1st Source Corporation · NASDAQ:SRCE
1st Source — Investor Presentation (November 2020)
42 slides from 1st Source's investor presentation, Nov 13, 2020
Slide 1: Third Quarter 2020 Investor Presentation
THIRD QUARTER 2020 INVESTOR PRESENTATION NASDAQ: SRCE www.1stsource.com
Slide 2: Disclosures
DISCLOSURES Forward-Looking Statements Except for historical information, the matters discussed may include “forward-looking statements.” Those statements are subject to material risks and uncertainties. 1st Source cautions readers not to place undue reliance on any forward-looking statements, which
Slide 3: Corporate Overview
CORPORATE OVERVIEW $7.3 billion Community Bank with International Reach headquartered in South Bend, Indiana Community Banking: ■ Locations throughout Northern Indiana and Southwestern Michigan ■ Business and personal banking, payment services, lending, mortgage, and leasing ■ Investment management,
Slide 4: Mission and Vision
MISSION AND VISION Mission To help our clients achieve security, build wealth and realize their dreams by offering straight talk, sound advice and keeping their best interests in mind for the long-term. Vision ■ Offer our clients the highest-quality service ■ Support a proud family of colleagues who
Slide 5: Market Area
MARKET AREA Community Bank Specialty Finance Loans and Leases Loans and Leases $3.20 billion $2.51 billion PAGE 5
Slide 6: Business Mix (Loans and Leases)
BUSINESS MIX (LOANS AND LEASES) Business Community Banking 80% 56% Personal Community Banking 20% Specialty Finance 44% PAGE 6
Slide 7: Community Banking
COMMUNITY BANKING ■ 78 Banking Centers ■ 99 Twenty-four hour ATMs ■ 8 Trust & Wealth Advisory locations with approximately $4.3 billion of assets under management ■ 10 1st Source Insurance offices In person Online Over the phone Mobile PAGE 7
Slide 8: Specialty Finance Group Services
SPECIALTY FINANCE GROUP SERVICES Aircraft Division — $806MM Aircraft division provides financing primarily for new and used general aviation aircraft (including helicopters) for private and corporate users, some for aircraft distributors and dealers, air charter operators, air cargo carriers, and ot
Slide 9: Experienced and Proven Team
EXPERIENCED AND PROVEN TEAM Executive Team ■ 4 executives with an average 38 years each of banking experience and 26 years with 1st Source Business Banking Officers ■ 40 business banking officers with an average 19 years each of lending experience and with 1st Source from 1 to 34 years Specialty Fin
Slide 10: Performance – Client
PERFORMANCE – CLIENT ■ #1 deposit share in our 15 ■ Indiana SBA Community Lender Award – 2013 contiguous county market – 2019 ■ #1 SBA Lender in our Indiana ■ Indiana SBA Rural Lender of the Year Award footprint – 2019 ■ #1 SBA Lender Headquartered in ■ Honored for highest total dollars and number S
Slide 11: Our Response to COVID-19
OUR RESPONSE TO COVID-19 Employees Clients Communities . High-risk employees are . Banking center drive-ups, . Grant of $600,000, in two working remotely ATMs and online/mobile phases, made by 1st Source banking services continue to Foundation to the United . Virtual meetings and operate Ways of the
Slide 12: Paycheck Protection Program Loans
PAYCHECK PROTECTION PROGRAM LOANS PPP Highlights Number of $ of Loans Average Phase Loans (000's) Loan Size 1 2,024 $ 520,583 $ 257,000 2 1,516 76,868 51,000 Total 3,540 $ 597,451 $ 169,000 • 1,972 of 3,540 for less than $50,000 • Over $200 million submitted for forgiveness as of mid-November • The
Slide 13: COVID-19 Related Loan Deferrals
COVID-19 RELATED LOAN DEFERRALS As of September 30, 2020 Principal and Total Additional Recorded Modifications as a Principal Interest Modifications in Modifications Total Investment at % of September 30, (1) (Dollars in millions) Deferrals Deferrals Deferment Expected Modifications September, 31 20
Slide 14: COVID-19 Related Loan Deferrals
COVID-19 RELATED LOAN DEFERRALS As of September 30, 2020 First Modification Second Modification Third Modification In In In (1) (1) (Dollars in millions) Expired Deferment Total Expired Deferment Total Expired Deferment Total Auto and light truck rental $ 255 $ 18 $ 273 $ 61 $ 4 $ 65 $ - $ 16 $ 16 S
Slide 15: Financial Review
FINANCIAL REVIEW source. PAGE 15 Corporation NE
Slide 16: Growing Loan Portfolio
GROWING LOAN PORTFOLIO Total Average Loans & Leases ($MM) Loans & Leases Yield on Loans & Leases - FTE (%)* 6000 6.00% 5445 5000 5000 4755 5.50% 4333 5.16% 4114 4.93% 4000 5.00% 4.50% 4.38% 3000 4.28% 4.50% 2000 4.00% 1000 3.50% 2016 2017 2018 2019 2020 YTD * See “Reconciliation of non-GAAP Financia
Slide 17: Diversified Loan Portfolio
DIVERSIFIED LOAN PORTFOLIO 2020 Average Loans by Type PPP Loans Commercial 7% Real Estate 17% Commercial and Agricultural Residential 21% Real Estate 10% Consumer 3% Medium and Aircraft Heavy Duty Truck 14% 5% Auto and Light Truck 10% Construction Equipment 13% PAGE 17
Slide 18: Pre-Tax, Pre-Provision Income
PRE-TAX, PRE-PROVISION INCOME ($MM) $175 $140 136.0 124.5 110.3 104.5 103.2 $105 95.0 $70 $35 $0 2016 2017 2018 2019 2019 2020 YTD YTD * See “Reconciliation of non-GAAP Financial Measures” in Appendix. PAGE 18
Slide 19: Strong Credit Quality
STRONG CREDIT QUALITY % of Net Loans and Leases Loan & Lease Loss Reserve Nonperforming Assets Net Charge-Offs Solid Reserves Low Nonperforming Assets Limited Losses 2.43% 2.19% 2.11% 2.10% 2.08% 1.33% 0.70% 0.67% 0.71% 0.37% 0.29% 0.13% 0.13% 0.06% 0.10% 2016 2017 2018 2019 2020 2016 2017 2018 2019
Slide 20: Core Deposit Franchise
CORE DEPOSIT FRANCHISE Total Average Deposits ($MM) Non-core Deposits Core Deposits Effective Rate on Deposits (%) 6500 2.00% 5658 5500 5277 655 4964 775 1.50% 4493 687 5003 4500 4303 444 4502 431 4277 4049 3500 3872 1.00% 0.96% 2500 0.70% 0.61% 0.50% 1500 0.43% 0.35% 500 0.00% 2016 2017 2018 2019 2
Slide 21: Attractive Core Deposit Franchise
ATTRACTIVE CORE DEPOSIT FRANCHISE 2020 Average Deposits By Type Savings and Interest Bearing Demand 47% Noninterest Bearing Demand 26% CD and IRA 27% PAGE 21
Slide 22: Deposit Market Share – County Contiguous Market
DEPOSIT MARKET SHARE – 15 COUNTY CONTIGUOUS MARKET* Leading Market Share in Community Banking Markets ($000) 2020 $7,000,000 1st Source 14.87% $6,000,000 Chase 10.59% Lake City Bank 9.45% $5,000,000 Horizon Bank 5.02% $4,000,000 Fifth Third 4.98% Data as of June 2020 – FDIC $3,000,000 (via S&P Globa
Slide 23: Net Income & Earnings Per Share
NET INCOME & EARNINGS PER SHARE ($MM) $105 $5.00 92.0 $90 82.4 $4.00 $75 68.1 70.0 3.57 57.8 55.0 $3.00 $60 3.16 2.72 $45 2.60 $2.00 2.22 2.14 $30 $1.00 $15 $0 $0.00 2016 2017 2018 2019 2019 2020 YTD YTD Net Income EPCS (Diluted) PAGE 23
Slide 24: Net Interest Margin (FTE)
NET INTEREST MARGIN (FTE)* ($MM) $250 4.25% 224.6 214.7 $200 187.4 4.05% 171.5 169.1 164.1 $150 3.85% 3.73% 3.74% 3.68% $100 3.57% 3.65% 3.43% $50 3.33% 3.45% $0 3.25% 2016 2017 2018 2019 2019 2020 YTD YTD Net Interest Income ($MM) Net Interest Margin (%) * See “Reconciliation of non-GAAP Financial
Slide 25: Diverse Sources of Noninterest Income
DIVERSE SOURCES OF NONINTEREST INCOME Noninterest Income Composition 2020 YTD = $62.6MM* Equipment Trust, Wealth Rental Advisory, and 5% Mortgage Retirement Plan Banking Services 19% 25% Fair Value of Assets Under Management of $4.3B Insurance Commissions 9% Other 14% Service Charges on Deposit Acco
Slide 26: Operating Expenses
OPERATING EXPENSES ($MM) $180.0 70.0% 160.2 163.9 148.8 $150.0 142.0 120.5 123.1 $120.0 60.0% 60.2% $90.0 57.7% 56.2% 54.7% 54.5% $60.0 53.6% 50.0% $30.0 $0.0 40.0% 2016 2017 2018 2019 2019 2020 YTD YTD Noninterest Expense ($MM)* Efficiency - Adjusted (%)* * Note: Noninterest expense is shown net of
Slide 27: Strong Capital Position
STRONG CAPITAL POSITION Tier 1 Leverage Ratio Tier 1 Risk Based Ratio 14.48% 13.80% 13.44% 13.42% 13.64% 12.11% 12.17% 12.06% 12.19% 12.14% 8% Well Capitalized 5% Well Capitalized 2016 2017 2018 2019 2020 YTD 2016 2017 2018 2019 2020 YTD Total Risk Based Capital Ratio Tangible Common Equity / Tangib
Slide 28: Tangible Book Value per Common Share
TANGIBLE BOOK VALUE PER COMMON SHARE* Consistent Growth $35.00 $31.06 $30.00 $29.18 $26.30 $25.00 $24.47 $22.75 $21.49 $20.16 $20.00 $18.65 $15.00 $10.00 2013 2014 2015 2016 2017 2018 2019 2020 YTD * See “Reconciliation of non-GAAP Financial Measures” in Appendix. PAGE 28
Slide 29: Common Dividends Per Share
COMMON DIVIDENDS PER SHARE 32 YEARS OF CONSECUTIVE DIVIDEND GROWTH $1.400 $1.200 1.100 1.130 $1.000 0.960 0.760 $0.800 0.720 0.671 0.618 0.645 0.582 0.600 $0.600 0.555 $0.400 $0.200 $0.000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD PAGE 29
Slide 30: Delivering Returns to Shareholders
DELIVERING RETURNS TO SHAREHOLDERS PAGE 30
Slide 31: Delivering Returns to Shareholders
DELIVERING RETURNS TO SHAREHOLDERS PAGE 31
Slide 32: Performance – Financial
PERFORMANCE – FINANCIAL ■ 2020 KBW Bank Honor Roll – fifteen banking institutions with more than $500 million in total assets selected ■ #26 of 123 banks between $5 billion and $50 billion in assets – Bank Performance Scorecard by Bank Director Magazine ■ 5 Star “Superior” Rating – Bauer Financial ■
Slide 33: Investment Considerations
INVESTMENT CONSIDERATIONS ■ Consistent and superior financial performance with a focus on long-term earnings per share and tangible book value growth ■ Experienced and proven team with significant investment in bank ■ Diversification of product mix and geography with asset generation capability ■ Le
Slide 34: Contact Information
CONTACT INFORMATION Christopher J. Murphy III Chairman of the Board, CEO and President (574) 235-2711 murphy-c@1stsource.com Andrea G. Short CFO and Treasurer (574) 235-2348 shorta@1stsource.com PAGE 34
Slide 35: Appendix
APPENDIX PAGE 35
Slide 36: Consolidated Balance Sheet
Consolidated Balance Sheet (Dollars in millions) 2016 2017 2018 2019 2020 YTD Cash and cash equivalents $ 108 $ 78 $ 99 $ 83 $ 154 Investment securities and other investments 873 930 1,019 1,069 1,111 Loans and leases, net of unearned discount 4,204 4,541 4,847 5,106 5,648 Reserve for loan and lease
Slide 37: Consolidated Income Statement
Consolidated Income Statement 2019 2020 (Dollars in millions) 2016 2017 2018 2019 YTD YTD Net interest income $ 170 $ 186 $ 214 $ 224 $ 169 $ 164 Provision for loan and leases losses 6 9 19 16 13 31 Noninterest income* 67 73 70 76 56 62 Noninterest expense* 142 149 160 164 120 123 Income before inco
Slide 38: Aircraft Portfolio – Industries by NAICS
Aircraft Portfolio – Industries by NAICS Construction Retail Trade 9% Manufacturing 14% 9% Ag, Forestry, Fishing & Hunting 6% Services Wholesale 18% Trade 5% Other* 6% Finance & Insurance and Real Estate Transportation & 13% Warehousing 20% *Other includes: Mining & Utilities and Information PAGE 38
Slide 39: Ownership Summary
Ownership Summary Shareholder Type Shares % of Total 1st Source ESOP Retail/Other 3.3% Institutional Institutional 11,661,506 45.6% 18.6% 45.6% Insiders 8,300,735 32.5% Retail/Other 4,753,870 18.6% 1st Source ESOP 837,533 3.3% Total Shares Outstanding(1) 25,553,644 100.0% Rank Institution (Top 10 In
Slide 40: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Calculation of Yield on Loans and Leases (Dollars in thousands) 2016 2017 2018 2019 2020 YTD (A) Loans and leases interest income (GAAP) $ 175,532 $ 194,297 $ 234,083 $ 257,738 $ 178,179 (B) Plus: loans and leases fully tax-equivalent adjustments 584 621
Slide 41: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Noninterest Income (Dollars in thousands) 2016 2017 2018 2019 2019 YTD 2020 YTD (A) Noninterest income (GAAP) $ 88,945 $ 98,706 $ 97,050 $ 101,130 $ 75,553 $ 77,904 (B) Less: depreciation - leased equipment (21,678) (25,215) (26,248) (25,128) (19,122) (1
Slide 42: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Calculation of Tangible Common Equity-to-Tangible Assets Ratio (Dollars in thousands) 2016 2017 2018 2019 2020 YTD (A) Total common shareholders' equity (GAAP) $ 672,650 $ 718,537 $ 762,082 $ 828,277 $ 877,754 (B) Less: goodwill and intangible assets (84