Lakeland Boasts Record ProfitPosted: Updated:
The parent company of Warsaw-based Lake City Bank is reporting record net income of $11.3 million dollars for the second quarter of 2014, compared to $9.2 during the same quarter last year. Lakeland Financial Corp. (Nasdaq: LKFN) Chief Executive Officer David Findlay says he's pleased with the performance and predicts strong growth will continue. July 25, 2014
WARSAW, Ind. -- Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record net income of $11.3 million for the second quarter of 2014, an increase of 22% versus $9.2 million for the second quarter of 2013. Diluted net income per common share increased 21% to $0.68 versus $0.56 for the comparable period of 2013. This per share performance also represents a record level for the company.
The company further reported net income of $21.2 million for the six months ended June 30, 2014 versus $18.5 million for the comparable period of 2013, an increase of 15% and a record performance for the company over a six-month period. Diluted net income per common share increased 13% to $1.27 for the six months ended June 30, 2014 versus $1.12 for the comparable period of 2013. This per share performance also represents a record level for the company.
David M. Findlay, President and Chief Executive Officer, commented, "We continue to deliver strong operating results for shareholders while at the same time taking care of clients. Our disciplined business model remains focused on strategically growing the bank in our existing Indiana communities. We are extremely pleased with this record performance and believe we are in a strong position to continue this growth strategy in our Indiana footprint."
Return on average total equity for the first six months of 2014 improved to 12.85% from 12.17% in the prior year period. Return on average assets for the first six months of 2014 increased to 1.32% up from 1.26% in the same period of 2013. The company's tangible common equity to tangible assets ratio was 9.96% at June 30, 2014, compared to 10.25% at June 30, 2013 and 10.18% at March 31, 2014. As previously announced, the board of directors approved a cash dividend for the second quarter of $0.21 per share, payable on August 5, 2014, to shareholders of record as of July 25, 2014. The quarterly dividend represents an 11% increase over the quarterly dividends paid for each quarter of 2013 and from the first quarter of 2014.The dividend yield is currently 2.15% based on the closing price of our common stock on June 30, 2014.
Total loans outstanding grew $338.6 million, or 15%, from $2.33 billion as of June 30, 2013 to $2.67 billion as of June 30, 2014. Average total loans for the second quarter of 2014 were $2.65 billion, an increase of $341.2 million, or 15% versus $2.30 billion for the comparable period in 2013. On a linked quarter basis, average total loans increased $107.1 million, or 4%, from $2.54 billion for the first quarter of 2014 to $2.65 billion for the second quarter of 2014.
Findlay observed, "The best way for Lake City Bank to support economic expansion in our Indiana markets is to continue to make loans to local businesses. We've grown loans by $138 million through the first six months of 2014 and are encouraged by the improving strength of the economy in our markets. This loan growth continues to be geographically diverse as we have experienced ongoing growth in both mature and newer markets in Indiana."
Total deposits grew $344 million, or 14%, from $2.48 billion as of June 30, 2013 to $2.83 billion as of June 30, 2014. Average total deposits for the quarter ended June 30, 2014 were $2.79 billion versus $2.49 billion for the second quarter of 2013, an increase of 12%. On a linked quarter basis, average total deposits increased $145.6 million, or 6%.
The company's net interest margin was 3.34% in the second quarter of 2014, up from 3.20% for the second quarter of 2013. The net interest margin was 3.38% in the linked first quarter of 2014. The net interest margin for the six months ended June 30, 2014 was 3.35% compared to 3.19% in the prior year six month period. Despite downward pressure on loan yields and the prolonged low interest rate environment, the company improved its net interest margin during the six months ended June 30, 2014 compared to the same period in 2013. The net interest margin expansion is attributable to declines in deposit rates and overall funding costs and improvement in the investment portfolio yields which have more than offset declining loan yields.
Nonperforming assets decreased 31% to $15.2 million as of June 30, 2014 versus $21.8 million as of June 30, 2013. On a linked quarter basis, nonperforming assets were 7% lower than the $16.3 million reported on March 31, 2014. The decrease in nonperforming assets during the second quarter of 2014 primarily resulted from payments including payoffs received on a number of nonperforming loans. The ratio of nonperforming assets to total assets at June 30, 2014, was 0.45% versus 0.73% at both June 30, 2013 and 0.50% at March 31, 2014. Net charge-offs totaled $532,000 in the second quarter of 2014 versus $183,000 during the second quarter of 2013 and $2.7 million during the linked first quarter of 2014. Net charge-offs to average loans were 0.25% for the six months ended June 30, 2014 compared to 0.07% for the same period in 2013.
For the sixth consecutive quarter, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by the stabilization and improvement in key loan quality metrics, including lower levels of nonperforming loans, appropriate reserve coverage of nonperforming loans, continuing signs of stabilization in the economic conditions of the company's markets and sustained signs of improvement in its borrowers' performance and future prospects. The company's allowance for loan losses as of June 30, 2014 was $45.6 million compared to $50.6 million as of June 30, 2013 and $46.1 million as of March 31, 2014. The allowance for loan losses represented 1.71% of total loans as of June 30, 2014 versus 2.17% at June 30, 2013 and 1.79% as of March 31, 2014. Further, the allowance for loan losses as a percentage of nonperforming loans increased to 324% as of June 30, 2014, versus 234% as of June 30, 2013, and 306% as of March 31, 2014.
Findlay noted, "The growth of our commercial loan portfolio, coupled with our continued stable asset quality metrics, is having a positive contribution to our profitability. As a result, our net interest income grew by 16% during the first half of 2014. While the low interest rate environment will continue to pressure net interest margin, we believe that we are well positioned to continue our profitable growth for our shareholders."
The company's noninterest income was unchanged at $7.6 million for the second quarter of each of 2014 and 2013. Year-over-year, quarterly noninterest income was positively impacted by a $398,000 increase in other income, driven primarily by $304,000 in swap fees. Offsetting the increase was a $359,000 decrease in mortgage banking income during the quarter, which was driven by lower mortgage production volumes due to higher mortgage rates. Noninterest income was $15.0 million for the six months ended June 30, 2014, also unchanged from the same period in 2013. Growth in swap fees, deposit fees and wealth management income offset the decline in mortgage banking income which declined by $803,000 for the first half of the year compared to the prior period.
The company's noninterest expense increased $993,000, or 7%, to $16.1 million in the second quarter of 2014 versus $15.1 million in the comparable quarter of 2013. On a linked quarter basis, noninterest expense decreased by $706,000 from $16.8 million in the first quarter of 2014. Salaries and employee benefits increased by $576,000 in the three month period ended Ju