Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q4 2023 Earnings Presentation
63 slides from Lakeland Financial's earnings presentation, January 2024
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 2023 LKFN LISTED
Slide 2: Presenter contacts
David M. Findlay Chairman & Chief Executive Officer david.findlay@lakecitybank.com (574) 267-9197 Kristin L. Pruitt President kristin.pruitt@lakecitybank.com (574) 371-9220 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: Long Term Success for Shareholders
Long Term Success for Shareholders 9 Institutions (including LKFN) LTM LTM ROE >13% ROE >13% Consecutive Increases 15 Institutions in PTPP Income Since 2012(3) 159 Institutions Profitable for the Last 10 Years(2) 193 Institutions Exchange Traded Depositories with Assets Between $1B and $10B(1) Sourc
Slide 5: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share Allowance for Credit * $31.25 Losses $35.00 8.1% $25.22 $30.00 Tangible Common Equity $25.00 91.9% $20.00 Key Ratios and Per Share Data as of $15.00 December 31, 2023 TCE/Tangible Assets 9.91% $10.00 Adj. TCE/Adj. Tangible Assets 11.99% Total
Slide 6: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 53 branch offices - $6.5 billion banking assets - $3.2 billion trust, retirement and investment brokerage assets • Focused on execution – “blocking and tackling” • Continued growth potential 6
Slide 7: 32 Years of Organic Growth
32 Years of Organic Growth Record Net Income for 32 of 35 Years (000’s) $120,000 $93,767 $100,000 Compound Annual Growth 1991 – 2023 • Loans = 11% • Deposits = 10% $80,000 • Net Income = 12% • Earnings Per Share = 12% $60,000 $40,000 $2,707 $20,000 $0 2001 2004 2015 1991 1992 1993 1994 1995 1996 199
Slide 8: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Expanding Markets 8
Slide 9: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Unemployment Rate In The Lake City Bank Footprint Is Consistent With The National Average 14.0% 13.0% 12.0% 10.0% Unemployment 8.0% 7.4% 11.9% 6.0% 6.6% 6.4% 5.5% 8.0% 4.8% 4.0% 6.6% 4.4% 5.7% 3.9% 3.9% 3.7% 4.8% 3.5% 4.5% 3.4% 3.3% 3.8% 3.7% 3.4% 3.2% 3.2% 11.3
Slide 10: Lake City Bank Balance Sheet Dynamics
Lake City Bank Balance Sheet Dynamics 1. Capital Strength 2. Diversified Deposit Composition 3. Liquidity Availability 4. Investment Securities Portfolio 5. Asset Liability Management 10
Slide 11: Fortress Balance Sheet in Excess of Regulatory Capital Requirements
Fortress Balance Sheet in Excess of Regulatory Capital Requirements LKFN Above Peer Long-Term Profitability has Contributed to a Strong Capital Foundation Proxy Peer Average RBC Q3’23 14.4% 16.0% 15.5% 15.0% 14.0% 13.3% 13.0% 12.0% 11.0% Well Capitalized Threshold 10.0% for Consolidated Risk-Based C
Slide 12: Deposit Composition Provides Diversification
Deposit Composition Provides Diversification Commercial Deposits Increase Share of Total Deposits Brokered Brokered Deposits Deposits $135,405 $113,528 2% 3% Total Commercial Total Total Retail $1,276,047 Commercial $1,794,958 31% $2,227,147 Total Retail 32% $1,617,133 39% 39% Total Public Total Pub
Slide 13: Diversified Deposit Base
Diversified Deposit Base Deposits Are Not Concentrated to Any Industry or Client • Deposit composition has remained stable with commercial deposits increasing as a percent of total deposits • Lake City Bank had 119,278 deposit accounts at December 31, 2023. 116,845, or 98%, of those accounts are les
Slide 14: Checking Accounting Trends by Deposit Sector
Checking Accounting Trends by Deposit Sector Commercial Accounts Grow by 19% since December 2019 (000) $2,500,000 Checking Account Average Balances by Deposit Type (000) Public $2,000,000 Commercial Retail Funds $2,105,411 $2,079,407 12/31/23 $137 $15 $5,369 $1,953,969 Checking Account Balances 12/3
Slide 15: Liquidity Overview
Liquidity Overview • Available liquidity is stable at $3.4 billion, up from $3.0 billion at December 31, 2022 • Sources of liquidity are varied and represent wholesale funding and brokered deposits • Brokered deposits represent 2% of total deposits • Noncore funding represented 3% of total deposits
Slide 16: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates 10.00% Asset Sensitive Balance Sheet Shifts More Neutral 5.00% 1.74% 1.20% 0.40% 0.68% 0.22% 0.00% -0.58% -0.26% -1.34% -3.32% -5.00% -6.07% -10.00% NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NI
Slide 17: Evolution of Deposit and Loan Betas
Evolution of Deposit and Loan Betas Deposit Mix Shift Has Stabilized • NIM expanded 102 basis points from 4Q21 through 4Q22 due to asset sensitive balance sheet and lagged deposit rate increases • NIM compressed by 66 basis points from 4Q22 to 4Q23 resulting primarily from a deposit mix shift to int
Slide 18: Interest Rate Sensitivity
Interest Rate Sensitivity Asset Sensitivity Decreased Due to Current Deposit and Lending Environment • Asset sensitivity impacted by shift FHLB/Other to interest-bearing transaction $564,906 13% accounts SOFR • Approximately $676.7 million of Fixed Rate $1,094,235 $1,586,389 fixed rate commercial lo
Slide 19: 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 19
Slide 20: Commercial Banking Focus
Commercial Banking Focus Experienced Relationship Driven Team • 41 credit “smart” commercial bankers • Average 24 years in banking & 13 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 21: Credit Process
Credit Process Commercial Banking Focus • Our credit discipline has never changed • We have a centralized committee structure • We are in-market lender to in-market clients • Character matters – we lend to people first • We focus on management/cash flow • Structure is important and is disciplined •
Slide 22: Corporate Social Responsibility
Corporate Social Responsibility Over 150 Years of Focusing on Our Customers, Employees and Our Communities • Supporting our communities since 1872 • Caring for and building a diverse and inclusive team • Delivering customer-focused loan and deposit products to our communities • Developing strong cyb
Slide 23: 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 are ongoing initiatives that create a culture of belonging • Our community involvement is real and critical to our
Slide 24: Mature Market Deposit Performance
Mature1 Market Deposit Performance Organic Growth 2013 – 2023 $3,000 $2,631 $2,419 $2,500 Lake City Bank has grown $1,975 deposits by 100% over the $2,000 $1,500 last ten-year period. $1,000 $500 $483 $459 $417 $359 $221 $0 -$500 -$300 -$1,000 -$1,500 -$1,472 -$2,000 1st Source Lake City Bank JPM Ch
Slide 25: A Strong Environment for Growth and Expansion
A Strong Environment for Growth and Expansion • Indiana #1 manufacturing state in the country(1) • Manufacturing jobs decreased by 1.1% from 544,800 to 538,700 from November ‘22 to November ‘23(2) • Indiana seasonally adjusted unemployment at 3.7% as of November 2023(3) • Indiana received three tech
Slide 26: Commitment to Technology
Commitment to Technology Innovation and Competitive Technology is a Focus • Fintech partnerships play a significant role in our technology stack and enable delivery of innovative solutions to our customers • Investments in Lake City Bank Digital, a Q2 product implemented in 2021 with ongoing functio
Slide 27: Channel Utilization over Three-year Horizon
Channel Utilization over Three-year Horizon Mobile Adoption Outpacing All Other Delivery Channels Total Total Three Channel Transactions % of Transactions % of Year Type 2020(1) Total 2023(1) Total Change Branch Transactions 2,005,429 15% 2,058,771 15% 3% ATM/ITM 877,768 7% 800,015 6% (9)% Online Lo
Slide 28: Customer Composition and Digital Adoption
Customer Composition and Digital Adoption Digital Platform Upgrade with Fintech Partner in 2021 Positively Impacting Digital Adoption Across All Generations Customer Composition and Digital Adoption Over Three Years Customer Generation Breakdown 12/31/23 12/31/22 12/31/21 Gen Z (1996 - Current) 18%
Slide 29: Financial Performance
Qoake City Bank Financial Performance
Slide 30: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National Peers and Contributes to Strong Capital Levels ROAE and ROATE LTM Peer 22.00% Average Data1 National Indiana 2.70% ROAE 10.8% 10.8% 20.00% 17.52% ROATE 12.1% 12.6% 16.64% 16.03% 18.00% 15.57% 2.20% 17.40% 16.00% 16.51% 14.27% ROAE and ROAT
Slide 31: Net Income and EPS
Net Income and EPS Core Operational Profitability Declines by 2% in 2023 $103,817 $4.50 $101,575 $100,000 $95,733 $93,767 $4.00 $87,047 $84,337 $4.04 $3.95 $80,411 $3.74 $3.50 $80,000 $3.65 $3.38 $3.30 $3.00 Net Income $3.13 $60,000 EPS $2.50 $40,000 $2.00 $1.50 $20,000 $1.00 $0 $0.50 2018 2019 2020
Slide 32: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings Core Pretax Pre-Provision Earnings $160,000 6.00% $140,000 $134,539 $126,544 5.00% Pretax Pre-Provision Earnings/Average Assets $118,646 $118,521 $116,183 $120,000 $110,620 $105,344 Pretax Pre-Provision Earnings 4.00% $100,000 $80,000 3.00% $60,000 2.00% 2.21% 2.24% 2.1
Slide 33: Average Loans
Average Loans Average YTD Loan Growth of $387 million or 9% Compared to Prior Year $5,000,000 $4,813,678 $4,424,472 $4,421,094 $4,427,166 120% $4,500,000 $3,974,532 $4,000,000 $3,843,912 110% $3,500,000 100% Loans to Deposit Ratio $3,000,000 95% 90% 94% 94% Loans $2,500,000 $2,000,000 86% 80% 83% $1
Slide 34: Line of Credit Utilization
25% 35% 55% 65% 75% 85% 95% 45% $1,696 $1,737 3,433 49% $1,616 $1,797 3,413 47% $1,669 $1,738 3,407 $1,630 $1,785 3,416 49% 48% $1,593 $1,835 3,429 46% PPP Round 1 $1,637 $1,785 3,423 48% $1,473 $2,066 3,539 $1,446 $2,109 3,554 PPP Round 2 $1,499 $2,044 3,544 42% 41% 42% $1,410 $2,190 3,600 $1,494 $
Slide 35: Line of Credit Utilization vs. Commercial DDA
Line of Credit Utilization 30% 40% 45% 55% 60% 35% 50% Dec-13 $389,051 50% Dec-14 $467,458 51% Dec-15 $572,966 50% Dec-16 $660,360 52% Dec-17 $740,576 54% Dec-18 $775,947 49% Commercial DDA Mar-19 $761,686 Jun-19 $772,995 47% 49% Sep-19 $849,092 48% Dec-19 $814,430 46% PPP Mar-20 $883,956 48% Round
Slide 36: Loan Portfolio Breakdown
Loan Portfolio Breakdown C&I Drives Lending Business Agri-business - Other Residential Agriculture Commercial Mortgage Commercial RE - $388,764 $120,726 $258,103 Construction 8% 2% 5% $634,435 13% Home Equity $189,663 4% Installment - Other Commercial RE - Multifamily Consumer $253,534 $104,443 5% 2
Slide 37: Top Industry Concentrations
Top 10 Industry Concentrations Loan Portfolio is Diversified- Commercial Office Space Represents 1.5% of Loans Lessors of Nonresidential Automobile Dealers Nonbank Lenders $125,368 $120,750 Misc. Durable Goods Buildings 2% 2% Merchant Wholesalers $136,914 $103,944 3% 2% Senior Living $155,605 Restau
Slide 38: Average Deposits
Average Deposits Pandemic’s Deposit Surge Abates in 2023 (000’s) 150% $6,000,000 $5,717,358 $5,604,228 140% $5,357,284 130% $5,000,000 $4,650,597 Deposits as a Percent of Total Funding $4,093,894 $4,242,524 120% $4,000,000 110% Deposits 100% $3,000,000 98% 98% 99% 100% 97% 97% 90% $2,000,000 80% 70%
Slide 39: Deposit Breakdown
Deposit Breakdown Deposit Costs Rise in Response to Interest Rate Environment and Increased Competition Brokered Deposits Cost of Deposits 3.00% 2.46% $135,405 2% 2.00% 1.19% 1.35% 0.98% 1.10% 1.00% 0.63% 0.48% 0.50% 0.54% 0.72% 0.63% 0.63% 0.28% 0.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 20
Slide 40: Public Fund Deposit Trends
$100,000 $500,000 $700,000 $900,000 $300,000 $1,100,000 $1,300,000 $1,500,000 $1,700,000 -$100,000 Jun-17 $1,225,991 Sep-17 $1,149,765 Dec-17 $1,235,119 Mar-18 $1,291,170 Jun-18 $1,225,127 Sep-18 $1,250,576 Checking and MMA Dec-18 $1,215,533 Mar-19 $1,211,148 Jun-19 $1,253,704 Sep-19 $1,281,451 $1,1
Slide 41: Net Interest Income
Net Interest Income Deposit Mix Shift Reduces Net Interest Margin (000’s) $250,000 5.00% $202,887 Net Interest Margin, fully tax equivalent $197,035 $200,000 4.50% $178,088 Net Interest Income $163,008 $151,271 $155,047 $150,000 4.00% 3.43% 3.38% 3.40% $100,000 3.50% 3.19% 3.07% 3.31% $50,000 3.00%
Slide 42: Asset Quality: Watchlist Loans
Asset Quality Watchlist Loans as a Percentage of Total Loans Remain at Historic Lows 5.00% 14.00% 4.00% Watch List Loans to Total Loans excluding PPP 12.00% Nonperforming Assets to Total Assets 3.00% 10.00% 8.86% 8.17% 8.06% 7.46% 8.00% 2.00% 6.64% 6.75% 5.75% 5.50% 6.00% 4.64% 4.77% 4.28% 4.50% 4.4
Slide 43: Asset Quality: Allowance for Credit Losses
Asset Quality Allowance for Credit Losses Represents Strong Coverage 0.60% 2.70% 2.39% 2.28% 2.40% 0.50% ACL to Total Loans, excluding PPP 2.15% 2.10% Net Chargeoffs to Average Loans 1.92% 0.40% 1.67% 1.80% 1.59% 1.59% 1.54% 1.42% 1.45% 1.46% 0.30% 1.50% 1.26% 1.23% 1.24% 1.25% 0.20% 1.20% 0.90% 0.1
Slide 44: Noninterest Income
Noninterest Income Noninterest Income Includes $6.3 million in Insurance and Wire Fraud Loss Recoveries in 2023 (000’s) $60,000 60% Non-Interest Income as % of Total Revenue $49,858 $50,000 $46,843 50% $44,997 $44,720 $41,862 Non-Interest Income $40,302 $40,000 40% $30,000 30% $20,000 20% 21% 22% 22
Slide 45: Total Revenue
Total Revenue Revenue Growth Benefited by Loan Growth and Improvement in Noninterest Income (000’s) $300,000 $244,749 $246,893 $250,000 $222,808 $209,851 $200,044 $200,000 $191,573 $150,000 $100,000 $50,000 $0 2018 2019 2020 2021 2022 2023 2023 YOY Increase 1% 2023 Core Revenue Decrease (2)% 45
Slide 46: Non-Interest Expense
Non-Interest Expense Core Noninterest Expense Growth at 3% for 2023 (000’s) $140,000 $130,710 $120,000 $110,210 $114,049 $104,287 $100,000 $91,205 $86,229 $89,424 $80,000 $60,000 $40,000 $20,000 $0 2018 2019 2020 2021 2022 2023 2023 Adj. (1) 12023 Year-to-date noninterest expense adjusted reflects C
Slide 47: Efficiency Ratio
Efficiency Ratio Adjusted Core Efficiency Ratio of 47% Excludes Impact of Wire Fraud Loss 70% Constant investment in technology and facilities 60% 52% 53% 51% 50% 50% 48% 47% 50% 46% 45% 45% 45% 43% 47% 40% 30% 20% 10% 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 12023 Year-to-date
Slide 48: Stable Healthy Dividend
Stable Healthy Dividend Growth in Dividend Reflects Strength of Capital 5.00% $1.90 $1.84 4.50% $1.70 $1.60 $1.50 4.00% $1.36 Dividend per Share $1.30 $1.20 3.50% Dividend Yield $1.16 $1.10 $1.00 3.00% $0.90 2.40% 2.25% 2.24% 2.82% 2.50% 2.19% $0.70 1.70% 2.00% $0.50 $0.30 1.50% $0.10 1.00% 2018 201
Slide 49: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 12/31/23 3,500.00 3,000.00 2,728.55% 2,500.00 2,000.00 1,500.00 1,000.00 462.10% 500.00 158.56% 0.00 152.09% (500.00) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 20
Slide 50: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 50
Slide 51: Supplemental Information
Supplemental Information Qoake City Bank
Slide 52: Lake City Bank Capital Adequacy
Lake City Bank Capital Adequacy Capital Strength Continues in December 2023 Non-GAAP Non-GAAP Non-GAAP Adjusted December Well- Capital AOCI and Excess Capital Regulatory Ratio 31, 2023 Capitalized Cushion HTM Capital Ratios with Description * Actual Threshold (in 000’s) Losses- after AOCI AOCI and a
Slide 53: Liquidity Preparedness
Liquidity Preparedness December 31, 2023 Additional Loan Collateral Liquidity Available for (000) Availability Used Unused/ Available Pledge Secured/Committed Borrowings: Federal Home Loan Bank-Indianapolis(1) $ 624,910 $ 50,000 $ 574,910 $ -- Federal Reserve Bank Discount Window 1,259,474 -- 1,259,
Slide 54: Stable Deposit Base
Stable Deposit Base • Continued monitoring of liquidity position, large depositor fluctuation report, uninsured deposit balances, and significant daily balance fluctuations • Depositors greater than $10 million grew by $259 million or 14% to $2.1 billion during 2023 from $1.88 billion at year-end 20
Slide 55: Lake City Bank Uninsured Deposits
Lake City Bank Uninsured Deposits Public Funds Account for 31% of Total Uninsured Deposits $6,000 100% 90% $5,000 80% 70% Uninsured deposits % of Deposits $4,000 56% 57% 54% 54% 54% 60% Deposits $3,000 50% 40% $2,000 30% 30% 29% 31% 28% 28% 20% $1,000 $1,135 $2,919 $1,334 $1,625 $1,996 $1,991 $2,017
Slide 56: Investment Portfolio
Investment Portfolio Recurring Cash Flows Used to Fund Organic Loan Growth 25% 21% US Govt 20% US Govt Remics Agencies 20% 18% 10.1% 8.4% MV Investments as a % of Assets 15% HTM Municipals 10.2% 14% 14% 10% 13% 12% 12% 12% 12% 5% US Govt Pools 29.9% 0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 20
Slide 57: Investment Security Portfolio Cashflows
(000) 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 5,000,000 - 18,383,946 9,434,278 14,617,459 7,284,785 18,806,433 9,208,379 15,311,083 7,111,418 16,486,356 9,010,657 Principal 13,992,315 6,950,996 December 31, 2023 $200 million in cash flow and 17,895,065 8,834,194 proceeds from sales YT
Slide 58: Investment Portfolio Analysis
Investment Portfolio Analysis Investment Portfolio Declines as a Percentage of Total Assets in 2023 12/31/2023 12/31/2022 Weighted Market % of Weighted Market % of Maturity Value Total Maturity Value Total US Govt REMICS 6.28 98,265 8% 5.97 114,355 9% US Govt Pools 7.44 349,577 30% 7.34 377,953 29%
Slide 59: Investment Securities Overview
Investment Securities Overview Excess Liquidity Deployed to Investment Security Portfolio • Excess liquidity of $1 billion deployed to investment portfolio during 2020-2022 • Investment portfolio longer duration offsets shorter duration of loan portfolio for interest rate risk management • The inves
Slide 60: Commercial Loans by County
Commercial Loans by County Commercial Customers in 49 Indiana Counties and 21 Other States Other IN Marshall Counties (1) 3% 18% Outside IN Marion 6% 14% Allen Hamilton 18% 8% Commercial Loans Kosciusko Outstanding as of 10% Elkhart 12/31/2023 St. Joseph 15% $4.4 billion 8% December 31, 2023 (000’s)
Slide 61: Larger Market Organic Expansion
Larger Market Organic Expansion Organic Growth State LCB LCB Deposit Rank County Primary City Population* Entry Market Share** # of Branches 21. Kosciusko Warsaw 80,826 1872 64% 12 6. Elkhart Elkhart 206,890 1990 23% 11 5. St. Joseph South Bend 272,234 1997 8% 4 3. Allen Fort Wayne 391,449 1999 12%
Slide 62: Mature Market Strength and Growth
Mature Market Strength and Growth Organic Growth (millions)1 2023 2013 2023 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $5,258 19.69% $2,627 14.33% 100.15% 53 2. Lake City Bank $4,828 18.08% $2,409 13.14% 100.42% 53 3. JPM Chase $3,651 13.68% $1,676 9.14% 117.84% 20 4. PNC $1,6
Slide 63: Lake City Bank
Qvake City Bank LAKECITYBANK.COM