Lakeland Financial Corporation · NASDAQ:LKFN
Lakeland Financial — Q1 2020 Earnings Presentation
52 slides from Lakeland Financial's earnings presentation, 2020
Slide 1: Lakeland Financial Corporation
Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 1st Quarter 2020 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: Top Banks
TOP 25 BANKS Profitability Capital Adequacy Asset Quality Core Core Tang Common NPAs/ Neos/ Rank CompanyName Ticker state Glin) "ta)” ame "U) Rank Assets)” Rank REDIGS) Rank 50." Rank Sore 1 RBB Bancorp RBB CA 1,691 1.84 4 12.99 23 14.09 10 0.21 18 -0.05 16 54.0 2 Bank of the Ozarks OZRK AR 21,276 e
Slide 5: Long Term Success for Shareholders
Long Term Success for Shareholders 4 Institutions (including LKFN) LTM ROE >15% Consecutive Increases in Net 17 Institutions Income Since 2010(3) Profitable for the Last 104 Institutions 10 Years(2) Exchange Traded Depositories 164 Institutions with Assets Between $1B and $5B(1) Source: S&P Global M
Slide 6: Strong Capital Structure
Strong Capital Structure Tangible Book Value(1) Per Share $23.72 Tangible Reserves $25.00 Common 8.2% Equity 91.8% $20.00 $15.00 Key Ratios and Per Share Data as of March $10.00 31, 2020 TCE/Tangible Assets 11.99% $5.00 Total Risk-Based 14.23% $1.21 Leverage 11.67% $0.00 Book Value $23.87 1991 1993
Slide 7: COVID-19 Crisis Management
COVID-19 Crisis Management • Active Credit Risk Management • COVID-19 Related Loan Deferrals • Paycheck Protection Program • Liquidity Preparedness • Deferment of CECL Implementation 7
Slide 8: Active Credit Risk Management
Active Credit Risk Management Early Identification of Potential Risk Sectors Transportation & Higher C&I Building Trucking Contractors Education Consruction 0.9% 0.9% 0.6% Restaurants 1.6% Automotive, Boating, Trailer & Truck 1.7% Entertainment & Recreation 0.5% Self-Storage Facilities 1.9% Recreati
Slide 9: COVID-19 Related Loan Deferrals
COVID-19 Related Loan Deferrals COVID-19 Loan Deferrals as of April 22, 2020 Credit Risk Management Efforts % of total • Actively working with borrowers on COVID-19 Type of # of Loans Loan loan deferral requests Loan Customers (000’s) Portfolio Commercial 267 $459,788 13% • Ongoing scrutiny of poten
Slide 10: Paycheck Protection Program
Paycheck Protection Program 100% of Customer Applications Approved PPP Loans- Phase 1 PPP Highlights % of % of Loan $ Loans to Phase I: Number to Total # of Loans Total $ of Size of Loan of Loans of Loans (000’S) Loans • 1,677 Loans $1 to $24,999 383 23% $ 5,310 1% • $530 million $25,000 to $49,999
Slide 11: Liquidity Preparedness
Liquidity Preparedness • Overall, line utilization has been stable in 2020 • Overall utilization rate of credit lines was 44% as of April 22, 2020 down from 48% as of March 31, 2020 • Expansion of funding sources has provided additional liquidity • Liquidity availability of $2.2 billion consists of
Slide 12: Deferment of CECL Implementation
Deferment of CECL Implementation • Incurred methodology provides: − The ability to leverage objective and subjective data analysis for the most accurate calculation − A tested and proven methodology to ensure the loan loss reserve is appropriately conservative − A loan-by-loan evaluation of non-impa
Slide 13: Lake City Bank Today
Lake City Bank Today • A long-term and consistent organic growth story • Headquartered in Warsaw, Indiana • 50 branch offices - $5.0 billion banking assets - $2.2 billion trust and investment assets • Focused on execution – “blocking and tackling” • Continued growth potential 13
Slide 14: A Quarter Century of Organic Growth
A Quarter Century of Organic Growth Record Net Income for 30 of 31 Years (000’s) $87,047 $100,000 $90,000 Compound Annual Growth 1991 – 2019 • Loans = 11% $80,000 • Deposits = 10% $70,000 • Net Income = 13% Net Income $60,000 • Earnings Per Share = 13% $50,000 $40,000 $30,000 $20,000 $2,707 $10,000
Slide 15: Established Market Presence
Established Market Presence Organic Growth Potential in Mature and Developing Markets Market Data Warsaw – 1872 22 offices Elkhart – 1990 11 offices South Bend – 1997 4 offices Fort Wayne – 1999 7 offices Indianapolis – 2011 6 offices 15
Slide 16: Strong Regional and Statewide Economy
Strong Regional and Statewide Economy Indiana Employment Trends Versus National Averages 12.0% 10.0% 10.4% 9.5% Unemployment 8.0% 8.7% 8.1% 11.8% 7.0% 6.0% 9.6% 9.0% 9.0% 5.8% 6.9% 5.2% 4.9% 4.0% 5.6% 5.1% 4.4% 4.1% 11.9% 3.7% 4.3% 4.1% 3.8% 3.8% 9.6% 9.0% 8.8% 6.5% 5.2% 4.6% 3.8% 3.3% 3.0% 3.4% 2.0
Slide 17: 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 17
Slide 18: Experienced Relationship Driven Team
Commercial Banking Focus Experienced Relationship Driven Team • 39 credit “smart” commercial bankers • Average 20 years in banking & 9 years at Lake City Bank • We live where we lend • Face to face calling matters and is a team effort • We understand our client needs • Deep organizational structure
Slide 19: Credit Process
Commercial Banking Focus 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
Slide 20: Lake City Bank Culture
High Quality Team Members Lake City Bank Culture • Our culture is our greatest asset and we will preserve it • Lake City University drives our culture • Our community involvement is real and critical to our strategy • Our culture has not been diluted by acquisition 20
Slide 21: Mature Market Deposit Performance
Organic Growth 2009 - 2019 Mature Market Deposit Performance 1 $2,150 $2,003 $1,650 $1,376 Lake City Bank has grown $1,171 deposits by 115% over the last $1,150 ten-year period. $704 $650 $212 $167 $141 $150 $14 -$71 -$219 -$350 Lake City Bank 1st Source JPM Chase Flagstar First Merchants Star Fifth
Slide 22: Indianapolis Market Opportunity
Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market Deposit Market Share 1. JPM Chase 22% 2. PNC 14% 3. Fifth Third 9% 4. Huntington National 7% 12% 5. First Internet Bank 7% 6. BMO Harris 7% 7. KeyBank 6% 8. Bank of America 6% 9. Merchants Bank 5% 10. National B
Slide 23: A Strong Environment for Growth and Expansion
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 2019 • Economic expansion of 1.25% in 2019(2) (1) Based on per capita populatio
Slide 24: Core Deposits Fund Organic Loan Growth
Core Deposit Funding Core Deposits Fund Organic Loan Growth • We focus on core deposit growth in retail, commercial and public funds • Commercial deposit growth over 5 years is a 18% compounded annual growth rate • We capitalize on market disruption in our footprint to grow deposits • We emphasize c
Slide 25: Innovative and Competitive Technology is a Focus
Commitment to Technology and Cyber Risk Management Innovative and Competitive Technology is a Focus • Technology partnership with FIS is strong – User Planning Council and Strategic Planning Advisory Council • Fintech partnerships play a growing role in our technology strategy • Mobile banking appli
Slide 26: Channel Utilization Over Three Year Horizon
Digital Solutions Growing Rapidly Channel Utilization Over Three Year Horizon Total Total Three Channel Transactions % of Transactions % of Year Type 2016 Total 2019 Total Change Branch Transactions 2,440,198 23% 2,279,975 18% (7)% ATM/ITM 754,695 7% 944,785 7% 25% Online Logins 4,795,231 44% 5,058,
Slide 27: Technology Focused Solutions
Commitment to Technology and Cyber Risk Management Technology Focused Solutions 27
Slide 28: Financial Performance
Financial Performance (lake City Bank
Slide 29: Income Performance Metrics
Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers ROE and ROTE LTM Peer Data1 2.50% National Indiana 20.00% ROE 9.4% 10.9% 2.30% ROTE 10.9% 12.2% 18.00% 16.64% 2.10% 15.57% 16.00% 16.51% ROE and ROTE 1.90% 15.47% 12.83% 14.00% 12.45% 12.61% 1.70% ROA 1.76% 11.58% 12.00%
Slide 30: Net Income and EPS
Net Income and EPS (000’s) Record Net Income and EPS $100,000 $4.00 $90,000 $87,047 $80,411 $3.50 $80,000 $3.38 $70,000 $3.00 $3.13 $60,000 $57,330 $52,084 $2.50 Net Income $50,000 $46,367 EPS $2.23 $2.00 $40,000 $2.05 $30,000 $1.84 $1.50 $21,682 $20,000 $17,299 $0.84 $1.00 $10,000 $0.67 $0 $0.50 20
Slide 31: Pretax Pre-Provision Earnings
Pretax Pre-Provision Earnings (000’s) Demonstrates Consistent Operating Strength $120,000 $110,620 Pretax Pre-Provision Earnings/Average Assets $105,344 2.90% Pretax Pre-Provision Earnings $100,000 $92,634 2.70% $78,367 $80,000 2.50% $69,200 2.21% 2.24% 2.23% 2.22% 2.30% $60,000 2.08% 2.10% $40,000
Slide 32: Average Loans
Average Loans (000’s) Commercial Emphasis Drives Growth $4,500,000 150% $4,059,174 $3,974,532 $4,000,000 $3,843,912 140% $3,610,908 130% $3,500,000 $3,225,635 120% $3,000,000 $2,885,568 Loans to Deposit Ratio 110% $2,500,000 Loans 100% $2,000,000 96% 95% 90% 93% 93% 94% 94% $1,500,000 80% $1,000,000
Slide 33: Loan Breakdown
Loan Breakdown C&I Drives Lending Business Agri-business - Other Residential Commercial RE - Agriculture Commercial Mortgage Construction $329,397 $104,286 $173,431 $334,524 8% 8% 3% 4% Home Equity $181,541 4% Commercial RE - Installment - Other Multifamily Consumer $269,479 $109,242 7% 3% Commercia
Slide 34: Average Deposits
Average Deposits Core Deposits Grow by 5% or $179 Million Year-over-Year (000’s) $4,500,000 $4,242,524 $4,204,094 150% $4,093,894 $4,000,000 $3,757,209 140% Deposits as a Percent of Total Funding $3,477,816 130% $3,500,000 $3,088,598 120% $3,000,000 110% Deposits $2,500,000 97% 97% 97% 98% 97% 95% 1
Slide 35: Deposit Breakdown
Deposit Breakdown Deposit Growth Key to Franchise Value CDARS Brokered CDs $993 $24,499 Brokered MMA 0% 1% $85,076 Cost of Deposits 2% 2.00% 1.35% 1.38% 1.19% 0.98% 1.10% 1.07% 1.00% 0.63% 0.48%0.50% 0.54% 0.72% 0.00% Total 2011 2012 2013 2014 2015 2016 2017 2018 2019 1Q19 1Q20 Commercial $1,382,090
Slide 36: Net Interest Income
Net Interest Income Loan Growth Driving Growth in Income (000’s) $160,000 $155,047 6.00% $151,271 $135,892 $140,000 5.50% $118,481 $120,000 5.00% $105,927 Net Interest Income Net Interest Margin $100,000 4.50% $80,000 4.00% 3.43% 3.38% 3.45% 3.33% 3.35% $60,000 3.20% 3.18% 3.50% $38,209 $38,854 $40,
Slide 37: Interest Rate Sensitivity
Interest Rate Sensitivity Impact of FOMC Accommodative Policy on Commercial Loans: • Proactive deposit pricing FHLB/Other reductions concurrent with $391,986 11% FOMC easing • 56% of Public Funds are tied to 1 Month Fixed Rate LIBOR $1,275,665 Fed Funds effective rate $978,873 35% 26% • 89% of loan
Slide 38: Nonperforming Assets to Total Assets
Asset Quality Nonperforming Levels Reflect Economic Strength of Markets 5.00% 14.00% Impaired and Watch List Loans to Total 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% 6.00% 4.64% 4.77% 4.28% 4.50% 4.43% 4.50% 1.00% 0.42% 0.35%
Slide 39: Net Chargeoffs to Average Loans
Asset Quality 0.60% Strong Reserve Coverage 2.70% 2.39% 2.28% 2.40% 0.50% 2.15% Loan Loss Reserve to Total Loans 2.10% Net Chargeoffs to Average Loans 1.92% 0.40% 1.80% 0.30% 1.67% 1.50% 1.59% 1.42% 0.20% 1.20% 1.26% 1.23% 1.24% 1.25% 1.31% 0.90% 0.10% 0.42% 0.54% 0.25% 0.20% 0.11% 0.10% 0.09% 0.13%
Slide 40: Non-Interest Income
Non-Interest Income Fee-Based Revenue Drives Increases (000’s) $50,000 60% Non-Interest Income as % of Total Revenue $44,997 $45,000 $40,302 50% $40,000 $36,009 $35,000 $32,864 Non-Interest Income $31,479 40% $30,000 $25,000 30% $20,000 22% 23% 23% 20% $15,000 22% 22% 21% 22% $11,525 $10,777 $10,000
Slide 41: Non-Interest Expense
Non-Interest Expense Disciplined Approach to Cost Structure While Continuing to Invest in the Future (000’s) $100,000 $86,229 $89,424 $90,000 $79,267 $80,000 $72,978 $68,206 $70,000 $60,000 $50,000 $40,000 $30,000 $22,089 $22,473 $20,000 $10,000 $0 2015 2016 2017 2018 2019 YTD 2019 YTD 2020 2020 YOY
Slide 42: 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 Indianapolis Expansion Clearwat
Slide 43: Stable Healthy Dividend
Stable Healthy Dividend Dividend Reflects Strength of Balance Sheet $1.30 3.00% $1.16 $1.10 $1.00 2.75% 2.50% 2.56% $0.90 $0.85 Dividend per Share 2.40% Dividend Yield $0.73 2.25% $0.70 2.00% $0.63 2.10% 1.95% $0.50 1.77% 1.50% $0.30 $0.30 $0.26 $0.10 1.00% 2015 2016 2017 2018 2019 1Q19 1Q20 Dividen
Slide 44: LKFN Shareholder Value
LKFN Shareholder Value Total Return Performance from 12/31/00 to 3/31/20 2,000.00 1,500.00 1,350.07% 1,000.00 500.00 186.78% 0.00 33.26% 25.75% (500.00) LKFN S&P 500 SNL U.S. Bank S&P 500 Bank Source: SNL database 44
Slide 45: Investment Highlights
Investment Highlights • Proven History of Organic Growth • Disciplined and Focused Strategy • Strong Internal Culture • Consistent Execution • Service Excellence Drives Shareholder Value 45
Slide 46: Supplemental Information
Supplemental Information (lake City Bank
Slide 47: 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 79,344 1872 59% 12 6. Elkhart Elkhart 205,560 1990 21% 9 5. St. Joseph South Bend 270,771 1997 8% 4 3. Allen Fort Wayne 375,351 1999 14% 5
Slide 48: Mature Market Strength and Growth
Organic Growth Mature Market Strength and Growth (millions)1 2019 2019 2009 # of Deposits Share Deposits Share Increase Offices 1. 1st Source $4,053 19.62% $2,677 17.16% 51.40% 53 2. Lake City Bank $3,739 18.10% $1,736 11.13% 115.38% 50 3. JPM Chase $2,655 12.85% $1,484 9.51% 78.91% 23 4. PNC $1,432
Slide 49: 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 49
Slide 50: Investment Portfolio – Source of Liquidity
Investment Portfolio – Source of Liquidity CMCL CMO 17.0% 6.70% Investments as a % of Assets 16.0% US Govt Remics 15.0% 16.28% 14.0% Taxable Municipals US Govt Pools 13.0% 14.1% 0.32% 30.70% 12.0% 12.9% 12.3% 12.4% 11.0% 11.8% 11.5% 12.0% Exempt Municipals 10.0% 46.00% 2014 2015 2016 2017 2018 2019
Slide 51: Projected Impact of Rising/Falling Rates
Projected Impact of Rising/Falling Rates Asset Sensitive Balance Sheet 16.00% 14.98% 14.00% 12.00% 9.89% 10.00% 8.00% 6.00% 4.81% 4.00% 2.37% 2.00% 1.23% 0.00% -2.00% -2.19% -4.00% NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates NII - Rates Down 25 Up 25 Up 50 Up 100 Up 200 Up 300 Graph
Slide 52: LAKECITYBANK.COM
(800) 827-4522 LAKECITYBANK.COM