Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q1 2021 Earnings Presentation
52 slides from Lakeland Financial's earnings presentation, 2021
Slide 1: A Proven History of Shareholder Value Creation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 1st Quarter 2021 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: Top Banks
TOP 25 BANKS Profitability Capital Adequacy Asset Quality Core Core Tang Common NPAs/ Neos/ Rank CompanyName Ticker state Glin) "ta)” ame "U) Rank Assets)” Rank REDIGS) Rank 50." Rank Sore 1 RBB Bancorp RBB CA 1,691 1.84 4 12.99 23 14.09 10 0.21 18 -0.05 16 54.0 2 Bank of the Ozarks OZRK AR 21,276 e
Slide 5: Long Term Success for Shareholders
Long Term Success for Shareholders 6 Institutions (including LKFN) LTM ROE >13.5% Consecutive Increases in PTPP 35 Institutions Income Since 2012(3) Profitable for the Last 163 Institutions 10 Years(2) Exchange Traded Depositories 223 Institutions with Assets Between $1B and $10B(1) Source: S&P Glob
Slide 6: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share Tangible $25.43 $30.00 Reserves Common 8.3% Equity $25.00 91.7% $20.00 $15.00 Key Ratios and Per Share Data as of March 31, 2021 $10.00 TCE/Tangible Assets 10.77% $1.21 $5.00 Total Risk-Based 15.15% Leverage 10.79% $0.00 1995 1991 1993 1997 1
Slide 7: COVID-19 Crisis Management
COVID-19 Crisis Management • Active Credit Risk Management • COVID-19 Related Loan Deferrals • Paycheck Protection Program 7
Slide 8: Active Credit Risk Management
Active Credit Risk Management Ongoing Assessment of Potential Risk Sectors – COVID-19 March 31, 2020 March 31, 2021 Transportation & Education C&I Building Trucking 0.9% Construction Contractors 0.6% 0.9% Restaurants Automotive, 1.6% Boating, Trailer & Truck Full Service Entertainment & 1.7% Restaur
Slide 9: COVID-19 Related Loan Deferrals
COVID-19 Related Loan Deferrals COVID-19 Loan Deferrals as of April 23, 2021 Credit Risk Management Efforts % of Total • All COVID-19 related loan deferrals remain on accrual status Type of # of Loans Loan • Each deferral is evaluated individually, and management Loan Borrowers (000’s) Portfolio has
Slide 10: Paycheck Protection Program
Paycheck Protection Program Significant Positive Impact to Borrowers Continues PPP Round 1 and Round 2 Originations PPP Round 1 Highlights $600 • $571 million thru 2,409 loans $555 $558 • Average loan size $237,000 $500 • 82% of loans, or $305 million $412 forgiven as of 4/23/21 $400 $372 • $169 mil
Slide 11: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 50 branch offices - $6.0 billion banking assets - $2.7 billion trust and investment brokerage assets • Focused on execution – “blocking and tackling” • Continued growth potential 11
Slide 12: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth Record Net Income for 30 of 32 Years (000’s) $84,337 $100,000 $90,000 Compound Annual Growth 1991 – 2020 • Loans = 11% $80,000 • Deposits = 10% $70,000 • Net Income = 13% Net Income $60,000 • Earnings Per Share = 12% $50,000 $40,000 $30,000 $20,000 $2,707 $10,000
Slide 13: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Developing Markets Market Data Warsaw – 1872 22 offices Elkhart – 1990 11 offices South Bend – 1997 4 offices Fort Wayne – 1999 7 offices Indianapolis – 2011 6 offices 13
Slide 14: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Indiana Employment Trends Versus National Averages 14.0% 13.0% 12.0% 10.0% Unemployment 10.4% 9.5% 8.7% 8.0% 11.9% 11.8% 8.1% 7.0% 9.6% 6.0% 9.0% 9.0% 6.2% 5.8% 6.9% 5.2% 4.9% 5.6% 4.0% 5.1% 11.9% 11.3% 4.4% 4.3% 3.7% 9.6% 9.0% 8.8% 6.5% 5.2% 4.6% 3.8% 3.3% 3.8%
Slide 15: 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 15
Slide 16: Experienced Relationship Driven Team
Commercial Banking Focus Experienced Relationship Driven Team • 41 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
Slide 17: Credit Process
Commercial Banking Focus 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
Slide 18: Lake City Bank Culture
High Quality Team Members 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 18
Slide 19: Mature Market Deposit Performance
Organic Growth 2010 - 2020 Mature Market Deposit Performance 1 $2,150 $1,980 $1,757 $1,650 $1,399 Lake City Bank has grown deposits by 93% over the last $1,150 ten-year period. $824 $650 $341 $339 $202 $150 $83 -$83 -$350 -$328 Lake City Bank 1st Source JPM Chase Flagstar First Merchants Star Fifth
Slide 20: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 22% 2. PNC 14% 3. Fifth Third 9% 4. Huntington National 7% 12% 5. First Internet Bank 7% 6. BMO Harris 7% 7. KeyBank 6% 8. Bank of America 6% 9. Merchants Bank 5% 10. National B
Slide 21: A Strong Environment for Growth and Expansion
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 2020 • Ten-year population growth of 4% through 2020 • Economic expansion of 1.
Slide 22: Core Deposits Fund Organic Loan Growth
Core Deposit Funding Core Deposits Fund Organic Loan Growth • Focus on core deposit growth in retail, commercial and public funds • Commercial deposit growth over 5 years = 22% CAGR • Capitalize on market disruption in our footprint to grow deposits • Emphasize checking account relationship products
Slide 23: Innovative and Competitive Technology is a Focus
Commitment to Technology and Cyber Risk Management Innovative and Competitive Technology is a Focus • Fintech partnerships play a growing role in our technology • Lake City Bank Digital, the next generation digital solution rolls out in March 2021 • Technology partnership with FIS is strong – User P
Slide 24: Channel Utilization Over Three Year Horizon
Mobile Adoption is Growing Rapidly Channel Utilization Over Three Year Horizon(1) Total Total Three Channel Transactions % of Transactions % of Year Type 2018 Total 2021 Total Change Branch Transactions 2,384,159 20% 1,969,469 15% (17)% ATM/ITM 958,326 8% 878,845 6% (9)% Online Logins 4,855,943 41%
Slide 25: Lake City Bank Mobile App Adoption by Age Demographic
Lake City Bank Mobile App Adoption by Age Demographic March 2021 CUSTOMER BREAKDOWN MOBILE APP ADOPTION Gen Z Millennial 10% 14% 10% Gen X Baby Boomer 21% 42% Senior 32% 25% 35% 19% 50% Gen Z 1996 – Current Millennial 1977 – 1995 Gen X 1965 – 1976 Baby Boomer 1946 – 1964 Senior 1945 or before 25
Slide 26: Technology Focused Solutions
Commitment to Technology and Cyber Risk Management Technology Focused Solutions 26
Slide 27: Financial Performance
Financial Performance (take City Bank
Slide 28: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers ROE and ROTE LTM Peer Data1 National Indiana 2.50% 20.00% ROE 11.5% 13.5% ROTE 12.9% 14.9% 2.30% 18.00% 16.64% 2.10% 15.57% 16.00% 16.51% 14.35% ROE and ROTE 1.90% 15.47% 13.59% 12.83% 14.00% 12.61% 1.70% 14.27% ROA 1.76%
Slide 29: Net Income and EPS
Net Income and EPS (000’s) Net income improves in 2021 $4.50 $100,000 $4.00 $87,047 $84,337 $80,411 $80,000 $3.50 $3.38 $3.30 $3.00 $57,330 $3.13 $60,000 Net Income $52,084 $2.50 EPS $40,000 $2.23 $2.00 $2.05 $22,983 $1.50 $20,000 $17,299 $0.90 $0.67 $1.00 $0 $0.50 2016 2017(1) 2018 2019 2020 YTD 20
Slide 30: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings (000’s) Demonstrates Consistent Operating Strength $140,000 Pretax Pre-Provision Earnings/Average Assets 2.90% $118,646 $120,000 Pretax Pre-Provision Earnings $110,620 $105,344 2.70% $100,000 $92,634 2.50% $78,367 $80,000 2.40% 2.22% 2.30% $60,000 2.24% 2.21% 2.00% 2.10
Slide 31: Average Loans
Average Loans (000’s) PPP Loans Impact Growth in 2020 and 2021 $5,000,000 150% $4,567,226 $4,424,472 $4,500,000 140% $3,974,532 $4,000,000 $3,843,912 130% $3,610,908 $3,500,000 $3,225,635 120% Loans to Deposit Ratio $3,000,000 110% Loans $2,500,000 100% $2,000,000 96% 95% 90% 93% 94% 94% $1,500,000
Slide 32: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Commercial RE - Agri-business - Other Residential Construction Agriculture Commercial Mortgage $370,906 $347,167 $86,477 $161,573 8% 8% 2% Commercial RE - 4% Home Equity Multifamily $157,492 $301,385 4% 7% Installment - Other Consumer $108,273 2% Commercial
Slide 33: Average Deposits
Average Deposits Core Deposits Grew by 25% or $1 Billion Year-over-Year (000’s) $6,000,000 130% $5,107,019 Deposits as a Percent of Total Funding 120% $5,000,000 $4,650,597 $4,093,894 $4,242,524 110% $4,000,000 $3,757,209 $3,477,816 100% Deposits 98% 98% 99% $3,000,000 97% 97% 90% 95% 80% $2,000,000
Slide 34: Deposit Breakdown
Deposit Breakdown Demand Deposits Grew by $546 million or 52% in One Year Brokered Deposits $10,003 Cost of Deposits 0% 3.00% 2.00% 1.19% 0.98% 1.10%1.35% 1.00% 0.63% 0.48% 0.50% 0.54% 0.72% 0.63% 0.33% 0.00% Total 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Commercial Total Retail 2021 $2
Slide 35: Net Interest Income
Net Interest Income Growth in Net Interest Income Offset by Margin Compression (000’s) $180,000 6.00% $163,008 $160,000 $155,047 $151,271 5.50% $135,892 $140,000 5.00% $118,481 $120,000 Net Interest Income Net Interest Margin 4.50% $100,000 4.00% $80,000 3.43% 3.33% 3.38% 3.35% 3.18% 3.19% 3.19% 3.5
Slide 36: Interest Rate Sensitivity
Interest Rate Sensitivity Commercial Loan Portfolio Pricing Composition • Proactive deposit pricing FHLB/Other reductions $403,606 10% • 65% of Public Funds are tied to Fed Funds effective rate 1 Month LIBOR Fixed Rate • 91% of loan portfolio consists $1,172,229 $1,594,946 28% 39% of commercial loan
Slide 37: Asset Quality: Nonperforming Assets to Total Assets
Asset Quality Nonperforming Levels are Low Despite Economic Challenges 5.00% 14.00% Impaired and Watch List Loans to Total Loans Nonperforming Assets to Total Assets 4.00% 12.00% 3.00% 10.00% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 6.15% 5.75% 6.06% 6.00% 4.64% 4.77% 4.28% 4.50% 4.43% 1.00% 0.46% 0.38%
Slide 38: Asset Quality: Net Chargeoffs to Average Loans
Asset Quality CECL Adopted effective January 1, 2021 0.60% 2.70% 2.39% 2.28% 2.40% 0.50% 2.15% Loan Loss Reserve to Total Loans 2.10% Net Chargeoffs to Average Loans 1.92% 0.40% 1.67% 1.80% 1.61% 0.30% 1.42% 1.32% 1.50% 1.26% 1.23% 1.24% 1.25% 0.20% 1.20% 0.13% 0.90% 0.10% 0.54% 0.25% 0.20% 0.11% 0.
Slide 39: Non-Interest Income
Non-Interest Income Mortgage Banking Income is a Bright Spot in 2021 (000’s) $50,000 $46,843 60% Non-Interest Income as % of Total Revenue $44,997 $45,000 $40,302 50% $40,000 $36,009 Non-Interest Income $35,000 $32,864 40% $30,000 $25,000 30% 22% 22% 21% 22% 22% 22% 22% $20,000 20% $15,000 $12,557 $
Slide 40: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future (000’s) $100,000 $89,424 $91,205 $90,000 $86,229 $79,267 $80,000 $72,978 $70,000 $60,000 $50,000 $40,000 $26,746 $30,000 $22,089 $20,000 $10,000 $0 2016 2017 2018 2019 2020 YTD 2020 YTD 2021 2021 YOY
Slide 41: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver Constant investment in technology and facilities 55% 52% 50% 51% 50% 50% 48% 48% 48% 47% 45% 46% 45% 45% 43% 40% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021 41
Slide 42: Stable Healthy Dividend
Stable Healthy Dividend Dividend Reflects Strength of Balance Sheet $1.30 4.00% $1.20 $1.16 $1.10 3.27% 3.50% $1.00 $0.90 $0.85 3.00% Dividend per Share Dividend Yield $0.73 $0.70 2.50% 2.40% 1.97% $0.50 2.25% 2.27% 2.00% $0.34 1.95% 1.77% $0.30 $0.30 1.50% $0.10 1.00% 2016 2017 2018 2019 2020 YTD 2
Slide 43: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 3/31/21 3,500.00 3,000.00 2,703.74% 2,500.00 2,000.00 1,500.00 1,000.00 348.39% 500.00 205.40% 121.35% 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 44: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 44
Slide 45: Supplemental Information
Supplemental Information (take City Bank
Slide 46: Liquidity
Liquidity Line of Credit Utilization March 31, 2021 4,000 75% 3,470 3,433 3,413 3,407 3,416 3,429 3,423 3,539 3,554 3,544 3,600 3,500 3,267 3,327 3,266 3,096 3,079 3,084 3,134 65% 2,850 3,000 2,516 1,546 1,611 1,806 1,737 1,738 2,500 2,179 1,475 1,468 1,493 1,514 1,612 1,797 1,785 1,835 1,785 2,066
Slide 47: Commercial Loans by County
Commercial Loans by County Commercial Customers in 39 Indiana Counties and 18 Other States Other IN Counties (1) Marshall 18% 5% Outside IN 6% Marion 11% Allen Hamilton 18% 8% Commercial Loans Kosciusko Outstanding as of 9% Elkhart 3/31/2021 14% St. Joseph $4.1 million 11% March 31, 2021 (000’s) (1)
Slide 48: Larger Market Organic Expansion
Organic Growth Larger Market Organic Expansion State LCB LCB Deposit Rank County Primary City Population* Entry 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
Slide 49: Mature Market Strength and Growth
Organic Growth Mature Market Strength and Growth (millions)1 2020 2020 2010 # of Deposits Share Deposits Share Increase Offices 1. 1st 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
Slide 50: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity CMCL CMO US Govt Treas 4.27% 0.11% 17.0% US Govt Agencies US Govt Remics Investments as a % of Assets 4.15% 10.75% 16.0% 15.0% US Govt Pools 30.57% 14.0% 15.0% Taxable 13.0% 14.1% Municipals 13.6% 12.0% 0.06% 12.9% 12.3% 11.0% 11.8% 11.5% 12.0% Exempt Munic
Slide 51: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet 25.00% 19.44% 20.00% 15.00% 12.82% 10.00% 6.08% 5.00% 3.02% 1.48% 0.00% -1.85% -5.00% 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 presents 12 month projec
Slide 52: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM