Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q4 2021 Earnings Presentation
50 slides from Lakeland Financial's earnings presentation, 2022
Slide 1: Lakeland Financial Corporation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 4th 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. Forward-looking statements are not historical facts and
Slide 4: Bank Director's 2021 Scorecard
Bank Director’s 2021 Scorecard 4
Slide 5: Long Term Success for Shareholders
Long Term Success for Shareholders 12 Institutions (including LKFN) LTM ROE >14% Consecutive Increases in PTPP 30 Institutions Income Since 2012(3) Profitable for the Last 150 Institutions 10 Years(2) Exchange Traded Depositories 210 Institutions with Assets Between $1B and $10B(1) Source: S&P Globa
Slide 6: Interest Rate Sensitivity
Interest Rate Sensitivity Highly Asset Sensitive Balance Sheet • Every 25 basis point move up in the FHLB/Other federal funds rate is expected to $448,935 improve margin by 3-5 basis points 11% • Cost of funds at historic lows 1 Month LIBOR $938,195 Fixed Rate • Excess liquidity will likely 24% $1,2
Slide 7: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share $27.50 Tangible Reserves $30.00 Common 8.2% Equity $25.00 91.8% $20.00 $15.00 Key Ratios and Per Share Data as of December 31, 2021 $10.00 TCE/Tangible Assets 10.70% $1.21 $5.00 Total Risk-Based 15.34% Leverage 10.72% $0.00 1995 1991 1993 199
Slide 8: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 51 branch offices - $6.6 billion banking assets - $3.0 billion trust, retirement and investment brokerage assets • Focused on execution – “blocking and tackling” • Continued growth potential 8
Slide 9: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth Record Net Income for 31 of 33 Years (000’s) $120,000 $95,733 Compound Annual Growth 1991 – 2021 $100,000 • Loans = 11% • Deposits = 11% $80,000 • Net Income = 13% Net Income • Earnings Per Share = 12% $60,000 $40,000 $2,707 $20,000 $0 2005 2006 1991 1992 1993 199
Slide 10: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Expanding Markets 10
Slide 11: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Indiana Unemployment Rate is Lower Than the National Average 14.0% 13.0% 12.0% 10.0% Unemployment 8.0% 8.2% 7.4% 11.9% 6.0% 6.6% 6.4% 8.7% 5.5% 8.0% 4.8% 4.0% 6.6% 4.4% 5.7% 3.9% 3.9% 3.7% 4.8% 4.5% 3.3% 3.8% 3.7% 2.0% 3.2% 3.2% 11.3% 6.5% 9.0% 8.0% 5.5% 4.2% 3.
Slide 12: 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 12
Slide 13: Commercial Banking Focus
Commercial Banking Focus Experienced Relationship Driven Team • 39 credit “smart” commercial bankers • Average 23 years in banking & 12 years at Lake City Bank • We live where we lend • Face to face calling matters and is a team effort • We understand our clients’ needs • Deep organizational structu
Slide 14: Credit Process
Credit Process Commercial Banking Focus • 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 15: Corporate Social Responsibility
Corporate Social Responsibility 150 Year History of Focusing on Our Customers, Employees and Our Communities • Supporting our communities since 1872 • Building and caring for our team • Delivering loan products to our communities • Supporting financial literacy • Protecting our customers and their d
Slide 16: Lake City Bank Culture
Lake City Bank Culture High Quality Team Members • Our culture is our greatest asset and we will preserve it • Lake City University drives our culture • Diversity, Equity and Inclusion initiatives underway • Our community involvement is real and critical to our strategy • Our culture has not been di
Slide 17: Mature Market Deposit Performance
Mature Market Deposit Performance 1 Organic Growth 2011 - 2021 $2,650 $2,501 $2,180 $2,157 $2,150 Lake City Bank has grown $1,650 deposits by 110% over the last ten-year period. $1,150 $944 $650 $622 $499 $3… $296 $150 $51 -$215 -$350 Lake City Bank JPM Chase 1st Source Flagstar First Merchants Star
Slide 18: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 23% 2. PNC 14% 3. Merchants Bank 11% 4. Fifth Third 10% 12% 5. Huntington National 7% 6. BMO Harris 5% 7. Bank of America 5% 8. First Internet Bank 5% 9. National Bank of Indy 4
Slide 19: A Strong Environment for Growth and Expansion
A Strong Environment for Growth and Expansion Indiana Economy has Largely Rebounded from Pandemic Despite Supply Chain and Labor Availability Challenges • Indiana #1 manufacturing state in the country(1) • Manufacturing jobs increased 1.54% from December 2019 to December 2021(2) • U.S. Census Bureau
Slide 20: Core Deposit Funding
Core Deposit Funding Core Deposit Growth Adds Liquidity to Balance Sheet • Deposit surge from PPP funding and stimulus • DDA growth over two years, equal to 93% • Focus on core deposit growth in retail, commercial, and public funds • Capitalize on market disruption in our footprint to grow deposits
Slide 21: Commitment to Technology and Cyber Risk Management
Commitment to Technology and Cyber Risk Management Innovation and Competitive Technology is a Focus • Fintech partnerships play a growing role in our technology • Investments in Lake City Bank Digital, our focus on a solution that is experiencing increased demand • Technology partnership with FIS is
Slide 22: Channel Utilization Over Three Year Horizon
Channel Utilization Over Three Year Horizon Mobile Adoption is Growing Rapidly Total Total Three Channel Transactions % of Transactions % of Year Type 2018(1) Total 2021(1) Total Change Branch Transactions 2,339,018 19% 2,040,905 15% (13)% ATM/ITM 938,674 8% 902,387 6% (4)% Online Logins 5,056,323 4
Slide 23: Customer Composition and Digital Adoption
Customer Composition and Digital Adoption December 2021 CUSTOMER BREAKDOWN DIGITAL ADOPTION Gen Z Millennial 10% 15% Gen X 15% 20% Baby Boomer Mature 31% 19% 25% 25% 19% 21% Gen Z 1996 – Current Millennial 1977 – 1995 Gen X 1965 – 1976 Baby Boomer 1946 – 1964 Mature 1945 or before 23
Slide 24: Technology Focused Solutions
Technology Focused Solutions Commitment to Technology and Cyber Risk Management 24
Slide 25: Financial Performance
Financial Performance (take City Bank
Slide 26: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers and Maintains Strong Capital Levels ROAE and ROATE LTM Peer Data1 National Indiana 2.50% 20.00% ROAE 11.8% 12.2% ROATE 13.4% 13.6% 2.30% 18.00% 16.64% 2.10% 15.57% 16.00% ROAE and ROATE 16.51% 14.27% 1.90% 15.47% 13.59% 1
Slide 27: Net Income and EPS
Net Income and EPS (000’s) Net income improves in 2021 $4.50 $100,000 $95,733 $4.00 $87,047 $84,337 $80,411 $80,000 $3.74 $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 $1.50 $20,000 $1.00 $0 $0.50 2016 2017(1) 2018 2019 2020 2021 Net Income Dilu
Slide 28: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings Margin Pressure and Lower Loan Demand Impact Net Interest Income (000’s) $140,000 6.00% Pretax Pre-Provision Earnings/Average Assets $118,646 $118,521 $120,000 Pretax Pre-Provision Earnings $110,620 5.00% $105,344 $100,000 $92,634 4.00% $78,367 $80,000 3.00% $60,000 2.0
Slide 29: Average Loans
Average Loans Organic Loan Growth ex PPP of $135 million or 3% for 2021 (000’s) $5,000,000 $4,424,472 $4,421,094 120% $4,500,000 $3,974,532 $4,000,000 $3,843,912 110% $3,610,908 $3,500,000 $3,225,635 Loans to Deposit Ratio 100% $3,000,000 96% 95% 90% 94% 94% Loans $2,500,000 93% $2,000,000 80% 83% $
Slide 30: Line of Credit Utilization
$500 $0 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $1,621 $1,475 3,096 $1,611 $1,468 3,079 $1,591 $1,493 3,084 Outstanding $1,588 $1,546 3,134 52% 52% 52% 51% $1,753 $1,514 3,267 54% $1,715 $1,612 3,327 Available $1,655 $1,611 3,266 52% 51% $1,664 $1,806 3,470 $1,696 $1,737 3,433 $1,616
Slide 31: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Agri-business - Other Residential Commercial RE - Agriculture Commercial Mortgage Construction $445,825 $73,490 $176,561 $379,813 10% 2% 4% Home Equity 9% $156,238 4% Commercial RE - Installment - Other Multifamily Consumer $247,204 $94,676 6% 2% Commercial
Slide 32: Average Deposits
Average Deposits Deposit Growth Surges in 2020 and in 2021 (000’s) $6,000,000 150% $5,357,284 140% Deposits as a Percent of Total Funding $5,000,000 $4,650,597 130% $4,093,894 $4,242,524 120% $4,000,000 $3,757,209 $3,477,816 110% Deposits $3,000,000 100% 97% 97% 98% 98% 99% 90% 95% $2,000,000 80% 70
Slide 33: Deposit Breakdown
Deposit Breakdown Deposit Costs at a Historic Low 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% 0.28% 0.00% Total 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total Retail Commercial $2,178,535 $2,262,229 38% 40%
Slide 34: Investment Portfolio
Investment Portfolio Excess Liquidity Temporarily Deployed to Investment Portfolio Investments as a % of Assets ex PPP 21.4% 22.0% 20.0% US Govt US Govt Treas Agencies 0.06% 18.0% 10.26% US Govt 16.0% Remics 8.13% US Govt Pools 14.0% CMCL CMO 26.67% 12.0% 14.1% 13.6% 0.04% 12.9% 11.8% 11.5% 12.0% 12
Slide 35: Net Interest Income
Net Interest Income Growth in Net Interest Income Offset by Margin Compression (000’s) $200,000 6.00% Net Interest Margin, fully tax equivalent $178,088 $180,000 $163,008 5.50% $155,047 $160,000 $151,271 5.00% $135,892 $140,000 Net Interest Income $118,481 4.50% $120,000 $100,000 4.00% $80,000 3.43%
Slide 36: Asset Quality: Nonperforming Assets
Asset Quality Asset Quality Trends Improve in 2021 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% 6.64% 6.75% 2.00% 5.75% 5.50% 6.00% 4.64% 4.77% 4.28% 4.50% 4.43% 1.00% 0.46% 0.38% 4.00% 0.20% 0.35% 0.
Slide 37: Asset Quality: Reserve Coverage
Asset Quality Reserve Represents Strong Coverage with Stable Asset Quality Metrics 0.60% 2.70% 2.39% Net Charge Offs (Recoveries) to Average Loans 2.28% 2.40% 0.50% Loan Loss Reserve to Total Loans 2.15% 1.92% 2.10% 0.40% 1.67% 1.80% 1.59% 1.42% 1.45% 0.30% 1.50% 1.26% 1.23% 1.24% 1.25% 0.20% 1.20%
Slide 38: Non-Interest Income
Non-Interest Income Double Digit Growth in Wealth Advisory, Interchange and Merchant Card Fees (000’s) $50,000 $46,843 60% Non-Interest Income as % of Total Revenue $44,997 $44,720 $45,000 $40,302 50% $40,000 $36,009 Non-Interest Income $35,000 $32,864 40% $30,000 $25,000 30% $20,000 20% $15,000 22%
Slide 39: Non-Interest Expense
Non-Interest Expense Payroll Costs and Professional Fees Impact 2021 Expenses (000’s) $104,287 $100,000 $91,205 $89,424 $86,229 $80,000 $79,267 $72,978 $60,000 $40,000 $20,000 $0 2016 2017 2018 2019 2020 2021 2021 YOY Increase 14% 39
Slide 40: Efficiency Ratio
Efficiency Ratio Efficiency Ratio Normalizes in 2021 Constant investment in technology and facilities 55% 52% 50% 51% 50% 50% 48% 48% 47% 45% 46% 45% 45% 43% 40% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 40
Slide 41: Stable Healthy Dividend
Stable Healthy Dividend Growth in Dividend Reflects Strength of Capital $1.50 5.00% $1.36 $1.30 4.50% $1.20 $1.16 4.00% $1.10 $1.00 Dividend per Share 3.50% Dividend Yield $0.90 $0.85 $0.73 3.00% $0.70 2.50% $0.50 2.40% 2.25% 2.24% 2.00% 1.95% $0.30 1.77% 1.50% 1.70% $0.10 1.00% 2016 2017 2018 2019
Slide 42: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 12/31/21 3,500.00 3,197.93% 3,000.00 2,500.00 2,000.00 1,500.00 1,000.00 500.00 443.53% 178.62% 0.00 148.47% (500.00) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 LKFN S&P 500
Slide 43: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 43
Slide 44: Supplemental Information
Supplemental Information (take City Bank
Slide 45: Paycheck Protection Program
Paycheck Protection Program PPP Loan Forgiveness Accelerates Unearned Fees into Net Interest Income PPP Round 1 and Round 2 Outstanding Balances PPP Round 1 Highlights $600 $555 $558 • $571 million thru 2,409 loans • Average loan size $237,000 $500 • 99% of loans, or $567 million $412 forgiven as of
Slide 46: Commercial Loans by County
Commercial Loans by County Commercial Customers in 46 Indiana Counties and 22 Other States Other IN Counties (1) Marshall 18% 4% Outside IN 6% Marion 12% Allen 17% Hamilton 8% Commercial Loans Outstanding as of Kosciusko 10% Elkhart 12/31/2021 16% St. Joseph $3.9 billion 9% December 31, 2021 (000’s)
Slide 47: Larger Market Organic Expansion
Larger Market Organic Expansion Organic Growth State LCB LCB Deposit Rank County Primary City Population* Entry Market Share** # of Branches 20. Kosciusko Warsaw 78,988 1872 58% 12 6. Elkhart Elkhart 206,161 1990 26% 10 5. St. Joseph South Bend 271,484 1997 10% 4 3. Allen Fort Wayne 382,187 1999 12%
Slide 48: Mature Market Strength and Growth
Mature Market Strength and Growth Organic Growth (millions)1 2021 2021 2011 # of Deposits Share Deposits Share Increase Offices 1. Lake City Bank $4,778 18.74% $2,277 13.37% 109.84% 51 2. 1st Source $4,670 18.31% $2,513 14.75% 85.83% 53 3. JPM Chase $3,601 14.12% $1,421 8.34% 153.41% 21 4. PNC $1,76
Slide 49: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet 25.00% 22.39% 20.00% 14.64% 15.00% 10.00% 6.86% 5.00% 3.38% 1.64% 0.00% -1.62% -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 50: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM