Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q2 2016 Earnings Presentation
42 slides from Lakeland Financial's earnings presentation, 2016
Slide 1: Lakeland Financial Corporation Investor Update 2nd Quarter 2016
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities Investor Update 2nd Quarter 2016 LKFN LISTED
Slide 2: David M. Findlay and Lisa M. O'Neill
David M. Findlay President & Chief Executive Officer david.findlay@lakecitybank.com (574) 267-9197 Lisa M. O’Neill Executive Vice President & Chief Financial Officer lisa.oneill@lakecitybank.com (574) 267-9125 2
Slide 3: Forward-Looking Information
Forward-Looking Information This presentation 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 oper
Slide 4: A High Performer Among Peers
A High Performer Among Peers 2 Institutions LTM (including LKFN) ROE >12% Consecutive Increases in Net Income Since 16 Institutions 2009(3) Profitable for the Last 10 Years(2) 74 Institutions Exchange Traded Depositories with Assets Between $1B and $5B(1) 174 Institutions Source: SNL Financial. Fina
Slide 5: Strong Capital Structure
Strong Capital Structure Subordinated Debt 6.3% Tangible Book Value Per Reserves 8.8% Share Tangible $24.90 $30.00 Common Equity 84.9% $25.00 $20.00 $15.00 Key Ratios and Per Share Data As of June 30, 2016 $10.00 TCE /Tangible Assets 10.57% Total Risk-Based 13.65% $1.82 $5.00 Leverage 10.85% $0.00 B
Slide 6: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 48 branch offices /531 FTEs • $3.9 billion banking assets • $1.65 billion trust assets • A regional franchise focused on core banking • Continued high growth potential 5
Slide 7: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth Record Net Income for 26 of 27 Years $46,367 (000’s) $50,000 $45,000 Compound Annual Growth 1991 – 2015 $40,000 • Loans = 12% $35,000 • Deposits = 11% $30,000 • Net Income = 13% $25,000 $20,000 $15,000 $2,707 $10,000 $5,000 $0 2005 2007 1991 1992 1993 1994 1995 19
Slide 8: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and New Markets Market Data Warsaw – 1872 22 offices Elkhart – 1990 11 offices South Bend – 1997 4 offices Fort Wayne – 1999 7 offices Indianapolis – 2011 4 offices +1 under development 8
Slide 9: Indiana Economic Outlook
Indiana Economic Outlook Indiana Employment Trends Versus National Averages 12.0% 10.0% 9.4% 9.3% 8.0% 8.2% 7.4% 10.1% 9.6% 6.6% 6.0% 6.5% 8.7% 8.0% 5.5% 6.8% 6.6% 5.9% 4.0% 4.5% 4.3% 10.6% 10.0% 7.4% 9.1% 8.0% 6.5% 5.7% 4.0% 2.0% 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013 Nov 2014 Nov 2016 M
Slide 10: Shareholder Value Strategy
Shareholder Value Strategy 1. Commercial Banking Focus 2. High Quality Team Members 3. Proven Organic Growth Experience 4. Focus on Core Deposit Funding 5. Commitment to Technology 10
Slide 11: Experienced and Committed Team
Commercial Banking Focus Experienced and Committed Team • 39 credit “smart” commercial bankers • Average 22 years experience in banking and 10 years at Lake City Bank • Deep organizational structure provides credit and administrative support • Our commercial team reside in the markets they serve 11
Slide 12: Relationship Strategy
Commercial Banking Focus Relationship Strategy • We lead with credit and the operating relationship • We understand our client needs • We cross-sell aggressively by leveraging technology 12
Slide 13: Credit Process
Commercial Banking Focus Credit Process • We have a centralized committee structure • We focus on management/cash flow • We lend to people first – character matters • Structure is important on collateral and guarantees • We have an orientation toward owner-occupied and well structured nonowner occup
Slide 14: Lake City Bank Culture
High Quality Team Members Lake City Bank Culture • Our Core Values start with honesty • Lake City University drives our culture • Our community involvement is “real” and critical to our strategy • Our culture has not been diluted by acquisition 14
Slide 15: Face to Face Contact
High Quality Team Members Face to Face Contact • We simply love to call • Sales calling program Includes 104 officers • 16,301 client contacts in 2015 • Our people are the competitive advantage 15
Slide 16: Larger Market Organic Expansion
Organic Growth Larger Market Organic Expansion State LCB LCB Deposit # of Rank County Primary City Population* Entry Market Share** Branches 20. Kosciusko Warsaw 78,564 1872 52% 12 6. Elkhart Elkhart 201,971 1990 21% 9 5. St. Joseph South Bend 267,618 1997 7% 4 3. Allen Fort Wayne 365,918 1999 11% 4
Slide 17: Commercial Banking Target Opportunities
Organic Growth Commercial Banking Target Opportunities Growth Potential in Every Market Elkhart/South Bend 2,296 Warsaw 22% 650 6% Fort Wayne 1,757 17% Indianapolis 5,652 55% Companies with Revenue of $1 to $30 million Source: 2012 Hoover’s 17
Slide 18: Mature Market Strength and Growth
Organic Growth Mature Market Strength and Growth (millions) (1) 2015 2015 2005 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $2,850 16.09% $2,393 17.77% 19.10% 53 2. Lake City Bank $2,752 15.53% $1,127 8.38% 144.19% 46 3. Wells Fargo $2,276 12.85% $1,030 7.65% 120.97% 28 4. JPM C
Slide 19: Mature Market Deposit Performance
Organic Growth Mature Market Deposit Performance (1) $1,625 $1,700 $1,500 Lake City Bank is the $1,246 $1,300 Market share winner in $1,100 last decade $900 $700 $457 $500 $389 $300 $164 $95 $7 $100 -$100 -$44 -$86 -$151 -$300 Lake City Bank Wells Fargo 1st Source JPM Chase Star IAB Financial KeyBan
Slide 20: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 28% 12% 2. PNC 20% 3. Fifth Third 10% 4. Huntington National 8% 5. BMO Harris 6% 6. KeyBank 6% 7. Merchants Bank of IN 4% 8. National Bank of Indy 4% 9. Regions Bank 4% 10. Firs
Slide 21: Core Deposits Fund Organic Loan Growth
Core Deposit Funding Core Deposits Fund Organic Loan Growth • Deposit Strategy Task Force created in 2014 • Focus is on core deposit growth in retail, commercial and public funds • Demographic and lifestyle data is being leveraged • Enhanced checking deposit offering in 2015 through segmentation stu
Slide 22: Competitive Technology Edge is Critical
Commitment to Technology Competitive Technology Edge is Critical • Mobile and online adoption rates are accelerating • Technology is a core competency – Fully resourced online banking for commercial and retail – Robust mobile banking capabilities • Competitive commercial treasury management services
Slide 23: Financial Performance
Financial Performance (take City Bank
Slide 24: Income Performance Metrics
Income Performance Metrics LKFN performance exceeds National and Indiana Peers 14.00% 12.76% 12.98% 1.90% 12.55% 12.45% 12.52% 12.05% 13.00% 12.77% 12.00% 1.70% 12.30% 12.50% 12.26% 12.43% 11.78% ROE and ROTE LTM Peer Data(1) 11.00% National Indiana 1.50% ROE 7.82% 8.88% 10.00% ROTE 8.80% 9.95% 9.00
Slide 25: Net Income and EPS
Net Income and EPS Record Net Income and EPS $50,000 $46,367 $43,805 $2.80 $45,000 $38,839 $2.75 $40,000 $2.61 $35,394 $2.30 $35,000 $2.33 $30,662 $30,000 $2.15 $25,082 $1.80 $25,000 $1.88 $22,516 $20,000 $1.48 $1.30 $15,000 $1.34 $10,000 $0.80 $5,000 $0 $0.30 2011 2012 2013 2014 2015 YTD 2015 YTD 2
Slide 26: Average Loans
Average Loans Commercial Emphasis Drives Growth $3,500,000 $3,140,947 120% $3,000,000 $2,885,568 $2,650,678 $2,343,422 $2,500,000 $2,148,046 100% $2,216,131 93% 93% 95% 93% 94% $2,000,000 87% 80% $1,500,000 60% $1,000,000 40% $500,000 $0 20% 2011 2012 2013 2014 2015 YTD 2016 Retail Commercial Loans
Slide 27: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Agri-business - Residential Mortgage Commercial RE - Other Commercial Agriculture $164,564 Construction $82,786 $308,759 5% Commercial RE - $221,027 3% Home Equity 10% Multifamily 7% $164,645 $114,618 5% Installment - Other 4% Consumer $62,062 Commercial RE
Slide 28: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity Taxable CMBS Treasuries Municipals 7.05% 0.21% Agencies Investments as a Percent of Assets: 17.0% Exempt 0.17% 1.39% 16.0% Municipals 25.95% 15.0% US Govt 15.6% Remics 14.0% 15.1% 34.75% 13.0% 14.1% 12.0% 12.9% 12.7% US Govt Pools 11.0% 30.48% 10.0% 2012 20
Slide 29: Asset Quality
Asset Quality Nonperforming levels reflect economic strength of markets 2.50% 10.00% 9.00% 8.06% 2.00% 7.46% 8.00% 6.64% 7.00% 1.50% 5.75% 6.00% 4.97% 1.00% 4.64% 5.00% 4.00% 0.50% 3.00% 1.77% 2.19% 1.37% 1.75% 0.94% 1.31% 0.50% 0.41% 0.42% 0.29% 0.24% 0.35% 0.00% 2.00% 2011 2012 2013 2014 2015 YTD
Slide 30: Net Chargeoffs/Average Loans
Asset Quality Strong Reserve Coverage 0.25% 2.70% 2.39% 2.28% Reserve to 2.40% Nonperforming Loan Loss Reserve to Total Loans Loans = 464% Net Chargeoffs/Average Loans 0.20% 1.92% 2.10% 1.67% 1.80% 0.15% 1.42% 1.35% 1.50% 1.20% 0.10% 0.90% 0.05% 0.60% 0.30% 0.10% 0.25% 0.20% 0.11% 0.09% 0.02% 0.00%
Slide 31: Average Deposits
Average Deposits Core Deposits* Fund Organic Loan Growth $3,500,000 $3,334,395 100% $3,088,598 98% $3,000,000 $2,797,929 97% 96% $2,505,195 $2,505,340 94% $2,500,000 $2,325,963 95% 95% 94% 93% 92% 92% $2,000,000 90% 88% $1,500,000 86% 84% $1,000,000 82% $500,000 80% 2011 2012 2013 2014 2015 YTD 2016
Slide 32: Deposit Breakdown
Deposit Breakdown Deposit Growth Key to Franchise Value Total Brokered Brokered Cost of Deposits CDARS Commercial CDs MMA 1.19% 0.98% $22,126 2.00% $711,278 $50,000 $40,758 0.63% 0.48% 0.51% 0.54% 1% 21% 1% 1% 0.00% 2011 2012 2013 2014 2015 YTD 2016 Total Retail Total Public $1,416,430 Fund 42% $1,1
Slide 33: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income 5.00% $120,000 $105,927 $102,303 $100,000 $92,080 $90,439 4.50% $87,671 $80,000 4.00% $60,000 $57,855 $51,764 3.50% $40,000 3.54% 3.28% 3.26% 3.32% 3.20% 3.23% 3.24% 3.00% $20,000 $0 2.50% 2011 2012 2013 2014 2015 YTD 2015 YTD 2016 Net Interes
Slide 34: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet due to floating rate commercial loan portfolio • 88% of loan portfolio consists of commercial loans – 68% of commercial loans are variable rate • Floors with average rate of 3.84% exist on 23% of commercial variable rate loans – The majo
Slide 35: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet 30.00% 25.18% 25.00% Percent Change From Base 20.00% 15.00% 10.00% 8.37% 3.99% 5.00% 1.96% 0.00% -1.27% -5.00% NII - Rates Down 100 NII - Rates Up 25 NII - Rates Up 50 NII - Rates Up 100 NII - Rates Up 300 1)Graph presents 12 month proje
Slide 36: Non-Interest Income
Non-Interest Income Stable, Fee-Based Strategy Drives Increases $35,000 50% $30,737 $31,479 $30,053 $30,000 45% Non-Interest Income/Total Revenue $25,196 40% $25,000 Non-Interest Income $22,205 35% $20,000 $15,508 30% 26% $15,110 $15,000 23% 23% 23% 22% 25% 21% $10,000 19% 20% $5,000 15% $0 10% 2011
Slide 37: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future $68,206 $66,166 $70,000 $62,778 $55,105 $57,742 $60,000 $50,000 $35,830 $40,000 $33,642 $30,000 $20,000 $10,000 $0 2011 2012 2013 2014 2015 YTD 2015 YTD 2016 YTD 2016 Growth 7% 37
Slide 38: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio 60% Indianapolis – Indianapolis and South Fishers and Clearwater Michigan Rd and Bend Market Expansion offices in Indianapolis Fort Wayne DT 55% 52% 50% 52% 51% 50% 50% 49% 48% 45% 47% 40% 2009 2010 2011 2012 2013 2014 2015 YT
Slide 39: Stable Healthy Dividend
Stable Healthy Dividend Significant Increase in Dividend Reflects Strength of Balance Sheet Dividend Payout Ratio of 35% $1.12 $1.20 $0.98 $1.00 $0.84 $0.76 $0.80 $0.68 $0.62 $0.60 $0.40 $0.20 $0.00 2011 2012 2013 2014 2015 2016 Annualized 2016 Growth 14% 39
Slide 40: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 7/19/16 LKFN: 1,100% SNL US Bank: 25% S&P 500 Bank: 9% SNL US Bank $1B-$5B: 159% 40
Slide 41: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence drives Shareholder Value 41
Slide 42: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM