Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q1 2017 Earnings Presentation
42 slides from Lakeland Financial's earnings presentation, 2017
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 2017 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: Long Term Success for Shareholders
Long Term Success for Shareholders LTM 2 Institutions ROE >12% Consecutive Increases in Net Income Since 13 Institutions 2009(3) Profitable for the Last 10 Years(2) 74 Institutions Exchange Traded Depositories with Assets Between $1B and $5B(1) 165 Institutions Source: SNL Financial. Financial data
Slide 5: Strong Capital Structure
Strong Capital Structure Subordinated Debt 6.1% Tangible Book Value+ Per Reserves Share 8.6% $17.24 $20.00 Tangible Common $18.00 Equity 85.3% $16.00 $14.00 $12.00 $10.00 Key Ratios and Per Share Data $8.00 As of March 31, 2017 $6.00 TCE /Tangible Assets 10.06% $4.00 $1.21 Total Risk-Based 13.16% $2
Slide 6: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 49 branch offices - $4.3 billion banking assets - $1.5 billion trust assets • Focused on execution – “blocking and tackling” • Continued growth potential 6
Slide 7: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth Record Net Income for 27 of 28 Years (000’s) $52,084 $60,000 Compound Annual Growth 1991 – 2016 • Loans = 11% $50,000 • Deposits = 12% $40,000 • Net Income = 13% • Earnings Per Share = 12% $30,000 $20,000 $2,707 $10,000 $0 1998 2014 1991 1992 1993 1994 1995 1996 1
Slide 8: 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 7 offices Indianapolis – 2011 5 offices 8
Slide 9: Indiana Economic Outlook
Indiana Economic Outlook Indiana Employment Trends Versus 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% 5.9% 4.6% 4.0% 10.6% 10.0% 4.2% 7.4% 9.1% 8.0% 6.5% 5.7% 3.7% 2.0% 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013 Nov 2014 Nov 2016 N
Slide 10: 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 10
Slide 11: Experienced Relationship Driven Team
Commercial Banking Focus Experienced Relationship Driven Team • 40 credit “smart” commercial bankers • Average 20 years in banking & 11 years at Lake City Bank • Deep organizational structure provides credit and administrative support • Our commercial team reside in the markets they serve • We lead
Slide 12: Credit Process
Commercial Banking Focus Credit Process • We have a centralized committee structure • We lend to people first – character matters • We focus on management/cash flow • 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 111 officers • 17,454 client contacts in 2016 • Our people are the competitive advantage 14
Slide 15: Mature Market Deposit Performance
Organic Growth Mature Market Deposit Performance (1) $2,200 $1,944 Lake City Bank has grown $1,700 $1,469 deposits by 104% over the last ten year period $1,200 $707 $631 $700 $110 $41 $200 -$6 -$38 -$141 -$161 -$300 Wells Fargo Lake City Bank 1st Source JPM Chase IAB Financial Star KeyBank MutualBan
Slide 16: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 27% 12% 2. PNC 17% 3. Fifth Third 10% 4. Huntington National 8% 5. BMO Harris 5% 6. KeyBank 5% 7. Merchants Bank of IN 5% 8. Regions Bank 4% 9. National Bank of Indy 4% 10. Firs
Slide 17: 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 • Account offerings positioned for rates-up environment • Emphasis is
Slide 18: Competitive Technology Edge is Critical
Commitment to Technology and Cyber Risk Management Competitive Technology Edge is Critical • Fintech’s role constantly under review • Mobile and online adoption rates are accelerating • Technology is a core competency – Fully resourced online banking for commercial and retail – Robust mobile banking
Slide 19: Financial Performance
Financial Performance (take City Bank
Slide 20: Income Performance Metrics
Income Performance Metrics LKFN performance exceeds National and Indiana Peers 13.73% 14.00% 12.98% 12.76% 1.90% 12.55% 12.45% 12.61% 13.00% 13.63% 12.50% 12.77% 12.52% 12.00% 1.70% 12.30% 12.26% ROE and ROTE LTM Peer Data(1) National Indiana 11.00% ROE 7.49% 8.80% 1.50% 10.00% ROTE 8.33% 9.72% 9.00
Slide 21: Net Income and EPS
Net Income and EPS Record Net Income and EPS $60,000 $52,084 $2.80 $50,000 $46,367 $43,805 $2.30 $38,839 $40,000 $35,394 $2.05 $1.80 $30,000 $1.84 $1.74 $1.55 $1.30 $20,000 $1.43 $14,514 $12,279 $10,000 $0.57 $0.80 $0.48 $0 $0.30 2012 2013 2014 2015 2016 YTD 2016 YTD 2017 Net Income Diluted EPS 2017
Slide 22: Average Loans
Average Loans Commercial Emphasis Drives Growth $4,000,000 150% $3,509,155 140% $3,500,000 $3,225,635 130% $3,000,000 $2,885,568 $2,650,678 120% $2,343,422 $2,500,000 $2,216,131 110% $2,000,000 100% 96% 90% $1,500,000 93% 95% 93% 93% 87% 80% $1,000,000 70% $500,000 60% $0 50% 2012 2013 2014 2015 201
Slide 23: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Agri-business - Other Residential Commercial RE - Agriculture Commercial Mortgage Construction $327,587 $105,684 $166,158 $238,018 9% 3% 5% Home Equity Commercial RE - 7% $167,517 Multifamily 5% Installment - Other $201,147 Consumer 6% $71,155 2% Commercial
Slide 24: Asset Quality
Asset Quality Nonperforming levels reflect economic strength of markets 3.00% 10.00% 8.86% 9.00% 2.50% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 7.00% 5.75% 1.50% 5.39% 6.00% 5.20% 4.64% 4.31% 5.00% 1.00% 4.28% 4.00% 0.28% 0.50% 0.16% 3.00% 2.75% 2.20% 0.46% 0.48% 1.13% 0.92% 1.52% 1.22% 2.15% 1.82% 1.37%
Slide 25: Net Chargeoffs/Average Loans
Asset Quality Strong Reserve Coverage 0.60% 2.70% 2.40% 0.50% Loan Loss Reserve to Total Loans 2.39% 2.10% Net Chargeoffs/Average Loans 2.28% 2.15% 0.40% 1.80% 1.92% 1.67% 1.50% 0.30% 1.59% 1.42% 1.20% 1.26% 1.24% 0.20% 1.04% 1.03% 0.90% 0.60% 0.10% 0.03% 0.02% 0.30% 0.21% 0.43% 0.42% 0.54% 0.25% 0.
Slide 26: Average Deposits
Average Deposits Core Deposits* Fund Organic Loan Growth $4,000,000 100% $3,637,171 $3,477,816 99% $3,500,000 $3,088,598 98% $3,000,000 $2,797,929 97% $2,505,195 $2,505,340 $2,500,000 97% 96% 96% $2,000,000 95% 95% 94% $1,500,000 94% 94% 93% $1,000,000 93% 92% $500,000 91% $0 90% 2012 2013 2014 2015
Slide 27: Deposit Breakdown
Deposit Breakdown Deposit Growth Key to Franchise Value Total Brokered Brokered Cost of Deposits CDARS Commercial CDs MMA 1.19% 0.98% $7,169 2.00% $772,237 $100,000 $28,426 0.63% 0.48% 0.51% 0.54% 0.61% 0% 21% 3% 1% 0.00% 2011 2012 2013 2014 2015 2016 YTD Total Retail 2017 Total Public $1,529,308 Fu
Slide 28: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income $118,480 5.00% $120,000 $105,927 $102,303 4.50% $100,000 $90,439 $87,671 4.00% $80,000 3.28% 3.26% 3.32% 3.25% 3.27% 3.50% $60,000 3.20% 3.18% $40,000 3.00% $32,061 $28,582 $20,000 2.50% $0 2.00% 2012 2013 2014 2015 2016 YTD 2016 YTD 2017 Net
Slide 29: Asset Sensitive Balance Sheet
Asset Sensitive Balance Sheet Floating rate commercial loan portfolio drives asset sensitivity • 89% of loan portfolio consists of commercial loans – 67% of commercial loans are variable rate • Floors with average rate of 3.79% exist on 19% of commercial variable rate loans – The majority of fixed r
Slide 30: Non-Interest Income
Non-Interest Income Stable, Fee-Based Strategy Drives Increases $35,000 $32,864 50% $30,737 $31,479 $30,053 45% $30,000 Non-Interest Income/Total Revenue 40% $25,196 $25,000 35% Non-Interest Income 26% 30% $20,000 22% 23% 23% 22% 25% 20% 20% $15,000 20% $10,000 15% $7,043 $8,259 10% $5,000 5% $0 0%
Slide 31: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future $80,000 $72,977 $68,206 $66,166 $70,000 $62,778 $57,742 $60,000 $50,000 $40,000 $30,000 $20,048 $17,384 $20,000 $10,000 $0 2012 2013 2014 2015 2016 YTD 2016 YTD 2017 2017 YOY Growth 15% 31
Slide 32: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio Constant investment in technology and facilities 60% Indianapolis North and Indianapolis Fishers Indianapolis Michigan Indianapolis South Bend Downtown and Clearwater Rd and Fort Wayne Greenwood 55% Expansion Expansion Downtow
Slide 33: Stable Healthy Dividend
Stable Healthy Dividend Significant Increase in Dividend Reflects Strength of Balance Sheet Dividend Payout Ratio of 33% $1.00 $0.88 $0.90 $0.76 $0.80 $0.65 $0.70 $0.56 $0.60 $0.51 $0.45 $0.50 $0.40 $0.30 $0.20 $0.10 2012 2013 2014 2015 2016 2017 Annualized 2017 Growth 16% 33
Slide 34: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 4/24/17 34
Slide 35: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence drives Shareholder Value 35
Slide 36: Supplemental Information
Supplemental Information (take City Bank
Slide 37: 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 77,358 1872 52% 12 6. Elkhart Elkhart 197,559 1990 21% 9 5. St. Joseph South Bend 266,931 1997 7% 4 3. Allen Fort Wayne 355,329 1999 10% 5
Slide 38: Mature Market Strength and Growth
Organic Growth Mature Market Strength and Growth (millions) (1) 2016 2016 2006 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $3,128 16.15% $2,421 17.77% 29.20% 54 2. Wells Fargo $2,915 15.05% $971 8.38% 200.21% 28 3. Lake City Bank $2,878 14.86% $1,409 7.65% 104.26% 48 4. JPM Cha
Slide 39: Commercial Banking Target Opportunities
Organic Growth Commercial Banking Target Opportunities Growth Potential in Every Market Elkhart/South Bend 2,296 Fort Wayne 22% Warsaw 1,855 291 15% 2% Indianapolis 7,665 64% Companies with Revenue of $1 to $50 million Source: 2016 Hoover’s 39
Slide 40: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity CMCL MBS Treasuries Taxable Agencies 8.90% 0.19% Investments as a Percent of Assets: Municipals 1.16% 17.0% Exempt 0.16% 16.0% Municipals US Govt Remics 29.90% 15.0% 24.15% 14.0% 15.1% 13.0% 14.1% 12.0% US Govt Pools 12.9% 35.54% 11.0% 12.2% 11.8% 10.0% 201
Slide 41: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet 30.00% Percent Change From Base 24.28% 25.00% 20.00% 16.30% 15.00% 10.00% 8.21% 4.14% 5.00% 2.08% 0.00% -5.00% -10.00% -11.14% -15.00% NII - Rates NII - Rates Up NII - Rates Up NII - Rates Up NII - Rates Up NII - Rates Up Down 100 25 50
Slide 42: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM