Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q2 2017 Earnings Presentation
42 slides from Lakeland Financial's earnings presentation, 2017
Slide 1: Lakeland Financial Corporation 2nd Quarter 2017
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 2nd Quarter 2017 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 with respect to the financial condition, results of oper
Slide 4: Long Term Success for Shareholders
Long Term Success for Shareholders 3 Institutions LTM (including LKFN) ROE >12% Consecutive Increases in Net Income Since 13 Institutions 2009(3) Profitable for the Last 10 Years(2) 78 Institutions Exchange Traded Depositories with Assets Between $1B and $5B(1) 164 Institutions Source: SNL Financial
Slide 5: Strong Capital Structure
Strong Capital Structure Subordinated Debt Tangible Book Value+ Per 5.9% Share $17.76 $20.00 Reserves Tangible Common 8.5% $18.00 Equity $16.00 85.6% $14.00 $12.00 $10.00 Key Ratios and Per Share Data $8.00 as of June 30, 2017 $6.00 TCE /Tangible Assets 10.19% $4.00 Total Risk-Based 13.30% $1.21 $2.
Slide 6: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 49 branch offices - $4.4 billion banking assets - $1.5 billion trust assets • Focused on execution – “blocking and tackling” • Continued growth potential 6
Slide 7: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth Record Net Income for 27 of 28 Years (000’s) $52,084 $60,000 Compound Annual Growth 1991 – 2016 $50,000 • Loans = 11% • Deposits = 12% $40,000 • Net Income = 13% Net Income • Earnings Per Share = 12% $30,000 $20,000 $2,707 $10,000 $0 1998 2014 1991 1992 1993 1994
Slide 8: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and New Markets Market Data Warsaw – 1872 22 offices Elkhart – 1990 11 offices South Bend – 1997 4 offices Fort Wayne – 1999 7 offices Indianapolis – 2011 5 offices 8
Slide 9: Indiana Economic Outlook
Indiana Economic Outlook Indiana Employment Trends Versus National Averages 12.0% 10.0% 9.3% 9.1% Unemployment 8.7% 8.0% 7.9% 7.3% 10.4% 10.3% 6.0% 8.7% 6.1% 8.0% 7.8% 5.3% 5.2% 5.9% 4.0% 4.5% 2.8% 5.2% 4.9% 2.6% 4.1% 10.6% 10.4% 4.2% 5.1% 8.8% 8.0% 7.7% 5.7% 4.6% 3.9% 2.0% 2008 2009 2010 2011 2012
Slide 10: 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 10
Slide 11: Experienced Relationship Driven Team
Commercial Banking Focus Experienced Relationship Driven Team • 40 credit “smart” commercial bankers • Average 20 years in banking & 11 years at Lake City Bank • Deep organizational structure provides credit and administrative support • Our commercial team reside in the markets they serve • We lead
Slide 12: Credit Process
Commercial Banking Focus Credit Process • We have a centralized committee structure • We lend to people first – character matters • We focus on management/cash flow • Structure is important on collateral and guarantees • We have an orientation toward owner-occupied and well structured nonowner occup
Slide 13: Lake City Bank Culture
High Quality Team Members Lake City Bank Culture • Our Core Values start with honesty • Lake City University drives our culture • Our community involvement is real and critical to our strategy • Our culture has not been diluted by acquisition 13
Slide 14: Face to Face Contact
High Quality Team Members Face to Face Contact • We simply love to call • Sales calling program Includes 111 officers • 17,454 client contacts in 2016 • Our people are the competitive advantage 14
Slide 15: Organic Growth 2006-2016: Mature Market Deposit Performance
Organic Growth 2006 - 2016 Mature Market Deposit Performance (millions) 1 $2,200 $1,944 $1,700 $1,469 Lake City Bank has grown deposits by 104% over the last $1,200 ten-year period. $707 $700 $631 $200 $110 $41 -$6 -$38 -$141 -$161 -$300 Wells Fargo Lake City Bank 1st Source JPM Chase IAB Financial
Slide 16: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 27% 2. PNC 17% 3. Fifth Third 10% 4. Huntington National 8% 12% 5. BMO Harris 5% 6. KeyBank 5% 7. Merchants Bank of IN 5% 8. Regions Bank 4% 9. National Bank of Indy 4% 10. Firs
Slide 17: Core Deposits Fund Organic Loan Growth
Core Deposit Funding Core Deposits Fund Organic Loan Growth • Deposit Strategy Task Force created in 2014 • Focus is on core deposit growth in retail, commercial and public funds • Demographic and lifestyle data is being leveraged • Account offerings positioned for rates-up environment • Emphasis is
Slide 18: Competitive Technology Edge is Critical
Commitment to Technology and Cyber Risk Management Competitive Technology Edge is Critical • Fintech’s role constantly under review • Mobile and online adoption rates are accelerating • Technology is a core competency – Fully resourced online banking for commercial and retail – Robust mobile banking
Slide 19: Financial Performance
Financial Performance (take City Bank
Slide 20: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers 13.83% 14.00% 12.98% 1.90% 12.76% 12.61% 12.55% 12.45% 13.74% 13.00% 12.77% 12.52% 12.00% 1.70% 12.30% 12.50% 12.26% ROE and ROTE LTM Peer Data1 11.00% ROE and ROTE National Indiana ROE 7.49% 8.80% 1.50% 10.00% ROTE 8.33%
Slide 21: Net Income and EPS
Net Income and EPS Record Net Income and EPS (000’s) $60,000 $52,084 $2.80 $50,000 $46,367 $43,805 $2.30 $38,839 $40,000 $35,394 Net Income $2.05 $1.80 $29,878 EPS $30,000 $1.84 $1.74 $25,082 $1.55 $1.17 $1.30 $20,000 $1.43 $0.99 $10,000 $0.80 $0 $0.30 2012 2013 2014 2015 2016 YTD 2016 YTD 2017 Net
Slide 22: Average Loans and Loans to Deposit Ratio
Average Loans (000’s) Commercial Emphasis Drives Growth $4,000,000 150% $3,547,995 140% $3,500,000 $3,225,635 130% $3,000,000 $2,885,568 $2,650,678 120% Loans to Deposit Ratio $2,343,422 $2,500,000 $2,216,131 110% Loans $2,000,000 100% 95% 97% 90% $1,500,000 93% 93% 93% 87% 80% $1,000,000 70% $500,0
Slide 23: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Agri-business - Other Residential Commercial RE - Agriculture Commercial Mortgage Construction $331,387 $116,651 $171,495 $209,772 9% 3% 5% Home Equity 6% $172,530 Commercial RE - 5% Multifamily Installment - Other $170,902 Consumer 5% $78,764 2% Commercial
Slide 24: Asset Quality: Nonperforming Assets
Asset Quality Nonperforming Levels Reflect Economic Strength of Markets 5.00% 14.00% Watch list Loan as Percentage of Loans 4.00% Nonperforming Assets to Total Assets 12.00% 3.00% 10.00% 8.86% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 5.75% 5.20% 5.39% 6.00% 4.64% 4.28% 4.28% 1.00% 0.46% 0.48% 0.50% 0.41%
Slide 25: Asset Quality: Net Chargeoffs and Reserve Coverage
Asset Quality 1.50% Strong Reserve Coverage 2.70% 2.39% 1.30% 2.40% 2.15% Loan Loss Reserve to Total Loans 1.10% 2.28% 2.10% Net Chargeoffs to Average Loans 0.90% 1.92% 1.80% 1.59% 0.70% 1.67% 1.50% 1.42% 0.50% 1.03% 1.20% 1.26% 1.25% 0.20% 0.30% 1.04% 0.90% 0.09% 0.10% 0.11% 0.21% 0.43% 0.42% 0.54%
Slide 26: Average Deposits
Average Deposits (000’s) Core Deposits* Fund Organic Loan Growth $4,000,000 150% $3,659,884 $3,477,816 $3,500,000 Deposits as a Percent of Total Funding $3,088,598 140% $3,000,000 $2,797,929 $2,505,195 $2,505,340 130% $2,500,000 Deposits $2,000,000 120% $1,500,000 110% $1,000,000 97% 94% 95% 96% 94%
Slide 27: Deposit Breakdown
Deposit Breakdown Deposit Growth Key to Franchise Value CDARS Brokered CDs Brokered $4,927 $100,000 MMA 0% 3% $11,508 Cost of Deposits 0% 2.00% 1.19% 0.98% 1.00% 0.63% 0.48% 0.51% 0.54% 0.64% Total Commercial $740,869 0.00% 21% 2011 2012 2013 2014 2015 2016 YTD 2017 Total Retail Total Public $1,520,
Slide 28: Net Interest Income and Net Interest Margin
Net Interest Income Loan Growth Driving Growth in Income (000’s) $118,480 5.00% $120,000 $105,927 $102,303 4.50% $100,000 $90,439 $87,671 Net Interest Income Net Interest Margin 4.00% $80,000 $65,880 $60,000 3.28% 3.26% 3.32% $57,855 3.50% 3.20% 3.18% 3.31% 3.22% 3.00% $40,000 $20,000 2.50% $0 2.00%
Slide 29: Asset Sensitive Balance Sheet
Asset Sensitive Balance Sheet Floating Rate Commercial Loan Portfolio Drives Asset Sensitivity • 88% of loan portfolio consists of commercial loans – 67% of commercial loans are variable rate – The majority of fixed rate commercial loans have terms of 5 years or less • Deposit rate increases should
Slide 30: Non-Interest Income
Non-Interest Income (000’s) Stable, Fee-Based Strategy Drives Increases $35,000 $32,864 50% Non-Interest Income as % of Total Revenue $31,479 $30,737 $30,053 45% $30,000 40% $25,196 $25,000 35% Non-Interest Income 30% $20,000 $17,050 25% 26% $15,110 $15,000 22% 23% 23% 22% 20% 21% 21% $10,000 15% 10
Slide 31: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future (000’s) $80,000 $72,977 $68,206 $70,000 $66,166 $62,778 $57,742 $60,000 $50,000 $39,400 $35,830 $40,000 $30,000 $20,000 $10,000 $0 2012 2013 2014 2015 2016 YTD 2016 YTD 2017 2017 YOY Growth 10% 31
Slide 32: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio Constant investment in technology and facilities 60% Indianapolis Michigan Road Indianapolis North and and Fort Wayne Indianapolis South Bend Downtown Indianapolis Fishers and Downtown Greenwood Expansion Clearwater Expansion
Slide 33: Stable Healthy Dividend
Stable Healthy Dividend Significant Increase in Dividend Reflects Strength of Balance Sheet Dividend Payout $1.00 Ratio of 37% 3.00% $0.90 $0.88 $0.80 $0.76 2.61% 2.50% Dividend per Share $0.70 Dividend Yield $0.65 $0.60 $0.56 $0.51 2.09% 2.00% $0.50 $0.45 1.96% 1.93% 1.92% $0.40 1.60% 1.50% $0.30 $
Slide 34: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 7/14/17 2,000.00 1,582.80% 1,500.00 Total Return (%) 1,000.00 500.00 158.60% 76.76% 0.00 57.64% (500.00) LKFN SNL U.S. Bank S&P 500 S&P 500 Bank Source: SNL database 34
Slide 35: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 35
Slide 36: Supplemental Information
Supplemental Information (take City Bank
Slide 37: 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 77,358 1872 52% 12 6. Elkhart Elkhart 197,559 1990 21% 9 5. St. Joseph South Bend 266,931 1997 7% 4 3. Allen Fort Wayne 355,329 1999 10% 5
Slide 38: Mature Market Strength and Growth
Organic Growth Mature Market Strength and Growth (millions)1 2016 2016 2006 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $3,128 16.15% $2,421 17.77% 29.20% 54 2. Wells Fargo $2,915 15.05% $971 8.38% 200.21% 28 3. Lake City Bank $2,878 14.86% $1,409 7.65% 104.26% 48 4. JPM Chase
Slide 39: Commercial Banking Target Opportunities
Organic Growth Commercial Banking Target Opportunities Growth Potential in Every Market Elkhart/South Bend 2,296 Fort Wayne Warsaw 1,855 291 Indianapolis 7,665 Companies with Revenue of $1 to $50 million Source: 2016 Hoover’s 39
Slide 40: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity Agencies Treasuries 1.10% 17.0% Investments as a % of Assets 0.19% 16.0% CMCL MBS US Govt Remics 8.48% 25.31% 15.0% 14.0% 15.1% 13.0% 14.1% Taxable Municipals 12.0% 12.9% 0.16% US Govt Pools 12.1% Exempt 33.51% 11.0% 11.8% Municipals 10.0% 31.25% 2013 2014
Slide 41: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet 25.00% 20.84% 20.00% 14.10% 15.00% 10.00% 7.17% 5.00% 3.61% 1.81% 0.00% -5.00% -10.00% -9.80% -15.00% NII - Rates NII - Rates Up NII - Rates Up NII - Rates Up NII - Rates Up NII - Rates Up Down 100 25 50 100 200 300 Graph presents 12 mon
Slide 42: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM