• Lakeland Financial Reports Record Second Quarter 2022 Performance; Year-to-Date Record Net Income Improves by 4% to $49.3 million

    Source: Nasdaq GlobeNewswire / 25 Jul 2022 07:00:02   America/Chicago

    WARSAW, Ind., July 25, 2022 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record second quarter net income of $25.7 million for the three months ended June 30, 2022, an increase of 5%, or $1.3 million, versus $24.3 million for the second quarter of 2021. Diluted earnings per share increased 5% to $1.00 for the second quarter of 2022, versus $0.95 for the second quarter of 2021. On a linked quarter basis, net income increased 9%, or $2.0 million, from the first quarter of 2022 in which the company had net income of $23.6 million, or $0.92 diluted earnings per share. Pretax pre-provision earnings, which is a non-GAAP financial measure, were $31.3 million for the second quarter of 2022, an increase of 10%, or $2.9 million, from $28.4 million for the second quarter of 2021. On a linked quarter basis, pretax pre-provision earnings increased 9%, or $2.7 million, from $28.6 million for the first quarter of 2022.

    The company further reported record net income of $49.3 million for the six months ended June 30, 2022 versus $47.3 million for the comparable period of 2021, an increase of 4%, or $2.0 million. Diluted earnings per share also increased 4% to $1.92 for the six months ended June 30, 2022 versus $1.85 for the comparable period of 2021. Pretax pre-provision earnings were $59.9 million for the six months ended June 30, 2022, versus $57.8 million for the comparable period of 2021, an increase of 3%, or $2.0 million.

    David M. Findlay, President and Chief Executive Officer commented, “On May 14th, we began a yearlong celebration of Lake City Bank’s 150th anniversary. On a spring day in 1872, a group of investors came together to form Lake City Bank, and that name has been on the door ever since. We are proud of our history as a community bank and our exceptional track record of serving the Indiana communities where we live and work. Our 150th anniversary celebration will focus on our Lake City Bank team members and those communities and kicked off with a $150,000 donation given in $10,000 increments to the community foundations in the 15 Indiana Counties we serve.”

    Findlay continued, “Our record results for the quarter and first six months of 2022 reflect our disciplined and consistent track record of strong operating performance. Our long history of organic balance sheet growth continued in the quarter with healthy loan growth and our asset sensitive balance sheet benefitted from the Federal Reserve’s interest rate actions during the first six months of 2022.”

    Financial Performance – Second Quarter 2022

    Second Quarter 2022 versus Second Quarter 2021 highlights:

    • Return on average equity of 17.65%, compared to 14.71%
    • Return on average assets of 1.59%, compared to 1.58%
    • Core loan growth, excluding PPP loans, of $260.0 million, or 6%
    • Core deposit growth of $226.9 million, or 4%
    • Noninterest bearing demand deposit account growth of $54.6 million, or 3%
    • Net interest income increase of $5.0 million, or 11%
    • Net interest margin expansion of 25 basis points to 3.26% compared to 3.01%
    • Provision expense of $0 compared to a reverse provision of $1.7 million
    • Noninterest expense increase of $1.3 million, or 5%
    • Dividend per share increase of 18%, or $0.06 per share, to $0.40 from $0.34
    • Watch list loans decreased by $68.5 million, or 26%, from $260.5 million to $192.1 million
    • Total risk-based capital ratio of 15.15% compared to 15.04%
    • Tangible capital ratio of 8.92% compared to 10.81%

    Second Quarter 2022 versus First Quarter 2022 highlights:

    • Return on average equity of 17.65%, compared to 14.04%
    • Return on average assets of 1.59% compared to 1.44%
    • Core loan growth, excluding PPP loans, of $78.3 million, or 2%
    • Core deposit reduction of $198.8 million, or 3%
    • Noninterest bearing demand deposit account contraction of $82.8 million, or 4%
    • Net interest income increase of $3.8 million, or 8%
    • Net interest margin expansion of 33 basis points to 3.26% compared to 2.93%
    • Provision expense of $0 compared to provision expense of $417,000
    • Noninterest expense increase of $944,000, or 4%
    • Watch list loans decreased by $26.7 million, or 12%, from $218.8 million to $192.1 million
    • Total risk-based capital of 15.15% at the end of each period
    • Tangible capital ratio of 8.92% compared to 9.22%

    As announced on July 12, 2022, the board of directors approved a cash dividend for the second quarter of $0.40 per share, payable on August 5, 2022, to shareholders of record as of July 25, 2022. The second quarter dividend per share of $0.40 is unchanged from the dividend per share paid for the first quarter of 2022 and reflects an 18% increase from the dividend rate a year ago.

    Return on average total equity for the second quarter of 2022 was 17.65%, compared to 14.71% in the second quarter of 2021 and 14.04% in the linked first quarter of 2022. Return on average assets for the second quarter of 2022 was 1.59%, compared to 1.58% in the second quarter of 2021 and 1.44% in the linked first quarter of 2022. The company’s total capital as a percent of risk-weighted assets was 15.15% at June 30, 2022, compared to 15.04% at June 30, 2021 and 15.15% at March 31, 2022.

    “The strength of our balance sheet continues to support the significant increase in our dividend to shareholder and our record profitability further bolstered our fortress balance sheet,” Findlay stated.

    The company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 8.92% at June 30, 2022, compared to 10.81% at June 30, 2021 and 9.22% at March 31, 2022. Tangible equity and tangible assets have been negatively impacted by the decline in market value of the company’s available-for-sale investment securities portfolio. The market value decline was a result of the yield curve steepening during the first half of 2022. The increase in market interest rates led to an unrealized loss in market value of $175.6 million as of June 30, 2022, compared to an unrealized gain in market value of $29.9 million at June 30, 2021 and an unrealized loss in market value of $117.4 million at March 31, 2022. When excluding the impact of accumulated other comprehensive income on tangible common equity, the company's adjusted tangible common equity to adjusted tangible assets ratio was 11.08% at June 30, 2022 compared to 10.49% at June 30, 2021 and 10.44% at March 31, 2022.

    The company elected to transfer $151.4 million of municipal bonds from the available-for-sale securities portfolio to held-to-maturity designation on April 1, 2022 as a balance sheet management strategy.

    Average total loans, excluding PPP loans, were $4.42 billion for the second quarter of 2022 compared to $4.14 billion for the second quarter of 2021, an increase of $276.4 million, or 7%. On a linked quarter basis, average total loans, excluding PPP loans, increased by $132.7 million, or 3%.

    “Core loan growth was encouraging this quarter and included gross commercial originations in excess of $548 million. Although the commercial line utilization rate remained unchanged at 43% on a linked quarter basis, our commercial lines increased by $105 million, while line usage increased by $59 million in the second quarter. Notably, the loan pipeline remains encouraging,” added Findlay.

    Average total loans were $4.43 billion in the second quarter of 2022, an increase of $124.8 million, or 3%, from $4.30 billion for the first quarter of 2022, and a decrease of $62.0 million, or 1%, from $4.49 billion for the second quarter 2021. PPP average loan forgiveness of $338.4 million during the past 12 months brought PPP average loan balances to $9.7 million during the second quarter of 2022, compared to $348.0 million average PPP loans during the second quarter of 2021.

    Total loans, excluding PPP loans, increased by $260.0 million, or 6%, as of June 30, 2022 compared to June 30, 2021. On a linked quarter basis, total loans, excluding PPP loans, were $4.42 billion as of June 30, 2022, an increase of $78.3 million, or 2%, as compared to March 31, 2022. Total loans outstanding increased by $71.0 million, or 2%, from $4.35 billion as of June 30, 2021 to $4.42 billion as of June 30, 2022, due primarily to organic loan growth of $260.0 million and offset by PPP loan forgiveness of $189.0 million. PPP loans outstanding were $5.2 million as of June 30, 2022, $12.5 million as of March 31, 2022, and $194.2 million as of June 30, 2021.

    Average total deposits were $5.75 billion for the second quarter of 2022, an increase of $365.3 million, or 7%, versus $5.39 billion for the second quarter of 2021. On a linked quarter basis, average total deposits decreased by $96.1 million, or 2%. Total deposits increased $226.9 million, or 4%, from $5.39 billion as of June 30, 2021 to $5.62 billion as of June 30, 2022. On a linked quarter basis, total deposits decreased by $199.0 million, or 3%, from $5.82 billion as of March 31, 2022.

    Core deposits, which exclude brokered deposits, increased by $226.9 million, or 4%, from $5.38 billion at June 30, 2021 to $5.61 billion at June 30, 2022. This increase was due to growth in public fund deposits of $182.8 million, or 14%; growth in retail deposits of $73.8 million, or 4%; and contraction in commercial deposits of $29.7 million, or 1%. On a linked quarter basis, core deposits decreased by $198.8 million, or 3%, at June 30, 2022 compared to March 31, 2022. Linked quarter decreases resulted from commercial deposit contraction of $189.7 million, an 8% decrease; retail deposit contraction of $126.7 million, a 6% decrease; and public funds growth of $117.6 million, a 9% increase.

    Investment securities were $1.43 billion at June 30, 2022, an increase of $303.8 million, or 27%, as compared to $1.12 billion at June 30, 2021. Investment securities represented 23% of total assets on June 30, 2022 compared to 18% on June 30, 2021 and 23% on March 31, 2022. The company paused additions to the investment securities portfolio at the end of the second quarter as excess liquidity on the balance sheet was reduced by loan growth and deposit outflows during the quarter. The company expects to use cash flows from the investment securities portfolio to help fund loan growth and for the investment securities portfolio to represent a lower percent of total assets over time.

    Findlay added, “We are pleased that excess liquidity on our balance sheet declined by $305 million during the quarter due to the combined effects of loan growth and commercial deposit outflows. The improvement in the loan to deposit ratio to 79% from 75% in March is also an encouraging development.”

    The company’s net interest margin increased 25 basis points to 3.26% for the second quarter of 2022 compared to 3.01% for the second quarter of 2021. The increased margin in the second quarter of 2022 compared to the prior year period was due to higher yields on loans, partially offset by a higher cost of funds. The higher yields were driven by three Federal Reserve Bank increases to the target Federal Funds rate in March, May, and June of 2022. The overall effect of these rate increases raised the Federal Funds rate by a cumulative 150 basis points and increased the target Federal Funds rate range from a zero-bound range of 0.00% - 0.25% prior to the first rate increase in March of 2022 to a range of 1.50 - 1.75% at June 30, 2022.

    Total PPP loan income recognized for the second quarter of 2022 was $204,000 compared to $3.7 million for the second quarter of 2021, a decrease of 94%. PPP interest and fees had a nominal impact on the second quarter 2022 net interest margin compared to net interest margin compression of 6 basis points for the second quarter 2021. Despite the decrease in PPP loan fee income, earning asset yields increased 30 basis points from 3.28% for the second quarter of 2021 to 3.58% for the second quarter of 2022. Offsetting the increased yield on earning assets was an increase to the company's cost of funds of 5 basis points. Interest expense as a percentage of earning assets increased to 0.32% for the three-month period ended June 30, 2022, from 0.27% for the three-month period ended June 30, 2021.

    Linked quarter net interest margin was 33 basis points higher at 3.26% for the second quarter of 2022 compared to 2.93% for the first quarter of 2022. Earning asset yields increased by 45 basis points. Interest expense as a percentage of earning assets increased 12 basis points for the three-month period ended June 30, 2022, from a historical low of 0.20% for the three-month period ended March 31, 2022.

    Net interest income increased by $5.0 million, or 11%, for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. On a linked quarter basis, net interest income increased $3.8 million, or 8%, from the first quarter of 2022. PPP loan income, including interest and fees, was $204,000 for the second quarter of 2022, compared to $3.7 million for the second quarter of 2021, and $505,000 during the first quarter of 2022. Net interest income increased by $6.2 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 due primarily to an increase in investment security income of $7.2 million offset by a decline in loan interest income of $1.7 million.

    “The aggressive Federal Reserve Bank tightening during the second quarter and the resulting benefit to net interest margin highlighted our balance sheet sensitivity to market interest rates. Commercial loan yields improved by 28 basis points from 3.76% to 4.04% during the quarter,” Findlay stated.

    The company recorded no provision for credit losses in the second quarter of 2022, compared to a reverse provision of $1.7 million in the second quarter of 2021. On a linked quarter basis, provision expense was $417,000 in the first quarter of 2022. Provision expense was $417,000 for the six months ended June 30, 2022, compared to reverse provision of $223,000 for the prior six-month period ended June 30, 2021. The company’s credit loss reserve to total loans was 1.53% at June 30, 2022 versus 1.65% at June 30, 2021 and 1.55% at March 31, 2022. The company’s credit loss reserve to total loans excluding PPP loans, which is a non-GAAP financial measure, was 1.53% at June 30, 2022 versus 1.72% at June 30, 2021 and 1.56% at March 31, 2022.

    Net charge offs in the second quarter of 2022 were $3,000 versus net recoveries of $1.6 million in the second quarter of 2021 and net charge offs of $664,000 during the linked first quarter of 2022. Annualized net charge offs (recoveries) to average loans were 0.00% for the second quarter of 2022, (0.14%) for the second quarter of 2021, and 0.06% for the linked first quarter of 2022. Net charge offs were $667,000 for the six months ended June 30, 2022 compared to $1.5 million net recoveries recorded in the prior year six month period ending June 30, 2021. Annualized net charge offs as a percentage of average loans was 0.03% for the six months ended June 30, 2022 compared to net recoveries as a percent of average loans of 0.07% for the six months ended June 30, 2021.

    Nonperforming assets increased $1.0 million, or 8%, to $12.8 million as of June 30, 2022 versus $11.8 million as of June 30, 2021. On a linked quarter basis, nonperforming assets decreased $1.3 million, or 9%, versus the $14.1 million reported as of March 31, 2022. The ratio of nonperforming assets to total assets at June 30, 2022 increased to 0.20% from 0.19% at June 30, 2021 and decreased from 0.22% at March 31, 2022. Total individually analyzed and watch list loans decreased by $68.5 million, or 26%, to $192.1 million at June 30, 2022 versus $260.5 million as of June 30, 2021. On a linked quarter basis, total individually analyzed and watch list loans decreased by $26.7 million, or 12%, from $218.8 million at March 31, 2022, due primarily to borrower risk rating upgrades.

    Findlay commented, “We are pleased to report that watch list loans have decreased for six consecutive quarters. Further, the semi-annual commercial loan portfolio reviews notably did not include any borrower downgrades. We are closely monitoring the impact of ongoing supply chain challenges, the impact of inflation and rising interest rates on our borrowers, and broader economic conditions. While we are pleased with our overall loan quality measures, we will continue to look for any signs of a potential recession. Finally, as we always have, we will maintain our disciplined credit approval process.”

    The company’s noninterest income decreased $848,000, or 7%, to $10.5 million for the second quarter of 2022, compared to $11.3 million for the second quarter of 2021. Noninterest income was positively impacted by elevated service charges on deposit accounts which increased by $361,000, or 14%, as a result of increased economic activity in the company's operating footprint. In addition, loan and service fee income increased by $153,000, or 5%; merchant card fee income increased by $138,000, or 18%; and wealth advisory fees increased by $126,000, or 6%. Driving the decrease was a reduction of $888,000 in bank owned life insurance income related to the company’s variable life insurance policies. These policies are tied to the equity markets and can be subject to volatility based on market performance. In addition, other income decreased $445,000, which was caused by a reduction in income recognized during the quarter related to various limited partnership investment holdings and other non-recurring items.

    Noninterest income decreased by $195,000, or 2%, on a linked quarter basis from $10.7 million. The linked quarter decrease resulted primarily from a decrease in other income of $648,000 and a decrease in mortgage banking income of $158,000, or 31%. The decrease in other income was driven by a decrease in income recognized during the quarter related to various limited partnership and low-income housing investment holdings. The decrease in mortgage banking income was caused by a decrease in volume due to a slowdown in demand as a result of the higher rate environment. Offsetting these decreases was an increase in loan and service fees of $306,000, or 11%, driven by increased interchange fee income, and an increase in interest rate swap fee income of $304,000.

    Noninterest income decreased by $2.7 million to $21.2 million for the six months ended June 30, 2022, compared to $23.9 million for the prior year six month period. Notably, wealth advisory fees improved by 6%, service charges on deposit accounts improved by 14%, loan and service fees improved by 5% and merchant card fee income improved by 24%. The decrease in noninterest income resulted primarily from reduced bank owned life insurance income of $1.7 million due to decline in the equity markets as well as $1 million decline in mortgage banking income due to the impact of rising interest rates on reduced mortgage loan origination volumes.

    The company’s noninterest expense increased by $1.3 million, or 5% to $27.9 million in the second quarter of 2022, compared to $26.6 million in the second quarter of 2021. Other expense increased $1.4 million driven by accruals for ongoing legal matters. In addition, corporate and business development expenses increased $734,000, or 105%, and net occupancy expense increased $261,000, or 18%. The increase in corporate and business development expenses was primarily a result of increased sponsorships and contributions, including $150,000 given in $10,000 increments to the 15 community foundations in our market footprint in recognition of Lake City Bank’s 150th anniversary. In addition, corporate and business development expense reflects higher advertising costs and increased client development expense. The increase to net occupancy expense was caused by budgeted repairs to company facilities. Salaries and employee benefits decreased by $964,000, or 6%, and professional fees decreased $425,000, or 23%. The decrease to salary and benefits was driven by reduced deferred compensation expense, which is tied to equity market performance, and the reduction in professional fees was a result of reduced legal expenses during the second quarter of 2022.

    On a linked quarter basis, noninterest expense increased by $944,000, or 4%, from $27.0 million. Salaries and employee benefits increased $406,000, or 3%, based on an increase in compensation for every hourly employee in the bank during the first quarter of 2022 in response to the competitive workforce environment and the impact of inflation on the employee base. Corporate and business development increased $214,000, or 18%, primarily driven by contributions associated with the company’s sesquicentennial celebration. FDIC insurance and other regulatory fees increased $180,000, or 41%, due to increased FDIC premiums caused by fluctuations in the bank's capital position and asset size. Offsetting these increases was a decrease in professional fees of $145,000, or 9%, due to a decrease in legal expense incurred during the quarter.

    Noninterest expense increased by $1.5 million, or 3%, for the six months ended June 30, 2022, from $53.4 million to $54.9 million. The increase was due primarily to an increase of $2.4 million in other expense, offset by decreases in salaries and benefits of $957,000 and a $743,000 reduction in professional fees. The company’s efficiency ratio was 47.2% for the second quarter of 2022, compared to 48.5% for the second quarter of 2021 and 48.5% for the linked first quarter of 2022.

    Information regarding Lakeland Financial Corporation may be accessed on the home page of its subsidiary, Lake City Bank, at lakecitybank.com. The company’s common stock is traded on the Nasdaq Global Select Market under “LKFN.” In addition to the results presented in accordance with generally accepted accounting principles in the United States, this earnings release contains certain non-GAAP financial measures. The company believes that providing non-GAAP financial measures provides investors with information useful to understanding the company’s financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including tangible common equity, tangible assets, 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 governmental monetary and fiscal policies and the impact on the current economic environment, including its effects on our customers, local economic conditions, our operations and vendors, and the responses of federal, state and local governmental authorities, as well as those identified in the company’s filings with the Securities and Exchange Commission, including the company’s Annual Report on Form 10-K and quarterly reports on Form 10-Q.

    LAKELAND FINANCIAL CORPORATION
    SECOND QUARTER 2022 FINANCIAL HIGHLIGHTS

     Three Months Ended Six Months Ended
    (Unaudited – Dollars in thousands, except per share data)June 30, March 31, June 30, June 30, June 30,
    END OF PERIOD BALANCES2022 2022 2021 2022 2021
    Assets$6,265,087  $6,572,259  $6,232,914  $6,265,087  $6,232,914 
    Deposits 5,621,584   5,820,623   5,394,664   5,621,584   5,394,664 
    Brokered Deposits 10,008   10,244   10,004   10,008   10,004 
    Core Deposits (1) 5,611,576   5,810,379   5,384,660   5,611,576   5,384,660 
    Loans 4,424,699   4,353,714   4,353,709   4,424,699   4,353,709 
    PPP Loans 5,219   12,506   194,212   5,219   194,212 
    Allowance for Credit Losses 67,523   67,526   71,713   67,523   71,713 
    Total Equity 562,063   609,102   677,471   562,063   677,471 
    Goodwill net of deferred tax assets 3,803   3,803   3,794   3,803   3,794 
    Tangible Common Equity (2) 558,260   605,299   673,677   558,260   673,677 
    AVERAGE BALANCES         
    Total Assets$6,460,888  $6,651,943  $6,171,427  $6,555,888  $6,030,178 
    Earning Assets 6,157,051   6,392,075   5,924,801   6,273,914   5,782,293 
    Investments 1,476,144   1,514,024   955,242   1,494,979   864,250 
    Loans 4,425,713   4,300,926   4,487,683   4,363,664   4,527,234 
    PPP Loans 9,665   17,555   348,026   13,588   375,226 
    Total Deposits 5,752,519   5,848,638   5,387,185   5,800,313   5,247,878 
    Interest Bearing Deposits 3,927,191   3,882,521   3,753,499   3,904,979   3,647,826 
    Interest Bearing Liabilities 3,981,587   3,957,547   3,828,499   3,969,634   3,723,580 
    Total Equity 583,324   682,692   663,993   632,733   658,690 
    INCOME STATEMENT DATA         
    Net Interest Income$48,678  $44,880  $43,661  $93,558  $87,340 
    Net Interest Income-Fully Tax Equivalent 50,079   46,148   44,452   96,227   88,818 
    Provision for Credit Losses 0   417   (1,700)  417   (223)
    Noninterest Income 10,492   10,687   11,340   21,179   23,897 
    Noninterest Expense 27,913   26,969   26,648   54,882   53,394 
    Net Income 25,673   23,642   24,348   49,315   47,331 
    Pretax Pre-Provision Earnings (2) 31,257   28,598   28,353   59,855   57,843 
    PER SHARE DATA         
    Basic Net Income Per Common Share$1.00  $0.93  $0.96  $1.93  $1.86 
    Diluted Net Income Per Common Share 1.00   0.92   0.95   1.92   1.85 
    Cash Dividends Declared Per Common Share 0.40   0.40   0.34   0.80   0.68 
    Dividend Payout 40.00%  43.48%  35.79%  41.67%  36.76%
    Book Value Per Common Share (equity per share issued) 22.01   23.86   26.59   22.01   26.59 
    Tangible Book Value Per Common Share (2) 21.87   23.71   26.45   21.87   26.45 
    Market Value – High 79.14   85.71   70.25   85.71   77.05 
    Market Value – Low 64.84   72.78
    		   57.02   64.84   53.03 
        
     Three Months Ended Six Months Ended
     June 30,
    2022    		 March 31,
    2022    		 June 30,
    2021    		 June 30,
    2022    		 June 30,
    2021
    Basic Weighted Average Common Shares Outstanding 25,527,896   25,515,271   25,473,497   25,521,618   25,465,621 
    Diluted Weighted Average Common Shares Outstanding 25,697,577   25,690,372   25,602,063   25,699,908   25,596,843 
    KEY RATIOS         
    Return on Average Assets 1.59%  1.44%  1.58%  1.52%  1.58%
    Return on Average Total Equity 17.65   14.04   14.71   15.72   14.49 
    Average Equity to Average Assets 9.03   10.26   10.76   9.65   10.92 
    Net Interest Margin 3.26   2.93   3.01   3.09   3.10 
    Net Interest Margin, Excluding PPP Loans (2) 3.26   2.90   2.95   3.08   3.00 
    Efficiency (Noninterest Expense / Net Interest Income plus Noninterest Income) 47.17   48.53   48.45   47.83   48.00 
    Tier 1 Leverage (3) 10.83   10.47   10.59   10.83   10.59 
    Tier 1 Risk-Based Capital (3) 13.90   13.90   13.79   13.90   13.79 
    Common Equity Tier 1 (CET1) (3) 13.90   13.90   13.79   13.90   13.79 
    Total Capital (3) 15.15   15.15   15.04   15.15   15.04 
    Tangible Capital (2) (3) 8.92   9.22   10.81   8.92   10.81 
    ASSET QUALITY         
    Loans Past Due 30 - 89 Days$784  $3,671  $673  $784  $673 
    Loans Past Due 90 Days or More 105   18   18   105   18 
    Non-accrual Loans 12,494   13,900   10,709   12,494   10,709 
    Nonperforming Loans (includes nonperforming TDRs) (4) 12,599   13,918   10,727   12,599   10,727 
    Other Real Estate Owned 196   196   1,079   196   1,079 
    Other Nonperforming Assets 0   17   0   0   0 
    Total Nonperforming Assets 12,795   14,131   11,806   12,795   11,806 
    Performing Troubled Debt Restructurings (4) 0   0   5,040   0   5,040 
    Nonperforming Troubled Debt Restructurings (included in nonperforming loans) (4) 0   0   5,938   0   5,938 
    Total Troubled Debt Restructurings (4) 0   0   10,978   0   10,978 
    Individually Analyzed Loans 19,986   24,554   19,277   19,986   19,277 
    Non-Individually Analyzed Watch List Loans 172,084   194,222   241,265   172,084   241,265 
    Total Individually Analyzed and Watch List Loans 192,070   218,776   260,542   192,070   260,542 
    Gross Charge Offs 98   740   267   838   503 
    Recoveries 95   76   1,836   171   1,981 
    Net Charge Offs/(Recoveries) 3   664   (1,569)  667   (1,478)
    Net Charge Offs/(Recoveries) to Average Loans 0.00%  0.06%  (0.14%)  0.03%  (0.07%)
        
     Three Months Ended Six Months Ended
     June 30,
    2022    		 March 31,
    2022    		 June 30,
    2021    		 June 30,
    2022    		 June 30,
    2021
    Credit Loss Reserve to Loans 1.53%  1.55%  1.65%  1.53%  1.65%
    Credit Loss Reserve to Loans, Excluding PPP Loans (2) 1.53%  1.56%  1.72%  1.53%  1.72%
    Credit Loss Reserve to Nonperforming Loans 535.97%  485.18%  668.51%  535.97%  668.51%
    Credit Loss Reserve to Nonperforming Loans and Performing TDRs (4) 535.97%  485.18%  454.82%  535.97%  454.82%
    Nonperforming Loans to Loans 0.28%  0.32%  0.25%  0.28%  0.25%
    Nonperforming Assets to Assets 0.20%  0.22%  0.19%  0.20%  0.19%
    Total Individually Analyzed and Watch List Loans to Total Loans 4.34%  5.03%  5.98%  4.34%  5.98%
    Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans (2) 4.35%  5.04%  6.26%  4.35%  6.26%
    OTHER DATA         
    Full Time Equivalent Employees 606   585   600   606   600 
    Offices 52   52   50   52   50 


    __________________________________________________
    (1)Core deposits equals deposits less brokered deposits
    (2)Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures"
    (3)Capital ratios for June 30, 2022 are preliminary until the Call Report is filed.
    (4)On April 1, 2022, the company adopted certain aspects of ASU 2022-02, whereby the company no longer recognizes or accounts for TDRs. Adoption of this standard was retrospective to January 1, 2022.

      

        
    CONSOLIDATED BALANCE SHEETS (in thousands, except share data)   
    ​June 30,
    2022    		 December 31,
    2021
    ​(Unaudited) ​
    ASSETS   
    Cash and due from banks$72,386  $51,830 
    Short-term investments 97,129   631,410 
    Total cash and cash equivalents 169,515   683,240 
    ​   
    Securities available-for-sale, at fair value 1,300,580   1,398,558 
    Securities held-to-maturity, at amortized cost (fair value of $113,350 and $0, respectively) 127,411   0 
    Real estate mortgage loans held-for-sale 2,646   7,470 
    Loans, net of allowance for credit losses of $67,523 and $67,773 4,357,176   4,220,068 
    Land, premises and equipment, net 58,601   59,309 
    Bank owned life insurance 97,599   97,652 
    Federal Reserve and Federal Home Loan Bank stock 12,840   13,772 
    Accrued interest receivable 20,733   17,674 
    Goodwill 4,970   4,970 
    Other assets 113,016   54,610 
    Total assets$6,265,087  $6,557,323 
    ​   
    ​   
    LIABILITIES   
    Noninterest bearing deposits$1,797,614  $1,895,481 
    Interest bearing deposits 3,823,970   3,839,926 
    Total deposits 5,621,584   5,735,407 
    ​   
    Borrowings - Federal Home Loan Bank advances 0   75,000 
    Accrued interest payable 1,948   2,619 
    Other liabilities 79,492   39,391 
    Total liabilities 5,703,024   5,852,417 
    ​   
    STOCKHOLDERS’ EQUITY   
    Common stock: 90,000,000 shares authorized, no par value   
    25,816,997 shares issued and 25,345,162 outstanding as of June 30, 2022   
    25,777,609 shares issued and 25,300,793 outstanding as of December 31, 2021 123,571   120,615 
    Retained earnings 612,026   583,134 
    Accumulated other comprehensive income (loss) (158,534)  16,093 
    Treasury stock at cost (471,835 shares as of June 30, 2022, 476,816 shares as of December 31, 2021) (15,089)  (15,025)
    Total stockholders’ equity 561,974   704,817 
    Noncontrolling interest 89   89 
    Total equity 562,063   704,906 
    Total liabilities and equity$6,265,087  $6,557,323 


     
    CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)
    ​Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
    ​ 2022   2021   2022   2021 
    NET INTEREST INCOME       
    Interest and fees on loans       
    Taxable$44,138  $42,342  $83,873  $85,803 
    Tax exempt 280   101   449   205 
    Interest and dividends on securities​ ​    
    Taxable 3,727   2,177   7,005   4,012 
    Tax exempt 4,994   2,870   9,600   5,359 
    Other interest income 483   135   729   223 
    Total interest income 53,622   47,625   101,656   95,602 
    ​​ ​ ​ ​
    Interest on deposits 4,890   3,890   7,971   8,108 
    Interest on borrowings​ ​    
    Short-term 0   0   0   7 
    Long-term 54   74   127   147 
    Total interest expense 4,944   3,964   8,098   8,262 
    ​​ ​ ​ ​
    NET INTEREST INCOME 48,678   43,661   93,558   87,340 
    ​​ ​ ​ ​
    Provision (Reversal) for credit losses 0   (1,700)  417   (223)
    ​​ ​ ​ ​
    NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 48,678   45,361   93,141   87,563 
    ​​ ​ ​ ​
    NONINTEREST INCOME       
    Wealth advisory fees 2,204   2,078   4,491   4,256 
    Investment brokerage fees 541   575   1,060   1,039 
    Service charges on deposit accounts 2,882   2,521   5,691   5,012 
    Loan and service fees 3,195   3,042   6,084   5,818 
    Merchant card fee income 904   766   1,719   1,388 
    Bank owned life insurance income (loss) (183)  705   (266)  1,461 
    Interest rate swap fee income 354   505   404   754 
    Mortgage banking income 351   415   860   1,788 
    Net securities gains 0   44   0   797 
    Other income 244   689   1,136   1,584 
    Total noninterest income 10,492   11,340   21,179   23,897 
    ​​ ​ ​ ​
    NONINTEREST EXPENSE       
    Salaries and employee benefits 14,798   15,762   29,190   30,147 
    Net occupancy expense 1,688   1,427   3,317   2,930 
    Equipment costs 1,459   1,318   2,870   2,763 
    Data processing fees and supplies 3,203   3,204   6,284   6,523 
    Corporate and business development 1,433   699   2,652   2,208 
    FDIC insurance and other regulatory fees 619   495   1,058   959 
    Professional fees 1,414   1,839   2,973   3,716 
    Other expense 3,299   1,904   6,538   4,148 
    Total noninterest expense 27,913   26,648   54,882   53,394 
    ​​ ​ ​ ​
    INCOME BEFORE INCOME TAX EXPENSE 31,257   30,053   59,438   58,066 
    Income tax expense 5,584   5,705   10,123   10,735 
    NET INCOME$25,673  $24,348  $49,315  $47,331 
    ​​ ​ ​ ​
     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
    BASIC WEIGHTED AVERAGE COMMON SHARES 25,527,896   25,473,497   25,521,618   25,465,621 
    ​​ ​    
    BASIC EARNINGS PER COMMON SHARE$1.00  $0.96  $1.93  $1.86 
    ​​ ​    
    DILUTED WEIGHTED AVERAGE COMMON SHARES 25,697,577   25,602,063   25,699,908   25,596,843 
    ​       
    DILUTED EARNINGS PER COMMON SHARE$1.00  $0.95  $1.92  $1.85 


    LAKELAND FINANCIAL CORPORATION
    LOAN DETAIL
    (unaudited, in thousands)

     June 30,
    2022    		 March 31,
    2022    		 June 30,
    2021
    Commercial and industrial loans:           
    Working capital lines of credit loans$726,798  16.4% $678,567  15.6% $616,401  14.1%
    Non-working capital loans 802,994  18.2   784,890  18.0   886,284  20.3 
    Total commercial and industrial loans 1,529,792  34.6   1,463,457  33.6   1,502,685  34.4 
                
    Commercial real estate and multi-family residential loans:           
    Construction and land development loans 418,284  9.4   399,618  9.2   402,583  9.2 
    Owner occupied loans 726,531  16.4   724,588  16.6   672,903  15.5 
    Nonowner occupied loans 635,477  14.4   619,163  14.2   606,096  13.9 
    Multifamily loans 173,875  3.9   214,003  4.9   300,449  6.9 
    Total commercial real estate and multi-family residential loans 1,954,167  44.1   1,957,372  44.9   1,982,031  45.5 
                
    Agri-business and agricultural loans:           
    Loans secured by farmland 194,248  4.4   164,252  3.8   167,314  3.8 
    Loans for agricultural production 193,654  4.4   259,417  6.0   179,338  4.1 
    Total agri-business and agricultural loans 387,902  8.8   423,669  9.8   346,652  7.9 
                
    Other commercial loans 93,157  2.1   78,412  1.8   85,356  2.0 
    Total commercial loans 3,965,018  89.6   3,922,910  90.1   3,916,724  89.8 
                
    Consumer 1-4 family mortgage loans:           
    Closed end first mortgage loans 190,988  4.3   180,448  4.1   169,653  3.9 
    Open end and junior lien loans 172,449  3.9   158,583  3.6   162,327  3.7 
    Residential construction and land development loans 10,075  0.2   11,135  0.3   12,505  0.3 
    Total consumer 1-4 family mortgage loans 373,512  8.4   350,166  8.0   344,485  7.9 
                
    Other consumer loans 88,683  2.0   83,395  1.9   100,771  2.3 
    Total consumer loans 462,195  10.4   433,561  9.9   445,256  10.2 
    Subtotal 4,427,213  100.0%  4,356,471  100.0%  4,361,980  100.0%
    Less: Allowance for credit losses (67,523)    (67,526)    (71,713) ​
    Net deferred loan fees (2,514)    (2,757)    (8,271) ​
    Loans, net$4,357,176    $4,286,188    $4,281,996  ​


    LAKELAND FINANCIAL CORPORATION
    DEPOSITS AND BORROWINGS
    (unaudited, in thousands)

     June 30,
    2022    		 March 31,
    2022    		 June 30,
    2021
    Noninterest bearing demand deposits$1,797,614 $1,880,418 $1,743,000
    Savings and transaction accounts:     
    Savings deposits 430,752  423,030  358,568
    Interest bearing demand deposits 2,631,304  2,702,912  2,333,758
    Time deposits:     
    Deposits of $100,000 or more 577,571  620,737  740,484
    Other time deposits 184,343  193,526  218,854
    Total deposits$5,621,584 $5,820,623 $5,394,664
    FHLB advances 0  75,000  75,000
    Total funding sources$5,621,584 $5,895,623 $5,469,664


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

      Three Months Ended June 30, 2022 Three Months Ended March 31, 2022 Three Months Ended June 30, 2021
    (fully tax equivalent basis, dollars in thousands) Average
    Balance    		 Interest
    Income    		 Yield (1)/
    Rate    		 Average
    Balance    		 Interest
    Income    		 Yield (1)/
    Rate    		 Average
    Balance    		 Interest
    Income    		 Yield (1)/
    Rate
    Earning Assets                  
    Loans:                  
    Taxable (2)(3) $4,396,333  $44,138 4.03% $4,278,894  $39,735 3.77% $4,474,844  $42,342 3.80%
    Tax exempt (1)  29,380   353 4.82   22,032   213 3.92   12,839   128 4.00 
    Investments: (1)                  
    Securities  1,476,144   10,049 2.73   1,514,024   9,108 2.44   955,242   5,811 2.44 
    Short-term investments  2,301   2 0.35   2,143   1 0.11   2,305   0 0.00 
    Interest bearing deposits  252,893   481 0.76   574,982   245 0.17   479,571   135 0.11 
    Total earning assets $6,157,051  $55,023 3.58% $6,392,075  $49,302 3.13% $5,924,801  $48,416 3.28%
    Less: Allowance for credit losses  (67,527)      (68,051)      (72,222)    
    Nonearning Assets                  
    Cash and due from banks  74,158       71,905       68,798     
    Premises and equipment  58,978       59,309       59,848     
    Other nonearning assets  238,228       196,705       190,202     
    Total assets $6,460,888      $6,651,943      $6,171,427     
                       
    Interest Bearing Liabilities                  
    Savings deposits $425,102  $81 0.08% $408,314  $75 0.07% $359,484  $71 0.08%
    Interest bearing checking accounts  2,710,674   3,784 0.56   2,642,003   1,862 0.29   2,428,524   1,700 0.28 
    Time deposits:                  
    In denominations under $100,000  189,538   307 0.65   198,257   346 0.71   224,025   545 0.98 
    In denominations over $100,000  601,877   718 0.48   633,947   798 0.51   741,466   1,574 0.85 
    Miscellaneous short-term borrowings  0   0 0.00   26   0 0.00   0   0 0.00 
    Long-term borrowings  54,396   54 0.40   75,000   73 0.40   75,000   74 0.40 
    Total interest bearing liabilities $3,981,587  $4,944 0.50% $3,957,547  $3,154 0.32% $3,828,499  $3,964 0.42%
    Noninterest Bearing Liabilities                  
    Demand deposits  1,825,327       1,966,117       1,633,686     
    Other liabilities  70,650       45,587       45,249     
    Stockholders' Equity  583,324       682,692       663,993     
    Total liabilities and stockholders' equity $6,460,888      $6,651,943      $6,171,427     
    Interest Margin Recap                  
    Interest income/average earning assets    55,023 3.58     49,302 3.13     48,416 3.28 
    Interest expense/average earning assets    4,944 0.32     3,154 0.20     3,964 0.27 
    Net interest income and margin   $50,079 3.26%   $46,148 2.93%   $44,452 3.01%


    (1)Tax exempt income was converted to a fully taxable equivalent basis at a 21 percent tax rate. The tax equivalent rate for tax exempt loans and tax exempt securities acquired after January 1, 1983 included the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) adjustment applicable to nondeductible interest expenses. Taxable equivalent basis adjustments were $1.40 million, $1.27 million and $791,000 in the three-month periods ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively.
    (2)Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $180,000, $461,000, and $2.76 million for the three months ended June 30, 2022, March 31, 2022 and June 30, 2021, respectively. All other loan fees were immaterial in relation to total taxable loan interest income for the periods presented.
    (3)Nonaccrual loans are included in the average balance of taxable loans.

    Reconciliation of Non-GAAP Financial Measures

    The allowance for credit losses to loans, excluding PPP loans, and total individually analyzed and watch list loans to total loans, excluding PPP loans, are non-GAAP ratios that management believes are important because they provide better comparability to prior periods. PPP loans are fully guaranteed by the SBA and have not been allocated for within the allowance for credit losses.

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

     June 30,
    2022    		 March 31,
    2022    		 June 30,
    2021
    Total Loans$4,424,699  $4,353,714  $4,353,709 
    Less: PPP Loans 5,219   12,506   194,212 
    Total Loans, Excluding PPP Loans 4,419,480   4,341,208   4,159,497 
          
    Allowance for Credit Losses$67,523  $67,526  $71,713 
          
    Credit Loss Reserve to Total Loans 1.53%  1.55%  1.65%
    Credit Loss Reserve to Total Loans, Excluding PPP Loans 1.53%  1.56%  1.72%
          
    Total Individually Analyzed and Watch List Loans$192,070  $218,776  $260,542 
          
    Total Individually Analyzed and Watch List Loans to Total Loans 4.34%  5.03%  5.98%
    Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans 4.35%  5.04%  6.26%

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

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

     Three Months Ended Six Months Ended
     June 30,
    2022    		 March 31,
    2022    		 June 30,
    2021    		 June 30,
    2022    		 June 30,
    2021
    Total Equity 562,063   609,102   677,471  $562,063  $677,471 
    Less: Goodwill (4,970)  (4,970)  (4,970)  (4,970)  (4,970)
    Plus: DTA related to goodwill 1,167   1,167   1,176   1,167   1,176 
    Tangible Common Equity 558,260   605,299   673,677   558,260   673,677 
    AOCI Market Value Adjustment

    		 157,625   92,751   (23,618)  157,625   (23,618)
    Adjusted Tangible Common Equity 715,885   698,050   650,059   715,885   650,059 
              
    Assets$6,265,087  $6,572,259  $6,232,914  $6,265,087  $6,232,914 
    Less: Goodwill (4,970)  (4,970)  (4,970)  (4,970)  (4,970)
    Plus: DTA related to goodwill 1,167   1,167   1,176   1,167   1,176 
    Tangible Assets 6,261,284   6,568,456   6,229,120   6,261,284   6,229,120 
    Market Value Adjustment 199,525   117,406   (29,896)  199,525   (29,896)
    Adjusted Tangible Assets 6,460,809   6,685,862   6,199,224   6,460,809   6,199,224 
              
    Ending common shares issued 25,527,896   25,527,896   25,473,437   25,527,896   25,473,437 
              
    Tangible Book Value Per Common Share$21.87  $23.71  $26.45  $21.87  $26.45 
    Tangible Common Equity/Tangible Assets 8.92%  9.22%  10.81%  8.92%  10.81%
    Adjusted Tangible Common Equity/

    Adjusted Tangible Assets    		 11.08%  10.44%  10.49%  11.08%  10.49%
              
    Net Interest Income$48,678  $44,880  $43,661  $93,558  $87,340 
    Plus: Noninterest income 10,492   10,687   11,340   21,179   23,897 
    Minus: Noninterest expense (27,913)  (26,969)  (26,648)  (54,882)  (53,394)
    Pretax Pre-Provision Earnings$31,257  $28,598  $28,353  $59,855  $57,843 

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

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

    Impact of Paycheck Protection Program on Net Interest Margin FTE

     Three Months Ended  Six Months Ended
     June 30,
    2022    		 March 31,
    2022    		 June 30,
    2021    		  June 30,
    2022    		 June 30,
    2021
    Total Average Earnings Assets 6,157,051  $6,392,075  $5,924,801   $6,273,914  $5,782,293 
    Less: Average Balance of PPP Loans (9,665)  (17,555)  (348,026)   (13,588)  (375,226)
    Total Adjusted Earning Assets 6,147,386   6,374,520   5,576,775    6,260,326   5,407,067 
               
    Total Interest Income FTE$55,023  $49,302  $48,416   $104,325  $97,080 
    Less: PPP Loan Income (204)  (505)  (3,652)   (710)  (8,818)
    Total Adjusted Interest Income FTE 54,819   48,797   44,764    103,615   88,262 
               
    Adjusted Earning Asset Yield, net of PPP Impact 3.58%  3.10%  3.22%   3.34%  3.29%
               
    Total Average Interest Bearing Liabilities$3,981,587  $3,957,547  $3,828,499   $3,969,634  $3,723,580 
    Less: Average Balance of PPP Loans (9,665)  (17,555)  (348,026)   (13,588)  (375,226)
    Total Adjusted Interest Bearing Liabilities 3,971,922   3,939,992   3,480,473    3,956,046   3,348,354 
               
    Total Interest Expense FTE$4,944  $3,154  $3,964   $8,098  $8,262 
    Less: PPP Cost of Funds (6)  (11)  (162)   (17)  (465)
    Total Adjusted Interest Expense FTE 4,938   3,143   3,802    8,081   7,797 
               
    Adjusted Cost of Funds, net of PPP Impact 0.32%  0.20%  0.27%   0.26%  0.29%
               
    Net Interest Margin FTE, net of PPP Impact 3.26%  2.90%  2.95%   3.08%  3.00%

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


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