Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q2 2021 Earnings Presentation
52 slides from Lakeland Financial's earnings presentation, Aug 2, 2021
Slide 1: A Proven History of Shareholder Value Creation – 2nd Quarter 2021
A Proven History of Shareholder Value Creation And Commitment to Our Communities 2nd Quarter 2021 Lakeland Financial Corporation LKFN L I S T E D
Slide 2: David M. Findlay President & Chief Executive Officer david.findlay@lakecitybank.com (574) 267-9197 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
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 are generally identifiable
Slide 4: Bank Director's 2021 Scorecard
4 Bank Director’s 2021 Scorecard
Slide 5: Long Term Success for Shareholders
Consecutive Increases in PTPP Income Since 2012(3) Profitable for the Last 10 Years(2) Exchange Traded Depositories with Assets Between $1B and $10B(1) 7 Institutions 31 Institutions 152 Institutions 210 Institutions (including LKFN) 5 Long Term Success for Shareholders Source: S&P Global Market Int
Slide 6: Strong Capital Structure
Strong Capital Structure 6 Tangible Common Equity 91.7% Reserves 8.3% $ 1 .2 1 $ 2 6 .4 5 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 1 9 91 1 9 93 1 9 95 1 9 97 1 9 99 2 0 01 2 0 03 2 0 05 2 0 07 2 0 09 2 0 11 2 0 13 2 0 15 2 0 17 2 0 19 2 0 21 Tangible Book Value(1) Per Share (1)compounded annu
Slide 7: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 50 branch offices - $6.2 billion banking assets - $2.9 billion trust and investment brokerage assets • Focused on execution – “blocking and tackling” • Continued growth potential 7
Slide 8: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth 8 $ 2 ,7 0 7 $ 8 4 ,3 3 7 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 1 9 91 1 9 92 1 9 93 1 9 94 1 9 95 1 9 96 1 9 97 1 9 98 1 9 99 2 0 00 2 0 01 2 0 02 2 0 03 2 0 04 2 0 05 2 0 06 2 0 07 2 0 08 2 0 09 2 0 10 2 0 11 2 0 12
Slide 9: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Developing Markets 9 Market Data Warsaw – 1872 22 offices Elkhart – 1990 11 offices South Bend – 1997 4 offices Fort Wayne – 1999 7 offices Indianapolis – 2011 6 offices
Slide 10: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Indiana Employment Trends Versus National Averages 10 Source: United States Bureau of Labor Statistics. Lake City Bank footprint is defined as Kosciusko, Marshall, Fulton, Pulaski, Noble, Whitley, St. Joseph, Elkhart, LaGrange, Allen, DeKalb, Huntington, Marion,
Slide 11: Shareholder Value Strategy
Shareholder Value Strategy 11 1. Commercial Banking Focus 2. High Quality Team Members 3. Proven Organic Growth Experience 4. Focus on Core Deposit Funding 5. Commitment to Technology
Slide 12: Commercial Banking Focus: Experienced Relationship Driven Team
• 42 credit “smart” commercial bankers • Average 20 years in banking & 11 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 structure provides credit and administrative support • We cross-sell a
Slide 13: Credit Process
Credit Process • 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 owner occupied and well
Slide 14: Lake City Bank Culture
Lake City Bank Culture • 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 diluted by acquisition 14 Hi
Slide 15: Mature Market Deposit Performance
Mature1 Market Deposit Performance $1,980 $1,757 $1,399 $824 $341 $339 $202 $83 -$83 -$328-$350 $150 $650 $1,150 $1,650 $2,150 Lake C ity B an k 1 st So u rce JP M C h ase Flagstar First M erch an ts Star Fifth Th ird P N C O ld N atio n al K eyB an k Organic Growth 2010 - 2020 1Mature Markets inclu
Slide 16: Indianapolis Market Opportunity
Organic Growth 16 Indianapolis Market Opportunity Indianapolis Market Banks Share of Market 1. JPM Chase 22% 2. PNC 14% 3. Fifth Third 9% 4. Huntington National 7% 5. First Internet Bank 7% 6. BMO Harris 7% 7. KeyBank 6% 8. Bank of America 6% 9. Merchants Bank 5% 10. National Bank of Indy 4% 16. Lak
Slide 17: A Strong Environment for Growth and Expansion
17 A Strong Environment for Growth and Expansion • #1 manufacturing state in the country(1) • CNBC named Indiana as #1 state for infrastructure • K-12 funding increased $1 billion since 2017 • Net population in-migration in 2020 • Ten-year population growth of 4% through 2020 • State GDP percent inc
Slide 18: Core Deposits Fund Organic Loan Growth
18 Core Deposits Fund Organic Loan Growth • Focus on core deposit growth in retail, commercial and public funds • Commercial deposit growth over 5 years = 22% CAGR • Capitalize on market disruption in our footprint to grow deposits • Emphasize checking account relationship products and flexible solu
Slide 19: Commitment to Technology and Cyber Risk Management
• Fintech partnerships play a growing role in our technology • Lake City Bank Digital, the next generation digital solution implemented in March 2021 • Technology partnership with FIS is strong – User Planning Council and Strategic Planning Advisory Council • Retail and Commercial platforms ensure c
Slide 20: Mobile Adoption is Growing Rapidly
Mobile Adoption is Growing Rapidly 20 Channel Utilization Over Three Year Horizon(1) Channel Type Total Transactions 2018 % of Total Total Transactions 2021 % of Total Three Year Change Branch Transactions 2,361,272 20% 2,020,517 15% (14)% ATM/ITM 951,855 8% 895,677 7% (6)% Online Logins 4,934,041 4
Slide 21: Lake City Bank Digital Adoption by Age Demographic
Lake City Bank Digital Adoption by Age Demographic 15% 25% 19% 31% 10% CUSTOMER BREAKDOWN 41% 53% 44% 40% 27% DIGITAL ADOPTION Gen Z Millennial Gen X Baby Boomer Mature Gen Z 1996 – Current Millennial 1977 – 1995 Gen X 1965 – 1976 Baby Boomer 1946 – 1964 Mature 1945 or before June 2021 21
Slide 22: Technology Focused Solutions
22 Technology Focused Solutions Commitment to Technology and Cyber Risk Management
Slide 23: Financial Performance
Financial Performance (ake City Bank
Slide 24: LKFN Performance Exceeds National and Indiana Peers
1.29% 1.29% 1.69% 1.76% 1.55% 1.58% 12.52% 12.72% 16.51% 15.47% 13.51% 14.49%12.61% 12.83% 16.64% 15.57% 13.59% 14.57% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 0.70% 0.90% 1.10% 1.30% 1.50% 1.70% 1.90% 2.10% 2.30% 2.50% 2016 2017 2018 2019 2020 YTD 2021 Return on Average Assets Re
Slide 25: Net Income and EPS
$52,084 $57,330 $80,411 $87,047 $84,337 $36,969 $47,331 $2.05 $2.23 $3.13 $3.38 $3.30 $1.44 $1.85 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $0 $20,000 $40,000 $60,000 $80,000 $100,000 2016 2017(1) 2018 2019 2020 YTD 2020 YTD 2021 Net Income Diluted EPS Net Income and EPS 2021 Net Income
Slide 26: Pretax Pre-Provision Earnings
$78,367 $92,634 $105,344 $110,620 $118,646 $57,160 $57,843 1.94% 2.08% 2.21% 2.24% 2.40% 2.21% 1.93% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 2016 2017 2018 2019 2020 YTD 2020 YTD 2021 Pretax Pre-Provision Earnings Pretax Pre-Provision/Average
Slide 27: Organic Loan Growth Returns to the Balance Sheet
Average Loans Organic Loan Growth Returns to the Balance Sheet 93% 96% 94% 94% 95% 86% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 $4,500,000 $5,000,000 2016 2017 2018 2019 2020(1) YTD 2021 Retail Commerci
Slide 28: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Commercial & Industrial $1,502,685 34% Commercial RE - Owner Occupied $672,903 15% Commercial RE - Nonowner Occupied $606,096 14% Commercial RE - Multifamily $300,449 7% Commercial RE - Construction $402,583 9% Agri-business - Agriculture $346,652 8% Other
Slide 29: Paycheck Protection Program
• $165 million thru 1,192 loans • Average loan size $139,000 • 15% of loans or $6 million forgiven as of 6/30/21 29 Paycheck Protection Program PPP Forgiveness Approvals Accelerate in Second Quarter • $571 million thru 2,409 loans • Average loan size $237,000 • 94% of loans, or $514 million forgiven
Slide 30: Deposit Growth Impacted by PPP Loans and Federal Stimulus
$3,477,816 $3,757,209 $4,093,894 $4,242,524 $4,650,597 $5,247,878 97% 95% 97% 98% 98% 99% 50% 60% 70% 80% 90% 100% 110% 120% 130% $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 2016 2017 2018 2019 2020 YTD 2021 Average Deposits % of Funding Average Deposits Deposit Growth Impac
Slide 31: Deposit Breakdown
Total Retail $1,987,251 37% Total Public Fund $1,275,388 24% Total Commercial $2,122,022 39% Brokered Deposits $10,004 0% Deposit Breakdown Demand Deposits Grew by $317 million or 22% in One Year 1.19% 0.98% 0.63% 0.48% 0.50% 0.54% 0.72% 1.10%1.35% 0.63% 0.31% 0.00% 1.00% 2.00% 3.00% 2011 2012 2013
Slide 32: Net Interest Income
Net Interest Income Growth in Net Interest Income Offset by Margin Compression $118,481 $135,892 $151,271 $155,047 $163,008 $78,382 $87,340 3.18% 3.33% 3.43% 3.38% 3.19% 3.22% 3.10% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $1
Slide 33: Interest Rate Sensitivity
Fixed Rate $1,380,781 35% Prime $1,055,104 26% 1 Month LIBOR $1,159,675 29% FHLB/Other $410,194 10% Interest Rate Sensitivity • Proactive deposit pricing reductions • 70% of Public Funds are tied to Fed Funds effective rate • 90% of loan portfolio consists of commercial loans • Fixed rate commercial
Slide 34: Asset Quality
Asset Quality Semi-Annual Portfolio Reviews Affirm Overall Strength of Asset Quality 2 .1 5 % 2 .7 5 % 1 .3 7 % 0 .9 4 % 0 .5 0 % 0 .4 2 % 0 .1 9 % 0 .2 5 % 0 .1 9 % 0 .4 6 % 0 .2 6 % 0 .2 5 % 1 .8 2 % 2 .2 0 % 1 .7 5 % 1 .3 1 % 0 .4 1 % 0 .3 5 % 0 .1 6 % 0 .2 0 % 0 .1 6 % 0 .3 8 % 0 .2 1 % 0 .1 9 %
Slide 35: Asset Quality: Reserve Represents Strong Coverage
0 .5 4 % 0 .2 5 % 0 .2 0 % 0 .1 1 % 0 .1 0 % 0 .0 9 % 0 .0 3 % -0 .0 1 % 0 .1 3 % 0 .0 3 % 0 .0 9 % -0 .0 7 % 2.15% 2.39% 2.28% 1.92% 1.67% 1.42% 1.26% 1.23% 1.24% 1.25% 1.45% 1.72% 0.00% 0.30% 0.60% 0.90% 1.20% 1.50% 1.80% 2.10% 2.40% 2.70% -0.20% -0.10% 0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 20
Slide 36: Non-Interest Income
$32,864 $36,009 $40,302 $44,997 $46,843 $21,946 $23,897 22% 22% 21% 22% 22% 22% 21% 0% 10% 20% 30% 40% 50% 60% $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 2016 2017 2018 2019 2020 YTD 2020 YTD 2021 N o n -I n te re st In co m e as % o f To ta l R ev en u e N o n
Slide 37: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future 37 $72,978 $79,267 $86,229 $89,424 $91,205 $43,168 $53,394 $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 2016 2017 2018 2019 2020 YTD 2020 YTD 2021 2021 YOY Incr
Slide 38: Efficiency Ratio
47% 48% 51% 52% 50% 50% 48% 46% 45% 45% 43% 48% 40% 45% 50% 55% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD 2021 Efficiency Ratio Revenue Growth is Primary Driver Constant investment in technology and facilities 38
Slide 39: Stable Healthy Dividend
Stable Healthy Dividend $0.73 $0.85 $1.00 $1.16 $1.20 $0.60 $0.68 1.95% 1.77% 2.25% 2.40% 2.27% 2.57% 2.21% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% $0.10 $0.30 $0.50 $0.70 $0.90 $1.10 $1.30 2016 2017 2018 2019 2020 YTD 2020 YTD 2021 Dividend Per Share - split adjusted Dividend Yield 20
Slide 40: LKFN Shareholder Value Total Return Performance
(500.00) 0.00 500.00 1,000.00 1,500.00 2,000.00 2,500.00 3,000.00 3,500.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 LKFN S&P US BMI Banks Index S&P 500 S&P 500 Financials 2,556.56% 48.53% 254.60% 9.18% LKFN Shareholder Value Total
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: Supplemental Information
Supplemental Information (ake City Bank
Slide 43: COVID-19 Crisis Management
43 COVID-19 Crisis Management • Active Credit Risk Management • COVID-19 Related Loan Deferrals • Paycheck Protection Program
Slide 44: Active Credit Risk Management
Active Credit Risk Management Ongoing Assessment of Potential Risk Sector – COVID-19 Hotel & Accomodations 2.3% June 30, 2021 2.3% of Loan Portfolio $96 million (excludes PPP Loans) 44 March 31, 2020 Recreational Vehicle 4.3% Nursing Home & Assisted Living 4.0% Hotel & Accomodations 2.4% Self-Storag
Slide 45: COVID-19 Loan Deferrals
$467 $737 $653 $158 $101 $85 $37 $28 404 487 384 102 49 26 10 4 0 100 200 300 400 500 600 700 800 900 $0 $100 $200 $300 $400 $500 $600 $700 $800 Deferrals Borrowers COVID-19 Related Loan Deferrals COVID-19 Loan Deferrals as of June 30, 2021 Credit Risk Management Efforts Type of Loan # of Borrowers
Slide 46: Liquidity Line of Credit Utilization
1, 0 84 1, 2 74 1, 43 9 1, 6 21 1, 6 11 1, 5 91 1, 5 88 1, 7 53 1, 7 15 1, 6 55 1, 6 64 1, 6 96 1, 6 16 1, 6 69 1, 6 30 1, 5 93 1, 6 37 1, 4 73 1, 4 46 1, 4 99 1, 4 10 1, 4 94 1, 0 95 1 ,2 4 3 1, 41 1 1, 4 75 1, 4 68 1, 4 93 1, 5 46 1, 5 14 1, 6 12 1, 6 11 1, 8 0 6 1, 7 3 7 1, 7 9 7 1, 7 3 8 1, 7 8
Slide 47: Commercial Loans by County
Commercial Loans by County Allen 17% Elkhart 14% St. Joseph 11% Kosciusko 9% Hamilton 8% Marion 11% Marshall 5% Other IN Counties (1) 19% Outside IN 6% June 30, 2021 47 (000’s) Commercial Loans Outstanding as of 6/30/2021 $3.9 million (1) All other counties individually represent less than 0.5% of t
Slide 48: Larger Market Organic Expansion
Larger Market Organic Expansion 48 State Rank County Primary City Population* LCB Entry LCB Deposit Market Share** # of Branches 20. Kosciusko Warsaw 79,456 1872 58% 12 6. Elkhart Elkhart 206,341 1990 23% 9 5. St. Joseph South Bend 271,286 1997 9% 4 3. Allen Fort Wayne 379,299 1999 14% 5 1. Hamilton
Slide 49: Mature Market Strength and Growth
Mature Market Strength and Growth (millions)1 2020 2010 2020 # of OfficesDeposits Share Deposits Share Increase 1. 1st Source $4,433 19.68% $2,676 15.68% 65.66% 53 2. Lake City Bank $4,113 18.26% $2,133 12.50% 92.83% 50 3. JPM Chase $2,992 13.29% $1,593 10.81% 87.82% 22 4. PNC $1,626 7.22% $1,543 9.
Slide 50: Investment Portfolio – Source of Liquidity
14.1% 12.9% 11.8% 11.5% 12.0% 12.3% 13.6% 18.6% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 2014 2015 2016 2017 2018 2019 2020(1) 2021(2) US Govt Treas 0.08% US Govt Remics 8.17% US Govt Pools 31.59% Exempt Municipals 49.44% US Govt Agencies 8.04% CMCL CMO 2.68% Investment Portfolio – Source of Liquidity 50
Slide 51: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet -1.71% 1.59% 3.28% 6.64% 14.00% 21.26% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 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 52: (800) 827-4522 LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM