Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q3 2022 Earnings Presentation
53 slides from Lakeland Financial's earnings presentation, 2022
Slide 1: Lakeland Financial Corporation: A Proven History of Shareholder Value Creation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 3rd 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 8 Institutions (including LKFN) LTM ROE >13% Consecutive Increases in PTPP 23 Institutions Income Since 2012(3) Profitable for the Last 159 Institutions 10 Years(2) Exchange Traded Depositories with Assets Between $1B and $10B(1) 207 Institutions Source: S&P Capita
Slide 7: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share $35.00 Reserves Tangible 8.2% $28.83 * Common Equity $30.00 91.8% $25.00 $20.18 $20.00 Key Ratios and Per Share Data as of $15.00 September 30, 2022 TCE/Tangible Assets 8.20% $10.00 Adj. TCE/Adj. Tangible Assets 11.22% Total Risk-Based 15.29%
Slide 8: Interest Rate Sensitivity
Interest Rate Sensitivity Highly Asset Sensitive Balance Sheet • Every 25 basis point move up in the federal funds rate is expected to FHLB/Other $648,562 improve margin by 3-5 basis points 16% • Fixed rate loans have shorter, 1 Month LIBOR average original terms of 5 years $621,550 Fixed Rate 16% $
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: 30 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 1991 1992 1993 1994 1995 1996 1997 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 12.0% 10.0% Unemployment 9.1% 8.5% 8.0% 8.2% 7.3% 7.5% 6.0% 6.3% 9.4% 8.4% 5.3% 5.2% 7.3% 7.2% 5.0% 4.5% 5.9% 4.0% 3.9% 3.8% 3.8% 4.5% 4.4% 4.0% 4.0% 3.6% 3.2% 3.1% 9.5% 8.4% 7.2% 5.7% 4.
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 & 12 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 2012 - 2022 $3,000 $2,509 $2,501 $2,500 $2,373 Lake City Bank has grown $2,000 deposits by 102% over the last ten-year period. $1,500 $1,000 $596 $509 $500 $486 $328 $93 $0 -$210 -$500 -$1,000 -$1,162 -$1,500 Lake City Bank 1st Source JPM Chase PNC S
Slide 19: Organic Growth: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 24% 2. PNC 14% 3. Merchants Bank 10% 3% 4. Fifth Third 8% 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 29% – Retail quarter average growth of 58% over two years – Commercial quarter average growth of 24% over two years
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 2,309,051 18% 2,033,179 14% (12)% ATM/ITM 941,914 7% 867,327 6% (8)% Online Log
Slide 24: Customer Composition and Digital Adoption
Customer Composition and Digital Adoption September 2022 Customer Composition and Digital Adoption Over Three Years Generation Customer Breakdown 9/30/22 9/30/21 9/30/20 Gen Z (1996 - Current) 16% 54% 45% 43% Millennial (1977 - 1995) 25% 63% 56% 55% Gen X (1965 - 1976) 19% 52% 46% 44% Baby Boomer (1
Slide 25: Financial Performance
Financial Performance 1872/2022
Slide 26: 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 11.9% 12.5% 18.00% ROATE 13.8% 14.3% 16.99% 16.64% 2.10% 15.57% 16.89% 16.00% 16.51% 14.27% 1.90% 15.47% 13.59% RO
Slide 27: 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 $80,000 $77,840 $3.50 $71,450 $3.38 $3.30 $3.00 $3.13 $3.03 Net Income $60,000 $57,330 $2.79 EPS $2.50 $40,000 $2.23 $2.00 $1.50 $20,000 $1.00 $0 $0.50 2017(1) 2018 2019 2020 2021 YTD
Slide 28: 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 $94,617 $88,731 4.00% $80,000 3.00
Slide 29: Average Loans
Average Loans Organic Average Loan Growth ex PPP of $199 million or 5% for 2022 (000’s) $5,000,000 $4,424,472 $4,421,094 120% $4,500,000 $4,381,284 $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% 95% Loans 94% 94% 90% $2,500,000 $2,000,000 80% 8
Slide 30: Line of Credit Utilization
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $1,588 $1,546 3,134 51% Outstanding $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 % Line Usage $1,669 $1,738 3,407 $1,630 $1,785 3,416 48% 4
Slide 31: 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 46% Commercial DDA 45% $80
Slide 32: Loan Portfolio Breakdown
Loan Portfolio Breakdown C&I Drives Lending Business Other Residential Agri-business - Agriculture Commercial Mortgage Commercial RE - Construction $342,066 $100,831 8% $196,077 $468,288 2% 4% Home Equity 10% $173,419 4% Commercial RE - Multifamily $191,212 Installment - Other Consumer 4% $111,801 2
Slide 33: Top 10 Industry Concentrations
Top 10 Industry Concentrations Loan Portfolio is Diversified Plastics Product Durable Goods Merchant Hotels Manufacturing Wholesalers $106,843 $99,888 $96,910 2% 2% 2% Self-Storage $94,501 2% Automobile Dealers $121,261 Restaurants 3% $90,473 2% Nursing Homes & Assisted Living $161,113 4% Agricultur
Slide 34: Average Deposits
Average Deposits Deposit Growth Slows in 2022 Compared to 2021 (000’s) $7,000,000 150% 140% $6,000,000 $5,745,771 $5,357,284 Deposits as a Percent of Total Funding 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
Slide 35: Deposit Breakdown
Deposit Breakdown Deposit Costs Rise in Response to Rising Interest Rate Environment Brokered Deposits Cost of Deposits $10,017 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% 0.42% 0.50% 0.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Slide 36: Public Fund Deposit Trends
$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $629,892 $604,907 $1,235,687 $649,271 $575,833 $1,225,991 $638,349 $510,528 Checking $1,149,765 $731,445 $518,786 $1,2351,119 $752,745 $537,537 $1,291,170 $780,046 $444,194 $1,225,127 CDs $721,203 $528,485 $1,250,576
Slide 37: Investment Portfolio
Investment Portfolio Excess Liquidity Temporarily Deployed to Investment Portfolio 25.0% US Govt Treas US Govt Agencies 0.15% 10.13% MV Investments as a % of Assets 20.0% 21.4% 20.6% US Govt Remics 9.57% 15.0% US Govt Pools 14.1% 29.39% 13.6% 12.9% 12.3% 10.0% 11.8% 11.5% 12.0% HTM Municipals 7.98%
Slide 38: 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 Margin, fully tax equivalent $160,000 $155,047 Net Interest Income $151,271 $146,050 $140,000 $135,892 $133,081 5.00% $120,000 4.50% $10
Slide 39: Asset Quality: Nonperforming Assets
Asset Quality Watchlist Loans as a Percentage of Total Loans at Historic Lows 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% 4.28% 1.00
Slide 40: 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% 2.15% ACL to Total Loans, excluding PPP 2.10% Net Chargeoffs to Average Loans 1.92% 0.40% 1.80% 0.30% 1.67% 1.50% 1.59% 1.59% 1.50% 1.42% 1.45% 0.20% 1.20% 1.26% 1.23% 1.24% 1.25% 0.90% 0.10% 0.4
Slide 41: Noninterest Income
Noninterest Income Growth in Fee Generating Lines of Business is Offset by Market Driven Volatile Activity (000’s) $50,000 60% $46,843 $44,997 $44,720 $45,000 $40,302 50% $40,000 Non-Interest Income as % of Total Revenue $36,009 $35,011 $35,000 Non-Interest Income $31,343 40% $30,000 $25,000 30% $20
Slide 42: Total Revenue
Total Revenue Revenue Growth Benefited by Core Loan Growth and Rising Rates (000’s) $250,000 $222,808 $209,851 $200,044 $200,000 $191,573 $177,393 $171,932 $168,092 $150,000 $100,000 $50,000 $0 2017 2018 2019 2020 2021 YTD 2021 YTD 2022 2022 YOY Increase 6% 42
Slide 43: Non-Interest Expense
Non-Interest Expense Disciplined Operating Expense Management (000’s) $104,287 $100,000 $91,205 $89,424 $86,229 $82,776 $79,267 $79,361 $80,000 $60,000 $40,000 $20,000 $0 2017 2018 2019 2020 2021 YTD 2021 YTD 2022 2022 YOY Increase 4% 43
Slide 44: Efficiency Ratio
Efficiency Ratio Revenue Growth Outpaces Expense Growth Constant investment in technology and facilities 70% 60% 50% 51% 52% 50% 50% 48% 47% 47% 40% 46% 45% 45% 43% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD 2022 44
Slide 45: 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 $1.20 $1.16 $1.10 $1.02 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% 2.20% 1.91% $0.30 1.77% 2.00% 1.70% $0.10 1.50% 2017 2018 2019
Slide 46: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 9/30/22 3,500.00 3,000.00 2,944.01% 2,500.00 2,000.00 1,500.00 1,000.00 313.81% 500.00 111.30% 102.94% 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 47: Investment Highlights
Investment Highlights •Proven History of Organic Growth •Disciplined and Focused Strategy •Strong Internal Culture •Consistent Execution •Service Excellence Drives Shareholder Value 47
Slide 48: Supplemental Information
Supplemental Information 1872/2022
Slide 49: 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 Hamilton 17% 8% Kosciusko Commercial Loans 11% Elkhart Outstanding as of 15% St. Joseph 9/30/2022 9% $4.0 billion September 30, 2022 (000’s)
Slide 50: 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 80,106 1872 60% 12 6. Elkhart Elkhart 206,921 1990 23% 11 5. St. Joseph South Bend 272,212 1997 9% 4 3. Allen Fort Wayne 388,608 1999 13%
Slide 51: Mature Market Strength and Growth
Mature Market Strength and Growth Organic Growth (millions)1 2022 2012 2022 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $5,051 18.67% $2,550 14.77% 98.08% 53 2. Lake City Bank $4,978 18.40% $2,469 14.30% 101.62% 52 3. JPM Chase $3,896 14.40% $1,523 8.82% 155.81% 20 4. PNC $1,84
Slide 52: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates 15.00% Asset Sensitive Balance Sheet 11.10% 10.00% 7.36% 5.00% 3.66% 1.84% 0.92% 0.00% -1.16% -2.43% -5.00% -5.13% -10.00% -11.01% -15.00% -17.41% -20.00% NII - Rates Dn NII - Rates Dn NII - Rates Dn NII - Rates Dn NII - Rates Dn NII - Rates Up NII - Rates Up
Slide 53: cll Fmd fa
cll Fmd fa =I N Qoake Ci Bank pS, 1872/2022 (888) 522-2265 LAKECITYBANK.COM