Lakeland Financial Corporation. 4 th Quarter 2017 LKFN. A Proven History of Shareholder Value Creation And Commitment to Our Communities L I S T E D

Transcription

1 Lakeland Financial Corporation A Proven History of Shareholder Value Creation And Commitment to Our Communities 4 th Quarter 2017 LKFN L I S T E D

2 David M. Findlay President & Chief Executive Officer (574) Lisa M. O Neill Executive Vice President & Chief Financial Officer lisa.oneill@lakecitybank.com (574)

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 with respect to the financial condition, results of operations, plans, objectives, future performance and business of the Company. Forward-looking statements are generally identifiable by the use of words such as believe, expect, anticipate, estimate, could, and other similar expressions. All statements in this presentation, including forward-looking statements, speak only as of today s date, and the Company undertakes no obligation to update any statement in light of new information or future events. A number of factors, many of which are beyond the ability of the Company to control or predict, could cause actual results to differ materially from those in its forward-looking statements. Additional information is included in the Company s filings with the Securities and Exchange Commission. Factors that could have a material adverse effect on the Company s financial condition, results of operations and future prospects can be found in the Risk Factors section of the prospectus included in the Registration Statement on Form S-1 filed on October 26, 2009, as amended under Item 1A Risk Factors in the Company s Annual Report on Form 10-K for the year ended December 31, 2008 and elsewhere in the Company s periodic and current reports filed with the Securities and Exchange Commission. These factors include, but are not limited to, the effects of future economic, business and market conditions and changes, domestic and foreign, including competition, governmental policies and seasonality; legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by Company regulators, and changes in the scope and cost of FDIC insurance and other coverages; the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand and other interest sensitive assets and liabilities; the failure of assumptions and estimates underlying the establishment of reserves for possible loan losses, analysis of capital needs and other estimates; changes in borrowers credit risks and payment behaviors; and changes in the availability and cost of credit and capital in the financial markets. 3

4 Long Term Success for Shareholders LTM ROE >12% 3 Institutions (including LKFN) Consecutive Increases in Net Income Since 2009 (3) 13 Institutions Profitable for the Last 10 Years (2) 78 Institutions Exchange Traded Depositories with Assets Between $1B and $5B (1) 166 Institutions Source: SNL Financial. Financial data is as of September 30, (1) Includes banks and thrifts traded on the NYSE, NYSEAM or NASDAQ as of 1/10/18. (2) Defined as having positive net income before extraordinary items and preferred dividends for each of the last 10 years (calendar years ended December 31, 2007 through December 31, 2016). Net income before extraordinary items is defined by SNL Financial as GAAP net income, after taxes, minority interest, and other after tax items, but before any extraordinary items. (3) Defined as consecutive increases in net income before extraordinary items for each of the years ending December 31, 2010, 2011, 2012, 2013, 2014, 2015, and

5 $1.21 $18.45 Strong Capital Structure $20.00 $18.00 $16.00 Tangible Book Value + Per Share Tangible Common Equity 85.6% Subordinated Debt 5.7% Reserves 8.7% $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Key Ratios and Per Share Data as of December 31, 2017 TCE /Tangible Assets 9.93% Total Risk-Based 13.26% Leverage 10.76% Book Value + $18.60 Tangible Book Value + $ Book Value split adjusted 5

6 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

7 $2,707 Net Income $61,467 (1) A Quarter Century of Organic Growth (000 s) $70,000 $60,000 $50,000 $40,000 Record Net Income for 28 of 29 Years Compound Annual Growth Loans = 12% Deposits = 11% Net Income = 13% (1) Earnings Per Share = 13% (1) $30,000 $20,000 $10,000 $0 Net Income (1) Excludes the income tax provision of $4.1 million related to the 2017 revaluation of deferred tax assets 7

8 Established Market Presence Organic Growth Potential in Mature and New Markets Market Data Warsaw offices Elkhart offices South Bend offices Fort Wayne offices Indianapolis offices 8

9 7.3% 10.4% 9.9% 9.0% 8.0% 6.5% 5.5% 4.2% 4.5% 4.8% 3.6% 3.9% 4.4% 3.1% 3.4% 3.9% 6.8% 6.6% 10.1% 9.6% 8.7% 8.0% 5.7% 5.5% Unemployment 6.5% 6.6% 7.4% 8.2% 9.4% 9.3% Strong Regional and Statewide Economy Indiana Employment Trends Versus National Averages 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 2008 Nov 2009 Nov 2010 Nov 2011 Nov 2012 Nov 2013 Nov 2014 Nov Consolidated LCB Footprint Indiana United States 2015 Nov 2016 Nov 2017 Nov 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, Hamilton and Johnson Counties in Indiana 9

10 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

11 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 with credit and the operating relationship We understand our client needs We cross-sell aggressively by leveraging technology 11

12 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 occupied real estate 12

13 Our Core Values start with honesty Lake City University drives our culture Lake City Bank Culture Our community involvement is real and critical to our strategy Our culture has not been diluted by acquisition High Quality Team Members 13

14 We simply love to call Sales calling program Includes 117 officers 18,374 client contacts in 2017 Our people are the competitive advantage High Quality Team Members Face to Face Contact 14

15 Mature 1 (millions) $2,200 Organic Growth Market Deposit Performance $1,700 $1,200 $1,669 $1,388 Lake City Bank has grown deposits by 118% over the last ten-year period. $700 $719 $697 $200 $155 $117 $22 -$15 -$300 -$145 -$230 Lake City Bank Wells Fargo JPM Chase 1st Source iab Star KeyBank 1 Mature Markets includes 12 Northern Indiana counties and excludes 3 Central Indiana counties Note: Totals adjusted to include branches subsequently acquired by surviving banks 15 MutualBank Old National PNC

16 Organic Growth Indianapolis Market Opportunity Indianapolis Market Banks Share of Market 1. JPM Chase 26% 2. PNC 17% 3. Fifth Third 10% 4. Huntington National 7% 5. BMO Harris 5% 6. Merchants Bank of IN 5% 7. KeyBank 5% 8. National Bank of Indy 4% 9. First Internet Bank of IN 4% 10. Regions Bank 4% Deposit Market Share 12% 88% 13. Lake City Bank 2% - Marion, Hamilton and Johnson Counties as of 6/30/17; Source: FDIC Statistics Out of State In State 16

17 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 strategy Emphasis is on checking account relationship products Demographic and lifestyle data is being leveraged Omni channel media campaign a focus for 2017 and

18 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 mobile banking capabilities Competitive commercial treasury management services Progressive retail applications include P to P, Apple Pay, Samsung Pay, Android Pay, debit card controls and cardless cash Flexible interactive teller machines (ITM) introduced in 2016 Emerging technologies are top of mind Tablet banker in implementation Online retail and small business lending Expansion of mobile capabilities Enhanced cybersecurity protection Call Center technology upgrade 18

19 Financial Performance

20 ROA ROE and ROTE Income Performance Metrics LKFN Performance Exceeds National and Indiana Peers 1.90% 12.55% 12.76% 12.98% 12.45% 12.61% 12.82% 14.00% 13.00% 1.70% 1.50% 12.30% 12.50% 12.77% 12.26% 12.52% 12.72% ROE and ROTE LTM Peer Data 1 National Indiana ROE 8.39% 9.55% ROTE 9.30% 10.57% 12.00% 11.00% 10.00% 1.30% 1.10% 1.19% 1.29% 1.32% 1.29% 1.29% 1.29% 9.00% 8.00% 7.00% 0.90% ROA LTM Peer Data 1 National Indiana ROA 0.88% 1.04% 6.00% 5.00% 0.70% Return on Average Assets Return on Average Equity Return on Average Tangible Common Equity 1 Source KBW Price Performance Review September % 20

21 Net Income EPS (000 s) Net Income and EPS Record Net Income and EPS $70,000 $60,000 $50,000 $40,000 $30,000 $35,394 $1.43 $38,839 $1.55 $43,805 $1.74 $46,367 $1.84 $52,084 $2.05 $57,330 $2.23 $61,467 $2.40 $2.80 $2.30 $1.80 $1.30 $20,000 $10,000 $0.80 $ (pre-tax Net Income Diluted EPS reform) (1) The compound annual growth rate for 2012 to 2017 utilizes net income for 2017, adjusted to exclude the income tax provision of $4.1 million related to the 2017 revaluation of deferred tax assets Net Income Growth pre-tax reform 18% 2017 Net Income Growth 10% 2017 Diluted EPS Growth 9% $

22 Loans Loans to Deposit Ratio (000 s) $4,000,000 Average Loans Commercial Emphasis Drives Growth 150% $3,500,000 $3,000,000 $2,500,000 $2,216,131 $2,343,422 $2,650,678 $2,885,568 $3,225,635 $3,610, % 130% 120% 110% $2,000, % $1,500,000 $1,000,000 87% 93% 95% 93% 93% 96% 90% 80% 70% $500,000 60% $ % Retail Commercial Loans to Deposits 2017 YOY Growth 12% 22

23 Commercial RE - Construction $224,474 6% Commercial RE - Multifamily $173,715 5% Loan Breakdown C&I Drives Lending Business Agri-business - Agriculture $382,841 10% Other Commercial $124,076 3% Residential Mortgage $179,302 5% Home Equity $181,865 5% Installment - Other Consumer $87,847 2% Commercial RE - Nonowner Occupied $508,121 13% Commercial RE - Owner Occupied $538,603 14% Commercial & Industrial $1,418,681 37% $3.8 billion as of December 31, 2017 (000 s) Commercial 88% Consumer 12% 23

24 1.13% 0.92% 1.52% 1.22% 2.15% 1.82% 2.75% 2.20% 1.37% 1.75% 0.94% 1.31% 0.46% 0.48% 0.50% 0.41% 0.42% 0.35% 0.19% 0.16% 0.25% 0.20% Nonperforming Assets to Total Assets Watch list Loan as Percentage of Loans Asset Quality Nonperforming Levels Reflect Economic Strength of Markets 5.00% 14.00% 4.00% 12.00% 3.00% 2.00% 1.00% 5.20% 5.39% 8.86% 8.17% 7.46% 8.06% 6.64% 5.75% 4.64% 4.28% 4.50% 10.00% 8.00% 6.00% 4.00% 0.00% % Nonperforming Loans/Total Loans Nonperforming Assets/Total Assets Watch List as a Percent of Loans 24

25 -0.01% 0.21% 0.43% 0.42% 0.54% 0.25% Net Chargeoffs to Average Loans 0.03% 0.11% 0.10% 0.09% 0.20% Loan Loss Reserve to Total Loans 0.60% Asset Quality Strong Reserve Coverage 2.70% 0.50% 2.15% 2.39% 2.40% 2.28% 2.10% 0.40% 1.59% 1.92% 1.80% 0.30% 1.67% 1.50% 0.20% 1.03% 1.42% 1.26% 1.23% 1.20% 0.10% 1.04% 0.90% 0.60% 0.00% 0.30% -0.10% Net Chargeoffs/Average Loans Loan Loss Reserve to Total Loans 0.00% 25

26 Deposits Deposits as a Percent of Total Funding (000 s) Average Deposits Core Deposits* Fund Organic Loan Growth $4,000,000 $3,757, % $3,500,000 $3,000,000 $2,500,000 $2,000,000 $2,505,195 $2,505,340 $2,797,929 94% 93% 95% $3,477,816 $3,088,598 97% 97% 95% 140% 130% 120% 110% 100% $1,500,000 90% $1,000,000 80% 70% $500,000 60% $ % Average Deposits % of Funding 2017 YOY Growth 8% *Core Deposits are defined as total deposits less brokered deposits 26

27 Deposit Breakdown Deposit Growth Key to Franchise Value CDARS $3,996 0% Brokered CDs $249,950 6% Brokered MMA $15,030 0% 2.00% Cost of Deposits 1.00% 1.19% 0.98% 0.63% 0.48% 0.50% 0.54% 0.72% Total Commercial $969,292 24% Total Public Fund $1,263,650 32% Total Retail $1,506,738 38% December 31, 2017 Total Deposits - $4.0 billion 0.00% Deposit Composition at end of period Non-interest Bearing Demand Deposits 12% 22% Interest Bearing Demand, Savings & MMA 34% 43% Time Deposits > or = to $100,000 35% 29% Time Deposits < $100,000 19% 6% Total Deposits (billions) $1.9 $4.0 (000 s) 27

28 Net Interest Income Net Interest Margin Net Interest Income Loan Growth Driving Growth in Income (000 s) $140,000 $135, % $120,000 $100,000 $87,671 $90,439 $102,303 $105,927 $118, % 4.00% $80,000 $60,000 $40, % 3.26% 3.32% 3.20% 3.18% 3.33% 3.50% 3.00% $20, % $ % Net Interest Income Net Interest Margin 2017 YOY Growth 15% 28

29 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 lag market actions absent aggressive loan growth Every 0.25% Fed rate increase expected to boost net interest margin by 3 to 5 basis points 29

30 Non-Interest Income Non-Interest Income as % of Total Revenue (000 s) Non-Interest Income Stable, Fee-Based Strategy Drives Increases $40,000 $35,000 $30,000 $25,000 $25,196 $30,737 $30,053 $31,479 $32,864 $36,009 50% 45% 40% 35% 30% $20,000 $15,000 $10,000 22% 26% 23% 23% 22% 22% 25% 20% 15% 10% $5,000 5% $0 0% Non-Interest Income % of Total Revenue 2017 YOY Growth 10% 30

31 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 $ Non-Interest Expense 2017 YOY Growth 9% 31

32 60% 55% Efficiency Ratio Revenue Growth is Primary Driver of Low Efficiency Ratio Constant investment in technology and facilities Indianapolis North and South Bend Downtown Expansion Indianapolis Fishers and Clearwater Expansion Indianapolis Michigan Road and Fort Wayne Downtown Expansion Indianapolis Greenwood Expansion 50% 52% 51% 52% 50% 50% 45% 47% 48% 48% 46% Indianapolis Data Center 40%

33 Dividend per Share Dividend Yield $1.00 Stable Healthy Dividend Significant Increase in Dividend Reflects Strength of Balance Sheet Dividend Payout Ratio of 38% 4.00% $0.90 $0.80 $0.73 $ % $0.70 $0.60 $0.50 $0.49 $0.55 $ % 2.50% $0.40 $0.30 $0.20 $ % 2.28% 1.99% 2.10% 1.95% 1.77% 2.00% 1.50% $0.10 (1) (1) Dividend Per Share - split adjusted Dividend Yield - using average stock price 1.00% (1) The special fourth quarter dividend paid in 2012 is included in Growth 16% 33

34 Total Return (%) LKFN Shareholder Value Total Return Performance from 12/31/00 to 1/18/18 2, ,796.49% 1, , % % 91.76% (500.00) LKFN SNL U.S. Bank S&P 500 S&P 500 Bank Source: SNL database 34

35 Investment Highlights Proven History of Organic Growth Disciplined and Focused Strategy Strong Internal Culture Consistent Execution Service Excellence Drives Shareholder Value 35

36 Supplemental Information

37 Organic Growth Larger Market Organic Expansion State Rank County Primary City Population* LCB Entry LCB Deposit Market Share** # of Branches 20. Kosciusko Warsaw 79, % Elkhart Elkhart 203, % 9 5. St. Joseph South Bend 269, % 4 3. Allen Fort Wayne 370, % 5 1. Hamilton/Marion Indianapolis 1,257, % 4 * Source: STATS Indiana ** Source: FDIC 6/30/17 Statistics 37

38 Organic Growth Mature Market Strength and Growth (millions) Deposits Share Deposits Share Increase 1. 1 st Source $3, % $2, % 27.15% Lake City Bank $3, % $1, % % Wells Fargo $2, % $1, % % JPM Chase $2, % $1, % 45.88% PNC $1, % $1, % (14.87)% KeyBank $1, % $1, % 2.07% iab Financial Bank $ % $ % 26.23% Old National Bank $ % $ % (16.98)% Star $ % $ % 29.10% MutualBank $ % $ % (3.15)% 15 Market Total $19,756 $14, % 2017 # of Offices 1 Mature Markets includes 12 Northern Indiana counties and excludes 2 Central Indiana counties Adjusted to include branches subsequently acquired by surviving banks 38

39 Organic Growth Commercial Banking Target Opportunities Growth Potential in Every Market Fort Wayne 1,878 Elkhart/South Bend 2,220 Warsaw 313 Indianapolis 6,555 Companies with Revenue of $1 to $50 million in Lake City Bank footprint by county Source: 2017 Hoover s 39

40 Investments as a % of Assets Investment Portfolio Source of Liquidity 17.0% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 15.1% 14.1% 12.9% 11.8% 11.5% Treasuries 0.19% CMCL CMO 8.21% Taxable Municipals 0.46% Agencies 0.95% Exempt Municipals 31.92% US Govt Remics 26.00% US Govt Pools 32.27% December 31, 2017 Weighted Maturity Book Yield Duration Market Value US Treasury Notes % 3.74 $997 US Agencies % ,122 US Govt REMICS % ,988 US Govt Pools % ,786 Exempt Municipals (TEY) % ,886 Taxable Municipals % ,503 CMCL CMO % ,211 Total (Tax-Equivalent Yield) % 4.76 $538,493 40

41 30.00% Projected Impact of Rising Rates Asset Sensitive Balance Sheet 25.00% 23.59% 20.00% 15.00% 15.77% 10.00% 7.89% 5.00% 1.87% 3.88% 0.00% -5.00% % % -9.94% NII - Rates Down 100 NII - Rates Up 25 NII - Rates Up 50 NII - Rates Up 100 NII - Rates Up 200 NII - Rates Up 300 Graph presents 12 month projected net interest income simulation results as of December 31, 2017 using parallel shocks 41

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