Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q2 2022 Earnings Presentation
51 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 2nd 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 9 Institutions (including LKFN) LTM ROE >13% Consecutive Increases in PTPP 23 Institutions Income Since 2012(3) Profitable for the Last 160 Institutions 10 Years(2) Exchange Traded Depositories with Assets Between $1B and $10B(1) 208 Institutions Source: S&P Capita
Slide 7: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share $30.00 Reserves Tangible 8.3% Common Equity 91.7% $21.87 $25.00 $20.00 $15.00 Key Ratios and Per Share Data as of June 30, 2022 $10.00 TCE/Tangible Assets 8.92% TCE/Tangible Asset, ex AOCI 11.08% $5.00 Total Risk-Based 15.15% $1.21 Leverage 1
Slide 8: Interest Rate Sensitivity
Interest Rate Sensitivity Highly Asset Sensitive Balance Sheet FHLB/SOFR and • Every 25 basis point move up in the Other $571,271 federal funds rate is expected to 14% improve margin by 6-8 basis points 1 Month LIBOR $704,266 • Fixed rate loans have shorter, Fixed Rate 18% $1,279,721 average origina
Slide 9: Lake City Bank Today
Lake City Bank Today Sesquicentennial •A long-term and consistent organic growth story •Headquartered in Warsaw, Indiana •52 branch offices - $6.3 billion banking assets - $2.6 billion trust, retirement and investment brokerage assets •Focused on execution – “blocking and tackling” •Continued growth
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% 8.7% 8.0% 7.9% 7.3% 11.9% 6.0% 6.1% 5.8% 5.3% 8.7% 8.0% 7.8% 4.0% 4.5% 4.1% 5.9% 3.6% 3.6% 3.4% 4.9% 4.2% 4.0% 2.0% 3.2% 3.2% 3.0% 2.2% 11.4% 8.8% 8.0
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 • 40 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 in our footprint • Protecting our cust
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 ongoing initiatives • Our community involvement is real and critical to our strategy • Our culture has not been dil
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 4.2% from June ‘21 to June ‘22(2) • U.S. Census Bureau announced Indiana’s population grew by 4.7% between 2010 and 2020 • Indiana unemployment at 2.4% as of June 2022(3) •
Slide 21: Core Deposit Funding Strategy
Core Deposit Funding Strategy Core Deposit Growth Impacted by Excess Liquidity in Economy • Deposit surge from PPP funding and stimulus starting to abate • DDA growth over two years of 26% – Retail growth of 57% – Commercial growth of 21% • Capitalize on market disruption in our footprint to grow de
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 stack • Investments in Lake City Bank Digital, our focus on a solution that is experiencing increased demand • Technology partnership with
Slide 23: Channel Utilization Over Three Year Horizon
Channel Utilization Over Three Year Horizon Mobile Channel Engagement Continues to Accelerate Total Total Three Channel Transactions % of Transactions % of Year Type 2019(1) Total 2022(1) Total Change Branch Transactions 2,316,183 19% 2,019,449 14% (13)% ATM/ITM 935,534 7% 873,922 6% (6)% Online Log
Slide 24: Customer Composition and Digital Adoption
Customer Composition and Digital Adoption June 2022 CUSTOMER BREAKDOWN Digital Adoption Over Three Years 9% 16% Generation 6/30/22 6/30/21 6/30/20 Gen Z 51% 41% 41% 31% Millennial 61% 53% 54% 25% Gen X 50% 44% 44% Baby Boomer 45% 40% 39% Mature 31% 27% 26% 19% Digital Adoption 49% 43% 42% Gen Z 1996
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 10.3% 10.5% 18.00% 16.64% ROATE 11.8% 11.5% 2.10% 15.57% 15.81% 16.00% 16.51% 14.27% 15.72% 1.90% 15.47% 13.59% RO
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 $49,315 $2.50 $47,331 $40,000 $2.23 $2.00 $1.85 $1.92 $1.50 $20,000 $1.00 $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% $57,843 $59,85
Slide 30: Average Loans
Average Loans Organic Average Loan Growth ex PPP of $198 million or 5% for 2022 (000’s) $5,000,000 $4,424,472 $4,421,094 120% $4,500,000 $4,363,664 $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% 8
Slide 31: Line of Credit Utilization
$0 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $500 $1,591 $1,493 3,084 $1,588 $1,546 3,134 52% 51% Outstanding $1,753 $1,514 3,267 54% $1,715 $1,612 3,327 $1,655 $1,611 3,266 52% 51% $1,664 $1,806 3,470 Available $1,696 $1,737 3,433 $1,616 $1,797 3,413 $1,669 $1,738 3,407 $1,630 $1,785
Slide 32: Line of Credit Utilization vs. Commercial DDA
Line of Credit Utilization vs. Commercial DDA PPP Funding Negatively Impacted Line Utilization (000’s) 60% $1,600,000 PPP PPP Round 1 Round 2 $1,400,000 55% 54% 52% 52% 52% 52% 51% 51% 51% $1,200,000 50% 50% 50% 49% 49% 48% 48% 48% Line of Credit Utilization 47% $1,000,000 Commercial DDA 46% 45% $80
Slide 33: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Other Residential Agri-business - Agriculture Commercial Mortgage Commercial RE - Construction $387,902 $93,157 9% $190,988 $418,284 2% 4% Home Equity 10% $172,449 4% Commercial RE - Multifamily $173,875 Installment - Other Consumer 4% $98,758 2% Commercial
Slide 34: Average Deposits
Average Deposits Deposit Growth Slows in 2022 (000’s) $7,000,000 150% 140% $6,000,000 $5,800,313 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 35: Deposit Breakdown
Deposit Breakdown Deposit Costs at a Historic Lows Brokered Deposits Cost of Deposits $10,008 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% 0.31% 0.28% 0.50% 0.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD 2022 Total Commercial Total Re
Slide 36: Investment Portfolio
Investment Portfolio Excess Liquidity Deployed to Investment Portfolio 26.0% 24.0% US Govt Agencies US Govt Treas 0.16% MV Investments as a % of Assets 10.06% 22.0% 22.6% 21.4% 20.0% US Govt Remics 9.80% 18.0% US Govt Pools 16.0% 29.67% 14.0% HTM Municipals 14.1% 8.01% 13.6% 12.0% 12.9% 11.8% 12.3%
Slide 37: Net Interest Income
Net Interest Income Growth in Net Interest Income Impacted by Higher Rates and 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 $93,558 $87,
Slide 38: Asset Quality: Nonperforming Assets
Asset Quality Watchlist Loans Decline by $42 million since Year-end 5.00% 14.00% 4.00% 12.00% Watch List Loans to Total Loans excluding PPP 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% 4.64% 4.77% 4.50% 4.43% 4.35% 4.28% 1.00% 0.
Slide 39: 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% 1.53% 1.42% 1.45% 0.20% 1.20% 1.26% 1.23% 1.24% 1.25% 0.90% 0.10% 0.2
Slide 40: Non-Interest Income
Non-Interest Income Growth in Fee Generating Lines of Business is Offset by Market Driven Volatile Activity (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 $23,897 30% $21,179 $2
Slide 41: 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 $54,882 $53,394 $40,000 $20,000 $0 2017 2018 2019 2020 2021 YTD 2021 YTD 2022 2022 YOY Increase 3% 41
Slide 42: Efficiency Ratio
Efficiency Ratio Revenue Growth Outpaces Expense Growth Constant investment in technology and facilities 55% 52% 50% 51% 50% 50% 48% 48% 47% 45% 46% 45% 45% 43% 40% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD 2022 42
Slide 43: 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% $0.80 $0.68 $0.70 3.00% 2.40% $0.50 2.25% 2.50% 2.24% 2.41% $0.30 1.77% 2.21% 2.00% 1.70% $0.10 1.50% 2017 2018 2019
Slide 44: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 6/30/22 3,500.00 3,000.00 2,661.16% 2,500.00 2,000.00 1,500.00 1,000.00 335.05% 500.00 116.48% 109.44% 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 LKFN S&P
Slide 45: Investment Highlights
Investment Highlights •Proven History of Organic Growth •Disciplined and Focused Strategy •Strong Internal Culture •Consistent Execution •Service Excellence Drives Shareholder Value 45
Slide 46: Supplemental Information
Supplemental Information 1872/2022
Slide 47: 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 11% Allen Hamilton 17% 9% Kosciusko Commercial Loans 10% Elkhart Outstanding as of 16% St. Joseph 6/30/2022 9% $4.0 billion June 30, 2022 (000’s) 47 (
Slide 48: 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 49: 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 50: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet 15.00% 10.74% 10.00% 7.18% 5.00% 3.63% 1.83% 0.92% 0.00% -1.37% -3.04% -5.00% -6.39% -10.00% NII - Rates Down 100 NII - Rates Down 50 NII - Rates Down 25 NII - Rates Up 25 NII - Rates Up 50 NII - Rates Up 100 NII - Rates Up 200 N
Slide 51: aa avexx
aa avexx IW2Xy, 1872/2022 (888) 522-2265 LAKECITYBANK.COM