Lakeland Financial Reports Record Second Quarter 2021 Performance

WARSAW, Ind., July 26, 2021 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record quarterly net income of $24.3 million for the three months ended June 30, 2021, an increase of 24% versus $19.7 million for the second quarter of 2020. Diluted earnings per share increased 23% to $0.95 for the second quarter of 2021, versus $0.77 for the second quarter of 2020. On a linked quarter basis, net income increased $1.4 million, or 6%, from the first quarter of 2021, in which the company had net income of $23.0 million, or $0.90, diluted earnings per share. Pretax pre-provision earnings1 were $28.4 million for the second quarter of 2021, a decrease of 4%, or $1.3 million, from $29.6 million for the second quarter of 2020. On a linked quarter basis, pretax pre-provision earnings decreased 4%, or $1.1 million, from $29.5 million for the first quarter of 2021.

The company further reported record net income of $47.3 million for the six months ended June 30, 2021 versus $37.0 million for the comparable period of 2020, an increase of 28%. Diluted earnings per share also increased 28% to $1.85 for the six months ended June 30, 2021 versus $1.44 for the comparable period of 2020. Pretax pre-provision earnings1 were $57.8 million for the six months ended June 30, 2021, versus $57.2 million for the comparable period of 2020, an increase of 1%, or $0.7 million.

David M. Findlay, President and Chief Executive Officer commented, “We are very pleased with our strong performance in 2021 under challenging conditions. Our record net income for the quarter and first six months of the year reflects strong organic loan and deposit growth, exceptional management of the Paycheck Protection Program and prudent overall balance sheet management. As we transition to the second half of 2021, we look forward to expanding our business development efforts and focusing on growing relationships with clients and prospects.”

Financial Performance – Second Quarter 2021

Second Quarter 2021 versus Second Quarter 2020 highlights:

  • Return on average equity of 14.71%, compared to 12.92%
  • Return on average assets of 1.58%, compared to 1.45%
  • Organic loan growth, excluding PPP loans, of $223.6 million, or 6%
  • Core deposit growth of $769.3 million, or 17%
    • Noninterest bearing demand deposit account growth of $317.1 million, or 22%
  • Net interest income increase of $4.1 million, or 10%
  • Net interest margin of 3.01% compared to 3.10%
  • Noninterest income increase of $171,000, or 2%
  • Revenue growth of $4.3 million, or 8%
  • Noninterest expense increase of $5.6 million, or 26%
  • Recovery of a $1.7 million loan charged off in 2009, resulting in $1.7 million reverse provision compared to provision expense of $5.5 million, a decrease of $7.2 million
  • Dividend per share increase of 13% to $0.34 from $0.30
  • Average total equity increase of $51.7 million, or 8%
  • Total risk-based capital ratio improved to 15.04% compared to 14.93%
  • Tangible capital ratio of 10.81% compared to 11.35%

Second Quarter 2021 versus First Quarter 2021 highlights:

  • Return on average equity of 14.71%, compared to 14.27%
  • Return on average assets of 1.58% for both periods
  • Organic loan growth, excluding PPP loans, of $81.6 million, or 2%
  • Core deposit growth of $164.7 million, or 3%
    • Noninterest bearing demand deposit account growth of $138.9 million, or 9%
  • Net interest income decrease of $18,000
  • Net interest margin of 3.01% compared to 3.19%
  • Noninterest income decrease of $1.2 million, or 10%
  • Recovery of a $1.7 million loan charged off in 2009, resulting in $1.7 million reverse provision compared to provision expense of $1.5 million, a decrease of $3.2 million
  • Decrease in watch list loans of $10.8 million, or 4% decline
  • Noninterest expense decrease of $98,000
  • Average total equity increase of $10.7 million, or 2%
  • Total risk-based capital declined to 15.04% compared to 15.20%
  • Tangible capital ratio was 10.81% compared to 10.77%

As announced on July 13, 2021, the board of directors approved a cash dividend for the second quarter of $0.34 per share, payable on August 5, 2021, to shareholders of record as of July 25, 2021. The second quarter dividend per share of $0.34 is unchanged from the dividend per share paid for the first quarter of 2021 and reflects a 13% increase from the dividend rate a year ago. 

On April 13, 2021, the company’s board of directors reauthorized and extended the share repurchase program through April 30, 2023. Under the program the company is authorized to repurchase, from time to time as the company deems appropriate, shares of the company’s common stock with an aggregate purchase price of up to $30 million. No shares were repurchased under the plan during 2021. Under the program, the company repurchased 289,101 shares, with an average purchase price of $34.66, during the first quarter of 2020.

Average total loans for the second quarter of 2021 were $4.49 billion, an increase of $27.3 million, or 1%, versus $4.46 billion for the second quarter 2020. Average PPP loans were $348.0 million during the second quarter 2021. Excluding PPP loans, average loans were $4.14 billion compared to $4.00 billion for the second quarter of 2020, an increase of $137.0 million, or 3%. On a linked quarter basis, average loans excluding PPP loans decreased by $24.8 million, or 1%. Average total loans including PPP loans decreased $79.5 million, or 2%, from $4.57 billion for the first quarter of 2021.

Total loans, excluding PPP loans, increased by $223.6 million, or 6%, as of June 30, 2021 as compared to June 30, 2020. On a linked quarter basis, total loans excluding PPP loans were $4.16 billion as of June 30, 2021, an increase of $81.6 million, or 2%, as compared to the first quarter of 2021. Total loans outstanding, including PPP loans, decreased by $136.8 million, or 3%, from $4.49 billion as of June 30, 2020 to $4.35 billion as of June 30, 2021. PPP loans outstanding were $194.2 million as of June 30, 2021, which reflects PPP forgiveness and repayments of $535.2 million since the program’s inception.

Findlay stated, “We are pleased to report substantial progress in PPP forgiveness application approvals during the quarter with $228.1 million, or approximately 578 loans, forgiven during the quarter. Approximately 95% of our round one PPP loans have been forgiven by the SBA and 29% of our round two PPP loans have been forgiven as of July 20, 2021. Our lenders look forward to shifting their focus to organic loan growth opportunities in our Lake City Bank footprint. The loan pipeline is healthy and we are optimistic about future loan growth potential.”

Average total deposits were $5.39 billion for the second quarter of 2021, an increase of $690.4 million, or 15%, versus $4.70 billion for the second quarter of 2020. On a linked quarter basis, average total deposits increased by $280.2 million, or 5%. Total deposits increased $751.2 million, or 16%, from $4.64 billion as of June 30, 2020 to $5.39 billion as of June 30, 2021. On a linked quarter basis, total deposits increased by $164.7 million, or 3%, from $5.23 billion as of March 31, 2021.

Core deposits, which exclude brokered deposits, increased by $769.3 million, or 17%, from $4.62 billion at June 30, 2020 to $5.38 billion at June 30, 2021. This increase was due to growth in commercial deposits of $338.9 million, or 19%; growth in retail deposits of $258.1 million, or 15%; and growth in public fund deposits of $172.4 million, or 16%. On a linked quarter basis, core deposits increased by $164.7 million, or 3%, at June 30, 2021 as compared to March 31, 2021. The linked quarter growth resulted from commercial deposit growth of $114.4 million, a 6% increase; public fund growth of $71.2 million, a 6% increase; and retail contraction of $20.9 million, a 1% decrease. PPP loan forgiveness and the first round of stimulus payments to municipalities contributed to the increase in deposits during the second quarter.

Investment securities were $1.1 billion at June 30, 2021, reflecting an increase of $491.3 million, or 78%, as compared to $632.9 million at June 30, 2020. Investment securities increased $283.8 million, or 34%, on a linked quarter basis. Investment securities represent 18% of total assets compared to 12% on June 30, 2020 and 14% on March 31, 2021. The increase in investment securities reflects the deployment of excess liquidity resulting from deposit increases that resulted from PPP and economic stimulus.

Findlay added, “We have deployed $600 million in excess liquidity to our investment securities portfolio since late 2020 in response to the surge in deposit balances that began in 2020 and has continued into 2021. The unprecedented liquidity of our balance sheet has presented some unique challenges and we have judiciously allocated a portion of that liquidity to the investment portfolio without significant impact to our asset sensitive balance sheet. Our commercial line utilization has improved from 39% in March 2021 to 41% in July, however it is considerably lower than in previous years. During the past eight years, we have averaged 49% commercial line utilization, so the trends in 2020 and 2021 have clearly been created by the impact on our clients of the governmental programs designed to strengthen and stabilize the economy.”

The company’s net interest margin decreased 9 basis points to 3.01% for the second quarter of 2021 compared to 3.10% for the second quarter of 2020. The lower margin in the second quarter of 2021 as compared to the prior year period was due to lower yields on loans and securities, partially offset by a lower cost of funds. As a result of the excess liquidity on the company's balance sheet, the mix of earning assets included lower earning assets consisting of balances at the Federal Reserve Bank and the investment securities portfolio. The decline in earning asset yields, and thereby net interest margin, resulted from the Federal Reserve Bank decreases in the target Federal Funds Rate by 150 basis points during the first quarter of 2020, which brought the Federal Funds Rate back to the zero-bound range of 0.00% to 0.25%. Second quarter loan yields were impacted by the lower yield on the PPP loan portfolio, offset by fees earned as a result of PPP loan forgiveness.

The company’s net interest margin excluding PPP loans1 was 6 basis points lower at 2.95% for the second quarter of 2021 compared to actual net interest margin of 3.01%, and reflects a 22 basis point decline from net interest margin excluding PPP loans of 3.17% in the second quarter of 2020. Linked quarter net interest margin excluding PPP loans decreased by 11 basis points compared to 3.06% for the first quarter of 2021 due to declining earning asset yields and excess liquidity on the balance sheet. Cost of funds decreased to a historical low of 0.27% for the three-month period ended June 30, 2021 from 0.56% at June 30, 2020 and 0.31% on a linked quarter basis.

Net interest income increased by $4.1 million, or 10%, for the three months ended June 30, 2021 as compared to the three months ended June 30, 2020. On a linked quarter basis, net interest income decreased $18,000 from the first quarter of 2021. PPP loan income was $3.7 million for the three months ended June 30, 2021, compared to $5.2 million during the first quarter of 2021. Net interest income increased by $9.0 million, or 11%, for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 due primarily to a decrease in interest expense of $10.6 million and an increase in investment securities income of $1.5 million, offset by a $3.1 million decline in loan interest income.

The company adopted CECL during the first quarter of 2021, effective January 1, 2021. The day one impact of adoption was an increase in the allowance for credit losses2 of $9.1 million, with an offset, net of taxes, to beginning stockholders’ equity. The company recorded a provision for credit losses2 reversal of $1.7 million in the second quarter of 2021, compared to $5.5 million provision expense in the second quarter of 2020, a decrease of $7.2 million. On a linked quarter basis, the provision2 decreased by $3.2 million from expense of $1.5 million in the first quarter of 2021. The provision reversal in the second quarter of 2021 was driven primarily by a one-time recovery of $1.7 million from a commercial loan relationship that had been partially charged off in 2009. The company’s credit loss reserve to total loans2 was 1.65% at June 30, 2021 versus 1.31% at June 30, 2020 and 1.61% at March 31, 2021. The company’s credit loss reserve2 to total loans excluding PPP loans1 was 1.72% at June 30, 2021 versus 1.50% at June 30, 2020 and 1.76% at March 31, 2021. PPP loans are guaranteed by the United States Small Business Administration (SBA) and have not been allocated for within the allowance for credit losses2.

“The $1.7 million recovery recorded during the second quarter is a testament to our long-standing approach to working with our borrowers when they encounter challenges. We prudently charged off the loan 12 years ago but continued to do business with the borrower and maintained a meaningful relationship. As a result, the bank was able to work with the borrower to secure this recovery,” commented Findlay.     

Net recoveries in the second quarter of 2021 were $1.6 million versus net charge offs of $90,000 in the second quarter of 2020 and net charge offs of $91,000 during the linked first quarter of 2021. Annualized net charge offs (recoveries) to average loans were (0.14%) for the second quarter of 2021 versus 0.01% for the second quarter of 2020, and 0.01% for the linked first quarter of 2021.

Nonperforming assets decreased $3.3 million, or 22%, to $11.8 million as of June 30, 2021 versus $15.1 million as of June 30, 2020. On a linked quarter basis, nonperforming assets decreased $383,000, or 3%, versus the $12.2 million reported as of March 31, 2021. The ratio of nonperforming assets to total assets at June 30, 2021 decreased to 0.19% from 0.28% at June 30, 2020 and decreased from 0.20% at March 31, 2021 on a linked quarter basis. Total individually analyzed and watch list loans increased by $57.1 million, or 31%, to $241.3 million at June 30, 2021 versus $184.2 million as of June 30, 2020. On a linked quarter basis, total individually analyzed and watch list loans decreased by $9.9 million, or 4%, from $251.2 million at March 31, 2021. The decrease in total individually analyzed and watch list loans was due primarily to a decrease in non-individually analyzed watch list credits. Individually analyzed watch list loans decreased by $4.7 million, or 20%, to $19.3 million at June 30, 2021 versus $24.0 million at June 30, 2020. On a linked quarter basis, individually analyzed watch list loans decreased by $872,000, or 4%, from $20.1 million at March 31, 2021.

The company’s noninterest income increased $171,000, or 2%, to $11.3 million for the second quarter of 2021, compared to $11.2 million for the second quarter of 2020. Noninterest income was positively impacted by elevated wealth and investment brokerage fees which increased by $538,000, or 25%, for these comparable periods. In addition, service charges on deposit accounts were up $332,000, or 15%, and loan and service fees were up $617,000, or 25%, for these comparable periods due to an increase in economic activity within the company's operating footprint. Offsetting these increases were decreases of $804,000, or 61%, in interest rate swap fee income and $939,000, or 69%, in mortgage banking income. Both interest rate swap arrangements and mortgage banking have seen a decrease in demand during the second quarter of 2021 compared to the second quarter of 2020, and the carrying value of mortgage service rights has been impacted by increased prepayment speeds due to the current rate environment and appreciating single-home values.

Noninterest income decreased by $1.2 million, or 10%, on a linked quarter from $12.6 million. The linked quarter decrease resulted primarily from a decrease in net securities gains of $709,000 and mortgage banking income of $958,000. Offsetting these decreases was a $256,000 increase in interest rate swap fee income during the quarter.

The company’s noninterest expense increased $5.6 million, or 26%, to $26.6 million in the second quarter of 2021, compared to $21.1 million in the second quarter of 2020. Salaries and employee benefits increased $4.3 million, or 38%, driven by higher performance-based incentive compensation expense and higher employee health insurance expense. Professional fees increased $786,000, or 75%, driven by expenses related to the company's implementation of Lake City Bank Digital, an innovative digital banking platform, in the first quarter of 2021, as well as an increase in legal and regulatory expense. Data processing fees increased $375,000, or 13%, driven by the company’s continued investment in customer focused, technology-based solutions, such as the online PPP origination and forgiveness platform, and ongoing cybersecurity and data management enhancements.

On a linked quarter basis, noninterest expense decreased by $98,000 to $26.6 million. Salaries and employee benefits increased by $1.4 million, or 10%, driven by higher performance-based incentive compensation expense. Offsetting this increase was a planned seasonal decrease of $311,000 in advertising spending and a reduction in equipment costs of $127,000. In addition, the company made a $500,000 contribution to its foundation in the first quarter that did not repeat in the second quarter of 2021.

The company’s efficiency ratio was 48.5% for the second quarter of 2021, compared to 41.6% for the second quarter of 2020 and 47.6% for the linked first quarter of 2021. The company's efficiency ratio was 48.0% for the six months ended June 30, 2021 compared to 43.0% in the prior period.

_____________________________________________________
1 Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”
2 Beginning January 1, 2021 calculation is based on the Current Expected Credit Loss methodology (CECL). Prior to January 1, 2021 calculation was based on the incurred loss methodology. 

Active Management of Credit Risk

The company’s Commercial Banking and Credit Administration leadership continues to review and refine the list of industries that the company believes are most likely to be materially impacted by the potential economic impact resulting from the COVID-19 pandemic. The current assessment of impacted industries has narrowed from year end 2020 and includes only one industry, hotel and accommodation, as compared to the initial list of ten potentially affected industries disclosed in the company’s earnings release for the first quarter of 2020. The hotel and accommodation industry represents approximately 2.3%, or $96 million, of the company’s total loan portfolio. The original ten industries represented a peak of $765 million, or 18.7%, as of March 31, 2020, excluding PPP loans.

Findlay noted, “Asset quality metrics have continued to improve during 2021 on nearly every front, and we are cautiously optimistic about overall trends in asset quality. While our borrowers continue to experience supply chain issues and an increase in cost of goods sold, they are generally working through these issues effectively.”

The company’s commercial loan portfolio is highly diversified, and no industry sector represents more than 8% of the bank’s loan portfolio, net of PPP, as of June 30, 2021. Agri-business and agricultural loans, along with healthcare loans, represented the highest specific industry concentrations, at 8% of total loans in both cases. The company’s Commercial Banking and Credit Administration teams continue to actively work with customers to understand their business challenges and credit needs during this time.

COVID-19 Related Loan Deferrals

Loan deferrals peaked on June 17, 2020, at $737 million, which represented 16% of the total loan portfolio. As of June 30, 2021, total deferrals attributable to COVID-19 were $37 million, representing eight borrowers, or 1% of the total loan portfolio. Total deferrals as of July 20, 2021 represented a decline in deferral balances of 96% from peak levels. Of the $28 million, four were commercial loan borrowers representing $28 million in loans, or 1% of total commercial loans, and there were no retail loan deferrals. All COVID-19 related loan deferrals remain on accrual status, as each deferral is evaluated individually, and management has determined that all contractual cashflows are collectable at this time.

As of July 20, 2021, of the total commercial deferrals attributed to COVID-19, $8 million represented a first deferral action, $250,000 represented a second deferral action and $20 million represented a third deferral action. In accordance with Section 4013 of the CARES Act, these deferrals were not considered to be troubled debt restructurings. This provision was extended to January 1, 2022 under the Consolidated Appropriations Act, 2021. The third deferral actions, which are comprised of two borrowers, have been classified as watchlist credits and are adequately reserved for in the allowance for credit losses as of June 30, 2021.

The company’s retail loan portfolio is comprised of 1-4 family mortgage loans, home equity lines of credit and other direct and indirect installment loans. A third-party vendor manages the company’s retail and commercial credit card program and the company does not have any balance sheet exposure with respect to this program except for nominal recourse on limited commercial card accounts. 

Paycheck Protection Program

During the first and second quarter of 2021, the company funded PPP loans totaling $165.1 million for its customers through the second round of the PPP program. In addition, the bank has continued processing forgiveness applications for PPP loans made during the first and second rounds of the PPP program. As of June 30, 2021, Lake City Bank had $194.2 million in PPP loans outstanding, net of deferred fees, consisting of $40.7 million from PPP round one and $153.5 million from PPP round two. Most of the PPP loans are for existing customers and 55% of the number of PPP loans originated are for amounts less than $50,000. As of June 30, 2021, the SBA has approved forgiveness for $513.6 million in PPP loans originated during round one and $5.7 million in PPP loans originated during round two. The company has submitted forgiveness applications on behalf of customers in the amount of $15.2 million for PPP round one and $1.7 million for PPP round two that are awaiting SBA approval.

 June 30, 2021
 Originated Forgiven Outstanding (1)
 Number Amount Number Amount Number Amount
PPP Round 12,409 $570,500  2,256 $513,626  133 $40,746 
PPP Round 21,192 165,142  180 5,746  1,012 153,466 
Total3,601 $735,642  2,436 $519,372  1,145 $194,212 

(1)  Outstanding balance includes deferred loan origination fees, net of costs, and any loans repaid by borrowers.

Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at lakecitybank.com. The company’s common stock is traded on the Nasdaq Global Select Market under “LKFN.” In addition to the results presented in accordance with generally accepted accounting principles in the United States, this earnings release contains certain non-GAAP financial measures. The company believes that providing non-GAAP financial measures provides investors with information useful to understanding the company’s financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio and pretax pre-provision earnings. A reconciliation of these and other non-GAAP measures to the most comparable GAAP equivalents is included in the attached financial tables where the non-GAAP measures are presented.

This document contains, and future oral and written statements of the company and its management may contain, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the company. Forward-looking statements, which may be based upon beliefs, expectations and assumptions of the company’s management and on information currently available to management, are generally identifiable by the use of words such as “believe,” “expect,” “anticipate,” “continue,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. The company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain and, accordingly, the reader is cautioned not to place undue reliance on any forward-looking statements made by the company. Additionally, all statements in this document, including forward-looking statements, speak only as of the date they are made, and the company undertakes no obligation to update any statement in light of new information or future events. Numerous factors could cause the company’s actual results to differ from those reflected in forward-looking statements, including the effects of the COVID-19 pandemic, including its effects on our customers, local economic conditions, our operations and vendors, and the responses of federal, state and local governmental authorities, as well as those identified in the company’s filings with the Securities and Exchange Commission, including the company’s Annual Report on Form 10-K and quarterly reports on Form 10-Q.

LAKELAND FINANCIAL CORPORATION
SECOND QUARTER 2021 FINANCIAL HIGHLIGHTS

 Three Months Ended Six Months Ended
(Unaudited – Dollars in thousands, except per share data)Jun. 30, Mar. 31, Jun. 30, Jun. 30, Jun. 30,
END OF PERIOD BALANCES2021 2021 2020 2021 2020
Assets$6,232,914  $6,016,642  $5,441,092  $6,232,914  $5,441,092 
Deposits5,394,664  5,229,970  4,643,427  5,394,664  4,643,427 
Brokered Deposits10,004  10,003  28,052  10,004  28,052 
Core Deposits (1)5,384,660  5,219,967  4,615,375  5,384,660  4,615,375 
Loans4,353,709  4,474,631  4,490,532  4,353,709  4,490,532 
Paycheck Protection Program (PPP) Loans194,212  396,723  554,636  194,212  554,636 
Allowance for Credit Losses (2)71,713  71,844  59,019  71,713  59,019 
Total Equity677,471  651,668  620,892  677,471  620,892 
Goodwill net of deferred tax assets3,794  3,794  3,789  3,794  3,789 
Tangible Common Equity (3)673,677  647,874  617,103  673,677  617,103 
AVERAGE BALANCES             
Total Assets$6,171,427  $5,887,361  $5,454,608  $6,030,178  $5,210,873 
Earning Assets5,924,801  5,638,202  5,212,985  5,782,293  4,975,358 
Investments - available-for-sale955,242  772,247  621,134  864,250  620,005 
Loans4,487,683  4,567,226  4,460,411  4,527,234  4,259,792 
Paycheck Protection Program (PPP) Loans348,026  402,730  457,757  375,226  228,878 
Total Deposits5,387,185  5,107,019  4,696,832  5,247,878  4,450,463 
Interest Bearing Deposits3,753,499  3,540,974  3,335,189  3,647,826  3,273,815 
Interest Bearing Liabilities3,828,499  3,617,491  3,421,041  3,723,580  3,373,027 
Total Equity663,993  653,329  612,313  658,690  608,293 
INCOME STATEMENT DATA         
Net Interest Income$43,661  $43,679  $39,528  $87,340  $78,382 
Net Interest Income-Fully Tax Equivalent44,452  44,366  40,124  88,818  79,567 
Provision for Credit Losses (2)(1,700) 1,477  5,500  (223) 12,100 
Noninterest Income11,340  12,557  11,169  23,897  21,946 
Noninterest Expense26,648  26,746  21,079  53,394  43,168 
Net Income24,348  22,983  19,670  47,331  36,969 
Pretax Pre-Provision Earnings (3)28,353  29,490  29,618  57,843  57,160 
PER SHARE DATA         
Basic Net Income Per Common Share$0.96  $0.90  $0.77  $1.86  $1.45 
Diluted Net Income Per Common Share0.95  0.90  0.77  1.85  1.44 
Cash Dividends Declared Per Common Share0.34  0.34  0.30  0.68  0.60 
Dividend Payout35.79% 37.78% 38.96% 36.76% 41.67%
Book Value Per Common Share (equity per share issued)26.59  25.58  24.43  26.59  24.43 
Tangible Book Value Per Common Share (3)26.45  25.43  24.28  26.45  24.28 
Market Value – High70.25  77.05  47.49  77.05  49.85 
Market Value – Low57.02  53.03  33.92  53.03  30.49 
               
 Three Months Ended Six Months Ended
 Jun. 30,
2021
 Mar. 31,
2021
 Jun. 30,
2020
 Jun. 30,
2021
 Jun. 30,
2020
Basic Weighted Average Common Shares Outstanding 25,473,497   25,457,659   25,412,014   25,465,621   25,517,499 
Diluted Weighted Average Common Shares Outstanding 25,602,063   25,550,111   25,469,680   25,596,843   25,594,959 
KEY RATIOS         
Return on Average Assets1.58% 1.58% 1.45% 1.58% 1.43%
Return on Average Total Equity14.71  14.27  12.92  14.49  12.22 
Average Equity to Average Assets10.76  11.10  11.23  10.92  11.67 
Net Interest Margin3.01  3.19  3.10  3.10  3.22 
Net Interest Margin, Excluding PPP Loans (3)2.95  3.06  3.17  3.00  3.25 
Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income)48.45  47.56  41.58  48.00  43.03 
Tier 1 Leverage (4)10.59  10.79  10.84  10.59  10.84 
Tier 1 Risk-Based Capital (4)13.79  13.95  13.68  13.79  13.68 
Common Equity Tier 1 (CET1) (4)13.79  13.95  13.68  13.79  13.68 
Total Capital (4)15.04  15.20  14.93  15.04  14.93 
Tangible Capital (3) (4)10.81  10.77  11.35  10.81  11.35 
ASSET QUALITY                   
Loans Past Due 30 - 89 Days$673  $739  $683  $673  $683 
Loans Past Due 90 Days or More18  18  19  18  19 
Non-accrual Loans10,709  11,707  14,779  10,709  14,779 
Nonperforming Loans (includes nonperforming TDRs)10,727  11,725  14,798  10,727  14,798 
Other Real Estate Owned1,079  447  316  1,079  316 
Other Nonperforming Assets0  17  0  0  0 
Total Nonperforming Assets11,806  12,189  15,114  11,806  15,114 
Performing Troubled Debt Restructurings5,040  5,111  5,772  5,040  5,772 
Nonperforming Troubled Debt Restructurings (included in nonperforming loans)5,938  6,508  7,582  5,938  7,582 
Total Troubled Debt Restructurings10,978  11,619  13,354  10,978  13,354 
Individually Analyzed Loans19,277  20,149  23,987  19,277  23,987 
Non-Individually Analyzed Watch List Loans241,265  251,183  184,203  241,265  184,203 
Total Individually Analyzed and Watch List Loans260,542  271,332  208,190  260,542  208,190 
Gross Charge Offs267  236  411  503  4,260 
Recoveries1,836  145  321  1,981  527 
Net Charge Offs/(Recoveries)(1,569) 91  90  (1,478) 3,733 
Net Charge Offs/(Recoveries) to Average Loans(0.14%) 0.01% 0.01% (0.07%) 0.18%
Credit Loss Reserve to Loans (2)1.65% 1.61% 1.31% 1.65% 1.31%
Credit Loss Reserve to Loans, Excluding PPP Loans (2) (3)1.72% 1.76% 1.50% 1.72% 1.50%
               
 Three Months Ended Six Months Ended
 Jun. 30,
2021
 Mar. 31,
2021
 Jun. 30,
2020
 Jun. 30,
2021
 Jun. 30,
2020
Credit Loss Reserve to Nonperforming Loans (2)668.51% 612.70% 398.83% 668.51% 398.83%
Credit Loss Reserve to Nonperforming Loans and Performing TDRs (2)454.82% 426.70% 286.92% 454.82% 286.92%
Nonperforming Loans to Loans0.25% 0.26% 0.33% 0.25% 0.33%
Nonperforming Assets to Assets0.19% 0.20% 0.28% 0.19% 0.28%
Total Individually Analyzed and Watch List Loans to Total Loans5.98% 6.06% 4.64% 5.98% 4.64%
Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans (3)6.26% 6.65% 5.29% 6.26% 5.29%
OTHER DATA         
Full Time Equivalent Employees 600   587   574   600   574 
Offices 50   50   50   50   50 

_____________________________________________________________
(1)  Core deposits equals deposits less brokered deposits
(2)  Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.
(3)  Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
(4)  Capital ratios for June 30, 2021 are preliminary until the Call Report is filed.

    
CONSOLIDATED BALANCE SHEETS (in thousands, except share data)   
June 30,
2021
 December 31,
2020
(Unaudited) 
ASSETS   
Cash and due from banks$57,412  $74,457 
Short-term investments515,398  175,470 
Total cash and cash equivalents572,810  249,927 
   
Securities available-for-sale (carried at fair value)1,124,235  734,845 
Real estate mortgage loans held-for-sale7,005  11,218 
   
Loans, net of allowance for credit losses* of $71,713 and $61,4084,281,996  4,587,748 
   
Land, premises and equipment, net59,539  59,298 
Bank owned life insurance96,921  95,227 
Federal Reserve and Federal Home Loan Bank stock13,772  13,772 
Accrued interest receivable17,056  18,761 
Goodwill4,970  4,970 
Other assets54,610  54,669 
Total assets$6,232,914  $5,830,435 
   
   
LIABILITIES   
Noninterest bearing deposits$1,743,000  $1,538,331 
Interest bearing deposits3,651,664  3,498,474 
Total deposits5,394,664  5,036,805 
   
Borrowings   
Federal Home Loan Bank advances75,000  75,000 
Miscellaneous borrowings0  10,500 
Total borrowings75,000  85,500 
   
Accrued interest payable3,871  5,959 
Other liabilities81,908  44,987 
Total liabilities5,555,443  5,173,251 
   
STOCKHOLDERS’ EQUITY   
Common stock: 90,000,000 shares authorized, no par value   
25,762,538 shares issued and 25,289,966 outstanding as of June 30, 2021   
25,713,408 shares issued and 25,239,748 outstanding as of December 31, 2020117,796  114,927 
Retained earnings552,063  529,005 
Accumulated other comprehensive income22,271  27,744 
Treasury stock at cost (472,572 shares as of June 30, 2021, 473,660 shares as of December 31, 2020)(14,748) (14,581)
Total stockholders’ equity677,382  657,095 
Noncontrolling interest89  89 
Total equity677,471  657,184 
Total liabilities and equity$6,232,914  $5,830,435 

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

 
CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)
Three Months Ended
June 30,
 Six Months Ended
June 30,
2021 2020 2021 2020
NET INTEREST INCOME       
Interest and fees on loans       
Taxable$42,342  $42,649  $85,803  $88,703 
Tax exempt101  216  205  438 
Interest and dividends on securities     
Taxable2,177  1,869  4,012  3,842 
Tax exempt2,870  2,033  5,359  4,039 
Other interest income135  64  223  248 
Total interest income47,625  46,831  95,602  97,270 
   
Interest on deposits3,890  7,184  8,108  18,383 
Interest on borrowings     
Short-term0  45  7  407 
Long-term74  74  147  98 
Total interest expense3,964  7,303  8,262  18,888 
   
NET INTEREST INCOME43,661  39,528  87,340  78,382 
   
Provision for credit losses*(1,700) 5,500  (223) 12,100 
   
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES45,361  34,028  87,563  66,282 
   
NONINTEREST INCOME       
Wealth advisory fees2,078  1,805  4,256  3,664 
Investment brokerage fees575  310  1,039  727 
Service charges on deposit accounts2,521  2,189  5,012  4,961 
Loan and service fees3,042  2,425  5,818  4,833 
Merchant card fee income766  594  1,388  1,263 
Bank owned life insurance income705  836  1,461  544 
Interest rate swap fee income505  1,309  754  1,962 
Mortgage banking income415  1,354  1,788  1,940 
Net securities gains44  49  797  49 
Other income689  298  1,584  2,003 
Total noninterest income11,340  11,169  23,897  21,946 
   
NONINTEREST EXPENSE       
Salaries and employee benefits15,762  11,424  30,147  22,990 
Net occupancy expense1,427  1,545  2,930  2,932 
Equipment costs1,318  1,430  2,763  2,847 
Data processing fees and supplies3,204  2,829  6,523  5,711 
Corporate and business development699  627  2,208  1,738 
FDIC insurance and other regulatory fees495  403  959  670 
Professional fees1,839  1,053  3,716  2,200 
Other expense1,904  1,768  4,148  4,080 
Total noninterest expense26,648  21,079  53,394  43,168 
   
INCOME BEFORE INCOME TAX EXPENSE30,053  24,118  58,066  45,060 
Income tax expense5,705  4,448  10,735  8,091 
NET INCOME$24,348  $19,670  $47,331  $36,969 
 ​​ 

          
Three Months Ended
June 30,
 ​​ Six Months Ended
June 30,
 2021 2020 2021 2020
        
BASIC WEIGHTED AVERAGE COMMON SHARES25,473,497  25,412,014  25,465,621  25,517,499 
     
BASIC EARNINGS PER COMMON SHARE$0.96  $0.77  $1.86  $1.45 
     
DILUTED WEIGHTED AVERAGE COMMON SHARES25,602,063  25,469,680  25,596,843  25,594,959 
       
DILUTED EARNINGS PER COMMON SHARE$0.95  $0.77  $1.85  $1.44 

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

 
LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
(unaudited, in thousands)
      
 June 30,
2021
 March 31,
2021
 June 30,
2020
Commercial and industrial loans:           
Working capital lines of credit loans$616,401  14.1% $574,659  12.8% $568,621  12.6%
Non-working capital loans886,284  20.3  1,101,805  24.6  1,238,556  27.5 
Total commercial and industrial loans1,502,685  34.4  1,676,464  37.4  1,807,177  40.1 
            
Commercial real estate and multi-family residential loans:           
Construction and land development loans402,583  9.2  370,906  8.3  359,948  8.0 
Owner occupied loans672,903  15.5  669,390  14.9  576,213  12.8 
Nonowner occupied loans606,096  13.9  605,640  13.5  554,572  12.3 
Multifamily loans300,449  6.9  301,385  6.7  290,566  6.4 
Total commercial real estate and multi-family residential loans1,982,031  45.5  1,947,321  43.4  1,781,299  39.5 
            
Agri-business and agricultural loans:           
Loans secured by farmland167,314  3.8  154,826  3.5  153,774  3.4 
Loans for agricultural production179,338  4.1  192,341  4.3  198,277  4.4 
Total agri-business and agricultural loans346,652  7.9  347,167  7.8  352,051  7.8 
            
Other commercial loans85,356  2.0  86,477  1.9  110,833  2.5 
Total commercial loans3,916,724  89.8  4,057,429  90.5  4,051,360  89.9 
            
Consumer 1-4 family mortgage loans:           
Closed end first mortgage loans169,653  3.9  161,573  3.6  169,897  3.8 
Open end and junior lien loans162,327  3.7  157,492  3.5  174,300  3.9 
Residential construction and land development loans12,505  0.3  9,221  0.2  11,164  0.2 
Total consumer 1-4 family mortgage loans344,485  7.9  328,286  7.3  355,361  7.9 
            
Other consumer loans100,771  2.3  99,052  2.2  98,667  2.2 
Total consumer loans445,256  10.2  427,338  9.5  454,028  10.1 
Subtotal4,361,980  100.0% 4,484,767  100.0% 4,505,388  100.0%
Less:  Allowance for credit losses (1)(71,713)   (71,844)   (59,019)  
Net deferred loan fees(8,271)   (10,136)   (14,856)  
Loans, net$4,281,996    $4,402,787    $4,431,513   

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

 
LAKELAND FINANCIAL CORPORATION
DEPOSITS AND BORROWINGS
(unaudited, in thousands)
      
 June 30,
2021
 March 31,
2021
 June 30,
2020
Noninterest bearing demand deposits$1,743,000  $1,604,068  $1,425,901 
Savings and transaction accounts:     
Savings deposits358,568  357,791  274,078 
Interest bearing demand deposits2,333,758  2,261,232  1,774,217 
Time deposits:     
Deposits of $100,000 or more740,484  777,460  907,095 
Other time deposits218,854  229,419  262,136 
Total deposits$5,394,664  $5,229,970  $4,643,427 
FHLB advances and other borrowings75,000  75,000  110,500 
Total funding sources$5,469,664  $5,304,970  $4,753,927 
            


 
LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)
       
  Three Months Ended
June 30, 2021
 Three Months Ended
March 31, 2021
 Three Months Ended
June 30, 2020
(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) $4,474,844  $42,342  3.80% $4,554,183  $43,461  3.87% $4,437,843  $42,649  3.87%
Tax exempt (1) 12,839  128  4.00  13,043  131  4.07  22,568  272  4.85 
Investments: (1)                  
Available-for-sale 955,242  5,811  2.44  772,247  4,984  2.62  621,134  4,442  2.88 
Short-term investments 2,305  0  0.00  2,206  1  0.18  79,446  29  0.15 
Interest bearing deposits 479,571  135  0.11  296,523  87  0.12  51,994  35  0.27 
Total earning assets $5,924,801  $48,416  3.28% $5,638,202  $48,664  3.50% $5,212,985  $47,427  3.66%
Less:  Allowance for credit losses (4) (72,222)     (70,956)     (56,005)    
Nonearning Assets                  
Cash and due from banks 68,798      70,720      57,157     
Premises and equipment 59,848      59,278      60,815     
Other nonearning assets 190,202      190,117      179,656     
Total assets $6,171,427      $5,887,361      $5,454,608     
                   
Interest Bearing Liabilities                  
Savings deposits $359,484  $71  0.08% $330,069  $61  0.07% $264,250  $59  0.09%
Interest bearing checking accounts 2,428,524  1,700  0.28  2,182,164  1,495  0.28  1,842,373  1,544  0.34 
Time deposits:                  
In denominations under $100,000 224,025  545  0.98  235,271  648  1.12  271,064  1,216  1.80 
In denominations over $100,000 741,466  1,574  0.85  793,470  2,014  1.03  957,502  4,365  1.83 
Miscellaneous short-term borrowings 0  0  0.00  1,517  7  1.87  10,852  45  1.67 
Long-term borrowings and subordinated debentures 75,000  74  0.40  75,000  73  0.39  75,000  74  0.40 
Total interest bearing liabilities $3,828,499  $3,964  0.42% $3,617,491  $4,298  0.48% $3,421,041  $7,303  0.86%
Noninterest Bearing Liabilities                  
Demand deposits 1,633,686      1,566,045      1,361,643     
Other liabilities 45,249      50,496      59,611     
Stockholders' Equity 663,993      653,329      612,313     
Total liabilities and stockholders' equity $6,171,427      $5,887,361      $5,454,608     
Interest Margin Recap                  
Interest income/average earning assets   48,416  3.28    48,664  3.50    47,427  3.66 
Interest expense/average earning assets   3,964  0.27    4,298  0.31    7,303  0.56 
Net interest income and margin   $44,452  3.01%   $44,366  3.19%   $40,124  3.10%

(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 $791,000, $687,000 and $596,000 in the three-month periods ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.
(2)  Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $2.76 million and $4.15 million for the three months ended June 30, 2021 and March 31, 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.
(4)  Beginning January 1, 2021 calculation is based on the current expected credit loss methodology. Prior to January 1, 2021 calculation was based on the incurred loss methodology.

Reconciliation of Non-GAAP Financial Measures

The allowance for credit losses (1) 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 loan losses (1).

A reconciliation of these non-GAAP measures is provided below (dollars in thousands).

 Three Months Ended
 June 30,
2021
 March 31,
2021
 June 30,
2020
Total Loans$4,353,709  $4,474,631  $4,490,532 
Less: PPP Loans194,212  396,723  554,636 
Total Loans, Excluding PPP Loans4,159,497  4,077,908  3,935,896 
      
Allowance for Credit Losses (1)$71,713  $71,844  $59,019 
      
Credit Loss Reserve to Total Loans (1)1.65% 1.61% 1.31%
Credit Loss Reserve to Total Loans, Excluding PPP Loans (1)1.72% 1.76% 1.50%


 Six Months Ended
 June 30,
2021
 March 31,
2021
 June 30,
2020
Total Loans$4,353,709  $4,474,631  $4,490,532 
Less: PPP Loans194,212  396,723  554,636 
Total Loans, Excluding PPP Loans4,159,497  4,077,908  3,935,896 
      
Total Individually Analyzed and Watch List Loans$260,542  $271,332  $208,190 
      
Total Individually Analyzed and Watch List Loans to Total Loans5.98% 6.06% 4.64%
Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans6.26% 6.65% 5.29%
         

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

Tangible common equity, tangible assets, tangible book value per share, tangible common equity to tangible assets ratio and pretax pre-provision earnings are non-GAAP financial measures calculated using GAAP amounts. Tangible common equity is calculated by excluding the balance of goodwill and other intangible assets from the calculation of equity, net of deferred tax. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets, net of deferred tax. Tangible book value per share is calculated by dividing tangible common equity by the number of shares outstanding less true treasury stock. Pretax pre-provision earnings is calculated by adding net interest income to noninterest income and subtracting noninterest expense. Because not all companies use the same calculation of tangible common equity and tangible assets, this presentation may not be comparable to other similarly titled measures calculated by other companies. However, management considers these measures of the company’s value including only earning assets as meaningful to an understanding of the company’s financial information.

A reconciliation of these non-GAAP financial measures is provided below (dollars in thousands, except per share data).

 Three Months Ended Six Months Ended
 Jun. 30,
2021
 Mar. 31,
2021
 Jun. 30,
2020
 Jun. 30,
2021
 Jun. 30,
2020
Total Equity$677,471  $651,668  $620,892  $677,471  $620,892 
Less: Goodwill(4,970) (4,970) (4,970) (4,970) (4,970)
Plus: Deferred tax assets related to goodwill1,176  1,176  1,181  1,176  1,181 
Tangible Common Equity673,677  647,874  617,103  673,677  617,103 
          
Assets$6,232,914  $6,016,642  $5,441,092  $6,232,914  $5,441,092 
Less: Goodwill(4,970) (4,970) (4,970) (4,970) (4,970)
Plus: Deferred tax assets related to goodwill1,176  1,176  1,181  1,176  1,181 
Tangible Assets6,229,120  6,012,848  5,437,303  6,229,120  5,437,303 
          
Ending common shares issued25,473,437  25,473,437  25,412,014  25,473,437  25,412,014 
          
Tangible Book Value Per Common Share$26.45  $25.43  $24.28  $26.45  $24.28 
          
Tangible Common Equity/Tangible Assets10.81% 10.77% 11.35% 10.81% 11.35%
          
Net Interest Income$43,661  $43,679  $39,528  $87,340  $78,382 
Plus:  Noninterest income11,340  12,557  11,169  23,897  21,946 
Minus:  Noninterest expense(26,648) (26,746) (21,079) (53,394) (43,168)
          
Pretax Pre-Provision Earnings$28,353  $29,490  $29,618  $57,843  $57,160 
                    

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
 Jun. 30,
2021
 Mar. 31,
2021
 Jun. 30,
2020
 Jun. 30,
2021
 Jun. 30,
2020
Total Average Earnings Assets$5,924,801  $5,638,202  $5,212,985  $5,782,293  $4,975,358 
Less: Average Balance of PPP Loans(348,026) (402,730) (457,757) (375,226) (228,878)
Total Adjusted Earning Assets5,576,775  5,235,472  4,755,228  5,407,067  4,746,480 
          
Total Interest Income FTE$48,416  $48,664  $47,427  $97,080  $98,455 
Less: PPP Loan Income(3,652) (5,166) (3,029) (8,818) (3,029)
Total Adjusted Interest Income FTE44,764  43,498  44,398  88,262  95,426 
          
Adjusted Earning Asset Yield, net of PPP Impact3.22% 3.37% 3.76% 3.29% 4.04%
          
Total Average Interest Bearing Liabilities$3,828,499  $3,617,491  $3,421,041  $3,617,491  $3,373,027 
Less: Average Balance of PPP Loans(348,026) (402,730) (457,757) (375,226) (228,878)
Total Adjusted Interest Bearing Liabilities3,480,473  3,214,761  2,963,284  3,242,265  3,144,149 
          
Total Interest Expense FTE$3,964  $4,298  $7,303  $8,262  $18,888 
Less: PPP Cost of Funds(162) (248) (285) (465) (285)
Total Adjusted Interest Expense FTE3,802  4,050  7,018  7,797  18,603 
          
Adjusted Cost of Funds, net of PPP Impact0.27% 0.31% 0.59% 0.29% 0.79%
          
Net Interest Margin FTE, net of PPP Impact2.95% 3.06% 3.17% 3.00% 3.25%
               

Contact
Lisa M. O’Neill
Executive Vice President and Chief Financial Officer
(574) 267-9125
lisa.oneill@lakecitybank.com


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