Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q3 2021 Earnings Presentation
50 slides from Lakeland Financial's earnings presentation, 2021
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 2021 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. Forward-looking statements are not historical facts and
Slide 4: Bank Director's 2021 Scorecard
Bank Director’s 2021 Scorecard 4
Slide 5: Long Term Success for Shareholders
Long Term Success for Shareholders 8 Institutions (including LKFN) LTM ROE >14.5% Consecutive Increases in PTPP 30 Institutions Income Since 2012(3) Profitable for the Last 151 Institutions 10 Years(2) Exchange Traded Depositories 214 Institutions with Assets Between $1B and $10B(1) Source: S&P Glob
Slide 6: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share $26.66 Tangible Reserves $30.00 Common 8.1% Equity $25.00 91.9% $20.00 $15.00 Key Ratios and Per Share Data as of September 30, 2021 $10.00 TCE/Tangible Assets 10.92% $1.21 $5.00 Total Risk-Based 15.44% Leverage 10.91% $0.00 1995 1991 1993 19
Slide 7: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 51 branch offices - $6.2 billion banking assets - $3.0 billion trust, retirement and investment brokerage assets • Focused on execution – “blocking and tackling” • Continued growth potential 7
Slide 8: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth Record Net Income for 30 of 32 Years (000’s) $84,337 $100,000 $90,000 Compound Annual Growth 1991 – 2020 • Loans = 11% $80,000 • Deposits = 10% $70,000 • Net Income = 13% Net Income $60,000 • Earnings Per Share = 12% $50,000 $40,000 $30,000 $20,000 $2,707 $10,000
Slide 9: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Developing Markets 9
Slide 10: 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% 8.5% 8.2% 7.5% 7.3% 10.1% 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% 10.2% 3.9% 4.0% 4.0% 3.8% 8.4% 3.6% 9.5% 7.2% 5.7% 4.2% 4.1% 3.7% 3.4% 3.0%
Slide 11: 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 11
Slide 12: Experienced Relationship Driven Team
Commercial Banking Focus Experienced Relationship Driven Team • 41 credit “smart” commercial bankers • Average 23 years in banking & 12 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 structur
Slide 13: 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 14: 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 • Diversity, Equity and Inclusion initiatives underway • Our community involvement is real and critical to our strategy • Our culture has not been di
Slide 15: Organic Growth 2011 - 2021: Mature Market Deposit Performance
Organic Growth 2011 - 2021 Mature Market Deposit Performance 1 $2,650 $2,501 $2,180 $2,157 $2,150 Lake City Bank has grown $1,650 deposits by 110% over the last ten-year period. $1,150 $944 $650 $622 $499 $3… $296 $150 $51 -$215 -$350 Lake City Bank JPM Chase 1st Source Flagstar First Merchants Star
Slide 16: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 23% 2. PNC 14% 3. Merchants Bank 11% 4. Fifth Third 10% 12% 5. Huntington National 7% 6. BMO Harris 5% 7. Bank of America 5% 8. First Internet Bank 5% 9. National Bank of Indy 4
Slide 17: 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 2020 • Ten-year population growth of 4% through 2020 • State GDP percent increa
Slide 18: 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 = 22% CAGR • Capitalize on market disruption in our footprint to grow deposits • Emphasize checking account relationship products
Slide 19: Innovative and Competitive Technology is a Focus
Commitment to Technology and Cyber Risk Management Innovative and Competitive Technology is a Focus • Fintech partnerships play a growing role in our technology • Lake City Bank Digital, the next generation digital solution implemented in March 2021 • Technology partnership with FIS is strong – User
Slide 20: 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 2018 Total 2021 Total Change Branch Transactions 2,339,055 20% 2,027,652 15% (13)% ATM/ITM 941,512 8% 905, 213 6% (4)% Online Logins 4,969,352 41%
Slide 21: Lake City Bank Digital Adoption by Age Demographic
Lake City Bank Digital Adoption by Age Demographic September 2021 CUSTOMER BREAKDOWN DIGITAL ADOPTION Gen Z Millennial 10% 15% Gen X 29% 45% Baby Boomer Mature 41% 31% 25% 56% 19% 46% Gen Z 1996 – Current Millennial 1977 – 1995 Gen X 1965 – 1976 Baby Boomer 1946 – 1964 Mature 1945 or before 21
Slide 22: Technology Focused Solutions
Commitment to Technology and Cyber Risk Management Technology Focused Solutions 22
Slide 23: Financial Performance
Financial Performance (take City Bank
Slide 24: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers ROE and ROTE LTM Peer Data1 National Indiana 2.50% 20.00% ROE 12.0% 12.2% ROTE 13.6% 13.5% 2.30% 18.00% 16.64% 2.10% 15.57% 16.00% 16.51% 14.37% ROE and ROTE 1.90% 15.47% 13.59% 12.83% 14.00% 12.61% 1.70% 14.29% ROA 1.76%
Slide 25: Net Income and EPS
Net Income and EPS (000’s) Net income improves in 2021 $4.50 $100,000 $4.00 $87,047 $84,337 $80,411 $80,000 $3.50 $71,450 $3.38 $3.30 $3.00 $57,330 $3.13 $59,745 $60,000 Net Income $52,084 $2.50 $2.79 EPS $40,000 $2.23 $2.33 $2.00 $2.05 $1.50 $20,000 $1.00 $0 $0.50 2016 2017(1) 2018 2019 2020 YTD 20
Slide 26: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings (000’s) Margin Pressure Impacts Net Interest Income $140,000 4.00% Pretax Pre-Provision Earnings/Average Assets $118,646 $120,000 Pretax Pre-Provision Earnings $110,620 $105,344 3.50% $100,000 $92,634 $88,731 $87,063 $78,367 3.00% $80,000 $60,000 2.50% $40,000 2.40% 2.2
Slide 27: Average Loans
Average Loans Organic Loan Growth Despite Line Utilization Below Historical Standard (000’s) $5,000,000 150% $4,424,472 $4,468,891 $4,500,000 140% $3,974,532 $4,000,000 $3,843,912 130% $3,610,908 $3,500,000 $3,225,635 120% Loans to Deposit Ratio $3,000,000 110% Loans $2,500,000 100% $2,000,000 96% 9
Slide 28: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Commercial RE - Agri-business - Other Residential Construction Agriculture Commercial Mortgage $378,716 $324,080 $83,595 $173,689 9% 8% 2% 4% Home Equity Commercial RE - $161,941 Multifamily 4% $252,983 Installment - Other 6% Consumer $104,711 2% Commercial
Slide 29: Paycheck Protection Program
Paycheck Protection Program PPP Loan Forgiveness Accelerates Unearned Fees into Net Interest Income PPP Round 1 and Round 2 Outstanding Balances PPP Round 1 Highlights $600 $555 $558 • $571 million thru 2,409 loans • Average loan size $237,000 $500 • 98% of loans, or $539 million $412 forgiven as of
Slide 30: Average Deposits
Average Deposits Deposit Growth Impacted by PPP Loans and Federal Stimulus (000’s) $6,000,000 130% $5,280,361 Deposits as a Percent of Total Funding 120% $5,000,000 $4,650,597 $4,093,894 $4,242,524 110% $4,000,000 $3,757,209 $3,477,816 100% Deposits 98% 98% 99% $3,000,000 97% 97% 90% 95% 80% $2,000,
Slide 31: Deposit Breakdown
Deposit Breakdown Cost of Deposits at Historical Low Rates Brokered Deposits $11,654 Cost of Deposits 0% 3.00% 2.00% 1.19% 0.98% 1.10%1.35% 1.00% 0.63% 0.48% 0.50% 0.54% 0.72% 0.32% 0.29% 0.00% Total Total Retail 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Commercial $1,970,447 2021 $2,143
Slide 32: Net Interest Income
Net Interest Income Growth in Net Interest Income Offset by Margin Compression (000’s) $180,000 6.00% $163,008 Net Interest Margin, fully tax equivalent $160,000 $155,047 $151,271 5.50% $135,892 $140,000 $133,081 5.00% $118,481 $118,295 $120,000 Net Interest Income 4.50% $100,000 4.00% $80,000 3.43%
Slide 33: Interest Rate Sensitivity
Interest Rate Sensitivity Asset Sensitive Balance Sheet • Proactive deposit pricing FHLB/Other reductions $428,243 11% • 70% of Public Funds are tied to Fed Funds effective rate Fixed Rate 1 Month LIBOR $1,106,358 $1,285,646 • 90% of loan portfolio consists 29% 33% of commercial loans • Fixed rate c
Slide 34: Asset Quality: Nonperforming Assets
Asset Quality Asset Quality Trends Remain Stable Despite Increase in Nonperforming Loans 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% 8.17% 8.06% 7.46% 8.00% 6.64% 6.75% 2.00% 6.23% 5.75% 6.00% 4.64% 4.77% 4.28% 4.50% 4.43%
Slide 35: Asset Quality: Net Charge Offs and Reserve
Asset Quality Reserve Represents Strong Coverage with Stable Asset Quality Metrics 0.60% 2.70% 2.39% 2.28% 2.40% Net Charge Offs (Recoveries) to Average Loans 0.50% 2.15% Loan Loss Reserve to Total Loans 1.92% 2.10% 0.40% 1.76% 1.67% 1.80% 1.42% 1.45% 0.30% 1.50% 1.26% 1.23% 1.24% 1.25% 0.20% 1.20%
Slide 36: Non-Interest Income
Non-Interest Income Double Digit Growth in Wealth Advisory, Interchange and Merchant Card Fees (000’s) $50,000 $46,843 60% Non-Interest Income as % of Total Revenue $44,997 $45,000 $40,302 50% $40,000 $36,009 $35,061 $35,011 Non-Interest Income $35,000 $32,864 40% $30,000 $25,000 30% $20,000 23% 20%
Slide 37: Non-Interest Expense
Non-Interest Expense Elevated Growth Rate for Non-Interest Expense Results from Low 2020 Run-Rate (000’s) $100,000 $89,424 $91,205 $90,000 $86,229 $79,267 $79,361 $80,000 $72,978 $70,000 $66,293 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2016 2017 2018 2019 2020 YTD 2020 YTD 2021 2021 YOY In
Slide 38: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver Constant investment in technology and facilities 55% 52% 50% 51% 50% 50% 48% 48% 47% 47% 45% 46% 45% 45% 43% 40% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021 38
Slide 39: Stable Healthy Dividend
Stable Healthy Dividend Dividend Reflects Strength of Balance Sheet $1.30 5.00% $1.20 $1.16 4.50% $1.10 $1.00 $1.02 4.00% $0.90 $0.90 $0.85 Dividend per Share 3.50% Dividend Yield $0.73 $0.70 3.00% 2.91% 2.50% $0.50 2.40% 2.25% 2.27% 2.00% $0.30 1.95% 1.91% 1.77% 1.50% $0.10 1.00% 2016 2017 2018 201
Slide 40: LKFN Shareholder Value
0.00 500.00 (500.00) 1,000.00 1,500.00 2,000.00 3,000.00 3,500.00 2,500.00 5/14/2001 11/2/2001 4/24/2002 10/9/2002 3/28/2003 9/15/2003 3/3/2004 8/19/2004 LKFN 2/3/2005 7/18/2005 12/28/2005 6/9/2006 11/21/2006 5/8/2007 10/23/2007 4/11/2008 9/26/2008 3/10/2009 8/20/2009 2/2/2010 S&P US BMI Banks Index
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: Supplemental Information
Supplemental Information (take City Bank
Slide 43: COVID-19 Related Loan Deferrals
COVID-19 Related Loan Deferrals COVID-19 Loan Deferrals as of October 20, 2021 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 44: Liquidity
Liquidity Line of Credit Utilization September 30, 2021 44
Slide 45: Commercial Loans by County
Commercial Loans by County Commercial Customers in 46 Indiana Counties and 22 Other States Other IN Counties (1) Marshall 18% 5% Outside IN 6% Marion 12% Allen 17% Hamilton 9% Commercial Loans Outstanding as of Kosciusko 9% Elkhart 9/30/2021 15% St. Joseph $3.8 million 9% September 30, 2021 (000’s)
Slide 46: 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 78,988 1872 58% 12 6. Elkhart Elkhart 206,161 1990 26% 10 5. St. Joseph South Bend 271,484 1997 10% 4 3. Allen Fort Wayne 382,187 1999 12%
Slide 47: Mature Market Strength and Growth
Organic Growth Mature Market Strength and Growth (millions)1 2021 2021 2011 # of Deposits Share Deposits Share Increase Offices 1. Lake City Bank $4,778 18.74% $2,277 13.37% 109.84% 51 2. 1st Source $4,670 18.31% $2,513 14.75% 85.83% 53 3. JPM Chase $3,601 14.12% $1,421 8.34% 153.41% 21 4. PNC $1,76
Slide 48: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity CMCL CMO US Govt Treas 1.95% 0.07% 22.0% US Govt Agencies US Govt Remics Investments as a % of Assets 9.39% 6.41% 20.0% US Govt Pools 28.42% 18.0% 20.2% 16.0% 14.0% 14.1% Exempt Municipals 12.0% 13.6% 53.76% 12.9% 11.8% 11.5% 12.0% 12.3% 10.0% 2014 2015 201
Slide 49: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet 25.00% 20.09% 20.00% 15.00% 13.19% 10.00% 6.29% 5.00% 3.07% 1.51% 0.00% -1.71% -5.00% 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 presents 12 month projec
Slide 50: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM