Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q4 2017 Earnings Presentation
42 slides from Lakeland Financial's earnings presentation, January 2018
Slide 1: A Proven History of Shareholder Value Creation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 4th 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 3 Institutions LTM (including LKFN) ROE >12% Consecutive Increases in Net Income Since 13 Institutions 2009(3) Profitable for the Last 10 Years(2) 78 Institutions Exchange Traded Depositories with Assets Between $1B and $5B(1) 166 Institutions Source: SNL Financial
Slide 5: Strong Capital Structure
Strong Capital Structure Subordinated Debt Tangible Book Value+ Per 5.7% $18.45 $20.00 Share Tangible Reserves Common 8.7% $18.00 Equity $16.00 85.6% $14.00 $12.00 $10.00 Key Ratios and Per Share Data $8.00 as of December 31, 2017 $6.00 TCE /Tangible Assets 9.93% $4.00 Total Risk-Based 13.26% $1.21
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 - $4.7 billion banking assets - $1.7 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 28 of 29 Years $61,467(1) (000’s) $70,000 Compound Annual Growth 1991 – 2017 $60,000 • Loans = 12% • Deposits = 11% $50,000 • Net Income = 13%(1) Net Income $40,000 • Earnings Per Share = 13%(1) $30,000 $20,000 $2,707 $10,000 $0 2002 1991 199
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: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Indiana Employment Trends Versus National Averages 12.0% 10.0% 9.4% 9.3% Unemployment 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% 5.7% 4.0% 4.4% 4.5% 10.4% 3.9% 3.9% 9.9% 9.0% 7.3% 8.0% 6.5% 5.5% 4.2% 3.6% 3.4% 3.1% 2.0% 2008 2009 2010
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 117 officers • 18,374 client contacts in 2017 • Our people are the competitive advantage 14
Slide 15: Organic Growth 2007 - 2017: Mature Market Deposit Performance
Organic Growth 2007 - 2017 Mature Market Deposit Performance (millions) 1 $2,200 $1,669 $1,700 $1,388 Lake City Bank has grown deposits by 118% over the last $1,200 ten-year period. $719 $697 $700 $200 $155 $117 $22 -$15 -$145 -$300 -$230 Lake City Bank Wells Fargo JPM Chase 1st Source iAB Star KeyB
Slide 16: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 26% 2. PNC 17% 3. Fifth Third 10% 4. Huntington National 7% 12% 5. BMO Harris 5% 6. Merchants Bank of IN 5% 7. KeyBank 5% 8. National Bank of Indy 4% 9. First Internet Bank of I
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 • Account offerings positioned for rates-up environment • Asset sensitive balance sheet supports competitive rate strateg
Slide 18: Competitive Technology Edge is Critical
Commitment to Technology and Cyber Risk Management Competitive Technology Edge is Critical • Fintech’s role is expanding and part of our strategy • Mobile and online adoption rates are accelerating • Technology is a core competency – Fully resourced online banking for commercial and retail – Robust
Slide 19: Financial Performance
Financial Performance (take City Bank
Slide 20: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers 14.00% 12.98% 12.82% 1.90% 12.76% 12.61% 12.55% 12.45% 13.00% 12.77% 12.52% 12.72% 12.00% 1.70% 12.30% 12.50% 12.26% ROE and ROTE LTM Peer Data1 11.00% ROE and ROTE National Indiana ROE 8.39% 9.55% 1.50% 10.00% ROTE 9.30%
Slide 21: Net Income and EPS
Net Income and EPS (000’s) Record Net Income and EPS $70,000 $2.80 $61,467 $60,000 $57,330 $52,084 $2.30 $2.40 $50,000 $46,367 $43,805 $2.23 $38,839 $2.05 $1.80 $40,000 $35,394 $1.84 Net Income $1.74 EPS $30,000 $1.55 $1.30 $1.43 $20,000 $0.80 $10,000 $0 $0.30 2012 2013 2014 2015 2016 2017 2017 (pre
Slide 22: Average Loans
Average Loans (000’s) Commercial Emphasis Drives Growth $4,000,000 150% $3,610,908 140% $3,500,000 $3,225,635 130% $3,000,000 $2,885,568 $2,650,678 120% Loans to Deposit Ratio $2,343,422 $2,500,000 $2,216,131 110% Loans $2,000,000 100% 95% 96% 90% $1,500,000 93% 93% 93% 87% 80% $1,000,000 70% $500,0
Slide 23: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Agri-business - Other Residential Commercial RE - Agriculture Commercial Mortgage Construction $382,841 $124,076 $179,302 $224,474 10% 3% 5% Home Equity 6% $181,865 Commercial RE - 5% Multifamily Installment - Other $173,715 Consumer 5% $87,847 2% Commercia
Slide 24: Asset Quality: Nonperforming Assets to Total Assets
Asset Quality Nonperforming Levels Reflect Economic Strength of Markets 5.00% 14.00% Watch list Loan as Percentage of Loans 4.00% Nonperforming Assets to Total Assets 12.00% 3.00% 10.00% 8.86% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 5.75% 5.20% 5.39% 6.00% 4.64% 4.50% 4.28% 1.00% 0.46% 0.48% 0.50% 0.41%
Slide 25: Asset Quality: Net Chargeoffs to Average Loans
Asset Quality 0.60% Strong Reserve Coverage 2.70% 2.39% 2.40% 0.50% 2.15% Loan Loss Reserve to Total Loans 2.28% 2.10% Net Chargeoffs to Average Loans 0.40% 1.92% 1.80% 1.59% 0.30% 1.67% 1.50% 0.20% 1.42% 0.20% 1.03% 1.20% 1.26% 1.23% 0.11% 0.10% 0.09% 1.04% 0.90% 0.10% 0.03% 0.21% 0.43% 0.42% 0.54%
Slide 26: Deposits
Average Deposits (000’s) Core Deposits* Fund Organic Loan Growth $4,000,000 $3,757,209 150% $3,477,816 140% $3,500,000 Deposits as a Percent of Total Funding $3,088,598 130% $3,000,000 $2,797,929 120% $2,505,195 $2,505,340 $2,500,000 110% Deposits 97% 97% 95% $2,000,000 94% 93% 95% 100% 90% $1,500,0
Slide 27: Deposit Breakdown
Deposit Breakdown Deposit Growth Key to Franchise Value CDARS Brokered CDs Brokered $3,996 $249,950 MMA 0% 6% $15,030 Cost of Deposits 0% 2.00% 1.19% 0.98% 1.00% 0.63% 0.48% 0.50% 0.54% 0.72% Total 0.00% Commercial 2011 2012 2013 2014 2015 2016 2017 $969,292 Total Retail 24% $1,506,738 38% Total Pub
Slide 28: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income (000’s) 5.00% $140,000 $135,892 $118,481 4.50% $120,000 $105,927 $102,303 Net Interest Income Net Interest Margin $100,000 $90,439 4.00% $87,671 $80,000 3.33% 3.28% 3.26% 3.32% 3.50% 3.20% 3.18% $60,000 3.00% $40,000 2.50% $20,000 $0 2.00% 201
Slide 29: Asset Sensitive Balance Sheet
Asset Sensitive Balance Sheet Floating Rate Commercial Loan Portfolio Drives Asset Sensitivity • 88% of loan portfolio consists of commercial loans – 67% of commercial loans are variable rate – The majority of fixed rate commercial loans have terms of 5 years or less • Deposit rate increases should
Slide 30: Non-Interest Income
Non-Interest Income (000’s) Stable, Fee-Based Strategy Drives Increases $40,000 50% Non-Interest Income as % of Total Revenue $36,009 45% $35,000 $32,864 $30,737 $31,479 $30,053 40% $30,000 35% Non-Interest Income $25,196 $25,000 30% $20,000 25% 26% 23% 23% 20% $15,000 22% 22% 22% 15% $10,000 10% $5
Slide 31: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future (000’s) $90,000 $79,267 $80,000 $72,978 $68,206 $70,000 $66,166 $62,778 $57,742 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2012 2013 2014 2015 2016 2017 Non-Interest Expense 2… 2017 YOY Growt
Slide 32: Efficiency Ratio
Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio Constant investment in technology and facilities 60% Indianapolis Michigan Road Indianapolis North and and Fort Wayne Indianapolis South Bend Downtown Indianapolis Fishers and Downtown Greenwood Clearwater Expansion Expansion
Slide 33: Stable Healthy Dividend
Stable Healthy Dividend Significant Increase in Dividend Reflects Strength of Balance Sheet Dividend Payout $1.00 Ratio of 38% 4.00% $0.90 $0.85 3.50% $0.80 $0.73 $0.70 3.00% Dividend per Share $0.63 Dividend Yield $0.60 $0.55 $0.49 2.50% $0.50 $0.40 2.28% 2.00% $0.33 2.10% 1.99% 1.95% $0.30 1.91% 1
Slide 34: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 1/18/18 2,000.00 1,796.49% 1,500.00 Total Return (%) 1,000.00 500.00 197.14% 109.72% 0.00 91.76% (500.00) LKFN SNL U.S. Bank S&P 500 S&P 500 Bank Source: SNL database 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 Rank County Primary City Population* Entry Market Share** # of Branches 20. Kosciusko Warsaw 79,092 1872 53% 12 6. Elkhart Elkhart 203,781 1990 22% 9 5. St. Joseph South Bend 269,141 1997 8% 4 3. Allen Fort Wayne 370,404 1999 11% 5
Slide 38: Mature Market Strength and Growth
Organic Growth Mature Market Strength and Growth (millions)1 2017 2017 2007 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $3,264 16.52% $2,567 17.54% 27.15% 54 2. Lake City Bank $3,080 15.59% $1,411 9.64% 118.28% 49 3. Wells Fargo $2,396 12.13% $1,008 6.89% 137.70% 27 4. JPM Chas
Slide 39: Commercial Banking Target Opportunities
Organic Growth Commercial Banking Target Opportunities Growth Potential in Every Market Elkhart/South Bend 2,220 Warsaw Fort Wayne 313 1,878 Indianapolis 6,555 Companies with Revenue of $1 to $50 million in Lake City Bank footprint by county Source: 2017 Hoover’s 39
Slide 40: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity Agencies Treasuries 0.95% 17.0% Investments as a % of Assets 0.19% 16.0% CMCL CMO US Govt Remics 8.21% 26.00% 15.0% 14.0% 15.1% 13.0% 14.1% Taxable Municipals 12.0% 12.9% 0.46% US Govt Pools Exempt 32.27% 11.0% 11.8% 11.5% Municipals 10.0% 31.92% 2013 2014
Slide 41: Projected Impact of Rising Rates
Projected Impact of Rising Rates Asset Sensitive Balance Sheet 30.00% 25.00% 23.59% 20.00% 15.77% 15.00% 10.00% 7.89% 3.88% 5.00% 1.87% 0.00% -5.00% -10.00% -9.94% -15.00% NII - Rates NII - Rates Up NII - Rates Up NII - Rates Up NII - Rates Up NII - Rates Up Down 100 25 50 100 200 300 Graph presents
Slide 42: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM