Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q3 2014 Earnings Presentation
36 slides from Lakeland Financial's earnings presentation, November 2014
Slide 1: Lakeland Financial Corporation Investor Update
Lakeland Financial Corporation Investor Update November 2014 A Proven History of Shareholder Value Creation Driven by Service Excellence
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: Lake City Bank Today
Lake City Bank Today • Headquartered in Warsaw, Indiana • 46 branch offices • 502 FTEs • $3.4 billion banking assets • $1.0 billion trust assets • Regional franchise • Low market shares – high growth potential 4
Slide 5: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and New Markets 5
Slide 6: Growth Strategy
Lake City Bank Growth Strategy 1. Business Owner Focus 2. High Quality People 3. Larger Market Organic Expansion 6
Slide 7: Business Owner Focus
Business Owner Focus • 38 Commercial Banking Officers • Average 20 years experience in banking and 10 years at Lake City Bank • Significant credit and administrative support staff • Commercial staff reside in market they serve 7
Slide 8: Relationship Strategy
Business Owner Focus Relationship Strategy • Lead with Credit and Operating Relationship • Understand Client Needs • Cross-sell Aggressively by Leveraging Technology 8
Slide 9: Credit Process
Business Owner Focus Credit Process • Centralized/Committee Approvals • Focus on Management/Cash Flow • Collateral and Guarantees • Orientation Toward Owner-Occupied and well structured Nonowner Occupied RE • Be Responsive and Consistent 9
Slide 10: Lake City Bank Culture
Quality People Lake City Bank Culture • Core Values start with honesty • Lake City University drives education and culture • Community involvement is “Real” and critical to our strategy • Our Culture has not been diluted by acquisition • Leadership is key to culture and succession plan will ensure s
Slide 11: Face to Face Contact
Quality People Face to Face Contact • We Love to Call • Sales Calling Program Includes 105 Officers • 11,658 “Real” Client Contacts in 2013 • Our People are the Competitive Advantage 11
Slide 12: Larger Market Organic Expansion
Larger Market Organic Expansion State LCB LCB Deposit # of Rank County Primary City Population* Entry Market Share** Branches 20. Kosciusko Warsaw 77,963 1872 53% 12 6. Elkhart Elkhart 200,563 1990 22% 9 5. St. Joseph South Bend 266,709 1997 7% 4 3. Allen Fort Wayne 363,014 1999 11% 4 1. Hamilton/Ma
Slide 13: Commercial Banking Market
Larger Markets Commercial Banking Market Growth Potential in Every Market Elkhart/South Bend 2,296 22% Warsaw 650 6% Fort Wayne 1,757 17% Indianapolis 5,652 55% Companies with Revenue of $1 to $30 million 13 Source: 2012 Hoover’s
Slide 14: Lake City Bank Market Area
Larger Markets Lake City Bank Market Area* Key Competitors (millions) 2014 2014 2004 # of Deposits Share Deposits Share Increase Offices 1. Lake City Bank $2,828 13.04% $1,023 6.92% 176.44% 46 2. JPM Chase $2,809 12.95% $1,948 13.17% 44.20% 46 3. 1st Source $2,701 12.45% $2,060 13.93% 31.12% 50 4. W
Slide 15: Market Deposit Performance
Larger Markets Market Deposit Performance $2,000 $1,805 $1,800 Lake City Bank is the $1,600 Market share winner in $1,400 $1,312 last decade $1,200 $1,000 $861 $800 $641 $600 $400 $308 $264 $224 $203 $161 $200 $21 $0 Lake City Wells Fargo JPMorgan 1st Source Old National KeyBank Star Fifth Third IAB
Slide 16: Indianapolis Deposit Share
Larger Markets Indianapolis Deposit Share Indianapolis Market Banks Share of Market 12% 1. JPM Chase 29% 2. PNC 20% 3. Fifth Third 11% 4. Huntington National 8% 5. BMO Harris 6% 6. KeyBank 5% 7. National Bank of Indy 4% 8. Regions Bank 4% 88% 9. Merchants Bank of IN 3% 10. First Internet Bank of IN
Slide 17: Financial Performance
Lakeland Financial Corporation Financial Performance 17
Slide 18: Net Income and EPS
Net Income and EPS Record net income and EPS $40,000 $38,839 $35,394 $2.80 $35,000 $32,735 $30,662 $30,000 $28,251 $2.30 $24,543 $2.33 $25,000 $2.15 $1.95 $1.80 $20,000 $18,979 $1.88 $1.70 $15,000 $1.30 $1.26 $1.32 $10,000 $0.80 $5,000 $0 $0.30 2009 2010 2011 2012 2013 YTD 2013 YTD 2014 Net Income D
Slide 19: Average Loans
Average Loans Commercial Emphasis Drives Growth $3,000,000 $2,623,522 120% $2,343,422 $2,500,000 $2,216,131 $2,148,046 109% $2,049,209 100% $2,000,000 $1,901,746 95% 93% 93% 94% 87% 80% $1,500,000 60% $1,000,000 $500,000 40% $0 20% 2009 2010 2011 2012 2013 YTD 2014 Retail Commercial Loans to Deposit
Slide 20: Loan Breakdown
Loan Breakdown C & I Drives Lending Business Commercial RE - Agri-business - Residential Mortgage Construction Agriculture Other Commercial $143,892 $153,118 $209,719 $77,076 5% Commercial RE - 6% 8% 3% Home Equity Multifamily $150,859 5% Installment - Other $84,875 Consumer 3% $53,693 Commercial RE
Slide 21: Investment Portfolio
Investment Portfolio September 30, 2014 Security Average Book Effective Market Type Life Yield Duration Value MBS Pass-through 5.29 2.82% 5.21 $129,327 CMO 3.58 3.27% 2.98 $216,689 CMBS 6.24 2.41% 5.68 $25,730 Municipal 5.07 3.44% 5.32 $96,993 Taxable Municipal 5.82 2.55% 5.32 $3,352 Taxable Treasur
Slide 22: Asset Quality
Asset Quality Nonperforming Levels Continue to Improve 2.50% 2.19% 2.00% 1.77% 1.80% 1.77% 1.75% 1.53% 1.37% 1.50% 1.31% 1.22% 0.94% 1.00% 0.55% 0.45% 0.50% 0.00% 2009 2010 2011 2012 2013 YTD 2014 Nonperforming Loans/Total Loans Nonperforming Assets/Total Assets 22
Slide 23: Asset Quality
Asset Quality Improving Credit Trends $180,000 $171,422 $168,263 $168,781 $164,151 $160,000 $152,739 $140,000 $120,000 $100,000 $80,000 $60,000 $47,347 $40,000 $43,218 $34,101 $34,137 $32,049 $23,198 $23,945 $20,000 $15,102 $14,075 $14,764 $0 Q3-13 Q4-13 Q1-14 Q2-14 9/30/2014 Impaired & Non-Impaired
Slide 24: Net Chargeoffs/Average Loans
Asset Quality Strong Reserve Coverage 0.60% 2.70% 2.39% 2.28% 2.40% 2.15% Loan Loss Reserve to Total Loans 0.50% Net Chargeoffs/Average Loans 1.92% 2.10% 1.72% 0.40% 1.80% 1.59% 1.50% 0.30% Reserve to 1.20% Nonperforming 0.20% Loans = 314% 0.90% 0.60% 0.10% 0.42% 0.54% 0.25% 0.20% 0.11% 0.12% 0.30%
Slide 25: Average Deposits
Average Deposits Improved Funding Mix Deposits = 97% of Funding vs. 87% in 2009 $3,200,000 $2,750,627 $2,505,195 $2,505,340 $2,700,000 $2,325,963 $2,132,608 $2,200,000 $1,870,231 $1,700,000 $1,200,000 $700,000 $200,000 2009 2010 2011 2012 2013 YTD 2014 2014 Growth 11% 25
Slide 26: Deposit Breakdown
Deposit Breakdown Retail Strategy Key to Deposit Growth Cost of Deposits 4.00% 3.10% 3.00% 1.72% 2.00% 1.30% 1.19% 0.98% 0.63% 1.00% 0.48% 0.00% Pre-Liquidity Strategy 2008 2009 2010 2011 2012 2013 YTD December 31, 2008 2014 September 30, 2014 Brokered Total Total CDARS Brokered CDs MMA CDARS Broker
Slide 27: Net Interest Income
Net Interest Income Margin Improved Each Quarter in 2013 5.00% $120,000 $100,000 $92,653 4.50% $92,080 $90,439 $87,671 $80,281 $80,000 $76,199 4.00% $66,141 $60,000 3.73% 3.50% 3.51% 3.54% $40,000 3.28% 3.34% 3.26% 3.22% 3.00% $20,000 $0 2.50% 2009 2010 2011 2012 2013 YTD 2013 YTD 2014 Net Interest
Slide 28: Impact of Rising Rates
Impact of Rising Rates • 89% of loan portfolio is commercial • 65% of commercial loans are variable rate – mostly Prime and LIBOR based o Floors with average rate of 3.79% exist on 41% of commercial variable rate loans • 35% of commercial loans are fixed rate with most less than 5 years • Deposit ra
Slide 29: Non-Interest Income
Non-Interest Income Stable, Fee-Based Strategy Drives Increases $35,000 50% $30,737 $30,000 45% $25,196 40% $25,000 Non-Interest Income/Total Revenue $22,243 $22,205 $22,859 $22,890 $21,509 35% Non-Interest Income $20,000 30% 26% $15,000 25% 23% 23% 25% 22% $10,000 20% 19% 20% $5,000 15% $0 10% 2009
Slide 30: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure $70,000 $62,778 $57,742 $60,000 $53,475 $53,435 $55,105 $49,534 $50,000 $46,250 $40,000 $30,000 $20,000 $10,000 $0 2009 2010 2011 2012 2013 YTD 2013 YTD 2014 2014 YTD Growth 7% 30
Slide 31: Efficiency Ratio
Efficiency Ratio Leveraging Offices, People and Technology 60% 55% Indianapolis and South Bend Market Expansion Fishers office in Indianapolis 52% 50% 51% 52% 50% 48% 47% 45% 40% 2009 2010 2011 2012 2013 YTD 2014 31
Slide 32: Stable Healthy Dividend
Stable Healthy Dividend Dividend Payout Ratio of 31% $0.84 $0.90 $0.76 $0.80 $0.68 $0.62 $0.62 $0.62 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 2009 2010 2011 2012 2013 2014 Annualized 2014 Growth 11% 32
Slide 33: Strong Capital Structure
Strong Capital Structure Subordinated Key Ratios and Per Share Data Debt Reserves 7.3% 10.9% As of September 30, 2014 TCE /Tangible Assets 10.40% Bank - Total Risk-Based 13.95% Bank - Leverage 10.83% Tangible Common Book Value $21.26 Equity Tangible Book Value $21.08 81.8% Tangible Book Value Per Sh
Slide 34: LKFN Performance
LKFN Performance Lakeland Financial Corporation - Price Change (%) m= LKFN (+418.69%) === KBW Bank (-10.88%) w= SNL U.S. Bank (-4.01%) —— S&P 500 Bank (-30.95%) —— DUIA (+44.51%) 600, 400 200) Price Change (%) ° -200 T T T T T T T T T T T T T T 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 35: Consistently Strong Performance
Consistently Strong Performance LTM 9 Institutions (including LKFN) ROE >12%(4) Consecutive Increases in Net 33 Institutions Income Since 2009(3) Profitable for the Last 10 Years(2) 84 Institutions Exchange Traded Depositories 180 Institutions with Assets Between $1B and $5B(1) Source Keefe, Bruyett
Slide 36: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined Strategy • Strong Internal Culture • Consistent Execution • Service Excellence drives Shareholder Value 36