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Lakeland Financial Reports Record Quarterly Performance

WARSAW, Ind., Jan. 25, 2021 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported full year net income of $84.3 million, which represents a decrease of $2.7 million, or 3%, compared with net income of $87.0 million for 2019. Diluted earnings per share decreased 2% to $3.30 compared to $3.38 for 2019. Pretax pre-provision earnings1 were $118.6 million for 2020 compared to $110.6 million for 2019, an increase of $8.0 million, or 7%, due primarily to an increase in net interest income.

The company further reported record quarterly net income of $24.6 million for the three months ended December 31, 2020 versus $22.2 million for the comparable period of 2019, an increase of 11%. Diluted net income per common share was also a record for the quarter and increased 13% to $0.97 for the three months ended December 31, 2020 versus $0.86 for the comparable period of 2019. On a linked quarter basis, net income increased $1.8 million, or 8%, from the third quarter of 2020, in which the company had net income of $22.8 million, or $0.89 diluted earnings per share. Pretax pre-provision earnings1 were $31.6 million for the fourth quarter of 2020, an increase of 13%, or $3.7 million, from $27.9 million for the fourth quarter of 2019. On a linked quarter basis, pretax pre-provision earnings increased 6%, or $1.7 million, from $29.9 million for the third quarter of 2020.

David M. Findlay, President and Chief Executive Officer commented, “The Lake City Bank team demonstrated how much we can accomplish in a challenging environment when everyone steps up. During 2020, we experienced unprecedented loan growth on our balance sheet through the combination of the Paycheck Protection Program and more traditional organic loan growth. We are proud of the role we played in assisting our clients in working through the challenges presented by the COVID-19 crisis. Further, we provided uninterrupted service through our 50 branch offices in a continuously difficult environment. As we conclude 2020 with consecutive record results in the third and fourth quarters, we are well-positioned as we enter 2021.”

Highlights for the year and quarter are noted below.

Full year 2020 versus 2019 highlights:

  • Total assets of $5.8 billion, an increase of $884 million, or 18%

  • Return on average equity of 13.51% compared to 15.47%

  • Return on average assets of 1.55% compared to 1.76%

  • Average loan growth of $444.9 million, or 11%
    -- Paycheck Protection Program (PPP) loans originated of $570 million
    -- Loan growth, excluding PPP loans, of $171 million, or 4%
    -- PPP loans forgiveness applications approved by SBA of $142 million

  • Core deposit growth of $1.00 billion, or 25%
    -- Noninterest bearing demand deposit growth of $555 million, or 56%

  • Net interest income increase of $8.0 million, or 5%

  • Noninterest income increase of $1.8 million, or 4%

  • Revenue growth of $9.8 million, or 5%

  • PPP interest and fee income of $12.8 million

  • Pretax pre-provision earnings growth of $8.0 million, or 7%

  • Provision expense of $14.8 million versus $3.2 million in 2019

  • Allowance for loan losses increase of $11 million or 21%

  • Total equity and tangible common equity2 increase of $59 million, or 10%

Fourth Quarter 2020 versus Fourth Quarter 2019 highlights:

  • Return on average equity of 15.18%, compared to 14.90%

  • Loan growth, excluding PPP loans, of $171 million, or 4%
    -- PPP loans outstanding of $412 million

  • Average fourth quarter deposit growth of $651 million, or 15%

  • Net interest income increase of $5.8 million, or 15%

  • PPP interest and fee income of $6.5 million

  • Noninterest income increase of $663,000, or 6%

  • Revenue growth of $6.5 million, or 13%

  • Noninterest expense increase of $2.8 million, or 13%

  • Pretax pre-provision earnings increase of $3.7 million, or 13%

  • Average total equity increase of $53 million, or 9%

  • Risk-based capital ratio of 14.7% at December 31, 2020 compared to 14.4% at December 31, 2019

Fourth Quarter 2020 versus Third Quarter 2020 highlights:

  • Return on average equity of 15.18%, compared to 14.36%

  • Return on average assets of 1.70%, compared to 1.64%

  • Loan growth, excluding PPP loans, of $205 million, or 5%

  • Core deposit growth of $284 million, or 6%

  • Noninterest bearing demand deposit growth of $117 million, or 8%

  • Net interest income increase of $4.8 million, or 12%

  • Net interest margin of 3.28%, compared to 3.05%

  • PPP interest and fee income of $6.5 million, compared to $3.3 million

  • Revenue growth of $3.5 million, or 7%

  • Provision for loan losses of $920,000 compared to $1.8 million, a decrease of $830,000, or 47%

  • Nonperforming loans of $12.1 million, a reduction of $1.4 million, or 10%

  • Noninterest expense increase of $1.8 million, or 8%

  • Pretax pre-provision earnings increase of $1.7 million, or 6%

  • Average total equity increase of $13.7 million, or 2%

  • Full-time employee equivalent increase of 13

Return on average total equity for the year ended December 31, 2020 was 13.51%, compared to 15.47% in 2019. Return on average assets was 1.55% in 2020 compared to 1.76% in 2019. The company’s total capital as a percent of risk-weighted assets was 14.65% at December 31, 2020, compared to 14.36% at December 31, 2019 and 14.90% at September 30, 2020. The company’s tangible common equity to tangible assets ratio3 was 11.21% at December 31, 2020, compared to 12.02% at December 31, 2019 and 11.41% at September 30, 2020.

As announced on January 12, 2021, the board of directors approved a cash dividend for the fourth quarter of $0.34 per share, payable on February 5, 2021, to shareholders of record as of January 25, 2021. The fourth quarter dividend per share of $0.34 represents a 13% increase from the $0.30 dividend per share paid in the third quarter of 2020.

Findlay stated, “Our balance sheet strength is critical to our success. We concluded 2020 with a strong capital position, which was further bolstered by our strong 2020 earnings performance. This robust capital foundation supports our ability to increase the dividend for our shareholders.”

During the first quarter of 2020, the company repurchased 289,101 shares of its common stock for $10 million at a weighted average price per share of $34.63. Share repurchases under the repurchase plan were suspended in March with $20 million of authorization remaining available under the plan, although the company may resume repurchases at any time. No shares were repurchased under the plan during the second, third or fourth quarters of 2020. The company continues to evaluate the share repurchase program pursuant to its previously established criteria for execution, which is set to expire on January 31, 2021.

Average total loans for 2020 were $4.42 billion, an increase of $449.9 million, or 11%, versus $3.97 billion for 2019. Included in the 2020 average were $376.8 million in PPP loans. Total loans outstanding grew $583.3 million, or 14%, from $4.07 billion as of December 31, 2019 to $4.65 billion as of December 31, 2020. PPP loans outstanding were $412.0 million as of December 31, 2020. Core loan growth, which excludes PPP loans, of $171.3 million, or 4%, reflects the underlying strength of the economy in our Indiana footprint. On a linked quarter basis, total loans grew $59.2 million, or 1%, from $4.59 billion at September 30, 2020. Core loans grew by $205.1 million offset by PPP loans forgiven and repaid in the amount of $145.8 million.

As of December 31, 2020, 900 loans with an aggregate principal amount of $142 million, representing 37% of the 2,409 total PPP loans originated with an aggregate amount of $570.5 million, were forgiven during the fourth quarter. In addition, the company had submitted an additional 10% of the total PPP loans originated in 2020, totaling $159.3 million, to the Small Business Administration (SBA) for forgiveness as of year-end. As of January 20, 2021, 1,211, or 50%, of the total PPP loans originated in 2020 totaling $180.4 million, were forgiven and $174.1 million, or 31%, had been submitted to the SBA for forgiveness. The company introduced a Fintech solution through a partnership with Numerated to manage the PPP loan portfolio. Additionally, the company has started accepting and submitting loan applications for the second round of PPP loans.

Findlay noted, “While the success of the PPP impacted our clients tremendously, we were also pleased with another strong quarter of organic loan growth. Clearly, despite its challenges, 2020 created opportunity for many of our clients and we were very pleased to see healthy loan demand as we moved through the third and fourth quarters.”

Average total loans for the fourth quarter of 2020 were $4.62 billion, an increase of $616.3 million, or 15%, versus $4.00 billion for the comparable period of 2019. On a linked quarter basis, average total loans increased by $61.1 million, or 1%, from $4.56 billion for the third quarter of 2020 to $4.62 billion for the fourth quarter of 2020. On a linked quarter basis, average core loans increased by $115.3 million, or 3%, and average PPP loans declined by $54.2 million, or 10%.

Average total deposits for 2020 were $4.65 billion, an increase of $408.1 million, or 10%, versus $4.24 billion for 2019. Importantly, average core deposits increased by 12%, or $506.1 million, during 2020 to $4.6 billion from $4.1 billion in 2019 due to growth in average commercial deposits of $453.5 million, or 37%, and growth in average retail deposits of $148.3 million, or 9%, offset by a decline in public funds of $95.6 million, or 7%.

Total deposits grew $903.0 million, or 22%, from $4.13 billion as of December 31, 2019 to $5.04 billion as of December 31, 2020. In addition, total core deposits, which exclude brokered deposits, increased $1.00 billion, or 25%, from $4.02 billion at December 31, 2019 to $5.02 billion at December 31, 2020 due to growth in commercial deposits of $664.3 million, or 52%, growth in retail deposits of $301.9 million, or 19%, and growth in public fund deposits of $35.3 million, or 3%. The growth in deposits during 2020 was due primarily to an increase of $555.0 million, or 56%, in noninterest bearing demand deposits of $1.5 billion. Commercial and retail customers increased their cash on hand in response to the challenging economic environment. Brokered deposits decreased by $98.5 million, or 87%, from $113.5 million at December 31, 2019 to $15.0 million at December 31, 2020 due to reduced reliance on wholesale funding as a result of core deposit growth.

Findlay added, “The growth in deposits in 2020 created unprecedented liquidity on our balance sheet and provided us with great flexibility in funding the high levels of loan growth we experienced. We ended 2020 with very low reliance on non-core funding tools. As a result, we enter 2021 with a liquidity position that will provide for continued funding of expected loan demand.”

The company’s net interest margin decreased 19 basis points to 3.19% for 2020 compared to 3.38% for 2019. The lower margin in 2020 was impacted by lower yields on loans and securities, partially offset by a lower cost of funds. The Federal Reserve Bank decreased the target Federal Funds Rate by 225 basis points since the second half of 2019, including two Federal Reserve Bank emergency cuts to the Federal Funds Rate during March 2020. The two emergency cuts in March reduced the Federal Funds Rate by 150 basis points and brought the Federal Funds Rate back to the zero-bound range of 0.00% to 0.25%.

The company’s net interest margin was 3.28% in the fourth quarter of 2020 versus 3.30% for the fourth quarter of 2019 and 3.05% during the third quarter 2020. Quarterly net interest margin was impacted by a lower yield on the PPP loan portfolio, offset by fees earned as a result of PPP loan forgiveness and excess liquidity on the balance sheet. The company’s net interest margin excluding PPP loans was 16 basis points lower at 3.12% and reflected an 18 basis point decline from 3.30% for the fourth quarter of 2019. Linked quarter net interest margin excluding PPP loans was 3.17% for the third quarter of 2020. The yield on PPP loans was 3.41% for year ended December 31, 2020, which reflects the combined impact of the 1.00% interest rate on PPP loans and net PPP loan fee accretion.

Net interest income increased $8.0 million, or 5%, to $163.0 million in 2020, versus $155.0 million in 2019, due to significant loan and core deposit growth offset by margin compression. PPP loan interest and fees were $12.8 million during 2020. Net interest income increased $5.8 million, or 15%, to $44.7 million in the fourth quarter of 2020, versus $38.9 million in the fourth quarter of 2019. On a linked quarter basis, net interest income increased by $4.8 million, or 12%, from $39.9 million recorded in the third quarter of 2020. PPP interest and loan fees were $6.5 million in the fourth quarter of 2020, up from $3.3 million in the linked quarter due to PPP loan forgiveness approvals from the SBA and the resulting impact of accelerated PPP loan fee recognition.

On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021. This law extended relief for troubled debt restructurings and current expected credit losses (CECL) adoption under the CARES Act. The company elected to remain on the incurred loan loss methodology for 2020. The company will adopt the CECL standard during the first quarter of 2021, effective January 1, 2021 and is in the process of re-evaluating and finalizing CECL day 1 impact.

The company recorded a provision for loan losses of $14.8 million in 2020 compared to $3.2 million in 2019, an increase of 362%, or $11.6 million. The company recorded a provision for loan losses of $920,000 in the fourth quarter of 2020, versus $250,000 in the fourth quarter of 2019 and $1.8 million in the third quarter of 2020. The higher provision in 2020 was driven by the potential negative impact to the company’s borrowers from the economic conditions resulting from the COVID-19 pandemic.

The company’s allowance for loan losses as of December 31, 2020 was $61.4 million compared to $50.7 million as of December 31, 2019 and $60.7 million as of September 30, 2020. The allowance for loan losses represented 1.32% of total loans as of December 31, 2020 versus 1.25% as of December 31, 2019 and 1.32% as of September 30, 2020. The company’s loan loss reserve to total loans excluding PPP loans4 was 1.45% as of December 31, 2020. PPP loans are guaranteed by the United States SBA and have not been allocated for within the allowance for loan losses.

Net charge-offs were $4.0 million in 2020 versus $1.0 million in 2019. The increase in net charge-offs in 2020 was primarily due to a $3.7 million charge-off resulting from a single commercial manufacturing borrower recorded in the first quarter of 2020. Net charge-offs for the fourth quarter of 2020 were $259,000 versus net charge-offs of $226,000 in the fourth quarter of 2019 and net charge-offs of $22,000 during the linked third quarter of 2020. Net charge-offs to average loans were 0.09% in 2020 compared to 0.03% for 2019. Annualized net charge-offs to average loans were 0.02% for the fourth quarters of 2020 and 2019 and 0.00% for the linked third quarter of 2020.

Nonperforming assets decreased $6.6 million, or 35%, to $12.4 million as of December 31, 2020 versus $19.0 million as of December 31, 2019 due to a decrease in nonaccrual loans. On a linked quarter basis, nonperforming assets were $1.4 million, or 10%, lower than the $13.8 million reported as of September 30, 2020. The ratio of nonperforming assets to total assets at December 31, 2020 decreased to 0.21% from 0.38% at December 31, 2019 and decreased from 0.25% at September 30, 2020. Watchlist loans as a percent of total loans, excluding PPP were 6.8% compared to 4.4% as of December 31, 2019 and 5.5% as of September 30, 2020.

“As we entered this crisis in the spring of 2020, we identified at-risk industries that totaled 19% of total loans. As we moved through 2020, it became clear that this was a conservative assessment of risk and we ended the year with identified at-risk industries totaling 3% of total loans. We are pleased to report that our borrowers fared better than our original concerns when the COVID-19 crisis started.” Findlay continued, “The increase in watch-list loans during 2020 reflects the challenges some of our borrowers are experiencing, particularly in the hotel and entertainment industries. We continue to work with these borrowers and believe our long track record of working through credit challenges will be valuable as we continue to support these borrowers.”

The company’s noninterest income increased $1.8 million, or 4%, to $46.8 million in 2020, compared to $45.0 million in 2019. The company’s noninterest income increased by $663,000, or 6%, to $11.8 million for the fourth quarter of 2020, compared to $11.1 million for the fourth quarter of 2019. Noninterest income decreased by $1.3 million, or 10%, from $13.1 million during the linked third quarter of 2020 due to lower interest rate swap fee income during the fourth quarter. For the full year of 2020, noninterest income was positively impacted by increases in interest rate swap fee income generated from commercial lending transactions, mortgage banking income, and wealth advisory fees due to continued growth of client relationships. Offsetting these increases was a decrease in service charges on deposit accounts driven primarily by lower treasury management fees as well as reduced levels of overdraft fee income.

The company’s noninterest expense increased $1.8 million, or 2%, to $91.2 million in 2020 compared to $89.4 million in 2019. The company’s noninterest expense increased $2.8 million, or 13%, to $24.9 million in the fourth quarter of 2020, compared to $22.1 million in the fourth quarter of 2019, and was higher by $1.8 million, or 8%, on a linked quarter basis. Data processing fees increased during 2020 primarily due to the company’s continued investment in customer-focused, technology-based solutions and ongoing cybersecurity and data management enhancements. FDIC insurance and other regulatory fees increased due to the expiration of insurance assessment credits and the impact of PPP loans on balance sheet growth. Salaries and employee benefits increased during 2020 primarily due to an increase to staffing in revenue producing and risk management areas as well as higher health insurance expenses. Professional fees increased due to higher legal expenses, increased fees to accounting firms and professional fees for innovative project implementations. Corporate and business development expenses decreased as in-person trainings and face-to-face customer and prospect meetings were limited due to COVID-19 safety protocols.

The company’s efficiency ratio was 43.5% for 2020 compared to 44.7% for 2019. The company’s efficiency ratio was 44.1% for the fourth quarter of 2020, compared to 44.2% for the fourth quarter of 2019 and 43.6% for the linked third quarter of 2020.

“2020 highlighted the strategic importance of our long-term strategy of continued focus and investment in technology and innovation. Fintech partnerships proved critical to us as we navigated the new banking environment for customer service delivery to our clients,” stated Findlay, “Despite the shift to remote workplaces, our teams continued to provide highly personalized services to our customers through technology. Innovation in technology, products and services and our brand is a marketplace expectation and critical to remaining relevant and competitive. Yet, we look forward to a return to a more normal operating environment when we can spend more time face-to-face with our clients and communities. It’s a hallmark of community banking and we’ll be ready for that when conditions permit. While keeping in contact through technology is great, it does not replicate the personal relationships we have with our clients, each other, and our communities.”

_______________________
1 Non-GAAP financial measure – see “Reconciliation of Non-GAAP Financial Measures”

COVID-19 Crisis Management

On November 18, 2020, in response to the evolving COVID-19 situation in its markets, the company returned to limited lobby access to all its branch lobbies as well as a remote workplace environment for most non-retail employees. The company continued to invest in personal protective equipment, protective barriers and enhanced social distancing measures for the safety of bank customers and employees. These investments have totaled approximately $640,000 since the pandemic began. The company will keep all safety protocols in place until it determines that the public health risks posed by COVID-19 no longer require them.

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 impacted materially by the potential economic impact resulting of the COVID-19 pandemic. The current assessment includes a smaller group of industries compared to the initial list of potentially affected industries disclosed in the company’s April 27, 2020 first quarter, July 27, 2020 second quarter, and October 26, 2020 third quarter news releases. The company’s current list of industries under review represents approximately 3.3%, or $141 million, of the total loan portfolio, excluding PPP loans, versus $765 million, or 18.7%, as of April 27, 2020, $261 million, or 6.6%, as of July 27, 2020 and $228 million, or 5.7%, as of October 26, 2020. The current list of industries under review, along with their respective percentage of the loan portfolio, is hotel and accommodations – 2.3%, entertainment and recreation – 0.6% and full-service restaurants – 0.4%. The company has no direct exposure to oil and gas and limited exposure to retail shopping centers.

The company’s commercial loan portfolio is highly diversified, and no industry sector represents more than 10% of the bank’s loan portfolio as of December 31, 2020. Agri-business and agricultural loans represented the highest specific industry concentration at 10% of total loans. 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

As detailed below, loan deferrals peaked on June 17, 2020, at $737 million, which represented 16% of the total loan portfolio. As of December 31, 2020, total deferrals attributable to COVID-19 were $101 million, representing 49 borrowers, or 2% of the total loan portfolio. Total deferrals as of January 20, 2021 represented a decline in deferral balances of 86% from peak levels. Of the $104 million, 23 were commercial loan borrowers representing $101 million in loans, or 2% of total commercial loans, and 25 were retail loan borrowers representing $3 million, or 1%, of total retail loans. 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 January 20, 2021, nine borrowers with loans outstanding of $23 million were in their second deferral period and 11 borrowers with loans outstanding of $40 million were in their third deferral period, most of which were additional 90-day deferrals. Additionally, 14 borrowers with loans outstanding of $27 million were in their fourth-deferral period. Of the fourth deferral borrowers, two represented 82% of the fourth deferral population and were commercial real estate nonowner occupied loans supported by adequate collateral and personal guarantors and consist of loans to the hotel and accommodation industry.

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.

Total Loan Deferrals

Peak
June 17, 2020


June 30, 2020


December 31, 2020


January 20, 2021

% change from
Peak

Borrowers

487

384

49

48

-90

%

Amount
(in millions)

$737

$653

$101

$104

-86

%

% of Total
Loan Portfolio

16

%

15

%

2

%

2

%

NA


Total Commercial Loan Deferrals

Peak
June 17, 2020


June 30, 2020


December 31, 2020


January 20, 2021

% change from
Peak

Borrowers

351

322

22

23

-93

%

Amount
(in millions)

$730

$647

$98

$101

-86

%

% of Commercial
Loan Portfolio

18

%

16

%

2

%

2

%

NA


Total Retail Loan Deferrals

Peak
June 17, 2020


June 30, 2020


December 31, 2020


January 20, 2021

% change from
Peak

Borrowers

136

62

27

25

-82

%

Amount
(in millions)

$7

$6

$3

$3

-57

%

% of Retail
Loan Portfolio

2

%

1

%

1

%

1

%

NA

Paycheck Protection Program

During the third quarter, the company began to process PPP loan forgiveness applications for its customers and in November 2020, the SBA began to approve forgiveness applications. In addition, the bank has engaged a third-party Fintech technology partner to assist the bank and its customers to automate the forgiveness application process. This application will also be used for the second round of PPP loan originations and forgiveness. As of December 31, 2020, Lake City Bank had 2,409 PPP loans originated representing $570.5 million in loan balances. Most of the PPP loans are for existing customers and 51% of the number of PPP loans are for amounts less than $50,000. As of December 31, 2020, the bank has submitted 1,145 loan forgiveness applications to the SBA in the amount of $300 million, which represented 48% of total PPP loans originated. The SBA has approved forgiveness for 900 loans in the amount of $142 million.

Liquidity Preparedness

Throughout the COVID-19 crisis, the company has monitored liquidity preparedness. Critical to this effort has been the monitoring of commercial and retail borrowers’ line of credit utilization. The company’s commercial and retail line of credit utilization at December 31, 2020 was 43% versus 46% at December 31, 2019. The company has a long-standing liquidity plan in place that ensures that appropriate liquidity resources are available to fund the balance sheet.

Lakeland Financial Corporation is a $5.8 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank, its single bank subsidiary, is the sixth largest bank headquartered in the state and the largest bank 100% invested in Indiana. Lake City Bank operates 50 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. 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 measures based on “tangible common equity” which is “total equity” excluding intangible assets, net of deferred tax, and “tangible assets” which is “total assets” excluding intangible assets, net of deferred tax. A reconciliation of these 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

FOURTH QUARTER 2020 FINANCIAL HIGHLIGHTS

Three Months Ended

Twelve Months Ended

(Unaudited – Dollars in thousands, except per share data)

Dec. 31,

Sep. 30,

Dec. 31,

Dec. 31,

Dec. 31,

END OF PERIOD BALANCES

2020

2020

2019

2020

2019

Assets

$

5,830,435

$

5,551,108

$

4,946,745

$

5,830,435

$

4,946,745

Deposits

5,036,805

4,767,954

4,133,819

5,036,805

4,133,819

Brokered Deposits

15,002

29,703

113,527

15,002

113,527

Core Deposits (3)

5,021,803

4,738,251

4,020,292

5,021,803

4,020,292

Loans

4,649,156

4,589,924

4,065,828

4,649,156

4,065,828

Paycheck Protection Program (PPP) Loans

412,007

557,851

0

412,007

0

Allowance for Loan Losses

61,408

60,747

50,652

61,408

50,652

Total Equity

657,184

636,839

598,100

657,184

598,100

Goodwill net of deferred tax assets

3,794

3,794

3,789

3,794

3,789

Tangible Common Equity (1)

653,390

633,045

594,311

653,390

594,311

AVERAGE BALANCES

Total Assets

$

5,747,818

$

5,520,861

$

4,981,989

$

5,424,796

$

4,941,904

Earning Assets

5,501,505

5,282,569

4,748,361

5,184,836

4,656,707

Investments - available-for-sale

657,990

637,523

610,947

633,957

603,580

Loans

4,617,912

4,556,812

4,001,640

4,424,472

3,974,532

Paycheck Protection Program (PPP) Loans

503,041

557,290

0

376,785

0

Total Deposits

4,959,443

4,737,671

4,308,623

4,650,597

4,242,524

Interest Bearing Deposits

3,477,431

3,336,268

3,302,593

3,340,696

3,298,406

Interest Bearing Liabilities

3,568,572

3,433,326

3,336,343

3,437,338

3,390,512

Total Equity

644,677

630,978

591,193

624,174

562,601

INCOME STATEMENT DATA

Net Interest Income

$

44,713

$

39,913

$

38,882

$

163,008

$

155,047

Net Interest Income-Fully Tax Equivalent

45,362

40,523

39,459

165,454

157,176

Provision for Loan Losses

920

1,750

250

14,770

3,235

Noninterest Income

11,782

13,115

11,119

46,843

44,997

Noninterest Expense

24,912

23,125

22,122

91,205

89,424

Net Income

24,592

22,776

22,198

84,337

87,047

Pretax Pre-Provision Earnings (1)

31,583

29,903

27,879

118,646

110,620

PER SHARE DATA

Basic Net Income Per Common Share

$

0.97

$

0.89

$

0.86

$

3.31

$

3.40

Diluted Net Income Per Common Share

0.97

0.89

0.86

3.30

3.38

Cash Dividends Declared Per Common Share

0.30

0.30

0.30

1.20

1.16

Dividend Payout

30.93

%

33.71

%

34.88

%

36.36

%

34.32

%

Book Value Per Common Share (equity per share issued)

25.85

25.05

23.34

25.85

23.34

Tangible Book Value Per Common Share (1)

25.70

24.90

23.19

25.70

23.19

Market Value – High

56.28

53.00

50.00

56.28

50.00

Market Value – Low

40.57

39.38

42.00

30.49

39.78

Basic Weighted Average Common Shares Outstanding

25,424,307

25,418,712

25,623,016

25,469,242

25,588,404

Diluted Weighted Average Common Shares Outstanding

25,519,643

25,487,302

25,818,433

25,573,941

25,758,893

KEY RATIOS

Return on Average Assets

1.70

%

1.64

%

1.77

%

1.55

%

1.76

%

Return on Average Total Equity

15.18

14.36

14.90

13.51

15.47

Average Equity to Average Assets

11.22

11.43

11.87

11.49

11.38

Net Interest Margin

3.28

3.05

3.30

3.19

3.38

Net Interest Margin, Excluding PPP Loans (1)

3.12

3.17

3.30

3.19

3.38

Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income)

44.10

43.61

44.24

43.46

44.70

Tier 1 Leverage (2)

10.93

11.07

11.67

10.93

11.67

Tier 1 Risk-Based Capital (2)

13.39

13.65

13.21

13.39

13.21

Common Equity Tier 1 (CET1) (2)

13.39

13.65

13.21

13.39

13.21

Total Capital (2)

14.65

14.90

14.36

14.65

14.36

Tangible Capital (1) (2)

11.21

11.41

12.02

11.21

12.02

ASSET QUALITY

Loans Past Due 30 - 89 Days

$

1,263

$

1,106

$

1,471

$

1,263

$

1,471

Loans Past Due 90 Days or More

116

19

45

116

45

Non-accrual Loans

11,986

13,478

18,675

11,986

18,675

Nonperforming Loans (includes nonperforming TDRs)

12,102

13,497

18,720

12,102

18,720

Other Real Estate Owned

316

316

316

316

316

Other Nonperforming Assets

6

0

0

6

0

Total Nonperforming Assets

12,424

13,813

19,036

12,424

19,036

Performing Troubled Debt Restructurings

5,237

5,658

5,909

5,237

5,909

Nonperforming Troubled Debt Restructurings (included in nonperforming loans)

6,476

6,547

3,188

6,476

3,188

Total Troubled Debt Restructurings

11,713

12,205

9,097

11,713

9,097

Impaired Loans

20,177

22,484

27,763

20,177

27,763

Non-Impaired Watch List Loans

265,970

198,851

152,421

265,970

152,421

Total Impaired and Watch List Loans

286,147

221,335

180,184

286,147

180,184

Gross Charge Offs

688

305

321

5,253

1,910

Recoveries

429

283

95

1,239

874

Net Charge Offs/(Recoveries)

259

22

226

4,014

1,036

Net Charge Offs/(Recoveries) to Average Loans

0.02

%

0.00

%

0.02

%

0.09

%

0.03

%

Loan Loss Reserve to Loans

1.32

%

1.32

%

1.25

%

1.32

%

1.25

%

Loan Loss Reserve to Loans, Excluding PPP Loans (1)

1.45

%

1.51

%

1.25

%

1.45

%

1.25

%

Loan Loss Reserve to Nonperforming Loans

507.42

%

450.09

%

270.58

%

507.42

%

270.58

%

Loan Loss Reserve to Nonperforming Loans and Performing TDRs

354.17

%

317.13

%

205.66

%

354.17

%

205.66

%

Nonperforming Loans to Loans

0.26

%

0.29

%

0.46

%

0.26

%

0.46

%

Nonperforming Assets to Assets

0.21

%

0.25

%

0.38

%

0.21

%

0.38

%

Total Impaired and Watch List Loans to Total Loans

6.15

%

4.82

%

4.43

%

6.15

%

4.43

%

Total Impaired and Watch List Loans to Total Loans, Excluding PPP Loans (1)

6.75

%

5.49

%

4.43

%

6.75

%

4.43

%

OTHER DATA

Full Time Equivalent Employees

585

571

568

585

568

Offices

50

50

50

50

50

(1) Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"

(2) Capital ratios for December 31, 2020 are preliminary until the Call Report is filed.

(3) Core deposits equals deposits less brokered deposits


CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

December 31,

December 31,

2020

2019

(Unaudited)

ASSETS

Cash and due from banks

$

74,457

$

68,605

Short-term investments

175,470

30,776

Total cash and cash equivalents

249,927

99,381

Securities available-for-sale (carried at fair value)

734,845

608,233

Real estate mortgage loans held-for-sale

11,218

4,527

Loans, net of allowance for loan losses of $61,408 and $50,652

4,587,748

4,015,176

Land, premises and equipment, net

59,298

60,365

Bank owned life insurance

95,227

83,848

Federal Reserve and Federal Home Loan Bank stock

13,772

13,772

Accrued interest receivable

18,761

15,391

Goodwill

4,970

4,970

Other assets

54,669

41,082

Total assets

$

5,830,435

$

4,946,745

LIABILITIES

Noninterest bearing deposits

$

1,538,331

$

983,307

Interest bearing deposits

3,498,474

3,150,512

Total deposits

5,036,805

4,133,819

Borrowings

Federal Home Loan Bank advances

75,000

170,000

Miscellaneous borrowings

10,500

0

Total borrowings

85,500

170,000

Accrued interest payable

5,959

11,604

Other liabilities

44,987

33,222

Total liabilities

5,173,251

4,348,645

STOCKHOLDERS' EQUITY

Common stock: 90,000,000 shares authorized, no par value

25,713,408 shares issued and 25,239,748 outstanding as of December 31, 2020

25,623,016 shares issued and 25,444,275 outstanding as of December 31, 2019

114,927

114,858

Retained earnings

529,005

475,247

Accumulated other comprehensive income

27,744

12,059

Treasury stock at cost (473,660 shares as of December 31, 2020, 178,741 shares as of December 31, 2019)

(14,581

)

(4,153)

Total stockholders' equity

657,095

598,011

Noncontrolling interest

89

89

Total equity

657,184

598,100

Total liabilities and equity

$

5,830,435

$

4,946,745


CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2020

2019

2020

2019

NET INTEREST INCOME

Interest and fees on loans

Taxable

$

45,779

$

47,639

$

176,538

$

196,733

Tax exempt

105

231

647

951

Interest and dividends on securities

Taxable

1,554

1,953

6,973

8,909

Tax exempt

2,340

1,956

8,577

7,127

Other interest income

76

533

368

1,490

Total interest income

49,854

52,312

193,103

215,210

Interest on deposits

5,018

13,017

29,342

57,148

Interest on borrowings

Short-term

48

16

506

1,311

Long-term

75

397

247

1,704

Total interest expense

5,141

13,430

30,095

60,163

NET INTEREST INCOME

44,713

38,882

163,008

155,047

Provision for loan losses

920

250

14,770

3,235

NET INTEREST INCOME AFTER PROVISION FOR

LOAN LOSSES

43,793

38,632

148,238

151,812

NONINTEREST INCOME

Wealth advisory fees

1,874

1,833

7,468

6,835

Investment brokerage fees

522

387

1,670

1,687

Service charges on deposit accounts

2,658

2,926

10,110

15,717

Loan and service fees

2,615

2,508

10,085

9,911

Merchant card fee income

475

659

2,408

2,641

Bank owned life insurance income

629

644

2,105

1,890

Interest rate swap fee income

984

844

5,089

1,691

Mortgage banking income

966

370

3,911

1,626

Net securities gains

70

48

433

142

Other income

989

900

3,564

2,857

Total noninterest income

11,782

11,119

46,843

44,997

NONINTEREST EXPENSE

Salaries and employee benefits

13,717

12,203

49,413

48,742

Net occupancy expense

1,515

1,295

5,851

5,295

Equipment costs

1,550

1,378

5,766

5,521

Data processing fees and supplies

3,128

2,788

11,864

10,407

Corporate and business development

769

995

3,093

4,371

FDIC insurance and other regulatory fees

483

72

1,707

638

Professional fees

1,808

1,157

5,314

4,644

Other expense

1,942

2,234

8,197

9,806

Total noninterest expense

24,912

22,122

91,205

89,424

INCOME BEFORE INCOME TAX EXPENSE

30,663

27,629

103,876

107,385

Income tax expense

6,071

5,431

19,539

20,338

NET INCOME

$

24,592

$

22,198

$

84,337

$

87,047

BASIC WEIGHTED AVERAGE COMMON SHARES

25,424,307

25,623,016

25,469,242

25,588,404

BASIC EARNINGS PER COMMON SHARE

$

0.97

$

0.86

$

3.31

$

3.40

DILUTED WEIGHTED AVERAGE COMMON SHARES

25,519,643

25,818,433

25,573,941

25,758,893

DILUTED EARNINGS PER COMMON SHARE

$

0.97

$

0.86

$

3.30

$

3.38


LAKELAND FINANCIAL CORPORATION

LOAN DETAIL

FOURTH QUARTER 2020

(unaudited, in thousands)

December 31,

September 30,

December 31,

2020

2020

2019

Commercial and industrial loans:

Working capital lines of credit loans

$

626,023

13.5

%

$

592,560

12.9

%

$

709,849

17.5

%

Non-working capital loans

1,165,355

25.0

1,256,853

27.3

717,019

17.6

Total commercial and industrial loans

1,791,378

38.5

1,849,413

40.2

1,426,868

35.1

Commercial real estate and multi-family residential loans:

Construction and land development loans

362,653

7.8

393,101

8.5

287,641

7.1

Owner occupied loans

648,019

13.9

619,820

13.5

573,665

14.1

Nonowner occupied loans

579,625

12.5

567,674

12.3

571,364

14.0

Multifamily loans

304,717

6.5

279,713

6.1

240,652

5.9

Total commercial real estate and multi-family residential loans

1,895,014

40.7

1,860,308

40.4

1,673,322

41.1

Agri-business and agricultural loans:

Loans secured by farmland

195,410

4.2

150,503

3.2

174,380

4.3

Loans for agricultural production

234,234

5.0

187,651

4.1

205,151

5.0

Total agri-business and agricultural loans

429,644

9.2

338,154

7.3

379,531

9.3

Other commercial loans

94,013

2.0

97,533

2.1

112,302

2.8

Total commercial loans

4,210,049

90.4

4,145,408

90.0

3,592,023

88.3

Consumer 1-4 family mortgage loans:

Closed end first mortgage loans

167,847

3.6

170,671

3.7

177,227

4.4

Open end and junior lien loans

163,664

3.5

170,867

3.7

186,552

4.6

Residential construction and land development loans

12,007

0.3

11,012

0.3

12,966

0.3

Total consumer 1-4 family mortgage loans

343,518

7.4

352,550

7.7

376,745

9.3

Other consumer loans

103,616

2.2

105,285

2.3

98,617

2.4

Total consumer loans

447,134

9.6

457,835

10.0

475,362

11.7

Subtotal

4,657,183

100.0

%

4,603,243

100.0

%

4,067,385

100.0

%

Less: Allowance for loan losses

(61,408

)

(60,747

)

(50,652

)

Net deferred loan fees

(8,027

)

(13,319

)

(1,557

)

Loans, net

$

4,587,748

$

4,529,177

$

4,015,176

LAKELAND FINANCIAL CORPORATION

DEPOSITS AND BORROWINGS

FOURTH QUARTER 2020

(unaudited, in thousands)

December 31,

September 30,

December 31,

2020

2020

2019

Noninterest bearing demand deposits

$

1,538,331

$

1,420,853

$

983,307

Savings and transaction accounts:

Savings deposits

312,702

289,500

234,508

Interest bearing demand deposits

2,160,953

1,844,211

1,723,937

Time deposits:

Deposits of $100,000 or more

785,238

965,709

910,134

Other time deposits

239,581

247,681

281,933

Total deposits

$

5,036,805

$

4,767,954

$

4,133,819

FHLB advances and other borrowings

85,500

85,500

170,000

Total funding sources

$

5,122,305

$

4,853,454

$

4,303,819


LAKELAND FINANCIAL CORPORATION

AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS

(UNAUDITED)

Three Months Ended

Three Months Ended

Three Months Ended

December 31, 2020

September 30, 2020

December 31, 2019

Average

Interest

Yield (1)/

Average

Interest

Yield (1)/

Average

Interest

Yield (1)/

(fully tax equivalent basis, dollars in thousands)

Balance

Income

Rate

Balance

Income

Rate

Balance

Income

Rate

Earning Assets

Loans:

Taxable (2)(3)

$

4,604,704

$

45,779

3.96

%

$

4,541,608

$

42,056

3.68

%

$

3,977,782

$

47,639

4.75

%

Tax exempt (1)

13,208

132

3.97

15,204

130

3.40

23,858

288

4.79

Investments: (1)

Available-for-sale

657,990

4,516

2.73

637,523

4,359

2.72

610,947

4,429

2.88

Short-term investments

2,334

1

0.17

8,865

3

0.13

54,439

339

2.47

Interest bearing deposits

223,269

75

0.13

79,369

41

0.21

81,335

194

0.95

Total earning assets

$

5,501,505

$

50,503

3.65

%

$

5,282,569

$

46,589

3.51

%

$

4,748,361

$

52,889

4.42

%

Less: Allowance for loan losses

(61,438

)

(59,519

)

(50,753

)

Nonearning Assets

Cash and due from banks

66,851

61,656

65,294

Premises and equipment

59,942

60,554

59,850

Other nonearning assets

180,958

175,601

159,237

Total assets

$

5,747,818

$

5,520,861

$

4,981,989

Interest Bearing Liabilities

Savings deposits

$

297,832

$

57

0.08

%

$

282,456

$

53

0.07

%

$

237,241

$

55

0.09

%

Interest bearing checking accounts

2,058,069

1,585

0.31

1,827,061

1,405

0.31

1,764,854

5,765

1.30

Time deposits:

In denominations under $100,000

242,846

792

1.30

254,315

982

1.54

282,683

1,422

2.00

In denominations over $100,000

878,684

2,584

1.17

972,436

3,501

1.43

1,017,815

5,775

2.25

Miscellaneous short-term borrowings

16,141

48

1.18

22,058

51

0.92

3,495

16

1.82

Long-term borrowings and

subordinated debentures

75,000

75

0.40

75,000

74

0.39

30,255

397

5.21

Total interest bearing liabilities

$

3,568,572

$

5,141

0.57

%

$

3,433,326

$

6,066

0.70

%

$

3,336,343

$

13,430

1.60

%

Noninterest Bearing Liabilities

Demand deposits

1,482,012

1,401,403

1,006,030

Other liabilities

52,557

55,154

48,423

Stockholders' Equity

644,677

630,978

591,193

Total liabilities and stockholders' equity

$

5,747,818

$

5,520,861

$

4,981,989

Interest Margin Recap

Interest income/average earning assets

50,503

3.65

46,589

3.51

52,889

4.42

Interest expense/average earning assets

5,141

0.37

6,066

0.46

13,430

1.12

Net interest income and margin

$

45,362

3.28

%

$

40,523

3.05

%

$

39,459

3.30

%


(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 $649,000, $610,000 and $577,000 in the three-month periods ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively.

(2)

Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $5.21 million and $1.87 million for the three months ended December 31, 2020 and September 30, 2020, respectively. All other loan fees were immaterial in relation to total taxable loan interest income for the periods presented.

(3)

Nonaccrual loans are included in the average balance of taxable loans.

Reconciliation of Non-GAAP Financial Measures

The loan loss reserve to total loans, excluding PPP loans and total impaired 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.
A reconciliation of these non-GAAP measures is provided below (dollars in thousands).

Three Months Ended

Twelve Months Ended

Dec. 31,

Sep. 30,

Dec. 31,

Dec 31,

Dec. 31,

2020

2020

2019

2020

2019

Total Loans

$

4,649,156

$

4,589,924

$

4,065,828

$

4,649,156

$

4,065,828

Less: PPP Loans

412,007

557,851

0

412,007

0

Total Loans, Excluding PPP Loans

$

4,237,149

$

4,032,073

$

4,065,828

$

4,237,149

$

4,065,828

Allowance for Loan Losses

$

61,408

$

60,747

$

50,652

$

61,408

$

50,652

Loan Loss Reserve to Total Loans

1.32

%

1.32

%

1.25

%

1.32

%

1.25

%

Loan Loss Reserve to Total Loans, Excluding PPP Loans

1.45

%

1.51

%

1.25

%

1.45

%

1.25

%

Three Months Ended

Twelve Months Ended

Dec. 31,

Sep. 30,

Dec. 31,

Dec 31,

Dec. 31,

2020

2020

2019

2020

2019

Total Loans

$

4,649,156

$

4,589,924

$

4,065,828

$

4,649,156

$

4,065,828

Less: PPP Loans

412,007

557,851

0

412,007

0

Total Loans, Excluding PPP Loans

$

4,237,149

$

4,032,073

$

4,065,828

$

4,237,149

$

4,065,828

Total Impaired and Watch List Loans

$

286,147

$

221,335

$

180,184

$

286,147

$

180,184

Total Impaired and Watch List Loans to Total Loans

6.15

%

4.82

%

4.43

%

6.15

%

4.43

%

Total Impaired and Watch List Loans to Total Loans, Excluding PPP Loans

6.75

%

5.49

%

4.43

%

6.75

%

4.43%

%

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 taxes. Tangible assets are calculated by excluding the balance of goodwill and other intangible assets from the calculation of total assets, net of deferred taxes. 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

Twelve Months Ended

Dec. 31,

Sep. 30,

Dec. 31,

Dec 31,

Dec. 31,

2020

2020

2019

2020

2019

Total Equity

$

657,184

$

636,839

$

598,100

$

657,184

$

598,100

Less: Goodwill

(4,970

)

(4,970

)

(4,970

)

(4,970

)

(4,970

)

Plus: Deferred tax assets related to goodwill

1,176

1,176

1,181

1,176

1,181

Tangible Common Equity

653,390

633,045

594,311

653,390

594,311

Assets

$

5,830,435

$

5,551,108

$

4,946,745

$

5,830,435

$

4,946,745

Less: Goodwill

(4,970

)

(4,970

)

(4,970

)

(4,970

)

(4,970

)

Plus: Deferred tax assets related to goodwill

1,176

1,176

1,181

1,176

1,181

Tangible Assets

5,826,641

5,547,314

4,942,956

5,826,641

4,942,956

Ending common shares issued

25,424,307

25,419,814

25,623,016

25,424,307

25,623,016

Tangible Book Value Per Common Share

$

25.70

$

24.90

$

23.19

$

25.70

$

23.19

Tangible Common Equity/Tangible Assets

11.21

%

11.41

%

12.02

%

11.21

%

12.02

%

Net Interest Income

$

44,713

$

39,913

$

38,882

$

163,008

$

155,047

Plus: Noninterest income

11,782

13,115

11,119

46,843

44,997

Pretax Pre-Provision Earnings

(24,912

)

(23,125

)

(22,122

)

(91,205

)

(89,424

)


$

31,583

$

29,903

$

27,879

$

118,646

$

110,620

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

Twelve Months Ended

Dec. 31,

Sep. 30,

Dec. 31,

Dec. 31,

Dec. 31,

2020

2020

2019

2020

2019

Total Average Earnings Assets

$

5,501,505

$

5,282,569

$

4,748,361

$

5,184,836

$

4,656,707

Less: Average Balance of PPP Loans

503,041

557,290

0

376,785

0

Total Adjusted Earning Assets

4,998,464

4,725,279

4,748,361

4,808,051

4,656,707

Total Interest Income FTE

$

50,503

$

46,589

$

52,889

$

195,549

$

217,339

Less: PPP Loan Income

(6,509

)

(3,294

)

0

(12,832

)

0

Total Adjusted Interest Income FTE

43,994

43,295

52,889

182,717

217,339

Adjusted Earning Asset Yield, net of PPP Impact

3.50

%

3.65

%

4.42

%

3.80

%

4.67

%

Total Average Interest Bearing Liabilities

$

3,568,572

$

3,433,326

$

3,336,343

$

3,437,338

$

3,390,512

Less: Average Balance of PPP Loans

503,041

557,290

0

376,785

0

Total Adjusted Interest Bearing Liabilities

4,071,613

3,990,616

3,336,343

3,814,123

3,390,512

Total Interest Expense FTE

$

5,141

$

6,066

$

13,430

$

30,095

$

60,163

Less: PPP Cost of Funds

(320

)

(350

)

0

(956

)

0

Total Adjusted Interest Expense FTE

4,821

5,716

13,430

29,139

60,163

Adjusted Cost of Funds, net of PPP Impact

0.38

%

0.48

%

1.12

%

0.61

%

1.29

%

Net Interest Margin FTE, net of PPP Impact

3.12

%

3.17

%

3.30

%

3.19

%

3.38

%


Contact

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


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