Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q4 2015 Earnings Presentation
42 slides from Lakeland Financial's earnings presentation, 2016
Slide 1: Investor Update 4th Quarter 2015
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities Investor Update 4th 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 14 Institutions 2009(3) Profitable for the Last 10 Years(2) 74 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 • 47 branch offices /518 FTEs • $3.8 billion banking assets • $1.6 billion trust assets • A regional franchise focused on core banking • Continued high growth potential 5
Slide 6: A Quarter Century of Strong Organic Growth
A Quarter Century of Strong Organic Growth Record Net Income for 26 of 27 Years $46,367 (000’s) $50,000 Compound Annual Growth $45,000 1991 – 2015 $40,000 • Loans = 12% $35,000 • Deposits = 11% $30,000 • Net Income = 13% $25,000 $20,000 $15,000 $2,707 $10,000 $5,000 $0 2005 2007 1991 1992 1993 1994
Slide 7: 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 6 offices +1 under development Indianapolis – 2011 4 offices +1 under development 7
Slide 8: Indiana Economic Outlook
Indiana Economic Outlook Indiana Employment Trends Exceed 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% 4.8% 5.9% 4.0% 4.5% 10.6% 10.0% 7.4% 9.1% 8.0% 6.5% 5.7% 4.2% 2.0% 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013 Nov 2014 Nov 2015 N
Slide 9: 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 9
Slide 10: 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 10
Slide 11: 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 11
Slide 12: 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 13: 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 13
Slide 14: Face to Face Contact
High Quality Team Members Face to Face Contact • We simply love to call • Sales calling program Includes 104 officers • 16,301 client contacts in 2015 • Our people are the competitive advantage 14
Slide 15: 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 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
Slide 16: Commercial Banking Target Opportunities
Organic Growth Commercial Banking Target Opportunities 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 16
Slide 17: Mature Market Strength and Growth
Organic Growth 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 4. JPM C
Slide 18: Mature Market Deposit Performance
Organic Growth 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 Financial KeyBan
Slide 19: Indianapolis Market Opportunity
Organic Growth 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. Regions Bank 4% 10. Firs
Slide 20: 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 21: Competitive Technology Edge is Critical
Commitment to Technology 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 treasury management services
Slide 22: Financial Performance
Financial Performance (take City Bank
Slide 23: 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% 12.05% 13.00% 12.77% 12.00% 1.70% 12.30% 12.50% 12.26% 11.78% 11.00% LTM Peer Data(1) 1.50% National Indiana 10.00% 8.10% 8.59% 9.00% 1.30% 1.29% 1.32% 1.29% 8.00% 1.10% 1.19% 7.00
Slide 24: Net Income and EPS
Net Income and EPS Record Net Income and EPS $50,000 $46,367 $43,805 $2.80 $45,000 $38,839 $2.75 $40,000 $2.61 $35,394 $2.30 $35,000 $2.33 $30,662 $30,000 $2.15 $1.80 $25,000 $1.88 $20,000 $1.30 $15,000 $10,000 $0.80 $5,000 $0 $0.30 2011 2012 2013 2014 2015 Net Income Diluted EPS 2015 Net Income Gro
Slide 25: Average Loans
Average Loans Commercial Emphasis Drives Growth $3,000,000 $2,885,568 $2,650,678 120% $2,343,422 $2,500,000 $2,148,046 $2,216,131 100% $2,000,000 93% 93% 95% 93% 87% 80% $1,500,000 60% $1,000,000 $500,000 40% $0 20% 2011 2012 2013 2014 2015 Retail Commercial Loans to Deposits 2015 Growth 9% 25
Slide 26: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Residential Mortgage Agri-business - $158,062 Commercial RE - Agriculture Other Commercial Construction $85,075 5% $306,094 Home Equity $230,719 10% 3% $163,700 8% 5% Commercial RE - Installment - Other Multifamily Consumer $79,425 $59,210 3% 2% Commercial
Slide 27: Investment Portfolio
Investment Portfolio Source of Liquidity Investments as a Percent of Assets: Taxable Treasuries Agency MBS Pass- 18.0% Municipal 0.21% 1.49% through 17.0% 0.71% 19.97% Municipal 16.0% 16.6% 21.07% 15.0% 14.0% 15.6% 15.1% CMBS CMO 13.0% 14.1% 20.79% 40.82% 12.0% 12.9% 11.0% 10.0% 2011 2012 2013 2014
Slide 28: Asset Quality
Asset Quality Nonperforming levels are at 5-year lows 2.50% 10.00% 9.00% 8.06% 2.00% 7.46% 8.00% 6.64% 7.00% 1.50% 5.75% 6.00% 1.00% 4.64% 5.00% 4.00% 0.50% 3.00% 1.77% 2.19% 1.37% 1.75% 0.94% 1.31% 0.50% 0.41% 0.42% 0.35% 0.00% 2.00% 2011 2012 2013 2014 2015 Nonperforming Loans/Total Loans Nonperfo
Slide 29: Net Chargeoffs/Average Loans
Asset Quality Strong Reserve Coverage 0.30% 2.70% 2.39% 2.28% Reserve to 2.40% Nonperforming Loan Loss Reserve to Total Loans 0.25% Loans = 334% Net Chargeoffs/Average Loans 1.92% 2.10% 0.20% 1.67% 1.80% 1.42% 1.50% 0.15% 1.20% 0.10% 0.90% 0.60% 0.05% 0.25% 0.20% 0.11% 0.10% 0.09% 0.30% 0.00% 0.00%
Slide 30: Average Deposits
Average Deposits Core Deposits Fund Organic Loan Growth Deposits = 97% of Funding vs. 92% in 2011 $3,088,598 $3,200,000 $2,797,929 $2,505,195 $2,505,340 $2,700,000 $2,325,963 $2,200,000 $1,700,000 $1,200,000 $700,000 $200,000 2011 2012 2013 2014 2015 2015 Growth 10% 30
Slide 31: Average Deposit Breakdown
Average Deposit Breakdown Deposit Growth Key to Franchise Value Brokered Cost of Deposits Total CDARS Brokered CDs MMA 1.19% Commercial $45,669 2.00% 0.98% $99,870 $2,501 0.63% 0.48% 0.51% $707,269 2% 3% 0% 22% 0.00% 2011 2012 2013 2014 2015 Total Public Total Retail Fund $1,426,865 $901,247 45% 28%
Slide 32: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income 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% 3.00% $20,000 $0 2.50% 2011 2012 2013 2014 2015 Net Interest Income Net Interest Margin 2015 Growth 3% 32
Slide 33: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet due to floating rate commercial loan portfolio • 90% of loan portfolio consists of commercial loans – 67% of commercial loans are variable rate • Floors with average rate of 3.84% exist on 25% of commercial variable rate loans – The majo
Slide 34: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet 30.00% 25.91% 25.00% 20.00% 15.00% Percent Change From Base 8.62% 10.00% 4.14% 5.00% 2.06% 0.00% -5.00% -3.76% -10.00% NII - Rates Down 100 NII - Rates Up 25 NII - Rates Up 50 NII - Rates Up 100 NII - Rates Up 300 1)Graph presents 12 mon
Slide 35: Non-Interest Income
Non-Interest Income Stable, Fee-Based Strategy Drives Increases $35,000 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% $15,000 25% 26% $10,000 23% 23% 20% 22% $5,000 19% 15% $0 10% 2011 2012 2013 2014 2015 % o
Slide 36: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future $68,206 $66,166 $70,000 $62,778 $55,105 $57,742 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2011 2012 2013 2014 2015 2015 Growth 3% 36
Slide 37: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio 60% Indianapolis and South Fishers and Clearwater Indianapolis – Bend Market Expansion offices in Indianapolis Michigan Road 55% 52% 50% 52% 51% 50% 50% 48% 45% 47% 40% 2009 2010 2011 2012 2013 2014 2015 37
Slide 38: 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% 38
Slide 39: Strong Capital Structure
Strong Capital Structure Subordinated Debt 6.7% Tangible Book Value Per Reserves 9.4% Share $23.42 Tangible Common $25.00 Equity 83.9% $20.00 $15.00 Key Ratios and Per Share Data As of December 31, 2015 $10.00 TCE /Tangible Assets 10.36% Total Risk-Based 13.62% $1.82 $5.00 Leverage 11.10% Book Value
Slide 40: LKFN Shareholder Value
ST LKFN Shareholder Value Lakeland Financial Corporation - Price Change (%) = LKFN (+463.28%) === KBW Nasdaq Bank (-19.25%) w= SNL U.S. Bank (-10.91%) Ni == NASDAQ Bank (+49.04%) === S&P 500 (+30.37%) 600 400 200 Price Change (%) -200) T T T T T T T T T T T T T T T T 2000 2001 2002 2003 2004 2005 20
Slide 41: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence drives Shareholder Value 41
Slide 42: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM