Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q3 2020 Earnings Presentation
52 slides from Lakeland Financial's earnings presentation, 2020
Slide 1: A Proven History of Shareholder Value Creation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 3rd Quarter 2020 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: Top Banks
TOP 25 BANKS Profitability Capital Adequacy Asset Quality Core Core Tang Common NPAs/ Neos/ Rank CompanyName Ticker state Glin) "ta)” ame "U) Rank Assets)” Rank REDIGS) Rank 50." Rank Sore 1 RBB Bancorp RBB CA 1,691 1.84 4 12.99 23 14.09 10 0.21 18 -0.05 16 54.0 2 Bank of the Ozarks OZRK AR 21,276 e
Slide 5: Long Term Success for Shareholders
Long Term Success for Shareholders 5 Institutions (including LKFN) LTM ROE >13.5% Consecutive Increases in Net 21 Institutions Income Since 2010(3) Profitable for the Last 137 Institutions 10 Years(2) Exchange Traded Depositories 222 Institutions with Assets Between $1B and $10B(1) Source: S&P Globa
Slide 6: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share Tangible Reserves $24.90 $30.00 Common 8.4% Equity $25.00 91.6% $20.00 $15.00 Key Ratios and Per Share Data as of September 30, 2020 $10.00 TCE/Tangible Assets 11.41% $1.21 $5.00 Total Risk-Based 14.90% Leverage 11.07% $0.00 1999 1991 1993 19
Slide 7: COVID-19 Crisis Management
COVID-19 Crisis Management • Active Credit Risk Management • COVID-19 Related Loan Deferrals • Paycheck Protection Program • Liquidity Preparedness • Current Expected Loss (CECL) Standard Update 7
Slide 8: Active Credit Risk Management
Active Credit Risk Management Ongoing Assessment of Potential Risk Sectors - COVID-19 June 30, 2020 September 30, 2020 Education Education 0.9% Full Service 1.0% Restaurants Restaurants 1.0% 0.4% Entertainment & Recreation Entertainment & 0.7% Recreation 0.6% Hotel & Hotel & Accomodations Accomodati
Slide 9: COVID-19 Related Loan Deferrals
COVID-19 Related Loan Deferrals COVID-19 Loan Deferrals as of October 21, 2020 Credit Risk Management Efforts % of Total • All COVID-19 related loan deferrals remain on accrual status, each deferral is evaluated individually and Type of # of Loans Loan management has determined that all contractual
Slide 10: Paycheck Protection Program
Paycheck Protection Program Significant Positive Impact to Borrowers PPP Loans Outstanding as of October 22, 2020 PPP Highlights (000’s) PPP Loans through October 22, 2020: % $ % Size of Loan Number to Total of Loans to Total • 2,409 Loans $50 or less 1,236 51% $ 24,264 4% • $558 million $51 to $150
Slide 11: Liquidity Preparedness
Liquidity Preparedness • Overall utilization of credit lines was 41% as of September 30, 2020 down from 48% as of March 31, 2020 and 46% at December 31, 2019 • Expansion of funding sources has provided additional liquidity • Liquidity availability of $2.7 billion consists of access to: – FHLB Indian
Slide 12: Current Expected Credit Loss (CECL) Standard Update
Current Expected Credit Loss (CECL) Standard Update • Adoption anticipated during the fourth quarter of 2020 • CECL Day 1 impact is estimated to result in a $7.7 million increase to the allowance for credit losses, with an offset net of taxes to stockholders’ equity • Cumulative 2020 difference in p
Slide 13: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 50 branch offices - $5.6 billion banking assets - $2.1 billion trust and investment assets • Focused on execution – “blocking and tackling” • Continued growth potential 13
Slide 14: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth Record Net Income for 30 of 31 Years (000’s) $87,047 $100,000 $90,000 Compound Annual Growth 1991 – 2019 • Loans = 11% $80,000 • Deposits = 10% $70,000 • Net Income = 13% Net Income $60,000 • Earnings Per Share = 13% $50,000 $40,000 $30,000 $20,000 $2,707 $10,000
Slide 15: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Developing Markets Market Data Warsaw – 1872 22 offices Elkhart – 1990 11 offices South Bend – 1997 4 offices Fort Wayne – 1999 7 offices Indianapolis – 2011 6 offices 15
Slide 16: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Indiana Employment Trends Versus National Averages 12.0% 10.0% 9.5% 9.1% Unemployment 8.0% 8.2% 7.7% 7.3% 6.8% 10.1% 6.0% 9.4% 6.3% 8.4% 7.3% 5.2% 6.5% 5.0% 5.9% 4.0% 4.5% 4.5% 4.4% 10.2% 3.9% 4.0% 3.8% 5.7% 4.1% 9.5% 8.4% 7.2% 4.2% 3.7% 3.4% 3.6% 3.0% 3.2% 2.0%
Slide 17: 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 17
Slide 18: Experienced Relationship Driven Team
Commercial Banking Focus Experienced Relationship Driven Team • 40 credit “smart” commercial bankers • Average 20 years in banking & 11 years at Lake City Bank • We live where we lend • Face to face calling matters and is a team effort • We understand our client needs • Deep organizational structure
Slide 19: Credit Process
Commercial Banking Focus Credit Process • We are in-market lender to in-market clients • Character matters – we lend to people first • Our credit discipline has never changed • We focus on management/cash flow • We have a centralized committee structure • Structure is important • Orientation towards
Slide 20: Lake City Bank Culture
High Quality Team Members Lake City Bank Culture • Our culture is our greatest asset and we will preserve it • Lake City University drives our culture • Our community involvement is real and critical to our strategy • Our culture has not been diluted by acquisition 20
Slide 21: Organic Growth 2010 - 2020: Mature Market Deposit Performance
Organic Growth 2010 - 2020 Mature Market Deposit Performance 1 $2,150 $1,980 $1,757 $1,650 $1,399 Lake City Bank has grown deposits by 93% over the last $1,150 ten-year period. $824 $650 $341 $339 $202 $150 $83 -$83 -$350 -$328 Lake City Bank 1st Source JPM Chase Flagstar First Merchants Star Fifth
Slide 22: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 22% 2. PNC 14% 3. Fifth Third 9% 4. Huntington National 7% 12% 5. First Internet Bank 7% 6. BMO Harris 7% 7. KeyBank 6% 8. Bank of America 6% 9. Merchants Bank 5% 10. National B
Slide 23: A Strong Environment for Growth and Expansion
A Strong Environment for Growth and Expansion • #1 manufacturing state in the country(1) • CNBC named Indiana as #1 state for infrastructure • K-12 funding increased $1 billion since 2017 • Net population in-migration in 2019 • Economic expansion of 1.25% in 2019(2) (1) Based on per capita populatio
Slide 24: Core Deposits Fund Organic Loan Growth
Core Deposit Funding Core Deposits Fund Organic Loan Growth • Focus on core deposit growth in retail, commercial and public funds • Commercial deposit growth over 5 years = 18% CAGR • Capitalize on market disruption in our footprint to grow deposits • Emphasize checking account relationship products
Slide 25: Innovative and Competitive Technology is a Focus
Commitment to Technology and Cyber Risk Management Innovative and Competitive Technology is a Focus • Technology partnership with FIS is strong – User Planning Council and Strategic Planning Advisory Council • Fintech partnerships play a growing role in our technology strategy with an emphasis on di
Slide 26: Mobile Adoption is Growing Rapidly
Mobile Adoption is Growing Rapidly Channel Utilization Over Three Year Horizon(1) Total Total Three Channel Transactions % of Transactions % of Year Type 2017 Total 2020 Total Change Branch Transactions 2,439,894 21% 2,073,708 16% (15)% ATM/ITM 973,412 8% 891,756 7% (8)% Online Logins 4,729,525 41%
Slide 27: Lake City Bank Mobile App Adoption by Age Demographic
Lake City Bank Mobile App Adoption by Age Demographic September 2020 CUSTOMER BREAKDOWN MOBILE APP ADOPTION Gen Z Millennial 10% 14% 9% Gen X Baby Boomer 20% 39% Senior 32% 25% 33% 19% 48% Gen Z 1996 – Current Millennial 1977 – 1995 Gen X 1965 – 1976 Baby Boomer 1946 – 1964 Senior 1945 or before 27
Slide 28: Technology Focused Solutions
Commitment to Technology and Cyber Risk Management Technology Focused Solutions 28
Slide 29: Financial Performance
Financial Performance (take City Bank
Slide 30: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers ROE and ROTE LTM Peer Data1 2.50% National Indiana 20.00% ROE 8.3% 10.5% 2.30% ROTE 9.5% 11.8% 18.00% 16.64% 2.10% 15.57% 16.00% 16.51% ROE and ROTE 1.90% 15.47% 12.83% 13.04% 14.00% 12.45% 12.61% 1.70% ROA 1.76% 12.96% 1
Slide 31: Net Income and EPS
Net Income and EPS (000’s) Elevated Provision Impacts 2020 Performance $4.00 $100,000 $87,047 $3.50 $80,411 $80,000 $3.38 $3.00 $3.13 $64,849 $57,330 $59,745 $2.50 $60,000 Net Income $52,084 $2.52 $46,367 $2.33 EPS $2.23 $2.00 $40,000 $2.05 $1.84 $1.50 $20,000 $1.00 $0 $0.50 2015 2016 2017(1) 2018 2
Slide 32: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings (000’s) Demonstrates Consistent Operating Strength $120,000 3.50% Pretax Pre-Provision Earnings/Average Assets $110,620 $105,344 3.30% Pretax Pre-Provision Earnings $100,000 $92,634 3.10% $87,063 $82,741 $78,367 2.90% $80,000 $69,200 2.70% $60,000 2.50% 2.30% $40,000 2.
Slide 33: Average Loans
Average Loans (000’s) PPP Loans Impact Growth in 2020 $5,000,000 150% $4,500,000 $4,359,522 140% $3,974,532 $4,000,000 $3,843,912 130% $3,610,908 $3,500,000 $3,225,635 120% Loans to Deposit Ratio $3,000,000 $2,885,568 110% Loans $2,500,000 100% $2,000,000 96% 96% 90% 93% 93% 94% 94% $1,500,000 80% $
Slide 34: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Commercial RE - Agri-business - Other Residential Construction Agriculture Commercial Mortgage $393,101 $338,154 $97,533 $170,671 9% 7% 2% Commercial RE - 4% Home Equity $170,867 Multifamily 4% $279,713 Installment - Other 6% Consumer $116,297 3% Commercial
Slide 35: Average Deposits
Average Deposits Core Deposits Grow by 14% or $572 Million Year-over-Year (000’s) $5,000,000 130% $4,546,899 $4,500,000 $4,242,524 Deposits as a Percent of Total Funding $4,093,894 120% $4,000,000 $3,757,209 $3,477,816 110% $3,500,000 $3,088,598 100% Deposits $3,000,000 97% 97% 97% 98% 98% $2,500,00
Slide 36: Deposit Breakdown
Deposit Breakdown Deposit Growth Key to Franchise Value Brokered Deposits $29,702 1% Cost of Deposits 2.00% 1.35% 1.40% 1.19% 0.98% 1.10% 1.00% 0.63% 0.48% 0.50% 0.54% 0.72% 0.71% 0.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD YTD Total Total Retail 2019 2020 Commercial $1,722,249 $1,803,873
Slide 37: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income Offset by Margin Compression (000’s) $160,000 $155,047 6.00% $151,271 $135,892 $140,000 5.50% $118,481 $118,295 $120,000 $116,165 5.00% $105,927 Net Interest Income Net Interest Margin $100,000 4.50% $80,000 4.00% 3.43% 3.38% 3.40% 3.33% $60,0
Slide 38: Interest Rate Sensitivity
Interest Rate Sensitivity Commercial Loan Portfolio Pricing Composition • Proactive deposit pricing FHLB/Other $383,375 reductions concurrent with 9% FOMC easing • 54% of Public Funds are tied to 1 Month LIBOR $1,136,142 27% Fed Funds effective rate • 90% of loan portfolio consists Fixed Rate $1,787
Slide 39: Asset Quality: Nonperforming Assets to Total Assets
Asset Quality Nonperforming Levels are Low Despite Economic Challenges 5.00% 14.00% Impaired and Watch List Loans to Total Loans Nonperforming Assets to Total Assets 4.00% 12.00% 3.00% 10.00% 8.86% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 5.75% 5.49% 6.00% 4.64% 4.77% 4.28% 4.50% 4.43% 4.82% 1.00% 0.42%
Slide 40: Asset Quality: Net Chargeoffs to Average Loans
Asset Quality Allowance for Loan Losses increases by 20% or $10 million since year-end 2019 0.60% 2.70% 2.39% 2.28% 2.40% 0.50% 2.15% Loan Loss Reserve to Total Loans 2.10% Net Chargeoffs to Average Loans 1.92% 0.40% 1.80% 1.51% 0.30% 1.67% 1.50% 1.59% 1.42% 0.20% 1.32% 1.20% 1.26% 1.23% 1.24% 1.25%
Slide 41: Non-Interest Income
Non-Interest Income Mortgage Banking and Swap Fee Revenue are Bright Spots in 2020 (000’s) $50,000 60% Non-Interest Income as % of Total Revenue $44,997 $45,000 $40,302 50% $40,000 $36,009 $33,878 $35,061 $35,000 $32,864 Non-Interest Income $31,479 40% $30,000 $25,000 30% $20,000 23% 23% 20% $15,000
Slide 42: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future (000’s) $100,000 $86,229 $89,424 $90,000 $79,267 $80,000 $72,978 $68,206 $67,302 $66,293 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2015 2016 2017 2018 2019 YTD 2019 YTD 2020 2020 YOY
Slide 43: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio Constant investment in technology and facilities 60% Indianapolis Michigan Road Indianapolis North and and Fort Wayne Indianapolis South Bend Downtown Indianapolis Fishers and Downtown Greenwood Indianapolis Expansion Clearwat
Slide 44: Stable Healthy Dividend
Stable Healthy Dividend Dividend Reflects Strength of Balance Sheet $1.30 3.00% $1.16 2.91% $1.10 $1.00 2.72% 2.50% $0.90 $0.85 Dividend per Share 2.40% Dividend Yield $0.73 2.25% $0.70 2.00% $0.63 2.10% 1.95% $0.50 1.77% 1.50% $0.30 $0.30 $0.30 $0.10 1.00% 2015 2016 2017 2018 2019 3Q19 3Q20 Dividen
Slide 45: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 9/30/20 2,500.00 2,000.00 1,500.00 1,549.80% 1,000.00 500.00 276.56% 99.47% 0.00 54.87% (500.00) LKFN-Total Return (Daily)(%) S&P 500-Total Return (Daily)(%) SNL U.S. Financial Institutions-Total Return (Daily)(%) S&P 500 Financials-To
Slide 46: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 46
Slide 47: Supplemental Information
Supplemental Information (take City Bank
Slide 48: Larger Market Organic Expansion
Organic Growth Larger Market Organic Expansion State LCB LCB Deposit Rank County Primary City Population* Entry Market Share** # of Branches 20. Kosciusko Warsaw 79,456 1872 58% 12 6. Elkhart Elkhart 206,341 1990 23% 9 5. St. Joseph South Bend 271,286 1997 9% 4 3. Allen Fort Wayne 379,299 1999 14% 5
Slide 49: Mature Market Strength and Growth
Organic Growth Mature Market Strength and Growth (millions)1 2020 2020 2010 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $4,433 19.68% $2,676 15.68% 65.66% 53 2. Lake City Bank $4,113 18.26% $2,133 12.50% 92.83% 50 3. JPM Chase $2,992 13.29% $1,593 10.81% 87.82% 22 4. PNC $1,626
Slide 50: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity CMCL CMO 6.08% 17.0% Investments as a % of Assets US Govt US Govt Remics 16.0% Agencies 12.77% 1.56% 15.0% US Govt Pools 14.0% 25.78% 13.0% 14.1% Taxable Municipals 12.0% 12.9% 12.9% 0.08% 11.0% 11.8% 11.5% 12.0% 12.3% Exempt Municipals 53.73% 10.0% 2014 20
Slide 51: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet 16.00% 15.06% 14.00% 12.00% 9.89% 10.00% 8.00% 6.00% 4.98% 4.00% 2.34% 2.00% 1.16% 0.00% -2.00% -1.28% -4.00% NII - Rates Down 25 NII - Rates Up 25 NII - Rates Up 50 NII - Rates Up 100 NII - Rates Up 200 NII - Rates Up 300 Graph
Slide 52: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM