Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q3 2024 Earnings Presentation
62 slides from Lakeland Financial's earnings presentation, 2024
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 2024 LKFN LISTED
Slide 2: Presenters and contact details
David M. Findlay Chairman & 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: Bank Director Magazine – Top U.S. Banks
Bank Director Magazine – Top U.S. Banks 4
Slide 5: Long Term Success for Shareholders
Long Term Success for Shareholders 5 Institutions (including LKFN) LTM ROE >13% LTM ROE >13% 20-Year TBVPS 15 Institutions CAGR >8%(3) 155 Institutions Profitable for the Last 10 Years(2) 189 Institutions Exchange Traded Depositories with Assets Between $1B and $10B(1) Source: S&P Capital IQ Pro. Fi
Slide 6: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share Allowance for Credit $27.22 $32.42* Losses $35.00 8.0% $30.00 Tangible Common Equity $25.00 92.0% $20.00 Key Ratios and Per Share Data as of $15.00 September 30, 2024 TCE/Tangible Assets 10.47% $10.00 Adj. TCE/Adj. Tangible Assets 12.29% Tota
Slide 7: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 54 branch offices - $6.6 billion banking assets - $3.5 billion trust, retirement and investment brokerage assets • Focused on execution – “blocking and tackling” • Continued growth potential 7
Slide 8: 32 Years of Organic Growth
32 Years of Organic Growth Record Net Income for 32 of 35 Years (000’s) $120,000 $93,767 $100,000 Compound Annual Growth 1991 – 2023 • 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 200
Slide 9: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Expanding Markets 9
Slide 10: A Continued Path to Economic Growth
A Continued Path to Economic Growth • 67% of Lake City Bank counties are growth and high growth counties • 40% of Lake City Bank counties are high growth counties • Indiana is poised to experience continued economic strength and vitality 10
Slide 11: 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% 8.0% 8.5% Unemployment 8.2% 7.3% 6.0% 6.3% 8.4% 7.3% 7.2% 5.3% 5.2% 5.0% 5.9% 4.0% 4.5% 4.4% 4.5% 4.4% 4.4% 3.9% 3.9% 3.8% 3.8% 4.0% 4.0% 3.6% 8.4% 7.2% 5.7% 4.
Slide 12: 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 12
Slide 13: Fortress Balance Sheet And Capital In Excess of Requirements
Fortress Balance Sheet And Capital In Excess of Requirements LKFN Above Peer Long-Term Profitability has Contributed to a Strong Capital Foundation Proxy Peer Average RBC Q2’24 14.9% 16.0% 15.5% 15.0% 14.0% 13.3% 13.0% 12.0% 11.0% Well Capitalized Threshold 10.0% for Consolidated Risk-Based Capital
Slide 14: Deposit Composition Provides Diversification
Deposit Composition Provides Diversification Commercial Deposits Increase Share of Total Deposits Brokered Brokered Deposits Deposits $96,504 $113,528 2% 3% Total Commercial Total Total Retail $1,276,047 Commercial $1,709,899 31% Total Retail $2,304,041 29% 39% $1,617,133 39% Total Public Total Publ
Slide 15: 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 119,844 deposit accounts at September 30, 2024. 117,365, or 98%, of those accounts are le
Slide 16: Public Fund Deposit Trends
$100,000 $300,000 $700,000 $900,000 $500,000 -$100,000 $1,100,000 $1,300,000 $1,500,000 $1,700,000 $1,250,576 $1,215,533 $1,211,148 $1,253,704 $1,281,451 Checking and MMA $1,127,111 $1,132,438 $1,103,014 $1,212,131 $1,162,457 CDs $1,204,153 $1,275,388 $1,289,603 $1,284,641 $1,340,566 $1,458,179 $1,4
Slide 17: Checking Account Trends by Deposit Sector
Checking Accounting Trends by Deposit Sector Commercial Accounts Grow by 21% since December 2019 (000) Checking Account Average Balances $2,500,000 by Deposit Type (000) Public Commercial Retail Funds $2,165,549 $2,000,000 $2,105,411 09/30/24 $138 $14 $5,934 $2,079,407 $1,953,969 12/31/23 $137 $15 $
Slide 18: Liquidity Overview
Liquidity Overview • Available liquidity is stable at $3.7 billion, up from $3.3 billion at September 30, 2023 • Sources of liquidity are varied and represent wholesale funding and brokered deposits • Brokered deposits represent 2% of total deposits • Noncore funding represented 2% of total deposits
Slide 19: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet Maintains Neutral Shift 4.00% 2.00% 0.05% 0.07% 0.10% 0.07% 0.04% 0.00% -0.21% -0.07% -0.59% -2.00% -1.58% -3.03% -4.00% Dn 300 Dn 200 Dn 100 Dn 50 Dn 25 Up 25 Up 50 Up 100 Up 200 Up 300 Graph presents 12 month projected net inte
Slide 20: Net Interest Margin
Net Interest Margin Deposit Mix has Stabilized • Noninterest bearing deposits to total deposits improved to 22% at September 30, 2024 compared to 21% at June 30, 2024 • Net interest margin expanded by 4 basis points in 3Q24 compared to 2Q24, excluding the impact of increased nonaccrual loans • Cumul
Slide 21: Interest Rate Sensitivity
Interest Rate Sensitivity Continued Neutral Balance Sheet Sensitivity • Asset sensitivity impacted by shift to FHLB/Other interest-bearing transaction and $559,976 short-term time deposit accounts 13% • Approximately $660.8 million of fixed SOFR Fixed Rate rate commercial loans are estimated $1,275,
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 • 42 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 customer-focused loan and deposit products to our communities • Developing strong cyb
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 2014 – 2024 $3,000 $2,688 $2,495 $2,500 Lake City Bank has grown $2,000 deposits by 93% over the $1,763 last ten-year period. $1,500 $1,000 $521 $447 $500 $373 $332 $257 $0 -$219 -$500 -$1,000 -$1,500 -$1,210 1st Source Lake City Bank JPM Chase Star
Slide 28: Expansion and Innovation Occurring Throughout Indiana
Expansion and Innovation Occurring Throughout Indiana • Indiana #1 manufacturing state in the country(1) • Indiana received tech hub designations from the federal government in microelectronics, hydrogen energy and biotechnology.(2) • Indiana to host semiconductor event in 2025. The state has attrac
Slide 29: 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 30: Channel Utilization Today versus Pre-Pandemic
Channel Utilization Today versus Pre-Pandemic Mobile Adoption Outpacing All Other Delivery Channels Total Total Channel Transactions % of Transactions % of Period Type 2019(1) Total 2024(1) Total Change Branch Transactions 2,279,975 18% 2,051,456 14% (10)% ATM/ITM 944,785 7% 775,243 5% (18)% Online
Slide 31: Customer Composition and Digital Adoption
Customer Composition and Digital Adoption Digital Platform Upgrade with Fintech Partner in 2021 Positively Impacting Digital Adoption Across All Generations Customer Composition and Digital Adoption Over Three Years Customer Generation(1) Breakdown 9/30/24 9/30/23 9/30/22 Gen Alpha (2010 - Current)
Slide 32: Financial Performance
Qoake City Bank Financial Performance
Slide 33: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National Peers and Contributes to Strong Capital Levels ROAE and ROATE LTM Peer Average Data1 22.00% National Indiana ROAE 9.3% 8.9% 2.70% ROATE 11.0% 10.0% 20.00% 17.52% 18.00% 16.03% 15.57% 2.20% 17.40% 14.29% 16.00% 14.27% ROAE and ROATE 13.59%
Slide 34: Net Income and EPS
Net Income and EPS Net Income Improves in 2024 $103,817 $4.50 $101,575 $100,000 $95,733 $93,767 $4.00 $87,047 $84,337 $4.04 $3.95 $3.74 $3.50 $80,000 $3.65 $69,288 $3.38 $3.30 $64,141 $3.00 Net Income $60,000 $2.50 EPS $2.69 $2.49 $40,000 $2.00 $1.50 $20,000 $1.00 $0 $0.50 2019 2020 2021 2022 2023 2
Slide 35: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings Pretax Pre-Provision Earnings Improves in 2024 $160,000 6.00% $140,000 $134,539 $126,544 5.00% Pretax Pre-Provision Earnings/Average Assets $118,646 $118,521 $116,183 $120,000 $110,620 Pretax Pre-Provision Earnings 4.00% $100,000 $95,522 $79,821 $80,000 3.00% $60,000 2.
Slide 36: Average Loans
Average Loans Average YTD Loan Growth of $232 million or 5% Compared to Prior Year $6,000,000 120% $5,023,556 $5,000,000 $4,813,678 110% $4,424,472 $4,421,094 $4,427,166 $3,974,532 $4,000,000 100% Loans to Deposit Ratio 94% 95% 90% $3,000,000 Loans 86% 87% 80% 83% $2,000,000 77% 70% $1,000,000 60% $
Slide 37: Line of Credit Utilization
25% 35% 45% 55% 65% 75% 85% 95% $1,630 $1,785 3,416 48% $1,593 $1,835 3,429 46% PPP Round 1 $1,637 $1,785 3,423 48% $1,473 $2,066 3,539 $1,446 $2,109 3,554 PPP 3,544 Round 2 $1,499 $2,044 42% 41% 42% $1,410 $2,190 3,600 $1,494 $2,206 3,700 39% 40% $1,553 $2,243 3,795 $1,690 $2,321 4,011 41% 42% $1,7
Slide 38: Commercial DDA
Line of Credit Utilization 35% 40% 45% 50% 55% 60% 30% Dec-13 $389,051 50% Dec-14 $467,458 51% Dec-15 $572,966 50% Dec-16 $660,360 52% Dec-17 $740,576 54% Dec-18 $775,947 49% Mar-19 $761,686 47% Commercial DDA Jun-19 $772,995 49% Sep-19 $849,092 48% Dec-19 $814,430 46% PPP $883,956 Round 1 Mar-20 48
Slide 39: Loan Portfolio Breakdown
Loan Portfolio Breakdown C&I Drives Lending Business Agri-business - Other Residential Agriculture Commercial Mortgage Commercial RE - $358,384 $94,309 $261,462 Construction 7% 2% 5% $729,293 14% Home Equity $210,275 4% Installment - Other Commercial RE - Multifamily Consumer $243,283 $117,747 5% 2%
Slide 40: Top Industry Concentrations
Top 10 Industry Concentrations Loan Portfolio is Diversified Restaurants Nonbank Lenders Automobile Dealers $119,608 $110,670 $120,043 Hotels 2% 2% 3% $110,515 2% Senior Living $127,091 3% Misc. Durable Goods Merchant Wholesalers RV Industry $102,651 $200,652 2% 4% Industrial CRE $255,427 Multifamil
Slide 41: Average Deposits
Average Deposits Average YTD Deposit Growth of $240 million or 4% Compared to Prior Year (000’s) 150% $6,000,000 $5,717,358 $5,777,234 $5,604,228 140% $5,357,284 130% $5,000,000 $4,650,597 Deposits as a Percent of Total Funding $4,242,524 120% $4,000,000 110% Deposits 100% $3,000,000 98% 98% 99% 100
Slide 42: Deposit Breakdown
Deposit Breakdown Deposit Costs Are Repricing Downward with Federal Funds Rate Cuts Brokered Deposits Cost of Deposits $96,504 3.00% 2% 2.00% 1.00% 0.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD 2024 Total Retail Total $1,709,899 Commercial 29% $2,304,041 39% Deposit Comp
Slide 43: Net Interest Income
Net Interest Income Net Interest Margin Compression Offset by Organic Loan and Deposit Growth (000’s) $250,000 4.50% $202,887 Net Interest Margin, fully tax equivalent $197,035 $200,000 $178,088 Net Interest Income $163,008 $155,047 4.00% $148,436 $144,985 $150,000 3.38% 3.40% 3.50% 3.31% $100,000 3
Slide 44: Asset Quality: Nonperforming Assets
Asset Quality Nonperforming Loans Rise Due Primarily to a Single Commercial Credit 5.00% 14.00% 4.00% Watch List Loans to Total Loans excluding PPP 12.00% Nonperforming Assets to Total Assets 3.00% 8.86% 10.00% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 6.75% 5.75% 5.50% 5.27% 6.00% 4.64% 4.77% 4.28% 4.50%
Slide 45: 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% 0.50% ACL to Total Loans, excluding PPP 2.15% 2.10% Net Chargeoffs to Average Loans 1.92% 0.40% 1.67% 1.65% 1.80% 1.59% 1.59% 1.54% 1.42% 1.45% 1.46% 0.30% 1.50% 1.26% 1.23% 1.24% 1.25% 0.20% 1.20% 0.9
Slide 46: Noninterest Income
Noninterest Income Noninterest Income Includes $9.0 million in Visa Stock Net Gain (000’s) $60,000 60% Non-Interest Income as % of Total Revenue $49,858 $50,000 $46,843 50% $44,997 $44,720 $44,968 $41,862 Non-Interest Income $40,000 40% $32,650 $30,000 30% $20,000 24% 20% 22% 22% 20% 20% 17% 18% $10
Slide 47: Total Revenue
Total Revenue Revenue Growth Benefited by Loan Growth and Improvement in Noninterest Income (000’s) $300,000 $246,893 $244,749 $250,000 $222,808 $209,851 $200,044 $200,000 $189,953 $181,086 $150,000 $100,000 $50,000 $0 2019 2020 2021 2022 2023 YTD 2023 YTD 2024 Compound annual growth rate “CAGR” is
Slide 48: Non-Interest Expense
Non-Interest Expense Disciplined Investment in People and Technology Continues (000’s) $140,000 $130,710 $120,000 $110,210 $114,049 $104,287 $101,265 $100,000 $94,431 $89,424 $91,205 $80,000 $60,000 $40,000 $20,000 $0 2019 2020 2021 2022 2023 2023 Adj. YTD 2023 YTD 2024 (1) 12023 noninterest expense
Slide 49: Efficiency Ratio
Efficiency Ratio Efficiency Ratio Normalizing in 2024 70% Constant investment in technology and facilities 60% 52% 53% 51% 50% 50% 48% 47% 50% 46% 45% 45% 45% 43% 50% 47% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD 12023 Year-to-date adjusted core efficiency ra
Slide 50: Stable Healthy Dividend
Stable Healthy Dividend Growth in Dividend Reflects Strength of Capital 6.00% $1.90 $1.84 $1.70 $1.60 5.00% $1.50 $1.44 $1.36 $1.38 4.00% Dividend per Share $1.30 $1.20 Dividend Yield $1.16 3.88% $1.10 2.82% 3.00% 2.40% $0.90 2.24% 2.19% 2.95% 1.70% 2.00% $0.70 $0.50 1.00% $0.30 $0.10 0.00% 2019 202
Slide 51: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 9/30/24 3,500.00 3,000.00 2,789.54% 2,500.00 2,000.00 1,500.00 1,000.00 586.20% 500.00 215.21% 201.78% 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 202
Slide 52: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 52
Slide 53: Supplemental Information
Supplemental Information Qoake City Bank
Slide 54: Lake City Bank Capital Adequacy
Lake City Bank Capital Adequacy Capital Strength Continues in September 2024 Non-GAAP Non-GAAP Non-GAAP Adjusted September Well- Capital AOCI and Excess Capital Regulatory Ratio 30, 2024 Capitalized Cushion HTM Capital Ratios with Description * Actual Threshold (in 000’s) Losses- after AOCI AOCI and
Slide 55: Liquidity Preparedness
Liquidity Preparedness September 30, 2024 Additional Loan Collateral Liquidity Available for (000) Availability Used Unused/ Available Pledge Secured/Committed Borrowings: Federal Home Loan Bank-Indianapolis(1) $ 577,690 $ 0 $ 577,690 $ -- Federal Reserve Bank Discount Window 1,383,394 -- 1,383,394
Slide 56: Investment Portfolio
Investment Portfolio Recurring Cash Flows Used to Fund Organic Loan Growth 25% 20% 21% 20% US Govt MV Investments as a % of Assets 18% Remics US Govt 15% 17% 8% Pools US Govt 29% 10% 13% 12% 12% 12% 12% 14% Agencies 10% 5% HTM Municipals 11% 0% AFS Municipals 2015 2016 2017 2018 2019 2020 2021 2022
Slide 57: Investment Security Portfolio Cashflows
Investment Security Portfolio Cashflows Cash Flows of $407 million Expected Through September 2028 Investment Portfolio has generated (000) $268 million in cash flow and 35,000,000 proceeds from sales January 2023 through September 2024 5,885,391 30,000,000 6,379,237 8,566,385 8,127,692 8,370,527 8,
Slide 58: Investment Portfolio Analysis
Investment Portfolio Analysis Investment Portfolio as a Percentage of Total Assets Continues to Decline 9/30/2024 12/31/2023 Weighted Market % of Weighted Market % of Maturity Value Total Maturity Value Total US Govt REMICS 5.81 91,575 8% 6.28 98,265 8% US Govt Pools 7.07 331,492 29% 7.44 349,577 30
Slide 59: Commercial Loans by County
Commercial Loans by County Commercial Customers in 49 Indiana Counties and 21 Other States Other IN Marshall Counties (1) 3% 17% Outside IN Marion 6% 15% Allen 18% Hamilton 9% Commercial Loans Kosciusko Outstanding as of 9% Elkhart 9/30/2024 St. Joseph 14% $4.5 billion 9% September 30, 2024 (000’s)
Slide 60: Larger Market Organic Expansion
Larger Market Organic Expansion Organic Growth State LCB LCB Deposit Rank County Primary City Population* Entry Market Share** # of Branches 22. Kosciusko Warsaw 80,364 1872 67% 12 6. Elkhart Elkhart 206,409 1990 22% 11 5. St. Joseph South Bend 272,848 1997 8% 4 3. Allen Fort Wayne 394,545 1999 14%
Slide 61: Mature Market Strength and Growth
Mature Market Strength and Growth Organic Growth (millions)1 2024 2014 2024 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $5,389 19.43% $2,701 15.68% 99.52% 52 2. Lake City Bank $5,182 18.68% $2,687 15.60% 92.85% 54 3. JPM Chase $3,483 12.56% $1,720 9.99% 102.50% 20 4. PNC $1,589
Slide 62: Lake City Bank
Qiake City Bank LAKECITYBANK.COM