1. Presented By:
Tim Barnes Brant Macquoid Chris Starkey
Lake City Bank 1-888-522-2265 www.lakecitybank.com
2. Lakeland Financial (LKFN)
Market Cap: 416.2 Million
Chairman and CEO, Michael Kubacki
Lake City Bank 1-888-522-2265 www.lakecitybank.com
3. Last Price $25.10
Market Cap 416.2 Million
Fiscal Year End December 31
Last Earnings 01/24/2012
Announcement
Next Earnings 04/25/2012
Announcement
Number of Analyst 6
Dividend Yield 2.43%
% of Institutional 64.59%
Ownership
Chief Financial Officer, David Findlay,
Lake City Bank 1-888-522-2265 www.lakecitybank.com
4.
5.
6. Lubbock size equivalent
Bank Total Assets Total Deposits
Plains Capital $5.7 Billion $4.2 Billion
Lake City Bank $2.9 Billion $2.3 Billion
American State $2.75 Billion $2.2 Billion
City Bank $1.9 Billion $1.73 Billion
First United $994 Million $863 Million
Lubbock National $711 Million $621 Million
First Bank & Trust $473 Million $372 Million
Lake City Bank 1-888-522-2265 www.lakecitybank.com
7.
8.
9.
10.
11. Warsaw is the
“Orthopedic Capital of
the World” with an $11
Billion local industry.
Warsaw home to 3 of the
world’s 5 largest
orthopedics
manufacturers: DePuy,
Zimmer, Biomet.
Warsaw is home to the
largest spinal-implant
manufacturing facility.
Collectively the area’s
orthopedics companies
represent more than
40% of the world
orthopedics
manufacturing market
Source: Lilly Endowment Inc. 2010 annual report.
share.
12. LakeLand Financial
Value Drivers
1. Economic Moat as “Orthopedic Capital of the
World”
2. 21 years of record earnings
3. Lowest efficiency rating among all Midwest
banks
4. Dominant Market share winner in previous decade
(206.05% market share growth), expansion into the
larger South Bend and Indianapolis markets
5. Named to the prestigious KBW Bank Honor Roll
of High Performing Banks
Lake City Bank 1-888-522-2265 www.lakecitybank.com
13. KBW Bank Honor Roll
On April 3rd 2012 Lakeland Financial announced that
Keefe, Bruyette, and Woods Inc. (KBW) had recognized
Lakeland for inclusion in the KBW Bank Honor Roll.
Of the estimated 6,453 banks in the United States only the
top 45 are included in the KBW Bank Honor Roll.
In order to be eligible for the KBW Bank Honor Roll, banks
must have:
1. No annual loss reported in net income per share
before xo over the past 10 years.
2. 2011 annual reported net income per share before xo
equal to or greater than peak net income per share
over the past 10 years.
3. Consecutive increases in net income per share before
xo items since 2009.
Lake City Bank 1-888-522-2265 www.lakecitybank.com
14. Lakeland Financial
Peers
• Old National Bancorp (ONB)
Market Cap: $1.2B
Headquartered in Evansville, Indiana
• 1st Source Corporation (SRCE)
Market Cap: $568M
Headquartered in South Bend, Indiana
• German American Bancorp (GABC)
Market Cap: $235M
Headquartered in Jasper, Indiana
Lake City Bank 1-888-522-2265 www.lakecitybank.com
15. Lakeland Financial
Peers Fundamentals
Stock P/E P/B ROA ROE NIM Efficiency Operating
Ratio Margin
Peer 13.13 1.31 .87% 10.73% 3.91% 64.13% 33.76%
Average
Lakeland 13.13 1.53 1.10% 11.79% 3.54% 46.99% 45.21%
Financial
(LKFN)
Old 16.39 1.17 .91% 7.58% 4.09% 74.15% 26.52%
National
Bank
(ONB)
1st Source 11.48 1.08 1.09% 9.54% 3.69% 65.73% 37.62%
(SCRE)
German 11.46 1.43 1.25% 14.01% 4.35% 58.52% 25.71%
American
Bank
(GABC)
Lake City Bank 1-888-522-2265 www.lakecitybank.com
16. Porters 5 Forces: LakeLand Financial
Lake City Bank 1-888-522-2265 www.lakecitybank.com
18. Risk Factors from Management Discussions
1. Adverse economic conditions that affect growth rate and ability of our
customers to repay their loans.
2. Further increased regulation, which would increase our regulatory expenses.
3. Our continued pace of growth may require us to raise additional capital in the
future, but that capital may not be available when it is needed.
4. Interest rate shifts may reduce net interest income
• When interest rates rise, the rate of interest we pay on our liabilities rises
more quickly than the rate of interest that we receive on our interest
bearing assets, which may cause our profits to decrease.
5. Our allowance for loan losses may prove to be insufficient to absorb potential
losses in our loan portfolio.
6. Any changes in Indiana’s Public Deposit Insurance Fund could require us to
find alternative, higher-cost funding sources to replace public fund deposits.
• 19% of our deposits are concentrated in public funds from a small
number of municipalities and government agencies.
41. Default Risk and 5 Yr CDS Spreads(bp)
Lake City Bank 1-888-522-2265 www.lakecitybank.com
42. CAMELS Rating System
C – Capital Adequacy
A – Asset Quality
M – Management Quality
E – Earnings
L – Liquidity
S – Sensitivity to Market Risk
Bank supervisory authorities assign each bank
a score on a scale of 1(best) to 5(worst) for
each factor.
This ranking helps supervisory authorities
identify banks that are at risk of failure. This
rating is kept extremely private and only
revealed to top levels of bank
management, for fear that a bad rating could
cause a “run on the bank” scenario.
Source: frbs.org
43. CAMELS Rating
Criteria Quality Level LakeLand Financial
Equity-to-Total Assets > 5% 9.45%
Capital Adequacy Basel Ratio >9.5% 13.57%
Loan Loss provisions to gross loan < 1% .64%
portfolio
Reserve for loan losses to gross < 3% 2.39%
loan portfolio
Loan write-offs to gross loan < .5% .25%
Asset Quality portfolio
Reserve for loan losses to non- >1% 1.35%
performing loans
Non-performing loans to total >2% 1.3%
assets
Experienced N/A
Management
Net interest income to total assets >3% 3.18%
Efficiency Ratio < 60% 47%
Earnings
ROA >1% 1.10%
ROE >15% 11.79%
Liquid Assets to total deposits >20% 16.51%
Liquid Assets to total assets >30% N/A
Liquidity
Loans to total assets < 65% 77.30%
Gap Analysis [RSA – RSL] N/A -10.23%
Sensitivity Source: Analyst of Waymond
Grier
44. Management’s commentary from 10-K on managing interest rate risk
• Company’s cumulative repricing Gap ratio for the next 12 months
was -10.23% of earning assets.
• As of December 31, 2011, the Company’s investment in mortgage
backed securities represented approximately 82% of total
securities, with 75% of the securities consisting of Collateralized
Mortgage Obligations (“CMOs”) and mortgage pools issued by
Ginnie Mae, Fannie Mae and Freddie Mac. Ginnie Mae, Fannie Mae
and Freddie Mac securities are each guaranteed by their respective
agencies as to principal and interest.
• As of December 31, 2011, the securities in the Available For Sale
portfolio had approximately a 1.06 year duration with approximately
a negative 5.51% return in the event of a 300 basis points upward
movement, 1.21% return if there is no change in rates and a 3.43%
return in the event of a 300 basis point downward movement in
rates.
Lake City Bank 1-888-522-2265 www.lakecitybank.com
45. 10.00%
Interest Rate with Lakeland Financial Gap Ratio Overlay
5.00%
0.00%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-5.00%
Gap Ratio
-10.00%
-15.00%
-20.00%
Gap ratio = (Rate-sensitive assets – Rate-sensitive liabilities)
Average earning assets
Lake City Bank 1-888-522-2265 www.lakecitybank.com
46. 5.00%
0.00%
Net Interest Margin vs. Gap Ratio
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
-5.00%
Gap Ratio
-10.00%
NIM
-15.00%
-20.00%
Lake City Bank 1-888-522-2265 www.lakecitybank.com
47. Loans/Securities Over 1 Year
65.00%
60.00%
55.00%
LKFN Loans/Securities Over 1 year
Axis Title
Peer Group
50.00%
ONB L/S Over 1 year
SRCE L/S over 1 year
45.00% GABC L/S over 1 year
40.00%
35.00%
2007 2008 2009 2010 2011
Lake City Bank 1-888-522-2265 www.lakecitybank.com Source: www.ffiec.gov/ubpr.htm
48. Loans/Securities Over 3 years
55.00%
50.00%
45.00%
40.00%
LKFN Loans/Securities Over 3 years
35.00%
Axis Title
Peer Group
ONB L/S Over 3 years
30.00%
SRCE L/S over 3 years
GABC L/S over 3 years
25.00%
20.00%
15.00%
10.00%
2007 2008 2009 2010 2011
Lake City Bank 1-888-522-2265 www.lakecitybank.com Source: www.ffiec.gov/ubpr.htm
49. Largest weight in
sensitive assets and
liabilities in Year 1
Lake City Bank 1-888-522-2265 www.lakecitybank.com
86. Management Commentary
• http://beta.fool.com/robertdcoleman/2012/01/30/too-small-fail-3-commercial-banks-will-outperform-
/1453/?source=eogyholnk0000001 LKFN) represents another regional bank success story. The company, which was founded
almost a century and a half ago and serves the Midwest region, is still valued at only 1.5 times book value after posting a 52
week price performance of 22%. More encouraging than the stock’s performance in the market is the fact that Lakeland has
grown its EPS around 5% over the past five years and is projected to grow its EPS another 10% over the next 3-5 years. LKFN
also pays a strong dividend (2.4% yield) and carries $104.5 million in cash.
Lake City Bank
87. Management Commentary
• "In the past five years, loans have grown by $880 million, or 65%. This loan growth has not been the result of acquisition or
entry into new markets. Rather, it's resulted from targeted growth in our core Indiana markets by great client relationship
teams. We've remained committed to contributing to Indiana's economic stability throughout this challenging period and
look forward to continuing to play a role in our state's future economic growth.“ - President and CFO David Findlay
• The Company's net interest margin was 3.38% in the fourth quarter of 2011 versus 3.62% for the fourth quarter of 2010 and
3.48% in the linked third quarter of 2011. The year-over-year margin decline resulted primarily from reduced yields in the
investment portfolio and slightly lower commercial loan yields as interest rates continue to be at historic lows. For the
year ended December 31, 2011, the Company's net interest margin was 3.54% versus 3.73% for the comparable period in
2010.
• http://finance.yahoo.com/news/Lake-City-Bank-Net-Income-pz-1996656220.html?x=0
Lake City Bank