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

First Quarter Performance

Net Income Increases 26% and Dividend Increases 18%

Warsaw, Indiana (April 25, 2018) – Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record first quarter net income of $18.3 million for the three months ended March 31, an increase of 26% versus $14.5 million for the first quarter of 2017.   Diluted earnings per share increased 25% to $0.71 for the first quarter of 2018, versus $0.57 for the first quarter of 2017, representing a record quarter for the company and its shareholders. On a linked quarter basis, net income increased 58% or $6.7 million from the fourth quarter ended December 31, 2017, which had net income of $11.6 million and $0.45 diluted earnings per share. Results for the fourth quarter of 2017 included a $4.1 million income tax provision related to revaluing the company's net deferred tax asset position as a result of the tax bill enacted at the end of the year.

David M. Findlay, President and CEO commented, "Lake City Bank's strong first quarter performance was highlighted by the record net income for the quarter, but we are particularly proud of the healthy loan and deposit growth in the quarter. Our ability to consistently produce performance for our shareholders begins with balance sheet growth and this represents a good start to 2018."

Highlights for the quarter are noted below.

1st Quarter 2018 versus 1st Quarter 2017 highlights:

·	Organic average loan growth of $283 million or 8%

·	Average deposit growth of $458 million or 13%

·	Net interest income increase of $4.2 million or 13%

·	Net interest margin increase of 9 basis points to 3.36%

·	Revenue growth of $5.8 million or 14%

·	Tangible common equity1 increase of $35.5 million or 8%

1st Quarter 2018 versus 4th Quarter 2017 highlights:

·	Organic average loan growth of $64 million or 2%

·	Average deposit growth of $105 million or 3%

·	Net interest income increase of $831,000 or 2%

·	Revenue growth of $1.2 million or 3%

·	Tangible common equity1 increase of $4.7 million or 1%

 

¹ Non-GAAP financial measure – see "Reconciliation of Non-GAAP Financial Measures."

 

As announced on April 10, 2018, the board of directors approved a cash dividend for the first quarter of $0.26 per share, payable on May 7, 2018, to shareholders of record as of April 25, 2018. The first quarter dividend per share represents an 18% increase over the dividend rate paid in the prior four quarters of $0.22 per share.

Findlay added, "Dividends represent a critical component of our shareholder value equation, and this 18% increase is made possible by our consistent long-term ability to produce quality earnings that contribute to a strong capital base."

Return on average total equity for the first quarter of 2018 was 15.82%, compared to 13.63% in the first quarter of 2017 and 9.87% in the linked fourth quarter of 2017. Return on average assets for the first quarter of 2018 was 1.58%, compared to 1.37% in the first quarter of 2017 and 1.00% in the linked fourth quarter of 2017. The company's total capital as a percent of risk-weighted assets was 13.41% at March 31, 2018, compared to 13.31% at March 31, 2017 and 13.26% at December 31, 2017. The company's tangible common equity to tangible assets ratio¹ was 9.94% at March 31, 2018, compared to 10.06% at March 31, 2017 and 9.93% at December 31, 2017.

Average total loans for the first quarter of 2018 were $3.79 billion, an increase of $282.8 million, or 8%, versus $3.51 billion for the first quarter 2017. On a linked quarter basis, total average loans grew $64.0 million, or 2%, from $3.73 billion at December 31, 2017. Total loans outstanding grew $313.4 million, or 9%, from $3.53 billion as of March 31, 2017 to $3.85 billion as of March 31, 2018.

Average total deposits for the first quarter of 2018 were $4.09 billion, an increase of $457.7 million, or 13%, versus $3.64 billion for the first quarter of 2017. On a linked quarter basis, total average deposits grew $105.3 million or 3% from $3.99 billion at December 31, 2017. Total deposits grew $420.1 million, or 11%, from $3.68 billion as of March 31, 2017 to $4.10 billion as of March 31, 2018. In addition, total core deposits, which exclude brokered deposits, increased $328.4 million, or 9%, from $3.54 billion at March 31, 2017 to $3.87 billion at March 31, 2018 due to growth in retail deposits of $165.6 million or 11%, growth in commercial deposits of $105.3 million or 12% and growth in public fund deposits of $57.6 million or 5%.

"We're committed to a deposit growth strategy over all deposit categories and are particularly pleased that our non-interest bearing demand deposits increased 13% on a year over year basis. In addition, our focus on core deposit growth has translated into double digit growth in both our retail and commercial deposit client bases on a year over year basis," Findlay observed.

The company's net interest margin increased nine basis points to 3.36% for the first quarter of 2018 compared to 3.27% for the first quarter of 2017. The higher margin in the first quarter of 2018 was due to higher yields on loans, partially offset by a higher cost of funds. On a linked quarter basis, the net interest margin improved by three basis points from 3.33% in the fourth quarter of 2017 due to the positive impact of Federal Reserve Bank increases in the target Federal Funds Rate in mid-December 2017 and mid-March 2018. Net interest income increased $4.1 million, or 13%, to $36.2 million for the first quarter of 2018, versus $32.1 million in the first quarter of 2017.

 

¹ Non-GAAP financial measure – see "Reconciliation of Non-GAAP Financial Measures."

 

The company recorded a provision for loan losses of $3.3 million in the first quarter of 2018, driven by strong loan growth and net charge offs during the quarter. Net charge offs in the quarter were $4.8 million versus net charge offs of $144,000 in the first quarter of 2017 and net charge offs of $226,000 during the linked fourth quarter 2017. Net charge offs included a $4.6 million charge off related to a single commercial borrower. At December 31, 2017, loans to the borrower were current and performing. Late in the first quarter of 2018, the borrower encountered working capital challenges and it became clear to the bank that the borrower was not able to generate sufficient cash flow from operations to fully support its business. As a result, it was determined that full collection of the outstanding loan balance of $6.8 million was not probable and would likely not be repaid. The remaining loan exposure of $2.2 million to this borrower, which is on nonaccrual status, is secured by a blanket lien on all assets, including accounts receivable, land, buildings and equipment. In addition the exposure is supported by personal guarantees and a security interest in undeveloped commercial real estate.

The company's allowance for loan losses as of March 31, 2018 was $45.6 million compared to $43.8 million as of March 31, 2017 and $47.1 million as of December 31, 2017. The allowance for loan losses represented 1.19% of total loans as of March 31, 2018 versus 1.24% at March 31, 2017 and 1.23% as of December 31, 2017.

Nonperforming assets decreased $797,000, or 7%, to $11.2 million as of March 31, 2018 versus $12.0 million as of March 31, 2017 due to a decrease in loans past due 90 days or more. On a linked quarter basis, nonperforming assets were $1.6 million higher than the $9.5 million reported as of December 31, 2017 primarily due to placing one commercial relationship in nonaccrual status. The ratio of nonperforming assets to total assets at March 31, 2018 decreased to 0.24% from 0.28% at March 31, 2017 and increased from 0.20% at December 31, 2017.  Annualized net charge-offs to average loans were 0.51% for the first quarter of 2018 compared to 0.02% for the first quarter of 2017 and 0.02% for the fourth quarter of 2017.

Findlay noted, "We continue to be encouraged by the strength of the general economic conditions in our markets and the bank's overall credit quality remains stable.  While we are disappointed with the notable charge off in the quarter, the factors impacting this borrower's situation were unique and we believe are not reflective of any broader asset quality concerns."

The company's noninterest income increased $1.6 million, or 20%, to $9.9 million for the first quarter of 2018, compared to $8.3 million for the first quarter of 2017. Noninterest income was positively impacted by a 15% increase over the prior year first quarter in recurring fee income for service charges on deposit accounts, primarily due to growth in fees from business accounts. In addition, wealth advisory fees increased by 20% compared to the year ago period due to continued growth of client relationships.

Findlay added, "Effectively expanding our relationships with new and existing clients has contributed to this positive growth in fee-based services of 20%. These value-add products reflect both the adoption of technology by our clients and our ability to build upon existing client relationships with investment and treasury management products and services."

The company adopted the new revenue recognition accounting standard effective on January 1, 2018 that requires the evaluation of all contracts and the related recognition of revenue. Although the adoption of this standard did not have a significant impact to net income, the evaluation of recording revenue gross versus net did cause some reclassifications of expenses associated with various revenue streams.  Adoption of this standard resulted in an increase of $194,000 to the loans and service fee line item and a $70,000 increase to the merchant card fee line item, both due to reclassifications of data processing expenses to non-interest income based on interchange revenue related transactions.

 

 

 

The company's noninterest expense increased $1.2 million, or 6%, to $21.2 million in the first quarter of 2018, compared to $20.0 million in the first quarter of 2017.  Salaries and employee benefits increased primarily due to higher employee health insurance expense, an increase to the company's minimum hiring wage, special bonuses paid to non-officer employees, and normal merit increases. Data processing fees increased due to the company's continued investment in technology-based solutions as well as the adoption of the new FASB revenue recognition accounting standard. Corporate and business development expense decreased primarily due to a reduction in contributions as well as lower advertising expenses. The company's efficiency ratio was 46.0% for the first quarter of 2018, compared to 49.7% for the first quarter of 2017 and 43.7% for the linked fourth quarter of 2017.

The effective tax rate for the first quarter 2018 was 15.1%, compared to 27.7% for the first quarter 2017 and reflects the effect of the Tax Cuts and Jobs Act, which lowered the company's federal tax rate to 21% from 35%.

Lakeland Financial Corporation is a $4.7 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the fourth largest bank headquartered in the state, and the largest bank 100% invested in Indiana. Lake City Bank operates 49 offices in Northern and Central Indiana, delivering technology-driven and client-centric financial services solutions to individuals and businesses.

Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at 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. Lakeland Financial believes that providing non-GAAP financial measures provides investors with information useful to understanding the company's financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on "tangible common equity" which is "common stockholders' equity" excluding intangible assets, net of deferred tax and "tangible assets" which is "assets" excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent are 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. Additional information concerning the company and its business, including factors that could materially affect the company's financial results, is included in the company's filings with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K.

 

 

 

 

 

 

 

 

LAKELAND FINANCIAL CORPORATION

AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS

(UNAUDITED)

(1) Reconciliation of Non-GAAP Financial Measures

###