Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Investor Presentation (November 2020)
52 slides from Lakeland Financial's investor presentation, Nov 19, 2020
Slide 1: A Proven History of Shareholder Value Creation
A Proven History of Shareholder Value Creation And Commitment to Our Communities 3 rd Quarter 2020 Lakeland Financial Corporation LKFN LISTED
Slide 2: Presenters: 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
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 operations, plans, objectives,
Slide 4: Profitability, Capital Adequacy, Asset Quality
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Slide 5: Long Term Success for Shareholders
Consecutive Increases in Net Income Since 2010 (3) Profitable for the Last 10 Years (2) Exchange Traded Depositories with Assets Between $1B and $10B (1) 5 Institutions 21 Institutions 137 Institutions 222 Institutions (including LKFN) 5 Long Term Success for Shareholders Source: S&P Global Market I
Slide 6: Strong Capital Structure
Strong Capital Structure 6 Tangible Common Equity 91.6% Reserves 8.4% $1.21 $24.90 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Tangible Book Value (1) Per Share (1) compounded annual growth rate computed from 1991 - 2019 K
Slide 7: COVID-Crisis Management
7 COVID - 19 Crisis Management • Active Credit Risk Management • COVID - 19 Related Loan Deferrals • Paycheck Protection Program • Liquidity Preparedness • Current Expected Loss (CECL) Standard Update
Slide 8: Active Credit Risk Management
Active Credit Risk Management Ongoing Assessment of Potential Risk Sectors - COVID - 19 Hotel & Accomodations 2.5% Education 1.0% Restaurants 1.0% Entertainment & Recreation 0.6% Dairy & Hogs 1.6% June 30, 2020 September 30, 2020 5.7% of Loan Portfolio $228 million (excludes PPP Loans) 6.6% of Loan
Slide 9: COVID-Related Loan Deferrals
9 COVID - 19 Related Loan Deferrals COVID - 19 Loan Deferrals as of October 21, 2020 Credit Risk Management Efforts Type of Loan # of Borrowers Loans (000’s) % of Total Loan Portfolio Commercial 37 $107,626 3% Consumer 26 2,840 1% Total 63 $110,465 2% • All COVID - 19 related loan deferrals remain o
Slide 10: Paycheck Protection Program
10 Paycheck Protection Program Significant Positive Impact to Borrowers PPP Loans through October 22, 2020: • 2,409 Loans • $558 million • Average loans size of $231,000 Forgiveness Process Update: • Fintech portal opened on August 27, 2020 • 36 PPP forgiveness applications submitted to SBA as of 10
Slide 11: Liquidity Preparedness
Liquidity Preparedness 11 • Overall utilization of credit lines was 41% as of September 30, 2020 down from 48% as of March 31, 2020 and 46% at December 31, 2019 • Expansion of funding sources has provided additional liquidity • Liquidity availability of $2.7 billion consists of access to: – FHLB Ind
Slide 12: Current Expected Credit Loss (CECL) Standard Update
Current Expected Credit Loss (CECL) Standard Update • Adoption anticipated during the fourth quarter of 2020 • CECL Day 1 impact is estimated to result in a $7.7 million increase to the allowance for credit losses, with an offset net of taxes to stockholders’ equity • Cumulative 2020 difference in p
Slide 13: Lake City Bank Today
Lake City Bank Today • A long - term and consistent organic growth story • Headquartered in Warsaw, Indiana • 50 branch offices - $5.6 billion banking assets - $2.1 billion trust and investment assets • Focused on execution – “blocking and tackling” • Continued growth potential 13
Slide 14: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth 14 $2,707 $87,047 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Net Income Compou
Slide 15: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Developing Markets 15 Market Data Warsaw – 1872 22 offices Elkhart – 1990 11 offices South Bend – 1997 4 offices Fort Wayne – 1999 7 offices Indianapolis – 2011 6 offices
Slide 16: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Indiana Employment Trends Versus National Averages 16 Source: United States Bureau of Labor Statistics. Lake City Bank footprint is defined as Kosciusko, Marshall, Fulton, Pulaski, Noble, Whitley, St. Joseph, Elkhart, LaGrange, Allen, DeKalb, Huntington, Marion,
Slide 17: Shareholder Value Strategy
Shareholder Value Strategy 17 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 18: Commercial Banking Focus
• 40 credit “smart” commercial bankers • Average 20 years in banking & 11 years at Lake City Bank • We live where we lend • Face to face calling matters and is a team effort • We understand our client needs • Deep organizational structure provides credit and administrative support • We cross - sell
Slide 19: Credit Process
Credit Process • We are in - market lender to in - market clients • Character matters – we lend to people first • Our credit discipline has never changed • We focus on management/cash flow • We have a centralized committee structure • Structure is important • Orientation towards owner - occupied and
Slide 20: Lake City Bank Culture
Lake City Bank Culture • Our culture is our greatest asset and we will preserve it • Lake City University drives our culture • Our community involvement is real and critical to our strategy • Our culture has not been diluted by acquisition 20 High Quality Team Members
Slide 21: Mature Market Deposit Performance
Mature 1 Market Deposit Performance $1,980 $1,757 $1,399 $824 $341 $339 $202 $83 - $83 - $328 -$350 $150 $650 $1,150 $1,650 $2,150 Lake City Bank 1st Source JPM Chase Flagstar First Merchants Star Fifth Third PNC Old National KeyBank Organic Growth 2010 - 2020 1 Mature Markets include 12 Northern In
Slide 22: Indianapolis Market Opportunity
Organic Growth 22 Indianapolis Market Opportunity Indianapolis Market Banks Share of Market 1. JPM Chase 22% 2. PNC 14% 3. Fifth Third 9% 4. Huntington National 7% 5. First Internet Bank 7% 6. BMO Harris 7% 7. KeyBank 6% 8. Bank of America 6% 9. Merchants Bank 5% 10. National Bank of Indy 4% 16. Lak
Slide 23: A Strong Environment for Growth and Expansion
23 A Strong Environment for Growth and Expansion • #1 manufacturing state in the country (1) • CNBC named Indiana as #1 state for infrastructure • K - 12 funding increased $1 billion since 2017 • Net population in - migration in 2019 • Economic expansion of 1.25% in 2019 (2) (1) Based on per capita
Slide 24: Core Deposits Fund Organic Loan Growth
24 Core Deposits Fund Organic Loan Growth • Focus on core deposit growth in retail, commercial and public funds • Commercial deposit growth over 5 years = 18% CAGR • Capitalize on market disruption in our footprint to grow deposits • Emphasize checking account relationship products and flexible solu
Slide 25: Commitment to Technology and Cyber Risk Management
• Technology partnership with FIS is strong – User Planning Council and Strategic Planning Advisory Council • Fintech partnerships play a growing role in our technology strategy with an emphasis on digital mobile and online solutions • Mobile banking applications adoption accelerating in Retail and
Slide 26: Mobile Adoption is Growing Rapidly
Mobile Adoption is Growing Rapidly 26 Channel Utilization Over Three Year Horizon (1) Channel Type Total Transactions 2017 % of Total Total Transactions 2020 % of Total Three Year Change Branch Transactions 2,439,894 21% 2,073,708 16% (15)% ATM/ITM 973,412 8% 891,756 7% (8)% Online Logins 4,729,525
Slide 27: Mobile App Adoption by Age Demographic
Lake City Bank Mobile App Adoption by Age Demographic 14% 25% 19% 32% 10% CUSTOMER BREAKDOWN 39% 48% 33% 20% 9% MOBILE APP ADOPTION Gen Z Millennial Gen X Baby Boomer Senior Gen Z 1996 – Current Millennial 1977 – 1995 Gen X 1965 – 1976 Baby Boomer 1946 – 1964 Senior 1945 or before September 2020 27
Slide 28: Technology Focused Solutions
28 Technology Focused Solutions Commitment to Technology and Cyber Risk Management
Slide 29: Financial Performance
Financial Performance
Slide 30: LKFN Performance Exceeds National and Indiana Peers
1.29% 1.29% 1.29% 1.69% 1.76% 1.50% 12.26% 12.52% 12.72% 16.51% 15.47% 12.96% 12.45% 12.61% 12.83% 16.64% 15.57% 13.04% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 0.70% 0.90% 1.10% 1.30% 1.50% 1.70% 1.90% 2.10% 2.30% 2.50% 2015 2016 2017 2018 2019 YTD 2020 Return on Average Assets R
Slide 31: Net Income and EPS
$46,367 $52,084 $57,330 $80,411 $87,047 $64,849 $59,745 $1.84 $2.05 $2.23 $3.13 $3.38 $2.52 $2.33 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $0 $20,000 $40,000 $60,000 $80,000 $100,000 2015 2016 2017(1) 2018 2019 YTD 2019 YTD 2020 Net Income Diluted EPS Net Income and EPS 2020 Net Income declin
Slide 32: Pretax Pre-Provision Earnings
$69,200 $78,367 $92,634 $105,344 $110,620 $82,741 $87,063 1.92% 1.94% 2.08% 2.21% 2.24% 2.24% 2.18% 1.50% 1.70% 1.90% 2.10% 2.30% 2.50% 2.70% 2.90% 3.10% 3.30% 3.50% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 2015 2016 2017 2018 2019 YTD 2019 YTD 2020 Pretax Pre-Provision Earnings Pretax P
Slide 33: Average Loans
Average Loans PPP Loans Impact Growth in 2020 93% 93% 96% 94% 94% 96% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 2015 2016 2017 2018 2019 YTD 2020 Retail Commercial Loans to Deposits
Slide 34: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Commercial & Industrial $1,849,413 40% Commercial RE - Owner Occupied $619,820 13% Commercial RE - Nonowner Occupied $567,674 12% Commercial RE - Multifamily $279,713 6% Commercial RE - Construction $393,101 9% Agri - business - Agriculture $338,154 7% Othe
Slide 35: Deposits
$3,088,598 $3,477,816 $3,757,209 $4,093,894 $4,242,524 $4,546,899 97% 97% 95% 97% 98% 98% 50% 60% 70% 80% 90% 100% 110% 120% 130% $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 2015 2016 2017 2018 2019 YTD 2020 Average Deposits % of Fun
Slide 36: Deposit Breakdown
Total Retail $1,722,249 36% Total Public Fund $1,212,131 25% Total Commercial $1,803,873 38% Brokered Deposits $29,702 1% Deposit Breakdown Deposit Growth Key to Franchise Value 1.19% 0.98% 0.63% 0.48% 0.50% 0.54% 0.72% 1.10% 1.35% 1.40% 0.71% 0.00% 1.00% 2.00% 2011 2012 2013 2014 2015 2016 2017 201
Slide 37: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income Offset by Margin Compression $105,927 $118,481 $135,892 $151,271 $155,047 $116,165 $118,295 3.20% 3.18% 3.33% 3.43% 3.38% 3.40% 3.16% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $1
Slide 38: Interest Rate Sensitivity
Fixed Rate $1,787,495 42% Prime $911,825 22% 1 Month LIBOR $1,136,142 27% FHLB/Other $383,375 9% Interest Rate Sensitivity • Proactive deposit pricing reductions concurrent with FOMC easing • 54% of Public Funds are tied to Fed Funds effective rate • 90% of loan portfolio consists of commercial loan
Slide 39: Asset Quality
Asset Quality Nonperforming Levels are Low Despite Economic Challenges 1.52% 2.15% 2.75% 1.37% 0.94% 0.50% 0.42% 0.19% 0.25% 0.19% 0.46% 0.29% 1.22% 1.82% 2.20% 1.75% 1.31% 0.41% 0.35% 0.16% 0.20% 0.16% 0.38% 0.25% 8.86% 8.17% 7.46% 8.06% 6.64% 5.75% 4.64% 4.28% 4.50% 4.77% 4.43% 4.82% 5.49% 2.00% 4
Slide 40: Asset Quality: Allowance for Loan Losses
0.42% 0.54% 0.25% 0.20% 0.11% 0.10% 0.09% 0.03% - 0.01% 0.13% 0.03% 0.12% 1.59% 2.15% 2.39% 2.28% 1.92% 1.67% 1.42% 1.26% 1.23% 1.24% 1.25% 1.32% 1.51% 0.00% 0.30% 0.60% 0.90% 1.20% 1.50% 1.80% 2.10% 2.40% 2.70% -0.10% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 2009 2010 2011 2012 2013 2014 2015 2016
Slide 41: Non-Interest Income
$31,479 $32,864 $36,009 $40,302 $44,997 $33,878 $35,061 23% 22% 22% 21% 22% 23% 22% 0% 10% 20% 30% 40% 50% 60% $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 2015 2016 2017 2018 2019 YTD 2019 YTD 2020 Non - Interest Income as % of Total Revenue Non - Interest Incom
Slide 42: Non-Interest Expense
Non - Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future 42 $68,206 $72,978 $79,267 $86,229 $89,424 $67,302 $66,293 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 2015 2016 2017 2018 2019 YTD 2019 YTD 2020 2020 YOY De
Slide 43: Efficiency Ratio
47% 48% 51% 52% 50% 50% 48% 46% 45% 45% 43% 40% 45% 50% 55% 60% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD 2020 Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio Indianapolis North and South Bend Downtown Expansion Indianapolis Fishers and Clearwater Expansion Indi
Slide 44: Stable Healthy Dividend
Stable Healthy Dividend $0.63 $0.73 $0.85 $1.00 $1.16 $0.30 $0.30 2.10% 1.95% 1.77% 2.25% 2.40% 2.72% 2.91% 1.00% 1.50% 2.00% 2.50% 3.00% $0.10 $0.30 $0.50 $0.70 $0.90 $1.10 $1.30 2015 2016 2017 2018 2019 3Q19 3Q20 Dividend Per Share - split adjusted Dividend Yield - using average stock price 2020 G
Slide 45: LKFN Shareholder Value Total Return Performance
LKFN Shareholder Value 45 Total Return Performance from 12/31/00 to 9/30/20 Source: SNL database 1,549.80% 54.87% 276.56% (500.00) 0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 LKFN-Total Return (Daily)(%) S&P 500-Total Return (Daily)(%) SNL U.S. Financial Institutions-Total Return (Daily)(%) S&P
Slide 46: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 46
Slide 47: Supplemental Information
Supplemental Information
Slide 48: Larger Market Organic Expansion
Larger Market Organic Expansion 48 State Rank County Primary City Population* LCB Entry LCB Deposit Market Share** # of Branches 20. Kosciusko Warsaw 79,456 1872 58% 12 6. Elkhart Elkhart 206,341 1990 23% 9 5. St. Joseph South Bend 271,286 1997 9% 4 3. Allen Fort Wayne 379,299 1999 14% 5 1. Hamilton
Slide 49: Mature Market Strength and Growth
Mature Market Strength and Growth (millions) 1 2020 2010 2020 # of Offices Deposits Share Deposits Share Increase 1. 1 st Source $4,433 19.68% $2,676 15.68% 65.66% 53 2. Lake City Bank $4,113 18.26% $2,133 12.50% 92.83% 50 3. JPM Chase $2,992 13.29% $1,593 10.81% 87.82% 22 4. PNC $1,626 7.22% $1,543
Slide 50: Investment Portfolio – Source of Liquidity
14.1% 12.9% 11.8% 11.5% 12.0% 12.3% 12.9% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 17.0% 2014 2015 2016 2017 2018 2019 2020(1) US Govt Remics 12.77% US Govt Pools 25.78% Exempt Municipals 53.73% Taxable Municipals 0.08% US Govt Agencies 1.56% CMCL CMO 6.08% Investment Portfolio – Source of Liquidit
Slide 51: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet - 1.28% 1.16% 2.34% 4.98% 9.89% 15.06% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% NII - Rates Down 25 NII - Rates Up 25 NII - Rates Up 50 NII - Rates Up 100 NII - Rates Up 200 NII - Rates Up 300 Graph
Slide 52: Lake City Bank contact
(800) 827 - 4522 LAKECITYBANK.COM
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