Slide 1: Investor Presentation 1st Quarter 2023
INVESTOR PRESENTATION 1st Quarter 2023 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 $8.3 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 & 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 $3.28 billion Community Bank Loans & Leases $2.87 billion
Slide 6: Business Mix
BUSINESS MIX Loans & Leases 6page COMMUNITY BANKING 47% SPECIALTY FINANCE 53% Business 74% Personal 26%
Slide 7: Community Banking
COMMUNITY BANKING 79 Banking Centers 97 Twenty-four-hour ATMs 9 Trust & Wealth Advisory locations with approximately $4.9 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 60% 61% 63% 15% 15% 13% 25% 24% 24% 0% 25% 50% 75% 100% Q1 21 Q1 22 Q1 23 Digital Adoption¹ Mobile & Online Online Only Non-Digital 25% 25% 31% 23% 23% 23% 29% 28% 25% 23% 24% 21% 0% 25% 50% 75% 100% Q1 21 Q1 22 Q1 23 Ser
Slide 11: An Experienced and Proven Team
AN EXPERIENCED AND PROVEN TEAM Executive Team 6 executives with an average 34 years each of banking experience and 25 years with 1st Source Business Banking Officers 38 business banking officers with an average 18 years each of lending experience and with 1st Source from 1 to 34 years Specialty Fina
Slide 12: Performance: Client
PERFORMANCE CLIENT Indiana SBA Community Lender Award 2013-2022 #1 Deposit share in our 16 contiguous county market #1 SBA Lender in our Indiana footprint #1 SBA Lender Headquartered in State of Indiana #1 Lender of Community Development Loans (Total Dollars) in State of Indiana by Banks Headquarter
Slide 13: Performance: People
PERFORMANCE PEOPLE Forbes’ 150 Best Employers for Veterans 2021 Forbes’ 500 Best Midsize Employers 2021-2023 Forbes’ 500 Best Employers for Diversity 2022 Indianapolis Business Journal’s 250 Most Influential Business Leaders Christopher J. Murphy III Chairman, President, and CEO, 1st Source Corporat
Slide 14: Financial Review
FINANCIAL REVIEW
Slide 15: Growing Loan Portfolio
15page 5000 5463 5438 5567 6036 5.16% 4.44% 4.32% 4.74% 5.83% 3.75% 4.25% 4.75% 5.25% 5.75% 6.25% 6.75% 2500 4000 5500 7000 2019 2020 2021 2022 2023 YTD Loans & Leases ($MM) Yield on Loans & Leases - FTE (%)* GROWING LOAN PORTFOLIO Total Average Loans & Leases * See “Reconciliation of non-GAAP Finan
Slide 16: Diversified Loan Portfolio
16page Commercial Real Estate 16% Residential Real Estate 10% Consumer 2% Medium and Heavy Duty Truck 5% Auto and Light Truck 14%Construction Equipment 16% Aircraft 18% Solar 6% Commercial and Agriculture 13% DIVERSIFIED LOAN PORTFOLIO 2023 Average Loans by Type
Slide 17: Strong Credit Quality
17page 2.19% 2.56% 2.38% 2.32% 2.33% 2019 2020 2021 2022 2023 YTD STRONG CREDIT QUALITY % of Net Loans and Leases Loan & Lease Loss Allowance 0.37% 1.16% 0.77% 0.45% 0.30% 2019 2020 2021 2022 2023 YTD Low Nonperforming Assets 0.10% 0.17% 0.16% 0.03% -0.01% 2019 2020 2021 2022 2023 YTD Limited Losses
Slide 18: Core Deposit Franchise
18page 4502 5128 5987 6426 6180 775 609 356 285 689 0.96% 0.53% 0.19% 0.38% 1.26% 0.00% 0.50% 1.00% 1.50% 2.00% 0 2,000 4,000 6,000 8,000 2019 2020 2021 2022 2023 YTD Core Deposits ($MM) Non-core Deposits ($MM) Effective Rate on Deposits (%) CORE DEPOSIT FRANCHISE TOTAL AVERAGE DEPOSITS *Non-core de
Slide 19: Diversified Deposit Mix
19page Time 21% Noninterest- bearing demand 27% Interest- bearing demand 35% Savings 17% Public Fund 17% Brokered 7% Business 27% Consumer (1) 49% (1) Includes business customer certificates of deposit which were immaterial Approximately 225,500 deposit accounts with an average balance of $30,150. A
Slide 20: Deposit Market Share
20page $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 June 16 June 17 June 18 June 19 June 20 June 21 June 22 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 21: Net Income & Earnings Per Share
21page 92.0 81.4 118.5 120.5 27.4 31.1 3.57 3.17 4.70 4.84 1.10 1.25 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $0 $15 $30 $45 $60 $75 $90 $105 $120 $135 2019 2020 2021 2022 2022 YTD 2023 YTD Net Income ($MM) EPCS (Diluted) NET INCOME & EARNINGS PER SHARE
Slide 22: Pre-Tax, Pre-Provision Income
22page 136.0 142.3 150.6 170.0 37.4 43.5 $0 $50 $100 $150 $200 2019 2020 2021 2022 2022 YTD 2023 YTD PRE-TAX, PRE-PROVISION INCOME ($MM) *See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 23: Income Performance Metrics
23page 1.21% 1.34% 1.41% 1.14% 1.53% 1.49% 1.52% 9.69% 11.09% 11.50% 9.41% 13.07% 13.81% 14.18% 11.00% 12.50% 12.85% 10.42% 14.40% 15.28% 15.65% 4.00% 8.00% 12.00% 16.00% 0.60% 1.20% 1.80% 2.40% 3.00% 2017 2018 2019 2020 2021 2022 2023 YTD R O AE a nd R O AT E R O AA Return on Average Assets Return
Slide 24: Net Interest Margin (FTE)
24page 224.6 226.4 237.1 264.1 59.7 69.8 3.68% 3.39% 3.23% 3.45% 3.18% 3.60% 2.00% 3.00% 4.00% 5.00% $0 $60 $120 $180 $240 $300 2019 2020 2021 2022 2022 YTD 2023 YTD Net Interest Income ($MM) Net Interest Margin (%) NET INTEREST MARGIN (FTE)* * See “Reconciliation of non-GAAP Financial Measures” in
Slide 25: Diverse Sources of Noninterest Income
25page Trust, Wealth Advisory, and Retirement Plan Services 27% Other 23% Debit Card 21% Service Charges on Deposit Accounts 14% Insurance Commissions 9% Mortgage Banking 4% Equipment Rental 2% DIVERSE SOURCES OF NONINTEREST INCOME Fair Value of Assets Under Management of $4.9B * Note: Equipment ren
Slide 26: Operating Expenses
26page 163.9 167.2 172.5 174.7 42.3 47.4 54.7% 54.2% 53.5% 51.1% 53.3% 52.9% 40.0% 50.0% 60.0% 70.0% 80.0% $0.0 $50.0 $100.0 $150.0 $200.0 2019 2020 2021 2022 2022 YTD 2023 YTD Noninterest Expense ($MM)* Efficiency - Adjusted (%)* OPERATING EXPENSES * Note: Noninterest expense is shown net of leased
Slide 27: Strong Liquidity Position
27page STRONG LIQUIDITY POSITION End of Period (Dollars in thousands) Total Available Utilized Net Available Internal Sources Free securities $ 1,713,480 $ 284,671 $ 1,428,809 External Sources FHLB advances¹ 631,811 245,896 385,915 FRB borrowings² 401,312 — 401,312 Fed funds purchased³ 245,000 — 245
Slide 28: Strong Capital Position
14.90% 15.99% 16.76% 16.10% 16.41% 2019 2020 2021 2022 2023 YTD 28page 12.19% 12.15% 11.89% 12.63% 12.72% 2019 2020 2021 2022 2023 YTD STRONG CAPITAL POSITION Tier 1 Leverage Ratio 13.64% 14.73% 15.50% 14.84% 15.15% 2019 2020 2021 2022 2023 YTD Tier 1 Risk Based Ratio Total Risk Based Capital Ratio
Slide 29: Long History of Conservative Capital
29page 16.41% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 1st Source Corp Well-Capitalized LONG HISTORY OF CONSERVATIVE CAPITAL Total Capital (To Risk-Weighted Assets) 10% Well Capitalized
Slide 30: Tangible Book Value Per Common Share
30page $22.75 $24.47 $26.30 $29.18 $31.62 $33.64 $31.63 $33.42 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 2016 2017 2018 2019 2020 2021 2022 2023 YTD TANGIBLE BOOK VALUE PER COMMON SHARE* * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 31: Common Dividends Per Share
31page 0.618 0.645 0.671 0.720 0.760 0.960 1.100 1.130 1.210 1.260 0.640 $0.000 $0.200 $0.400 $0.600 $0.800 $1.000 $1.200 $1.400 $1.600 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD COMMON DIVIDENDS PER SHARE 35 YEARS OF CONSECUTIVE DIVIDEND GROWTH
Slide 32: Delivering Returns to Shareholders
32page DELIVERING RETURNS TO SHAREHOLDERS Value of $100 Invested in 1st Source since 1971 Inception with Dividends Reinvested vs. Total Return of Stock Indices
Slide 33: Delivering Returns to Shareholders
33page DELIVERING RETURNS TO SHAREHOLDERS December 31, 2007 – April 24, 2023
Slide 34: Performance: Financial
PERFORMANCE FINANCIAL 2019-2023 KBW Bank Honor Roll Fifth 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 $50 billion in assets – Bank Performance Scorecard by B
Slide 35: Investment Considerations
INVESTMENT CONSIDERATIONS Consistent and superior financial performance with a focus on long-term earnings per share and tangible book value growth Experienced and proven team with significant investment in bank Diversification of product mix and geography with asset generation capability Leading ma
Slide 36: Contact Information
CONTACT INFORMATION Christopher J. Murphy III Chairman of the Board, CEO and President (574) 235-2711 Murphy-c@1stsource.com Brett A. Bauer CFO and Treasurer (574) 235-2638 bauerb@1stsource.com 36page
Slide 37: Appendix
APPENDIX
Slide 38: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET 38page (Dollars in millions) 2019 2020 2021 2022 2023 YTD Cash and cash equivalents 83$ 243$ 525$ 123$ 94$ Investment securities and other investments* 1,069 1,225 1,890 1,800 1,739 Loans and leases, net of unearned discount 5,106 5,502 5,360 6,015 6,119 Allowance for loan
Slide 39: Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT 39page (Dollars in millions) 2019 2020 2021 2022 2022 YTD 2023 YTD Net interest income 224$ 226$ 237$ 263$ 59$ 70$ Provision (recovery of provision) for credit losses 16 36 (4) 13 2 3 Noninterest income* 76 83 86 81 20 21 Noninterest expense* 164 167 172 174 42 48 Incom
Slide 40: Aircraft Portfolio Industries by NAICS
40page Transportation & Warehousing 16% Finance & Insurance and Real Estate 18% Services 18% Retail Trade 7% Construction 13% Manufacturing 10% Ag, Forestry, Fishing & Hunting 10% Wholesale Trade 5% Other* 3% * Other includes: Mining, Utilities, and Information AIRCRAFT PORTFOLIO INDUSTRIES BY NAICS
Slide 41: Scheduled Maturities and Cash Flows of Securities
41page Less than 3 years 41% Over 3 years through 5 years 21% Over 5 years through 15 years 23% Over 15 years 15% SCHEDULED MATURITIES AND CASH FLOWS OF SECURITIES AVAILABLE-FOR-SALE *The Company does not hold any Held to Maturity Investment Securities
Slide 42: Asset Liability Management
65% 32% 3% 42page ASSET LIABILITY MANAGEMENT Asset-sensitive posture Positioned for higher interest rates • Variable rate loans reprice quickly — 91% of Variable reprice within 3 months • Fixed rate loans have short terms — 2.78 year weighted average remaining life — High proportion of equipment len
Slide 43: Ownership Summary
43page OWNERSHIP SUMMARY Institutional 10,769,752 43.6% Insiders 7,847,343 31.8% Retail/Other 5,325,251 21.6% 1st Source ESOP 753,206 3.0% Total Shares Outstanding(1) 24,695,552 100.0% Institution (Top 10 Institutions) Shares % of Total Dimensional Fund Advisors LP 1,654,221 6.7% BlackRock Inc. 1,46
Slide 44: Reconciliation of Non-GAAP Financial Measures
44page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Yield on Loans and Leases (Dollars in thousands) 2019 2020 2021 2022 2023 YTD (A) Loans and leases interest income (GAAP) 257,738$ 242,172$ 234,583$ 263,677$ 86,657$ (B) Plus: loans and leases fully tax-equivalent adjustments 375 33
Slide 45: Reconciliation of Non-GAAP Financial Measures
45page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Net Interest Margin (Dollars in thousands) 2019 2020 2021 2022 2022 YTD 2023 YTD (A) Interest income (GAAP) 282,877$ 263,031$ 254,772$ 293,816$ 62,049$ 94,456$ (B) Plus: fully tax-equivalent adjustments 686 543 459 628 108 226 (C) I
Slide 46: Reconciliation of Non-GAAP Financial Measures
46page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Efficiency Ratio (Dollars in thousands) 2019 2020 2021 2022 2022 YTD 2023 YTD (A) Net interest income (GAAP) 223,866$ 225,820$ 236,638$ 263,469$ 59,618$ 69,565$ (B) Net interest income - FTE 224,552 226,363 237,097 264,097 59,726 69
Slide 47: Reconciliation of Non-GAAP Financial Measures
47page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Tangible Book Value per Common Share (Dollars in thousands, except for per share data) 2016 2017 2018 2019 2020 2021 2022 2023 YTD (A) Total common shareholders' equity (GAAP) 672,650$ 718,537$ 762,082$ 828,277$ 886,845$ 916,255$ 86