UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
| FORM | ||||||||
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 25, 2022
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
| , | |||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(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 | ||||||||||||
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 July 25, 2022, Lakeland Financial Corporation (the “Company”) issued a press release announcing its earnings for the three months and six months ended June 30, 2022. 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
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: July 25, 2022 | By: | /s/ Lisa M. O’Neill | ||||||
| Lisa M. O’Neill | ||||||||
| Executive Vice President | ||||||||
| and Chief Financial Officer | ||||||||
 | 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 Second Quarter 2022 Performance; Year-to-Date Record Net Income Improves by 4% to $49.3 million
Warsaw, Indiana (July 25, 2022) – Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record second quarter net income of $25.7 million for the three months ended June 30, 2022, an increase of 5%, or $1.3 million, versus $24.3 million for the second quarter of 2021. Diluted earnings per share increased 5% to $1.00 for the second quarter of 2022, versus $0.95 for the second quarter of 2021. On a linked quarter basis, net income increased 9%, or $2.0 million, from the first quarter of 2022 in which the company had net income of $23.6 million, or $0.92 diluted earnings per share. Pretax pre-provision earnings, which is a non-GAAP financial measure, were $31.3 million for the second quarter of 2022, an increase of 10%, or $2.9 million, from $28.4 million for the second quarter of 2021. On a linked quarter basis, pretax pre-provision earnings increased 9%, or $2.7 million, from $28.6 million for the first quarter of 2022.
The company further reported record net income of $49.3 million for the six months ended June 30, 2022 versus $47.3 million for the comparable period of 2021, an increase of 4%, or $2.0 million. Diluted earnings per share also increased 4% to $1.92 for the six months ended June 30, 2022 versus $1.85 for the comparable period of 2021. Pretax pre-provision earnings were $59.9 million for the six months ended June 30, 2022, versus $57.8 million for the comparable period of 2021, an increase of 3%, or $2.0 million.
David M. Findlay, President and Chief Executive Officer commented, “On May 14th, we began a yearlong celebration of Lake City Bank's 150th anniversary. On a spring day in 1872, a group of investors came together to form Lake City Bank, and that name has been on the door ever since. We are proud of our history as a community bank and our exceptional track record of serving the Indiana communities where we live and work. Our 150th anniversary celebration will focus on our Lake City Bank team members and those communities and kicked off with a $150,000 donation given in $10,000 increments to the community foundations in the 15 Indiana Counties we serve.”
Findlay continued, “Our record results for the quarter and first six months of 2022 reflect our disciplined and consistent track record of strong operating performance. Our long history of organic balance sheet growth continued in the quarter with healthy loan growth and our asset sensitive balance sheet benefitted from the Federal Reserve's interest rate actions during the first six months of 2022.”
Financial Performance – Second Quarter 2022
Second Quarter 2022 versus Second Quarter 2021 highlights:
•Return on average equity of 17.65%, compared to 14.71%
•Return on average assets of 1.59%, compared to 1.58%
•Core loan growth, excluding PPP loans, of $260.0 million, or 6%
•Core deposit growth of $226.9 million, or 4%
•Noninterest bearing demand deposit account growth of $54.6 million, or 3%
•Net interest income increase of $5.0 million, or 11%
•Net interest margin expansion of 25 basis points to 3.26% compared to 3.01%
•Provision expense of $0 compared to a reverse provision of $1.7 million
•Noninterest expense increase of $1.3 million, or 5%
•Dividend per share increase of 18%, or $0.06 per share, to $0.40 from $0.34
•Watch list loans decreased by $68.5 million, or 26%, from $260.5 million to $192.1 million
•Total risk-based capital ratio of 15.15% compared to 15.04%
•Tangible capital ratio of 8.92% compared to 10.81%
1
Second Quarter 2022 versus First Quarter 2022 highlights:
•Return on average equity of 17.65%, compared to 14.04%
•Return on average assets of 1.59% compared to 1.44%
•Core loan growth, excluding PPP loans, of $78.3 million, or 2%
•Core deposit reduction of $198.8 million, or 3%
•Noninterest bearing demand deposit account contraction of $82.8 million, or 4%
•Net interest income increase of $3.8 million, or 8%
•Net interest margin expansion of 33 basis points to 3.26% compared to 2.93%
•Provision expense of $0 compared to provision expense of $417,000
•Noninterest expense increase of $944,000, or 4%
•Watch list loans decreased by $26.7 million, or 12%, from $218.8 million to $192.1 million
•Total risk-based capital of 15.15% at the end of each period
•Tangible capital ratio of 8.92% compared to 9.22%
As announced on July 12, 2022, the board of directors approved a cash dividend for the second quarter of $0.40 per share, payable on August 5, 2022, to shareholders of record as of July 25, 2022. The second quarter dividend per share of $0.40 is unchanged from the dividend per share paid for the first quarter of 2022 and reflects an 18% increase from the dividend rate a year ago.
Return on average total equity for the second quarter of 2022 was 17.65%, compared to 14.71% in the second quarter of 2021 and 14.04% in the linked first quarter of 2022. Return on average assets for the second quarter of 2022 was 1.59%, compared to 1.58% in the second quarter of 2021 and 1.44% in the linked first quarter of 2022. The company’s total capital as a percent of risk-weighted assets was 15.15% at June 30, 2022, compared to 15.04% at June 30, 2021 and 15.15% at March 31, 2022.
“The strength of our balance sheet continues to support the significant increase in our dividend to shareholder and our record profitability further bolstered our fortress balance sheet,” Findlay stated.
The company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 8.92% at June 30, 2022, compared to 10.81% at June 30, 2021 and 9.22% at March 31, 2022. Tangible equity and tangible assets have been negatively impacted by the decline in market value of the company's available-for-sale investment securities portfolio. The market value decline was a result of the yield curve steepening during the first half of 2022. The increase in market interest rates led to an unrealized loss in market value of $175.6 million as of June 30, 2022, compared to an unrealized gain in market value of $29.9 million at June 30, 2021 and an unrealized loss in market value of $117.4 million at March 31, 2022. When excluding the impact of accumulated other comprehensive income on tangible common equity, the company's adjusted tangible common equity to adjusted tangible assets ratio was 11.08% at June 30, 2022 compared to 10.49% at June 30, 2021 and 10.44% at March 31, 2022.
The company elected to transfer $151.4 million of municipal bonds from the available-for-sale securities portfolio to held-to-maturity designation on April 1, 2022 as a balance sheet management strategy.
Average total loans, excluding PPP loans, were $4.42 billion for the second quarter of 2022 compared to $4.14 billion for the second quarter of 2021, an increase of $276.4 million, or 7%. On a linked quarter basis, average total loans, excluding PPP loans, increased by $132.7 million, or 3%.
“Core loan growth was encouraging this quarter and included gross commercial originations in excess of $548 million. Although the commercial line utilization rate remained unchanged at 43% on a linked quarter basis, our commercial lines increased by $105 million, while line usage increased by $59 million in the second quarter. Notably, the loan pipeline remains encouraging,” added Findlay.
Average total loans were $4.43 billion in the second quarter of 2022, an increase of $124.8 million, or 3%, from $4.30 billion for the first quarter of 2022, and a decrease of $62.0 million, or 1%, from $4.49 billion for the second quarter 2021. PPP average loan forgiveness of $338.4 million during the past 12 months brought PPP average loan balances to $9.7 million during the second quarter of 2022, compared to $348.0 million average PPP loans during the second quarter of 2021.
Total loans, excluding PPP loans, increased by $260.0 million, or 6%, as of June 30, 2022 compared to June 30, 2021. On a linked quarter basis, total loans, excluding PPP loans, were $4.42 billion as of June 30, 2022, an increase of $78.3 million, or
2
2%, as compared to March 31, 2022. Total loans outstanding increased by $71.0 million, or 2%, from $4.35 billion as of June 30, 2021 to $4.42 billion as of June 30, 2022, due primarily to organic loan growth of $260.0 million and offset by PPP loan forgiveness of $189.0 million. PPP loans outstanding were $5.2 million as of June 30, 2022, $12.5 million as of March 31, 2022, and $194.2 million as of June 30, 2021.
Average total deposits were $5.75 billion for the second quarter of 2022, an increase of $365.3 million, or 7%, versus $5.39 billion for the second quarter of 2021. On a linked quarter basis, average total deposits decreased by $96.1 million, or 2%. Total deposits increased $226.9 million, or 4%, from $5.39 billion as of June 30, 2021 to $5.62 billion as of June 30, 2022. On a linked quarter basis, total deposits decreased by $199.0 million, or 3%, from $5.82 billion as of March 31, 2022.
Core deposits, which exclude brokered deposits, increased by $226.9 million, or 4%, from $5.38 billion at June 30, 2021 to $5.61 billion at June 30, 2022. This increase was due to growth in public fund deposits of $182.8 million, or 14%; growth in retail deposits of $73.8 million, or 4%; and contraction in commercial deposits of $29.7 million, or 1%. On a linked quarter basis, core deposits decreased by $198.8 million, or 3%, at June 30, 2022 compared to March 31, 2022. Linked quarter decreases resulted from commercial deposit contraction of $189.7 million, an 8% decrease; retail deposit contraction of $126.7 million, a 6% decrease; and public funds growth of $117.6 million, a 9% increase.
Investment securities were $1.43 billion at June 30, 2022, an increase of $303.8 million, or 27%, as compared to $1.12 billion at June 30, 2021. Investment securities represented 23% of total assets on June 30, 2022 compared to 18% on June 30, 2021 and 23% on March 31, 2022. The company paused additions to the investment securities portfolio at the end of the second quarter as excess liquidity on the balance sheet was reduced by loan growth and deposit outflows during the quarter. The company expects to use cash flows from the investment securities portfolio to help fund loan growth and for the investment securities portfolio to represent a lower percent of total assets over time.
Findlay added, “We are pleased that excess liquidity on our balance sheet declined by $305 million during the quarter due to the combined effects of loan growth and commercial deposit outflows. The improvement in the loan to deposit ratio to 79% from 75% in March is also an encouraging development.”
The company’s net interest margin increased 25 basis points to 3.26% for the second quarter of 2022 compared to 3.01% for the second quarter of 2021. The increased margin in the second quarter of 2022 compared to the prior year period was due to higher yields on loans, partially offset by a higher cost of funds. The higher yields were driven by three Federal Reserve Bank increases to the target Federal Funds rate in March, May, and June of 2022. The overall effect of these rate increases raised the Federal Funds rate by a cumulative 150 basis points and increased the target Federal Funds rate range from a zero-bound range of 0.00% - 0.25% prior to the first rate increase in March of 2022 to a range of 1.50 - 1.75% at June 30, 2022.
Total PPP loan income recognized for the second quarter of 2022 was $204,000 compared to $3.7 million for the second quarter of 2021, a decrease of 94%. PPP interest and fees had a nominal impact on the second quarter 2022 net interest margin compared to net interest margin compression of 6 basis points for the second quarter 2021. Despite the decrease in PPP loan fee income, earning asset yields increased 30 basis points from 3.28% for the second quarter of 2021 to 3.58% for the second quarter of 2022. Offsetting the increased yield on earning assets was an increase to the company's cost of funds of 5 basis points. Interest expense as a percentage of earning assets increased to 0.32% for the three-month period ended June 30, 2022, from 0.27% for the three-month period ended June 30, 2021.
Linked quarter net interest margin was 33 basis points higher at 3.26% for the second quarter of 2022 compared to 2.93% for the first quarter of 2022. Earning asset yields increased by 45 basis points. Interest expense as a percentage of earning assets increased 12 basis points for the three-month period ended June 30, 2022, from a historical low of 0.20% for the three-month period ended March 31, 2022.
Net interest income increased by $5.0 million, or 11%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. On a linked quarter basis, net interest income increased $3.8 million, or 8%, from the first quarter of 2022. PPP loan income, including interest and fees, was $204,000 for the second quarter of 2022, compared to $3.7 million for the second quarter of 2021, and $505,000 during the first quarter of 2022. Net interest income increased by $6.2 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 due primarily to an increase in investment security income of $7.2 million offset by a decline in loan interest income of $1.7 million.
3
“The aggressive Federal Reserve Bank tightening during the second quarter and the resulting benefit to net interest margin highlighted our balance sheet sensitivity to market interest rates. Commercial loan yields improved by 28 basis points from 3.76% to 4.04% during the quarter,” Findlay stated.
The company recorded no provision for credit losses in the second quarter of 2022, compared to a reverse provision of $1.7 million in the second quarter of 2021. On a linked quarter basis, provision expense was $417,000 in the first quarter of 2022. Provision expense was $417,000 for the six months ended June 30, 2022, compared to reverse provision of $223,000 for the prior six-month period ended June 30, 2021. The company’s credit loss reserve to total loans was 1.53% at June 30, 2022 versus 1.65% at June 30, 2021 and 1.55% at March 31, 2022. The company’s credit loss reserve to total loans excluding PPP loans, which is a non-GAAP financial measure, was 1.53% at June 30, 2022 versus 1.72% at June 30, 2021 and 1.56% at March 31, 2022.
Net charge offs in the second quarter of 2022 were $3,000 versus net recoveries of $1.6 million in the second quarter of 2021 and net charge offs of $664,000 during the linked first quarter of 2022. Annualized net charge offs (recoveries) to average loans were 0.00% for the second quarter of 2022, (0.14%) for the second quarter of 2021, and 0.06% for the linked first quarter of 2022. Net charge offs were $667,000 for the six months ended June 30, 2022 compared to $1.5 million net recoveries recorded in the prior year six month period ending June 30, 2021. Annualized net charge offs as a percentage of average loans was 0.03% for the six months ended June 30, 2022 compared to net recoveries as a percent of average loans of 0.07% for the six months ended June 30, 2021.
Nonperforming assets increased $1.0 million, or 8%, to $12.8 million as of June 30, 2022 versus $11.8 million as of June 30, 2021. On a linked quarter basis, nonperforming assets decreased $1.3 million, or 9%, versus the $14.1 million reported as of March 31, 2022. The ratio of nonperforming assets to total assets at June 30, 2022 increased to 0.20% from 0.19% at June 30, 2021 and decreased from 0.22% at March 31, 2022. Total individually analyzed and watch list loans decreased by $68.5 million, or 26%, to $192.1 million at June 30, 2022 versus $260.5 million as of June 30, 2021. On a linked quarter basis, total individually analyzed and watch list loans decreased by $26.7 million, or 12%, from $218.8 million at March 31, 2022, due primarily to borrower risk rating upgrades.
Findlay commented, “We are pleased to report that watch list loans have decreased for six consecutive quarters. Further, the semi-annual commercial loan portfolio reviews notably did not include any borrower downgrades. We are closely monitoring the impact of ongoing supply chain challenges, the impact of inflation and rising interest rates on our borrowers, and broader economic conditions. While we are pleased with our overall loan quality measures, we will continue to look for any signs of a potential recession. Finally, as we always have, we will maintain our disciplined credit approval process.”
The company’s noninterest income decreased $848,000, or 7%, to $10.5 million for the second quarter of 2022, compared to $11.3 million for the second quarter of 2021. Noninterest income was positively impacted by elevated service charges on deposit accounts which increased by $361,000, or 14%, as a result of increased economic activity in the company's operating footprint. In addition, loan and service fee income increased by $153,000, or 5%; merchant card fee income increased by $138,000, or 18%; and wealth advisory fees increased by $126,000, or 6%. Driving the decrease was a reduction of $888,000 in bank owned life insurance income related to the company's variable life insurance policies. These policies are tied to the equity markets and can be subject to volatility based on market performance. In addition, other income decreased $445,000, which was caused by a reduction in income recognized during the quarter related to various limited partnership investment holdings and other non-recurring items.
Noninterest income decreased by $195,000, or 2%, on a linked quarter basis from $10.7 million. The linked quarter decrease resulted primarily from a decrease in other income of $648,000 and a decrease in mortgage banking income of $158,000, or 31%. The decrease in other income was driven by a decrease in income recognized during the quarter related to various limited partnership and low-income housing investment holdings. The decrease in mortgage banking income was caused by a decrease in volume due to a slowdown in demand as a result of the higher rate environment. Offsetting these decreases was an increase in loan and service fees of $306,000, or 11%, driven by increased interchange fee income, and an increase in interest rate swap fee income of $304,000.
Noninterest income decreased by $2.7 million to $21.2 million for the six months ended June 30, 2022, compared to $23.9 million for the prior year six month period. Notably, wealth advisory fees improved by 6%, service charges on deposit accounts improved by 14%, loan and service fees improved by 5% and merchant card fee income improved by 24%. The decrease in noninterest income resulted primarily from reduced bank owned life insurance income of $1.7 million due to decline in the
4
equity markets as well as $1 million decline in mortgage banking income due to the impact of rising interest rates on reduced mortgage loan origination volumes.
The company’s noninterest expense increased by $1.3 million, or 5% to $27.9 million in the second quarter of 2022, compared to $26.6 million in the second quarter of 2021. Other expense increased $1.4 million driven by accruals for ongoing legal matters. In addition, corporate and business development expenses increased $734,000, or 105%, and net occupancy expense increased $261,000, or 18%. The increase in corporate and business development expenses was primarily a result of increased sponsorships and contributions, including $150,000 given in $10,000 increments to the 15 community foundations in our market footprint in recognition of Lake City Bank's 150th anniversary. In addition, corporate and business development expense reflects higher advertising costs and increased client development expense. The increase to net occupancy expense was caused by budgeted repairs to company facilities. Salaries and employee benefits decreased by $964,000, or 6%, and professional fees decreased $425,000, or 23%. The decrease to salary and benefits was driven by reduced deferred compensation expense, which is tied to equity market performance, and the reduction in professional fees was a result of reduced legal expenses during the second quarter of 2022.
On a linked quarter basis, noninterest expense increased by $944,000, or 4%, from $27.0 million. Salaries and employee benefits increased $406,000, or 3%, based on an increase in compensation for every hourly employee in the bank during the first quarter of 2022 in response to the competitive workforce environment and the impact of inflation on the employee base. Corporate and business development increased $214,000, or 18%, primarily driven by contributions associated with the company's sesquicentennial celebration. FDIC insurance and other regulatory fees increased $180,000, or 41%, due to increased FDIC premiums caused by fluctuations in the bank's capital position and asset size. Offsetting these increases was a decrease in professional fees of $145,000, or 9%, due to a decrease in legal expense incurred during the quarter.
Noninterest expense increased by $1.5 million, or 3%, for the six months ended June 30, 2022, from $53.4 million to $54.9 million. The increase was due primarily to an increase of $2.4 million in other expense, offset by decreases in salaries and benefits of $957,000 and a $743,000 reduction in professional fees. The company’s efficiency ratio was 47.2% for the second quarter of 2022, compared to 48.5% for the second quarter of 2021 and 48.5% for the linked first quarter of 2022.
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 governmental monetary and fiscal policies and the impact on the current economic environment, 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.
5
LAKELAND FINANCIAL CORPORATION
SECOND QUARTER 2022 FINANCIAL HIGHLIGHTS
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| (Unaudited – Dollars in thousands, except per share data) | June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||||||||
| END OF PERIOD BALANCES | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
| Assets | $ | 6,265,087 | $ | 6,572,259 | $ | 6,232,914 | $ | 6,265,087 | $ | 6,232,914 | |||||||||||||||||||
| Deposits | 5,621,584 | 5,820,623 | 5,394,664 | 5,621,584 | 5,394,664 | ||||||||||||||||||||||||
| Brokered Deposits | 10,008 | 10,244 | 10,004 | 10,008 | 10,004 | ||||||||||||||||||||||||
| Core Deposits (1) | 5,611,576 | 5,810,379 | 5,384,660 | 5,611,576 | 5,384,660 | ||||||||||||||||||||||||
| Loans | 4,424,699 | 4,353,714 | 4,353,709 | 4,424,699 | 4,353,709 | ||||||||||||||||||||||||
| PPP Loans | 5,219 | 12,506 | 194,212 | 5,219 | 194,212 | ||||||||||||||||||||||||
| Allowance for Credit Losses | 67,523 | 67,526 | 71,713 | 67,523 | 71,713 | ||||||||||||||||||||||||
| Total Equity | 562,063 | 609,102 | 677,471 | 562,063 | 677,471 | ||||||||||||||||||||||||
| Goodwill net of deferred tax assets | 3,803 | 3,803 | 3,794 | 3,803 | 3,794 | ||||||||||||||||||||||||
| Tangible Common Equity (2) | 558,260 | 605,299 | 673,677 | 558,260 | 673,677 | ||||||||||||||||||||||||
| AVERAGE BALANCES | |||||||||||||||||||||||||||||
| Total Assets | $ | 6,460,888 | $ | 6,651,943 | $ | 6,171,427 | $ | 6,555,888 | $ | 6,030,178 | |||||||||||||||||||
| Earning Assets | 6,157,051 | 6,392,075 | 5,924,801 | 6,273,914 | 5,782,293 | ||||||||||||||||||||||||
| Investments | 1,476,144 | 1,514,024 | 955,242 | 1,494,979 | 864,250 | ||||||||||||||||||||||||
| Loans | 4,425,713 | 4,300,926 | 4,487,683 | 4,363,664 | 4,527,234 | ||||||||||||||||||||||||
| PPP Loans | 9,665 | 17,555 | 348,026 | 13,588 | 375,226 | ||||||||||||||||||||||||
| Total Deposits | 5,752,519 | 5,848,638 | 5,387,185 | 5,800,313 | 5,247,878 | ||||||||||||||||||||||||
| Interest Bearing Deposits | 3,927,191 | 3,882,521 | 3,753,499 | 3,904,979 | 3,647,826 | ||||||||||||||||||||||||
| Interest Bearing Liabilities | 3,981,587 | 3,957,547 | 3,828,499 | 3,969,634 | 3,723,580 | ||||||||||||||||||||||||
| Total Equity | 583,324 | 682,692 | 663,993 | 632,733 | 658,690 | ||||||||||||||||||||||||
| INCOME STATEMENT DATA | |||||||||||||||||||||||||||||
| Net Interest Income | $ | 48,678 | $ | 44,880 | $ | 43,661 | $ | 93,558 | $ | 87,340 | |||||||||||||||||||
| Net Interest Income-Fully Tax Equivalent | 50,079 | 46,148 | 44,452 | 96,227 | 88,818 | ||||||||||||||||||||||||
| Provision for Credit Losses | 0 | 417 | (1,700) | 417 | (223) | ||||||||||||||||||||||||
| Noninterest Income | 10,492 | 10,687 | 11,340 | 21,179 | 23,897 | ||||||||||||||||||||||||
| Noninterest Expense | 27,913 | 26,969 | 26,648 | 54,882 | 53,394 | ||||||||||||||||||||||||
| Net Income | 25,673 | 23,642 | 24,348 | 49,315 | 47,331 | ||||||||||||||||||||||||
| Pretax Pre-Provision Earnings (2) | 31,257 | 28,598 | 28,353 | 59,855 | 57,843 | ||||||||||||||||||||||||
| PER SHARE DATA | |||||||||||||||||||||||||||||
| Basic Net Income Per Common Share | $ | 1.00 | $ | 0.93 | $ | 0.96 | $ | 1.93 | $ | 1.86 | |||||||||||||||||||
| Diluted Net Income Per Common Share | 1.00 | 0.92 | 0.95 | 1.92 | 1.85 | ||||||||||||||||||||||||
| Cash Dividends Declared Per Common Share | 0.40 | 0.40 | 0.34 | 0.80 | 0.68 | ||||||||||||||||||||||||
| Dividend Payout | 40.00 | % | 43.48 | % | 35.79 | % | 41.67 | % | 36.76 | % | |||||||||||||||||||
| Book Value Per Common Share (equity per share issued) | 22.01 | 23.86 | 26.59 | 22.01 | 26.59 | ||||||||||||||||||||||||
| Tangible Book Value Per Common Share (2) | 21.87 | 23.71 | 26.45 | 21.87 | 26.45 | ||||||||||||||||||||||||
| Market Value – High | 79.14 | 85.71 | 70.25 | 85.71 | 77.05 | ||||||||||||||||||||||||
| Market Value – Low | 64.84 | 72.78 | 57.02 | 64.84 | 53.03 | ||||||||||||||||||||||||
| Basic Weighted Average Common Shares Outstanding | 25,527,896 | 25,515,271 | 25,473,497 | 25,521,618 | 25,465,621 | ||||||||||||||||||||||||
| Diluted Weighted Average Common Shares Outstanding | 25,697,577 | 25,690,372 | 25,602,063 | 25,699,908 | 25,596,843 | ||||||||||||||||||||||||
| KEY RATIOS | |||||||||||||||||||||||||||||
| Return on Average Assets | 1.59 | % | 1.44 | % | 1.58 | % | 1.52 | % | 1.58 | % | |||||||||||||||||||
| Return on Average Total Equity | 17.65 | 14.04 | 14.71 | 15.72 | 14.49 | ||||||||||||||||||||||||
| Average Equity to Average Assets | 9.03 | 10.26 | 10.76 | 9.65 | 10.92 | ||||||||||||||||||||||||
| Net Interest Margin | 3.26 | 2.93 | 3.01 | 3.09 | 3.10 | ||||||||||||||||||||||||
| Net Interest Margin, Excluding PPP Loans (2) | 3.26 | 2.90 | 2.95 | 3.08 | 3.00 | ||||||||||||||||||||||||
| Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) | 47.17 | 48.53 | 48.45 | 47.83 | 48.00 | ||||||||||||||||||||||||
| Tier 1 Leverage (3) | 10.83 | 10.47 | 10.59 | 10.83 | 10.59 | ||||||||||||||||||||||||
| Tier 1 Risk-Based Capital (3) | 13.90 | 13.90 | 13.79 | 13.90 | 13.79 | ||||||||||||||||||||||||
| Common Equity Tier 1 (CET1) (3) | 13.90 | 13.90 | 13.79 | 13.90 | 13.79 | ||||||||||||||||||||||||
| Total Capital (3) | 15.15 | 15.15 | 15.04 | 15.15 | 15.04 | ||||||||||||||||||||||||
| Tangible Capital (2) (3) | 8.92 | 9.22 | 10.81 | 8.92 | 10.81 | ||||||||||||||||||||||||
| ASSET QUALITY | |||||||||||||||||||||||||||||
| Loans Past Due 30 - 89 Days | $ | 784 | $ | 3,671 | $ | 673 | $ | 784 | $ | 673 | |||||||||||||||||||
| Loans Past Due 90 Days or More | 105 | 18 | 18 | 105 | 18 | ||||||||||||||||||||||||
| Non-accrual Loans | 12,494 | 13,900 | 10,709 | 12,494 | 10,709 | ||||||||||||||||||||||||
| Nonperforming Loans (includes nonperforming TDRs) (4) | 12,599 | 13,918 | 10,727 | 12,599 | 10,727 | ||||||||||||||||||||||||
| Other Real Estate Owned | 196 | 196 | 1,079 | 196 | 1,079 | ||||||||||||||||||||||||
| Other Nonperforming Assets | 0 | 17 | 0 | 0 | 0 | ||||||||||||||||||||||||
| Total Nonperforming Assets | 12,795 | 14,131 | 11,806 | 12,795 | 11,806 | ||||||||||||||||||||||||
| Performing Troubled Debt Restructurings (4) | 0 | 0 | 5,040 | 0 | 5,040 | ||||||||||||||||||||||||
| Nonperforming Troubled Debt Restructurings (included in nonperforming loans) (4) | 0 | 0 | 5,938 | 0 | 5,938 | ||||||||||||||||||||||||
| Total Troubled Debt Restructurings (4) | 0 | 0 | 10,978 | 0 | 10,978 | ||||||||||||||||||||||||
| Individually Analyzed Loans | 19,986 | 24,554 | 19,277 | 19,986 | 19,277 | ||||||||||||||||||||||||
| Non-Individually Analyzed Watch List Loans | 172,084 | 194,222 | 241,265 | 172,084 | 241,265 | ||||||||||||||||||||||||
| Total Individually Analyzed and Watch List Loans | 192,070 | 218,776 | 260,542 | 192,070 | 260,542 | ||||||||||||||||||||||||
| Gross Charge Offs | 98 | 740 | 267 | 838 | 503 | ||||||||||||||||||||||||
| Recoveries | 95 | 76 | 1,836 | 171 | 1,981 | ||||||||||||||||||||||||
| Net Charge Offs/(Recoveries) | 3 | 664 | (1,569) | 667 | (1,478) | ||||||||||||||||||||||||
| Net Charge Offs/(Recoveries) to Average Loans | 0.00 | % | 0.06 | % | (0.14 | %) | 0.03 | % | (0.07 | %) | |||||||||||||||||||
| Credit Loss Reserve to Loans | 1.53 | % | 1.55 | % | 1.65 | % | 1.53 | % | 1.65 | % | |||||||||||||||||||
| Credit Loss Reserve to Loans, Excluding PPP Loans (2) | 1.53 | % | 1.56 | % | 1.72 | % | 1.53 | % | 1.72 | % | |||||||||||||||||||
| Credit Loss Reserve to Nonperforming Loans | 535.97 | % | 485.18 | % | 668.51 | % | 535.97 | % | 668.51 | % | |||||||||||||||||||
| Credit Loss Reserve to Nonperforming Loans and Performing TDRs (4) | 535.97 | % | 485.18 | % | 454.82 | % | 535.97 | % | 454.82 | % | |||||||||||||||||||
| Nonperforming Loans to Loans | 0.28 | % | 0.32 | % | 0.25 | % | 0.28 | % | 0.25 | % | |||||||||||||||||||
| Nonperforming Assets to Assets | 0.20 | % | 0.22 | % | 0.19 | % | 0.20 | % | 0.19 | % | |||||||||||||||||||
| Total Individually Analyzed and Watch List Loans to Total Loans | 4.34 | % | 5.03 | % | 5.98 | % | 4.34 | % | 5.98 | % | |||||||||||||||||||
| Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans (2) | 4.35 | % | 5.04 | % | 6.26 | % | 4.35 | % | 6.26 | % | |||||||||||||||||||
| OTHER DATA | |||||||||||||||||||||||||||||
| Full Time Equivalent Employees | 606 | 585 | 600 | 606 | 600 | ||||||||||||||||||||||||
| Offices | 52 | 52 | 50 | 52 | 50 | ||||||||||||||||||||||||
(1)Core deposits equals deposits less brokered deposits
(2)Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
(3)Capital ratios for June 30, 2022 are preliminary until the Call Report is filed.
(4)On April 1, 2022, the company adopted certain aspects of ASU 2022-02, whereby the company no longer recognizes or accounts for TDRs. Adoption of this standard was retrospective to January 1, 2022.
6
| CONSOLIDATED BALANCE SHEETS (in thousands, except share data) | |||||||||||
| June 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ | 72,386 | $ | 51,830 | |||||||
| Short-term investments | 97,129 | 631,410 | |||||||||
| Total cash and cash equivalents | 169,515 | 683,240 | |||||||||
| Securities available-for-sale, at fair value | 1,300,580 | 1,398,558 | |||||||||
Securities held-to-maturity, at amortized cost (fair value of $113,350 and $0, respectively) | 127,411 | 0 | |||||||||
| Real estate mortgage loans held-for-sale | 2,646 | 7,470 | |||||||||
| Loans, net of allowance for credit losses of $67,523 and $67,773 | 4,357,176 | 4,220,068 | |||||||||
| Land, premises and equipment, net | 58,601 | 59,309 | |||||||||
| Bank owned life insurance | 97,599 | 97,652 | |||||||||
| Federal Reserve and Federal Home Loan Bank stock | 12,840 | 13,772 | |||||||||
| Accrued interest receivable | 20,733 | 17,674 | |||||||||
| Goodwill | 4,970 | 4,970 | |||||||||
| Other assets | 113,016 | 54,610 | |||||||||
| Total assets | $ | 6,265,087 | $ | 6,557,323 | |||||||
| LIABILITIES | |||||||||||
| Noninterest bearing deposits | $ | 1,797,614 | $ | 1,895,481 | |||||||
| Interest bearing deposits | 3,823,970 | 3,839,926 | |||||||||
| Total deposits | 5,621,584 | 5,735,407 | |||||||||
| Borrowings - Federal Home Loan Bank advances | 0 | 75,000 | |||||||||
| Accrued interest payable | 1,948 | 2,619 | |||||||||
| Other liabilities | 79,492 | 39,391 | |||||||||
| Total liabilities | 5,703,024 | 5,852,417 | |||||||||
| STOCKHOLDERS’ EQUITY | |||||||||||
| Common stock: 90,000,000 shares authorized, no par value | |||||||||||
| 25,816,997 shares issued and 25,345,162 outstanding as of June 30, 2022 | |||||||||||
| 25,777,609 shares issued and 25,300,793 outstanding as of December 31, 2021 | 123,571 | 120,615 | |||||||||
| Retained earnings | 612,026 | 583,134 | |||||||||
| Accumulated other comprehensive income (loss) | (158,534) | 16,093 | |||||||||
| Treasury stock at cost (471,835 shares as of June 30, 2022, 476,816 shares as of December 31, 2021) | (15,089) | (15,025) | |||||||||
| Total stockholders’ equity | 561,974 | 704,817 | |||||||||
| Noncontrolling interest | 89 | 89 | |||||||||
| Total equity | 562,063 | 704,906 | |||||||||
| Total liabilities and equity | $ | 6,265,087 | $ | 6,557,323 | |||||||
7
| CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data) | |||||||||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| NET INTEREST INCOME | |||||||||||||||||||||||
| Interest and fees on loans | |||||||||||||||||||||||
| Taxable | $ | 44,138 | $ | 42,342 | $ | 83,873 | $ | 85,803 | |||||||||||||||
| Tax exempt | 280 | 101 | 449 | 205 | |||||||||||||||||||
| Interest and dividends on securities | |||||||||||||||||||||||
| Taxable | 3,727 | 2,177 | 7,005 | 4,012 | |||||||||||||||||||
| Tax exempt | 4,994 | 2,870 | 9,600 | 5,359 | |||||||||||||||||||
| Other interest income | 483 | 135 | 729 | 223 | |||||||||||||||||||
| Total interest income | 53,622 | 47,625 | 101,656 | 95,602 | |||||||||||||||||||
| Interest on deposits | 4,890 | 3,890 | 7,971 | 8,108 | |||||||||||||||||||
| Interest on borrowings | |||||||||||||||||||||||
| Short-term | 0 | 0 | 0 | 7 | |||||||||||||||||||
| Long-term | 54 | 74 | 127 | 147 | |||||||||||||||||||
| Total interest expense | 4,944 | 3,964 | 8,098 | 8,262 | |||||||||||||||||||
| NET INTEREST INCOME | 48,678 | 43,661 | 93,558 | 87,340 | |||||||||||||||||||
| Provision (Reversal) for credit losses | 0 | (1,700) | 417 | (223) | |||||||||||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 48,678 | 45,361 | 93,141 | 87,563 | |||||||||||||||||||
| NONINTEREST INCOME | |||||||||||||||||||||||
| Wealth advisory fees | 2,204 | 2,078 | 4,491 | 4,256 | |||||||||||||||||||
| Investment brokerage fees | 541 | 575 | 1,060 | 1,039 | |||||||||||||||||||
| Service charges on deposit accounts | 2,882 | 2,521 | 5,691 | 5,012 | |||||||||||||||||||
| Loan and service fees | 3,195 | 3,042 | 6,084 | 5,818 | |||||||||||||||||||
| Merchant card fee income | 904 | 766 | 1,719 | 1,388 | |||||||||||||||||||
| Bank owned life insurance income (loss) | (183) | 705 | (266) | 1,461 | |||||||||||||||||||
| Interest rate swap fee income | 354 | 505 | 404 | 754 | |||||||||||||||||||
| Mortgage banking income | 351 | 415 | 860 | 1,788 | |||||||||||||||||||
| Net securities gains | 0 | 44 | 0 | 797 | |||||||||||||||||||
| Other income | 244 | 689 | 1,136 | 1,584 | |||||||||||||||||||
| Total noninterest income | 10,492 | 11,340 | 21,179 | 23,897 | |||||||||||||||||||
| NONINTEREST EXPENSE | |||||||||||||||||||||||
| Salaries and employee benefits | 14,798 | 15,762 | 29,190 | 30,147 | |||||||||||||||||||
| Net occupancy expense | 1,688 | 1,427 | 3,317 | 2,930 | |||||||||||||||||||
| Equipment costs | 1,459 | 1,318 | 2,870 | 2,763 | |||||||||||||||||||
| Data processing fees and supplies | 3,203 | 3,204 | 6,284 | 6,523 | |||||||||||||||||||
| Corporate and business development | 1,433 | 699 | 2,652 | 2,208 | |||||||||||||||||||
| FDIC insurance and other regulatory fees | 619 | 495 | 1,058 | 959 | |||||||||||||||||||
| Professional fees | 1,414 | 1,839 | 2,973 | 3,716 | |||||||||||||||||||
| Other expense | 3,299 | 1,904 | 6,538 | 4,148 | |||||||||||||||||||
| Total noninterest expense | 27,913 | 26,648 | 54,882 | 53,394 | |||||||||||||||||||
| INCOME BEFORE INCOME TAX EXPENSE | 31,257 | 30,053 | 59,438 | 58,066 | |||||||||||||||||||
| Income tax expense | 5,584 | 5,705 | 10,123 | 10,735 | |||||||||||||||||||
| NET INCOME | $ | 25,673 | $ | 24,348 | $ | 49,315 | $ | 47,331 | |||||||||||||||
| BASIC WEIGHTED AVERAGE COMMON SHARES | 25,527,896 | 25,473,497 | 25,521,618 | 25,465,621 | |||||||||||||||||||
| BASIC EARNINGS PER COMMON SHARE | $ | 1.00 | $ | 0.96 | $ | 1.93 | $ | 1.86 | |||||||||||||||
| DILUTED WEIGHTED AVERAGE COMMON SHARES | 25,697,577 | 25,602,063 | 25,699,908 | 25,596,843 | |||||||||||||||||||
| DILUTED EARNINGS PER COMMON SHARE | $ | 1.00 | $ | 0.95 | $ | 1.92 | $ | 1.85 | |||||||||||||||
8
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
(unaudited, in thousands)
| June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||||||||||||||||||||
| Commercial and industrial loans: | |||||||||||||||||||||||||||||||||||
| Working capital lines of credit loans | $ | 726,798 | 16.4 | % | $ | 678,567 | 15.6 | % | $ | 616,401 | 14.1 | % | |||||||||||||||||||||||
| Non-working capital loans | 802,994 | 18.2 | 784,890 | 18.0 | 886,284 | 20.3 | |||||||||||||||||||||||||||||
| Total commercial and industrial loans | 1,529,792 | 34.6 | 1,463,457 | 33.6 | 1,502,685 | 34.4 | |||||||||||||||||||||||||||||
| Commercial real estate and multi-family residential loans: | |||||||||||||||||||||||||||||||||||
| Construction and land development loans | 418,284 | 9.4 | 399,618 | 9.2 | 402,583 | 9.2 | |||||||||||||||||||||||||||||
| Owner occupied loans | 726,531 | 16.4 | 724,588 | 16.6 | 672,903 | 15.5 | |||||||||||||||||||||||||||||
| Nonowner occupied loans | 635,477 | 14.4 | 619,163 | 14.2 | 606,096 | 13.9 | |||||||||||||||||||||||||||||
| Multifamily loans | 173,875 | 3.9 | 214,003 | 4.9 | 300,449 | 6.9 | |||||||||||||||||||||||||||||
| Total commercial real estate and multi-family residential loans | 1,954,167 | 44.1 | 1,957,372 | 44.9 | 1,982,031 | 45.5 | |||||||||||||||||||||||||||||
| Agri-business and agricultural loans: | |||||||||||||||||||||||||||||||||||
| Loans secured by farmland | 194,248 | 4.4 | 164,252 | 3.8 | 167,314 | 3.8 | |||||||||||||||||||||||||||||
| Loans for agricultural production | 193,654 | 4.4 | 259,417 | 6.0 | 179,338 | 4.1 | |||||||||||||||||||||||||||||
| Total agri-business and agricultural loans | 387,902 | 8.8 | 423,669 | 9.8 | 346,652 | 7.9 | |||||||||||||||||||||||||||||
| Other commercial loans | 93,157 | 2.1 | 78,412 | 1.8 | 85,356 | 2.0 | |||||||||||||||||||||||||||||
| Total commercial loans | 3,965,018 | 89.6 | 3,922,910 | 90.1 | 3,916,724 | 89.8 | |||||||||||||||||||||||||||||
| Consumer 1-4 family mortgage loans: | |||||||||||||||||||||||||||||||||||
| Closed end first mortgage loans | 190,988 | 4.3 | 180,448 | 4.1 | 169,653 | 3.9 | |||||||||||||||||||||||||||||
| Open end and junior lien loans | 172,449 | 3.9 | 158,583 | 3.6 | 162,327 | 3.7 | |||||||||||||||||||||||||||||
| Residential construction and land development loans | 10,075 | 0.2 | 11,135 | 0.3 | 12,505 | 0.3 | |||||||||||||||||||||||||||||
| Total consumer 1-4 family mortgage loans | 373,512 | 8.4 | 350,166 | 8.0 | 344,485 | 7.9 | |||||||||||||||||||||||||||||
| Other consumer loans | 88,683 | 2.0 | 83,395 | 1.9 | 100,771 | 2.3 | |||||||||||||||||||||||||||||
| Total consumer loans | 462,195 | 10.4 | 433,561 | 9.9 | 445,256 | 10.2 | |||||||||||||||||||||||||||||
| Subtotal | 4,427,213 | 100.0 | % | 4,356,471 | 100.0 | % | 4,361,980 | 100.0 | % | ||||||||||||||||||||||||||
| Less: Allowance for credit losses | (67,523) | (67,526) | (71,713) | ||||||||||||||||||||||||||||||||
| Net deferred loan fees | (2,514) | (2,757) | (8,271) | ||||||||||||||||||||||||||||||||
| Loans, net | $ | 4,357,176 | $ | 4,286,188 | $ | 4,281,996 | |||||||||||||||||||||||||||||
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
(unaudited, in thousands)
| June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||
| Noninterest bearing demand deposits | $ | 1,797,614 | $ | 1,880,418 | $ | 1,743,000 | |||||||||||
| Savings and transaction accounts: | |||||||||||||||||
| Savings deposits | 430,752 | 423,030 | 358,568 | ||||||||||||||
| Interest bearing demand deposits | 2,631,304 | 2,702,912 | 2,333,758 | ||||||||||||||
| Time deposits: | |||||||||||||||||
| Deposits of $100,000 or more | 577,571 | 620,737 | 740,484 | ||||||||||||||
| Other time deposits | 184,343 | 193,526 | 218,854 | ||||||||||||||
| Total deposits | $ | 5,621,584 | $ | 5,820,623 | $ | 5,394,664 | |||||||||||
| FHLB advances | 0 | 75,000 | 75,000 | ||||||||||||||
| Total funding sources | $ | 5,621,584 | $ | 5,895,623 | $ | 5,469,664 | |||||||||||
9
LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
| Three Months Ended June 30, 2022 | Three Months Ended March 31, 2022 | Three Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (fully tax equivalent basis, dollars in thousands) | Average Balance | Interest Income | Yield (1)/ Rate | Average Balance | Interest Income | Yield (1)/ Rate | Average Balance | Interest Income | Yield (1)/ Rate | |||||||||||||||||||||||||||||||||||||||||||||||
| Earning Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Taxable (2)(3) | $ | 4,396,333 | $ | 44,138 | 4.03 | % | $ | 4,278,894 | $ | 39,735 | 3.77 | % | $ | 4,474,844 | $ | 42,342 | 3.80 | % | ||||||||||||||||||||||||||||||||||||||
| Tax exempt (1) | 29,380 | 353 | 4.82 | 22,032 | 213 | 3.92 | 12,839 | 128 | 4.00 | |||||||||||||||||||||||||||||||||||||||||||||||
| Investments: (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities | 1,476,144 | 10,049 | 2.73 | 1,514,024 | 9,108 | 2.44 | 955,242 | 5,811 | 2.44 | |||||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments | 2,301 | 2 | 0.35 | 2,143 | 1 | 0.11 | 2,305 | 0 | 0.00 | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing deposits | 252,893 | 481 | 0.76 | 574,982 | 245 | 0.17 | 479,571 | 135 | 0.11 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total earning assets | $ | 6,157,051 | $ | 55,023 | 3.58 | % | $ | 6,392,075 | $ | 49,302 | 3.13 | % | $ | 5,924,801 | $ | 48,416 | 3.28 | % | ||||||||||||||||||||||||||||||||||||||
| Less: Allowance for credit losses | (67,527) | (68,051) | (72,222) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonearning Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 74,158 | 71,905 | 68,798 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Premises and equipment | 58,978 | 59,309 | 59,848 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other nonearning assets | 238,228 | 196,705 | 190,202 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 6,460,888 | $ | 6,651,943 | $ | 6,171,427 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings deposits | $ | 425,102 | $ | 81 | 0.08 | % | $ | 408,314 | $ | 75 | 0.07 | % | $ | 359,484 | $ | 71 | 0.08 | % | ||||||||||||||||||||||||||||||||||||||
| Interest bearing checking accounts | 2,710,674 | 3,784 | 0.56 | 2,642,003 | 1,862 | 0.29 | 2,428,524 | 1,700 | 0.28 | |||||||||||||||||||||||||||||||||||||||||||||||
| Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In denominations under $100,000 | 189,538 | 307 | 0.65 | 198,257 | 346 | 0.71 | 224,025 | 545 | 0.98 | |||||||||||||||||||||||||||||||||||||||||||||||
| In denominations over $100,000 | 601,877 | 718 | 0.48 | 633,947 | 798 | 0.51 | 741,466 | 1,574 | 0.85 | |||||||||||||||||||||||||||||||||||||||||||||||
| Miscellaneous short-term borrowings | 0 | 0 | 0.00 | 26 | 0 | 0.00 | 0 | 0 | 0.00 | |||||||||||||||||||||||||||||||||||||||||||||||
| Long-term borrowings | 54,396 | 54 | 0.40 | 75,000 | 73 | 0.40 | 75,000 | 74 | 0.40 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | $ | 3,981,587 | $ | 4,944 | 0.50 | % | $ | 3,957,547 | $ | 3,154 | 0.32 | % | $ | 3,828,499 | $ | 3,964 | 0.42 | % | ||||||||||||||||||||||||||||||||||||||
| Noninterest Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand deposits | 1,825,327 | 1,966,117 | 1,633,686 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 70,650 | 45,587 | 45,249 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity | 583,324 | 682,692 | 663,993 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 6,460,888 | $ | 6,651,943 | $ | 6,171,427 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Margin Recap | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income/average earning assets | 55,023 | 3.58 | 49,302 | 3.13 | 48,416 | 3.28 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense/average earning assets | 4,944 | 0.32 | 3,154 | 0.20 | 3,964 | 0.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income and margin | $ | 50,079 | 3.26 | % | $ | 46,148 | 2.93 | % | $ | 44,452 | 3.01 | % | ||||||||||||||||||||||||||||||||||||||||||||
(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 $1.40 million, $1.27 million and $791,000 in the three-month periods ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively.
(2)Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $180,000, $461,000, and $2.76 million for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, 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.
10
Reconciliation of Non-GAAP Financial Measures
The allowance for credit losses to 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.
A reconciliation of these non-GAAP measures is provided below (dollars in thousands).
| June 30, 2022 | March 31, 2022 | June 30, 2021 | |||||||||||||||
| Total Loans | $ | 4,424,699 | $ | 4,353,714 | $ | 4,353,709 | |||||||||||
| Less: PPP Loans | 5,219 | 12,506 | 194,212 | ||||||||||||||
| Total Loans, Excluding PPP Loans | 4,419,480 | 4,341,208 | 4,159,497 | ||||||||||||||
| Allowance for Credit Losses | $ | 67,523 | $ | 67,526 | $ | 71,713 | |||||||||||
| Credit Loss Reserve to Total Loans | 1.53 | % | 1.55 | % | 1.65 | % | |||||||||||
| Credit Loss Reserve to Total Loans, Excluding PPP Loans | 1.53 | % | 1.56 | % | 1.72 | % | |||||||||||
| Total Individually Analyzed and Watch List Loans | $ | 192,070 | $ | 218,776 | $ | 260,542 | |||||||||||
| Total Individually Analyzed and Watch List Loans to Total Loans | 4.34 | % | 5.03 | % | 5.98 | % | |||||||||||
| Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans | 4.35 | % | 5.04 | % | 6.26 | % | |||||||||||
11
Tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio, adjusted tangible common equity to adjusted 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. Adjusted tangible assets and adjusted tangible equity remove the fair market value adjustment impact of the investment securities portfolio. 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 Ended | Six Months Ended | ||||||||||||||||||||||||||||
| June 30, 2022 | March 31, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||||
| Total Equity | 562,063 | 609,102 | 677,471 | $ | 562,063 | $ | 677,471 | ||||||||||||||||||||||
| Less: Goodwill | (4,970) | (4,970) | (4,970) | (4,970) | (4,970) | ||||||||||||||||||||||||
| Plus: DTA related to goodwill | 1,167 | 1,167 | 1,176 | 1,167 | 1,176 | ||||||||||||||||||||||||
| Tangible Common Equity | 558,260 | 605,299 | 673,677 | 558,260 | 673,677 | ||||||||||||||||||||||||
| AOCI Market Value Adjustment | 157,625 | 92,751 | (23,618) | 157,625 | (23,618) | ||||||||||||||||||||||||
| Adjusted Tangible Common Equity | 715,885 | 698,050 | 650,059 | 715,885 | 650,059 | ||||||||||||||||||||||||
| Assets | $ | 6,265,087 | $ | 6,572,259 | $ | 6,232,914 | $ | 6,265,087 | $ | 6,232,914 | |||||||||||||||||||
| Less: Goodwill | (4,970) | (4,970) | (4,970) | (4,970) | (4,970) | ||||||||||||||||||||||||
| Plus: DTA related to goodwill | 1,167 | 1,167 | 1,176 | 1,167 | 1,176 | ||||||||||||||||||||||||
| Tangible Assets | 6,261,284 | 6,568,456 | 6,229,120 | 6,261,284 | 6,229,120 | ||||||||||||||||||||||||
| Market Value Adjustment | 199,525 | 117,406 | (29,896) | 199,525 | (29,896) | ||||||||||||||||||||||||
| Adjusted Tangible Assets | 6,460,809 | 6,685,862 | 6,199,224 | 6,460,809 | 6,199,224 | ||||||||||||||||||||||||
| Ending common shares issued | 25,527,896 | 25,527,896 | 25,473,437 | 25,527,896 | 25,473,437 | ||||||||||||||||||||||||
| Tangible Book Value Per Common Share | $ | 21.87 | $ | 23.71 | $ | 26.45 | $ | 21.87 | $ | 26.45 | |||||||||||||||||||
| Tangible Common Equity/Tangible Assets | 8.92 | % | 9.22 | % | 10.81 | % | 8.92 | % | 10.81 | % | |||||||||||||||||||
| Adjusted Tangible Common Equity/Adjusted Tangible Assets | 11.08 | % | 10.44 | % | 10.49 | % | 11.08 | % | 10.49 | % | |||||||||||||||||||
| Net Interest Income | $ | 48,678 | $ | 44,880 | $ | 43,661 | $ | 93,558 | $ | 87,340 | |||||||||||||||||||
| Plus: Noninterest income | 10,492 | 10,687 | 11,340 | 21,179 | 23,897 | ||||||||||||||||||||||||
| Minus: Noninterest expense | (27,913) | (26,969) | (26,648) | (54,882) | (53,394) | ||||||||||||||||||||||||
| Pretax Pre-Provision Earnings | $ | 31,257 | $ | 28,598 | $ | 28,353 | $ | 59,855 | $ | 57,843 | |||||||||||||||||||
12
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 Ended | Six Months Ended | |||||||||||||||||||||||||||||||
| June 30, 2022 | March 31, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | ||||||||||||||||||||||||||||
| Total Average Earnings Assets | 6,157,051 | $ | 6,392,075 | $ | 5,924,801 | $ | 6,273,914 | $ | 5,782,293 | |||||||||||||||||||||||
| Less: Average Balance of PPP Loans | (9,665) | (17,555) | (348,026) | (13,588) | (375,226) | |||||||||||||||||||||||||||
| Total Adjusted Earning Assets | 6,147,386 | 6,374,520 | 5,576,775 | 6,260,326 | 5,407,067 | |||||||||||||||||||||||||||
| Total Interest Income FTE | $ | 55,023 | $ | 49,302 | $ | 48,416 | $ | 104,325 | $ | 97,080 | ||||||||||||||||||||||
| Less: PPP Loan Income | (204) | (505) | (3,652) | (710) | (8,818) | |||||||||||||||||||||||||||
| Total Adjusted Interest Income FTE | 54,819 | 48,797 | 44,764 | 103,615 | 88,262 | |||||||||||||||||||||||||||
| Adjusted Earning Asset Yield, net of PPP Impact | 3.58 | % | 3.10 | % | 3.22 | % | 3.34 | % | 3.29 | % | ||||||||||||||||||||||
| Total Average Interest Bearing Liabilities | $ | 3,981,587 | $ | 3,957,547 | $ | 3,828,499 | $ | 3,969,634 | $ | 3,723,580 | ||||||||||||||||||||||
| Less: Average Balance of PPP Loans | (9,665) | (17,555) | (348,026) | (13,588) | (375,226) | |||||||||||||||||||||||||||
| Total Adjusted Interest Bearing Liabilities | 3,971,922 | 3,939,992 | 3,480,473 | 3,956,046 | 3,348,354 | |||||||||||||||||||||||||||
| Total Interest Expense FTE | $ | 4,944 | $ | 3,154 | $ | 3,964 | $ | 8,098 | $ | 8,262 | ||||||||||||||||||||||
| Less: PPP Cost of Funds | (6) | (11) | (162) | (17) | (465) | |||||||||||||||||||||||||||
| Total Adjusted Interest Expense FTE | 4,938 | 3,143 | 3,802 | 8,081 | 7,797 | |||||||||||||||||||||||||||
| Adjusted Cost of Funds, net of PPP Impact | 0.32 | % | 0.20 | % | 0.27 | % | 0.26 | % | 0.29 | % | ||||||||||||||||||||||
| Net Interest Margin FTE, net of PPP Impact | 3.26 | % | 2.90 | % | 2.95 | % | 3.08 | % | 3.00 | % | ||||||||||||||||||||||
###
13