Slide 1: Second Quarter 2021 Investor Presentation
SECOND QUARTER 2021 INVESTOR PRESENTATION NASDAQ: SRCE www.1stsource.com
Slide 2: Disclosures
DISCLOSURES PAGE 2 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
Slide 3: Corporate Overview
CORPORATE OVERVIEW $7.7 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 Specialty Finance Loans and Leases $2.57 billion Community Bank Loans and Leases $2.97 billion PAGE 5
Slide 6: Business Mix (Loans and Leases)
BUSINESS MIX (LOANS AND LEASES) Business Community Banking 79% Personal Community Banking 21% Specialty Finance 46% 54% PAGE 6
Slide 7: Community Banking
COMMUNITY BANKING ■ 79 Banking Centers ■ 100 Twenty-four-hour ATMs ■ 9 Trust & Wealth Advisory locations with approximately $5.1 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 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 other aircr
Slide 9: Experienced and Proven Team
EXPERIENCED AND PROVEN TEAM Executive Team ■ 5 executives with an average 35 years each of banking experience and 25 years with 1st Source Business Banking Officers ■ 37 business banking officers with an average 19 years each of lending experience and with 1st Source from 1 to 32 years Specialty Fin
Slide 10: Performance – Client
PAGE ELEVEN PERFORMANCE – CLIENT ■ #1 deposit share in our 15 contiguous county market ■ #1 SBA Lender in our Indiana footprint ■ #1 SBA Lender Headquartered in State of Indiana ■ Indiana SBA Community Lender Award – 2013 – 2020 ■ #223 on Forbes’ 500 Best Midsize Employers 2021 List. One of only ten
Slide 11: Our Response to COVID-19
OUR RESPONSE TO COVID-19 Employees Clients Communities High-risk employees given option to work remotely Virtual meetings and conference calls have largely replaced in-person meetings Department teams were separated in 2020 to ensure that infection could not spread across entire units but are
Slide 12: Paycheck Protection Program Loans
PAYCHECK PROTECTION PROGRAM LOANS PAGE 12 2020 PPP Loans: • 1,972 out of 3,540 loans for less than $50,000 (56%) • Over 97% of total loan amounts funded during 2020 have been submitted to SBA for forgiveness as of August 31, 2021 2021 PPP Loans: • 2,424 out of 3,239 for less than $50,000 (75%) • Ove
Slide 13: COVID-19 Related Loan Deferrals
COVID-19 RELATED LOAN DEFERRALS PAGE 13 Modifications at June 30, 2021: • $16 million to bus clients or 26% of our total bus loan balances. Included in the Specialty vehicle category above. • $48 million to hotel industry clients or 29% of our total hotel loan balances. Included in the Commercial ca
Slide 14: Financial Review
FINANCIAL REVIEW i Corporation
Slide 15: Growing Loan Portfolio
GROWING LOAN PORTFOLIO 4333 4755 5000 5463 5507 4.50% 4.93% 5.16% 4.44% 4.21% 3.75% 4.25% 4.75% 5.25% 5.75% 6.25% 2000 3500 5000 6500 2017 2018 2019 2020 2021 YTD Loans & Leases Yield on Loans & Leases - FTE (%)* Total Average Loans & Leases ($MM) PAGE 15 * See “Reconciliation of non-GAAP Financial
Slide 16: Diversified Loan Portfolio
DIVERSIFIED LOAN PORTFOLIO 2021 Average Loans by Type PAGE 16 Commercial Real Estate 18% Residential Real Estate 9% Consumer 2% Medium and Heavy Duty Truck 5% Auto and Light Truck 10%Construction Equipment 13% Aircraft 16% Solar 5% Commercial and Agricultural 14% PPP Loans 8%
Slide 17: Pre-Tax, Pre-Provision Income
PRE-TAX, PRE-PROVISION INCOME PAGE 17 110.3 124.5 136.0 142.3 67.3 75.8 $0 $35 $70 $105 $140 $175 2017 2018 2019 2020 2020 YTD 2021 YTD ($MM) * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 18: Strong Credit Quality
STRONG CREDIT QUALITY PAGE 18 2.10% 2.08% 2.19% 2.31% 2.49% 2017 2018 2019 2020 YTD 2021 YTD % of Net Loans and Leases Loan & Lease Loss Allowance Nonperforming Assets Net Charge-Offs Solid Reserves 0.67% 0.71% 0.37% 1.20% 1.06% 2017 2018 2019 2020 YTD 2021 YTD Low Nonperforming Assets 0.06% 0.29% 0
Slide 19: Core Deposit Franchise
CORE DEPOSIT FRANCHISE Total Average Deposits ($MM) PAGE 19 4049 4277 4502 5128 5734 444 687 775 609 396 0.43% 0.70% 0.96% 0.53% 0.22% 0.00% 0.50% 1.00% 1.50% 2.00% 1000 2000 3000 4000 5000 6000 7000 2017 2018 2019 2020 2021 YTD Non-core Deposits Core Deposits Effective Rate on Deposits (%) * Non-co
Slide 20: Attractive Deposit Franchise
ATTRACTIVE DEPOSIT FRANCHISE 2021 Average Deposits By Type Noninterest Bearing Demand 29% CD and IRA 18% Savings and Interest Bearing Demand 53% PAGE 20
Slide 21: Deposit Market Share – County Contiguous Market
DEPOSIT MARKET SHARE – 15 COUNTY CONTIGUOUS MARKET* $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 June 14 June 15 June 16 June 17 June 18 June 19 June 20 1st Source Chase Lake City Bank Horizon Bank Fifth Third *Includes Allen, Elkhart, Fulton, Huntington, Kosciusko
Slide 22: Net Income & Earnings Per Share
68.1 82.4 92.0 81.4 34.9 58.3 2.60 3.16 3.57 3.17 1.36 2.29 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $0 $15 $30 $45 $60 $75 $90 $105 2017 2018 2019 2020 2020 YTD 2021 YTD Net Income EPCS (Diluted) ($MM) NET INCOME & EARNINGS PER SHARE PAGE 22
Slide 23: Net Interest Margin (FTE)
NET INTEREST MARGIN (FTE)* PAGE 23 187.4 214.7 224.6 226.4 109.1 114.6 3.57% 3.73% 3.68% 3.39% 3.40% 3.25% 1.00% 2.00% 3.00% 4.00% 5.00% $0 $50 $100 $150 $200 $250 2017 2018 2019 2020 2020 YTD 2021 YTD Net Interest Income ($MM) Net Interest Margin (%) ($MM) * See “Reconciliation of non-GAAP Financia
Slide 24: Diverse Sources of Noninterest Income
DIVERSE SOURCES OF NONINTEREST INCOME Noninterest Income Composition 2021 YTD = $43.4MM* PAGE 24 * Note: Equipment rental income is shown net of leased equipment depreciation. See “Reconciliation of non-GAAP Financial Measures” in Appendix . Trust, Wealth Advisory, and Retirement Plan Services 27% O
Slide 25: Operating Expenses
OPERATING EXPENSES PAGE 25 148.8 160.2 163.9 167.2 80.8 82.0 57.7% 56.2% 54.7% 54.2% 54.7% 51.9% 45.0% 55.0% 65.0% 75.0% $0.0 $50.0 $100.0 $150.0 $200.0 2017 2018 2019 2020 2020 YTD 2021 YTD Noninterest Expense ($MM)* Efficiency - Adjusted (%)* ($MM) * Note: Noninterest expense is shown net of lease
Slide 26: Strong Capital Position
14.70% 14.68% 14.90% 15.99% 16.58% 2017 2018 2019 2020 2021 YTD 13.44% 13.42% 13.64% 14.73% 15.32% 2017 2018 2019 2020 2021 YTD 12.17% 12.06% 12.19% 12.15% 12.08% 2017 2018 2019 2020 2021 YTD STRONG CAPITAL POSITION PAGE 26 Total Risk Based Capital Ratio Tier 1 Leverage Ratio Tier 1 Risk Based Ratio
Slide 27: Tangible Book Value Per Common Share
$20.16 $21.49 $22.75 $24.47 $26.30 $29.18 $31.62 $32.69 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 2014 2015 2016 2017 2018 2019 2020 2021 YTD TANGIBLE BOOK VALUE PER COMMON SHARE* Consistent Growth PAGE 27 * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 28: Common Dividends Per Share
0.582 0.600 0.618 0.645 0.671 0.720 0.760 0.960 1.100 1.130 0.900 $0.000 $0.200 $0.400 $0.600 $0.800 $1.000 $1.200 $1.400 $1.600 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 YTD COMMON DIVIDENDS PER SHARE 33 YEARS OF CONSECUTIVE DIVIDEND GROWTH PAGE 28
Slide 29: Delivering Returns to Shareholders
DELIVERING RETURNS TO SHAREHOLDERS PAGE 29
Slide 30: Delivering Returns to Shareholders
DELIVERING RETURNS TO SHAREHOLDERS PAGE 30 199.69% 46.61% 71.57% 51.68% 56.45% (100.00) (50.00) 0.00 50.00 100.00 150.00 200.00 250.00 300.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Pr ic e C ha ng e (% ) December 31, 2007 - August 13, 2021 1st Source Corp (SRCE) KBW NA
Slide 31: Performance – Financial
PERFORMANCE – FINANCIAL ■ 2021 KBW Bank Honor Roll – sixteen banking institutions with more than $500 million in total assets selected ■ #26 of 123 banks between $5 billion and $50 billion in assets – Bank Performance Scorecard by Bank Director Magazine ■ 5 Star “Superior” Rating – BauerFinancial ■
Slide 32: Investment Considerations
INVESTMENT CONSIDERATIONS ■ Consistent and superior financial performance with a focus on long-term earnings per share and tangible book value growth ■ Experienced and proven team with significant investment in bank ■ Diversification of product mix and geography with asset generation capability ■ Le
Slide 33: Contact Information
CONTACT INFORMATION Christopher J. Murphy III Chairman of the Board, CEO and President (574) 235-2711 murphy-c@1stsource.com Brett A. Bauer CFO and Treasurer (574) 235-2638 bauerb@1stsource.com PAGE 33
Slide 34: Appendix
APPENDIX Source. | Corporation
Slide 35: Consolidated Balance Sheet
Consolidated Balance Sheet PAGE 35 (Dollars in millions) 2017 2018 2019 2020 2021 YTD Cash and cash equivalents 78$ 99$ 83$ 243$ 469$ Investment securit ies and other investments 930 1,019 1,069 1,225 1,440 Loans and leases, net of unearned discount 4,541 4,847 5,106 5,502 5,490 Allowance for loan a
Slide 36: Consolidated Income Statement
Consolidated Income Statement PAGE 36 (Dollars in millions) 2017 2018 2019 2020 2020 YTD 2021 YTD Net interest income 186$ 214$ 224$ 226$ 109$ 114$ Provision for (recovery of) credit losses 9 19 16 36 22 (1) Noninterest income* 73 70 76 83 40 43 Noninterest expense* 149 160 164 167 81 82 Income befo
Slide 37: Aircraft Portfolio – Industries by NAICS
Aircraft Portfolio – Industries by NAICS Transportation & Warehousing 18% Finance & Insurance and Real Estate 12% Services 20% Retail Trade 16% Construction 9% Manufacturing 10% Ag, Forestry, Fishing & Hunting 6% Wholesale Trade 4% Other* 5% PAGE 37 *Other includes: Mining & Utilities and Informatio
Slide 38: Ownership Summary
Ownership Summary Institutional 45.7% Insiders 31.8% Retail/Other 19.4% 1st Source ESOP 3.1% (1) As of June 30, 2021 (2) As of March 31, 2021 or most recently reported data Source: S&P Global Market Intelligence and Company filings PAGE 38 Shareholder Type Shares % of Total Institutional 11,435,296
Slide 39: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures PAGE 39 (Dollars in thousands) 2017 2018 2019 2020 2021 YTD (A) Loans and leases interest income (GAAP) 194,297$ 234,083$ 257,738$ 242,172$ 114,868$ (B) Plus: loans and leases fully tax-equivalent adjustments 621 367 375 333 161 (C) Loans and leases inte
Slide 40: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures PAGE 40 2017 2018 2019 2020 2020 YTD 2021 YTD (A) Noninterest income (GAAP) 98,706$ 97,050$ 101,130$ 103,889$ 49,863$ 50,767$ (B) Less: depreciation - leased equipment (25,215) (26,248) (25,128) (20,203) (10,569) (7,323) Noninterest income - adjusted (A-
Slide 41: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures PAGE 41 2017 2018 2019 2020 2021 YTD (A) Total common shareholders' equity (GAAP) 718,537$ 762,082$ 828,277$ 886,845$ 901,226$ (B) Less: goodwill and intangible assets (83,742) (83,998) (83,971) (83,948) (83,937) (C) Total tangible common shareholders' e