SEC Filing | Lake City Bank

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lkfn09098k.htm

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) October 26, 2009

______________

Lakeland Financial Corporation

(Exact name of Registrant as specified in its charter)

______________

Indiana	0-11487	35-1559596
(State or other jurisdiction	(Commission File Number)	(IRS Employer
Of incorporation)		Identification No.)

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:

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

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

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

[ ] 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 October 26, 2009, Lakeland Financial Corporation issued a press release announcing its earnings for the three-months and nine-months ended September 30, 2009. The news release is attached as Exhibit 99.1.

Item 9.01. Financial Statements and Exhibits

(d)

Exhibits

99.1 Press Release dated October 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

Dated: October 26, 2009 By: /s/David M. Findlay

David M. Findlay

Chief Financial Officer

exhibit991.htm

Exhibit 99.1

FOR IMMEDIATE RELEASE & #160; Contact: David M. Findlay

&# 160; Executive Vice President-

&# 160; Administration and

&# 160; Chief Financial Officer

&# 160; (574) 267-9197

&# 160; david.findlay@lakecitybank.com

LAKELAND FINANCIAL REPORTS STRONG RESULTS

Loan Growth and Interest Margin Improvement Contributes

Warsaw, Indiana (October 26, 2009) – Lakeland Financial Corporation (Nasdaq Global Select/LKFN), parent company of Lake City Bank, today reported net income of $5.3 million for the third quarter of 2009 versus $5.2 million for the third quarter of 2008. Diluted net income per share for the quarter was $0.36 versus $0.42 for the comparable period of 2008. On a linked quarter basis, net income increased 18% compared to net income of $4.5 million, or $0.29 per diluted share, for the second quarter of 2009. Net income performance for the quarter was the highest reported net income in the Bank’s 138 year history.

The Company further reported net income of $13.6 million for the nine months ended September 30, 2009 versus $15.3 million for the comparable period of 2008. Diluted net income per common share was $0.94 for the nine months ended September 30, 2009 versus $1.23 for the comparable period of 2008.

The Company also announced that the Board of Directors approved a cash dividend for the third quarter of $0.155 per share, payable on November 5, 2009 to shareholders of record as of October 25, 2009. The quarterly dividend is unchanged from the dividends paid in 2008 and in the first and second quarters of 2009.

Average total loans for the third quarter of 2009 were $1.91 billion versus $1.69 billion for the third quarter of 2008 and $1.89 billion for the linked second quarter of 2009. The year-over-year increase for the third quarter represented an increase of 13%, or $221 million. On a linked quarter basis, average loans increased by $15 million versus the second quarter of 2009. Total gross loans as of September 30, 2009 were $1.94 billion compared to $1.72 billion as of September 30, 2008 and $1.88 billion as of June 30, 2009.

Michael L. Kubacki, Chairman, President and Chief Executive Officer, commented, “While we are gratified with our record net income performance for the quarter, we are equally pleased that our track record demonstrates that we are a responsive and relationship-oriented bank. We further believe that we’re developing a reputation throughout the state based upon this track record. In a tremendously challenging economic environment, we recognize that our clients need our support and we continue to use our balance sheet to lend to new and existing clients in Indiana. We are excited that Lake City Bank can contribute to the economic recovery by proactively growing our lending activities and we’ve demonstrated once again that we are doing just that with our loan growth this year.”

Kubacki added, “This good performance clearly supports our position on paying dividends to our shareholders. We are proud that our ongoing financial strength makes it possible for us to continue our dividend at a level consistent with the past six quarters.”

The Company’s net interest margin was 3.69% in the third quarter versus 3.45% in the second quarter and 3.35% for the third quarter of 2008. This margin improvement, in conjunction with strong growth in loans, contributed to an increase of 23% in the Company’s net interest income to $21.3 million in the third quarter of 2009 versus $17.3 million in the third quarter of 2008. On a linked quarter basis, net interest income increased by 9% versus the second quarter of 2009.

The Company’s provision for loan losses in the quarter of $5.5 million represented an increase of $1.8 million, or 48%, versus $3.7 million in the same period of 2008. In the second quarter of 2009, the provision was $4.9 million. The provision increases in 2009 were primarily driven by continued loan growth, the difficult economic conditions in the Company’s markets and the related possible weaknesses in our future borrowers’ performance and prospects.

The Company's non-interest income was $5.3 million in the third quarter of 2009 versus $6.2 million in the third quarter of 2008 and $6.0 million for the second quarter of 2009. Several factors affected noninterest income in the quarter versus the linked second quarter of 2009, including recognition of a non-cash other than temporary impairment of $225,000 on available for sale securities, a decline in mortgage banking income of $123,000 and mortgage servicing impairment costs of $236,000. Also contributing to the lower noninterest income performance was a change related to the processing of merchant credit card activities. Prior to the third quarter of 2009, transaction driven revenue and expenses related to this category were reported on a gross basis in merchant card fee income in noninterest income and credit card interchange fees in noninterest expense. Beginning in the second quarter of 2009, the Company began converting clients to a new third party processor for this activity. As a result, only net revenues with the new processor are being recognized in merchant card fee income in noninterest expense. The conversion is ongoing and will be completed by the end of 2009. Total revenue for the third quarter of 2009 was $26.5 million versus $23.5 million for the comparable period of 2008, an increase of 13%. On a linked quarter basis, total revenue increased by 4% versus the second quarter of 2009.

The Company's non-interest expense was $13.1 million for the third quarter of 2009 compared to $11.9 million for the same period in 2008 and $14.2 million for the second quarter of 2009. On a year over year basis, salaries and employee benefits increased by $916,000, or 14%, versus the third quarter of 2008, primarily as a result of staff additions in lending positions in the Indianapolis loan production office, higher incentive-based compensation resulting from increased revenue and net income and overall improved performance, normal merit increases system-wide and increased health insurance costs. In addition, regulatory expense increased by $435,000 due to higher FDIC insurance premiums that have been levied on all financial institutions. The Company's efficiency ratio for the third quarter of 2009 was 49%, compared to 51% for the same period in 2008 and 55% for the second quarter of 2009.

Net charge-offs totaled $1.8 million in the third quarter of 2009, versus $3.6 million during the third quarter of 2008 and $1.3 million during the second quarter of 2009. Lakeland Financial’s allowance for loan losses as of September 30, 2009 was $28.8 million, compared to $18.1 million as of September 30, 2008 and $25.1 million as of June 30, 2009. The allowance for loan losses increased to 1.48% of total loans as of September 30, 2009 versus 1.06% for the comparable period in 2008 and 1.33% as of June 30, 2009.

Nonperforming assets increased to $30.0 million as of September 30, 2009 compared to $20.5 million as of June 30, 2009 and $21.1 million on September 30, 2008. The ratio of nonperforming assets to total assets increased to 1.22% on September 30, 2009 compared to 0.85% on June 30, 2009 and 0.94% at September 30, 2008. The increase in nonperforming assets was due primarily to the addition of two commercial relationships totaling $9.4 million. One of the credits is engaged in commercial real estate development and the other is a real estate holding company which leased manufacturing buildings to an affiliated company involved in the recreational vehicle industry. The allowance for loan losses represented 98% of nonperforming loans as of September 30, 2009 versus 127% at June 30, 2009 and 90% at September 30, 2008.

Kubacki continued, “There are some signs of an economic recovery on the horizon, but we remain cautious in the short term. As the increase in nonperforming assets indicates, there remain real challenges in our Indiana markets. We are pleased that our net charge off activity has improved from 2008, yet this higher level of nonperforming assets provides cause for concern. We continue to work closely with our borrowers to work through these situations, as we’re cognizant that our reputation and our clients are always at risk. There is no cookie cutter approach to managing through individual situations and we always try to work with our clients to seek a fair result.”

“Our allowance for loan losses has grown by 53%, or $10 million, since year end 2008. We believe this growth reflects the challenges inherent in our loan portfolio. There remain clear risks of potential loan losses, but we believe our approach is appropriately conservative.” Kubacki added.

For the three months ended September 30, 2009, Lakeland Financial’s tangible equity to average assets ratio was 6.56% compared to 6.62% for the third quarter of 2008 and 6.42% for the second quarter of 2009. Average total capital to average assets for the quarter ended September 30, 2009 was 13.01% versus 10.76% for the third quarter of 2008 and 13.10% for the second quarter of 2009. Average total deposits for the quarter ended September 30, 2009 were $1.82 billion versus $1.85 billion for the second quarter of 2009 and $1.64 billion for the third quarter of 2008.

Lakeland Financial Corporation is a $2.5 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 Equity Capital Markets Corp., Goldman Sachs & Company, Howe Barnes Hoefer & Arnett, Inc., Keefe, Bruyette & Woods, Inc., Knight Equity Markets, L.P., 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.

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

THIRD QUARTER 2009 FINANCIAL HIGHLIGHTS

(Unaudited – Dollars in thousands except share and per share data)

	Three Months Ended									Nine Months Ended
	Sep. 30,			Jun. 30,			Sep. 30,			Sep. 30,			Sep. 30,
	2009			2009			2008			2009			2008
END OF PERIOD BALANCES
Assets	$	2,469,882		$	2,404,140		$	2,254,471		$	2,469,882		$	2,254,471
Deposits		1,821,031			1,735,136			1,707,930			1,821,031			1,707,930
Loans		1,941,111			1,882,106			1,717,345			1,941,111			1,717,345
Allowance for Loan Losses		28,778			25,090			18,124			28,778			18,124
Total Equity		219,714			212,193			153,447			219,714			153,447
Tangible Common Equity		161,659			154,144			148,984			161,659			148,984
AVERAGE BALANCES
Total Assets	$	2,439,847		$	2,426,602		$	2,208,067		$	2,417,422		$	2,125,305
Earning Assets		2,322,134			2,304,684			2,085,042			2,294,411			2,005,027
Investments		401,192			395,711			389,817			395,424			363,367
Loans		1,906,496			1,891,724			1,685,963			1,881,157			1,630,510
Total Deposits		1,816,697			1,852,776			1,641,525			1,859,042			1,569,995
Interest Bearing Deposits		1,587,103			1,630,532			1,420,367			1,635,814			1,350,832
Interest Bearing Liabilities		1,974,106			1,972,947			1,817,981			1,974,046			1,737,806
Total Equity		215,508			210,824			152,081			200,055			151,067
INCOME STATEMENT DATA
Net Interest Income	$	21,262		$	19,538		$	17,272		$	57,815		$	47,276
Net Interest Income-Fully Tax Equivalent		21,565			19,844			17,549			58,742			48,141
Provision for Loan Losses		5,500			4,936			3,710			14,952			7,884
Noninterest Income		5,279			6,022			6,202			16,871			17,943
Noninterest Expense		13,097			14,153			11,942			39,937			34,937
Net Income		5,267			4,460			5,225			13,597			15,262
Net Income Available to Common Shareholders		4,466			3,660			5,225			11,706			15,262
PER SHARE DATA
Basic Net Income Per Common Share	$	0.36		$	0.29		$	0.43		$	0.94		$	1.25
Diluted Net Income Per Common Share		0.36			0.29			0.42			0.94			1.23
Cash Dividends Declared Per Common Share		0.155			0.155			0.155			0.465			0.45
Book Value Per Common Share (equity per share issued)		13.32			12.75			12.47			13.32			12.47
Market Value – High		22.49			21.04			30.09			23.87			30.09
Market Value – Low		17.80			17.10			18.52			14.14			16.87
Basic Weighted Average Common Shares Outstanding		12,432,135			12,416,710			12,290,055			12,416,894			12,256,389
Diluted Weighted Average Common Shares Outstanding		12,531,264			12,515,196			12,468,446			12,519,460			12,454,426
KEY RATIOS
Return on Average Assets		0.86	%		0.74	%		0.94	%		0.75	%		0.96	%
Return on Average Total Equity		9.70			8.49			13.68			9.09			13.50
Efficiency (Noninterest Expense / Net Interest Income
plus Noninterest Income)		49.35			55.37			50.88			53.47			53.57
Average Equity to Average Assets		8.83			8.69			6.88			8.28			7.10
Net Interest Margin		3.69			3.45			3.35			3.42			3.20
Net Charge Offs to Average Loans		0.38			0.27			0.85			0.36			0.46
Loan Loss Reserve to Loans		1.48			1.33			1.06			1.48			1.06
Nonperforming Loans to Loans		1.51			1.05			1.18			1.51			1.18
Nonperforming Assets to Assets		1.22			0.85			0.94			1.22			0.94
Tier 1 Leverage		10.20			10.19			8.30			10.20			8.30
Tier 1 Risk-Based Capital		11.76			11.89			9.79			11.76			9.79
Total Capital		13.01			13.10			10.76			13.01			10.76
Tangible Capital		6.56			6.42			6.62			6.56			6.62
ASSET QUALITY
Loans Past Due 30 - 89 Days	$	5,240		$	13,805		$	5,210		$	5,240		$	5,210
Loans Past Due 90 Days or More		5,547			253			1,669			5,547			1,669
Non-accrual Loans		23,708			19,446			18,516			23,708			18,516
Nonperforming Loans		29,255			19,699			20,185			29,255			20,185
Other Real Estate Owned		723			711			879			723			879
Other Nonperforming Assets		36			59			30			36			30
Total Nonperforming Assets		30,014			20,469			21,094			30,014			21,094
Impaired Loans		28,236			18,967			19,464			28,236			19,464
Net Charge Offs/(Recoveries)		1,812			1,264			3,600			5,034			5,561

LAKELAND FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS

As of September 30, 2009 and December 31, 2008

(in thousands, except share data)

	September 30,			December 31,
	2009			2008
	(Unaudited)
ASSETS
Cash and due from banks	$	31,188		$	57,149
Short-term investments		8,072			6,858
Total cash and cash equivalents		39,260			64,007

Securities available for sale (carried at fair value)		407,331			387,030
Real estate mortgage loans held for sale		1,934			401

Loans, net of allowance for loan losses of $28,778 and $18,860		1,912,333			1,814,474

Land, premises and equipment, net		30,108			30,519
Bank owned life insurance		34,383			33,966
Accrued income receivable		8,990			8,599
Goodwill		4,970			4,970
Other intangible assets		259			413
Other assets		30,314			33,066
Total assets	$	2,469,882		$	2,377,445

LIABILITIES AND EQUITY

LIABILITIES
Noninterest bearing deposits	$	231,970		$	230,716
Interest bearing deposits		1,589,061			1,654,583
Total deposits		1,821,031			1,885,299

Short-term borrowings
Federal funds purchased		40,000			19,000
Securities sold under agreements to repurchase		122,672			137,769
U.S. Treasury demand notes		2,563			840
Other short-term borrowings		175,000			45,000
Total short-term borrowings		340,235			202,609

Accrued expenses payable		16,535			17,163
Other liabilities		1,397			1,434
Long-term borrowings		40,042			90,043
Subordinated debentures		30,928			30,928
Total liabilities		2,250,168			2,227,476

EQUITY
Cumulative perpetual preferred stock: 1,000,000 shares authorized, no par value, $1 liquidation value
56,044 shares issued and outstanding as of September 30, 2009		53,992			0
Common stock: 90,000,000 shares authorized, no par value
12,441,930 shares issued and 12,341,593 outstanding as of September 30, 2009
12,373,080 shares issued and 12,266,849 outstanding as of December 31, 2008		1,453			1,453
Additional paid-in capital		23,846			20,632
Retained earnings		147,295			141,371
Accumulated other comprehensive loss		(5,437	)		(12,024	)
Treasury stock, at cost (2009 - 100,337 shares, 2008 - 106,231 shares)		(1,524	)		(1,552	)
Total stockholders' equity		219,625			149,880

Noncontrolling interest		89			89
Total equity		219,714			149,969
Total liabilities and equity	$	2,469,882		$	2,377,445

LAKELAND FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

For the Three Months and Nine Months Ended September 30, 2009 and 2008

(in thousands except for share and per share data)

(unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2009			2008		2009			2008
NET INTEREST INCOME
Interest and fees on loans
Taxable	$	24,561		$	25,872	$	71,101		$	75,673
Tax exempt		26			28		126			87
Interest and dividends on securities
Taxable		4,335			4,437		13,231			11,793
Tax exempt		597			583		1,804			1,820
Interest on short-term investments		11			46		39			197
Total interest income		29,530			30,966		86,301			89,570

Interest on deposits		7,431			10,854		25,464			33,592
Interest on borrowings
Short-term		268			1,435		841			5,164
Long-term		569			1,405		2,181			3,538
Total interest expense		8,268			13,694		28,486			42,294
NET INTEREST INCOME		21,262			17,272		57,815			47,276
Provision for loan losses		5,500			3,710		14,952			7,884
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES		15,762			13,562		42,863			39,392

NONINTEREST INCOME
Wealth advisory fees		747			869		2,213			2,541
Investment brokerage fees		410			582		1,300			1,479
Service charges on deposit accounts		2,133			2,331		6,153			6,355
Loan, insurance and service fees		711			729		1,941			2,122
Merchant card fee income		536			949		2,179			2,646
Other income		506			585		1,459			1,453
Mortgage banking income		459			146		1,849			666
Net securities gains (losses)		2			11		2			39
Gain on redemption of Visa shares		0			0		0			642
Impairment on available-for-sale securities (includes total losses of $2,831,
net of $2,606 recognized in other comprehensive income, pre-tax)		(225	)		0		(225	)		0
Total noninterest income		5,279			6,202		16,871			17,943
NONINTEREST EXPENSE
Salaries and employee benefits		7,327			6,411		20,516			19,113
Occupancy expense		751			741		2,392			2,226
Equipment costs		571			426		1,588			1,344
Data processing fees and supplies		985			955		2,969			2,662
Credit card interchange		302			651		1,353			1,765
Other expense		3,161			2,758		11,119			7,827
Total noninterest expense		13,097			11,942		39,937			34,937

INCOME BEFORE INCOME TAX EXPENSE		7,944			7,822		19,797			22,398
Income tax expense		2,677			2,597		6,200			7,136
NET INCOME	$	5,267		$	5,225	$	13,597		$	15,262
Dividends and accretion of discount on preferred stock		801			0		1,891			0
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	4,466		$	5,225	$	11,706		$	15,262
BASIC WEIGHTED AVERAGE COMMON SHARES		12,432,135			12,290,055		12,416,894			12,256,389
BASIC EARNINGS PER COMMON SHARE	$	0.36		$	0.43	$	0.94		$	1.25
DILUTED WEIGHTED AVERAGE COMMON SHARES		12,531.264			12,468,446		12,519,460			12,454,426
DILUTED EARNINGS PER COMMON SHARE	$	0.36		$	0.42	$	0.94		$	1.23

LAKELAND FINANCIAL CORPORATION
LOAN DETAIL
THIRD QUARTER 2009
(unaudited in thousands)

	September 30,					December 31,					September 30,
	2009					2008					2008
Commercial and industrial loans	$	691,012		35.5	%	$	652,107		35.5	%	$	612,895		35.7	%
Commercial real estate - owner occupied		340,899		17.5			337,060		18.4			325,878		19.0
Commercial real estate - nonowner occupied		242,278		12.5			212,444		11.6			191,187		11.1
Commercial real estate - multifamily loans		25,651		1.3			25,428		1.4			23,674		1.4
Commercial real estate construction loans		153,426		7.9			116,970		6.4			96,004		5.6
Agri-business and agricultural loans		178,683		9.2			189,007		10.3			174,462		10.2
Residential real estate mortgage loans		95,095		4.9			117,230		6.4			114,900		6.7
Home equity loans		158,706		8.2			128,219		7.0			124,016		7.2
Installment loans and other consumer loans		57,504		3.0			55,102		3.0			54,504		3.1
Subtotal		1,943,254		100.0	%		1,833,567		100.0	%		1,717,520		100.0	%
Less: Allowance for loan losses		(28,778	)				(18,860	)				(18,124	)
Net deferred loan (fees)/costs		(2,143	)				(233	)				(175	)
Loans, net	$	1,912,333				$	1,814,474				$	1,699,221