Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q3 2023 Earnings Presentation
64 slides from Lakeland Financial's earnings presentation, 2023
Slide 1: Lakeland Financial Corporation 3rd Quarter 2023
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 3rd Quarter 2023 LKFN LISTED
Slide 2: Executive contacts
David M. Findlay Chief Executive Officer david.findlay@lakecitybank.com (574) 267-9197 Kristin L. Pruitt President kristin.pruitt@lakecitybank.com (574) 371-9220 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. Forward-looking statements are not historical facts and
Slide 4: Long Term Success for Shareholders
Long Term Success for Shareholders 9 Institutions (including LKFN) LTM LTM ROE >13% ROE >13% Consecutive Increases in PTPP 15 Institutions Income Since 2012(3) Profitable for the Last 162 Institutions 10 Years(2) Exchange Traded Depositories 196 Institutions with Assets Between $1B and $10B(1) Sourc
Slide 5: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share $30.48 * $35.00 Tangible Common Allowance for Credit Losses $30.00 Equity 8.3% 91.7% $21.60 $25.00 $20.00 Key Ratios and Per Share Data as of $15.00 September 30, 2023 TCE/Tangible Assets 8.62% $10.00 Adj. TCE/Adj. Tangible Assets 11.74% Tota
Slide 6: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 53 branch offices - $6.4 billion banking assets - $3.0 billion trust, retirement and investment brokerage assets • Focused on execution – “blocking and tackling” • Continued growth potential 6
Slide 7: 32 Years of Organic Growth
32 Years of Organic Growth Record Net Income for 32 of 34 Years $103,817 (000’s) $120,000 $100,000 Compound Annual Growth 1991 – 2022 • Loans = 11% • Deposits = 10% $80,000 • Net Income = 12% • Earnings Per Share = 12% $60,000 $40,000 $2,707 $20,000 $0 1991 1992 1993 1994 1995 1996 1997 1998 1999 20
Slide 8: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Expanding Markets 8
Slide 9: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Unemployment Rate In The Lake City Bank Footprint Is Consistent With The National Average 12.0% 10.0% 9.1% 8.0% 8.5% Unemployment 8.2% 7.5% 7.3% 6.0% 9.4% 6.3% 8.4% 7.3% 7.2% 5.3% 5.2% 5.0% 5.9% 4.0% 4.5% 4.5% 4.4% 3.9% 3.9% 3.8% 3.8% 4.0% 4.0% 3.7% 3.6% 9.5% 8.
Slide 10: Lake City Bank Balance Sheet Dynamics
Lake City Bank Balance Sheet Dynamics 1. Capital Strength 2. Diversified Deposit Composition 3. Liquidity Availability 4. Investment Securities Portfolio 5. Asset Liability Management 10
Slide 11: Fortress Balance Sheet in Excess of Regulatory Capital Requirements
Fortress Balance Sheet in Excess of Regulatory Capital Requirements LKFN Above Peer Long-Term Profitability has Contributed to a Strong Capital Foundation Proxy Peer Average RBC Q2’23 14.5% 16.0% 15.1% 15.0% 14.0% 13.3% 13.0% 12.0% 11.0% Well Capitalized Threshold 10.0% for Consolidated Risk-Based C
Slide 12: Stable Deposit Base
Stable Deposit Base • Daily monitoring of liquidity position, large depositor fluctuation report, uninsured deposit balances, and significant daily balance fluctuations • Depositors greater than $10 million totaled $1.79 billion at March 6, 2023, and $2.10 billion on October 16, 2023, an increase of
Slide 13: Deposit Composition Provides Diversification
Deposit Composition Provides Diversification Commercial Deposits Increase Share of Total Deposits Brokered Brokered Deposits Deposits $177,430 $113,528 3% 3% Total Commercial Total Total Retail $1,276,047 Commercial $1,761,235 31% Total Retail $2,154,853 31% $1,617,133 38% 39% Total Public Total Pub
Slide 14: Diversified Deposit Base
Diversified Deposit Base Deposits Are Not Concentrated to Any Industry or Client • Deposit composition has remained stable with commercial deposits increasing as a percent of total deposits • Lake City Bank had 127,108 deposit accounts at September 30, 2023. 124,380, or 98%, of those accounts are le
Slide 15: Checking Accounting Trends by Deposit Sector
Checking Accounting Trends by Deposit Sector Commercial Accounts Grow by Double Digits since December 2019 (000) $2,500,000 Checking Account Average Balances by Deposit Type (000) Public $2,000,000 Commercial Retail Funds $2,020,847 9/30/23 $132 $15 $5,917 $1,932,875 $1,912,065 Checking Account Bala
Slide 16: Liquidity Overview
Liquidity Overview • Available liquidity is stable $3.3 billion, up from $2.9 billion at June 30, 2023 • Sources of liquidity are varied and represent wholesale funding and brokered deposits • Brokered deposits represent 3% of total deposits • Noncore funding represented 5% of total deposits and pur
Slide 17: Liquidity Preparedness
Liquidity Preparedness September 30, 2023 Additional Loan Collateral Liquidity Available for (000) Availability Used Unused/ Available Pledge Secured/Committed Borrowings: Federal Home Loan Bank-Indianapolis(1) $ 582,245 $ 90,000 $ 492,245 $ -- Federal Reserve Bank Discount Window 1,291,010 -- 1,291
Slide 18: Investment Portfolio
Investment Portfolio Investment Portfolio as a Percent of Total Assets is Expected to Trend Lower Through Receipt of Cash Flows 25% US Govt US Govt Treas 21% Agencies 0.3% 20% 10.7% MV Investments as a % of Assets 20% US Govt Remics 9.0% 15% 17% 14% 13% 14% US Govt Pools 10% 12% 12% 12% 12% HTM Muni
Slide 19: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet 15.00% 10.00% 6.83% 4.57% 5.00% 2.30% 0.61% 1.18% 0.00% -0.77% -1.58% -5.00% -3.26% -7.02% -10.00% -11.21% -15.00% -20.00% NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rate
Slide 20: Evolution of Deposit and Loan Betas
Evolution of Deposit and Loan Betas Fed Tightening in 2022-2023 Has Been More Aggressive Than Past Cycles • NIM expanded 102 basis points from 4Q21 through 4Q22 due to asset sensitive balance sheet and lagged deposit rate increases • Total cumulative deposit beta of 46% from March 2022 to September
Slide 21: Interest Rate Sensitivity
Interest Rate Sensitivity Asset Sensitivity Attributable to Commercial Loan Portfolio • Cost of deposits increased due to FHLB/Other $545,308 deposit mix shift from DDA to interest 13% bearing products, increased competition for deposits, and liquidity SOFR $1,057,197 Fixed Rate used to fund loan gr
Slide 22: 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 22
Slide 23: Commercial Banking Focus
Commercial Banking Focus Experienced Relationship Driven Team • 41 credit “smart” commercial bankers • Average 24 years in banking & 13 years at Lake City Bank • We live where we lend • Face to face calling matters and is a team effort • We understand our clients’ needs • Deep organizational structu
Slide 24: Credit Process
Credit Process Commercial Banking Focus • Our credit discipline has never changed • We have a centralized committee structure • We are in-market lender to in-market clients • Character matters – we lend to people first • We focus on management/cash flow • Structure is important and is disciplined •
Slide 25: Corporate Social Responsibility
Corporate Social Responsibility Over 150 Years of Focusing on Our Customers, Employees and Our Communities • Supporting our communities since 1872 • Caring for and building a diverse and inclusive team • Delivering loan and deposit products to our communities • Developing strong cybersecurity contro
Slide 26: Lake City Bank Culture
Lake City Bank Culture High Quality Team Members • Our culture is our greatest asset and we will preserve it • Lake City University drives our culture • Diversity, Equity and Inclusion are ongoing initiatives that create a culture of belonging • Our community involvement is real and critical to our
Slide 27: Mature Market Deposit Performance
Mature1 Market Deposit Performance Organic Growth 2013 – 2023 $3,000 $2,631 $2,419 $2,500 Lake City Bank has grown $1,975 deposits by 100% over the $2,000 $1,500 last ten-year period. $1,000 $500 $483 $459 $417 $359 $221 $0 -$500 -$300 -$1,000 -$1,500 -$1,472 -$2,000 1st Source Lake City Bank JPM Ch
Slide 28: Organic Growth: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Share of Deposit Market Share Indianapolis Market Banks Market 1. JPM Chase 20% 2. Merchants Bank 16% 3% 3. PNC 13% 4. Fifth Third 9% 5. Huntington National 7% 6. Bank of America 5% 7. First Internet Bank 5% 8. BMO Harris 5% 9. National Bank of Indy 3%
Slide 29: A Strong Environment for Growth and Expansion
A Strong Environment for Growth and Expansion • Indiana #1 manufacturing state in the country(1) • Manufacturing jobs decreased slightly by 0.6% from 543,600 to 540,600 from August ‘22 to August ‘23(2) • Indiana unemployment at 3.4% as of August 2023(3) • Indiana ranked 14 in CNBC’s “America’s Top S
Slide 30: Commitment to Technology
Commitment to Technology Innovation and Competitive Technology is a Focus • Fintech partnerships play a significant role in our technology stack and enable delivery of innovative solutions to our customers • Investments in Lake City Bank Digital, a Q2 product implemented in 2021 with ongoing functio
Slide 31: Channel Utilization over Three-year Horizon
Channel Utilization over Three-year Horizon Number of Bank Transactions Increase by 7% Over Three Years Total Total Three Channel Transactions % of Transactions % of Year Type 2020(1) Total 2023(1) Total Change Branch Transactions 2,073,708 16% 2,064,617 15% 0% ATM/ITM 891,756 7% 815,366 6% (9)% Onl
Slide 32: Customer Composition and Digital Adoption
Customer Composition and Digital Adoption Digital Platform Upgrade in March of 2021 Positively Impacting Digital Adoption Across All Generations Customer Composition and Digital Adoption Over Three Years Customer Generation Breakdown 9/30/23 9/30/22 9/30/21 Gen Z (1996 - Current) 17% 53% 49% 41% Mil
Slide 33: Financial Performance
Qoake City Bank Financial Performance
Slide 34: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National Peers and Contributes to Strong Capital Levels ROAE and ROATE LTM Peer 22.00% Average Data1 National Indiana 2.70% ROAE 10.8% 11.0% 20.00% ROATE 12.9% 12.7% 17.52% 16.64% 18.00% 15.57% 14.53% 2.20% 17.40% 16.00% 16.51% 14.27% ROAE and ROAT
Slide 35: Net Income and EPS
Net Income and EPS Core Operational Profitability Declines by 2% in 2023 $103,817 $4.50 $100,000 $95,733 $4.00 $87,047 $84,337 $80,411 $4.04 $77,840 $76,356 $3.50 $80,000 $3.74 $3.38 $3.30 $64,141 $3.00 $3.13 Net Income $60,000 $3.03 $2.97 $2.50 EPS $2.49 $40,000 $2.00 $1.50 $20,000 $1.00 $0 $0.50 2
Slide 36: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings Core Pretax Pre-Provision Earnings Improve by 1% $160,000 6.00% $140,000 $134,539 5.00% Pretax Pre-Provision Earnings/Average Assets $118,646 $118,521 $120,000 $110,620 $105,344 Pretax Pre-Provision Earnings 4.00% $100,000 $94,617 $96,029 $79,821 $80,000 3.00% $60,000 2
Slide 37: Average Loans
Average Loans Average YTD Loan Growth of $410 million or 9% Compared to Prior Year $5,000,000 $4,791,430 $4,424,472 $4,421,094 $4,427,166 120% $4,500,000 $3,974,532 $4,000,000 $3,843,912 110% $3,500,000 100% Loans to Deposit Ratio $3,000,000 95% 90% $2,500,000 94% 94% Loans $2,000,000 87% 80% 83% $1
Slide 38: Line of Credit Utilization
25% 35% 45% 55% 65% 75% 85% 95% $1,664 $1,806 3,470 $1,696 $1,737 3,433 3,413 $1,616 $1,797 3,407 $1,669 $1,738 3,416 $1,630 $1,785 48% 49% 47% 49% 48% 3,429 $1,593 $1,835 46% PPP 3,423 Round 1 $1,637 $1,785 48% 3,539 $1,473 $2,066 3,554 $1,446 $2,109 PPP Round 2 $1,499 $2,044 3,544 42% 41% 42% 3,60
Slide 39: Commercial DDA Line of Credit Utilization vs. Commercial DDA
Line of Credit Utilization 30% 35% 40% 45% 50% 55% 60% 50% Dec-13 $389,051 51% Dec-14 $467,458 50% Dec-15 $572,966 52% Dec-16 $660,360 54% Dec-17 $740,576 52% Mar-18 $684,511 51% Jun-18 $689,450 Commercial DDA Sep-18 $730,373 48% 49% Dec-18 $775,947 47% Mar-19 $761,686 49% Jun-19 $772,995 48% Sep-19
Slide 40: Loan Portfolio Breakdown
Loan Portfolio Breakdown C&I Drives Lending Business Agri-business - Other Residential Agriculture Commercial Mortgage Commercial RE - $380,528 $125,939 $247,114 Construction 8% 2% 5% $633,920 Home Equity 13% $189,611 4% Installment - Other Commercial RE - Multifamily Consumer $236,581 $106,625 5% 2
Slide 41: Top Industry Concentrations
Top 10 Industry Concentrations Loan Portfolio is Diversified- Commercial Office Space Represents 1.5% of Loans Lessors of Nonresidential Automobile Dealers Nonbank Lenders Buildings $116,794 $110,029 Misc. Durable Goods $130,402 2% 2% Merchant Wholesalers 3% $105,206 2% Senior Living $156,496 3% Res
Slide 42: Average Deposits
Average Deposits Pandemic’s Deposit Surge Abates in 2023 (000’s) 150% $6,000,000 $5,717,358 $5,537,379 140% $5,357,284 130% $5,000,000 $4,650,597 Deposits as a Percent of Total Funding $4,093,894 $4,242,524 120% $4,000,000 110% Deposits 100% $3,000,000 98% 98% 99% 100% 97% 96% 90% $2,000,000 80% 70%
Slide 43: Deposit Breakdown
Deposit Breakdown Deposit Costs Rise in Response to Interest Rate Environment and Increased Competition Brokered Deposits 3.00% Cost of Deposits $177,430 2.31% 3% 2.00% 1.35% 1.19% 1.10% 0.98% 1.00% 0.63% 0.48% 0.50% 0.54% 0.72% 0.63% 0.63% 0.28% 0.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 20
Slide 44: Public Fund Deposit Trends
$100,000 $300,000 $500,000 $700,000 $900,000 -$100,000 $1,100,000 $1,300,000 $1,500,000 $1,700,000 Mar-17 $1,235,687 Jun-17 $1,225,991 Sep-17 $1,149,765 Dec-17 $1,2351,119 Mar-18 $1,291,170 Jun-18 $1,225,127 Checking and MMA Sep-18 $1,250,576 Dec-18 $1,215,533 Mar-19 $1,211,148 Jun-19 $1,253,704 CDs
Slide 45: Net Interest Income
Net Interest Income Year-to-date Net Interest Margin Improvement in 2023 (000’s) $250,000 5.00% $202,887 Net Interest Margin, fully tax equivalent $200,000 4.50% $178,088 Net Interest Income $163,008 $151,271 $155,047 $146,050 $148,436 $150,000 4.00% 3.43% 3.38% 3.40% $100,000 3.50% 3.19% 3.07% 3.33
Slide 46: Asset Quality: Nonperforming Assets
Asset Quality Watchlist Loans as a Percentage of Total Loans Remain at Historic Lows 5.00% 14.00% 4.00% Watch List Loans to Total Loans excluding PPP 12.00% Nonperforming Assets to Total Assets 3.00% 10.00% 8.86% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 6.75% 5.75% 5.50% 6.00% 4.64% 4.77% 4.28% 4.50% 4.4
Slide 47: Asset Quality: Net Chargeoffs and Allowance
Asset Quality Allowance for Credit Losses Represents Strong Coverage 0.60% 2.70% 2.39% 2.28% 2.40% 0.50% 2.15% ACL to Total Loans, excluding PPP 2.10% Net Chargeoffs to Average Loans 1.92% 0.40% 1.67% 1.80% 1.59% 1.59% 1.54% 1.45% 1.48% 0.30% 1.42% 1.50% 1.26% 1.23% 1.24% 1.25% 0.20% 1.20% 0.90% 0.1
Slide 48: Noninterest Income
Noninterest Income Noninterest Income as a Percentage of Total Revenue Stable at 18% (000’s) $50,000 $46,843 60% $44,997 $44,720 Non-Interest Income as % of Total Revenue $45,000 $40,302 $41,862 50% $40,000 Non-Interest Income $35,000 $32,650 $31,343 40% $30,000 $25,000 30% $20,000 20% $15,000 22% 2
Slide 49: Total Revenue
Total Revenue Revenue Growth Benefited by Loan Growth and Improvement in Noninterest Income (000’s) $300,000 $244,749 $250,000 $222,808 $209,851 $200,044 $200,000 $191,573 $177,393 $181,086 $150,000 $100,000 $50,000 $0 2018 2019 2020 2021 2022 YTD 2022 YTD 2023 2023 YOY Increase 2% 49
Slide 50: Non-Interest Expense
Non-Interest Expense Core Noninterest Expense Growth at 3% for 2023 (000’s) $120,000 $110,210 $104,287 $101,265 $100,000 $91,205 $89,424 $86,229 $82,776 $85,057 $80,000 $60,000 $40,000 $20,000 $0 2018 2019 2020 2021 2022 YTD 2022 YTD 2023 YTD 2023 12023 Year to date noninterest expense adjusted refl
Slide 51: Efficiency Ratio
Efficiency Ratio Adjusted Core Efficiency Ratio of 47% Excludes Impact of Wire Fraud Loss 70% Constant investment in technology and facilities 60% 50% 56% 51% 52% 50% 50% 48% 47% 47% 40% 46% 45% 45% 45% 43% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD 12023 Year to date
Slide 52: Stable Healthy Dividend
Stable Healthy Dividend Growth in Dividend Reflects Strength of Capital 5.00% $1.70 $1.60 4.50% $1.50 $1.38 $1.36 4.00% $1.30 $1.20 $1.20 $1.16 3.88% Dividend per Share 3.50% Dividend Yield $1.10 $1.00 3.00% $0.90 2.40% $0.70 2.25% 2.24% 2.19% 2.50% $0.50 1.70% 2.20% 2.00% $0.30 1.50% $0.10 1.00% 20
Slide 53: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 9/30/23 3,500.00 3,000.00 2,500.00 1,940.19% 2,000.00 1,500.00 1,000.00 403.26% 500.00 126.75% 104.69% 0.00 (500.00) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 LKF
Slide 54: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 54
Slide 55: Supplemental Information
Supplemental Information Qoake City Bank
Slide 56: Lake City Bank Capital Adequacy
Lake City Bank Capital Adequacy Capital Strength Continues in September 2023 Non-GAAP Non-GAAP Non-GAAP Adjusted September Well- Capital AOCI and Excess Capital Regulatory Ratio 30, 2023 Capitalized Cushion HTM Capital Ratios with Description * Actual Threshold (in 000’s) Losses- after AOCI AOCI and
Slide 57: Lake City Bank Uninsured Deposits
Lake City Bank Uninsured Deposits Public Funds Account for 28% of Total Uninsured Deposits $6,000 100% 90% $5,000 80% 70% Uninsured deposits % of Deposits $4,000 56% 60% 54% 54% 54% Deposits $3,000 50% 40% $2,000 30% 30% 29% 28% 28% 20% $1,000 10% $1,135 $1,334 $1,625 $1,996 $1,991 $2,017 $2,068 $2,
Slide 58: Investment Securities Overview
Investment Securities Overview Excess Liquidity Deployed to Investment Security Portfolio • Excess liquidity of $1 billion deployed to investment portfolio during 2020-2022 • Investment portfolio longer duration offsets shorter duration of loan portfolio for interest rate risk management • The inves
Slide 59: Investment Portfolio Analysis
Investment Portfolio Analysis Investment Portfolio Declines as a Percentage of Total Assets in 2023 9/30/2023 12/31/2022 Weighted Market % of Weighted Market % of Maturity Value Total Maturity Value Total US Govt REMICS 6.26 97,237 9% 5.97 114,355 9% US Govt Pools 7.35 332,425 31% 7.34 377,953 29% U
Slide 60: Investment Security Portfolio Cashflows
Investment Security Portfolio Cashflows Cash Flows of $353 million Expected Through June 2027 (000) Investment Portfolio has generated $158 million in cash flow and 30,000,000 proceeds from sales YTD through September 30, 2023 8,088,714 25,000,000 8,954,132 8,748,475 7,593,383 8,414,118 8,946,831 7,
Slide 61: Commercial Loans by County
Commercial Loans by County Commercial Customers in 46 Indiana Counties and 22 Other States Other IN Marshall Counties (1) 4% 17% Outside IN 6% Marion 14% Allen Hamilton 18% 8% Commercial Loans Kosciusko Outstanding as of 10% Elkhart 9/30/2023 St. Joseph 14% $4.3 billion 9% September 30, 2023 (000’s)
Slide 62: Larger Market Organic Expansion
Larger Market Organic Expansion Organic Growth State LCB LCB Deposit Rank County Primary City Population* Entry Market Share** # of Branches 21. Kosciusko Warsaw 80,826 1872 64% 12 6. Elkhart Elkhart 206,890 1990 23% 11 5. St. Joseph South Bend 272,234 1997 8% 4 3. Allen Fort Wayne 391,449 1999 12%
Slide 63: Mature Market Strength and Growth
Mature Market Strength and Growth Organic Growth (millions)1 2023 2013 2023 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $5,258 19.69% $2,627 14.33% 100.15% 53 2. Lake City Bank $4,828 18.08% $2,409 13.14% 101.42% 53 3. JPM Chase $3,651 13.68% $1,676 9.14% 117.84% 20 4. PNC $1,6
Slide 64: Lake City Bank
5 Qvake City Bank LAKECITYBANK.COM