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): October 25, 2022
(Exact name of Registrant as specified in its charter)
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(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:
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Securities registered pursuant to Section 12(b) of the Act:
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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 October 25, 2022, Lakeland Financial Corporation (the “Company”) issued a press release announcing its earnings for the three and nine months ended September 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: October 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 Quarterly Performance; Year-to-Date Record Net Income Improves by 9% to $77.8 million
Warsaw, Indiana (October 25, 2022) – Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record third quarter net income of $28.5 million for the three months ended September 30, 2022, an increase of 18%, or $4.4 million, versus $24.1 million for the third quarter of 2021. Diluted earnings per share increased 18% to $1.11 for the third quarter of 2022, versus $0.94 for the third quarter of 2021. Both the net income and diluted earnings per share represent the highest quarterly performance in the company’s 150-year history. On a linked quarter basis, net income increased 11%, or $2.9 million, from the second quarter of 2022 in which the company had net income of $25.7 million, or $1.00 diluted earnings per share. Pretax pre-provision earnings, which is a non-GAAP financial measure, were $34.8 million for the third quarter of 2022, an increase of 13%, or $3.9 million, from $30.9 million for the third quarter of 2021. On a linked quarter basis, pretax pre-provision earnings increased 11%, or $3.5 million, from $31.3 million for the second quarter of 2022.
The company further reported record net income of $77.8 million for the nine months ended September 30, 2022, versus $71.5 million for the comparable period of 2021, an increase of 9%, or $6.4 million. Diluted earnings per share also increased 9% to $3.03 for the nine months ended September 30, 2022, versus $2.79 for the comparable period of 2021. Pretax pre-provision earnings were $94.6 million for the nine months ended September 30, 2022, versus $88.7 million for the comparable period of 2021, an increase of 7%, or $5.9 million.
David M. Findlay, President and Chief Executive Officer stated, “As we continue to celebrate our 150th anniversary, the Lake City Bank team has delivered exceptional financial performance. Throughout the year, we have taken the time to reflect upon our success over the last 150 years and strengthen our commitment to the future. We are an organization that is focused on the culture and operating discipline that got us this far, while at the same time ensuring that it evolves for the future.”
Findlay added, “As we move through 2022, we are very proud of our performance through the last nine months. We are a community bank committed to the economic growth and vitality of our Indiana markets, and we are pleased that we are experiencing strong organic loan growth. That is the best indicator of our support of our commercial and retail clients, and our teams are doing a great job delivering on that commitment.”
Financial Performance – Third Quarter 2022
Third Quarter 2022 versus Third Quarter 2021 highlights:
•Diluted earnings per share increase of $0.17 per share, or 18%, from $0.94 to $1.11
•Return on average equity of 19.39%, compared to 13.90%
•Return on average assets of 1.80%, compared to 1.56%
•Core loan growth, which excludes PPP loans, of $340.7 million, or 8%
•Core deposit growth of $250.5 million, or 5%
•Net interest income increase of $6.8 million, or 15%
•Net interest margin excluding PPP loans expanded by 62 basis points to 3.57%, compared to 2.95%
•Revenue growth of $5.8 million, or 10%
•Provision expense of $0 compared to $1.3 million
•Noninterest expense increase of $1.9 million, or 7%
•Dividend per share increase of 18%, or $0.06 per share, to $0.40 from $0.34
•Watch list loans as a percentage of total loans excluding PPP loans decreased to a historical low of 3.64% from 6.23%
•Total risk-based capital ratio of 15.29%, compared to 15.44%
•Tangible capital ratio of 8.20% compared to 10.92%
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•Tangible capital ratio excluding AOCI of 11.22% compared to 10.75%
Third Quarter 2022 versus Second Quarter 2022 highlights:
•Diluted earnings per share increase of $0.11 per share, or 11%, from $1.00 to $1.11
•Return on average equity of 19.39%, compared to 17.65%
•Return on average assets of 1.80%, compared to 1.59%
•Core loan growth, which excludes PPP loans, of $68.8 million, or 2%
•Core deposit growth of $42.5 million, or 1%
•Net interest income increase of $3.8 million, or 8%
•Net interest margin excluding PPP loans expanded by 31 basis points to 3.57%, compared to 3.26%
•Revenue growth of $3.5 million, or 6%
•Provision expense of $0 for both periods
•Noninterest expense was unchanged at $27.9 million for both periods
•Watch list loans as a percentage of total loans excluding PPP loans decrease to a historical low of 3.64% from 4.35%
•Total risk-based capital of 15.29%, compared to 15.15%
•Tangible capital ratio of 8.20% compared to 8.92%
•Tangible capital ratio excluding AOCI of 11.22% compared to 11.08%
Return on average total equity for the third quarter of 2022 was 19.39%, compared to 13.90% in the third quarter of 2021 and 17.65% in the linked second quarter of 2022. Return on average assets for the third quarter of 2022 was 1.80%, compared to 1.56% in the third quarter of 2021 and 1.59% in the linked second quarter of 2022. The company’s total capital as a percent of risk-weighted assets was 15.29% at September 30, 2022, compared to 15.44% at September 30, 2021 and 15.15% at June 30, 2022.
The company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 8.20% at September 30, 2022, compared to 10.92% at September 30, 2021 and 8.92% at June 30, 2022. Tangible equity and tangible assets have been impacted by declines in the market value of the company’s available-for-sale investment securities portfolio. The market value decline was a result of the yield curve steepening caused by the tightening of monetary policy by the Federal Reserve Board beginning in March of 2022 to combat inflation. Unrealized losses from available-for-sale investment securities were $256.1 million at September 30, 2022, compared to unrealized gains of $15.5 million at September 30, 2021 and unrealized losses of $182.4 million at June 30, 2022. When excluding the impact of accumulated other comprehensive income (loss) on tangible common equity, the company's adjusted tangible common equity to adjusted tangible assets ratio, which is a non-GAAP financial measure, was 11.22% at September 30, 2022 compared to 10.75% at September 30, 2021 and 11.08% at June 30, 2022.
As announced on October 11, 2022, the board of directors approved a cash dividend for the third quarter of $0.40 per share, payable on November 7, 2022, to shareholders of record as of October 25, 2022. The third quarter dividend per share of $0.40 is unchanged from the dividend per share paid for the second quarter of 2022 and reflects an 18% increase from the dividend rate one year ago.
“Our record profitability has contributed to healthy increases in regulatory capital and provides support for the growth in our dividend to shareholders. Our fortress balance sheet and strong capital foundation provide capacity for continued organic loan growth and balance sheet expansion over the long term,” Findlay added.
Average total loans, excluding PPP loans, were $4.41 billion for the third quarter of 2022 compared to $4.21 billion for the third quarter of 2021, an increase of $201.5 million, or 5%. On a linked quarter basis, average total loans, excluding PPP loans, decreased by $3.3 million, or less than 1%.
Average total loans were $4.42 billion in the third quarter of 2022, an increase of $61.8 million, or 1%, from $4.35 billion for the third quarter 2021 and $4.43 billion for the second quarter of 2022, a decrease of $9.8 million, or less than 1%. Total PPP average loans decreased $139.7 million to $3.2 million during the third quarter of 2022, compared to $142.9 million average PPP loans during the third quarter of 2021.
Total loans, excluding PPP loans, increased by $340.7 million, or 8%, as of September 30, 2022 compared to September 30, 2021. On a linked quarter basis, total loans, excluding PPP loans, were $4.49 billion as of September 30, 2022, an increase of $68.8 million, or 2%, as compared to June 30, 2022. Total loans outstanding increased by $250.4 million, or 6%, from $4.24
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billion as of September 30, 2021, to $4.49 billion as of September 30, 2022, due primarily to organic loan growth of $340.7 million and offset by PPP loan forgiveness of $90.3 million. PPP loans outstanding were $1.6 million as of September 30, 2022, $5.2 million as of June 30, 2022, and $91.9 million as of September 30, 2021.
Commercial loan originations for the quarter included $477 million in loan originations offset by approximately $431 million in commercial loan paydowns. Commercial line of credit usage decreased from 43% in the second quarter of the year to 42% in the third quarter, and 41% in the third quarter of 2021. Available commercial lines of credit expanded by $547 million, or 14% as compared to a year ago, and line usage improved by $271 million or 17% for the same period.
Findlay commented, “Both our commercial and consumer loan portfolios experienced good growth in the quarter. While commercial line usage decreased slightly, we have experienced a healthy expansion in overall line availability, driven by traditional working capital demand in our commercial and industrial client base and continued development activity in the commercial real estate markets.”
Average total deposits were $5.64 billion for the third quarter of 2022, an increase of $294.2 million, or 6%, versus $5.34 billion for the third quarter of 2021. On a linked quarter basis, average total deposits decreased by $114.1 million, or 2%. Total deposits increased $249.5 million, or 5%, from $5.41 billion as of September 30, 2021, to $5.66 billion as of September 30, 2022. On a linked quarter basis, total deposits increased by $42.5 million, or 1%, from $5.62 billion as of June 30, 2022.
Core deposits, which exclude brokered deposits, increased by $250.5 million, or 5%, from $5.40 billion at September 30, 2021 to $5.65 billion at September 30, 2022. This increase was due to growth of public funds deposits of $191.5 million, or 15%, and growth of retail deposits of $86.2 million, or 4%, and was offset by contraction of commercial deposits of $27.2 million, or 1%. On a linked quarter basis, core deposits increased by $42.5 million, or 1%, at September 30, 2022 compared to June 30, 2022. The linked quarter increase resulted from growth of commercial deposits of $24.0 million, or 1%, and growth of public funds deposits of $22.9 million, or 2% and was offset by contraction of retail deposits of $4.4 million, or less than 1%.
Findlay stated, “Excess liquidity inflows stabilized during the quarter, and we have started to see slowing of deposit growth during 2022. Importantly, demand deposits continue to represent 32% of total deposits. Commercial, retail, and public funds deposits continue to contribute to core deposit growth with a history of high deposit retention of relationships.”
Total investment securities were $1.32 billion at September 30, 2022, an increase of $80.3 million, or 6%, as compared to $1.24 billion at September 30, 2021. Investment securities declined by $108.0 million, as compared to $1.43 billion at June 30, 2022. Investment securities represented 21% of total assets on September 30, 2022, compared to 20% on September 30, 2021, and 23% on June 30, 2022. The company deployed $35 million of cash flows from the investment securities portfolio to fund loan growth during the quarter and expects the investment securities portfolio as a percentage of total assets to decrease over time back towards historical levels of 14%.
The company’s net interest margin increased 44 basis points to 3.57% for the third quarter of 2022, compared to 3.13% for the third quarter of 2021. The increased margin in the third quarter of 2022 compared to the prior year period was due to higher yields on loans and partially offset by a higher cost of funds. The higher yields were driven by a series of increases made to the target Federal Funds rate by the Federal Reserve Board beginning in March of 2022, to combat inflation. These rate increases raised the target Federal Funds rate by a cumulative 300 basis points and increased the target Federal Funds rate range from a zero-bound range of 0.00% - 0.25% prior to the commencement of the Federal Reserve Board's tightening policy to a range of 3.00 - 3.25% at September 30, 2022.
Total PPP loan income recognized for the third quarter of 2022 was $58,000 compared to $3.9 million for the third quarter of 2021 and $204,000 during the second quarter 2022. PPP interest and fees had a nominal impact on the third quarter 2022 net interest margin compared to an 18 basis point contribution to net interest margin for the third quarter 2021. Net interest margin excluding PPP interest and fees was 3.57% for the third quarter of 2022, up 62 basis points from 2.95% for the third quarter of 2021. Earning asset yields increased 87 basis points from 3.37% for the third quarter of 2021 to 4.24% for the third quarter of 2022. Offsetting the increased yield on earning assets was an increase to the company's cost of funds of 43 basis points. Interest expense as a percentage of earning assets increased to 0.67% for the three months ended September 30, 2022, from 0.24% for the three months ended September 30, 2021.
Linked quarter net interest margin was 31 basis points higher at 3.57% for the third quarter of 2022, compared to 3.26% for the second quarter of 2022. Earning asset yields increased by 66 basis points over the same period. Interest expense as a percentage
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of earning assets increased 35 basis points for the three months ended September 30, 2022, from 0.32% for the three months ended June 30, 2022.
“Our asset sensitive balance sheet has contributed to the net interest margin expansion during 2022. Variable rate loans represent 67% of our loan portfolio and the rising rate environment has contributed to the growth in loan income. As deposit rates have not risen in conjunction with the overall rate increases, we have been very pleased with our net interest margin expansion. While further Federal Reserve Bank tightening will continue to benefit net interest margin, we expect to see deposit rates increase as repricing occurs,” Findlay noted.
Net interest income increased by $6.8 million, or 15%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. On a linked quarter basis, net interest income increased $3.8 million, or 8%, from the second quarter of 2022. Net interest income increased by $13.0 million, or 10%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 due primarily to an increase in securities income of $9.8 million and an increase in loan income of $8.3 million which were offset by an increase in deposit expense of $6.5 million.
The company recorded no provision for credit losses in the third quarter of 2022, compared to provision expense of $1.3 million in the third quarter of 2021 and no provision for the linked second quarter of 2022. Provision expense was $417,000 for the nine months ended September 30, 2022, compared to provision expense of $1.1 million for the prior nine months ended September 30, 2021. The company’s credit loss reserve to total loans was 1.50% at September 30, 2022 versus 1.72% at September 30, 2021 and 1.53% at June 30, 2022. The company’s credit loss reserve to total loans excluding PPP loans, which is a non-GAAP financial measure, was 1.50% at September 30, 2022 versus 1.76% at September 30, 2021 and 1.53% at June 30, 2022.
Net charge offs in the third quarter of 2022 were $284,000 versus net recoveries of $35,000 in the third quarter of 2021 and net charge offs of $3,000 during the linked second quarter of 2022. Annualized net charge offs to average loans were 0.03% for the third quarter of 2022, 0.00% for the third quarter of 2021, and 0.00% for the linked second quarter of 2022. Net charge offs were $951,000 for the nine months ended September 30, 2022 compared to net recoveries of $1.5 million in the nine month period ended September 30, 2021. Annualized net charge offs (recoveries) as a percentage of average loans was 0.03% for the nine months ended September 30, 2022 compared to (0.05%) for the nine months ended September 30, 2021.
Nonperforming assets decreased $21.2 million, or 68%, to $10.1 million as of September 30, 2022 versus $31.3 million as of September 30, 2021. On a linked quarter basis, nonperforming assets decreased $2.7 million, or 21%, versus the $12.8 million reported as of June 30, 2022. The ratio of nonperforming assets to total assets at September 30, 2022 decreased to 0.16% from 0.50% at September 30, 2021 and decreased from 0.20% at June 30, 2022 due primarily to loan paydowns. Total individually analyzed and watch list loans decreased by $95.4 million, or 37%, to $163.2 million at September 30, 2022 versus $258.5 million as of September 30, 2021. On a linked quarter basis, total individually analyzed and watch list loans decreased by $28.9 million, or 15%, from $192.1 million at June 30, 2022, due primarily to borrower risk rating upgrades and loan paydowns. Watch list loans as a percentage of total loans excluding PPP loans decreased to a historic low of 3.64% as of September 30, 2022, compared to 6.23% at September 30, 2021 and 4.35% at June 30, 2022.
Findlay commented, “Every asset quality metric continued to improve during the third quarter. Watch list and nonperforming loans are at historic lows that we believe are reflective of the general strength of our borrowers’ balance sheets and operating performance. While we have seen signs of economic slowdown in some sectors, they are not apparent in these asset quality metrics. We will continue to monitor economic conditions in our markets and approach the future with the same conservative discipline that we have always shown. Our borrowers have demonstrated resilience in weathering the continued challenges of labor availability, persistent inflation, and supply chain constraints.”
The company’s noninterest income decreased $950,000, or 9%, to $10.2 million for the third quarter of 2022, compared to $11.1 million for the third quarter of 2021. Noninterest income was positively impacted by increases in fee-based lines of business due to fee generating volume for the respective service lines. In particular service charges on deposit accounts increased $234,000, or 8%, investment brokerage fees increased $130,000, or 25% and merchant fee income increased $103,000 or 12%. Wealth advisory fees declined by $118,000, or 5% and were negatively impacted by market value declines of 15% in trust assets since December 31, 2021.
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Other income for the third quarter of 2022 declined by $606,000 compared to the third quarter of 2021 due to income declines in various limited partnership investment holdings and other non-recurring items. In addition, bank owned life insurance income decreased by $586,000. This decrease is largely attributable to the company’s variable life insurance policies which are tied to the equity markets and have declined in value by $234,000 during the third quarter of 2022, compared to an increase of $284,000 during the third quarter of 2021 and a decrease of $495,000 on a linked quarter basis. The valuation changes to the variable life insurance policies are offset by similar changes to the deferred compensation expense that is recognized in salary and employee benefits.
Noninterest income for the third quarter of 2022 decreased by $328,000, or 3%, on a linked quarter basis from $10.5 million. The linked quarter decrease resulted primarily from a decrease in mortgage banking income of $440,000 and a decrease in interest rate swap fee income of $267,000. The decrease in mortgage banking income was caused by a slowdown in mortgage demand because of the higher interest rate environment. Offsetting these decreases was an increase in bank owned life insurance income of $237,000 and an increase to other income of $179,000.
Noninterest income decreased by $3.7 million, or 10%, to $31.3 million for the nine months ended September 30, 2022, compared to $35.0 million for the comparable nine-month period of 2021. Notably, noninterest income increased across a variety of fee-based service lines by a cumulative $1.9 million, including improvement in wealth advisory fees by 2%, investment brokerage fees by 10%, service charges on deposit accounts by 12%, loan and service fees by 3% and merchant card fee income by 19%.
Market value declines impacted the overall decrease in noninterest income. Bank owned life insurance income for the nine months ended September 30, 2022, decreased by $2.3 million primarily due to declines in the market value of variable life insurance policies of $1.1 million compared to market value gains of $1.1 million in the corresponding period in 2021. In addition, across these same periods, other income decreased by $1.1 million, mortgage banking income decreased by $985,000, gains on securities sales decreased by $797,000 and interest rate swap fee income decreased by $442,000. Excluding the impact of the variable life insurance policy market value changes, noninterest income was $32.5 million for the nine months ended September 30, 2022, compared to $34.0 million for the nine months ended September 2021, a decline of $1.5 million, or 4%.
The company’s noninterest expense increased by $1.9 million, or 7%, to $27.9 million in the third quarter of 2022, compared to $26.0 million in the third quarter of 2021. Other expense increased $1.1 million driven by accruals for ongoing legal matters. In addition, corporate and business development expenses increased $426,000 and salaries and employee benefits increased $420,000. The increase in corporate and business development expenses was primarily a result of increased client development activities, advertising costs and increased contributions to our communities. The increase to salaries and employee benefits was driven primarily by increased salaries and wages of $415,000, increases to performance-based compensation expense of $366,000, and increased employee health insurance expense of $113,000, offset by declines in deferred compensation expense of $519,000. Operating expenses excluding the effects of one-time legal settlement accruals of $1.1 million and market value declines of $240,000 from the deferred compensation program, were $27.0 million for the three months ended September 30, 2022, compared to $25.7 million for 2021, an increase of $1.3 million, or 5%.
On a linked quarter basis, noninterest expense decreased by $19,000, or less than 1%, to $27.9 million in the third quarter of 2022. On a linked quarter basis, noninterest expense was flat at $27.9 million for both the third and second quarters of 2022. Other expense over these periods increased $425,000, primarily as a result of share-based compensation payments to the Board of Directors of $437,000, which are paid semi-annually in January and July. Offsetting this increase were decreases in net occupancy expense of $212,000, FDIC and other regulatory fees of $161,000 and salaries and employee benefits of $148,000. The decrease to salary and employee benefits resulted from a $662,000 decrease to performance-based compensation, offset by an increase to deferred compensation of $261,000 and increase to salary and wages of $199,000. Operating expenses excluding the effects of one-time legal settlement accruals and market value from the deferred compensation program, were $27.0 million for the three months ended September 30, 2022, compared to $27.2 million for 2021, a decrease of $230,000 or 1%.
Noninterest expense increased by $3.4 million, or 4%, for the nine months ended September 30, 2022, to $82.8 million compared to $79.4 million for the corresponding period of 2021. The increase was due primarily to an increase of $3.4 million in other expense caused by accruals for ongoing legal matters. Corporate and business development expense increased $870,000, caused by increased advertising, charitable contributions, including contributions associated with the company’s sesquicentennial celebration, and other corporate development activities. Net occupancy increased $450,000, driven by budgeted repairs and ongoing upgrades to existing facilities and the opening of a new branch in Elkhart. Offsetting these increases are decreases in salaries and employee benefits of $537,000 and professional fees of $531,000 due to a decrease in
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legal expense. The decline in salaries and benefits was impacted by a decline in deferred compensation of $2.4 million, offset by increases in salaries and wages of $758,000, increased performance-based compensation of $499,000, and increased health insurance expense of $329,000. Operating expenses excluding the effects of non-recurring legal settlement accruals of $3.0 million and market value declines from the deferred compensation program of $1.2 million, were $81.0 million for the nine months ended September 30, 2022, compared to $78.2 million for the corresponding period in 2021, an increase of $2.8 million, or 4%.
The company’s efficiency ratio was 44.5% for the third quarter of 2022, compared to 45.7% for the third quarter of 2021 and 47.2% for the linked second 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, adjusted tangible common equity, adjusted tangible assets, tangible book value per share, tangible common equity to tangible assets ratio, adjusted tangible common equity to adjusted tangible assets, and pretax pre-provision earnings and credit loss reserve to total loans excluding PPP loans. 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.
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LAKELAND FINANCIAL CORPORATION
THIRD QUARTER 2022 FINANCIAL HIGHLIGHTS
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
| (Unaudited – Dollars in thousands, except per share data) | September 30, | June 30, | September 30, | September 30, | September 30, | ||||||||||||||||||||||||
| END OF PERIOD BALANCES | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
| Assets | $ | 6,288,406 | $ | 6,265,087 | $ | 6,222,916 | $ | 6,288,406 | $ | 6,222,916 | |||||||||||||||||||
| Deposits | 5,664,133 | 5,621,584 | 5,414,638 | 5,664,133 | 5,414,638 | ||||||||||||||||||||||||
| Brokered Deposits | 10,017 | 10,008 | 11,012 | 10,017 | 11,012 | ||||||||||||||||||||||||
| Core Deposits (1) | 5,654,116 | 5,611,576 | 5,403,626 | 5,654,116 | 5,403,626 | ||||||||||||||||||||||||
| Loans | 4,489,835 | 4,424,699 | 4,239,453 | 4,489,835 | 4,239,453 | ||||||||||||||||||||||||
| PPP Loans | 1,603 | 5,219 | 91,897 | 1,603 | 91,897 | ||||||||||||||||||||||||
| Allowance for Credit Losses | 67,239 | 67,523 | 73,048 | 67,239 | 73,048 | ||||||||||||||||||||||||
| Total Equity | 519,220 | 562,063 | 683,202 | 519,220 | 683,202 | ||||||||||||||||||||||||
| Goodwill net of deferred tax assets | 3,803 | 3,803 | 3,794 | 3,803 | 3,794 | ||||||||||||||||||||||||
| Tangible Common Equity (2) | 515,417 | 558,260 | 679,408 | 515,417 | 679,408 | ||||||||||||||||||||||||
| AVERAGE BALANCES | |||||||||||||||||||||||||||||
| Total Assets | $ | 6,298,358 | $ | 6,460,888 | $ | 6,153,334 | $ | 6,469,102 | $ | 6,071,682 | |||||||||||||||||||
| Earning Assets | 5,991,630 | 6,157,051 | 5,909,834 | 6,178,787 | 5,825,275 | ||||||||||||||||||||||||
| Investments | 1,429,186 | 1,476,144 | 1,201,657 | 1,472,807 | 977,955 | ||||||||||||||||||||||||
| Loans | 4,415,944 | 4,425,713 | 4,354,104 | 4,381,284 | 4,468,891 | ||||||||||||||||||||||||
| PPP Loans | 3,232 | 9,665 | 142,917 | 10,098 | 296,938 | ||||||||||||||||||||||||
| Total Deposits | 5,638,469 | 5,752,519 | 5,344,272 | 5,745,771 | 5,280,361 | ||||||||||||||||||||||||
| Interest Bearing Deposits | 3,821,699 | 3,927,191 | 3,662,707 | 3,876,913 | 3,652,839 | ||||||||||||||||||||||||
| Interest Bearing Liabilities | 3,821,699 | 3,981,587 | 3,737,707 | 3,919,779 | 3,728,339 | ||||||||||||||||||||||||
| Total Equity | 583,679 | 583,324 | 688,252 | 616,202 | 668,652 | ||||||||||||||||||||||||
| INCOME STATEMENT DATA | |||||||||||||||||||||||||||||
| Net Interest Income | $ | 52,492 | $ | 48,678 | $ | 45,741 | $ | 146,050 | $ | 133,081 | |||||||||||||||||||
| Net Interest Income-Fully Tax Equivalent | 53,945 | 50,079 | 46,717 | 150,171 | 135,535 | ||||||||||||||||||||||||
| Provision for Credit Losses | 0 | 0 | 1,300 | 417 | 1,077 | ||||||||||||||||||||||||
| Noninterest Income | 10,164 | 10,492 | 11,114 | 31,343 | 35,011 | ||||||||||||||||||||||||
| Noninterest Expense | 27,894 | 27,913 | 25,967 | 82,776 | 79,361 | ||||||||||||||||||||||||
| Net Income | 28,525 | 25,673 | 24,119 | 77,840 | 71,450 | ||||||||||||||||||||||||
| Pretax Pre-Provision Earnings (2) | 34,762 | 31,257 | 30,888 | 94,617 | 88,731 | ||||||||||||||||||||||||
| PER SHARE DATA | |||||||||||||||||||||||||||||
| Basic Net Income Per Common Share | $ | 1.12 | $ | 1.00 | $ | 0.95 | $ | 3.05 | $ | 2.81 | |||||||||||||||||||
| Diluted Net Income Per Common Share | 1.11 | 1.00 | 0.94 | 3.03 | 2.79 | ||||||||||||||||||||||||
| Cash Dividends Declared Per Common Share | 0.40 | 0.40 | 0.34 | 1.20 | 1.02 | ||||||||||||||||||||||||
| Dividend Payout | 36.04 | % | 40.00 | % | 36.17 | % | 39.60 | % | 36.56 | % | |||||||||||||||||||
| Book Value Per Common Share (equity per share issued) | 20.33 | 22.01 | 26.80 | 20.33 | 26.80 | ||||||||||||||||||||||||
| Tangible Book Value Per Common Share (2) | 20.18 | 21.87 | 26.66 | 20.18 | 26.66 | ||||||||||||||||||||||||
| Market Value – High | 81.27 | 79.14 | 73.04 | 85.71 | 77.05 | ||||||||||||||||||||||||
| Market Value – Low | 64.05 | 64.84 | 56.06 | 64.05 | 53.03 | ||||||||||||||||||||||||
| Basic Weighted Average Common Shares Outstanding | 25,533,832 | 25,527,896 | 25,479,654 | 25,525,734 | 25,472,185 | ||||||||||||||||||||||||
| Diluted Weighted Average Common Shares Outstanding | 25,734,613 | 25,697,577 | 25,635,288 | 25,710,088 | 25,608,655 | ||||||||||||||||||||||||
| KEY RATIOS | |||||||||||||||||||||||||||||
| Return on Average Assets | 1.80 | % | 1.59 | % | 1.56 | % | 1.61 | % | 1.57 | % | |||||||||||||||||||
| Return on Average Total Equity | 19.39 | 17.65 | 13.90 | 16.89 | 14.29 | ||||||||||||||||||||||||
| Average Equity to Average Assets | 9.27 | 9.03 | 11.19 | 9.53 | 11.01 | ||||||||||||||||||||||||
| Net Interest Margin | 3.57 | 3.26 | 3.13 | 3.25 | 3.11 | ||||||||||||||||||||||||
| Net Interest Margin, Excluding PPP Loans (2) | 3.57 | 3.26 | 2.95 | 3.24 | 2.98 | ||||||||||||||||||||||||
| Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) | 44.52 | 47.17 | 45.67 | 46.66 | 47.21 | ||||||||||||||||||||||||
| Tier 1 Leverage (3) | 11.40 | 10.83 | 10.91 | 11.40 | 10.91 | ||||||||||||||||||||||||
| Tier 1 Risk-Based Capital (3) | 14.04 | 13.90 | 14.18 | 14.04 | 14.18 | ||||||||||||||||||||||||
| Common Equity Tier 1 (CET1) (3) | 14.04 | 13.90 | 14.18 | 14.04 | 14.18 | ||||||||||||||||||||||||
| Total Capital (3) | 15.29 | 15.15 | 15.44 | 15.29 | 15.44 | ||||||||||||||||||||||||
| Tangible Capital (2) | 8.20 | 8.92 | 10.92 | 8.20 | 10.92 | ||||||||||||||||||||||||
| Adjusted Tangible Capital (2) | 11.22 | 11.08 | 10.75 | 11.22 | 10.75 | ||||||||||||||||||||||||
| ASSET QUALITY | |||||||||||||||||||||||||||||
| Loans Past Due 30 - 89 Days | $ | 921 | $ | 784 | $ | 1,245 | $ | 921 | $ | 1,245 | |||||||||||||||||||
| Loans Past Due 90 Days or More | 25 | 105 | 18 | 25 | 18 | ||||||||||||||||||||||||
| Non-accrual Loans | 9,892 | 12,494 | 30,978 | 9,892 | 30,978 | ||||||||||||||||||||||||
| Nonperforming Loans (includes nonperforming TDRs) (4) | 9,917 | 12,599 | 30,996 | 9,917 | 30,996 | ||||||||||||||||||||||||
| Other Real Estate Owned | 196 | 196 | 316 | 196 | 316 | ||||||||||||||||||||||||
| Other Nonperforming Assets | 0 | 0 | 20 | 0 | 20 | ||||||||||||||||||||||||
| Total Nonperforming Assets | 10,113 | 12,795 | 31,332 | 10,113 | 31,332 | ||||||||||||||||||||||||
| Performing Troubled Debt Restructurings (4) | 0 | 0 | 4,973 | 0 | 4,973 | ||||||||||||||||||||||||
| Nonperforming Troubled Debt Restructurings (included in nonperforming loans) (4) | 0 | 0 | 6,093 | 0 | 6,093 | ||||||||||||||||||||||||
| Total Troubled Debt Restructurings (4) | 0 | 0 | 11,066 | 0 | 11,066 | ||||||||||||||||||||||||
| Individually Analyzed Loans | 17,313 | 19,986 | 41,148 | 17,313 | 41,148 | ||||||||||||||||||||||||
| Non-Individually Analyzed Watch List Loans | 145,839 | 172,084 | 217,386 | 145,839 | 217,386 | ||||||||||||||||||||||||
| Total Individually Analyzed and Watch List Loans | 163,152 | 192,070 | 258,534 | 163,152 | 258,534 | ||||||||||||||||||||||||
| Gross Charge Offs | 373 | 98 | 90 | 1,211 | 593 | ||||||||||||||||||||||||
| Recoveries | 89 | 95 | 125 | 260 | 2,106 | ||||||||||||||||||||||||
| Net Charge Offs/(Recoveries) | 284 | 3 | (35) | 951 | (1,513) | ||||||||||||||||||||||||
| Net Charge Offs/(Recoveries) to Average Loans | 0.03 | % | 0.00 | % | 0.00 | % | 0.03 | % | (0.05 | %) | |||||||||||||||||||
| Credit Loss Reserve to Loans | 1.50 | % | 1.53 | % | 1.72 | % | 1.50 | % | 1.72 | % | |||||||||||||||||||
| Credit Loss Reserve to Loans, Excluding PPP Loans (2) | 1.50 | % | 1.53 | % | 1.76 | % | 1.50 | % | 1.76 | % | |||||||||||||||||||
| Credit Loss Reserve to Nonperforming Loans | 678.01 | % | 535.97 | % | 235.67 | % | 678.01 | % | 235.67 | % | |||||||||||||||||||
| Credit Loss Reserve to Nonperforming Loans and Performing TDRs (4) | 678.01 | % | 535.97 | % | 203.08 | % | 678.01 | % | 203.08 | % | |||||||||||||||||||
| Nonperforming Loans to Loans | 0.22 | % | 0.28 | % | 0.73 | % | 0.22 | % | 0.73 | % | |||||||||||||||||||
| Nonperforming Assets to Assets | 0.16 | % | 0.20 | % | 0.50 | % | 0.16 | % | 0.50 | % | |||||||||||||||||||
| Total Individually Analyzed and Watch List Loans to Total Loans | 3.63 | % | 4.34 | % | 6.10 | % | 3.63 | % | 6.10 | % | |||||||||||||||||||
| Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans (2) | 3.64 | % | 4.35 | % | 6.23 | % | 3.64 | % | 6.23 | % | |||||||||||||||||||
| OTHER DATA | |||||||||||||||||||||||||||||
| Full Time Equivalent Employees | 600 | 606 | 592 | 600 | 592 | ||||||||||||||||||||||||
| Offices | 52 | 52 | 51 | 52 | 51 | ||||||||||||||||||||||||
(1)Core deposits equals deposits less brokered deposits.
(2)Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures".
(3)Capital ratios for September 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.
7
| CONSOLIDATED BALANCE SHEETS (in thousands, except share data) | |||||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ | 76,498 | $ | 51,830 | |||||||
| Short-term investments | 128,304 | 631,410 | |||||||||
| Total cash and cash equivalents | 204,802 | 683,240 | |||||||||
| Securities available-for-sale, at fair value | 1,192,186 | 1,398,558 | |||||||||
Securities held-to-maturity, at amortized cost (fair value of $103,326 and $0, respectively) | 127,820 | 0 | |||||||||
| Real estate mortgage loans held-for-sale | 1,097 | 7,470 | |||||||||
| Loans, net of allowance for credit losses of $67,239 and $67,773 | 4,422,596 | 4,220,068 | |||||||||
| Land, premises and equipment, net | 58,486 | 59,309 | |||||||||
| Bank owned life insurance | 97,702 | 97,652 | |||||||||
| Federal Reserve and Federal Home Loan Bank stock | 12,840 | 13,772 | |||||||||
| Accrued interest receivable | 22,822 | 17,674 | |||||||||
| Goodwill | 4,970 | 4,970 | |||||||||
| Other assets | 143,085 | 54,610 | |||||||||
| Total assets | $ | 6,288,406 | $ | 6,557,323 | |||||||
| LIABILITIES | |||||||||||
| Noninterest bearing deposits | $ | 1,832,328 | $ | 1,895,481 | |||||||
| Interest bearing deposits | 3,831,805 | 3,839,926 | |||||||||
| Total deposits | 5,664,133 | 5,735,407 | |||||||||
| Borrowings - Federal Home Loan Bank advances | 0 | 75,000 | |||||||||
| Accrued interest payable | 2,200 | 2,619 | |||||||||
| Other liabilities | 102,853 | 39,391 | |||||||||
| Total liabilities | 5,769,186 | 5,852,417 | |||||||||
| STOCKHOLDERS’ EQUITY | |||||||||||
| Common stock: 90,000,000 shares authorized, no par value | |||||||||||
| 25,825,127 shares issued and 25,350,134 outstanding as of September 30, 2022 | |||||||||||
| 25,777,609 shares issued and 25,300,793 outstanding as of December 31, 2021 | 125,832 | 120,615 | |||||||||
| Retained earnings | 630,337 | 583,134 | |||||||||
| Accumulated other comprehensive income (loss) | (221,729) | 16,093 | |||||||||
| Treasury stock at cost (474,993 shares as of September 30, 2022, 476,816 shares as of December 31, 2021) | (15,309) | (15,025) | |||||||||
| Total stockholders’ equity | 519,131 | 704,817 | |||||||||
| Noncontrolling interest | 89 | 89 | |||||||||
| Total equity | 519,220 | 704,906 | |||||||||
| Total liabilities and equity | $ | 6,288,406 | $ | 6,557,323 | |||||||
8
| CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| NET INTEREST INCOME | |||||||||||||||||||||||
| Interest and fees on loans | |||||||||||||||||||||||
| Taxable | $ | 52,707 | $ | 43,025 | $ | 136,580 | $ | 128,828 | |||||||||||||||
| Tax exempt | 462 | 119 | 911 | 324 | |||||||||||||||||||
| Interest and dividends on securities | |||||||||||||||||||||||
| Taxable | 3,608 | 2,470 | 10,613 | 6,482 | |||||||||||||||||||
| Tax exempt | 5,009 | 3,556 | 14,609 | 8,915 | |||||||||||||||||||
| Other interest income | 772 | 125 | 1,501 | 348 | |||||||||||||||||||
| Total interest income | 62,558 | 49,295 | 164,214 | 144,897 | |||||||||||||||||||
| Interest on deposits | 10,066 | 3,479 | 18,037 | 11,587 | |||||||||||||||||||
| Interest on borrowings | |||||||||||||||||||||||
| Short-term | 0 | 0 | 0 | 7 | |||||||||||||||||||
| Long-term | 0 | 75 | 127 | 222 | |||||||||||||||||||
| Total interest expense | 10,066 | 3,554 | 18,164 | 11,816 | |||||||||||||||||||
| NET INTEREST INCOME | 52,492 | 45,741 | 146,050 | 133,081 | |||||||||||||||||||
| Provision for credit losses | 0 | 1,300 | 417 | 1,077 | |||||||||||||||||||
| NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 52,492 | 44,441 | 145,633 | 132,004 | |||||||||||||||||||
| NONINTEREST INCOME | |||||||||||||||||||||||
| Wealth advisory fees | 2,059 | 2,177 | 6,550 | 6,433 | |||||||||||||||||||
| Investment brokerage fees | 651 | 521 | 1,711 | 1,560 | |||||||||||||||||||
| Service charges on deposit accounts | 2,990 | 2,756 | 8,681 | 7,768 | |||||||||||||||||||
| Loan and service fees | 3,047 | 3,005 | 9,131 | 8,823 | |||||||||||||||||||
| Merchant card fee income | 941 | 838 | 2,660 | 2,226 | |||||||||||||||||||
| Bank owned life insurance income (loss) | 54 | 640 | (212) | 2,101 | |||||||||||||||||||
| Interest rate swap fee income | 88 | 180 | 492 | 934 | |||||||||||||||||||
| Mortgage banking income (loss) | (89) | (32) | 771 | 1,756 | |||||||||||||||||||
| Net securities gains | 0 | 0 | 0 | 797 | |||||||||||||||||||
| Other income | 423 | 1,029 | 1,559 | 2,613 | |||||||||||||||||||
| Total noninterest income | 10,164 | 11,114 | 31,343 | 35,011 | |||||||||||||||||||
| NONINTEREST EXPENSE | |||||||||||||||||||||||
| Salaries and employee benefits | 14,650 | 14,230 | 43,840 | 44,377 | |||||||||||||||||||
| Net occupancy expense | 1,476 | 1,413 | 4,793 | 4,343 | |||||||||||||||||||
| Equipment costs | 1,380 | 1,371 | 4,250 | 4,134 | |||||||||||||||||||
| Data processing fees and supplies | 3,226 | 3,169 | 9,510 | 9,692 | |||||||||||||||||||
| Corporate and business development | 1,426 | 1,000 | 4,078 | 3,208 | |||||||||||||||||||
| FDIC insurance and other regulatory fees | 458 | 748 | 1,516 | 1,707 | |||||||||||||||||||
| Professional fees | 1,554 | 1,342 | 4,527 | 5,058 | |||||||||||||||||||
| Other expense | 3,724 | 2,694 | 10,262 | 6,842 | |||||||||||||||||||
| Total noninterest expense | 27,894 | 25,967 | 82,776 | 79,361 | |||||||||||||||||||
| INCOME BEFORE INCOME TAX EXPENSE | 34,762 | 29,588 | 94,200 | 87,654 | |||||||||||||||||||
| Income tax expense | 6,237 | 5,469 | 16,360 | 16,204 | |||||||||||||||||||
| NET INCOME | $ | 28,525 | $ | 24,119 | $ | 77,840 | $ | 71,450 | |||||||||||||||
| BASIC WEIGHTED AVERAGE COMMON SHARES | 25,533,832 | 25,479,654 | 25,525,734 | 25,472,185 | |||||||||||||||||||
| BASIC EARNINGS PER COMMON SHARE | $ | 1.12 | $ | 0.95 | $ | 3.05 | $ | 2.81 | |||||||||||||||
| DILUTED WEIGHTED AVERAGE COMMON SHARES | 25,734,613 | 25,635,288 | 25,710,088 | 25,608,655 | |||||||||||||||||||
| DILUTED EARNINGS PER COMMON SHARE | $ | 1.11 | $ | 0.94 | $ | 3.03 | $ | 2.79 | |||||||||||||||
9
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
(unaudited, in thousands)
| September 30, 2022 | June 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||||||||||
| Commercial and industrial loans: | |||||||||||||||||||||||||||||||||||
| Working capital lines of credit loans | $ | 684,281 | 15.2 | % | $ | 726,798 | 16.4 | % | $ | 659,166 | 15.5 | % | |||||||||||||||||||||||
| Non-working capital loans | 827,014 | 18.4 | 802,994 | 18.2 | 782,618 | 18.5 | |||||||||||||||||||||||||||||
| Total commercial and industrial loans | 1,511,295 | 33.6 | 1,529,792 | 34.6 | 1,441,784 | 34.0 | |||||||||||||||||||||||||||||
| Commercial real estate and multi-family residential loans: | |||||||||||||||||||||||||||||||||||
| Construction and land development loans | 468,288 | 10.4 | 418,284 | 9.4 | 378,716 | 8.9 | |||||||||||||||||||||||||||||
| Owner occupied loans | 741,293 | 16.5 | 726,531 | 16.4 | 740,836 | 17.4 | |||||||||||||||||||||||||||||
| Nonowner occupied loans | 655,975 | 14.6 | 635,477 | 14.4 | 582,019 | 13.7 | |||||||||||||||||||||||||||||
| Multifamily loans | 191,212 | 4.3 | 173,875 | 3.9 | 252,983 | 6.0 | |||||||||||||||||||||||||||||
| Total commercial real estate and multi-family residential loans | 2,056,768 | 45.8 | 1,954,167 | 44.1 | 1,954,554 | 46.0 | |||||||||||||||||||||||||||||
| Agri-business and agricultural loans: | |||||||||||||||||||||||||||||||||||
| Loans secured by farmland | 165,328 | 3.7 | 194,248 | 4.4 | 152,099 | 3.5 | |||||||||||||||||||||||||||||
| Loans for agricultural production | 176,738 | 3.9 | 193,654 | 4.4 | 171,981 | 4.1 | |||||||||||||||||||||||||||||
| Total agri-business and agricultural loans | 342,066 | 7.6 | 387,902 | 8.8 | 324,080 | 7.6 | |||||||||||||||||||||||||||||
| Other commercial loans | 100,831 | 2.2 | 93,157 | 2.1 | 83,595 | 2.0 | |||||||||||||||||||||||||||||
| Total commercial loans | 4,010,960 | 89.2 | 3,965,018 | 89.6 | 3,804,013 | 89.6 | |||||||||||||||||||||||||||||
| Consumer 1-4 family mortgage loans: | |||||||||||||||||||||||||||||||||||
| Closed end first mortgage loans | 196,077 | 4.4 | 190,988 | 4.3 | 173,689 | 4.1 | |||||||||||||||||||||||||||||
| Open end and junior lien loans | 173,419 | 3.9 | 172,449 | 3.9 | 161,941 | 3.8 | |||||||||||||||||||||||||||||
| Residential construction and land development loans | 18,775 | 0.4 | 10,075 | 0.2 | 12,542 | 0.3 | |||||||||||||||||||||||||||||
| Total consumer 1-4 family mortgage loans | 388,271 | 8.7 | 373,512 | 8.4 | 348,172 | 8.2 | |||||||||||||||||||||||||||||
| Other consumer loans | 93,026 | 2.1 | 88,683 | 2.0 | 92,169 | 2.2 | |||||||||||||||||||||||||||||
| Total consumer loans | 481,297 | 10.8 | 462,195 | 10.4 | 440,341 | 10.4 | |||||||||||||||||||||||||||||
| Subtotal | 4,492,257 | 100.0 | % | 4,427,213 | 100.0 | % | 4,244,354 | 100.0 | % | ||||||||||||||||||||||||||
| Less: Allowance for credit losses | (67,239) | (67,523) | (73,048) | ||||||||||||||||||||||||||||||||
| Net deferred loan fees | (2,422) | (2,514) | (4,901) | ||||||||||||||||||||||||||||||||
| Loans, net | $ | 4,422,596 | $ | 4,357,176 | $ | 4,166,405 | |||||||||||||||||||||||||||||
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
(unaudited, in thousands)
| September 30, 2022 | June 30, 2022 | September 30, 2021 | |||||||||||||||
| Noninterest bearing demand deposits | $ | 1,832,328 | $ | 1,797,614 | $ | 1,762,021 | |||||||||||
| Savings and transaction accounts: | |||||||||||||||||
| Savings deposits | 428,718 | 430,752 | 375,993 | ||||||||||||||
| Interest bearing demand deposits | 2,652,783 | 2,631,304 | 2,411,722 | ||||||||||||||
| Time deposits: | |||||||||||||||||
| Deposits of $100,000 or more | 573,923 | 577,571 | 658,050 | ||||||||||||||
| Other time deposits | 176,381 | 184,343 | 206,852 | ||||||||||||||
| Total deposits | $ | 5,664,133 | $ | 5,621,584 | $ | 5,414,638 | |||||||||||
| FHLB advances | 0 | 0 | 75,000 | ||||||||||||||
| Total funding sources | $ | 5,664,133 | $ | 5,621,584 | $ | 5,489,638 | |||||||||||
10
LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
| Three Months Ended September 30, 2022 | Three Months Ended June 30, 2022 | Three Months Ended September 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) | $ | 4,376,724 | $ | 52,707 | 4.78 | % | $ | 4,396,333 | $ | 44,138 | 4.03 | % | $ | 4,339,792 | $ | 43,025 | 3.93 | % | ||||||||||||||||||||||||||||||||||||||
| Tax exempt (1) | 39,220 | 583 | 5.90 | 29,380 | 353 | 4.82 | 14,312 | 150 | 4.16 | |||||||||||||||||||||||||||||||||||||||||||||||
| Investments: (1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Securities | 1,429,186 | 9,949 | 2.76 | 1,476,144 | 10,049 | 2.73 | 1,201,657 | 6,971 | 2.30 | |||||||||||||||||||||||||||||||||||||||||||||||
| Short-term investments | 2,307 | 9 | 1.55 | 2,301 | 2 | 0.35 | 2,304 | 0 | 0.00 | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing deposits | 144,193 | 763 | 2.10 | 252,893 | 481 | 0.76 | 351,769 | 125 | 0.14 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total earning assets | $ | 5,991,630 | $ | 64,011 | 4.24 | % | $ | 6,157,051 | $ | 55,023 | 3.58 | % | $ | 5,909,834 | $ | 50,271 | 3.37 | % | ||||||||||||||||||||||||||||||||||||||
| Less: Allowance for credit losses | (67,481) | (67,527) | (72,157) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonearning Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 70,672 | 74,158 | 67,715 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Premises and equipment | 58,796 | 58,978 | 59,824 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other nonearning assets | 244,741 | 238,228 | 188,118 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total assets | $ | 6,298,358 | $ | 6,460,888 | $ | 6,153,334 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings deposits | $ | 430,428 | $ | 85 | 0.08 | % | $ | 425,102 | $ | 81 | 0.08 | % | $ | 369,191 | $ | 71 | 0.08 | % | ||||||||||||||||||||||||||||||||||||||
| Interest bearing checking accounts | 2,623,747 | 8,809 | 1.33 | 2,710,674 | 3,784 | 0.56 | 2,390,462 | 1,712 | 0.28 | |||||||||||||||||||||||||||||||||||||||||||||||
| Time deposits: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| In denominations under $100,000 | 180,774 | 298 | 0.65 | 189,538 | 307 | 0.65 | 211,911 | 457 | 0.86 | |||||||||||||||||||||||||||||||||||||||||||||||
| In denominations over $100,000 | 586,750 | 874 | 0.59 | 601,877 | 718 | 0.48 | 691,143 | 1,239 | 0.71 | |||||||||||||||||||||||||||||||||||||||||||||||
| Miscellaneous short-term borrowings | 0 | 0 | 0.00 | 0 | 0 | 0.00 | 0 | 0 | 0.00 | |||||||||||||||||||||||||||||||||||||||||||||||
| Long-term borrowings | 0 | 0 | 0.00 | 54,396 | 54 | 0.40 | 75,000 | 75 | 0.40 | |||||||||||||||||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | $ | 3,821,699 | $ | 10,066 | 1.04 | % | $ | 3,981,587 | $ | 4,944 | 0.50 | % | $ | 3,737,707 | $ | 3,554 | 0.38 | % | ||||||||||||||||||||||||||||||||||||||
| Noninterest Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Demand deposits | 1,816,770 | 1,825,327 | 1,681,565 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other liabilities | 76,210 | 70,650 | 45,810 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity | 583,679 | 583,324 | 688,252 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 6,298,358 | $ | 6,460,888 | $ | 6,153,334 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Margin Recap | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income/average earning assets | 64,011 | 4.24 | % | 55,023 | 3.58 | % | 50,271 | 3.37 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense/average earning assets | 10,066 | 0.67 | 4,944 | 0.32 | 3,554 | 0.24 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income and margin | $ | 53,945 | 3.57 | % | $ | 50,079 | 3.26 | % | $ | 46,717 | 3.13 | % | ||||||||||||||||||||||||||||||||||||||||||||
(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 $1.45 million, $1.40 million and $976,000 in the three-month periods ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.
(2)Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $50,000, $180,000, and $3.57 million for the three months ended September 30, 2022, June 30, 2022 and September 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.
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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).
| September 30, 2022 | June 30, 2022 | September 30, 2021 | |||||||||||||||
| Total Loans | $ | 4,489,835 | $ | 4,424,699 | $ | 4,239,453 | |||||||||||
| Less: PPP Loans | 1,603 | 5,219 | 91,897 | ||||||||||||||
| Total Loans, Excluding PPP Loans | 4,488,232 | 4,419,480 | 4,147,556 | ||||||||||||||
| Allowance for Credit Losses | $ | 67,239 | $ | 67,523 | $ | 73,048 | |||||||||||
| Credit Loss Reserve to Total Loans | 1.50 | % | 1.53 | % | 1.72 | % | |||||||||||
| Credit Loss Reserve to Total Loans, Excluding PPP Loans | 1.50 | % | 1.53 | % | 1.76 | % | |||||||||||
| Total Individually Analyzed and Watch List Loans | $ | 163,152 | $ | 192,070 | $ | 258,534 | |||||||||||
| Total Individually Analyzed and Watch List Loans to Total Loans | 3.63 | % | 4.34 | % | 6.10 | % | |||||||||||
| Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans | 3.64 | % | 4.35 | % | 6.23 | % | |||||||||||
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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 common equity remove the fair market value adjustment impact of the available-for-sale 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 | Nine Months Ended | ||||||||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||||||||||||||
| Total Equity | 519,220 | $ | 562,063 | $ | 683,202 | $ | 519,220 | $ | 683,202 | ||||||||||||||||||||
| 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 | 515,417 | 558,260 | 679,408 | 515,417 | 679,408 | ||||||||||||||||||||||||
| AOCI Market Value Adjustment | 220,847 | 157,625 | (12,234) | 220,847 | (12,234) | ||||||||||||||||||||||||
| Adjusted Tangible Common Equity | 736,264 | 715,885 | 667,174 | 736,264 | 667,174 | ||||||||||||||||||||||||
| Assets | $ | 6,288,406 | $ | 6,265,087 | $ | 6,222,916 | $ | 6,288,406 | $ | 6,222,916 | |||||||||||||||||||
| 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 | 6,284,603 | 6,261,284 | 6,219,122 | 6,284,603 | 6,219,122 | ||||||||||||||||||||||||
| Market Value Adjustment | 279,553 | 199,525 | (15,486) | 279,553 | (15,486) | ||||||||||||||||||||||||
| Adjusted Tangible Assets | 6,564,156 | 6,460,809 | 6,203,636 | 6,564,156 | 6,203,636 | ||||||||||||||||||||||||
| Ending Common Shares Issued | 25,536,026 | 25,527,896 | 25,486,032 | 25,536,026 | 25,486,032 | ||||||||||||||||||||||||
| Tangible Book Value Per Common Share | $ | 20.18 | $ | 21.87 | $ | 26.66 | $ | 20.18 | $ | 26.66 | |||||||||||||||||||
| Tangible Common Equity/Tangible Assets | 8.20 | % | 8.92 | % | 10.92 | % | 8.20 | % | 10.92 | % | |||||||||||||||||||
| Adjusted Tangible Common Equity/Adjusted Tangible Assets | 11.22 | % | 11.08 | % | 10.75 | % | 11.22 | % | 10.75 | % | |||||||||||||||||||
| Net Interest Income | $ | 52,492 | $ | 48,678 | $ | 45,741 | $ | 146,050 | $ | 133,081 | |||||||||||||||||||
| Plus: Noninterest income | 10,164 | 10,492 | 11,114 | 31,343 | 35,011 | ||||||||||||||||||||||||
| Minus: Noninterest expense | (27,894) | (27,913) | (25,967) | (82,776) | (79,361) | ||||||||||||||||||||||||
| Pretax Pre-Provision Earnings | $ | 34,762 | $ | 31,257 | $ | 30,888 | $ | 94,617 | $ | 88,731 | |||||||||||||||||||
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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 Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||||||||||||||||||||||||
| Total Average Earnings Assets | $ | 5,991,630 | $ | 6,157,051 | $ | 5,909,834 | $ | 6,178,787 | $ | 5,825,275 | ||||||||||||||||||||||
| Less: Average Balance of PPP Loans | (3,232) | (9,665) | (142,917) | (10,098) | (296,938) | |||||||||||||||||||||||||||
| Total Adjusted Earning Assets | 5,988,398 | 6,147,386 | 5,766,917 | 6,168,689 | 5,528,337 | |||||||||||||||||||||||||||
| Total Interest Income FTE | $ | 64,011 | $ | 55,023 | $ | 50,271 | $ | 168,335 | $ | 147,351 | ||||||||||||||||||||||
| Less: PPP Loan Income | (58) | (204) | (3,946) | (767) | (12,764) | |||||||||||||||||||||||||||
| Total Adjusted Interest Income FTE | 63,953 | 54,819 | 46,325 | 167,568 | 134,587 | |||||||||||||||||||||||||||
| Adjusted Earning Asset Yield, net of PPP Impact | 4.24 | % | 3.58 | % | 3.19 | % | 3.63 | % | 3.25 | % | ||||||||||||||||||||||
| Total Average Interest Bearing Liabilities | $ | 3,821,699 | $ | 3,981,587 | $ | 3,737,707 | $ | 3,919,779 | $ | 3,728,339 | ||||||||||||||||||||||
| Less: Average Balance of PPP Loans | (3,232) | (9,665) | (142,917) | (10,098) | (296,938) | |||||||||||||||||||||||||||
| Total Adjusted Interest Bearing Liabilities | 3,818,467 | 3,971,922 | 3,594,790 | 3,909,681 | 3,431,401 | |||||||||||||||||||||||||||
| Total Interest Expense FTE | $ | 10,066 | $ | 4,944 | $ | 3,554 | $ | 18,164 | $ | 11,816 | ||||||||||||||||||||||
| Less: PPP Cost of Funds | (2) | (6) | (90) | (19) | (555) | |||||||||||||||||||||||||||
| Total Adjusted Interest Expense FTE | 10,064 | 4,938 | 3,464 | 18,145 | 11,261 | |||||||||||||||||||||||||||
| Adjusted Cost of Funds, net of PPP Impact | 0.67 | % | 0.32 | % | 0.24 | % | 0.39 | % | 0.27 | % | ||||||||||||||||||||||
| Net Interest Margin FTE, net of PPP Impact | 3.57 | % | 3.26 | % | 2.95 | % | 3.24 | % | 2.98 | % | ||||||||||||||||||||||
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