Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q1 2022 Earnings Presentation
50 slides from Lakeland Financial's earnings presentation, 2022
Slide 1: Lakeland Financial Corporation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 1st Quarter 2022 LKFN LISTED
Slide 2: Celebrating 150 Years of Community
1872/2022 CELEBRATING 150 YEARS OF COMMUNITY
Slide 3: 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 3
Slide 4: 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 5: Bank Director's 2021 Scorecard
Bank Director’s 2021 Scorecard 5
Slide 6: Long Term Success for Shareholders
Long Term Success for Shareholders 10 Institutions (including LKFN) LTM ROE >13% Consecutive 23 Institutions Increases in PTPP Income Since 2012(3) 163 Institutions Profitable for the Last 10 Years(2) 212 Institutions Exchange Traded Depositories with Assets Between $1B and $10B(1) Source: S&P Capit
Slide 7: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share $30.00 Reserves Tangible 8.3% $23.71 Common Equity 91.7% $25.00 $20.00 $15.00 Key Ratios and Per Share Data as of March 31, 2022 $10.00 TCE/Tangible Assets 9.22% Total Risk-Based 15.15% $5.00 Leverage 10.47% $1.21 Book Value $23.86 $0.00 Tang
Slide 8: Interest Rate Sensitivity
Interest Rate Sensitivity Highly Asset Sensitive Balance Sheet FHLB/Other • Every 25 basis point move up in the $507,668 federal funds rate is expected to 13% improve margin by 6-8 basis points 1 Month LIBOR Fixed Rate • Fixed rate loans have shorter, $785,760 20% $1,267,087 average terms of 5 years
Slide 9: Lake City Bank Today
Lake City Bank Today •A long-term and consistent organic growth story •Headquartered in Warsaw, Indiana •52 branch offices - $6.6 billion banking assets - $2.9 billion trust, retirement and investment brokerage assets •Focused on execution – “blocking and tackling” •Continued growth potential 9
Slide 10: Net Income: Years of Organic Growth
30 Years of Organic Growth Record Net Income for 31 of 33 Years (000’s) $120,000 $95,733 $100,000 Compound Annual Growth 1991 – 2021 • Loans = 11% • Deposits = 11% $80,000 • Net Income = 13% Net Income • Earnings Per Share = 12% $60,000 $40,000 $20,000 $2,707 $0 1999 2009 2019 1991 1992 1993 1994 19
Slide 11: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Expanding Markets 11
Slide 12: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Indiana Unemployment Rate is Significantly Lower Than the National Average 14.0% 13.0% 12.0% Unemployment 10.0% 9.5% 8.7% 8.0% 8.1% 11.9% 7.0% 6.6% 9.6% 6.0% 9.0% 9.0% 5.8% 5.2% 6.9% 4.9% 5.6% 4.0% 4.4% 5.1% 4.1% 4.1% 4.7% 4.3% 3.8% 4.1% 11.3% 3.8% 3.7% 9.6% 9.0
Slide 13: 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
Slide 14: Commercial Banking Focus
Commercial Banking Focus Experienced Relationship Driven Team • 39 credit “smart” commercial bankers • Average 23 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 15: 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 16: Corporate Social Responsibility
Corporate Social Responsibility 150 Year History of Focusing on Our Customers, Employees and Our Communities • Supporting our communities since 1872 • Building and caring for our team • Delivering loan products to our communities • Supporting financial literacy • Protecting our customers and their d
Slide 17: 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 initiatives underway • Our community involvement is real and critical to our strategy • Our culture has not been di
Slide 18: Mature Market Deposit Performance
Mature1 Market Deposit Performance Organic Growth 2011 - 2021 $2,650 $2,501 $2,180 $2,157 $2,150 Lake City Bank has grown deposits by $1,650 110% over the last ten-year period. $1,150 $944 $650 $622 $499 $322 $296 $150 $51 -$215 -$350 Lake City Bank JPM Chase 1st Source Flagstar First Merchants Star
Slide 19: Organic Growth: 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% 12% 4. Fifth Third 10% 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 20: A Strong Environment for Growth and Expansion
A Strong Environment for Growth and Expansion • Indiana #1 manufacturing state in the country(1) • Manufacturing jobs increased 1.54% from December 2019 to December 2021(2) • U.S. Census Bureau announced Indiana’s population grew by 4.7% between 2010 and 2020 • Indiana unemployment at 2.7% as of Dec
Slide 21: Core Deposit Funding
Core Deposit Funding Core Deposit Growth Adds Liquidity to Balance Sheet • Deposit surge from PPP funding and stimulus • DDA growth over two years of 78% – Retail growth of 91% – Commercial growth of 77% • Capitalize on market disruption in our footprint to grow deposits • Emphasize checking account
Slide 22: Commitment to Technology and Cyber Risk Management
Commitment to Technology and Cyber Risk Management Innovation and Competitive Technology is a Focus • Fintech partnerships play a growing role in our technology • Investments in Lake City Bank Digital, our focus on a solution that is experiencing increased demand • Technology partnership with FIS is
Slide 23: Channel Utilization Over Three Year Horizon
Channel Utilization Over Three Year Horizon Mobile Adoption is Growing Rapidly Total Total Three Channel Transactions % of Transactions % of Year Type 2019(1) Total 2022(1) Total Change Branch Transactions 2,332,024 19% 2,029,503 14% (13)% ATM/ITM 933,049 8% 878,935 6% (6)% Online Logins 5,066,424 4
Slide 24: Customer Composition and Digital Adoption
Customer Composition and Digital Adoption March 2022 CUSTOMER BREAKDOWN DIGITAL ADOPTION Gen Z 9% Millennial 16% 13% Gen X 21% Baby Boomer Mature 31% 18% 25% 25% Gen Z 1996 – Current 21% 19% Millennial 1977 – 1995 Gen X 1965 – 1976 Baby Boomer 1946 – 1964 Mature 1945 or before 24
Slide 25: Technology Focused Solutions
Technology Focused Solutions Commitment to Technology and Cyber Risk Management 25
Slide 26: Financial Performance
Financial Performance 1872/2022
Slide 27: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers and Maintains Strong Capital Levels 2.50% 20.00% ROAE and ROATE LTM Peer Data1 National Indiana 2.30% ROAE 11.2% 11.1% 18.00% 16.64% ROATE 12.8% 12.3% 2.10% 15.57% 16.00% 16.51% 14.27% 14.12% 1.90% 15.47% 13.59% ROAE and
Slide 28: Net Income and EPS
Net Income and EPS Profitability Improves in 2022 (000’s) $4.50 $100,000 $95,733 $4.00 $87,047 $84,337 $80,411 $3.74 $3.50 $80,000 $3.38 $3.30 $3.00 $3.13 Net Income $60,000 $57,330 EPS $2.50 $40,000 $2.23 $2.00 $22,983 $23,642 $1.50 $20,000 $1.00 $0.90 $0.92 $0 $0.50 2017(1) 2018 2019 2020 2021 YTD
Slide 29: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings Growth in Net Interest Income Offset by Decline in Noninterest Income (000’s) $140,000 6.00% Pretax Pre-Provision Earnings/Average Assets $118,646 $118,521 $120,000 $110,620 5.00% $105,344 Pretax Pre-Provision Earnings $100,000 $92,634 4.00% $80,000 3.00% $60,000 2.00%
Slide 30: Average Loans
Average Loans Organic Loan Growth ex PPP of $119 million or 3% for 2022 (000’s) $5,000,000 $4,424,472 $4,421,094 120% $4,500,000 $4,300,926 $3,974,532 $4,000,000 $3,843,912 110% $3,610,908 $3,500,000 100% Loans to Deposit Ratio $3,000,000 96% Loans 94% 94% 95% 90% $2,500,000 $2,000,000 80% 83% $1,50
Slide 31: Line of Credit Utilization
$0 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $500 $1,611 $1,468 3,079 $1,591 $1,493 3,084 Outstanding $1,588 $1,546 3,134 52% 52% 51% $1,753 $1,514 3,267 54% $1,715 $1,612 3,327 $1,655 $1,611 3,266 52% 51% Available $1,664 $1,806 3,470 $1,696 $1,737 3,433 $1,616 $1,797 3,413 $1,669 $1,
Slide 32: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Agri-business - Agriculture Other Residential $423,669 Commercial Mortgage Commercial RE - Construction $78,412 $399,618 10% $180,448 2% 4% Home Equity 9% $158,583 4% Commercial RE - Multifamily $214,003 Installment - Other Consumer 5% $94,530 2% Commercial
Slide 33: Average Deposits
Average Deposits Deposit Growth Slows in 2022 (000’s) $7,000,000 150% 140% $6,000,000 $5,848,638 Deposits as a Percent of Total Funding $5,357,284 130% $5,000,000 $4,650,597 120% $4,093,894 $4,242,524 110% $4,000,000 $3,757,209 Deposits 100% $3,000,000 97% 98% 98% 99% 99% 95% 90% $2,000,000 80% 70%
Slide 34: Deposit Breakdown
Deposit Breakdown Deposit Costs at a Historic Low Brokered Deposits Cost of Deposits $10,244 3.00% 0% 2.50% 2.00% 1.19% 1.35% 1.50% 1.10% 0.98% 1.00% 0.63% 0.48% 0.50% 0.54% 0.72% 0.63% 0.50% 0.28% 0.21% 0.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD 2022 Total Retail Total Commerc
Slide 35: Investment Portfolio
Investment Portfolio Excess Liquidity Temporarily Deployed to Investment Portfolio 26.0% 24.0% US Govt Agencies US Govt Treas 0.15% Investments as a % of Assets 10.04% 22.0% 23.2% 21.4% 20.0% US Govt Remics 10.02% 18.0% US Govt Pools CMCL CMO 16.0% 29.14% 0.01% 14.0% 14.1% 13.6% 12.0% 12.9% 11.8% 12
Slide 36: Net Interest Income
Net Interest Income Growth in Net Interest Income Impacted by Growth in Loans (000’s) $200,000 6.00% $180,000 $178,088 $163,008 5.50% Net Interest Income Net Interest Margin, fully tax equivalent $160,000 $151,271 $155,047 $140,000 $135,892 5.00% $120,000 4.50% $100,000 4.00% $80,000 $60,000 3.43% 3
Slide 37: Asset Quality: Nonperforming Assets
Asset Quality 5.00% Watchlist Trends Continue to Improve 14.00% Impaired and Watch List Loans to Total Loans excluding PPP 4.00% 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% 5.04% 4.64% 4.77% 4.50% 4.43% 4.28% 1.00% 0.50%
Slide 38: Asset Quality: Allowance for Credit Losses
Asset Quality Allowance for Credit Losses Represents Strong Coverage 0.60% 2.70% 2.39% 2.28% 2.40% ACL to Total Loans, excluding PPP 0.50% 2.15% Net Chargeoffs to Average Loans 1.92% 2.10% 0.40% 1.80% 0.30% 1.67% 1.50% 1.59% 1.59% 1.56% 1.42% 1.45% 0.20% 1.20% 1.26% 1.23% 1.24% 1.25% 0.90% 0.10% 0.2
Slide 39: Non-Interest Income
Non-Interest Income Growth in Fee Generating Lines of Business is Offset by Decline in Mortgage Banking Income (000’s) $50,000 60% Non-Interest Income as % of Total Revenue $46,843 $44,997 $44,720 $45,000 $40,302 50% $40,000 $36,009 Non-Interest Income $35,000 40% $30,000 $25,000 30% $20,000 20% $15
Slide 40: Non-Interest Expense
Non-Interest Expense Disciplined Operating Expense Management (000’s) $104,287 $100,000 $91,205 $89,424 $86,229 $80,000 $79,267 $60,000 $40,000 $26,969 $26,746 $20,000 $0 2017 2018 2019 2020 2021 YTD 2021 YTD 2022 2022 YOY Increase 1% 40
Slide 41: Efficiency Ratio
Efficiency Ratio Efficiency Ratio is Stable Constant investment in technology and facilities 55% 52% 50% 51% 50% 50% 49% 48% 47% 45% 46% 45% 45% 43% 40% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD 2022 41
Slide 42: Stable Healthy Dividend
Stable Healthy Dividend Growth in Dividend Reflects Strength of Capital $1.50 5.00% $1.36 $1.30 4.50% $1.20 $1.16 $1.10 4.00% $1.00 Dividend Yield Dividend per Share $0.90 $0.85 3.50% $0.70 3.00% 2.40% $0.50 2.25% 2.50% 2.24% $0.40 $0.34 $0.30 1.77% 2.20% 2.00% 1.70% 1.97% $0.10 1.50% 2017 2018 2019
Slide 43: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 3/31/22 3,500.00 3,000.00 2,918.90% 2,500.00 2,000.00 1,500.00 1,000.00 418.54% 500.00 160.38% 0.00 153.87% (500.00) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 LKFN S&P
Slide 44: Investment Highlights
Investment Highlights •Proven History of Organic Growth •Disciplined and Focused Strategy •Strong Internal Culture •Consistent Execution •Service Excellence Drives Shareholder Value 44
Slide 45: Supplemental Information
Supplemental Information 1872/2022
Slide 46: Commercial Loans by County
Commercial Loans by County Commercial Customers in 46 Indiana Counties and 22 Other States Other IN Counties (1) Marshall 18% 4% Outside IN 6% Marion 12% Allen 17% Hamilton 8% Kosciusko Commercial Loans 10% Elkhart Outstanding as of 16% St. Joseph 3/31/2022 9% $3.9 billion March 31, 2022 (000’s) 46
Slide 47: Larger Market Organic Expansion
Larger Market Organic Expansion Organic Growth 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 48: Mature Market Strength and Growth
Mature Market Strength and Growth Organic Growth (millions)1 2021 2011 2021 # 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 49: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet 20.00% 15.46% 15.00% 10.14% 10.00% 4.77% 5.00% 2.21% 1.06% 0.00% -1.58% -5.00% -4.08% NII - Rates Down 50 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 pres
Slide 50: aa avexx
aa avexx IW2Xy, 1872/2022 (888) 522-2265 LAKECITYBANK.COM