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Lakeland Financial Corp. Reports Operating Results (10-Q)

November 04, 2010 | About:
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10qk

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Lakeland Financial Corp. (LKFN) filed Quarterly Report for the period ended 2010-09-30.

Lakeland Financial Corp. has a market cap of $311.5 million; its shares were traded at around $19.5 with a P/E ratio of 15.6 and P/S ratio of 2.4. The dividend yield of Lakeland Financial Corp. stocks is 3.2%. Lakeland Financial Corp. had an annual average earning growth of 3% over the past 10 years.LKFN is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management.

Highlight of Business Operations:

Lakeland Financial Corporation is the holding company for Lake City Bank. The Company is headquartered in Warsaw, Indiana and operates 43 offices in 12 counties in Northern Indiana and a loan production office in Indianapolis, Indiana. The Company earned $18.8 million for the first nine months of 2010, versus $13.6 million in the same period of 2009, an increase of 38.0%. Net income was positively impacted by an $11.5 million increase in net interest income. Offsetting this positive impact was an increase of $2.5 million in the provision for loan losses, a decrease of $453,000 in noninterest income and a $165,000 increase in noninterest expense. Basic earnings per common share for the first nine months of 2010 were $0.97 per share, versus $0.94 per share for the first nine months of 2009. Diluted earnings per common share reflect the potential dilutive impact of stock options, stock awards and warrants. Diluted earnings per common share for the first nine months of 2010 were $0.96 per share, versus $0.94 for the first nine months of 2009. Basic and diluted earnings per share for the first nine months of 2010 and 2009 were impacted by $3.2 million and $1.9 million, respectively, in dividends and accretion of discount on preferred stock. Earnings per share for the first nine months of 2010 compared to the comparable period in 2009 were also impacted by the Company s issuance of 3.6 million common shares during the fourth quarter of 2009.

Net income for the third quarter of 2010 was $6.5 million, an increase of 23.8% versus $5.3 million for the comparable period of 2009. The increase was driven by a $2.0 million increase in net interest income as well as a $933,000 increase in noninterest income. Offsetting these positive impacts was an increase of $650,000 in the provision for loan losses, as well as an increase of $532,000 in noninterest expense. Basic earnings per share for the third quarter of 2010 were $0.40 per share, versus $0.36 per share for the third quarter of 2009. Diluted earnings per share for the third quarter of 2010 were $0.40 per share, versus $0.36 per share for the third quarter of 2009. Basic and diluted earnings per share for the third quarter of 2009 were impacted by $801,000 in dividends and accretion of discount on preferred stock. Earnings per share for the third quarter of 2010 compared to the comparable period in 2009 were impacted by the Company s issuance of 3.6 million common shares during the fourth quarter of 2009.

During the first nine months of 2010, loan interest income increased by $6.5 million, or 9.1%, to $77.7 million, versus $71.2 million during the first nine months of 2009. The increase was driven by a $157.2 million, or 8.4%, increase in average daily loan balances. During the third quarter of 2010, loan interest income increased by $1.8 million, or 7.4%, to $26.4 million, versus $24.6 million during the third quarter of 2009. The increase was driven by a $153.8 million, or 8.1%, increase in average daily loan balances.

The average daily securities balances for the first nine months of 2010 increased $30.6 million, or 7.7%, to $426.0 million, versus $395.4 million for the same period of 2009. During the same periods, income from securities decreased by $639,000, or 4.3%, to $14.4 million versus $15.0 million during the first nine months of 2009. The decrease was primarily the result of a 55 basis point decrease in the tax equivalent yield on securities, to 4.8%, versus 5.4% in the first nine months of 2009. The average daily securities balances for the third quarter of 2010 increased $35.0 million, or 8.7%, to $436.2 million, versus $401.2 million for the same period of 2009. During the third quarter of 2010, income from securities was $4.7 million, a decrease of $230,000, or 4.7%, versus the third quarter of 2009. The decrease was primarily the result of a 59 basis point decrease in the tax equivalent yield on securities, which was 4.58% during the third quarter of 2010 versus 5.17% in the comparable period in 2009.

On an average daily basis, total deposits (including demand deposits) increased $228.4 million, or 12.3%, to $2.087 billion for the nine-month period ended September 30, 2010, versus $1.859 billion during the same period in 2009. The average daily balances for the third quarter of 2010 increased $387.4 million, or 21.3%, to $2.204 billion from $1.817 billion during the third quarter of 2009. On an average daily basis, noninterest bearing demand deposits were $257.1 million for the nine-month period ended September 30, 2010, versus $223.2 million for the same period in 2009. The average daily noninterest bearing demand deposit balances for the third quarter of 2010 were $277.3 million, versus $229.6 million for the third quarter of 2009. On an average daily basis, interest bearing transaction accounts increased $134.0 million, or 24.7%, to $676.5 million for the nine-month period ended September 30, 2010, versus the same period in 2009. Average daily interest bearing transaction accounts increased $152.4 million, or 27.5%, to $706.0 million for the third quarter of 2010, versus $553.6 million for the third quarter of 2009. When comparing the nine months ended September 30, 2010 with the same period of 2009, the average daily balance of time deposits, which pay a higher rate of interest compared to demand deposit and transaction accounts, increased $14.7 million. The rate paid on time deposit accounts decreased 96 basis points to 1.8% for the nine-month period ended September 30, 2010, versus the same period in 2009. During the third quarter of 2010, the average daily balance of time deposits increased $127.6 million, and the rate paid decreased 76 basis points to 1.7%, versus the third quarter of 2009. The increase in average time deposit balances during the third quarter of 2010 was primarily due to increases in brokered deposits and time deposits of $100,000 or more. Despite the low interest rate environment, the Company has been able to attract and retain retail deposit customers through offering innovative deposit products such as Rewards Checking and Savings. These products pay somewhat higher interest rates, but also encourage certain customer behaviors such as using debit cards and electronic statements, which have the effect of generating additional third-party fee income and reducing the Company s processing costs.

The Company s funding strategy is focused on leveraging its retail branch network to grow traditional retail deposits and on its presence with commercial customers and public fund entities in its Indiana markets. In addition, the Company has utilized out of market deposit programs such as brokered certificates of deposit and the Certificate of Deposit Account Registry Service (CDARS) program. Due to ongoing loan growth, the Company has expanded its funding strategy over time to include these out of market deposit programs. The Company believes that these deposit programs represent an appropriate tool in the overall liquidity and funding strategy. On an average daily basis, total brokered certificates of deposit increased $6.7 million to $166.9 million for the nine-month period ended September 30, 2010, versus $160.2 million for the same period in 2009. During the third quarter of 2010, average daily brokered certificates of deposit were $223.0 million, versus $105.9 million during the third quarter of 2009. On an average daily basis, total public fund certificates of deposit decreased $19.7 million to $181.9 million for the nine-month period ended September 30, 2010, versus $201.7 million for the same period in 2009. During the third quarter of 2010, average daily public fund certificates of deposit were $191.9 million, versus $181.6 million during the third quarter of 2009. In addition, the Company had average public fund interest bearing transaction accounts of $80.8 million and $85.3 million, respectively, in the nine months and three months ended September 30, 2010, versus $14.0 million and $16.1 million for the comparable periods of 2009. Availability of public fund deposits can be cyclical, primarily due to the timing differences between when real estate property taxes are collected versus when those tax revenues are spent, as well as the intense competition for these funds.

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10qk
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