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Lakeland Financial Reports Record Third Quarter 2021 Performance; Year-to-Date Record Net Income Improves by 20% to $71.5 Million

WARSAW, Ind., Oct. 25, 2021 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record third quarter net income of $24.1 million for the three months ended September 30, 2021, an increase of 6%, versus $22.8 million for the third quarter of 2020. Diluted earnings per share increased 6% to $0.94 for the third quarter of 2021, versus $0.89 for the third quarter of 2020. On a linked quarter basis, net income decreased $229,000, or 1%, from the second quarter of 2021, in which the company had net income of $24.3 million, or $0.95, diluted earnings per share. Pretax pre-provision earnings1 were $30.9 million for the third quarter of 2021, an increase of 3%, or $1.0 million, from $29.9 million for the third quarter of 2020. On a linked quarter basis, pretax pre-provision earnings increased 9%, or $2.5 million, from $28.4 million for the second quarter of 2021.

The company further reported record net income of $71.5 million for the nine months ended September 30, 2021 versus $59.7 million for the comparable period of 2020, an increase of 20%. Diluted earnings per share also increased 20% to $2.79 for the nine months ended September 30, 2021 versus $2.33 for the comparable period of 2020. Pretax pre-provision earnings1 were $88.7 million for the nine months ended September 30, 2021, versus $87.1 million for the comparable period of 2020, an increase of 2%, or $1.7 million.

David M. Findlay, President and Chief Executive Officer commented, “The Lake City Bank team continues to produce quality earnings in a unique and challenging operating environment. As we move into the last quarter of 2021, our disciplined and execution-focused strategies continue to deliver consistent revenue growth despite the difficult interest rate environment.

Financial Performance – Third Quarter 2021

Third Quarter 2021 versus Third Quarter 2020 highlights:

  • Return on average equity of 13.90%, compared to 14.36%

  • Return on average assets of 1.56%, compared to 1.64%

  • Average loan growth, excluding PPP loans, of $211.7 million, or 5%

  • Core deposit growth of $665.4 million, or 14%

  • Noninterest bearing demand deposit account growth of $341.2 million, or 24%

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

  • Net interest margin of 3.13% compared to 3.05%

  • Revenue growth of $3.8 million, or 7%

  • Noninterest expense increase of $2.8 million, or 12%

  • Provision expense of $1.3 million compared to provision expense of $1.8 million, a decrease of $0.5 million

  • Nonperforming loans of $31.0 million, an increase of $17.5 million

  • Dividend per share increase of 13% to $0.34 from $0.30

  • Average total equity increase of $57.3 million, or 9%

  • Total risk-based capital ratio improved to 15.44% compared to 14.90%

  • Tangible capital ratio of 10.92% compared to 11.41%

____________________________
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.

Third Quarter 2021 versus Second Quarter 2021 highlights:

  • Return on average equity of 13.90%, compared to 14.71%

  • Return on average assets of 1.56% compared to 1.58%

  • Average loan growth, excluding PPP loans, of $71.5 million, or 2%

  • Core deposit growth of $19.0 million

  • Noninterest bearing demand deposit account growth of $19.0 million, or 1%

  • Net interest income increase of $2.1 million, or 5%

  • Net interest margin of 3.13% compared to 3.01%

  • Revenue growth of $1.9 million, or 3%

  • Noninterest expense decrease of $681,000, or 3%

  • Provision expense of $1.3 million compared to a reversal of provision expense of $1.7 million, an increase of $3.0 million

  • Nonperforming loans of $31.0 million, an increase of $20.3 million

  • Average total equity increase of $24.3 million, or 4%

  • Total risk-based capital increased to 15.44% compared to 15.04%

  • Tangible capital ratio was 10.92% compared to 10.81%

As announced on October 12, 2021, the board of directors approved a cash dividend for the third quarter of $0.34 per share, payable on November 5, 2021, to shareholders of record as of October 25, 2021. The third quarter dividend per share of $0.34 is unchanged from the dividend per share paid for the second quarter of 2021 and reflects a 13% increase from the dividend rate a year ago.

Average loans, excluding PPP loans, were $4.21 billion compared to $4.00 billion for the third quarter of 2020, an increase of $211.7 million, or 5%. On a linked quarter basis, average loans excluding PPP loans increased by $71.5 million, or 2%. Average total loans including PPP loans decreased $133.6 million, or 3%, from $4.49 billion for the second quarter of 2021. Average total loans for the third quarter of 2021 were $4.35 billion, a decrease of $202.7 million, or 4%, versus $4.56 billion for the third quarter 2020. Average PPP loans were $142.9 million during the third quarter 2021.

Total loans, excluding PPP loans, increased by $115.5 million, or 3%, as of September 30, 2021 as compared to September 30, 2020. On a linked quarter basis, total loans, excluding PPP loans, were $4.15 billion as of September 30, 2021, a decrease of $11.9 million, as compared to June 30, 2021. Total loans outstanding, including PPP loans, decreased by $350.5 million, or 8%, from $4.59 billion as of September 30, 2020 to $4.24 billion as of September 30, 2021. PPP loans outstanding were $91.9 million as of September 30, 2021, which reflects PPP forgiveness of $624.9 million since the program's inception.

Findlay stated, “We are proud of our commercial loan originations during the third quarter, as commercial origination activity exceeded $400 million. We continue to experience high levels of commercial and retail loan payoffs with PPP loan forgiveness being the most significant contributor. We also continue to experience reduced usage under commercial lines of credit and loan payoffs driven by the sale of commercial clients. As we plan for the balance of 2021, the loan pipeline is encouraging, and we continue to see an increase in both client and prospect in-person business development meetings that we are confident will lead to loan growth in the future.”

Average total deposits were $5.34 billion for the third quarter of 2021, an increase of $606.6 million, or 13%, versus $4.74 billion for the third quarter of 2020. On a linked quarter basis, average total deposits decreased by $42.9 million, or 1%. Total deposits increased $646.7 million, or 14%, from $4.77 billion as of September 30, 2020 to $5.41 billion as of September 30, 2021. On a linked quarter basis, total deposits increased by $20.0 million from $5.39 billion as of June 30, 2021.

Core deposits, which exclude brokered deposits, increased by $665.4 million, or 14%, from $4.74 billion at September 30, 2020 to $5.40 billion at September 30, 2021. This increase was due to growth in commercial deposits of $339.7 million, or 19%; growth in retail deposits of $248.2 million, or 14%; and growth in public fund deposits of $77.5 million, or 6%. On a linked quarter basis, core deposits increased by $19.0 million at September 30, 2021 as compared to June 30, 2021. The linked quarter growth resulted from commercial deposit growth of $21.6 million, a 1% increase; public fund growth of $14.2 million, a 1% increase; and retail contraction of $16.8 million, a 1% decrease. Proceeds from the sale of customer businesses as well as first round of stimulus payments to municipalities contributed to the increase in deposits during the third quarter.

____________________________
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.

Investment securities were $1.2 billion at September 30, 2021, reflecting an increase of $595.7 million, or 92%, as compared to $644.0 million at September 30, 2020. Investment securities increased $115.5 million, or 10%, on a linked quarter basis as the remaining balance of funds deployed to our investment subsidiary were fully invested during the third quarter. Investment securities represent 20% of total assets on September 30, 2021 compared to 12% on September 30, 2020 and 18% on June 30, 2021. The increase in investment securities reflects the deployment of excess liquidity from deposit increases that resulted from PPP and economic stimulus.

Findlay added, “We continue to experience significant levels of liquidity on our balance sheet as retail and commercial deposits remain at highly elevated levels. Given the combination of modest commercial loan growth and the increased liquidity position, we have continued to smartly grow our investment portfolio. While we are comfortable with the deployment of additional funds into the investment portfolio, we understand that our primary role is to be a lender in our Indiana communities, and we remain focused on developing strategies to ensure we return to our historical loan growth performance. Our commercial line utilization remained stable at 41% in September, unchanged from mid-year line utilization and continues to be lower than in the past. Loan demand by our borrowers continues to be impacted by labor workforce availability, supply chain disruption and elevated liquidity from governmental programs.”

The company’s net interest margin increased 8 basis points to 3.13% for the third quarter of 2021 compared to 3.05% for the third quarter of 2020. The higher margin in the third quarter of 2021 as compared to the prior year period was due to accelerated PPP forgiveness, which resulted in the accretion of outstanding deferred fees at the time of forgiveness. Total PPP fee income recognized for the third quarter of 2021 was $3.57 million compared to $1.87 million for the third quarter of 2020. PPP interest and fees added 18 basis points to third quarter 2021 net interest margin compared to a decrease of 12 basis points for the third quarter 2020 net interest margin. This fee income recognition was partially offset by the decrease in earning asset yield of 14 basis points from 3.51% for the third quarter of 2020 compared to 3.37% for the third quarter of 2021. As a result of the excess liquidity on the company's balance sheet, the mix of earning assets included lower yielding earning assets consisting of balances at the Federal Reserve Bank and the investment securities portfolio. Offsetting the lower yield on earning assets, the company has been able to reduce its cost of funds 32 basis points from 0.70% for the third quarter of 2020 compared to 0.38% for the third quarter of 2021.

The company’s net interest margin excluding PPP loans1 was 18 basis points lower at 2.95% for the third quarter of 2021 compared to actual net interest margin of 3.13% and reflects a 22 basis point decline from net interest margin excluding PPP loans of 3.17% in the third quarter of 2020. Linked quarter net interest margin excluding PPP was the same for the second and third quarters of 2021 at 2.95%. Interest expense as a percentage of earning assets decreased to a historical low of 0.24% for the three-month period ended September 30, 2021, down from 0.27% for the three-month period ended June 30, 2021.

Net interest income increased by $5.8 million, or 15%, for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. On a linked quarter basis, net interest income increased $2.1 million, or 5%, from the second quarter of 2021. PPP loan income, including interest and fees, was $3.9 million for the three months ended September 30, 2021, compared to $3.7 million during the second quarter of 2021. Net interest income increased by $14.8 million, or 12%, for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 due primarily to a decrease in interest expense of $13.1 million and an increase in investment securities income of $3.7 million, offset by a $2.1 million decline in loan interest income.

The company recorded a provision for credit losses2 of $1.3 million in the third quarter of 2021, compared to $1.8 million of provision expense in the third quarter of 2020, a decrease of $0.5 million. On a linked quarter basis, the provision2 increased by $3.0 million from a provision expense reversal of $1.7 million in the second quarter of 2021 due to a one-time recovery of $1.7 million in the second quarter. 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 provision expense in the third quarter of 2021 was driven primarily by the downgrading of two commercial loan borrowers to nonaccrual status. The company’s credit loss reserve to total loans2 was 1.72% at September 30, 2021 versus 1.32% at September 30, 2020 and 1.65% at June 30, 2021. The company’s credit loss reserve2 to total loans excluding PPP loans1 was 1.76% at September 30, 2021 versus 1.51% at September 30, 2020 and 1.72% at June 30, 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.

____________________________
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.

Net recoveries in the third quarter of 2021 were $35,000 versus net charge offs of $22,000 in the third quarter of 2020 and net recoveries of $1.6 million during the linked second quarter of 2021. Annualized net charge offs (recoveries) to average loans were 0.00% for the third quarter of 2021 and 2020, and (0.14%) for the linked second quarter of 2021.

Nonperforming assets increased $17.5 million, or 127%, to $31.3 million as of September 30, 2021 versus $13.8 million as of September 30, 2020. On a linked quarter basis, nonperforming assets increased $19.5 million, or 165%, versus the $11.8 million reported as of June 30, 2021. The ratio of nonperforming assets to total assets at September 30, 2021 increased to 0.50% from 0.25% at September 30, 2020 and increased from 0.19% at June 30, 2021. The increases were driven primarily by the downgrading of two commercial loan relationships, which totaled $21.2 million. The first credit relationship of $12.0 million was downgraded due to the severe impact on the business caused by the economic conditions resulting from the COVID-19 pandemic. The borrower is a retailer of party and special event supplies. During the third quarter of 2021, the borrower’s challenges significantly worsened. As a result, loans to the borrower were downgraded and placed on nonaccrual status. Loans to this borrower are secured by a blanket lien on all assets, including buildings, inventory, accounts receivable and equipment. In addition, the exposure is supported by a partial personal guarantee. The second downgrade relates to a shared national credit participation of $9.2 million to a commercial borrower that operates grain elevators and handles feed processing and merchandising of agriculture products. Loans to this borrower are secured by a blanket lien on all assets, including buildings, inventory, accounts receivable and equipment. These downgrades resulted in an increase to the specific credit loss allocations for each credit as they are now individually analyzed credits. The loans to both borrowers are current on interest and principal payments through September 2021. The bank believes that the allocations are adequate to cover any potential losses. Each of these downgrades resulted from a unique business challenge and management does not believe these downgrades are systemic as it relates to the bank's broader loan portfolio. Total individually analyzed and watch list loans increased by $37.2 million, or 17%, to $258.5 million at September 30, 2021 versus $221.3 million as of September 30, 2020. On a linked quarter basis, total individually analyzed and watch list loans decreased by $2.0 million, or 1%, from $260.5 million at June 30, 2021.

“Overall, asset quality remains stable, and our credit loss reserve is strong. Yet we are disappointed in the increase in nonperforming loans during the quarter. While the great majority of clients have managed through the crisis well, we have experienced isolated cases of impact and we are managing those situations to ensure the most favorable outcome for the bank,” commented Findlay.

The company’s noninterest income decreased $2.0 million, or 15%, to $11.1 million for the third quarter of 2021, compared to $13.1 million for the third quarter of 2020. Noninterest income was positively impacted by elevated wealth and investment brokerage fees which increased by $347,000, or 15%, for these comparable periods. In addition, service charges on deposit accounts were up $265,000, or 11%, and loan and service fees were up $368,000, or 14%, for these comparable periods due to an increase in economic activity within the company's operating footprint. Offsetting these increases were decreases of $2.0 million, or 92%, in interest rate swap fee income and $1.0 million in mortgage banking income. Both interest rate swap arrangements and mortgage banking have seen a decrease in demand during the third quarter of 2021 compared to the third 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.

“Our healthy growth in the core business lines driving noninterest income is a reaffirming indicator of success developing broad relationships with our clients. Revenue growth is critical to our ability to continue to produce quality earnings and the strength and stability of the wealth advisory, investment brokerage and commercial treasury management business lines continue to be a positive contributor,” added Findlay.

Noninterest income decreased by $226,000, or 2%, on a linked quarter from $11.3 million. The linked quarter decrease resulted primarily from a decrease in mortgage banking income of $447,000. Offsetting this decrease was an increase in other income of $340,000. This was driven primarily by appreciation in limited partnership investments.

____________________________
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.

The company’s noninterest expense increased $2.8 million, or 12%, to $26.0 million in the third quarter of 2021, compared to $23.1 million in the third quarter of 2020. Salaries and employee benefits increased $1.5 million, or 12%, driven by higher performance-based incentive compensation expense and higher employee health insurance expense. Corporate and business development expenses increased $414,000, or 71%, due to the timing of planned advertising campaigns and increased business development costs, as in-person meetings with clients and prospects have resumed. FDIC insurance and other regulatory fees increased $194,000, or 35%, driven by the company's rapid balance sheet growth year-over-year.

On a linked quarter basis, noninterest expense decreased by $681,000, or 3%, from $26.6 million. Salaries and employee benefits decreased by $1.5 million, or 10%, driven by fluctuations in performance-based incentive compensation expense. Offsetting this decrease was an increase in other expense of $790,000, or 41%. This was driven primarily by share-based payments to board members of $421,000, which are paid semi-annually in January and July.

The company’s efficiency ratio was 45.7% for the third quarter of 2021, compared to 43.6% for the third quarter of 2020 and 48.5% for the linked second quarter of 2021. The company's efficiency ratio was 47.2% for the nine months ended September 30, 2021 compared to 43.2% in the prior period.

COVID-19 Related Loan Deferrals

As of October 20, 2021, one commercial borrower in the amount of $8 million represented a second deferral action and was the only outstanding commercial loan deferral attributed to COVID-19. In accordance with Section 4013 of the CARES Act, this deferral was not considered to be a troubled debt restructuring. This provision was extended to January 1, 2022 under the Consolidated Appropriations Act, 2021.

Paycheck Protection Program

During the first half 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 September 30, 2021, Lake City Bank had $91.9 million in PPP loans outstanding, net of deferred fees, consisting of $15.5 million from PPP round one and $76.4 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 September 30, 2021, the SBA has approved forgiveness for $538.9 million in PPP loans originated during round one and $86.0 million in PPP loans originated during round two. The company has submitted forgiveness applications on behalf of customers in the amount of $14.6 million for PPP round one and $5.9 million for PPP round two that are awaiting SBA approval.

September 30, 2021

Originated

Forgiven

Outstanding (1)

Number

Amount

Number

Amount

Number

Amount

PPP Round 1

2,409

$

570,500

2,368

$

538,910

54

$

15,522

PPP Round 2

1,192

165,142

822

86,009

370

76,375

Total

3,601

$

735,642

3,190

$

624,919

424

$

91,897

(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
THIRD QUARTER 2021 FINANCIAL HIGHLIGHTS

Three Months Ended

Nine Months Ended

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

Sep 30,

Jun. 30,

Sep 30,

Sep 30,

Sep 30,

END OF PERIOD BALANCES

2021

2021

2020

2021

2020

Assets

$

6,222,916

$

6,232,914

$

5,551,108

$

6,222,916

$

5,551,108

Deposits

5,414,638

5,394,664

4,767,954

5,414,638

4,767,954

Brokered Deposits

11,012

10,004

29,703

11,012

29,703

Core Deposits (1)

5,403,626

5,384,660

4,738,251

5,403,626

4,738,251

Loans

4,239,453

4,353,709

4,589,924

4,239,453

4,589,924

Paycheck Protection Program (PPP) Loans

91,897

194,212

557,851

91,897

557,851

Allowance for Credit Losses (2)

73,048

71,713

60,747

73,048

60,747

Total Equity

683,202

677,471

636,839

683,202

636,839

Goodwill net of deferred tax assets

3,794

3,794

3,794

3,794

3,794

Tangible Common Equity (3)

679,408

673,677

633,045

679,408

633,045

AVERAGE BALANCES

Total Assets

$

6,153,334

$

6,171,427

$

5,520,861

$

6,071,682

$

5,314,956

Earning Assets

5,909,834

5,924,801

5,282,569

5,825,275

5,078,509

Investments - available-for-sale

1,201,657

955,242

637,523

977,955

625,887

Loans

4,354,104

4,487,683

4,556,812

4,468,891

4,359,522

Paycheck Protection Program (PPP) Loans

142,917

348,026

557,290

296,938

339,149

Total Deposits

5,344,272

5,387,185

4,737,671

5,280,361

4,546,897

Interest Bearing Deposits

3,662,707

3,753,499

3,336,268

3,652,839

3,294,785

Interest Bearing Liabilities

3,737,707

3,828,499

3,433,326

3,728,339

3,393,274

Total Equity

688,252

663,993

630,978

668,652

615,910

INCOME STATEMENT DATA

Net Interest Income

$

45,741

$

43,661

$

39,913

$

133,081

$

118,295

Net Interest Income-Fully Tax Equivalent

46,717

44,452

40,523

135,535

120,091

Provision for Credit Losses (2)

1,300

(1,700

)

1,750

1,077

13,850

Noninterest Income

11,114

11,340

13,115

35,011

35,061

Noninterest Expense

25,967

26,648

23,125

79,361

66,293

Net Income

24,119

24,348

22,776

71,450

59,745

Pretax Pre-Provision Earnings (3)

30,888

28,353

29,903

88,731

87,063

PER SHARE DATA

Basic Net Income Per Common Share

$

0.95

$

0.96

$

0.89

$

2.81

$

2.34

Diluted Net Income Per Common Share

0.94

0.95

0.89

2.79

2.33

Cash Dividends Declared Per Common Share

0.34

0.34

0.30

1.02

0.90

Dividend Payout

36.17

%

35.79

%

33.71

%

36.56

%

38.63

%

Book Value Per Common Share (equity per share issued)

26.80

26.59

25.05

26.80

25.05

Tangible Book Value Per Common Share (3)

26.66

26.45

24.90

26.66

24.90

Market Value – High

73.04

70.25

53.00

77.05

53.00

Market Value – Low

56.06

57.02

39.38

53.03

30.49

Three Months Ended

Nine Months Ended

Sep. 30,
2021

Jun. 30,
2021

Sep. 30,
2020

Sep. 30,
2021

Sep. 30,
2020

Basic Weighted Average Common Shares Outstanding

25,479,654

25,473,497

25,418,712

25,472,185

25,484,329

Diluted Weighted Average Common Shares Outstanding

25,635,288

25,602,063

25,487,302

25,608,655

25,618,401

KEY RATIOS

Return on Average Assets

1.56

%

1.58

%

1.64

%

1.57

%

1.50

%

Return on Average Total Equity

13.90

14.71

14.36

14.29

12.96

Average Equity to Average Assets

11.19

10.76

11.43

11.01

11.59

Net Interest Margin

3.13

3.01

3.05

3.11

3.16

Net Interest Margin, Excluding PPP Loans (3)

2.95

2.95

3.17

2.98

3.22

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

45.67

48.45

43.61

47.21

43.23

Tier 1 Leverage (4)

10.91

10.59

11.07

10.91

11.07

Tier 1 Risk-Based Capital (4)

14.18

13.79

13.65

14.18

13.65

Common Equity Tier 1 (CET1) (4)

14.18

13.79

13.65

14.18

13.65

Total Capital (4)

15.44

15.04

14.90

15.44

14.90

Tangible Capital (3) (4)

10.92

10.81

11.41

10.92

11.41

ASSET QUALITY

Loans Past Due 30 - 89 Days

$

1,245

$

673

$

1,106

$

1,245

$

1,106

Loans Past Due 90 Days or More

18

18

19

18

19

Non-accrual Loans

30,978

10,709

13,478

30,978

13,478

Nonperforming Loans (includes nonperforming TDRs)

30,996

10,727

13,497

30,996

13,497

Other Real Estate Owned

316

1,079

316

316

316

Other Nonperforming Assets

20

0

0

20

0

Total Nonperforming Assets

31,332

11,806

13,813

31,332

13,813

Performing Troubled Debt Restructurings

4,973

5,040

5,658

4,973

5,658

Nonperforming Troubled Debt Restructurings (included in nonperforming loans)

6,093

5,938

6,547

6,093

6,547

Total Troubled Debt Restructurings

11,066

10,978

12,205

11,066

12,205

Individually Analyzed Loans

41,148

19,277

22,484

41,148

22,484

Non-Individually Analyzed Watch List Loans

217,386

241,265

198,851

217,386

198,851

Total Individually Analyzed and Watch List Loans

258,534

260,542

221,335

258,534

221,335

Gross Charge Offs

90

267

305

593

4,565

Recoveries

125

1,836

283

2,106

810

Net Charge Offs/(Recoveries)

(35

)

(1,569

)

22

(1,513

)

3,755

Net Charge Offs/(Recoveries) to Average Loans

0.00

%

(0.14

%)

0.00

%

(0.05

%)

0.12

%

Credit Loss Reserve to Loans (2)

1.72

%

1.65

%

1.32

%

1.72

%

1.32

%

Credit Loss Reserve to Loans, Excluding PPP Loans (2) (3)

1.76

%

1.72

%

1.51

%

1.76

%

1.51

%

Credit Loss Reserve to Nonperforming Loans (2)

235.67

%

668.51

%

450.09

%

235.67

%

450.09

%

Three Months Ended

Nine Months Ended

Sep. 30,
2021

Jun. 30,
2021

Sep. 30,
2020

Sep. 30,
2021

Sep. 30,
2020

Credit Loss Reserve to Nonperforming Loans and Performing TDRs (2)

203.08

%

454.82

%

317.13

%

203.08

%

317.13

%

Nonperforming Loans to Loans

0.73

%

0.25

%

0.29

%

0.73

%

0.29

%

Nonperforming Assets to Assets

0.50

%

0.19

%

0.25

%

0.50

%

0.25

%

Total Individually Analyzed and Watch List Loans to Total Loans

6.10

%

5.98

%

4.82

%

6.10

%

4.82

%

Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans (3)

6.23

%

6.26

%

5.49

%

6.23

%

5.49

%

OTHER DATA

Full Time Equivalent Employees

592

600

571

592

571

Offices

51

50

50

51

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 September 30, 2021 are preliminary until the Call Report is filed.

CONSOLIDATED BALANCE SHEETS (in thousands, except share data)

September 30,
2021

December 31,
2020

(Unaudited)

ASSETS

Cash and due from banks

$

78,523

$

74,457

Short-term investments

478,710

175,470

Total cash and cash equivalents

557,233

249,927

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

1,239,715

734,845

Real estate mortgage loans held-for-sale

7,969

11,218

Loans, net of allowance for credit losses* of $73,048 and $61,408

4,166,405

4,587,748

Land, premises and equipment, net

59,998

59,298

Bank owned life insurance

97,224

95,227

Federal Reserve and Federal Home Loan Bank stock

13,772

13,772

Accrued interest receivable

17,780

18,761

Goodwill

4,970

4,970

Other assets

57,850

54,669

Total assets

$

6,222,916

$

5,830,435

LIABILITIES

Noninterest bearing deposits

$

1,762,021

$

1,538,331

Interest bearing deposits

3,652,617

3,498,474

Total deposits

5,414,638

5,036,805

Borrowings

Federal Home Loan Bank advances

75,000

75,000

Miscellaneous borrowings

0

10,500

Total borrowings

75,000

85,500

Accrued interest payable

2,916

5,959

Other liabilities

47,160

44,987

Total liabilities

5,539,714

5,173,251

STOCKHOLDERS’ EQUITY

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

25,775,133 shares issued and 25,299,178 outstanding as of September 30, 2021

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

119,625

114,927

Retained earnings

567,518

529,005

Accumulated other comprehensive income

10,932

27,744

Treasury stock at cost (475,955 shares as of September 30, 2021, 473,660 shares as of December 31, 2020)

(14,962

)

(14,581

)

Total stockholders’ equity

683,113

657,095

Noncontrolling interest

89

89

Total equity

683,202

657,184

Total liabilities and equity

$

6,222,916

$

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
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

NET INTEREST INCOME

Interest and fees on loans

Taxable

$

43,025

$

42,056

$

128,828

$

130,759

Tax exempt

119

104

324

542

Interest and dividends on securities

Taxable

2,470

1,577

6,482

5,419

Tax exempt

3,556

2,198

8,915

6,237

Other interest income

125

44

348

292

Total interest income

49,295

45,979

144,897

143,249

Interest on deposits

3,479

5,941

11,587

24,324

Interest on borrowings

Short-term

0

51

7

458

Long-term

75

74

222

172

Total interest expense

3,554

6,066

11,816

24,954

NET INTEREST INCOME

45,741

39,913

133,081

118,295

Provision for credit losses*

1,300

1,750

1,077

13,850

NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

44,441

38,163

132,004

104,445

NONINTEREST INCOME

Wealth advisory fees

2,177

1,930

6,433

5,594

Investment brokerage fees

521

421

1,560

1,148

Service charges on deposit accounts

2,756

2,491

7,768

7,452

Loan and service fees

3,005

2,637

8,823

7,470

Merchant card fee income

838

670

2,226

1,933

Bank owned life insurance income

640

932

2,101

1,476

Interest rate swap fee income

180

2,143

934

4,105

Mortgage banking income (loss)

(32

)

1,005

1,756

2,945

Net securities gains

0

314

797

363

Other income

1,029

572

2,613

2,575

Total noninterest income

11,114

13,115

35,011

35,061

NONINTEREST EXPENSE

Salaries and employee benefits

14,230

12,706

44,377

35,696

Net occupancy expense

1,413

1,404

4,343

4,336

Equipment costs

1,371

1,369

4,134

4,216

Data processing fees and supplies

3,169

3,025

9,692

8,736

Corporate and business development

1,000

586

3,208

2,324

FDIC insurance and other regulatory fees

748

554

1,707

1,224

Professional fees

1,342

1,306

5,058

3,506

Other expense

2,694

2,175

6,842

6,255

Total noninterest expense

25,967

23,125

79,361

66,293

INCOME BEFORE INCOME TAX EXPENSE

29,588

28,153

87,654

73,213

Income tax expense

5,469

5,377

16,204

13,468

NET INCOME

$

24,119

$

22,776

$

71,450

$

59,745

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

BASIC WEIGHTED AVERAGE COMMON SHARES

25,479,654

25,418,712

25,472,185

25,484,329

BASIC EARNINGS PER COMMON SHARE

$

0.95

$

0.89

$

2.81

$

2.34

DILUTED WEIGHTED AVERAGE COMMON SHARES

25,635,288

25,487,302

25,608,655

25,618,401

DILUTED EARNINGS PER COMMON SHARE

$

0.94

$

0.89

$

2.79

$

2.33

____________________________
* 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)

September 30,
2021

June 30,
2021

September 30,
2020

Commercial and industrial loans:

Working capital lines of credit loans

$

659,166

15.5

%

$

616,401

14.1

%

$

592,560

12.9

%

Non-working capital loans

782,618

18.5

886,284

20.3

1,256,853

27.3

Total commercial and industrial loans

1,441,784

34.0

1,502,685

34.4

1,849,413

40.2

Commercial real estate and multi-family residential loans:

Construction and land development loans

378,716

8.9

402,583

9.2

393,101

8.5

Owner occupied loans

740,836

17.4

672,903

15.5

619,820

13.5

Nonowner occupied loans

582,019

13.7

606,096

13.9

567,674

12.3

Multifamily loans

252,983

6.0

300,449

6.9

279,713

6.1

Total commercial real estate and multi-family residential loans

1,954,554

46.0

1,982,031

45.5

1,860,308

40.4

Agri-business and agricultural loans:

Loans secured by farmland

152,099

3.5

167,314

3.8

150,503

3.2

Loans for agricultural production

171,981

4.1

179,338

4.1

187,651

4.1

Total agri-business and agricultural loans

324,080

7.6

346,652

7.9

338,154

7.3

Other commercial loans

83,595

2.0

85,356

2.0

97,533

2.1

Total commercial loans

3,804,013

89.6

3,916,724

89.8

4,145,408

90.0

Consumer 1-4 family mortgage loans:

Closed end first mortgage loans

173,689

4.1

169,653

3.9

170,671

3.7

Open end and junior lien loans

161,941

3.8

162,327

3.7

170,867

3.7

Residential construction and land development loans

12,542

0.3

12,505

0.3

11,012

0.3

Total consumer 1-4 family mortgage loans

348,172

8.2

344,485

7.9

352,550

7.7

Other consumer loans

92,169

2.2

100,771

2.3

105,285

2.3

Total consumer loans

440,341

10.4

445,256

10.2

457,835

10.0

Subtotal

4,244,354

100.0

%

4,361,980

100.0

%

4,603,243

100.0

%

Less: Allowance for credit losses (1)

(73,048

)

(71,713

)

(60,747

)

Net deferred loan fees

(4,901

)

(8,271

)

(13,319

)

Loans, net

$

4,166,405

$

4,281,996

$

4,529,177

(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)

September 30,
2021

June 30,
2021

September 30,
2020

Noninterest bearing demand deposits

$

1,762,021

$

1,743,000

$

1,420,853

Savings and transaction accounts:

Savings deposits

375,993

358,568

289,500

Interest bearing demand deposits

2,411,722

2,333,758

1,844,211

Time deposits:

Deposits of $100,000 or more

658,050

740,484

965,709

Other time deposits

206,852

218,854

247,681

Total deposits

$

5,414,638

$

5,394,664

$

4,767,954

FHLB advances and other borrowings

75,000

75,000

85,500

Total funding sources

$

5,489,638

$

5,469,664

$

4,853,454


LAKELAND FINANCIAL CORPORATION
AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS
(UNAUDITED)

Three Months Ended
September 30, 2021

Three Months Ended
June 30, 2021

Three Months Ended
September 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)

$

4,339,792

$

43,025

3.93

%

$

4,474,844

$

42,342

3.80

%

$

4,541,608

$

42,056

3.68

%

Tax exempt (1)

14,312

150

4.16

12,839

128

4.00

15,204

130

3.40

Investments: (1)

Available-for-sale

1,201,657

6,971

2.30

955,242

5,811

2.44

637,523

4,359

2.72

Short-term investments

2,304

0

0.00

2,305

0

0.00

8,865

3

0.13

Interest bearing deposits

351,769

125

0.14

479,571

135

0.11

79,369

41

0.21

Total earning assets

$

5,909,834

$

50,271

3.37

%

$

5,924,801

$

48,416

3.28

%

$

5,282,569

$

46,589

3.51

%

Less: Allowance for credit losses (4)

(72,157

)

(72,222

)

(59,519

)

Nonearning Assets

Cash and due from banks

67,715

68,798

61,656

Premises and equipment

59,824

59,848

60,554

Other nonearning assets

188,118

190,202

175,601

Total assets

$

6,153,334

$

6,171,427

$

5,520,861

Interest Bearing Liabilities

Savings deposits

$

369,191

$

71

0.08

%

$

359,484

$

71

0.08

%

$

282,456

$

53

0.07

%

Interest bearing checking accounts

2,390,462

1,712

0.28

2,428,524

1,700

0.28

1,827,061

1,405

0.31

Time deposits:

In denominations under $100,000

211,911

457

0.86

224,025

545

0.98

254,315

982

1.54

In denominations over $100,000

691,143

1,239

0.71

741,466

1,574

0.85

972,436

3,501

1.43

Miscellaneous short-term borrowings

0

0

0.00

0

0

0.00

22,058

51

0.92

Long-term borrowings and subordinated debentures

75,000

75

0.40

75,000

74

0.40

75,000

74

0.39

Total interest bearing liabilities

$

3,737,707

$

3,554

0.38

%

$

3,828,499

$

3,964

0.42

%

$

3,433,326

$

6,066

0.70

%

Noninterest Bearing Liabilities

Demand deposits

1,681,565

1,633,686

1,401,403

Other liabilities

45,810

45,249

55,154

Stockholders' Equity

688,252

663,993

630,978

Total liabilities and stockholders' equity

$

6,153,334

$

6,171,427

$

5,520,861

Interest Margin Recap

Interest income/average earning assets

50,271

3.37

48,416

3.28

46,589

3.51

Interest expense/average earning assets

3,554

0.24

3,964

0.27

6,066

0.46

Net interest income and margin

$

46,717

3.13

%

$

44,452

3.01

%

$

40,523

3.05

%

(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 $976,000, $791,000 and $610,000 in the three-month periods ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
(2) Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $3.57 million, $2.76 million, and $1.87 million for the three months ended September 30, 2021, June 30, 2021 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.
(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).

September 30,
2021

June 30,
2021

September 30,
2020

Total Loans

$

4,239,453

$

4,353,709

$

4,589,924

Less: PPP Loans

91,897

194,212

557,851

Total Loans, Excluding PPP Loans

4,147,556

4,159,497

4,032,073

Allowance for Credit Losses (1)

$

73,048

$

71,713

$

60,747

Credit Loss Reserve to Total Loans (1)

1.72

%

1.65

%

1.32

%

Credit Loss Reserve to Total Loans, Excluding PPP Loans (1)

1.76

%

1.72

%

1.51

%

Total Individually Analyzed and Watch List Loans

$

258,534

$

260,542

$

221,335

Total Individually Analyzed and Watch List Loans to Total Loans

6.10

%

5.98

%

4.82

%

Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans

6.23

%

6.26

%

5.49

%

(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

Nine Months Ended

Sep. 30,
2021

Jun. 30,
2021

Sep. 30,
2020

Sep. 30,
2021

Sep. 30,
2020

Total Equity

$

683,202

$

677,471

$

636,839

$

683,202

$

636,839

Less: Goodwill

(4,970

)

(4,970

)

(4,970

)

(4,970

)

(4,970

)

Plus: Deferred tax assets related to goodwill

1,176

1,176

1,176

1,176

1,176

Tangible Common Equity

679,408

673,677

633,045

679,408

633,045

Assets

$

6,222,916

$

6,232,914

$

5,551,108

$

6,222,916

$

5,551,108

Less: Goodwill

(4,970

)

(4,970

)

(4,970

)

(4,970

)

(4,970

)

Plus: Deferred tax assets related to goodwill

1,176

1,176

1,176

1,176

1,176

Tangible Assets

6,219,122

6,229,120

5,547,314

6,219,122

5,547,314

Ending common shares issued

25,486,032

25,473,437

25,419,814

25,486,032

25,419,814

Tangible Book Value Per Common Share

$

26.66

$

26.45

$

24.90

$

26.66

$

24.90

Tangible Common Equity/Tangible Assets

10.92

%

10.81

%

11.41

%

10.92

%

11.41

%

Net Interest Income

$

45,741

$

43,661

$

39,913

$

133,081

$

118,295

Plus: Noninterest income

11,114

11,340

13,115

35,011

35,061

Minus: Noninterest expense

(25,967

)

(26,648

)

(23,125

)

(79,361

)

(66,293

)

Pretax Pre-Provision Earnings

$

30,888

$

28,353

$

29,903

$

88,731

$

87,063

Net interest margin on a fully-tax equivalent basis, net of PPP loan impact, is a non-GAAP measure that management believes is important because it provides for better comparability to prior periods. Because PPP loans have a low fixed interest rate of 1.0% and because the accretion of net loan fee income can be accelerated upon borrower forgiveness and repayment by the SBA, management is actively monitoring net interest margin on a fully tax equivalent basis with and without PPP loan impact for the duration of this program.

A reconciliation of this non-GAAP financial measure is provided below (dollars in thousands).

Impact of Paycheck Protection Program on Net Interest Margin FTE

Three Months Ended

Nine Months Ended

Sep. 30,
2021

Jun. 30,
2021

Sep. 30,
2020

Sep. 30,
2021

Sep. 30,
2020

Total Average Earnings Assets

$

5,909,834

$

5,924,801

$

5,282,569

$

5,825,275

$

5,078,509

Less: Average Balance of PPP Loans

(142,917

)

(348,026

)

(557,290

)

(296,938

)

(339,149

)

Total Adjusted Earning Assets

5,766,917

5,576,775

4,725,279

5,528,337

4,739,360

Total Interest Income FTE

$

50,271

$

48,416

$

46,589

$

147,351

$

145,045

Less: PPP Loan Income

(3,946

)

(3,652

)

(3,294

)

(12,764

)

(6,323

)

Total Adjusted Interest Income FTE

46,325

44,764

43,295

134,587

138,722

Adjusted Earning Asset Yield, net of PPP Impact

3.19

%

3.22

%

3.65

%

3.25

%

3.91

%

Total Average Interest Bearing Liabilities

$

3,737,707

$

3,828,499

$

3,433,326

$

3,728,339

$

3,393,274

Less: Average Balance of PPP Loans

(142,917

)

(348,026

)

(557,290

)

(296,938

)

(339,149

)

Total Adjusted Interest Bearing Liabilities

3,594,790

3,480,473

2,876,036

3,431,401

3,054,125

Total Interest Expense FTE

$

3,554

$

3,964

$

6,066

$

11,816

$

24,954

Less: PPP Cost of Funds

(90

)

(162

)

(350

)

(555

)

(635

)

Total Adjusted Interest Expense FTE

3,464

3,802

5,716

11,261

24,319

Adjusted Cost of Funds, net of PPP Impact

0.24

%

0.27

%

0.48

%

0.27

%

0.69

%

Net Interest Margin FTE, net of PPP Impact

2.95

%

2.95

%

3.17

%

2.98

%

3.22

%

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