compared to $12.8 million during 2020.

Net interest income was $45.0 million for the three months ended December 31, 2021, representing an increase of $294,000, or 1%, as compared to the three months ended December 31, 2020. On a linked quarter basis, net interest income decreased $734,000, or 2%, from the third quarter of 2021. PPP loan income, including interest and fees, was $2.2 million for the three months ended December 31, 2021, compared to $3.9 million during the third quarter of 2021.

Provision expense for 2021 was $1.1 million, down from $14.8 million in 2020. Provision expense for 2020 reflected the increased assessment of risk to the banks loan portfolio as a result of the economic downturn that resulted from the pandemic. The company recorded no provision for credit losses2 in the fourth quarter of 2021, compared to $920,000 of provision expense in the fourth quarter of 2020. On a linked quarter basis, the provision expense decreased by $1.3 million from the third quarter of 2021. The company adopted CECL during the first quarter of 2021, effective January 1, 2021. The day one impact of adoption was an increase in the allowance for credit losses2 of $9.1 million, with an offset, net of taxes, to beginning stockholders’ equity.

The credit loss reserve to total loans was 1.58% at December 31, 2021 versus 1.32% at December 31, 2020 and 1.72% at September 30, 2021. The decline in the credit reserve to total loans from September 2021 to December 2021, reflects the impact of charge offs as well as the impact of loan growth during the quarter. The credit loss reserve to total loans excluding PPP loans was 1.59% at December 31, 2021 versus 1.45% at December 31, 2020 and 1.76% at September 30, 2021. PPP loans are guaranteed by the United States Small Business Administration (SBA) and have not been allocated for within the allowance for credit losses2.
 
Net charge offs in the fourth quarter of 2021 were $5.3 million versus net charge offs of $259,000 in the fourth quarter of 2020 and net recoveries of $35,000 during the linked third quarter of 2021. Annualized net charge offs (recoveries) to average loans were 0.49% for the fourth quarter of 2021 and 0.02% in the fourth quarter of 2020, and 0.00% for the linked third quarter of 2021. Net charge offs to average loans were 0.09% during the full year of 2021 unchanged from 2020.

Nonperforming assets increased $2.9 million, or 23%, to $15.3 million as of December 31, 2021 versus $12.4 million as of December 31, 2020. On a linked quarter basis, nonperforming assets decreased $16.0 million, or 51%, versus $31.3 million as of September 30, 2021. The net decrease in non-performing assets on a linked quarter basis resulted from net charge offs, net upgrades of non-individually analyzed watchlist credits of $3.3 million as well as recurring loan repayments. The company recorded a $5.2 million charge off in the fourth quarter on a commercial borrower that was downgraded to nonperforming status during the third quarter of 2021. The operations of the borrower, a retailer of party and special event supplies, were severely impacted by the economic conditions resulting from the COVID-19 pandemic. There is no remaining credit exposure to this customer. The ratio of nonperforming assets to total assets at December 31, 2021 increased to 0.23% from 0.21% at December 31, 2020 and decreased from 0.50% at September 30, 2021. Total individually analyzed and watch list loans decreased by $51.7 million, or 18%, to $234.5 million at December 31, 2021 versus $286.1 million as of December 31, 2020. On a linked quarter basis, total individually analyzed and watch list loans decreased by $24.1 million, or 9%, from $258.5 million at September 30, 2021.

“We remain cautiously optimistic on the asset quality front. Clearly, our commercial borrowers continue to feel the impact of inflation, supply chain challenges, workforce availability and readiness, and wage pressures. These are widespread and are impacting every sector of our loan portfolio. Yet, borrowers’ balance sheets are generally healthy and while operating margins are being impacted, our clients are managing through the challenges,” commented Findlay.
1Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”
2Beginning January 1, 2021 calculation is based on the Current Expected Credit Loss methodology (CECL). Prior to January 1, 2021 calculation was based on the incurred loss methodology. 
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Noninterest income of $44.7 million decreased by $2.1 million, or 5%, for the year ended December 31, 2021 as compared to $46.8 million in 2020. The decrease was driven by a $4.1 million reduction in interest rate swap fees and a $2.5 million reduction in mortgage banking income, offset by a $1.8 million increase in loan service fees, a $1.6 million increase in wealth advisory fees, and a $615,000 increase in merchant card fee income. Interest rate swap arrangements have seen a decrease in demand during 2021 and the carrying value of mortgage servicing rights has been impacted by increased prepayment speeds, both due to the current interest rate environment. The increases in fee income were driven by higher transaction volumes and increased economic activity.

Noninterest income decreased $2.1 million, or 18%, to $9.7 million for the fourth quarter of 2021, compared to $11.8 million for the fourth quarter of 2020. Noninterest income was affected by a decrease of $1.3 million in mortgage banking income, or 135%, an $883,000 reduction in interest rate swap fee income, or 90%, and a $530,000 reduction in limited partnership income (a component of other income). These reductions were offset by improved loan and service fee income, which increased by $484,000, or 19%, growth in wealth advisory fees of $443,000, or 24%, and growth in merchant and interchange fee income of $322,000, or 68%. These changes were influenced by the same trends summarized in the preceding paragraph.

Noninterest income decreased by $1.4 million, or 13%, on a linked quarter from $11.1 million. The linked quarter decrease resulted primarily from decreases in limited partnership income of $656,000, mortgage banking income of $307,000, bank owned life insurance income of $273,000 and other noninterest income of $128,000. Offsetting these decreases was an increase in wealth advisory fee income of $140,000.

Noninterest expense increased by $13.1 million, or 14%, to $104.3 million for the year ended December 31, 2021 as compared to $91.2 million for 2020. Salaries and employee benefits increased by $8.5 million, or 17%, due primarily to increased performance-based compensation, increased salaries and increased health insurance expense. Additionally, increased legal fees and costs associated with the digital platform conversion contributed to an overall increase of $1.8 million, or 33%, in professional fees. Corporate and business development expenses increased as the economy re-opened in 2021, and client events and contributions increased in 2021.

Noninterest expense was $24.9 million in the fourth quarter of 2021, up by $14,000 from the fourth quarter of 2020. Corporate and business development expenses increased $285,000, or 37%, due to elevated business development and business contributions as in-person meetings with clients and prospects have resumed. Professional fees expenses increased $198,000, or 11%, over these periods. Offsetting these increases were decreases in salaries and employee benefits expense of $212,000, or 2%, and equipment costs of $154,000, or 10%.

On a linked quarter basis, noninterest expense decreased by $1.0 million, or 4%, from $26.0 million. Salaries and employee benefits decreased by $725,000, or 5%, driven by fluctuations in performance-based incentive compensation expense. Other expense decreased by $631,000, or 23%, due to board semi-annual share grant expense of $421,000 in the third quarter of 2021. Offsetting these decreases was an increase in professional fees of $664,000, or 49%. This was driven primarily by increased legal fees.
The company’s efficiency ratio was 45.6% for the fourth quarter of 2021, compared to 44.1% for the fourth quarter of 2020 and 45.7% for the linked third quarter of 2021. The company's efficiency ratio was 46.8% for the year ended December 31, 2021 compared to 43.5% in the prior year.

Paycheck Protection Program
 
During 2020 and the first half of 2021, the company funded PPP loans totaling $735.6 million for its customers through the PPP programs. In addition, the bank processed forgiveness applications for PPP loans representing 97% of loans originated. As of December 31, 2021, PPP loans outstanding, net of deferred fees, totaled $26.2 million; $3.8 million from PPP round one and $22.3 million from PPP round two. As of December 31, 2021, the SBA has approved forgiveness of, or the borrower had repaid, $709.5 million in PPP loans; $566.7 million for PPP loans originated during round one and $142.8 million for PPP loans originated during round two. As of December 31, 2021, the company had submitted additional PPP forgiveness applications on behalf of customers in the amount of $8.3 million that were awaiting SBA approval.


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 December 31, 2021
 OriginatedForgiven / Repaid
Outstanding (1)
 NumberAmountNumberAmountNumberAmount
PPP Round 12,409$570,500 2,390$566,682 19$3,818 
PPP Round 21,192165,142 1,117142,809 7522,333 
Total3,601$735,642 3,507$709,491 94$26,151 
 
(1)Outstanding balance includes deferred loan origination fees, net of costs, and reflects any loans repaid by borrowers.

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 tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio and pretax pre-provision earnings. A reconciliation of these and other non-GAAP measures to the most comparable GAAP equivalents is 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. Numerous factors could cause the company’s actual results to differ from those reflected in forward-looking statements, including the effects of the COVID-19 pandemic, including its effects on our customers, local economic conditions, our operations and vendors, and the responses of federal, state and local governmental authorities, as well as those identified in the company’s filings with the Securities and Exchange Commission, including the company’s Annual Report on Form 10-K and quarterly reports on Form 10-Q.
 


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LAKELAND FINANCIAL CORPORATION
FOURTH QUARTER 2021 FINANCIAL HIGHLIGHTS
 Three Months EndedTwelve Months Ended
(Unaudited – Dollars in thousands, except per share data)December 31,September 30,December 31,December 31,December 31,
END OF PERIOD BALANCES20212021202020212020
Assets$6,557,323 $6,222,916 $5,830,435 $6,557,323 $5,830,435 
Deposits5,735,407 5,414,638 5,036,805 5,735,407 5,036,805 
Brokered Deposits10,003 11,012 15,002 10,003 15,002 
Core Deposits (1)5,725,404 5,403,626 5,021,803 5,725,404 5,021,803 
Loans4,287,841 4,239,453 4,649,156 4,287,841 4,649,156 
Paycheck Protection Program (PPP) Loans26,151 91,897 412,007 26,151 412,007 
Allowance for Credit Losses (2)67,773 73,048 61,408 67,773 61,408 
Total Equity704,906 683,202 657,184 704,906 657,184 
Goodwill net of deferred tax assets3,794 3,794 3,794 3,794 3,794 
Tangible Common Equity (3)701,112 679,408 653,390 701,112 653,390 
AVERAGE BALANCES
Total Assets$6,397,397 $6,153,334 $5,747,818 $6,153,780 $5,424,796 
Earning Assets6,148,085 5,909,834 5,501,505 5,906,640 5,184,836 
Investments - available-for-sale1,336,492 1,201,657 657,990 1,068,325 633,957 
Loans4,279,262 4,354,104 4,617,912 4,421,094 4,424,472 
Paycheck Protection Program (PPP) Loans62,910 142,917 503,041 237,951 376,785 
Total Deposits5,585,537 5,344,272 4,959,443 5,357,284 4,650,597 
Interest Bearing Deposits3,784,837 3,662,707 3,477,431 3,686,112 3,340,696 
Interest Bearing Liabilities3,859,971 3,737,707 3,568,572 3,761,520 3,437,338 
Total Equity692,396 688,252 644,677 674,637 624,174 
INCOME STATEMENT DATA
Net Interest Income$45,007 $45,741 $44,713 $178,088 $163,008 
Net Interest Income-Fully Tax Equivalent46,140 46,717 45,362 181,675 165,454 
Provision for Credit Losses (2)0 1,300 920 1,077 14,770 
Noninterest Income9,709 11,114 11,782 44,720 46,843 
Noninterest Expense24,926 25,967 24,912 104,287 91,205 
Net Income24,283 24,119 24,592 95,733 84,337 
Pretax Pre-Provision Earnings (3)29,790 30,888 31,583 118,521 118,646 
PER SHARE DATA
Basic Net Income Per Common Share$0.95 $0.95 $0.97 $3.76 $3.31 
Diluted Net Income Per Common Share0.95 0.94 0.97 3.74 3.30 
Cash Dividends Declared Per Common Share0.34 0.34 0.30 1.36 1.20 
Dividend Payout35.79 %36.17 %30.93 %36.36 %36.36 %
Book Value Per Common Share (equity per share issued)27.65 26.80 25.85 27.65 25.85 
Tangible Book Value Per Common Share (3)27.50 26.66 25.70 27.50 25.70 
Market Value – High80.77 73.04 56.28 80.77 56.28 
Market Value – Low71.19 56.06 40.57 50.71 30.49 
Basic Weighted Average Common Shares Outstanding25,486,48425,479,65425,424,30725,475,99425,469,242
Diluted Weighted Average Common Shares Outstanding25,669,04225,635,28825,519,64325,620,10525,573,941
KEY RATIOS
Return on Average Assets1.51 %1.56 %1.70 %1.56 %1.55 %
Return on Average Total Equity13.91 13.90 15.18 14.19 13.51 
Average Equity to Average Assets10.82 11.19 11.22 10.96 11.51 
Net Interest Margin2.98 3.13 3.28 3.07 3.19 
Net Interest Margin, Excluding PPP Loans (3)2.87 2.95 3.12 2.95 3.19 
Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)45.56 45.67 44.10 46.81 43.46 
Tier 1 Leverage (4)10.72 10.91 10.93 10.72 10.93 
Tier 1 Risk-Based Capital (4)14.09 14.18 13.39 14.09 13.39 
Common Equity Tier 1 (CET1) (4)14.09 14.18 13.39 14.09 13.39 
Total Capital (4)15.34 15.44 14.65 15.34 14.65 
Tangible Capital (3) (4)10.70 10.92 11.21 10.70 11.21 
ASSET QUALITY
Loans Past Due 30 - 89 Days$729 $1,245 $1,263 $729 $1,263 
Loans Past Due 90 Days or More117 18 116 117 116 
Non-accrual Loans14,973 30,978 11,986 14,973 11,986 
Nonperforming Loans (includes nonperforming TDRs)15,090 30,996 12,102 15,090 12,102 
Other Real Estate Owned196 316 316 196 316 
Other Nonperforming Assets0 20 0 
Total Nonperforming Assets15,286 31,332 12,424 15,286 12,424 
Performing Troubled Debt Restructurings5,121 4,973 5,237 5,121 5,237 
Nonperforming Troubled Debt Restructurings (included in nonperforming loans)6,218 6,093 6,476 6,218 6,476 
Total Troubled Debt Restructurings11,339 11,066 11,713 11,339 11,713 
Individually Analyzed Loans25,581 41,148 20,177 25,581 20,177 
Non-Individually Analyzed Watch List Loans208,881 217,386 265,970 208,881 265,970 
Total Individually Analyzed and Watch List Loans234,462 258,534 286,147 234,462 286,147 
Gross Charge Offs5,390 90 688 5,983 5,253 
Recoveries115 125 429 2,221 1,239 
Net Charge Offs/(Recoveries)5,275 (35)259 3,762 4,014 
Net Charge Offs/(Recoveries) to Average Loans0.49 %0.00 %0.02 %0.09 %0.09 %
Credit Loss Reserve to Loans (2)1.58 %1.72 %1.32 %1.58 %1.32 %
Credit Loss Reserve to Loans, Excluding PPP Loans (2) (3)1.59 %1.76 %1.45 %1.59 %1.45 %
Credit Loss Reserve to Nonperforming Loans (2)449.13 %235.67 %507.42 %449.13 %507.42 %
Credit Loss Reserve to Nonperforming Loans and Performing TDRs (2)335.33 %203.08 %354.17 %335.33 %354.17 %
Nonperforming Loans to Loans0.35 %0.73 %0.26 %0.35 %0.26 %
Nonperforming Assets to Assets0.23 %0.50 %0.21 %0.23 %0.21 %
Total Individually Analyzed and Watch List Loans to Total Loans5.47 %6.10 %6.15 %5.47 %6.15 %
Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans (3)5.50 %6.23 %6.75 %5.50 %6.75 %
OTHER DATA
Full Time Equivalent Employees582592585582585
Offices5151505150

(1)Core deposits equals deposits less brokered deposits
(2)Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.
(3)Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
(4)Capital ratios for December 31, 2021 are preliminary until the Call Report is filed.
 
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CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
December 31,
2021
December 31,
2020
(Unaudited)
ASSETS
Cash and due from banks$51,830 $74,457 
Short-term investments631,410 175,470 
Total cash and cash equivalents683,240 249,927 
Securities available-for-sale (carried at fair value)1,398,558 734,845 
Real estate mortgage loans held-for-sale7,470 11,218 
Loans, net of allowance for credit losses* of $67,773 and $61,4084,220,068 4,587,748 
Land, premises and equipment, net59,309 59,298 
Bank owned life insurance97,652 95,227 
Federal Reserve and Federal Home Loan Bank stock13,772 13,772 
Accrued interest receivable17,674 18,761 
Goodwill4,970 4,970 
Other assets54,610 54,669 
Total assets$6,557,323 $5,830,435 
LIABILITIES
Noninterest bearing deposits$1,895,481 $1,538,331 
Interest bearing deposits3,839,926 3,498,474 
Total deposits5,735,407 5,036,805 
Borrowings
Federal Home Loan Bank advances75,000 75,000 
Miscellaneous borrowings0 10,500 
Total borrowings75,000 85,500 
Accrued interest payable2,619 5,959 
Other liabilities39,391 44,987 
Total liabilities5,852,417 5,173,251 
STOCKHOLDERS’ EQUITY
Common stock: 90,000,000 shares authorized, no par value
25,777,609 shares issued and 25,300,793 outstanding as of December 31, 2021
25,713,408 shares issued and 25,239,748 outstanding as of December 31, 2020120,615 114,927 
Retained earnings583,134 529,005 
Accumulated other comprehensive income16,093 27,744 
Treasury stock, at cost (476,816 shares and 473,660 shares as of December 31, 2021 and 2020, respectively)(15,025)(14,581)
Total stockholders’ equity704,817 657,095 
Noncontrolling interest89 89 
Total equity704,906 657,184 
Total liabilities and equity$6,557,323 $5,830,435 
 
*Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

 
 
 

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CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2021202020212020
NET INTEREST INCOME
Interest and fees on loans
Taxable$41,253 $45,779 $170,081 $176,538 
Tax exempt146 105 470 647 
Interest and dividends on securities
Taxable2,604 1,554 9,086 6,973 
Tax exempt4,118 2,340 13,033 8,577 
Other interest income201 76 549 368 
Total interest income48,322 49,854 193,219 193,103 
Interest on deposits3,240 5,018 14,827 29,342 
Interest on borrowings
Short-term0 48 7 506 
Long-term75 75 297 247 
Total interest expense3,315 5,141 15,131 30,095 
NET INTEREST INCOME45,007 44,713 178,088 163,008 
Provision for credit losses*0 920 1,077 14,770 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES45,007 43,793 177,011 148,238 
NONINTEREST INCOME
Wealth advisory fees2,317 1,874 8,750 7,468 
Investment brokerage fees415 522 1,975 1,670 
Service charges on deposit accounts2,840 2,658 10,608 10,110 
Loan and service fees3,099 2,615 11,922 10,085 
Merchant card fee income797 475 3,023 2,408 
Bank owned life insurance income366 629 2,467 2,105 
Interest rate swap fee income101 984 1,035 5,089 
Mortgage banking income (loss)(338)966 1,418 3,911 
Net securities gains0 70 797 433 
Other income112 989 2,725 3,564 
Total noninterest income9,709 11,782 44,720 46,843 
NONINTEREST EXPENSE
Salaries and employee benefits13,505 13,717 57,882 49,413 
Net occupancy expense1,385 1,515 5,728 5,851 
Equipment costs1,396 1,550 5,530 5,766 
Data processing fees and supplies2,982 3,128 12,674 11,864 
Corporate and business development1,054 769 4,262 3,093 
FDIC insurance and other regulatory fees535 483 2,242 1,707 
Professional fees2,006 1,808 7,064 5,314 
Other expense2,063 1,942 8,905 8,197 
Total noninterest expense24,926 24,912 104,287 91,205 
INCOME BEFORE INCOME TAX EXPENSE29,790 30,663 117,444 103,876 
Income tax expense5,507 6,071 21,711 19,539 
NET INCOME$24,283 $24,592 $95,733 $84,337 
BASIC WEIGHTED AVERAGE COMMON SHARES$25,486,484 $25,424,307 $25,475,994 $25,469,242 
BASIC EARNINGS PER COMMON SHARE$0.95 $0.97 $3.76 $3.31 
DILUTED WEIGHTED AVERAGE COMMON SHARES$25,669,042 25,519,643 $25,620,105 25,573,941 
DILUTED EARNINGS PER COMMON SHARE$0.95 $0.97 $3.74 $3.30 

*Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

 
 

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LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
(unaudited, in thousands)
December 31,
2021
September 30,
2021
December 31,
2020
Commercial and industrial loans:      
Working capital lines of credit loans$652,861 15.2 %$659,166 15.5 %$626,023 13.5 %
Non-working capital loans736,608 17.2 782,618 18.5 1,165,355 25.0 
Total commercial and industrial loans1,389,469 32.4 1,441,784 34.0 1,791,378 38.5 
Commercial real estate and multi-family residential loans:      
Construction and land development loans379,813 8.9 378,716 8.9 362,653 7.8 
Owner occupied loans739,371 17.2 740,836 17.4 648,019 13.9 
Nonowner occupied loans588,458 13.7 582,019 13.7 579,625 12.5 
Multifamily loans247,204 5.8 252,983 6.0 304,717 6.5 
Total commercial real estate and multi-family residential loans1,954,846 45.6 1,954,554 46.0 1,895,014 40.7 
Agri-business and agricultural loans:      
Loans secured by farmland206,331 4.8 152,099 3.5 195,410 4.2 
Loans for agricultural production239,494 5.6 171,981 4.1 234,234 5.0 
Total agri-business and agricultural loans445,825 10.4 324,080 7.6 429,644 9.2 
Other commercial loans73,490 1.7 83,595 2.0 94,013 2.0 
Total commercial loans3,863,630 90.1 3,804,013 89.6 4,210,049 90.4 
Consumer 1-4 family mortgage loans:      
Closed end first mortgage loans176,561 4.1 173,689 4.1 167,847 3.6 
Open end and junior lien loans156,238 3.6 161,941 3.8 163,664 3.5 
Residential construction and land development loans11,921 0.3 12,542 0.3 12,007 0.3 
Total consumer 1-4 family mortgage loans344,720 8.0 348,172 8.2 343,518 7.4 
Other consumer loans82,755 1.9 92,169 2.2 103,616 2.2 
Total consumer loans427,475 9.9 440,341 10.4 447,134 9.6 
Subtotal4,291,105 100.0 %4,244,354 100.0 %4,657,183 100.0 %
Less:  Allowance for credit losses (1)(67,773) (73,048) (61,408) 
Net deferred loan fees(3,264) (4,901) (8,027) 
Loans, net$4,220,068  $4,166,405  $4,587,748  
 
(1)Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.
 
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
(unaudited, in thousands)
 
December 31,
2021
September 30,
2021
December 31,
2020
Noninterest bearing demand deposits$1,895,481 $1,762,021 $1,538,331 
Savings and transaction accounts:   
Savings deposits409,343 375,993 312,702 
Interest bearing demand deposits2,601,065 2,411,722 2,160,953 
Time deposits:  
Deposits of $100,000 or more627,123 658,050 785,238 
Other time deposits202,395 206,852 239,581 
Total deposits$5,735,407 $5,414,638 $5,036,805 
FHLB advances and other borrowings75,000 75,000 85,500 
Total funding sources$5,810,407 $5,489,638 $5,122,305 
 
 
 
 

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LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED) 
Three Months Ended December 31, 2021Three months ended September 30, 2021Three Months Ended December 31, 2020
(fully tax equivalent basis, dollars in thousands)Average BalanceInterest IncomeYield (1)/
Rate
Average BalanceInterest IncomeYield (1)/
Rate
Average BalanceInterest IncomeYield (1)/
Rate
Earning Assets         
Loans:         
Taxable (2)(3)$4,260,960 $41,253 3.84 %$4,339,792 $43,025 3.93 %$4,604,704 $45,779 3.96 %
Tax exempt (1)18,302 184 3.99 14,312 150 4.16 13,208 132 3.97 
Investments: (1)     
Available-for-sale1,336,492 7,817 2.32 1,201,657 6,971 2.30 657,990 4,516 2.73 
Short-term investments2,201 1 0.11 2,304 0.00 2,334 0.17 
Interest bearing deposits530,130 200 0.15 351,769 125 0.14 223,269 75 0.13 
Total earning assets$6,148,085 $49,455 3.19 %$5,909,834 $50,271 3.37 %$5,501,505 $50,503 3.65 %
Less:  Allowance for credit losses (4)(72,972)  (72,157)(61,438)  
Nonearning Assets      
Cash and due from banks72,908   67,715 66,851   
Premises and equipment59,712   59,824 59,942   
Other nonearning assets189,664   188,118 180,958   
Total assets$6,397,397   $6,153,334 $5,747,818   
Interest Bearing Liabilities      
Savings deposits$384,229 $74 0.08 %$369,191 $71 0.08 %$297,832 $57 0.08 %
Interest bearing checking accounts2,563,557 1,854 0.29 2,390,462 1,712 0.28 2,058,069 1,585 0.31 
Time deposits:     
In denominations under $100,000203,706 388 0.76 211,911 457 0.86 242,846 792 1.30 
In denominations over $100,000633,345 924 0.58 691,143 1,239 0.71 878,684 2,584 1.17 
Miscellaneous short-term borrowings134 0 0.00 0.00 16,141 48 1.18 
  Long-term borrowings and subordinated debentures75,000 75 0.40 75,000 75 0.40 75,000 75 0.40 
Total interest bearing liabilities$3,859,971 $3,315 0.34 %$3,737,707 $3,554 0.38 %$3,568,572 $5,141 0.57 %
Noninterest Bearing Liabilities      
Demand deposits1,800,700   1,681,565 1,482,012   
Other liabilities44,330   45,810 52,557   
Stockholders' Equity692,396   688,252 644,677   
Total liabilities and stockholders' equity$6,397,397   $6,153,334 $5,747,818   
Interest Margin Recap      
Interest income/average earning assets 49,455 3.19 50,271 3.37  50,503 3.65 
Interest expense/average earning assets 3,315 0.21 3,554 0.24  5,141 0.37 
Net interest income and margin $46,140 2.98 %$46,717 3.13 % $45,362 3.28 %
 
(1)Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. 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 $1.13 million, $976,000 and $649,000 in the three-month periods ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.
(2)Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $2.02 million, $3.57 million, and $5.21 million for the three-month periods ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively. All other loan fees were immaterial in relation to total taxable loan interest income for the periods presented.
(3)Nonaccrual loans are included in the average balance of taxable loans.
(4)Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.
  

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Reconciliation of Non-GAAP Financial Measures
 
The allowance for credit losses (1) to total loans, excluding PPP loans, and total individually analyzed and watch list loans to total loans, excluding PPP loans, are non-GAAP ratios that management believes are important because they provide better comparability to prior periods. PPP loans are fully guaranteed by the SBA and have not been allocated for within the allowance for credit losses (1).
 
A reconciliation of these non-GAAP measures is provided below (dollars in thousands).
 
Three Months Ended
December 31,
2021
September 30,
2021
December 31,
2020
Total Loans$4,287,841 $4,239,453 $4,649,156 
Less: PPP Loans26,151 91,897 412,007 
Total Loans, Excluding PPP Loans4,261,690 4,147,556 4,237,149 
Allowance for Credit Losses (1)$67,773 $73,048 $61,408 
Credit Loss Reserve to Total Loans (1)1.58 %1.72 %1.32 %
Credit Loss Reserve to Total Loans, Excluding PPP Loans (1)1.59 %1.76 %1.45 %
Total Individually Analyzed and Watch List Loans$234,462 $258,534 $286,147 
Total Individually Analyzed and Watch List Loans to Total Loans5.47 %6.10 %6.15 %
Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans5.50 %6.23 %6.75 %
 
(1)Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.
 
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Tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio and pretax pre-provision earnings 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 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 less true treasury stock. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. 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 EndedTwelve Months Ended
Dec. 31, 2021Sep. 30, 2021Dec. 31, 2020Dec. 31, 2021Dec. 31, 2020
Total Equity$704,906 $683,202 $657,184 $704,906 $657,184 
Less: Goodwill(4,970)(4,970)(4,970)(4,970)(4,970)
Plus: Deferred tax assets related to goodwill1,176 1,176 1,176 1,176 1,176 
Tangible Common Equity701,112 679,408 653,390 701,112 653,390 
Assets$6,557,323 $6,222,916 $5,830,435 $6,557,323 $5,830,435 
Less: Goodwill(4,970)(4,970)(4,970)(4,970)(4,970)
Plus: Deferred tax assets related to goodwill1,176 1,176 1,176 1,176 1,176 
Tangible Assets6,553,529 6,219,122 5,826,641 6,553,529 5,826,641 
Ending common shares issued25,488,508 25,486,032 25,424,307 25,488,508 25,424,307 
Tangible Book Value Per Common Share$27.50 $26.66 $25.70 $27.50 $25.70 
Tangible Common Equity/Tangible Assets10.70 %10.92 %11.21 %10.70 %11.21 %
Net Interest Income$45,007 $45,741 $44,713 $178,088 $163,008 
Plus:  Noninterest income9,709 11,114 11,782 44,720 46,843 
Minus:  Noninterest expense(24,926)(25,967)(24,912)(104,287)(91,205)
Pretax Pre-Provision Earnings$29,790 $30,888 $31,583 $118,521 $118,646 
 


 
 
 
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Net interest margin on a fully-tax equivalent basis, net of PPP loan impact, is a non-GAAP measure that management believes is important because it provides for better comparability to prior periods. Because PPP loans have a low fixed interest rate of 1.0% and because the accretion of net loan fee income can be accelerated upon borrower forgiveness and repayment by the SBA, management is actively monitoring net interest margin on a fully tax equivalent basis with and without PPP loan impact for the duration of this program.
 
A reconciliation of this non-GAAP financial measure is provided below (dollars in thousands).
 
Impact of Paycheck Protection Program on Net Interest Margin FTE
 
 
 Three Months EndedTwelve Months Ended
Dec. 31, 2021Sep. 30, 2021Dec. 31, 2020Dec. 31, 2021Dec. 31, 2020
Total Average Earnings Assets$6,148,085 $5,909,834 $5,501,505 $5,906,640 $5,184,836 
Less: Average Balance of PPP Loans(62,910)(142,917)(503,041)(237,951)(376,785)
Total Adjusted Earning Assets6,085,175 5,766,917 4,998,464 5,668,689 4,808,051 
Total Interest Income FTE$49,455 $50,271 $50,503 $196,806 $195,549 
Less: PPP Loan Income(2,182)(3,946)(6,509)(14,945)(12,832)
Total Adjusted Interest Income FTE47,273 46,325 43,994 181,861 182,717 
Adjusted Earning Asset Yield, net of PPP Impact3.08 %3.19 %3.50 %3.21 %3.80 %
Total Average Interest Bearing Liabilities$3,859,971 $3,737,707 $3,568,572 $3,761,520 $3,437,338 
Less: Average Balance of PPP Loans(62,910)(142,917)(503,041)(237,951)(376,785)
Total Adjusted Interest Bearing Liabilities3,797,061 3,594,790 3,065,531 3,523,569 3,060,553 
Total Interest Expense FTE$3,315 $3,554 $5,141 $15,131 $30,095 
Less: PPP Cost of Funds(40)(90)(320)(595)(956)
Total Adjusted Interest Expense FTE3,275 3,464 4,821 14,536 29,139 
Adjusted Cost of Funds, net of PPP Impact0.21 %0.24 %0.38 %0.26 %0.61 %
Net Interest Margin FTE, net of PPP Impact2.87 %2.95 %3.12 %2.95 %3.19 %
 

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