Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q3 2015 Earnings Presentation
39 slides from Lakeland Financial's earnings presentation, 2015
Slide 1: Lakeland Financial Corporation Investor Update 3rd Quarter 2015
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities Investor Update 3rd Quarter 2015 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 4 Institutions LTM (including LKFN) ROE >12% Consecutive Increases in Net Income Since 13 Institutions 2009(3) Profitable for the Last 10 Years(2) 76 Institutions Exchange Traded Depositories with Assets Between $1B and $5B(1) 182 Institutions Source: SNL Financial. Fina
Slide 5: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 46 branch offices /502 FTEs • $3.7 billion banking assets • $1.3 billion trust assets • A regional franchise focused on core banking services • Continued high growth potential 5
Slide 6: A Quarter Century of Strong Organic Growth
A Quarter Century of Strong Organic Growth $40,000 • Loan CAGR equals 12% $35,000 • Deposits CAGR equals $30,000 11% $25,000 • Record net income for $20,000 25 of 26 years $15,000 $10,000 $5,000 $0 2013 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 6
Slide 7: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and New Markets 7
Slide 8: Growth Strategy
Growth Strategy 1. Business Owner Focus 2. High Quality People 3. Organic Growth Strategy – Larger Markets 4. Core Deposit Funding 8
Slide 9: Experienced and Committed Team
Business Owner Focus Experienced and Committed Team • 37 credit “smart” commercial bankers • Average 20 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 9
Slide 10: Relationship Strategy
Business Owner Focus Relationship Strategy • We lead with credit and the operating relationship • We understand our client needs • We cross-sell aggressively by leveraging technology 10
Slide 11: Credit Process
Business Owner 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 occupied
Slide 12: Lake City Bank Culture
High Quality People 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 12
Slide 13: Face to Face Contact
High Quality People Face to Face Contact • We simply love to call • Sales calling program Includes 103 officers • 16,431 client contacts in 2014 • Our people are the competitive advantage 13
Slide 14: 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 78,564 1872 52% 12 6. Elkhart Elkhart 201,971 1990 21% 9 5. St. Joseph South Bend 267,618 1997 7% 4 3. Allen Fort Wayne 365,918 1999 11% 4 1. Hamilton/Ma
Slide 15: Commercial Banking Market
Organic Growth Strategy – Larger Markets Commercial Banking Market Growth Potential in Every Market Elk/SB 2,296 Warsaw 22% 650 6% Fort Wayne 1,757 17% Indianapolis 5,652 55% Companies with Revenue of $1 to $30 million Source: 2012 Hoover’s 15
Slide 16: Mature Market Strength and Growth
Organic Growth Strategy Mature Market Strength and Growth (millions) (1) 2015 2015 2005 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $2,850 16.09% $2,393 17.77% 19.10% 53 2. Lake City Bank $2,752 15.53% $1,127 8.38% 144.19% 46 3. Wells Fargo $2,276 12.85% $1,030 7.65% 120.97% 28
Slide 17: Mature Market Deposit Performance
Organic Growth Strategy Mature Market Deposit Performance (1) $1,625 $1,700 $1,500 Lake City Bank is the $1,246 $1,300 Market share winner in $1,100 last decade $900 $700 $457 $500 $389 $300 $164 $95 $7 $100 -$100 -$44 -$86 -$151 -$300 Lake City Bank Wells Fargo 1st Source JPM Chase Star IAB Financi
Slide 18: Indianapolis Market Opportunity
Organic Growth Strategy – Larger Markets Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 28% 12% 2. PNC 20% 3. Fifth Third 10% 4. Huntington National 8% 5. BMO Harris 6% 6. KeyBank 6% 7. Merchants Bank of IN 4% 8. National Bank of Indy 4% 9
Slide 19: Core Deposit Funding
Core Deposit Funding • 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 complete • Emphasis is on checking account relationship products 19
Slide 20: Financial Performance
Financial Performance (take City Bank
Slide 21: Income Performance Metrics
Income Performance Metrics LKFN performance exceeds National and Indiana Peers 2.00% 12.77% 14.00% 12.30% 12.50% 12.18% 11.78% 12.00% LTM Peer Data(1) National Indiana 1.50% 9.34% 7.51% 8.65% 10.00% 1.29% 1.32% 1.29% 8.00% 1.00% 1.19% 1.10% LTM Peer Data (1) National Indiana 6.00% 0.93% 0.82% 0.94%
Slide 22: Net Income and EPS
Net Income and EPS Record Net Income and EPS $50,000 $43,805 $2.80 $45,000 $38,839 $40,000 $2.61 $35,394 $2.30 $32,735 $34,081 $35,000 $2.33 $30,662 $30,000 $2.15 $2.03 $1.80 $24,543 $1.95 $25,000 $1.88 $20,000 $1.30 $15,000 $1.32 $10,000 $0.80 $5,000 $0 $0.30 2010 2011 2012 2013 2014 YTD 2014 YTD 2
Slide 23: Average Loans
Average Loans Commercial Emphasis Drives Growth $3,000,000 $2,844,079 $2,650,678 120% $2,343,422 $2,500,000 $2,148,046 $2,216,131 $2,049,209 100% $2,000,000 95% 93% 93% 95% 93% 87% 80% $1,500,000 60% $1,000,000 $500,000 40% $0 20% 2010 2011 2012 2013 2014 YTD 2015 Retail Commercial Loans to Deposits
Slide 24: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Commercial RE - Agri-business - Other Commercial Construction Agriculture $82,976 Residential Mortgage $176,945 $249,070 3% $154,019 Home Equity Commercial RE - 6% 8% 5% $160,485 Multifamily $93,075 5% Installment - Other 3% Consumer $57,614 Commercial RE -
Slide 25: Investment Portfolio
Investment Portfolio September 30, 2015 Average Life Book Yield Effective Duration Market Value Agency 0.08 2.81% 0.08 $4,074 MBS Pass-through 7.50 2.81% 5.91 $97,070 CMO 4.45 3.04% 2.83 $179,596 CMBS 5.57 2.51% 5.09 $88,951 Municipal 4.98 4.58% 5.22 $103,584 Taxable Municipal 4.83 2.46% 4.49 $3,404
Slide 26: Asset Quality
Asset Quality Nonperforming levels are at 5-year lows 2.50% 10.00% 9.00% 8.10% 8.06% 2.00% 7.46% 8.00% 6.64% 7.00% 1.50% 5.75% 6.00% 4.87% 1.00% 5.00% 4.00% 0.50% 3.00% 1.77% 1.80% 1.77% 2.19% 1.37% 1.75% 0.94% 1.31% 0.50% 0.41% 0.48% 0.40% 0.00% 2.00% 2010 2011 2012 2013 2014 YTD 2015 Nonperforming
Slide 27: 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% 0.40% 1.67% 1.80% 1.50% 1.50% 0.30% Reserve to 1.20% Nonperforming 0.20% Loans = 312% 0.90% 0.60% 0.10% 0.11% 0.54% 0.25% 0.20% 0.10% 0.07% 0.30%
Slide 28: Average Deposits
Average Deposits Improved Funding Mix Deposits = 97% of Funding vs. 90% in 2010 $3,004,068 $3,200,000 $2,797,929 $2,505,195 $2,505,340 $2,700,000 $2,325,963 $2,132,608 $2,200,000 $1,700,000 $1,200,000 $700,000 $200,000 2010 2011 2012 2013 2014 YTD 2015 YTD 2015 Growth 11% 28
Slide 29: Average Deposit Breakdown
Average Deposit Breakdown Deposit Growth Key to Franchise Value Cost of Deposits 1.72% 2.00% 1.30% 1.19% 0.98% 0.63% 0.48% 0.51% 0.00% 2009 2010 2011 2012 2013 2014 YTD 2015 December 31, 2008 September 30, 2015 (Pre-Liquidity Strategy) Total Deposits - $3.0 billion Total Deposits - $1.9 billion Tota
Slide 30: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income 5.00% $120,000 $102,303 $100,000 $92,653 $92,080 $90,439 4.50% $87,671 $76,199 $78,475 $80,000 4.00% $60,000 3.73% 3.50% $40,000 3.54% 3.28% 3.26% 3.32% 3.34% 3.21% 3.00% $20,000 $0 2.50% 2010 2011 2012 2013 2014 YTD 2014 YTD 2015 Net Interest
Slide 31: Impact of Rising Rates
Impact of Rising Rates • Asset sensitive balance sheet due to floating rate commercial loan portfolio • 90% of loan portfolio is commercial –66% of commercial loans are variable rate o Floors with average rate of 3.87% exist on 27% of commercial variable rate loans –The majority of fixed rate commer
Slide 32: Non-Interest Income
Non-Interest Income Stable, Fee-Based Strategy Drives Increases $35,000 50% $30,737 $30,053 $30,000 45% Non-Interest Income/Total Revenue $25,196 40% $25,000 $22,890 $23,410 Non-Interest Income $21,509 $22,205 35% $20,000 30% $15,000 25% 26% $10,000 23% 23% 23% 23% 20% 22% $5,000 19% 15% $0 10% 2010
Slide 33: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure $66,166 $62,778 $70,000 $57,742 $53,435 $55,105 $60,000 $50,849 $49,534 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2010 2011 2012 2013 2014 YTD 2014 YTD 2015 YTD 2015 Growth 3% 33
Slide 34: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio 60% Indianapolis and South Fishers and Clearwater Bend Market Expansion offices in Indianapolis 55% 52% 50% 52% 51% 50% 50% 48% 45% 47% 40% 2009 2010 2011 2012 2013 2014 YTD 2015 34
Slide 35: Stable Healthy Dividend
Stable Healthy Dividend Significant Increase in Dividend Reflects Strength of Balance Sheet Dividend Payout Ratio of 36% $0.98 $1.00 $0.84 $0.90 $0.76 $0.80 $0.68 $0.62 $0.62 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 2010 2011 2012 2013 2014 2015 Annualized 2015 Growth 17% 35
Slide 36: Strong Capital Structure
Strong Capital Structure Subordinated Debt Key Ratios and Per Share Data 6.6% As of September 30, 2015 Reserves 9.0% TCE /Tangible Assets 10.47% Tangible Total Risk-Based 13.79% Common Equity Leverage 11.18% 84.4% Book Value $23.24 Tangible Book Value $23.05 Tangible Book Value Per Share $25.00 $20.
Slide 37: LKFN Performance
LKFN Performance Lakeland Financial Corporation - Price Change (%) w= LKFN (+510.28%) === KBW Nasdaq Bank (-5.51%) we SNL U.S. Bank (+3.11%) === NASDAQ Bank (+69.55%) === S&P 500 Bank (-26.81%) 400 200 Price Change (%) -200 T T T T T T T T T T T T T T T 2000 2001 2002 2003 2004 2005 2006 2007 2008 2
Slide 38: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence drives Shareholder Value 38
Slide 39: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM