1st Source Corporation · NASDAQ:SRCE
1st Source — Q4 2018 Earnings Presentation
38 slides from 1st Source's earnings presentation, Feb 14, 2019
Slide 1: Fourth Quarter 2018 Investor Presentation
Source. | 1Corporation FOURTH QUARTER 2018 INVESTOR PRESENTATION NASDAQ: SRCE www. |stsource.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 $6.3 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, wealt
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 a Offer our clients the highest-quality service = Support a proud family of colleagues who
Slide 5: Market Area
MARKET AREA Specialty Finance Community Bank Loans and Leases Loans and Leases $2.41 billion $2.56 billion Source. __ :
Slide 6: Business Mix (Loans and Leases)
BUSINESS MIX (LOANS AND LEASES) Business Community Banking 74% 51% Personal Community Banking 26% Specialty Finance 49%
Slide 7: Community Banking
COMMUNITY BANKING = 80 Banking Centers m 101 twenty-four hour ATMs = 10 Ist Source Insurance offices mw 8 Trust & Wealth Advisory locations with approximately $3.9 billion of assets under management In person Online Over the phone Mobile
Slide 8: Community Banking Market Area
COMMUNITY BANKING MARKET AREA Higher Education Agriculture Beerporation a Steel Production ail Medical Devices in Distribution Hub 17 — County Market Market 804,633 Households Client Households 104,958 Penetration 13.0% Businesses (approx) 69,400 Business Clients 19,538 Penetration 28.2% As of Decem
Slide 9: Specialty Finance Group Services
SPECIALTY FINANCE GROUP SERVICES Aircraft Division — $803MM Aircraft division provides financing primarily for new and used general aviation aircraft (including helicopters) for private and corporate users, some for aircraft distributors and dealers, air charter operators, air cargo carriers, and ot
Slide 10: Experienced and Proven Team
EXPERIENCED AND PROVEN TEAM Executive Team = 5 executives with an average 37 years each of banking experience and 27 years with Ist Source Business Banking Officers = 37 business banking officers with an average 20 years each of lending experience and with Ist Source from | to 35 years Specialty Fin
Slide 11: Performance - Client
PERFORMANCE -— CLIENT #1 deposit share in our 15 contiguous county market #1 SBA Lenderin our Indiana footprint #1 SBA Lender Headquartered in State of Indiana Forbes “Top-Rated Bank Headquarteredin Indiana" based on 2018 “‘Best-In-State- Banks" Survey #23 0n Monitor Magazine's 2018 Top 50 U.S. Bank
Slide 12: Financial Review
FINANCIAL REVIEW
Slide 13: Growing Loan Portfolio
GROWING LOAN PORTFOLIO Total Average Loans & Leases ($MM) Loans & Leases =@ Yield on Loans & Leases - FTE (%)*
Slide 14: Diversified Loan Portfolio
DIVERSIFIED LOAN PORTFOLIO 2018 Average Loans by Type Commercial and Commercial iT Real Estate Agricultural nase 22% Zo Residential Real Estate 11% lly Consumer 3% Aircraft 18% Medium and Heavy Duly Truck 6% Construction Auto and Light Truck Equipment % 13% 11%
Slide 15: Strong Credit Quality
STRONG CREDIT QUALITY % of Net Loans and Leases Loan & Lease Loss Reserve Nonperforming Assets Net Charge-Offs / (Recoveries) Stable Reserves Low Nonperforming Assets Limited Losses 2014 «2015. 2016) 2017, 2018 2014 «201520162017: 2018
Slide 16: Core Deposit Franchise
CORE DEPOSIT FRANCHISE Total Average Deposits ($MM) mmm Non-core Deposits =u Core Deposits =e Effective Rate on Deposits (%) 2014 2018 *Non-core deposits include CDs over $250,000, brokered CDs, and nationallisting service CDs. 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00%
Slide 17: Attractive Core Deposit Franchise
ATTRACTIVE CORE DEPOSIT FRANCHISE 2018 Average Deposits By Type Noninterest Bearing Demand 22% Savings and Interest Bearing Demand 49% CD and IRA 29%
Slide 18: Deposit Market Share - County Contiguous Market
DEPOSIT MARKET SHARE - 15 COUNTY CONTIGUOUS MARKET* Leading Market Share in Community Banking Markets ($000) 2018 | -eIst Source 13.97% ——Chase 9.52% | =—t-Lake City Bank 8.61% -@Flagstar Bank™* 6.66% Horizon Bank = 4.58% Fifth Third 452% Data as of June 2018 - FDIC (via S&P Global) **Wells Fargo de
Slide 19: Net Income & Earnings Per Share
NET INCOME & EARNINGS PER SHARE 2015 2016 2017 =a Net Income EPCS (Diluted)
Slide 20: Net Interest Margin (FTE)
NET INTEREST MARGIN (FTE)* 2015 2016 2017 2018 ==Net Interest Income ($MM) —-=®=Net Interest Margin (%) * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 21: Diverse Sources of Noninterest Income
DIVERSE SOURCES OF NONINTEREST INCOME Noninterest Income Composition 2018 = $70.8MM* Equipment Trust and Wealth ‘Advisory 30% Insurance ‘Commissions Fair Value of AssetsUnder Management of $3.98 Service Charges on Deposit Accounts 15% 25% of Total Revenue* * Note: Equipment rental income is shown ne
Slide 22: Operating Expenses
OPERATING EXPENSES 2014 2015 2016 2017 2018 “== Noninterest Expense ($MM)* Efficiency - Adjusted (%)* * Note: Noninterest expense is shown net of leased equipment depreciation. See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 23: Strong Capital Position
STRONG CAPITAL POSITION 12.16% = 12.21% = 12.11% 12.17% 2017 2014 apital Ratio | angible C 11.18% 10.96% 10.89%. 2014 2015 2016 2017 2018 2014 2015 2016 * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 24: Tangible Book Value per Common Share
TANGIBLE BOOK VALUE PER COMMON SHARE* Consistent Growth = = Li 2011 2012, 2013. 2014. 2015. 2016 2017—- 2018 * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 25: Common Dividends per Share
COMMON DIVIDENDS PER SHARE 31 YEARS OF CONSECUTIVE DIVIDEND GROWTH $1.200 $1.000 $0.800 $0.600 | g507 0.536 so.00 | soa | $0.000 Lu ao LI a. | 2008 «2009 §=62010 «2011 «2012. 2013. 2014 2015 «2016 2O17_—ss «DONS
Slide 26: Delivering Returns to Shareholders
DELIVERING RETURNS TO SHAREHOLDERS Value of $100 Invested in Ist Source since 1971 Inception with Dividends Reinvested vs. Total Return of Stock Indices —1st Source (SRCE) —S&P 500 —-Wilshire 5000 —Russell 2000 —-NASDAQ $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Lessors 1Corporation $11,231
Slide 27: Delivering Returns to Shareholders
DELIVERING RETURNS TO SHAREHOLDERS December 31, 2007 - February 04, 2019 — st Source Corp (SRCE) —-KBW NASDAQ Bank ——NASDAQ Bank =~ S&P 500 Bank —SNL U.S. Bank ——KBW NASDAQ Regional Bank 300.00 250.00 ) 8 8 [seat we ry D Cc be] = oO o ee. a 2009 «20102011 2012 «2013 2014. 2015. 2016S 2017,-— «2018 =
Slide 28: Performance - Financial
PERFORMANCE - FINANCIAL a #26 of 123 banks between $5 billion and $50 billion in assets — Bank Performance Scorecard by Bank Director Magazine a 5 Star “Superior” Rating — Bauer Financial a 31 years of consecutive dividend growth
Slide 29: 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 Leading ma
Slide 30: Contact Information
CONTACT INFORMATION Christopher J. Murphy III Chairman of the Board and CEO (574) 235-2711 murphy-c@ |stsource.com Andrea G. Short CFO and Treasurer (574) 235-2348 shorta@ Istsource.com
Slide 31: Appendix
APPENDIX
Slide 32: Consolidated Balance Sheet
Consolidated Balance Sheet [Dollars in millions) 2014 2015 2016 2017 2018 Cash and cash equivalents 80 $ 108 $ 78 $ 99 Investment securities and other investments 814 873 930 1,019 Loans and leases, net of unearned discount 4,005 4,204 4,541 4,847 Reserve for loan and lease losses (85) (88) (89) (95
Slide 33: Consolidated Income Statement
Consolidated Income Statement [Dollars in millions) 2014 2015 2016 2017 2018 Net interest income $ 160 $ 167 $ 170 $ 186 $ 214 Provision for loan and leases losses 6 2 19 Noninterest income* 73 70 Noninterest expense* 149 160 Income before income taxes 101 105 Income tax expense 26 33 23 Net income
Slide 34: Aircraft Portfolio — Industries by NAICS
Aircraft Portfolio — Industries by NAICS Construction Retail Trade 10% 13% Manufacturing 8% Ag, Forestry, Fishing & Hunti Services ‘ nee ung 19% Wholesale Trade 5% Other* 4% Finance & Insurance and Real Estate Transportation & 14% Warehousing 20% *Other includes: Mining & Utilities and Information
Slide 35: Ownership Summary
Ownership Summary Shareholder Type Shares % of Total Ist Source ESOP Retail/Other 3.9% Institutional 12,373,508 48.0% 15.8% Insiders 8,334,851 32.3% Institutional 48.0% Retail/Other 4,067,758 15.8% Ist Source ESOP 1,007,611 3.9% Total Shares Outstanding“) 25,783,728 100.0% Rank Institution (Top 10 I
Slide 36: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures 2015 ; 168,327 $ {8)_Plus: loans and leases fully tox-equivalent adjustments _274. — 621, oof (C} Loans and leases interest income - FTE (A+B) 161,027 168,611 176,116 194,918 234,450 (D) Average loans and leases $ 3,639,985 $ 3,837,149 $ 4,113,508 $ 4,33
Slide 37: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Noninterest Expense {Dollars in thousands) (A) Noninterest expense (GAAP) _(8)_Less: depreciation - leased equipment $ 2014 150,040 $ £13,893) 2015 199.114 $ {18,260}. 2016 163,645 (21,678) 2017 173,997 (25,215) Noninterest expense - adjusted (A-8) Calcu
Slide 38: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Calculation of Tangible Common Equity-to-Tangible Assets Ratio {Potersin thowsands 2014 2015 2016 201 2018. (A) Total common shareholders’ equity (GAAP) $ 614,473. § 644,053 $ 672,650 $ 718,537 $ 762,082 {8) Less: goodwill and intangible assets (85,371)