SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

---

FORM 8-K

---

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) January 26, 2009

---

Lakeland Financial Corporation

(Exact name of Registrant as specified in its charter)

---

---

---

202 East Center Street, P.O. Box 1387, Warsaw, Indiana 46581-1387

(Address of principal executive offices) (Zip Code)

(574) 267-6144

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Solicitation material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

 

Item 2.02. Results of Operations and Financial Condition

On January 26, 2009, Lakeland Financial Corporation issued a press release announcing its earnings for the twelve-months and three-months ended December 31, 2008. The news release is attached as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits

99.1 Press Release dated January 26, 2009

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

LAKELAND FINANCIAL CORPORATION

 

David M. Findlay

Chief Financial Officer

 

 

Exhibit 99.1

 

LAKE CITY BANK REPORTS RECORD INCOME

21^st Consecutive Year of Income Growth Achieved

Warsaw, Indiana (January 26, 2009) – Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported net income of $19.7 million for 2008 versus $19.2 million for 2007. “For the 21^st consecutive year, Lake City Bank established a new record for net income. We are extremely proud of this performance in the face of the intense economic and industry challenges we faced during the year,” commented Michael L. Kubacki, Chairman, President and Chief Executive Officer.

 

Net income of $19.7 million for 2008 represented an increase of 3% versus $19.2 million for 2007. Diluted net income per share for the year was $1.58 versus $1.55 for 2007. The Company reported net income of $4.4 million for the fourth quarter of 2008, a decrease of 8% versus $4.8 million reported for the fourth quarter of 2007. Diluted net income per share for the quarter was $0.35 versus $0.40 for the comparable period of 2007. On a linked quarter basis, fourth quarter results compared to net income of $5.2 million, or $0.42 per diluted share, for the third quarter of 2008.

 

“Our business is not immune to the challenging conditions we are experiencing nationally and locally. As a result, we were impacted by higher loan losses during the year. Further, there is no question that our traditional commercial and industrial commercial borrowing base is undergoing a very stressful period, as reflected in our loan loss provision for the quarter and full year. Yet, we were able to conclude the year with gratifying results,” said Kubacki.

 

The Company also announced that the Board of Directors approved a cash dividend for the fourth quarter of $0.155 per share, payable on February 5, 2009 to shareholders of record as of January 25, 2009. The quarterly dividend represents an 11% increase over the quarterly dividends paid in 2007, and maintains the level of dividend paid for the third quarter of 2008.

 

Average total loans for the fourth quarter of 2008 were $1.77 billion versus $1.46 billion for the fourth quarter of 2007 and $1.69 billion for the linked third quarter of 2008. The year-over-year increase for the fourth quarter represented an increase of 21%, or $305 million. On a linked quarter basis, average loans increased by $82 million versus the third quarter of 2008. Total gross loans as of December 31, 2008 were $1.83 billion compared to $1.52 billion as of December 31, 2007 and $1.72 billion as of September 30, 2008.

 

“We are particularly proud of the fact that we are using our balance sheet to demonstrate our commitment to Lake City Bank’s clients. In the fourth quarter, we grew our loan portfolio by $116

 

 

million, or 7%, over the third quarter totals. There has been quite a bit of commentary during the past several months about the banking industry’s lack of commitment to expanding lending activity in 2008. Clearly, that is not the case with Lake City Bank, as we continued to maintain our historical lending standards while at the same time growing our loan portfolio to provide capital to our clients. Further, our participation in the Capital Purchase Program will bolster an already strong capital structure and balance sheet and provide us with the ability to continue to expand our lending activities in our Indiana footprint,” stated Kubacki.

 

The Company’s net interest margin was 3.14% in 2008 versus 3.22% in 2007. The net interest margin was 2.98% in the fourth quarter versus 3.14% in the comparable period of 2007 and 3.35% in the third quarter of 2008. The higher net interest margin in the third quarter of 2008 resulted primarily from the recognition of $1.2 million in interest income from the payoff of a loan that had been on nonaccrual. Excluding the impact of this event, the net interest margin would have been 3.12% for the third quarter. The decline in the net interest margin during the fourth quarter resulted primarily from the impact of the Federal Reserve Bank’s Federal Open Market Committee (FOMC) actions. During the quarter, the FOMC reduced the target federal funds rate from 2.00% to a range of 0% to 0.25% at the conclusion of the quarter. The target fed funds rate on January 1, 2008 was 4.25%, therefore the FOMC lowered the target rate by a range of 4.00% to 4.25% in seven separate actions during the year. This unprecedented activity contributed to the decline in the Company’s margin as the cost of deposits and borrowed funds did not decline as rapidly as loan revenue. The loan revenue decline resulted directly from variable rate loans, which are generally linked to the prime rate. The prime rate concluded the year at 3.25% versus 7.25% at December 31, 2007.

 

The previously noted loan growth led to an increase in average earning assets, which contributed to an increase in net interest income of 14%. Net interest income grew to $16.0 million in the fourth quarter of 2008 versus $14.1 million in the fourth quarter of 2007. The Company’s provision for loan losses increased by $1.3 million, or 120%, to $2.3 million for the fourth quarter of 2008 versus $1.1 million in the same period of 2007. In the third quarter of 2008, the provision was $3.7 million. The provision increases in 2008 were primarily driven by a higher level of charge offs, strong loan growth and the overall weaker economic conditions in the Company’s markets.

 

The Company's noninterest expense was $12.6 million for the fourth quarter of 2008 compared to $11.4 million for the same period in 2007, an increase of 10%. This increase was driven primarily by increased regulatory expenses, as well as increases in payroll and benefit expenses. Other expense increased by $611,000, or 24%, in the quarter driven primarily by higher regulatory expenses of $508,000 due to the Company’s resumption of regular FDIC insurance premiums. Salaries and employee benefits increased by $258,000, or 4%, when compared to the same period in 2007 as a result of a combination of increases in health insurance and performance-based incentive expense, staff additions in administrative and commercial lending positions, normal merit increases and new office staff costs. The Company's efficiency ratio for the fourth quarter of 2008 was 59%, consistent with the same period in 2007. For the full year, the efficiency ratio was 55% versus 57% in 2007.

 

Net charge-offs totaled $1.6 million in the fourth quarter of 2008, versus $327,000 during the fourth quarter of 2007 and $3.6 million during the third quarter of 2008. Lakeland Financial’s allowance for loan losses as of December 31, 2008 was $18.9 million, compared to $15.8 million as of December 31, 2007 and $18.1 million as of September 30, 2008. Nonperforming assets totaled $22.4 million as of December 31, 2008 compared to $21.1 million as of September 30, 2008 and $9.9 million on December 31, 2007. The ratio of nonperforming assets to assets was 0.94% on both December 31, 2008 and September 30, 2008, compared to 0.50% at December 31, 2007. The allowance for loan losses represented 89% of nonperforming loans as of December 31, 2008 versus 90% at September 30, 2008 and 212% at December 30, 2007.

 

 

For the three months ended December 31, 2008, Lakeland Financial’s average equity to average assets ratio was 6.56% compared to 6.88% for the third quarter of 2008 and 7.47% for the fourth quarter of 2007. Average stockholders' equity for the quarter ended December 31, 2008 was $151.3 million versus $152.0 million for the third quarter of 2008 and $143.9 million for the fourth quarter of 2007. Average total deposits for the quarter ended December 31, 2008 were $1.84 billion versus $1.64 billion for the third quarter of 2008 and $1.52 billion for the fourth quarter of 2007. Earnings for the year ended December 31, 2008 were positively impacted by the pre-tax benefit of $642,000, or $382,000 after tax, realized from the first quarter initial public offering of Visa, Inc. common shares. Excluding the effect of the Visa transaction, net income for the year would have been $19.3 million and diluted earnings per share would have been $1.55.

 

Lakeland Financial Corporation is a $2.4 billion bank holding company headquartered in Warsaw, Indiana. Lake City Bank serves Northern Indiana with 43 branches located in the following Indiana counties: Kosciusko, Elkhart, Allen, St. Joseph, DeKalb, Fulton, Huntington, LaGrange, Marshall, Noble, Pulaski and Whitley. The Company also has a Loan Production Office in Indianapolis, Indiana.

 

Lakeland Financial Corporation may be accessed on its home page at www.lakecitybank.com. The Company’s common stock is traded on the Nasdaq Global Select Market under “LKFN”. Market makers in Lakeland Financial Corporation common shares include Automated Trading Desk Financial Services, LLC, B-Trade Services, LLC, Citadel Derivatives Group, LLC, Citigroup Global Markets Holdings, Inc., Domestic Securities, Inc., E*TRADE Capital Markets LLC, FTN Financial Securities Corp., FTN Midwest Securities Corp., Goldman Sachs & Company, Howe Barnes Hoefer & Arnett, Inc., Keefe, Bruyette & Woods, Inc., Knight Equity Markets, L.P., Lehman Brothers Inc., Morgan Stanley & Co., Inc., Stifel Nicolaus & Company, Inc., Susquehanna Capital Group and UBS Securities LLC.

 

In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. Lakeland Financial believes that providing non-GAAP financial measures provides investors with information useful to understanding Lakeland Financial’s financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on “tangible equity” which is “common stockholders’ equity” excluding intangible assets, net of deferred tax. A reconciliation of these non-GAAP measures to the most comparable GAAP equivalent is included in the attached financial tables where the non-GAAP measure is presented.

Visa Initial Public Offering Adjustments

Lake City Bank, as a member bank of Visa U.S.A. Inc., holds shares of restricted common stock in Visa. In connection with Visa's initial public offering in March 2008, a portion of our Visa shares were redeemed pursuant to a mandatory redemption. The after-tax benefit to the year-to-date net income from these Visa adjustments totaled $382,000, or $0.03 per diluted common share. This adjustment represents the net impact of the gain from the proceeds of the sale of these shares and the Company’s portion of the settlement expenses related to litigation involving Visa, which Lake City Bank was subject to as a member bank. Lake City Bank’s remaining shares of Visa stock are recorded at their original cost basis of zero. These shares have restrictions as to their sale or transfer and the ultimate realization of their value is subject to future adjustments based on the resolution of outstanding indemnified litigation.

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,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” or other similar expressions. 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. Additional information concerning the Company and its business, including factors that could materially affect the Company’s financial results, is included in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on form 10-K.

 

 

 

 

 

LAKELAND FINANCIAL CORPORATION

FOURTH QUARTER 2008 FINANCIAL HIGHLIGHTS

(Unaudited – Dollars in thousands except share and Per Share Data)

 

 

 

 

 

LAKELAND FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

As of December 31, 2008 and 2007

(in thousands, except share data)

 

 

 

 

 

 

LAKELAND FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months and Twelve Months Ended December 31, 2008 and 2007

(in thousands except for share and per share data)

(unaudited)