Slide 1: Investor Presentation 2nd Quarter 2022
INVESTOR PRESENTATION 2nd Quarter 2022 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 $8.0 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 & Vision
MISSION & VISION 4page 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
Slide 5: Market Area
MARKET AREA 5page Specialty Finance Loans & Leases $2.79 billion Community Bank Loans & Leases $2.80 billion
Slide 6: Business Mix
BUSINESS MIX Loans & Leases 6page COMMUNITY BANKING 50% SPECIALTY FINANCE 50% Business 76% Personal 24%
Slide 7: Community Banking
COMMUNITY BANKING 79 Banking Centers 98 Twenty-four-hour ATMs 9 Trust & Wealth Advisory locations with approximately $4.7 billion of assets under management 10 1st Source Insurance offices 7page In person OnlineOver the phone Mobile
Slide 8: Renewable Energy Financing
8page RENEWABLE ENERGY FINANCING Our Renewable Energy Financing Division provides sponsors and developers with one-stop shop financing by providing construction loans, permanent loans, and tax equity investments to community solar, commercial & industrial, small utility scale, university, and munici
Slide 9: Specialty Finance Group
SPECIALTY FINANCE GROUP Aircraft Division Aircraft division provides financing primarily for new and pre-owned general aviation aircraft (including helicopters) for private and corporate users, some for aircraft distributors and dealers, air charter operators, air cargo carriers, and other aircraft
Slide 10: Highly Rated, Feature-Rich Mobile App
Zelle (P2P) HIGHLY RATED, FEATURE-RICH MOBILE APP Budget & Account Aggregation 54% 57% 62% 17% 16% 14% 29% 27% 24% 0% 25% 50% 75% 100% Q2 20 Q2 21 Q2 22 Digital Adoption¹ Mobile & Online Online Only Non-Digital 17% 21% 27% 26% 25% 23% 35% 34% 27% 21% 20% 23% 0% 25% 50% 75% 100% Q2 20 Q2 21 Q2 22 Ser
Slide 11: An Experienced and Proven Team
AN EXPERIENCED AND PROVEN TEAM Executive Team 5 executives with an average 36 years each of banking experience and 26 years with 1st Source Business Banking Officers 39 business banking officers with an average 18 years each of lending experience and with 1st Source from 1 to 33 years Specialty Fina
Slide 12: Performance: Client
PERFORMANCE CLIENT Indiana SBA Community Lender Award 2013-2021 #1 Deposit share in our 16 contiguous county market #1 SBA Lender in our Indiana footprint #1 SBA Lender Headquartered in State of Indiana #22 On Monitor Magazine’s 2021 Top 50 Bank Finance/Leasing Companies in the U.S. #37 On Monitor M
Slide 13: Performance: People
PERFORMANCE PEOPLE Forbes’ 150 Best Employers for Veterans 2021 Forbes’ 500 Best Midsize Employers 2021-2022 Forbes’ 500 Best Employers for Diversity 2022 Indianapolis Business Journal’s 250 Most Influential Business Leaders Christopher J. Murphy III CEO and Chairman of the Board Tracy D. Graham Boa
Slide 14: Financial Review
FINANCIAL REVIEW
Slide 15: Growing Loan Portfolio
15page 4755 5000 5463 5438 5396 4.93% 5.16% 4.44% 4.32% 4.32% 3.75% 4.25% 4.75% 5.25% 5.75% 6.25% 2000 3500 5000 6500 2018 2019 2020 2021 2022 YTD Loans & Leases ($MM) Yield on Loans & Leases - FTE (%)* GROWING LOAN PORTFOLIO Total Average Loans & Leases * See “Reconciliation of non-GAAP Financial M
Slide 16: Diversified Loan Portfolio
16page Commercial Real Estate 17% Residential Real Estate 9% Consumer 3% Medium and Heavy Duty Truck 5% Auto and Light Truck 12%Construction Equipment 14% Aircraft 17% Solar 6% Commercial and Agriculture 16% PPP Loans 1% DIVERSIFIED LOAN PORTFOLIO 2022 Average Loans by Type
Slide 17: Paycheck Protection Program Loans
17page PAYCHECK PROTECTION PROGRAM LOANS 2020 PPP Loans: 1,972 out of 3,540 loans for less than $50,000 (56%) All loan amounts funded during 2020 have been forgiven by the SBA as of May 2, 2022 2021 PPP Loans: 2,424 out of 3,239 for less than $50,000 (75%) Over 500 loans to minority-owned or
Slide 18: Strong Credit Quality
18page 2.08% 2.19% 2.56% 2.38% 2.39% 2018 2019 2020 2021 2022 YTD STRONG CREDIT QUALITY % of Net Loans and Leases Loan & Lease Loss Allowance 0.71% 0.37% 1.16% 0.77% 0.60% 2018 2019 2020 2021 2022 YTD Low Nonperforming Assets 0.29% 0.10% 0.17% 0.16% -0.02% 2018 2019 2020 2021 2022 YTD Limited Losses
Slide 19: Core Deposit Franchise
19page 4277 4502 5128 5987 6433 687 775 609 356 274 0.70% 0.96% 0.53% 0.19% 0.18% 0.00% 0.50% 1.00% 1.50% 2.00% 0 2,000 4,000 6,000 8,000 2018 2019 2020 2021 2022 YTD Core Deposits ($MM) Non-core Deposits ($MM) Effective Rate on Deposits (%) CORE DEPOSIT FRANCHISE TOTAL AVERAGE DEPOSITS *Non-core de
Slide 20: Attractive Deposit Franchise
20page Noninterest Bearing Demand 30% CD and IRA 13% Savings and Interest Bearing Demand 57% ATTRACTIVE DEPOSIT FRANCHISE 2022 Average Deposits By Type
Slide 21: Deposit Market Share
21page $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 June 15 June 16 June 17 June 18 June 19 June 20 June 21 1st Source Chase Lake City Bank Horizon Bank Fifth Third DEPOSIT MARKET SHARE 16 COUNTY CONTIGUOUS MARKET* Leading Market Share in Community Banking Markets
Slide 22: Net Income & Earnings Per Share
22page 82.4 92.0 81.4 118.5 58.3 56.73.16 3.57 3.17 4.70 2.29 2.28 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $0 $15 $30 $45 $60 $75 $90 $105 $120 $135 2018 2019 2020 2021 2021 YTD 2022 YTD Net Income ($MM) EPCS (Diluted) NET INCOME & EARNINGS PER SHARE
Slide 23: Pre-Tax, Pre-Provision Income
23page 124.5 136.0 142.3 150.6 75.8 78.1 $0 $35 $70 $105 $140 $175 2018 2019 2020 2021 2021 YTD 2022 YTD PRE-TAX, PRE-PROVISION INCOME ($MM) *See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 24: Income Performance Metrics
24page 1.08% 1.21% 1.34% 1.41% 1.14% 1.53% 1.42% 8.71% 9.69% 11.09% 11.50% 9.41% 13.07% 12.91% 9.98% 11.00% 12.50% 12.85% 10.42% 14.40% 14.26% 4.00% 8.00% 12.00% 16.00% 0.60% 1.20% 1.80% 2.40% 3.00% 2016 2017 2018 2019 2020 2021 2022 YTD R O AE a nd R O AT E R O AA Return on Average Assets Return on
Slide 25: Net Interest Margin (FTE)
25page 214.7 224.6 226.4 237.1 114.6 123.33.73% 3.68% 3.39% 3.23% 3.25% 3.25% 2.00% 3.00% 4.00% 5.00% $0 $52 $104 $156 $208 $260 2018 2019 2020 2021 2021 YTD 2022 YTD Net Interest Income ($MM) Net Interest Margin (%) NET INTEREST MARGIN (FTE)* * See “Reconciliation of non-GAAP Financial Measures” in
Slide 26: Diverse Sources of Noninterest Income
26page Trust, Wealth Advisory, and Retirement Plan Services 30% Other 16% Debit Card 22% Service Charges on Deposit Accounts 14% Insurance Commissions 9% Mortgage Banking 6% Equipment Rental 3% DIVERSE SOURCES OF NONINTEREST INCOME Fair Value of Assets Under Management of $4.7B * Note: Equipment ren
Slide 27: Operating Expenses
27page 160.2 163.9 167.2 172.5 82.0 85.3 56.2% 54.7% 54.2% 53.5% 51.9% 52.5% 40.0% 50.0% 60.0% 70.0% 80.0% $0.0 $50.0 $100.0 $150.0 $200.0 2018 2019 2020 2021 2021 YTD 2022 YTD Noninterest Expense ($MM)* Efficiency - Adjusted (%)* OPERATING EXPENSES * Note: Noninterest expense is shown net of leased
Slide 28: Strong Capital Position
14.68% 14.90% 15.99% 16.76% 16.79% 2018 2019 2020 2021 2022 YTD 28page 12.06% 12.19% 12.15% 11.89% 12.21% 2018 2019 2020 2021 2022 YTD STRONG CAPITAL POSITION Tier 1 Leverage Ratio 13.42% 13.64% 14.73% 15.50% 15.53% 2018 2019 2020 2021 2022 YTD Tier 1 Risk Based Ratio Total Risk Based Capital Ratio
Slide 29: Tangible Book Value per Common Share
29page $21.49 $22.75 $24.47 $26.30 $29.18 $31.62 $33.64 $31.33 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 2015 2016 2017 2018 2019 2020 2021 2022 YTD TANGIBLE BOOK VALUE PER COMMON SHARE* Consistent Growth * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 30: Common Dividends Per Share
30page 0.600 0.618 0.645 0.671 0.720 0.760 0.960 1.100 1.130 1.210 0.940 $0.000 $0.200 $0.400 $0.600 $0.800 $1.000 $1.200 $1.400 $1.600 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 YTD COMMON DIVIDENDS PER SHARE 34 YEARS OF CONSECUTIVE DIVIDEND GROWTH
Slide 31: Delivering Returns to Shareholders
31page DELIVERING RETURNS TO SHAREHOLDERS Value of $100 Invested in 1st Source since 1971 Inception with Dividends Reinvested vs. Total Return of Stock Indices
Slide 32: Delivering Returns to Shareholders
32page DELIVERING RETURNS TO SHAREHOLDERS December 31, 2007 – August 3, 2022
Slide 33: Performance: Financial
PERFORMANCE FINANCIAL 2019-2022 KBW Bank Honor Roll Fourth consecutive year named among top 5% of banks with more than $500 million in total assets and ten consecutive years of increased earnings per share #26 Of 123 banks between $5 billion and $50 billion in assets – Bank Performance Scorecard by
Slide 34: Investment Considerations
INVESTMENT CONSIDERATIONS Consistent and superior financial performance with a focus on long-term earnings per share and tangible book value growth Experienced and proven team with significant investment in bank Diversification of product mix and geography with asset generation capability Leading ma
Slide 35: Contact Information
CONTACT INFORMATION Christopher J. Murphy III Chairman of the Board, CEO and President (574) 235-2711 Murphy-c@1stsource.com Brett A. Bauer CFO and Treasurer (574) 235-2638 bauerb@1stsource.com 35page
Slide 36: Appendix
APPENDIX
Slide 37: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET 37page (Dollars in millions) 2018 2019 2020 2021 2022 YTD Cash and cash equivalents 99$ 83$ 243$ 525$ 282$ Investment securities and other investments 1,019 1,069 1,225 1,890 1,862 Loans and leases, net of unearned discount 4,847 5,106 5,502 5,360 5,557 Allowance for loan
Slide 38: Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT 38page (Dollars in millions) 2018 2019 2020 2021 2021 YTD 2022 YTD Net interest income 214$ 224$ 226$ 237$ 114$ 123$ Provision for (recovery of) credit losses 19 16 36 (4) (1) 5 Noninterest income* 70 76 83 86 43 40 Noninterest expense* 160 164 167 172 82 85 Income befo
Slide 39: Aircraft Portfolio Industries by NAICS
39page Transportation & Warehousing 17% Finance & Insurance and Real Estate 16% Services 18% Retail Trade 10% Construction 11% Manufacturing 9% Ag, Forestry, Fishing & Hunting 9% Wholesale Trade 6% Other* 4% * Other includes: Mining & Utilities and Information AIRCRAFT PORTFOLIO INDUSTRIES BY NAICS
Slide 40: Ownership Summary
40page OWNERSHIP SUMMARY Institutional 10,730,808 43.5% Insiders 7,814,620 31.7% Retail/Other 5,340,800 21.7% 1st Source ESOP 764,179 3.1% Total Shares Outstanding(1) 24,650,407 100.0% Institution (Top 10 Institutions) Shares % of Total Dimensional Fund Advisors LP 1,677,326 6.8% BlackRock Inc. 1,29
Slide 41: Asset Liability Management
63% 33% 4% 41page ASSET LIABILITY MANAGEMENT Asset-sensitive posture Positioned for higher interest rates • Variable rate loans reprice quickly — 90% of Variable reprice within 3 months • Fixed rate loans have short terms — 2.6 year weighted average remaining life — High proportion of equipment lend
Slide 42: Reconciliation of Non-GAAP Financial Measures
42page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Yield on Loans and Leases (Dollars in thousands) 2018 2019 2020 2021 2022 YTD (A) Loans and leases interest income (GAAP) 234,083$ 257,738$ 242,172$ 234,583$ 115,504$ (B) Plus: loans and leases fully tax-equivalent adjustments 367 3
Slide 43: Reconciliation of Non-GAAP Financial Measures
43page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Net Interest Margin (Dollars in thousands) 2018 2019 2020 2021 2021 YTD 2022 YTD (A) Interest income (GAAP) 257,316$ 282,877$ 263,031$ 254,772$ 124,062$ 130,078$ (B) Plus: fully tax-equivalent adjustments 803 686 543 459 239 231 (C)
Slide 44: Reconciliation of Non-GAAP Financial Measures
44page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Efficiency Ratio (Dollars in thousands) 2018 2019 2020 2021 2021 YTD 2022 YTD (A) Net interest income (GAAP) 213,906$ 223,866$ 225,820$ 236,638$ 114,347$ 123,080$ (B) Net interest income - FTE 214,709 224,552 226,363 237,097 114,586
Slide 45: Reconciliation of Non-GAAP Financial Measures
45page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Tangible Book Value per Common Share (Dollars in thousands, except for per share data) 2015 2016 2017 2018 2019 2020 2021 2022 YTD (A) Total common shareholders' equity (GAAP) 644,053$ 672,650$ 718,537$ 762,082$ 828,277$ 886,845$ 91