Lake City Bank Touts Record Performance
The parent company of Warsaw-based Lake City Bank is reporting record profit for 2014. Warsaw-based Lakeland Financial Corp. (Nasdaq: LKFN) says net income was $43.8 million, compared to $38.8 million a year earlier. Chief Executive Officer David Findlay cites "robust loan growth" as a contributing factor in the results. January 26, 2015
WARSAW, Ind. - Lakeland Financial Corporation (Nasdaq:LKFN), parent company of Lake City Bank, today reported record high net income of $43.8 million for 2014. Net income increased 13% from $38.8 million for 2013. Diluted net income per common share increased 12% to $2.61 for 2014 versus $2.33 for 2013. This per share performance also represents a record level for the company and its shareholders since the company's founding in 1872.
The company further reported quarterly net income of $11.1 million for the fourth quarter of 2014, an increase of 5%, versus $10.6 million for the fourth quarter of 2013. Diluted net income per share was $0.66 for the fourth quarter of 2014, an increase of 5%, versus $0.63 for the comparable period of 2013.
David M. Findlay, President and CEO, commented, "Our success in 2014 was clearly driven by our ability to grow the loan portfolio and increase our market share of deposits. The most effective way for us to contribute to the economic strength of our communities is through this loan growth. Our record results reflect the efforts of the entire Lake City Bank team as we were able to successfully grow our balance sheet and significantly increase profitability. Our organic growth strategy is focused on building client relationships one at a time in our Indiana communities, and it is clearly working."
Return on average total equity for 2014 improved to 12.77% from 12.50% in 2013. Return on average assets for 2014 increased to 1.32% up from 1.29% in 2013. The company's tangible common equity to tangible assets ratio was 10.41% at December 31, 2014, compared to 10.05% at December 31, 2013 and 10.40% at September 30, 2014.
As previously announced, the board of directors approved a cash dividend for the fourth quarter of $0.21 per share, payable on February 5, 2015, to shareholders of record as of January 25, 2015. The quarterly dividend represents an 11% increase over the $0.19 quarterly dividends paid for each quarter of 2013 and for the first quarter of 2014.
The company experienced strong loan growth during the year as average total loans increased $307.3 million, or 13%, to $2.65 billion from $2.34 billion in 2013. Total loans outstanding grew $227.2 million, or 9%, from $2.54 billion as of December 31, 2013 to $2.76 billion as of December 31, 2014. On a linked quarter basis, total loans grew $60.4 million or 2% from $2.70 billion as of September 30, 2014. Average total loans for the fourth quarter of 2014 were $2.73 billion, an increase of $270.9 million, or 11%, versus $2.46 billion for the comparable period in 2013. On a linked quarter basis, average total loans increased $46.6 million, or 2%, from $2.68 billion for the third quarter of 2014 to $2.73 billion for the fourth quarter of 2014.
Total average deposits also experienced strong growth during the year and increased by $292.6 million, or 12% to $2.80 billion from $2.51 billion. Total deposits grew $327.1 million, or 13%, from $2.55 billion as of December 31, 2013 to $2.87 billion as of December 31, 2014. Average total deposits for the fourth quarter of 2014 were $2.94 billion versus $2.58 billion for the fourth quarter of 2013, an increase of 14%. On a linked quarter basis, average total deposits increased $119.1 million, or 4%.
Findlay added, "We're particularly proud that our robust loan growth was significantly funded by great core deposit growth in 2014. Our retail and commercial banking teams worked well together as this organic deposit growth was generated throughout our footprint and highlights our focus on growing relationships."
The company's net interest margin expanded by six basis points during 2014 to 3.32% for 2014 compared to 3.26% in 2013, although the net interest margin did decline sequentially in each quarter during 2014. The net interest margin improved for the year despite downward pressure on loan yields and the prolonged low interest rate environment. The net interest margin expansion was attributable primarily to declines in deposit rates and overall funding costs and improvement in the investment portfolio yields, which more than offset declining loan yields. The company's net interest margin was 3.28% in the fourth quarter of 2014, compared to 3.33% for the fourth quarter of 2013. The net interest margin was 3.31% in the linked third quarter of 2014, down three basis points due to declining loan yields and a one basis point increase in cost of funds.
Nonperforming assets decreased $10.4 million, or 43%, to $14.0 million as of December 31, 2014 versus $24.4 million as of December 31, 2013. On a linked quarter basis, nonperforming assets were $1.0 million, or 6%, lower than the $15.0 million reported as of September 30, 2014. The decrease in nonperforming assets during the fourth quarter of 2014 primarily resulted from payments received as well as charge-offs recognized on nonperforming loans. The ratio of nonperforming assets to total assets at December 31, 2014, was 0.41% versus 0.77% at December 31, 2013 and 0.45% at September 30, 2014. Net charge-offs to average loans were 0.10% for 2014 compared to 0.11% for 2013. Net charge offs totaled $2.6 million in 2014 compared to $2.5 million in 2013. Net charge-offs totaled $125,000 in the fourth quarter of 2014 versus net charge-offs of $1.0 million during the fourth quarter of 2013 and net recoveries of $782,000 during the linked third quarter of 2014.
For the second consecutive year, the company did not record a provision for loan losses. The absence of a provision for loan losses was generally driven by continued stabilization and improvement in key loan quality metrics, including lower levels of nonperforming loans, appropriate reserve coverage of nonperforming loans, continuing signs of stabilization of 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 December 31, 2014 was $46.3 million compared to $48.8 million as of December 31, 2013 and $46.4 million as of September 30, 2014. The allowance for loan losses represented 1.67% of total loans as of December 31, 2014 versus 1.92% at December 31, 2013 and 1.72% as of September 30, 2014. As a result of improved asset quality during 2014, the allowance for loan losses as a percentage of nonperforming loans increased to 338% as of December 31, 2014, versus 204% as of December 31, 2013, and 314% as of September 30, 2014.
The company's noninterest income was $30.1 million in 2014, compared to $30.7 million in 2013. Declines in mortgage banking income and investment brokerage fees, more than offset growth in deposit fees, loan fees and other income during 2014. Noninterest income was $7.2 million for the fourth quarter of 2014 versus $7.9 million in the comparable quarter of 2013 and the linked quarter of 2014. Year-over-year, quarterly noninterest income was positively impacted by a $264,000 increase in service charges on deposit accounts driven by higher deposit fees. Offsetting the increase was a $656,000 decrease in investment brokerage fees due to lower production volumes.
The company's noninterest expense increased by $3.4 million, to $66.2 million in 2014 compared to $62.8 million in 2013. During 2014, the increase in noninterest expense was driven primarily by increases in salary and employee benefit costs and data processing fees. Noninterest expense increased $104,000, or 1%, to $16.6 million in the fourth quarter of 2014 versus $16.5 million in the comparable quarter of 2013. On a linked quarter basis, nonin