Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q1 2015 Earnings Presentation
39 slides from Lakeland Financial's earnings presentation, May 2015
Slide 1: A Proven History of Shareholder Value Creation and Commitment to Our Communities
A Proven History of Shareholder Value Creation and Commitment to Our Communities May 2015
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 6 Institutions LTM (including LKFN) ROE >12% Consecutive Increases in Net Income Since 2009(3) 24 Institutions Profitable for the Last 10 Years(2) 80 Institutions Exchange Traded Depositories with Assets Between $1B and $5B(1) 188 Institutions Source: Keefe Bruyette & Wo
Slide 5: Lake City Bank Today
Lake City Bank Today • An organic growth story • Headquartered in Warsaw, Indiana • 46 branch offices /502 FTEs • $3.5 billion banking assets • $1.2 billion trust assets • A regional franchise focused on core banking services • Continued high growth potential 5
Slide 6: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and New Markets 6
Slide 7: Growth Strategy
Growth Strategy 1. Business Owner Focus 2. High Quality People 3. Growth Strategy – Larger Markets 4. Core Deposit Funding 7
Slide 8: Experienced and Committed Team
Business Owner Focus Experienced and Committed Team • 38 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 8
Slide 9: 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 9
Slide 10: 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 11: Lake City Bank Culture
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 11
Slide 12: Face to Face Contact
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 12
Slide 13: 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 77,963 1872 53% 12 6. Elkhart Elkhart 200,563 1990 22% 9 5. St. Joseph South Bend 266,709 1997 7% 4 3. Allen Fort Wayne 363,014 1999 11% 4 1. Hamilton/Ma
Slide 14: Commercial Banking Market
Organic Growth Strategy – Larger Markets Commercial Banking Market Growth Potential in Every Market Elkhart/South Bend 2,296 22% Warsaw 650 6% Fort Wayne 1,757 17% Indianapolis 5,652 55% Companies with Revenue of $1 to $30 million 14 Source: 2012 Hoover’s
Slide 15: Core Market Strength and Growth
Organic Growth Strategy – Larger Markets Core Market Strength and Growth (millions) 2014 2014 2004 # of Deposits Share Deposits Share Increase Offices 1. Lake City Bank $2,828 13.04% $1,023 6.92% 176.44% 46 2. JPM Chase $2,809 12.95% $1,948 13.17% 44.20% 46 3. 1st Source $2,701 12.45% $2,060 13.93%
Slide 16: Core Market Deposit Performance
Organic Growth Strategy – Larger Markets Core Market Deposit Performance $2,000 $1,805 $1,800 Lake City Bank is the $1,600 Market share winner in $1,400 $1,312 last decade $1,200 $1,000 $861 $800 $641 $600 $400 $308 $264 $224 $203 $161 $200 $21 $0 Lake City Wells Fargo JPMorgan 1st Source Old Nation
Slide 17: Indianapolis Market Opportunity
Larger Markets Indianapolis Market Opportunity Indianapolis Market Banks Share of Market 12% 1. JPM Chase 29% 2. PNC 20% 3. Fifth Third 11% 4. Huntington National 8% 5. BMO Harris 6% 6. KeyBank 5% 7. National Bank of Indy 4% 8. Regions Bank 4% 88% 9. Merchants Bank of IN 3% 10. First Internet Bank o
Slide 18: Retail Deposit Funding
Retail 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 • Constantly reviewing deposit products offering • Emphasis is on relationship structured products 18
Slide 19: Financial Performance
Financial Performance LAKELAND FINANCIAL CORPORATION LAKE CITY BANK
Slide 20: Income Performance Metrics
Income Performance Metrics LKFN performance exceeds National and Indiana Peers 2.00% 14.00% 12.50% 12.77% 12.30% 12.32% 11.78% 12.00% LTM Peer Data(1) National Indiana 1.50% 9.34% 6.26% 8.89% 10.00% 1.29% 1.32% 1.31% 8.00% 1.19% 1.00% 1.10% LTM Peer Data (1) National Indiana 6.00% 0.93% 0.70% 0.91%
Slide 21: Net Income and EPS
Net Income and EPS Record net income and EPS $50,000 $43,805 $2.80 $45,000 $40,000 $38,839 $2.61 $35,394 $2.30 $35,000 $2.33 $30,662 $30,000 $2.15 $24,543 $1.80 $25,000 $1.88 $20,000 $1.30 $15,000 $1.32 $9,912 $11,136 $10,000 $0.80 $5,000 $0.66 $0.59 $0 $0.30 2010 2011 2012 2013 2014 YTD 2014 YTD 20
Slide 22: Average Loans
Average Loans Commercial Emphasis Drives Growth $3,000,000 $2,754,847 $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 23: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Commercial RE - Agri-business - Construction Agriculture Other Commercial Residential Mortgage $151,065 $216,241 $82,478 $145,289 5% 8% 3% 5% Home Equity Commercial RE - $150,007 Multifamily Installment - Other 5% $94,327 Consumer 3% $57,399 Commercial RE -
Slide 24: Investment Portfolio
Investment Portfolio March 31, 2015 Security Average Book Effective Market Type Life Yield Duration Value Agency 9.17 2.68% 4.61 $4,215 MBS Pass-through 6.28 2.68% 5.15 $138,762 CMO 3.20 3.27% 2.28 $194,783 CMBS 5.79 2.24% 5.31 $34,444 Municipal 4.80 5.41% 4.84 $100,565 Taxable Municipal 5.32 2.78%
Slide 25: Asset Quality
Asset Quality Nonperforming Levels Are at 5 Year Lows 2.50% 2.19% 2.00% 1.77% 1.80% 1.77% 1.75% 1.37% 1.31% 1.50% 0.94% 1.00% 0.56% 0.50% 0.46% 0.41% 0.50% 0.00% 2010 2011 2012 2013 2014 YTD 2015 Nonperforming Loans/Total Loans Nonperforming Assets/Total Assets 25
Slide 26: Asset Quality
Asset Quality Stable Credit Trends $180,000 $168,781 $166,273 $164,151 $158,739 $160,000 $152,739 $140,000 $120,000 $100,000 $80,000 $60,000 $34,101 $40,000 $32,049 $34,137 $31,957 $30,154 $20,000 $15,102 $14,075 $14,764 $13,707 $15,608 $0 Q1-14 Q2-14 Q3-14 Q4-14 03/31/15 Impaired & Non-Impaired Wat
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% 1.65% 1.80% 1.50% 0.30% Reserve to 1.20% Nonperforming 0.20% Loans = 293% 0.90% 0.60% 0.10% 0.54% 0.25% 0.20% 0.11% 0.10% 0.09% 0.30%
Slide 28: Average Deposits
Average Deposits Improved Funding Mix Deposits = 96% of Funding vs. 90% in 2010 $3,200,000 $2,937,172 $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 2.00% 1.72% 1.30% 1.19% 1.50% 0.98% 1.00% 0.63% 0.48% 0.50% 0.50% Pre-Liquidity Strategy 0.00% December 31, 2008 2009 2010 2011 2012 2013 2014 YTD March 31, 2015 2015 Total Brokered CDARS Brokered CDs Total CDARS Broker
Slide 30: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income 5.00% $120,000 $102,303 $100,000 $92,653 4.50% $92,080 $90,439 $87,671 $80,000 4.00% $60,000 3.73% 3.38% 3.50% 3.54% 3.27% $40,000 3.28% 3.32% 3.26% $24,680 $25,700 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 • 89% of loan portfolio is commercial • 65% of commercial loans are variable rate – mostly Prime and LIBOR based o Floors with average rate of 3.86% exist on 35% of commercial variable rate loans • 35% of commercial loans are fixed rate with most less than 5 years • Deposit ra
Slide 32: Non-Interest Income
Non-Interest Income Stable, Fee-Based Strategy Drives Increases $35,000 50% $30,737 $30,053 $30,000 45% $25,196 40% $25,000 Non-Interest Income/Total Revenue $21,509 $22,205 35% Non-Interest Income $20,000 30% 26% $15,000 23% 23% 25% 22% $10,000 19% $7,427 $7,795 20% $5,000 15% $0 10% 2010 2011 2012
Slide 33: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure $66,166 $70,000 $62,778 $57,742 $60,000 $53,435 $55,105 $50,000 $40,000 $30,000 $16,790 $16,901 $20,000 $10,000 $0 2010 2011 2012 2013 2014 YTD 2014 YTD 2015 YTD 2015 Growth 1% 33
Slide 34: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio 60% Fishers and Clearwater offices 55% Indianapolis and South in Indianapolis Bend Market Expansion 52% 50% 51% 52% 50% 50% 48% 47% 45% 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 35% $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 Reserves Key Ratios and Per Share Data 6.9% 8.8% As of March 31, 2015 TCE /Tangible Assets 10.58% Total Risk-Based 14.07% Tangible Leverage 11.35% Common Book Value $22.32 Equity 84.3% Tangible Book Value $22.13 Tangible Book Value Per Share $25.00 $22.13 $
Slide 37: LKFN Performance
ee LKFN Performance Lakeland Financial Corporation - Price Change (%) m= LKFN (+445.07%) ——= KBW Bank (-4.82%) m= SNL U.S. Bank (+2.4356) = NASDAQ Bank (+60.40%) —— S&P 500 (+43.93%) 600, 400) yi zg 2 = 5 5 20 tag re) a £ a 0 -200 T T T T T T T T T T T T T T T 2000 2001 2002 2003 2004 2005 2006 2007
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: Lake City Bank
Qvake City Bank (800) 827-4522 LAKECITYBANK.COM