Slide 1: Investor Presentation 4th Quarter 2023
INVESTOR PRESENTATION 4th 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 Founded in 1863 $8.7 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 Investm
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 $3.46 billion Community Bank Loans & Leases $3.08 billion
Slide 6: Business Mix
BUSINESS MIX Loans & Leases 6page COMMUNITY BANKING 47% SPECIALTY FINANCE 53% Business 75% Personal 25%
Slide 7: Community Banking
COMMUNITY BANKING 78 Banking Centers 97 Twenty-four-hour ATMs 9 Trust & Wealth Advisory locations with approximately $5.5 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 57% 60% 63% 65% 16% 15% 14% 13% 27% 25% 23% 22% 0% 25% 50% 75% 100% Q4 20 Q4 21 Q4 22 Q4 23 Digital Adoption¹ Mobile & Online Online Only Non-Digital 13% 24% 24% 31% 23% 29% 28% 24% 35% 23% 24% 25% 29% 24% 24% 20% 0% 25%
Slide 11: Instant Payments
page 11 INSTANT PAYMENTS Successfully launched instant payment systems Real Time Payments (RTP) and FedNow over three phases in 2023: • RTP Receive All deposit accounts eligible to receive funds through RTP • RTP Send (Pilot Mode) Send capability restricted to select businesses • FedNow Send/Rec
Slide 12: An Experienced and Proven Team
AN EXPERIENCED AND PROVEN TEAM Executive Team 6 executives with an average 35 years each of banking experience and 26 years with 1st Source Business Banking Officers 41 business banking officers with an average 20 years each of lending experience and with 1st Source from 1 to 34 years Specialty Fina
Slide 13: Performance: Client
PERFORMANCE CLIENT Indiana SBA Community Lender Award 2013-2023 #1 SBA Lender in our Indiana footprint #1 SBA Lender Headquartered in State of Indiana #1 Deposit share in our 16 contiguous county market #5 Lender of Community Development Loans (Total Dollars) in State of Indiana by Banks Headquarter
Slide 14: Performance: Leadership
PERFORMANCE LEADERSHIP Newsweek 2023 America’s Greatest Workplaces for Parents and Families Forbes’ Best in State Banks 2023 Indiana Rank #1 Forbes’ 500 Best Midsize Employers 2021-2023 Forbes’ 500 Best Employers for Diversity 2022 Notre Dame Lucy Family Institute for Data & Society 2023 Lucy Breakt
Slide 15: Financial Review
FINANCIAL REVIEW
Slide 16: Core Deposit Franchise
16page 4502 5128 5987 6426 6121 775 609 356 285 836 0.96% 0.53% 0.19% 0.38% 1.77% 0.00% 0.70% 1.40% 2.10% 2.80% 0 2,000 4,000 6,000 8,000 2019 2020 2021 2022 2023 Core Deposits ($MM) Non-core Deposits ($MM) Effective Rate on Deposits (%) CORE DEPOSIT FRANCHISE TOTAL AVERAGE DEPOSITS *Non-core deposi
Slide 17: Diversified Deposit Mix
17page Time 25% Noninterest- bearing demand 23% Interest- bearing demand 35% Savings 17% Public Fund 18% Brokered 9% Business 26% Consumer (1) 47% (1) Includes business customer certificates of deposit which were immaterial Approximately 228,300 deposit accounts with an average balance of $30,800. A
Slide 18: Deposit Market Share
18page $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 June 17 June 18 June 19 June 20 June 21 June 22 June 23 1st Source Chase Lake City Bank Horizon Bank Fifth Third DEPOSIT MARKET SHARE 16 COUNTY CONTIGUOUS MARKET* Leading Market Share in Community Banking Markets
Slide 19: Growing Loan Portfolio
19page 5000 5463 5438 5567 6204 5.16% 4.44% 4.32% 4.74% 6.25% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 7.00% 2500 4000 5500 7000 2019 2020 2021 2022 2023 Loans & Leases ($MM) Yield on Loans & Leases - FTE (%)* GROWING LOAN PORTFOLIO Total Average Loans & Leases * See “Reconciliation of non-GAAP Financial
Slide 20: Diversified Loan Portfolio
20page Commercial Real Estate 16% Residential Real Estate 10% Consumer 3% Medium and Heavy Duty Truck 5% Auto and Light Truck 14% Construction Equipment 16% Aircraft 17% Commercial and Agriculture 19% DIVERSIFIED LOAN PORTFOLIO 2023 Average Loans by Type
Slide 21: Strong Credit Quality
21page 2.19% 2.56% 2.38% 2.32% 2.26% 2019 2020 2021 2022 2023 STRONG CREDIT QUALITY % of Net Loans and Leases Loan & Lease Loss Allowance 0.37% 1.16% 0.77% 0.45% 0.37% 2019 2020 2021 2022 2023 Low Nonperforming Assets 0.10% 0.17% 0.16% 0.03% -0.04% 2019 2020 2021 2022 2023 Limited Losses Nonperformi
Slide 22: Net Income & Earnings Per Share
22page 92.0 81.4 118.5 120.5 124.9 3.57 3.17 4.70 4.84 5.03 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $0 $15 $30 $45 $60 $75 $90 $105 $120 $135 2019 2020 2021 2022 2023 Net Income ($MM) EPCS (Diluted) NET INCOME & EARNINGS PER SHARE
Slide 23: Pre-Tax, Pre-Provision Income
23page 136.0 142.3 150.6 170.0 167.6 $0 $50 $100 $150 $200 2019 2020 2021 2022 2023 PRE-TAX, PRE-PROVISION INCOME ($MM) *See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 24: Income Performance Metrics
24page 1.21% 1.34% 1.41% 1.14% 1.53% 1.49% 1.48% 9.69% 11.09% 11.50% 9.41% 13.07% 13.81% 13.48% 11.00% 12.50% 12.85% 10.42% 14.40% 15.28% 14.82% 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 R O AE a nd R O AT E R O AA Return on Average Assets Return on A
Slide 25: Net Interest Margin (FTE)
25page 224.6 226.4 237.1 264.1 279.4 3.68% 3.39% 3.23% 3.45% 3.51% 2.25% 3.25% 4.25% 5.25% $0 $60 $120 $180 $240 $300 2019 2020 2021 2022 2023 Net Interest Income ($MM) Net Interest Margin (%) NET INTEREST MARGIN (FTE)* * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 26: Diverse Sources of Noninterest Income
26page Trust, Wealth Advisory, and Retirement Plan Services 29% Other 20% Debit Card 22% Service Charges on Deposit Accounts 15% Insurance Commissions 8% Mortgage Banking 4% Equipment Rental 2% DIVERSE SOURCES OF NONINTEREST INCOME Fair Value of Assets Under Management of $5.5B * Note: Equipment ren
Slide 27: Operating Expenses
27page 163.9 167.2 172.5 174.7 194.6 54.7% 54.2% 53.5% 51.1% 54.2% 40.0% 50.0% 60.0% 70.0% 80.0% $0.0 $70.0 $140.0 $210.0 2019 2020 2021 2022 2023 Noninterest Expense ($MM)* Efficiency - Adjusted (%)* OPERATING EXPENSES * Note: Noninterest expense is shown net of leased equipment depreciation. See “
Slide 28: Strong Capital Position
14.90% 15.99% 16.76% 16.10% 16.25% 2019 2020 2021 2022 2023 28page 12.19% 12.15% 11.89% 12.63% 13.26% 2019 2020 2021 2022 2023 STRONG CAPITAL POSITION Tier 1 Leverage Ratio 13.64% 14.73% 15.50% 14.84% 14.99% 2019 2020 2021 2022 2023 Tier 1 Risk Based Ratio Total Risk Based Capital Ratio Tangible Com
Slide 29: Long History of Conservative Capital
29page 16.25% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 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 $37.06 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 2016 2017 2018 2019 2020 2021 2022 2023 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 1.300 $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 COMMON DIVIDENDS PER SHARE 36 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 – January 18, 2024
Slide 34: Performance: Financial
PERFORMANCE FINANCIAL 2019-2023 KBW Bank Honor Roll Fifth consecutive year named among top 5% of banks with more than $500 million in total assets and ten consecutive years of increased earnings per share 2023 Piper Sandler Sm-All Stars One of 31 banks/thrifts identified as a top performing small-ca
Slide 35: Investment Considerations
INVESTMENT CONSIDERATIONS Consistent and superior financial performance with a focus on long-term earnings per share and tangible book value growth Experienced and proven team with significant investment in bank Diversification of product mix and geography with asset generation capability Leading ma
Slide 36: Contact Information
CONTACT INFORMATION Christopher J. Murphy III Chairman of the Board, President and CEO 1st Source Corporation (574) 235-2711 Murphy-c@1stsource.com Andrea G. Short President and CEO 1st Source Bank (574) 235-2348 shorta@1stsource.com Brett A. Bauer CFO and Treasurer (574) 235-2638 bauerb@1stsource.c
Slide 37: Appendix
APPENDIX
Slide 38: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET 38page (Dollars in millions) 2019 2020 2021 2022 2023 Cash and cash equivalents 83$ 243$ 525$ 123$ 130$ Investment securities and other investments* 1,069 1,225 1,890 1,800 1,648 Loans and leases, net of unearned discount 5,106 5,502 5,360 6,015 6,520 Allowance for loan an
Slide 39: Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT 39page (Dollars in millions) 2019 2020 2021 2022 2023 Net interest income 224$ 226$ 237$ 263$ 279$ Provision (recovery of provision) for credit losses 16 36 (4) 13 6 Noninterest income* 76 83 86 81 84 Noninterest expense* 164 167 172 174 195 Income before income taxes 1
Slide 40: Aircraft Portfolio Industries by NAICS
40page Transportation & Warehousing 17% Finance & Insurance and Real Estate 18% Services 19% Retail Trade 7% Construction 13% Manufacturing 9% Ag, Forestry, Fishing & Hunting 8% Wholesale Trade 4% Other* 5% * Other includes: Mining, Utilities, and Information AIRCRAFT PORTFOLIO INDUSTRIES BY NAICS
Slide 41: Asset Liability Management
63% 34% 3% 41page Interest Rate Risk Characteristics • Variable rate loans reprice quickly — 91% of Variable reprice within 3 months • Fixed rate loans have short terms — 2.76 year weighted average remaining life — High proportion of equipment lending • Stable, low-cost deposit funding base — 1.77%
Slide 42: Ownership Summary
42page OWNERSHIP SUMMARY Institutional 10,857,320 44.4% Insiders 7,802,652 31.9% Retail/Other 5,067,228 20.8% 1st Source ESOP 707,404 2.9% Total Shares Outstanding(1) 24,434,604 100.0% Institution (Top 10 Institutions) Shares % of Total Dimensional Fund Advisors LP 1,591,256 6.5% BlackRock Inc. 1,36
Slide 43: Reconciliation of Non-GAAP Financial Measures
43page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Yield on Loans and Leases (Dollars in thousands) 2019 2020 2021 2022 2023 (A) Loans and leases interest income (GAAP) 257,738$ 242,172$ 234,583$ 263,677$ 387,143$ (B) Plus: loans and leases fully tax-equivalent adjustments 375 333 3
Slide 44: Reconciliation of Non-GAAP Financial Measures
44page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Net Interest Margin (Dollars in thousands) 2019 2020 2021 2022 2023 (A) Interest income (GAAP) 282,877$ 263,031$ 254,772$ 293,816$ 416,907$ (B) Plus: fully tax-equivalent adjustments 686 543 459 628 741 (C) Interest income - FTE (A+
Slide 45: Reconciliation of Non-GAAP Financial Measures
45page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Efficiency Ratio (Dollars in thousands) 2019 2020 2021 2022 2023 (A) Net interest income (GAAP) 223,866$ 225,820$ 236,638$ 263,469$ 278,647$ (B) Net interest income - FTE 224,552 226,363 237,097 264,097 279,388 (C) Plus: noninterest
Slide 46: Reconciliation of Non-GAAP Financial Measures
46page 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 (A) Total common shareholders' equity (GAAP) 672,650$ 718,537$ 762,082$ 828,277$ 886,845$ 916,255$ 864,06