• Lakeland Financial Reports Record Quarterly Performance; Year-to-Date Record Net Income Improves by 9% to $77.8 million

    المصدر: Nasdaq GlobeNewswire / 25 أكتوبر 2022 08:00:53   America/New_York

    WARSAW, Ind., Oct. 25, 2022 (GLOBE NEWSWIRE) -- Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported record third quarter net income of $28.5 million for the three months ended September 30, 2022, an increase of 18%, or $4.4 million, versus $24.1 million for the third quarter of 2021. Diluted earnings per share increased 18% to $1.11 for the third quarter of 2022, versus $0.94 for the third quarter of 2021. Both the net income and diluted earnings per share represent the highest quarterly performance in the company’s 150-year history. On a linked quarter basis, net income increased 11%, or $2.9 million, from the second quarter of 2022 in which the company had net income of $25.7 million, or $1.00 diluted earnings per share. Pretax pre-provision earnings, which is a non-GAAP financial measure, were $34.8 million for the third quarter of 2022, an increase of 13%, or $3.9 million, from $30.9 million for the third quarter of 2021. On a linked quarter basis, pretax pre-provision earnings increased 11%, or $3.5 million, from $31.3 million for the second quarter of 2022.

    The company further reported record net income of $77.8 million for the nine months ended September 30, 2022, versus $71.5 million for the comparable period of 2021, an increase of 9%, or $6.4 million. Diluted earnings per share also increased 9% to $3.03 for the nine months ended September 30, 2022, versus $2.79 for the comparable period of 2021. Pretax pre-provision earnings were $94.6 million for the nine months ended September 30, 2022, versus $88.7 million for the comparable period of 2021, an increase of 7%, or $5.9 million.

    David M. Findlay, President and Chief Executive Officer stated, “As we continue to celebrate our 150th anniversary, the Lake City Bank team has delivered exceptional financial performance. Throughout the year, we have taken the time to reflect upon our success over the last 150 years and strengthen our commitment to the future. We are an organization that is focused on the culture and operating discipline that got us this far, while at the same time ensuring that it evolves for the future.”

    Findlay added, “As we move through 2022, we are very proud of our performance through the last nine months. We are a community bank committed to the economic growth and vitality of our Indiana markets, and we are pleased that we are experiencing strong organic loan growth. That is the best indicator of our support of our commercial and retail clients, and our teams are doing a great job delivering on that commitment.”

    Financial Performance – Third Quarter 2022

    Third Quarter 2022 versus Third Quarter 2021 highlights:

    • Diluted earnings per share increase of $0.17 per share, or 18%, from $0.94 to $1.11
    • Return on average equity of 19.39%, compared to 13.90%
    • Return on average assets of 1.80%, compared to 1.56%
    • Core loan growth, which excludes PPP loans, of $340.7 million, or 8%
    • Core deposit growth of $250.5 million, or 5%
    • Net interest income increase of $6.8 million, or 15%
    • Net interest margin excluding PPP loans expanded by 62 basis points to 3.57%, compared to 2.95%
    • Revenue growth of $5.8 million, or 10%
    • Provision expense of $0 compared to $1.3 million
    • Noninterest expense increase of $1.9 million, or 7%
    • Dividend per share increase of 18%, or $0.06 per share, to $0.40 from $0.34
    • Watch list loans as a percentage of total loans excluding PPP loans decreased to a historical low of 3.64% from 6.23%
    • Total risk-based capital ratio of 15.29%, compared to 15.44%
    • Tangible capital ratio of 8.20% compared to 10.92%
    • Tangible capital ratio excluding AOCI of 11.22% compared to 10.75%

    Third Quarter 2022 versus Second Quarter 2022 highlights:

    • Diluted earnings per share increase of $0.11 per share, or 11%, from $1.00 to $1.11
    • Return on average equity of 19.39%, compared to 17.65%
    • Return on average assets of 1.80%, compared to 1.59%
    • Core loan growth, which excludes PPP loans, of $68.8 million, or 2%
    • Core deposit growth of $42.5 million, or 1%
    • Net interest income increase of $3.8 million, or 8%
    • Net interest margin excluding PPP loans expanded by 31 basis points to 3.57%, compared to 3.26%
    • Revenue growth of $3.5 million, or 6%
    • Provision expense of $0 for both periods
    • Noninterest expense was unchanged at $27.9 million for both periods
    • Watch list loans as a percentage of total loans excluding PPP loans decrease to a historical low of 3.64% from 4.35%
    • Total risk-based capital of 15.29%, compared to 15.15%
    • Tangible capital ratio of 8.20% compared to 8.92%
    • Tangible capital ratio excluding AOCI of 11.22% compared to 11.08%

    Return on average total equity for the third quarter of 2022 was 19.39%, compared to 13.90% in the third quarter of 2021 and 17.65% in the linked second quarter of 2022. Return on average assets for the third quarter of 2022 was 1.80%, compared to 1.56% in the third quarter of 2021 and 1.59% in the linked second quarter of 2022. The company’s total capital as a percent of risk-weighted assets was 15.29% at September 30, 2022, compared to 15.44% at September 30, 2021 and 15.15% at June 30, 2022.

    The company’s tangible common equity to tangible assets ratio, which is a non-GAAP financial measure, was 8.20% at September 30, 2022, compared to 10.92% at September 30, 2021 and 8.92% at June 30, 2022. Tangible equity and tangible assets have been impacted by declines in the market value of the company’s available-for-sale investment securities portfolio. The market value decline was a result of the yield curve steepening caused by the tightening of monetary policy by the Federal Reserve Board beginning in March of 2022 to combat inflation. Unrealized losses from available-for-sale investment securities were $256.1 million at September 30, 2022, compared to unrealized gains of $15.5 million at September 30, 2021 and unrealized losses of $182.4 million at June 30, 2022. When excluding the impact of accumulated other comprehensive income (loss) on tangible common equity, the company's adjusted tangible common equity to adjusted tangible assets ratio, which is a non-GAAP financial measure, was 11.22% at September 30, 2022 compared to 10.75% at September 30, 2021 and 11.08% at June 30, 2022.

    As announced on October 11, 2022, the board of directors approved a cash dividend for the third quarter of $0.40 per share, payable on November 7, 2022, to shareholders of record as of October 25, 2022. The third quarter dividend per share of $0.40 is unchanged from the dividend per share paid for the second quarter of 2022 and reflects an 18% increase from the dividend rate one year ago.

    “Our record profitability has contributed to healthy increases in regulatory capital and provides support for the growth in our dividend to shareholders. Our fortress balance sheet and strong capital foundation provide capacity for continued organic loan growth and balance sheet expansion over the long term,” Findlay added.

    Average total loans, excluding PPP loans, were $4.41 billion for the third quarter of 2022 compared to $4.21 billion for the third quarter of 2021, an increase of $201.5 million, or 5%. On a linked quarter basis, average total loans, excluding PPP loans, decreased by $3.3 million, or less than 1%.

    Average total loans were $4.42 billion in the third quarter of 2022, an increase of $61.8 million, or 1%, from $4.35 billion for the third quarter 2021 and $4.43 billion for the second quarter of 2022, a decrease of $9.8 million, or less than 1%. Total PPP average loans decreased $139.7 million to $3.2 million during the third quarter of 2022, compared to $142.9 million average PPP loans during the third quarter of 2021.

    Total loans, excluding PPP loans, increased by $340.7 million, or 8%, as of September 30, 2022 compared to September 30, 2021. On a linked quarter basis, total loans, excluding PPP loans, were $4.49 billion as of September 30, 2022, an increase of $68.8 million, or 2%, as compared to June 30, 2022. Total loans outstanding increased by $250.4 million, or 6%, from $4.24 billion as of September 30, 2021, to $4.49 billion as of September 30, 2022, due primarily to organic loan growth of $340.7 million and offset by PPP loan forgiveness of $90.3 million. PPP loans outstanding were $1.6 million as of September 30, 2022, $5.2 million as of June 30, 2022, and $91.9 million as of September 30, 2021.

    Commercial loan originations for the quarter included $477 million in loan originations offset by approximately $431 million in commercial loan paydowns. Commercial line of credit usage decreased from 43% in the second quarter of the year to 42% in the third quarter, and 41% in the third quarter of 2021. Available commercial lines of credit expanded by $547 million, or 14% as compared to a year ago, and line usage improved by $271 million or 17% for the same period.

    Findlay commented, “Both our commercial and consumer loan portfolios experienced good growth in the quarter. While commercial line usage decreased slightly, we have experienced a healthy expansion in overall line availability, driven by traditional working capital demand in our commercial and industrial client base and continued development activity in the commercial real estate markets.”

    Average total deposits were $5.64 billion for the third quarter of 2022, an increase of $294.2 million, or 6%, versus $5.34 billion for the third quarter of 2021. On a linked quarter basis, average total deposits decreased by $114.1 million, or 2%. Total deposits increased $249.5 million, or 5%, from $5.41 billion as of September 30, 2021, to $5.66 billion as of September 30, 2022. On a linked quarter basis, total deposits increased by $42.5 million, or 1%, from $5.62 billion as of June 30, 2022.

    Core deposits, which exclude brokered deposits, increased by $250.5 million, or 5%, from $5.40 billion at September 30, 2021 to $5.65 billion at September 30, 2022. This increase was due to growth of public funds deposits of $191.5 million, or 15%, and growth of retail deposits of $86.2 million, or 4%, and was offset by contraction of commercial deposits of $27.2 million, or 1%. On a linked quarter basis, core deposits increased by $42.5 million, or 1%, at September 30, 2022 compared to June 30, 2022. The linked quarter increase resulted from growth of commercial deposits of $24.0 million, or 1%, and growth of public funds deposits of $22.9 million, or 2% and was offset by contraction of retail deposits of $4.4 million, or less than 1%.

    Findlay stated, “Excess liquidity inflows stabilized during the quarter, and we have started to see slowing of deposit growth during 2022. Importantly, demand deposits continue to represent 32% of total deposits. Commercial, retail, and public funds deposits continue to contribute to core deposit growth with a history of high deposit retention of relationships.”

    Total investment securities were $1.32 billion at September 30, 2022, an increase of $80.3 million, or 6%, as compared to $1.24 billion at September 30, 2021. Investment securities declined by $ 108.0 million, as compared to $1.43 billion at June 30, 2022. Investment securities represented 21% of total assets on September 30, 2022, compared to 20% on September 30, 2021, and 23% on June 30, 2022. The company deployed $35 million of cash flows from the investment securities portfolio to fund loan growth during the quarter and expects the investment securities portfolio as a percentage of total assets to decrease over time back towards historical levels of 14%.

    The company’s net interest margin increased 44 basis points to 3.57% for the third quarter of 2022, compared to 3.13% for the third quarter of 2021. The increased margin in the third quarter of 2022 compared to the prior year period was due to higher yields on loans and partially offset by a higher cost of funds. The higher yields were driven by a series of increases made to the target Federal Funds rate by the Federal Reserve Board beginning in March of 2022, to combat inflation. These rate increases raised the target Federal Funds rate by a cumulative 300 basis points and increased the target Federal Funds rate range from a zero-bound range of 0.00% - 0.25% prior to the commencement of the Federal Reserve Board's tightening policy to a range of 3.00 - 3.25% at September 30, 2022.

    Total PPP loan income recognized for the third quarter of 2022 was $58,000 compared to $3.9 million for the third quarter of 2021 and $204,000 during the second quarter 2022. PPP interest and fees had a nominal impact on the third quarter 2022 net interest margin compared to an 18 basis point contribution to net interest margin for the third quarter 2021. Net interest margin excluding PPP interest and fees was 3.57% for the third quarter of 2022, up 62 basis points from 2.95% for the third quarter of 2021. Earning asset yields increased 87 basis points from 3.37% for the third quarter of 2021 to 4.24% for the third quarter of 2022. Offsetting the increased yield on earning assets was an increase to the company's cost of funds of 43 basis points. Interest expense as a percentage of earning assets increased to 0.67% for the three months ended September 30, 2022, from 0.24% for the three months ended September 30, 2021.

    Linked quarter net interest margin was 31 basis points higher at 3.57% for the third quarter of 2022, compared to 3.26% for the second quarter of 2022. Earning asset yields increased by 66 basis points over the same period. Interest expense as a percentage of earning assets increased 35 basis points for the three months ended September 30, 2022, from 0.32% for the three months ended June 30, 2022.

    “Our asset sensitive balance sheet has contributed to the net interest margin expansion during 2022. Variable rate loans represent 67% of our loan portfolio and the rising rate environment has contributed to the growth in loan income. As deposit rates have not risen in conjunction with the overall rate increases, we have been very pleased with our net interest margin expansion. While further Federal Reserve Bank tightening will continue to benefit net interest margin, we expect to see deposit rates increase as repricing occurs,” Findlay noted.

    Net interest income increased by $6.8 million, or 15%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. On a linked quarter basis, net interest income increased $3.8 million, or 8%, from the second quarter of 2022. Net interest income increased by $13.0 million, or 10%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 due primarily to an increase in securities income of $9.8 million and an increase in loan income of $8.3 million which were offset by an increase in deposit expense of $6.5 million.

    The company recorded no provision for credit losses in the third quarter of 2022, compared to provision expense of $1.3 million in the third quarter of 2021 and no provision for the linked second quarter of 2022. Provision expense was $417,000 for the nine months ended September 30, 2022, compared to provision expense of $1.1 million for the prior nine months ended September 30, 2021. The company’s credit loss reserve to total loans was 1.50% at September 30, 2022 versus 1.72% at September 30, 2021 and 1.53% at June 30, 2022. The company’s credit loss reserve to total loans excluding PPP loans, which is a non-GAAP financial measure, was 1.50% at September 30, 2022 versus 1.76% at September 30, 2021 and 1.53% at June 30, 2022.

    Net charge offs in the third quarter of 2022 were $284,000 versus net recoveries of $35,000 in the third quarter of 2021 and net charge offs of $3,000 during the linked second quarter of 2022. Annualized net charge offs to average loans were 0.03% for the third quarter of 2022, 0.00% for the third quarter of 2021, and 0.00% for the linked second quarter of 2022. Net charge offs were $951,000 for the nine months ended September 30, 2022 compared to net recoveries of $1.5 million in the nine month period ended September 30, 2021. Annualized net charge offs (recoveries) as a percentage of average loans was 0.03% for the nine months ended September 30, 2022 compared to (0.05%) for the nine months ended September 30, 2021.

    Nonperforming assets decreased $21.2 million, or 68%, to $10.1 million as of September 30, 2022 versus $31.3 million as of September 30, 2021. On a linked quarter basis, nonperforming assets decreased $2.7 million, or 21%, versus the $12.8 million reported as of June 30, 2022. The ratio of nonperforming assets to total assets at September 30, 2022 decreased to 0.16% from 0.50% at September 30, 2021 and decreased from 0.20% at June 30, 2022 due primarily to loan paydowns. Total individually analyzed and watch list loans decreased by $95.4 million, or 37%, to $163.2 million at September 30, 2022 versus $258.5 million as of September 30, 2021. On a linked quarter basis, total individually analyzed and watch list loans decreased by $28.9 million, or 15%, from $192.1 million at June 30, 2022, due primarily to borrower risk rating upgrades and loan paydowns. Watch list loans as a percentage of total loans excluding PPP loans decreased to a historic low of 3.64% as of September 30, 2022, compared to 6.23% at September 30, 2021 and 4.35% at June 30, 2022.

    Findlay commented, “Every asset quality metric continued to improve during the third quarter. Watch list and nonperforming loans are at historic lows that we believe are reflective of the general strength of our borrowers’ balance sheets and operating performance. While we have seen signs of economic slowdown in some sectors, they are not apparent in these asset quality metrics. We will continue to monitor economic conditions in our markets and approach the future with the same conservative discipline that we have always shown. Our borrowers have demonstrated resilience in weathering the continued challenges of labor availability, persistent inflation, and supply chain constraints.”   

    The company’s noninterest income decreased $950,000, or 9%, to $10.2 million for the third quarter of 2022, compared to $11.1 million for the third quarter of 2021. Noninterest income was positively impacted by increases in fee-based lines of business due to fee generating volume for the respective service lines. In particular service charges on deposit accounts increased $234,000, or 8%, investment brokerage fees increased $130,000, or 25% and merchant fee income increased $103,000 or 12%. Wealth advisory fees declined by $118,000, or 5% and were negatively impacted by market value declines of 15% in trust assets since December 31, 2021.

    Other income for the third quarter of 2022 declined by $606,000 compared to the third quarter of 2021 due to income declines in various limited partnership investment holdings and other non-recurring items. In addition, bank owned life insurance income decreased by $586,000. This decrease is largely attributable to the company’s variable life insurance policies which are tied to the equity markets and have declined in value by $234,000 during the third quarter of 2022, compared to an increase of $284,000 during the third quarter of 2021 and a decrease of $495,000 on a linked quarter basis. The valuation changes to the variable life insurance policies are offset by similar changes to the deferred compensation expense that is recognized in salary and employee benefits.

    Noninterest income for the third quarter of 2022 decreased by $328,000, or 3%, on a linked quarter basis from $10.5 million. The linked quarter decrease resulted primarily from a decrease in mortgage banking income of $440,000 and a decrease in interest rate swap fee income of $267,000. The decrease in mortgage banking income was caused by a slowdown in mortgage demand because of the higher interest rate environment. Offsetting these decreases was an increase in bank owned life insurance income of $237,000 and an increase to other income of $179,000.  

    Noninterest income decreased by $3.7 million, or 10%, to $31.3 million for the nine months ended September 30, 2022, compared to $35.0 million for the comparable nine-month period of 2021. Notably, noninterest income increased across a variety of fee-based service lines by a cumulative $1.9 million, including improvement in wealth advisory fees by 2%, investment brokerage fees by 10%, service charges on deposit accounts by 12%, loan and service fees by 3% and merchant card fee income by 19%.

    Market value declines impacted the overall decrease in noninterest income. Bank owned life insurance income for the nine months ended September 30, 2022, decreased by $2.3 million primarily due to declines in the market value of variable life insurance policies of $1.1 million compared to market value gains of $1.1 million in the corresponding period in 2021. In addition, across these same periods, other income decreased by $1.1 million, mortgage banking income decreased by $985,000, gains on securities sales decreased by $797,000 and interest rate swap fee income decreased by $442,000. Excluding the impact of the variable life insurance policy market value changes, noninterest income was $32.5 million for the nine months ended September 30, 2022, compared to $34.0 million for the nine months ended September 2021, a decline of $1.5 million, or 4%.

    The company’s noninterest expense increased by $1.9 million, or 7%, to $27.9 million in the third quarter of 2022, compared to $26.0 million in the third quarter of 2021. Other expense increased $1.1 million driven by accruals for ongoing legal matters. In addition, corporate and business development expenses increased $426,000 and salaries and employee benefits increased $420,000. The increase in corporate and business development expenses was primarily a result of increased client development activities, advertising costs and increased contributions to our communities. The increase to salaries and employee benefits was driven primarily by increased salaries and wages of $415,000, increases to performance-based compensation expense of $366,000, and increased employee health insurance expense of $113,000, offset by declines in deferred compensation expense of $519,000. Operating expenses excluding the effects of one-time legal settlement accruals of $1.1 million and market value declines of $240,000 from the deferred compensation program, were $27.0 million for the three months ended September 30, 2022, compared to $25.7 million for 2021, an increase of $1.3 million, or 5%.

    On a linked quarter basis, noninterest expense decreased by $19,000, or less than 1%, to $27.9 million in the third quarter of 2022. On a linked quarter basis, noninterest expense was flat at $27.9 million for both the third and second quarters of 2022. Other expense over these periods increased $425,000, primarily as a result of share-based compensation payments to the Board of Directors of $437,000, which are paid semi-annually in January and July. Offsetting this increase were decreases in net occupancy expense of $212,000, FDIC and other regulatory fees of $161,000 and salaries and employee benefits of $148,000. The decrease to salary and employee benefits resulted from a $662,000 decrease to performance-based compensation, offset by an increase to deferred compensation of $261,000 and increase to salary and wages of $199,000. Operating expenses excluding the effects of one-time legal settlement accruals and market value from the deferred compensation program, were $27.0 million for the three months ended September 30, 2022, compared to $27.2 million for 2021, a decrease of $230,000 or 1%.

    Noninterest expense increased by $3.4 million, or 4%, for the nine months ended September 30, 2022, to $82.8 million compared to $79.4 million for the corresponding period of 2021. The increase was due primarily to an increase of $3.4 million in other expense caused by accruals for ongoing legal matters. Corporate and business development expense increased $870,000, caused by increased advertising, charitable contributions, including contributions associated with the company’s sesquicentennial celebration, and other corporate development activities. Net occupancy increased $450,000, driven by budgeted repairs and ongoing upgrades to existing facilities and the opening of a new branch in Elkhart. Offsetting these increases are decreases in salaries and employee benefits of $537,000 and professional fees of $531,000 due to a decrease in legal expense. The decline in salaries and benefits was impacted by a decline in deferred compensation of $2.4 million, offset by increases in salaries and wages of $758,000, increased performance-based compensation of $499,000, and increased health insurance expense of $329,000. Operating expenses excluding the effects of non-recurring legal settlement accruals of $3.0 million and market value declines from the deferred compensation program of $1.2 million, were $81.0 million for the nine months ended September 30, 2022, compared to $78.2 million for the corresponding period in 2021, an increase of $2.8 million, or 4%.

    The company’s efficiency ratio was 44.5% for the third quarter of 2022, compared to 45.7% for the third quarter of 2021 and 47.2% for the linked second 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, adjusted tangible common equity, adjusted tangible assets, tangible book value per share, tangible common equity to tangible assets ratio, adjusted tangible common equity to adjusted tangible assets, and pretax pre-provision earnings and credit loss reserve to total loans excluding PPP loans. 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
    THIRD QUARTER 2022 FINANCIAL HIGHLIGHTS

     Three Months Ended Nine Months Ended
    (Unaudited – Dollars in thousands, except per share data)September 30, June 30, September 30, September 30, September 30,
    END OF PERIOD BALANCES 2022   2022   2021   2022   2021 
    Assets$6,288,406  $6,265,087  $6,222,916  $6,288,406  $6,222,916 
    Deposits 5,664,133   5,621,584   5,414,638   5,664,133   5,414,638 
    Brokered Deposits 10,017   10,008   11,012   10,017   11,012 
    Core Deposits (1) 5,654,116   5,611,576   5,403,626   5,654,116   5,403,626 
    Loans 4,489,835   4,424,699   4,239,453   4,489,835   4,239,453 
    PPP Loans 1,603   5,219   91,897   1,603   91,897 
    Allowance for Credit Losses 67,239   67,523   73,048   67,239   73,048 
    Total Equity 519,220   562,063   683,202   519,220   683,202 
    Goodwill net of deferred tax assets 3,803   3,803   3,794   3,803   3,794 
    Tangible Common Equity (2) 515,417   558,260   679,408   515,417   679,408 
    AVERAGE BALANCES         
    Total Assets$6,298,358  $6,460,888  $6,153,334  $6,469,102  $6,071,682 
    Earning Assets 5,991,630   6,157,051   5,909,834   6,178,787   5,825,275 
    Investments 1,429,186   1,476,144   1,201,657   1,472,807   977,955 
    Loans 4,415,944   4,425,713   4,354,104   4,381,284   4,468,891 
    PPP Loans 3,232   9,665   142,917   10,098   296,938 
    Total Deposits 5,638,469   5,752,519   5,344,272   5,745,771   5,280,361 
    Interest Bearing Deposits 3,821,699   3,927,191   3,662,707   3,876,913   3,652,839 
    Interest Bearing Liabilities 3,821,699   3,981,587   3,737,707   3,919,779   3,728,339 
    Total Equity 583,679   583,324   688,252   616,202   668,652 
    INCOME STATEMENT DATA         
    Net Interest Income$52,492  $48,678  $45,741  $146,050  $133,081 
    Net Interest Income-Fully Tax Equivalent 53,945   50,079   46,717   150,171   135,535 
    Provision for Credit Losses 0   0   1,300   417   1,077 
    Noninterest Income 10,164   10,492   11,114   31,343   35,011 
    Noninterest Expense 27,894   27,913   25,967   82,776   79,361 
    Net Income 28,525   25,673   24,119   77,840   71,450 
    Pretax Pre-Provision Earnings (2) 34,762   31,257   30,888   94,617   88,731 
    PER SHARE DATA         
    Basic Net Income Per Common Share$1.12  $1.00  $0.95  $3.05  $2.81 
    Diluted Net Income Per Common Share 1.11   1.00   0.94   3.03   2.79 
    Cash Dividends Declared Per Common Share 0.40   0.40   0.34   1.20   1.02 
    Dividend Payout 36.04%  40.00%  36.17%  39.60%  36.56%
    Book Value Per Common Share (equity per share issued) 20.33   22.01   26.80   20.33   26.80 
    Tangible Book Value Per Common Share (2) 20.18   21.87   26.66   20.18   26.66 
    Market Value – High 81.27   79.14   73.04   85.71   77.05 
                        
                        
     Three Months Ended Nine Months Ended
     September 30,
    2022    		 June 30,
    2022    		 September 30,
    2021    		 September 30,
    2022    		 September 30,
    2021
    Market Value – Low 64.05   64.84
    		   56.06   64.05   53.03 
    Basic Weighted Average Common Shares Outstanding 25,533,832   25,527,896   25,479,654   25,525,734   25,472,185 
    Diluted Weighted Average Common Shares Outstanding 25,734,613   25,697,577   25,635,288   25,710,088   25,608,655 
    KEY RATIOS         
    Return on Average Assets 1.80%  1.59%  1.56%  1.61%  1.57%
    Return on Average Total Equity 19.39   17.65   13.90   16.89   14.29 
    Average Equity to Average Assets 9.27   9.03   11.19   9.53   11.01 
    Net Interest Margin 3.57   3.26   3.13   3.25   3.11 
    Net Interest Margin, Excluding PPP Loans (2) 3.57   3.26   2.95   3.24   2.98 
    Efficiency  (Noninterest Expense / Net Interest Income plus Noninterest Income) 44.52   47.17   45.67   46.66   47.21 
    Tier 1 Leverage (3) 11.40   10.83   10.91   11.40   10.91 
    Tier 1 Risk-Based Capital (3) 14.04   13.90   14.18   14.04   14.18 
    Common Equity Tier 1 (CET1) (3) 14.04   13.90   14.18   14.04   14.18 
    Total Capital (3) 15.29   15.15   15.44   15.29   15.44 
    Tangible Capital (2) 8.20   8.92   10.92   8.20   10.92 
    Adjusted Tangible Capital (2) 11.22   11.08   10.75   11.22   10.75 
    ASSET QUALITY         
    Loans Past Due 30 - 89 Days$921  $784  $1,245  $921  $1,245 
    Loans Past Due 90 Days or More 25   105   18   25   18 
    Non-accrual Loans 9,892   12,494   30,978   9,892   30,978 
    Nonperforming Loans (includes nonperforming TDRs) (4) 9,917   12,599   30,996   9,917   30,996 
    Other Real Estate Owned 196   196   316   196   316 
    Other Nonperforming Assets 0   0   20   0   20 
    Total Nonperforming Assets 10,113   12,795   31,332   10,113   31,332 
    Performing Troubled Debt Restructurings (4) 0   0   4,973   0   4,973 
    Nonperforming Troubled Debt Restructurings (included in nonperforming loans) (4) 0   0   6,093   0   6,093 
    Total Troubled Debt Restructurings (4) 0   0   11,066   0   11,066 
    Individually Analyzed Loans 17,313   19,986   41,148   17,313   41,148 
    Non-Individually Analyzed Watch List Loans 145,839   172,084   217,386   145,839   217,386 
    Total Individually Analyzed and Watch List Loans 163,152   192,070   258,534   163,152   258,534 
    Gross Charge Offs 373   98   90   1,211   593 
    Recoveries 89   95   125   260   2,106 
                        
                        
     Three Months Ended Nine Months Ended
     September 30,
    2022    		 June 30,
    2022    		 September 30,
    2021    		 September 30,
    2022    		 September 30,
    2021
    Net Charge Offs/(Recoveries) 284   3   (35)  951   (1,513)
    Net Charge Offs/(Recoveries) to Average Loans 0.03%  0.00%  0.00%  0.03%  (0.05%)
    Credit Loss Reserve to Loans 1.50%  1.53%  1.72%  1.50%  1.72%
    Credit Loss Reserve to Loans, Excluding PPP Loans (2) 1.50%  1.53%  1.76%  1.50%  1.76%
    Credit Loss Reserve to Nonperforming Loans 678.01%  535.97%  235.67%  678.01%  235.67%
    Credit Loss Reserve to Nonperforming Loans and Performing TDRs (4) 678.01%  535.97%  203.08%  678.01%  203.08%
    Nonperforming Loans to Loans 0.22%  0.28%  0.73%  0.22%  0.73%
    Nonperforming Assets to Assets 0.16%  0.20%  0.50%  0.16%  0.50%
    Total Individually Analyzed and Watch List Loans to Total Loans 3.63%  4.34%  6.10%  3.63%  6.10%
    Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans (2) 3.64%  4.35%  6.23%  3.64%  6.23%
    OTHER DATA         
    Full Time Equivalent Employees 600   606   592   600   592 
    Offices 52   52   51   52   51 


    __________________________________________________
    (1)Core deposits equals deposits less brokered deposits.
    (2)Non-GAAP financial measure - see "Reconciliation of Non-GAAP Financial Measures".
    (3)Capital ratios for September 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)   
    ​September 30,
    2022    		 December 31,
    2021
    ​(Unaudited) ​
    ASSETS   
    Cash and due from banks$76,498  $51,830 
    Short-term investments 128,304   631,410 
    Total cash and cash equivalents 204,802   683,240 
    ​   
    Securities available-for-sale, at fair value 1,192,186   1,398,558 
    Securities held-to-maturity, at amortized cost (fair value of $103,326 and $0, respectively) 127,820   0 
    Real estate mortgage loans held-for-sale 1,097   7,470 
    Loans, net of allowance for credit losses of $67,239 and $67,773 4,422,596   4,220,068 
    Land, premises and equipment, net 58,486   59,309 
    Bank owned life insurance 97,702   97,652 
    Federal Reserve and Federal Home Loan Bank stock 12,840   13,772 
    Accrued interest receivable 22,822   17,674 
    Goodwill 4,970   4,970 
    Other assets 143,085   54,610 
    Total assets$6,288,406  $6,557,323 
    ​   
    ​   
    LIABILITIES   
    Noninterest bearing deposits$1,832,328  $1,895,481 
    Interest bearing deposits 3,831,805   3,839,926 
    Total deposits 5,664,133   5,735,407 
    ​   
    Borrowings - Federal Home Loan Bank advances 0   75,000 
    Accrued interest payable 2,200   2,619 
    Other liabilities 102,853   39,391 
    Total liabilities 5,769,186   5,852,417 
    ​   
    STOCKHOLDERS’ EQUITY   
    Common stock: 90,000,000 shares authorized, no par value   
    25,825,127 shares issued and 25,350,134 outstanding as of September 30, 2022   
    25,777,609 shares issued and 25,300,793 outstanding as of December 31, 2021 125,832   120,615 
    Retained earnings 630,337   583,134 
    Accumulated other comprehensive income (loss) (221,729)  16,093 
    Treasury stock at cost (474,993 shares as of September 30, 2022, 476,816 shares as of December 31, 2021) (15,309)  (15,025)
    Total stockholders’ equity 519,131   704,817 
    Noncontrolling interest 89   89 
    Total equity 519,220   704,906 
    Total liabilities and equity$6,288,406  $6,557,323 


     
    CONSOLIDATED STATEMENTS OF INCOME (unaudited - in thousands, except share and per share data)
    ​Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,
    ​ 2022   2021   2022   2021 
    NET INTEREST INCOME        
    Interest and fees on loans        
    Taxable$52,707  $43,025  $136,580  $128,828 
    Tax exempt 462   119   911   324 
    Interest and dividends on securities​ ​     
    Taxable 3,608   2,470   10,613   6,482 
    Tax exempt 5,009   3,556   14,609   8,915 
    Other interest income 772   125   1,501   348 
    Total interest income 62,558   49,295   164,214   144,897 
    ​​ ​ ​ ​ 
    Interest on deposits 10,066   3,479   18,037   11,587 
    Interest on borrowings​ ​     
    Short-term 0   0   0   7 
    Long-term 0   75   127   222 
    Total interest expense 10,066   3,554   18,164   11,816 
    ​​ ​ ​ ​ 
    NET INTEREST INCOME 52,492   45,741   146,050   133,081 
    ​​ ​ ​ ​ 
    Provision for credit losses 0   1,300   417   1,077 
    ​​ ​ ​ ​ 
    NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 52,492   44,441   145,633   132,004 
    ​​ ​ ​ ​ 
    NONINTEREST INCOME        
    Wealth advisory fees 2,059   2,177   6,550   6,433 
    Investment brokerage fees 651   521   1,711   1,560 
    Service charges on deposit accounts 2,990   2,756   8,681   7,768 
    Loan and service fees 3,047   3,005   9,131   8,823 
    Merchant card fee income 941   838   2,660   2,226 
    Bank owned life insurance income (loss) 54   640   (212)  2,101 
    Interest rate swap fee income 88   180   492   934 
    Mortgage banking income (loss) (89)  (32)  771   1,756 
    Net securities gains 0   0   0   797 
    Other income 423   1,029   1,559   2,613 
    Total noninterest income 10,164   11,114   31,343   35,011 
    ​​ ​ ​ ​ 
    NONINTEREST EXPENSE        
    Salaries and employee benefits 14,650   14,230   43,840   44,377 
    Net occupancy expense 1,476   1,413   4,793   4,343 
    Equipment costs 1,380   1,371   4,250   4,134 
    Data processing fees and supplies 3,226   3,169   9,510   9,692 
    Corporate and business development 1,426   1,000   4,078   3,208 
    FDIC insurance and other regulatory fees 458   748   1,516   1,707 
    Professional fees 1,554   1,342   4,527   5,058 
    Other expense 3,724   2,694   10,262   6,842 
    Total noninterest expense 27,894   25,967   82,776   79,361 
    ​​ ​ ​ ​ 
    INCOME BEFORE INCOME TAX EXPENSE 34,762   29,588   94,200   87,654 
    Income tax expense 6,237   5,469   16,360   16,204 
    NET INCOME$28,525  $24,119  $77,840  $71,450 
             
    ​​ ​ ​ ​ 
     Three Months Ended
    September 30,    		 Nine Months Ended
    September 30,    		 
      2022   2021   2022   2021 
    BASIC WEIGHTED AVERAGE COMMON SHARES 25,533,832   25,479,654   25,525,734   25,472,185 
    ​​ ​     
    BASIC EARNINGS PER COMMON SHARE$1.12  $0.95  $3.05  $2.81 
    ​​ ​     
    DILUTED WEIGHTED AVERAGE COMMON SHARES 25,734,613   25,635,288   25,710,088   25,608,655 
    ​        
    DILUTED EARNINGS PER COMMON SHARE$1.11  $0.94  $3.03  $2.79 
                    

    LAKELAND FINANCIAL CORPORATION
    LOAN DETAIL
    (unaudited, in thousands)

     September 30,
    2022    		 June 30,
    2022    		 September 30,
    2021
    Commercial and industrial loans:           
    Working capital lines of credit loans$684,281  15.2% $726,798  16.4% $659,166  15.5%
    Non-working capital loans 827,014  18.4   802,994  18.2   782,618  18.5 
    Total commercial and industrial loans 1,511,295  33.6   1,529,792  34.6   1,441,784  34.0 
                
    Commercial real estate and multi-family residential loans:           
    Construction and land development loans 468,288  10.4   418,284  9.4   378,716  8.9 
    Owner occupied loans 741,293  16.5   726,531  16.4   740,836  17.4 
    Nonowner occupied loans 655,975  14.6   635,477  14.4   582,019  13.7 
    Multifamily loans 191,212  4.3   173,875  3.9   252,983  6.0 
    Total commercial real estate and multi-family residential loans 2,056,768  45.8   1,954,167  44.1   1,954,554  46.0 
                
    Agri-business and agricultural loans:           
    Loans secured by farmland 165,328  3.7   194,248  4.4   152,099  3.5 
    Loans for agricultural production 176,738  3.9   193,654  4.4   171,981  4.1 
    Total agri-business and agricultural loans 342,066  7.6   387,902  8.8   324,080  7.6 
                
    Other commercial loans 100,831  2.2   93,157  2.1   83,595  2.0 
    Total commercial loans 4,010,960  89.2   3,965,018  89.6   3,804,013  89.6 
                
    Consumer 1-4 family mortgage loans:           
    Closed end first mortgage loans 196,077  4.4   190,988  4.3   173,689  4.1 
    Open end and junior lien loans 173,419  3.9   172,449  3.9   161,941  3.8 
    Residential construction and land development loans 18,775  0.4   10,075  0.2   12,542  0.3 
    Total consumer 1-4 family mortgage loans 388,271  8.7   373,512  8.4   348,172  8.2 
                
    Other consumer loans 93,026  2.1   88,683  2.0   92,169  2.2 
    Total consumer loans 481,297  10.8   462,195  10.4   440,341  10.4 
    Subtotal 4,492,257  100.0%  4,427,213  100.0%  4,244,354  100.0%
    Less:  Allowance for credit losses (67,239)    (67,523)    (73,048) ​
    Net deferred loan fees (2,422)    (2,514)    (4,901) ​
    Loans, net$4,422,596    $4,357,176    $4,166,405  ​


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

     September 30,
    2022    		 June 30,
    2022    		 September 30,
    2021
    Noninterest bearing demand deposits$1,832,328 $1,797,614 $1,762,021
    Savings and transaction accounts:     
    Savings deposits 428,718  430,752  375,993
    Interest bearing demand deposits 2,652,783  2,631,304  2,411,722
    Time deposits:     
    Deposits of $100,000 or more 573,923  577,571  658,050
    Other time deposits 176,381  184,343  206,852
    Total deposits$5,664,133 $5,621,584 $5,414,638
    FHLB advances 0  0  75,000
    Total funding sources$5,664,133 $5,621,584 $5,489,638


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

      Three Months Ended September 30, 2022 Three Months Ended June 30, 2022 Three Months Ended September 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) $4,376,724  $52,707 4.78% $4,396,333  $44,138 4.03% $4,339,792  $43,025 3.93%
    Tax exempt (1)  39,220   583 5.90   29,380   353 4.82   14,312   150 4.16 
    Investments: (1)                  
    Securities  1,429,186   9,949 2.76   1,476,144   10,049 2.73   1,201,657   6,971 2.30 
    Short-term investments  2,307   9 1.55   2,301   2 0.35   2,304   0 0.00 
    Interest bearing deposits  144,193   763 2.10   252,893   481 0.76   351,769   125 0.14 
    Total earning assets $5,991,630  $64,011 4.24% $6,157,051  $55,023 3.58% $5,909,834  $50,271 3.37%
    Less:  Allowance for credit losses  (67,481)      (67,527)      (72,157)    
    Nonearning Assets                  
    Cash and due from banks  70,672       74,158       67,715     
    Premises and equipment  58,796       58,978       59,824     
    Other nonearning assets  244,741       238,228       188,118     
    Total assets $6,298,358      $6,460,888      $6,153,334     
                       
    Interest Bearing Liabilities                  
    Savings deposits $430,428  $85 0.08% $425,102  $81 0.08% $369,191  $71 0.08%
    Interest bearing checking accounts  2,623,747   8,809 1.33   2,710,674   3,784 0.56   2,390,462   1,712 0.28 
    Time deposits:                  
    In denominations under $100,000  180,774   298 0.65   189,538   307 0.65   211,911   457 0.86 
    In denominations over $100,000  586,750   874 0.59   601,877   718 0.48   691,143   1,239 0.71 
    Miscellaneous short-term borrowings  0   0 0.00   0   0 0.00   0   0 0.00 
    Long-term borrowings  0   0 0.00   54,396   54 0.40   75,000   75 0.40 
    Total interest bearing liabilities $3,821,699  $10,066 1.04% $3,981,587  $4,944 0.50% $3,737,707  $3,554 0.38%
    Noninterest Bearing Liabilities                  
    Demand deposits  1,816,770       1,825,327       1,681,565     
    Other liabilities  76,210       70,650       45,810     
    Stockholders' Equity  583,679       583,324       688,252     
    Total liabilities and stockholders' equity $6,298,358      $6,460,888      $6,153,334     
    Interest Margin Recap                  
    Interest income/average earning assets    64,011 4.24%    55,023 3.58%    50,271 3.37%
    Interest expense/average earning assets    10,066 0.67     4,944 0.32     3,554 0.24 
    Net interest income and margin   $53,945 3.57%   $50,079 3.26%   $46,717 3.13%


    (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 $1.45 million, $1.40 million and $976,000 in the three-month periods ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.
    (2)Loan fees are included as taxable loan interest income. Net loan fees attributable to PPP loans were $50,000, $180,000, and $3.57 million for the three months ended September 30, 2022, June 30, 2022 and September 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).

     September 30,
    2022    		 June 30,
    2022    		 September 30,
    2021
    Total Loans$4,489,835  $4,424,699  $4,239,453 
    Less: PPP Loans 1,603   5,219   91,897 
    Total Loans, Excluding PPP Loans 4,488,232   4,419,480   4,147,556 
          
    Allowance for Credit Losses$67,239  $67,523  $73,048 
          
    Credit Loss Reserve to Total Loans 1.50%  1.53%  1.72%
    Credit Loss Reserve to Total Loans, Excluding PPP Loans 1.50%  1.53%  1.76%
          
    Total Individually Analyzed and Watch List Loans$163,152  $192,070  $258,534 
          
    Total Individually Analyzed and Watch List Loans to Total Loans 3.63%  4.34%  6.10%
    Total Individually Analyzed and Watch List Loans to Total Loans, Excluding PPP Loans 3.64%  4.35%  6.23%

    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 common equity remove the fair market value adjustment impact of the available-for-sale 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 Nine Months Ended
     September 30,
    2022    		 June 30,
    2022    		 September 30,
    2021    		 September 30,
    2022    		 September 30,
    2021
    Total Equity 519,220  $562,063  $683,202  $519,220  $683,202 
    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 515,417   558,260   679,408   515,417   679,408 
    AOCI Market Value Adjustment 220,847   157,625   (12,234)  220,847   (12,234)
    Adjusted Tangible Common Equity 736,264   715,885   667,174   736,264   667,174 
              
    Assets$6,288,406  $6,265,087  $6,222,916  $6,288,406  $6,222,916 
    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 6,284,603   6,261,284   6,219,122   6,284,603   6,219,122 
    Market Value Adjustment 279,553   199,525   (15,486)  279,553   (15,486)
    Adjusted Tangible Assets 6,564,156   6,460,809   6,203,636   6,564,156   6,203,636 
              
    Ending Common Shares Issued 25,536,026   25,527,896   25,486,032   25,536,026   25,486,032 
              
    Tangible Book Value Per Common Share$20.18  $21.87  $26.66  $20.18  $26.66 
              
    Tangible Common Equity/Tangible Assets 8.20%  8.92%  10.92%  8.20%  10.92%
    Adjusted Tangible Common Equity/Adjusted Tangible Assets 11.22%  11.08%  10.75%  11.22%  10.75%
              
    Net Interest Income$52,492  $48,678  $45,741  $146,050  $133,081 
    Plus:  Noninterest income 10,164   10,492   11,114   31,343   35,011 
    Minus:  Noninterest expense (27,894)  (27,913)  (25,967)  (82,776)  (79,361)
              
    Pretax Pre-Provision Earnings$34,762  $31,257  $30,888  $94,617  $88,731 

    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
     September 30,
    2022    		 June 30,
    2022    		 September 30,
    2021    		 September 30,
    2022    		 September 30,
    2021
    Total Average Earnings Assets$5,991,630  $6,157,051  $5,909,834  $6,178,787  $5,825,275 
    Less: Average Balance of PPP Loans (3,232)  (9,665)  (142,917)  (10,098)  (296,938)
    Total Adjusted Earning Assets 5,988,398   6,147,386   5,766,917   6,168,689   5,528,337 
              
    Total Interest Income FTE$64,011  $55,023  $50,271  $168,335  $147,351 
    Less: PPP Loan Income (58)  (204)  (3,946)  (767)  (12,764)
    Total Adjusted Interest Income FTE 63,953   54,819   46,325   167,568   134,587 
              
    Adjusted Earning Asset Yield, net of PPP Impact 4.24%  3.58%  3.19%  3.63%  3.25%
              
    Total Average Interest Bearing Liabilities$3,821,699  $3,981,587  $3,737,707  $3,919,779  $3,728,339 
    Less: Average Balance of PPP Loans (3,232)  (9,665)  (142,917)  (10,098)  (296,938)
    Total Adjusted Interest Bearing Liabilities 3,818,467   3,971,922   3,594,790   3,909,681   3,431,401 
              
    Total Interest Expense FTE$10,066  $4,944  $3,554  $18,164  $11,816 
    Less: PPP Cost of Funds (2)  (6)  (90)  (19)  (555)
    Total Adjusted Interest Expense FTE 10,064   4,938   3,464   18,145   11,261 
              
    Adjusted Cost of Funds, net of PPP Impact 0.67%  0.32%  0.24%  0.39%  0.27%
              
    Net Interest Margin FTE, net of PPP Impact 3.57%  3.26%  2.95%  3.24%  2.98%


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


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