Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q4 2016 Earnings Presentation
43 slides from Lakeland Financial's earnings presentation, January 2017
Slide 1: A Proven History of Shareholder Value Creation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities Investor Update 4th Quarter 2016 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: A High Performer Among Peers
A High Performer Among Peers 2 Institutions LTM (including LKFN) ROE >12% Consecutive Increases in Net Income Since 16 Institutions 2009(3) Profitable for the Last 10 Years(2) 73 Institutions Exchange Traded Depositories with Assets Between $1B and $5B(1) 168 Institutions Source: SNL Financial. Fina
Slide 5: Strong Capital Structure
Strong Capital Structure Subordinated Debt 6.2% Tangible Book Value+ Per $16.89 Reserves $18.00 Share Tangible 8.8% Common $16.00 Equity 85.0% $14.00 $12.00 $10.00 $8.00 Key Ratios and Per Share Data As of December 31, 2016 $6.00 TCE /Tangible Assets 9.89% $4.00 $1.21 Total Risk-Based 13.23% $2.00 L
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 /524 FTEs • $4.3 billion banking assets • $1.73 billion trust assets • A regional franchise focused on core banking • Continued high 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% $30,000 $20,000 $2,707 $10,000 $0 1998 2014 1991 1992 1993 1994 1995 1996 1997 1999 2000 2001 2002 200
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% 9.4% 9.3% 8.0% 8.2% 7.4% 10.1% 9.6% 6.6% 6.0% 6.5% 8.7% 8.0% 5.5% 6.8% 6.6% 5.9% 4.6% 4.0% 10.6% 10.0% 4.2% 7.4% 9.1% 8.0% 6.5% 5.7% 3.7% 2.0% 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013 Nov 2014 Nov 2016 N
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 and Committed Team
Commercial Banking Focus Experienced and Committed Team • 39 credit “smart” commercial bankers • Average 22 years experience in banking and 10 years at Lake City Bank • Deep organizational structure provides credit and administrative support • Our commercial team reside in the markets they serve 11
Slide 12: Relationship Strategy
Commercial Banking Focus Relationship Strategy • We lead with credit and the operating relationship • We understand our client needs • We cross-sell aggressively by leveraging technology 12
Slide 13: Credit Process
Commercial Banking Focus Credit Process • We have a centralized committee structure • We focus on management/cash flow • We lend to people first – character matters • Structure is important on collateral and guarantees • We have an orientation toward owner-occupied and well structured nonowner occup
Slide 14: 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 14
Slide 15: 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 15
Slide 16: Mature Market Deposit Performance
Organic Growth Mature Market Deposit Performance (1) $2,200 $1,944 Lake City Bank has grown $1,700 $1,469 deposits by 104% over the last ten year period $1,200 $707 $631 $700 $110 $41 $200 -$6 -$38 -$141 -$161 -$300 Wells Fargo Lake City Bank 1st Source JPM Chase IAB Financial Star KeyBank MutualBan
Slide 17: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 27% 12% 2. PNC 17% 3. Fifth Third 10% 4. Huntington National 8% 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 18: 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 • Enhanced checking deposit offering in 2015 through segmentation stu
Slide 19: Competitive Technology Edge is Critical
Commitment to Technology and Cyber Risk Management Competitive Technology Edge is Critical • Mobile and online adoption rates are accelerating • Technology is a core competency – Fully resourced online banking for commercial and retail – Robust mobile banking capabilities • Competitive commercial tr
Slide 20: Financial Performance
Financial Performance (take City Bank
Slide 21: Income Performance Metrics
Income Performance Metrics LKFN performance exceeds National and Indiana Peers 14.00% 12.76% 12.98% 1.90% 12.55% 12.45% 12.61% 12.05% 13.00% 12.77% 12.00% 1.70% 12.30% 12.50% 12.26% 12.52% 11.78% ROE and ROTE LTM Peer Data(1) 11.00% National Indiana 1.50% ROE 7.49% 8.80% 10.00% ROTE 8.33% 9.72% 9.00
Slide 22: Net Income and EPS
Net Income and EPS Record Net Income and EPS $60,000 $52,084 $2.80 $50,000 $46,367 $43,805 $2.30 $38,839 $40,000 $35,394 $30,662 $2.05 $1.80 $30,000 $1.84 $1.74 $1.55 $1.30 $20,000 $1.43 $1.25 $10,000 $0.80 $0 $0.30 2011 2012 2013 2014 2015 2016 Net Income Diluted EPS 2016 Net Income Growth 12% 2016
Slide 23: Average Loans
Average Loans Commercial Emphasis Drives Growth $3,500,000 120% $3,225,635 $3,000,000 $2,885,568 110% $2,650,678 $2,343,422 100% $2,500,000 $2,148,046 $2,216,131 95% 90% $2,000,000 93% 93% 93% 93% 87% 80% $1,500,000 70% $1,000,000 60% $500,000 50% $0 40% 2011 2012 2013 2014 2015 2016 Retail Commerci
Slide 24: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Residential Mortgage Agri-business - Agriculture Other Commercial $163,155 Commercial RE - $394,843 $98,270 5% Home Equity Construction 11% 3% $245,182 $169,664 Commercial RE - 7% 5% Installment - Other Multifamily Consumer $127,632 $76,323 4% 2% Commercial
Slide 25: Asset Quality
Asset Quality Nonperforming levels reflect economic strength of markets 10.00% 2.00% 9.00% 8.06% 7.46% 8.00% 1.50% 6.64% 7.00% 5.75% 6.00% 1.00% 4.64% 4.28% 5.00% 4.00% 0.50% 3.00% 1.37% 0.41% 1.77% 2.19% 1.75% 0.94% 1.31% 0.50% 0.42% 0.35% 0.19% 0.16% 0.00% 2.00% 2011 2012 2013 2014 2015 2016 Nonpe
Slide 26: Strong Reserve Coverage
Asset Quality Strong Reserve Coverage 0.25% 2.70% 2.39% 2.28% Reserve to 2.40% Nonperforming Loan Loss Reserve to Total Loans Loans = 653% Net Chargeoffs/Average Loans 0.20% 1.92% 2.10% 1.67% 1.80% 0.15% 1.42% 1.26% 1.50% 1.20% 0.10% 0.90% 0.05% 0.60% 0.30% 0.25% 0.20% 0.11% 0.10% 0.09% 0.03% 0.00%
Slide 27: Average Deposits
Average Deposits Core Deposits* Fund Organic Loan Growth $4,000,000 100% 97% 98% $3,477,816 $3,500,000 95% 96% 94% $3,088,598 $3,000,000 93% 96% $2,797,929 94% 92% $2,505,195 $2,505,340 92% $2,500,000 $2,325,963 90% $2,000,000 88% $1,500,000 86% 84% $1,000,000 82% $500,000 80% 2011 2012 2013 2014 20
Slide 28: Deposit Breakdown
Deposit Breakdown Deposit Growth Key to Franchise Value Total Brokered Brokered Cost of Deposits CDARS Commercial CDs MMA 1.19% 0.98% $7,603 2.00% $799,549 $50,000 $40,574 0.63% 0.48% 0.51% 0.54% 0% 22% 2% 1% 0.00% 2011 2012 2013 2014 2015 2016 Total Public Fund Total Retail $1,206,920 $1,473,266 34
Slide 29: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income $118,480 5.00% $120,000 $105,927 $102,303 $100,000 $92,080 $90,439 4.50% $87,671 $80,000 4.00% $60,000 3.50% $40,000 3.54% 3.28% 3.26% 3.32% 3.20% 3.18% 3.00% $20,000 $0 2.50% 2011 2012 2013 2014 2015 2016 Net Interest Income Net Interest Marg
Slide 30: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet due to floating rate commercial loan portfolio • 88% of loan portfolio consists of commercial loans – 69% of commercial loans are variable rate • Floors with average rate of 3.78% exist on 19% of commercial variable rate loans – The majo
Slide 31: Non-Interest Income
Non-Interest Income Stable, Fee-Based Strategy Drives Increases $35,000 $32,864 50% $30,737 $31,479 $30,053 $30,000 45% Non-Interest Income/Total Revenue $25,196 40% $25,000 Non-Interest Income $22,205 35% $20,000 30% 26% $15,000 23% 23% 22% 22% 25% $10,000 19% 20% $5,000 15% $0 10% 2011 2012 2013 2
Slide 32: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future $80,000 $72,977 $66,166 $68,206 $70,000 $62,778 $57,742 $55,105 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2011 2012 2013 2014 2015 2016 2016 Growth 7% 32
Slide 33: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio 60% Indianapolis – Indianapolis and South Fishers and Clearwater Michigan Rd and Bend Market Expansion offices in Indianapolis Fort Wayne DT 55% 52% 50% 52% 51% 50% 50% 48% 48% 45% 47% 40% 2009 2010 2011 2012 2013 2014 2015 20
Slide 34: Stable Healthy Dividend
Stable Healthy Dividend Significant Increase in Dividend Reflects Strength of Balance Sheet Dividend Payout Ratio of 37% $0.90 $0.76 $0.80 $0.65 $0.70 $0.56 $0.60 $0.51 $0.45 $0.50 $0.41 $0.40 $0.30 $0.20 $0.10 2011 2012 2013 2014 2015 2016 Annualized 2016 Growth 17% 34
Slide 35: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 1/27/17 LKFN: 1,586% SNL US Bank: 70% S&P 500 Bank: 51% S&P 500: 139% 35
Slide 36: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence drives Shareholder Value 36
Slide 37: Supplemental Information
Supplemental Information (take City Bank
Slide 38: Larger Market Organic Expansion
Organic Growth Larger Market Organic Expansion State LCB LCB Deposit # of Rank County Primary City Population* Entry Market Share** 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 39: 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 Cha
Slide 40: Commercial Banking Target Opportunities
Organic Growth Commercial Banking Target Opportunities Growth Potential in Every Market Elkhart/South Bend 2,296 Fort Wayne 22% Warsaw 1,855 291 15% 2% Indianapolis 7,665 64% Companies with Revenue of $1 to $50 million Source: 2016 Hoover’s 40
Slide 41: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity CMCL MBS Treasuries Taxable Agencies 9.33% 0.20% Investments as a Percent of Assets: Municipals 1.24% 17.0% 0.17% 16.0% Exempt US Govt Municipals Remics 15.0% 28.67% 15.6% 26.67% 14.0% 15.1% 13.0% 14.1% 12.0% 12.9% US Govt Pools 11.0% 11.8% 33.72% 10.0% 201
Slide 42: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet 25.00% Percent Change From Base 21.88% 20.00% 14.67% 15.00% 10.00% 7.32% 5.00% 3.63% 1.77% 0.00% -5.00% -4.78% -10.00% NII - Rates NII - Rates Up NII - Rates Up NII - Rates Up NII - Rates Up NII - Rates Up Down 100 25 50 100 200 300 1)Gr
Slide 43: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM