What changed in this filing

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Item 1. Business

2023-02-22 compared with 2022-02-23 · 29 added, 25 removed, 382 unchanged (12% of the section changed)

3 unchanged sentences

The Company is not dependent upon any single industry or customer.

At December 31, 2021, Lakeland Financial had consolidated total assets of $6.6 billion and was the sixth largest independent bank holding company headquartered in the State of Indiana.

At December 31, 2022, Lakeland Financial had consolidated total assets of $6.4 billion and was the seventh largest independent bank holding company headquartered in the State of Indiana.

Company’s Business .

13 unchanged sentences

On January 31, 2022, the Bank opened its 52 nd branch in downtown Elkhart.

The Bank’s business strategy is focused on building long-term relationships with its customers based on top quality service, high ethical standards and safe and sound lending.

The Bank’s business strategy is focused on building long-term relationships with its customers based on in person, top-quality service, high ethical standards and safe and sound lending.

The Bank operates as a community-based financial services organization augmented by experienced, centralized support in select critical areas.

12 unchanged sentences

During this period, the Company has grown its assets from $286 million to $6.4 billion, a compound annual growth rate of 10%.

Mergers and acquisitions have not played a role in this growth

as the Company’s expansion strategy has been driven by organic growth.

The Company has open ed seven de nov o branches in the past seven years and plans to continue expansion in the Indianapolis market.

Over the past twenty years, the Company has primarily targeted growth in the larger cities located in Northern Indiana and the Indianapolis market in Central Indiana and areas that are two hours from a Lake City Bank branch.

Mergers and acquisitions have not played a role in this growth as the Company’s expansion strategy has been driven by organic growth.

The Company has opened eight de novo branches in the past eight years and plans to continue expansion in the Indianapolis market and additional markets that are in close proximity to the Company's Indiana footprint.

Over the past twenty-five years, the Company has primarily targeted growth in the larger cities located in Northern Indiana and the Indianapolis market in Central Indiana and areas that are two hours from a Lake City Bank branch.

The Company believes these areas offer above average growth potential with attractive demographics and potential for commercial lending and deposit gathering opportunities.

11 unchanged sentences

The Bank is committed to social and governance responsibility, and in 2020, the management team added “inclusivity” as the eighth core value defining our organizational culture.

The Bank’s employee Code of Conduct supports diversity and inclusion efforts in our workplace, and we established a Diversity and Inclusion Task Force to develop and promote initiatives throughout the corporation.

The Task Force developed and is carrying out a plan to further inclusivity at the bank, creating opportunities for education, awareness, and ongoing discussion of these important issues.

The Bank’s employee Code of Conduct supports diversity and inclusion efforts in our workplace, and a Diversity and Inclusion Task Force is charged with developing and promoting initiatives throughout the corporation.

In 2022, every employee participated in a foundational course to establish a base level of awareness and education on the topic of diversity and inclusion.

In 2023 the effort continues with a host of interactive, informative courses being offered to continue the learning process around these important issues.

Eighty-four percent of our employees identify as women or people of color.

8 unchanged sentences

From courses to improve technical skills, product knowledge, and customer service to classes focused on an employee’s well-being, like personal financial planning and benefits education, Lake City University supports and promotes the personal and professional growth of all the Bank employees.

In 2021, 144 employees were promoted and 125 employees were hired externally, demonstrating a commitment to professional development of Lake City Bank employees.

In 2022, 153 employees were promoted and 170 employees were hired externally, demonstrating a commitment to the professional development of Lake City Bank employees.

In addition to the substantial investment in employee professional development, the Bank’s benefit and compensation programs are designed to ensure we recruit and retain top talent.

The Bank offers employees a comprehensive health benefits package, provides a 401(k) match of up to 6% of an employee’s salary to encourage retirement savings, tuition reimbursement that 17 employees took advantage of in 2021, and structures its bonus program for officers to create meaningful performance-based incentives.

The Bank offers employees a comprehensive health benefits package, a 401(k) match of up to 6% of an employee’s salary to encourage retirement savings and tuition reimbursement that 28 employees took advantage of in 2022.

The Bank also structures its bonus program for officers to create meaningful performance-based incentives.

These programs, combined with an intentional focus to create a positive, values-based culture ensures the Bank team will continue as the acknowledged and recognized leader in Indiana community banking.

9 unchanged sentences

Actual results could differ materially from those addressed in the forward-looking statements as a result of numerous factors, including, without limitation:

• the effects of future economic, business and market conditions and changes, including in connection with the COVID-19 pandemic, both domestic and foreign;

• the effects of future economic, business and market conditions and changes, including prevailing interest rates, the rate of inflation and the effects of the COVID-19 pandemic;

• governmental monetary and fiscal policies and the impact the current economic environment will have on these;

• the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, and the values and liquidity of loan collateral, securities and other interest sensitive assets and liabilities;

• the risks of changes in interest rates on the levels, composition and costs of deposits, loan demand, availability of wholesale funding and the values and liquidity of loan collateral, securities and other interest sensitive assets and liabilities;

• changes in borrowers’ credit risks and payment behaviors;

• the failure of assumptions and estimates used in our reviews of our loan portfolio, underlying the establishment of reserves for possible credit losses, our analysis of our capital position and other estimates;

• changes in the prices, values and sales volumes of residential and commercial real estate;

• the effects of disruption and volatility in capital markets on the value of our investment portfolio;

• the risk of labor availability, trade policy and tariffs, as well as supply chain constraints could impact loan demand from the manufacturing sector;

• changes in the prices, values and sales volumes of residential and commercial real estate;

• changes in the scope and cost of FDIC insurance, the state of Indiana’s Public Deposit Insurance Fund and other coverages;

• changes in the availability and cost of credit and capital in the financial markets;

• the anticipated phase out of most LIBOR tenors by mid-2023 and establishment of a new reference rate or rates;

• the outcome of pending litigation and other claims we may be subject to from time to time;

• the anticipated phase out of the remaining LIBOR tenors by mid-2023 and implementation of a new reference rate or rates;

• the effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;

12 unchanged sentences

All such documents filed with the SEC are also available for free on the SEC’s website (www.sec.gov).

The Company’s Articles of Incorporation, Bylaws, Code of Conduct and the charters of the various committees of the Company’s board of directors are also available on the Investor Relations section of the website.

SUPERVISION AND REGULATION

13 unchanged sentences

banking organizations subjects banks and bank holding companies to regular examination by their respective regulatory agencies, which results in examination reports and ratings that are not publicly available and that can impact the conduct and growth of their business.

These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings,

liquidity, and various other factors.

These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, and various other factors.

The regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies.

167 unchanged sentences

Although the FDIC could have ceased the small bank credits, it waived the requirement that the reserve ratio be at least 1.35% for full remittance of the remaining assessment credits, and it refunded all small bank credits as of September 30, 2020.

On October 18, 2022, the FDIC adopted a final rule, applicable to all insured depository institutions, to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023.

The increase in assessment rate schedules is intended to increase the likelihood that the reserve ratio of the DIF reaches the statutory minimum of 1.35% by the statutory deadline of September 30, 2028.

The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2.00% in order to support growth in the DIF in progressing toward the FDIC's long-term goal of a 2.00% designated reserve ratio.

Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2.00% and again when it reaches 2.50%.

Supervisory Assessments .

10 unchanged sentences

Because the global financial crisis was in part a liquidity crisis, Basel III also includes a liquidity framework that requires FDIC-insured institutions to measure their liquidity against specific liquidity tests.

One test, referred to as the Liquidity Coverage Ratio, or LCR, is designed to ensure that the banking entity has an adequate stock of unencumbered high-quality liquid assets that can be converted easily and immediately in private markets into cash to meet liquidity needs for a 30-calendar

day liquidity stress scenario.

The other test, known as the Net Stable Funding Ratio, or NSFR, is designed to promote more medium- and long-term funding of the assets and activities of FDIC-insured institutions over a one-year horizon.

25 unchanged sentences

The federal banking agencies have adopted operational and managerial standards to promote the safety and soundness of FDIC-insured institutions.

The standards apply to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

The standards apply to internal

controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

In general, the safety and soundness standards prescribe the goals to be achieved in each area, and each institution is responsible for establishing its own procedures to achieve those goals.

1 unchanged sentence

If an FDIC-insured institution fails to submit an acceptable compliance plan, or fails in any material respect to implement a compliance plan that has been accepted by its primary federal regulator, the regulator is required to issue an order directing the institution to cure the deficiency.

Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the FDIC-insured institution’s rate of growth, require

the FDIC-insured institution to increase its capital, restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances.

Until the deficiency cited in the regulator’s order is cured, the regulator may restrict the FDIC-insured institution’s rate of growth, require the FDIC-insured institution to increase its capital, restrict the rates the institution pays on deposits or require the institution to take any action the regulator deems appropriate under the circumstances.

Noncompliance with safety and soundness may also constitute grounds for other enforcement action by the federal bank regulatory agencies, including cease and desist orders and civil money penalty assessments.

3 unchanged sentences

Bank regulators have identified key risk themes for 2023 as:

credit risk management given protracted economic conditions, cybersecurity risk, and commercial and residential real estate concentration risk management.

The agencies will also be monitoring banks for their transition away from LIBOR (London Interbank Offered Rate) as a reference rate, compliance risk management related to COVID-19 pandemic-related activities, Bank Secrecy Act/anti-money laundering (“AML”) compliance, cybersecurity, third-party and change management, climate and environmental, social and governance initiatives, digital assets and CRA performance.

credit risk management given the current interest rate environment and persistent inflationary concerns, cybersecurity risk, and commercial and residential real estate concentration risk management.

The agencies will also be monitoring banks for their transition away from LIBOR (London Interbank Offered Rate) as a reference rate, Bank Secrecy Act/anti-money laundering (“AML”) compliance, cybersecurity, third-party and change management, climate and environmental, social and governance initiatives, digital assets and CRA performance.

The Bank is expected to have active board and senior management oversight;

50 unchanged sentences

In addition, FDIC-insured institutions must maintain capital commensurate with the level and nature of their CRE concentration risk.

Based on the Bank’s loan portfolio as of December 31, 2021, it did not exceed the 300% guideline for commercial real estate loans.

Based on the Bank’s loan portfolio as of December 31, 2022, it did not exceed the 300% guideline for commercial real estate loans nor did it exceed the 100% guideline for construction and land development loans.

Consumer Financial Services.

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business