1st Source Corporation · NASDAQ:SRCE
1st Source — Q4 2017 Earnings Presentation
36 slides from 1st Source's earnings presentation, Feb 7, 2018
Slide 1: Fourth Quarter 2017 Investor Presentation
Source. | 1Corporation FOURTH QUARTER 2017 INVESTOR PRESENTATION Symbol: SRCE www. |stsource.com
Slide 2: Disclosures
DISCLOSURES Forward-Looking Statements Except for fete) ineeii, the matters discussed may include “forward-looking statements.” Those state subject to material risks and uncertainties. Ist Source cautions readers not to ee unde rel eee oh any forward-looking statements, which speak only as of the da
Slide 3: Corporate Overview
CORPORATE OVERVIEW $5.9 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 a 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 m Support a proud family of colleagues who
Slide 5: Market Area
MARKET AREA Specialty Finance Community Bank Loans and Leases / Loans and Leases $2.33 billion $2.34 billion
Slide 6: Business Mix (Loans and Leases)
BUSINESS MIX (LOANS AND LEASES) Business Community Banking 72% 50% Personal Community Banking 28% Specialty Finance 50%
Slide 7: Community Banking
COMMUNITY BANKING mu 79 Banking Centers m= 100 Twenty-four hour ATMs mu 10 Ist Source Insurance offices a 8 Trust & Wealth Advisory locations with approximately $4.6 billion of assets under management In person Online Over the phone Mobile
Slide 8: Community Banking Market Area
COMMUNITY BANKING MARKET AREA Households Client Households Penetration Businesses (approx) Business Clients Penetration As of December 31, 2017 Medical Devices Ss 17 - County Market 797,863 102,709 12.9% 70,600 14,574 20.6% Recreational Vehicle Manufacturing
Slide 9: Specialty Finance Group Services
SPECIALTY FINANCE GROUP SERVICES aa Aircraft Division— $845MM Mech division provides financing primarily for new and used general aviation aircraft (including helicopters) for private and eas users, some ii eeiet distributors and dealers, air charter operators, air cargo rs, and other aircraft opera
Slide 10: Experienced and Proven Team
EXPERIENCED AND PROVEN TEAM Executive Team = 5 executives with an average 36 years each of banking experience and 26 years with Ist Source Business Banking Officers = 34 business banking officers with an average 20 years each of lending experience and with Ist Source from 1 to 34 years Specialty Fin
Slide 11: Performance - Client
PERFORMANCE - CLIENT = #1 deposit share in our 15 = Best Branch Service in the Midwest - MSR contiguous county market Group, 2015 & 2016 = #1 SBA Lender in our Indiana = Indiana SBA Community Lender Award - liste eu 2013 - 2017 = #2 SBA Lender in State of Michiana's Best Bank for Business — Northwes
Slide 12: Financial Review
FINANCIAL REVIEW
Slide 13: Growing Loan Portfolio
5500 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 GROWING LOAN PORTFOLIO Total Average Loans & Leases ($MM) Loans & Leases @=Yield on Loans & Leases - FTE (%)* 442%, 4.39% 4.28% 4.50% ° I-—$ = e 2014 2015 2016 2017 * See “Reconciliation of non-GAAP Financial Measures” in Appendix. 10.00% 9.00% 8
Slide 14: Diversified Loan Portfolio
DIVERSIFIED LOAN PORTFOLIO 2017 Average Loans by Type e iin Commercial ommercial an Real Estate Agricultural 17% Residential Real Estate 12% Acre Consumer = 3% Medium and Heavy uty Truck Construction Equipment Auto and Light Truck 12% 1%
Slide 15: Strong Credit Quality
STRONG CREDIT QUALITY % of Net Loans and Leases Stable Reserves Low Nonperforming Assets Limited Losses 2.35% 931% 2.21% 211% 2.10% 0.70% 0.67% 0.50% 0.02% 0.06% (0.027%) 2013 2014 «2015 2016-2017 2013 2014 «2015 2016 «2017 eee? FN PAGE 15
Slide 16: Core Deposit Franchise
CORE DEPOSIT FRANCHISE Total Average Deposits ($MM) mm Non-core Deposits «= Core Deposits = Effective Rate on Deposits (%) 5500 1.00% 2013 2014 2015 *Non-core deposits include CDs over $250,000 and brokered CDs. [st pect =i PAGE 16 Corporation z
Slide 17: Attractive Core Deposit Franchise
ATTRACTIVE CORE DEPOSIT FRANCHISE 2017 Average Deposits By Type Noninterest Savings and Interest pesng Demers jearing Deman e CD and IRA 26%
Slide 18: Deposit Market Share - County Contiguous Market
DEPOSIT MARKET SHARE - 15 COUNTY CONTIGUOUS MARKET* Leading Market Share in Community Banking Markets ($000) -®Ist Source Chase Lake City Bank -@Wells Fargo Fifth Third =#-Horizon Bank Data as of June 2017 - FDIC (Via SNL Financial) Junel1 June12_ June 13. June 14. June 15 June 16 June 17 “Includes
Slide 19: Net Income & Earnings Per Share
NET INCOME & EARNINGS PER SHARE 2014 2016 “=2Net Income =@EPCS (Diluted) eeCrporation
Slide 20: Net Interest Margin (FTE)
NET INTEREST MARGIN (FTE)* 2013 2014 2015 2016 2017 “==Net Interest Income ($MM) _=®=Net Interest Margin (%) * See “Reconciliation of non-GAAP Financial Measures” in Appendix. eeCrporation
Slide 21: Diverse Sources of Noninterest Income
DIVERSE SOURCES OF NONINTEREST INCOME Noninterest Income Composition 2017 = $73.5MM* Mortgage Banking &% Equipment Rental T% Twwst and Wealth Advisory 29% surance ‘Commissions 8% Service Charges on Deposit Accounts 13% Debit Card 16% 28% of Total Revenue* F Fe ; Ee of non-GAAP Financial Measures" in
Slide 22: Operating Expenses
OPERATING EXPENSES 136.1 2013 2014 2015 2016 2017 “==,Noninterest Expense ($MM)* =®=Efficiency - Adjusted (%)* of non-GAAP Financial Measures” in Appendix. eeCrporation
Slide 23: Strong Capital Position
STRONG CAPITAL POSITION 14.54% 14.57% 3.45%, 13.80% 13.48% 12.08% 12.16% 12.21% 12.11% 12.17% : fF F&F 7 BBG Copitatized cowl | i Copitalized 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 15.86% 15.89% — yore, 15.12% 14.70% 10.76% 11.18% 10.96% += 10.89% +~—-10.94% owe | | Copitalzed 2013 2014 2
Slide 24: Tangible Book Value per Common Share
TANGIBLE BOOK VALUE PER COMMON SHARE* $27.50 $24.00 $20.50 $17.00 $13.50 $10.00 Consistent Growth $14.95 2010 2011 2012 2013 2014 * See “Reconciliation of non-GAAP Financial Measures” in Appendix. 2015 2016 2017
Slide 25: Common Dividends Per Share
$1.000 $0.900 $0.800 $0.700 $0.600 $0.500 $0.400 $0.300 $0.200 $0.100 $0.000 COMMON DIVIDENDS PER SHARE 30 YEARS OF CONSECUTIVE DIVIDEND GROWTH 0.671 0.645 0.582 0.600 0.618 0.555 0.509 0.527 0.536 2007 «= 2008)=— 2009S 2010. 2011._—S 2012) - 2013'S 2014-2015. 2016 = 2017
Slide 26: Delivering Returns to Shareholders
DELIVERING RETURNS TO SHAREHOLDERS Value of $100 Invested in 1st Source since 1971 Inception with Dividends Reinvested vs. Total Return of Stock Indices — Ist Source (SRCE) —S&P 500 —-Wilshire 5000 —Russell 2000 —-NASDAQ $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 EG eeerporation
Slide 27: Delivering Returns to Shareholders
DELIVERING RETURNS TO SHAREHOLDERS December 31, 2007 - January 22, 2018 —— Ist Source Corp (SRCE) —KBW NASDAQ Bank ——NASDAG Bank ——S&P 500 Bank —SNL U.S. Bank —KBW NASDAQ Regional Bank 300.00 250.00 & o) D fa 5 P= O ® od a Ww BA wae (50.00) (100.00) 2 2009 2010 2011 2012 2013 2014 2015 2016 2017 201
Slide 28: Performance - Financial
PERFORMANCE - FINANCIAL mu #38 of 117 banks between $5 billion and $50 billion in assets — Bank Performance Scorecard by Bank Director Magazine a 5 Star “Superior” Rating — Bauer Financial = 30 years of consecutive dividend growth PAGE 28
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@1stsource.com Andrea G. Short CFO and Treasurer (574) 235-2348 shorta@1stsource.com PAGE 30
Slide 31: Appendix
APPENDIX
Slide 32: Aircraft Portfolio - Industries by NAICS
Aircraft Portfolio — Industries by NAICS Construction 10% Retail Trade 13% Manufacturing 8% estry, rishi a Hunting Services 15% Wholesale Trade 5% Other* 5% Finance & Insurance and Real Estate Transportation & 16% jarehousing 21% *Other includes: Mining & Utilities, Information, & Public Administrat
Slide 33: Ownership Summary
Ownership Summary Shareholder Type Shares % of Total iyectmenee Institutional 11,470,223 44.2% ae ea 48% uf Institutional Insiders 9,417,633 36.3% ee Retail/Other 3,921,969 15.1% Ist Source ESOP 1,126,939 44% Total Shares Outstanding ”) 25,936,764 100.0% Rank Institution (Top 10 Institutions) Shares
Slide 34: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Calculation ch ies on Loans and Leases {Dollars in thous 013, 201 H [aj itoans cha locoesinteren income CAG] $ 160.837 $ 160,753 $ 168,327 $ 175532 $ 194,297 3 4 {C) Loans and leases interest income - FTE (A+B) 19% 161,027 611 176.116 194918 (0) Average
Slide 35: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Noninterest Expense {Dollar in thousands) 1 2014 1 2016 2017 (A) No tofieicsiagcn (eu) 149314 § 150,040 $ 163,645 $ 173,997 (8)_Less: depreciation -leased equipment (13,055) (13,893) i (25,215) Rorabiesencro- “adjusted (4-8) $ 136259 § 136,147 § 140834 §
Slide 36: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures (Dolo in thousands (A) Total comme ‘equity (GAAP) Total tangible common shareholders’ equity (A-B) (of Total assets (GAAP) Total tangible assets (D- Common equity-to-assets ae (GAAP-derived) (AD i 11.15% 10.96% Calculation of Tangible Book Value per eric