Slide 1: Investor Presentation 3rd Quarter 2023
INVESTOR PRESENTATION 3rd 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 $8.5 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 $3.39 billion Community Bank Loans & Leases $2.99 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 98 Twenty-four-hour ATMs 9 Trust & Wealth Advisory locations with approximately $5.0 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% 63% 65% 16% 14% 13% 27% 23% 22% 0% 25% 50% 75% 100% Q3 21 Q3 22 Q3 23 Digital Adoption¹ Mobile & Online Online Only Non-Digital 21% 29% 31% 25% 22% 23% 34% 25% 25% 20% 24% 21% 0% 25% 50% 75% 100% Q3 21 Q3 22 Q3 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 37 business banking officers with an average 19 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 SBA Lender in our Indiana footprint #1 SBA Lender Headquartered in State of Indiana #1 Deposit share in our 16 contiguous county market #1 Lender of Community Development Loans (Total Dollars) in State of Indiana by Banks Headquarter
Slide 13: 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 14: Financial Review
FINANCIAL REVIEW
Slide 15: Core Deposit Franchise
15page 4502 5128 5987 6426 6114 775 609 356 285 806 0.96% 0.53% 0.19% 0.38% 1.63% 0.00% 0.90% 1.80% 2.70% 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 deposits
Slide 16: Diversified Deposit Mix
16page Time 24% Noninterest- bearing demand 24% Interest- bearing demand 35% Savings 17% Public Fund 18% Brokered 9% Business 27% Consumer (1) 46% (1) Includes business customer certificates of deposit which were immaterial Approximately 228,900 deposit accounts with an average balance of $30,400. A
Slide 17: Deposit Market Share
17page $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 June 17 June 18 June 19 June 20 June 21 June 22 June 23 1st Source Chase Lake City Bank Horizon Bank Fifth Third DEPOSIT MARKET SHARE 16 COUNTY CONTIGUOUS MARKET* Leading Market Share in Community Banking Markets
Slide 18: Growing Loan Portfolio
18page 5000 5463 5438 5567 6142 5.16% 4.44% 4.32% 4.74% 6.10% 3.75% 4.25% 4.75% 5.25% 5.75% 6.25% 6.75% 2500 4000 5500 7000 2019 2020 2021 2022 2023 YTD Loans & Leases ($MM) Yield on Loans & Leases - FTE (%)* GROWING LOAN PORTFOLIO Total Average Loans & Leases * See “Reconciliation of non-GAAP Finan
Slide 19: Diversified Loan Portfolio
19page 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 20: Strong Credit Quality
20page 2.19% 2.56% 2.38% 2.32% 2.27% 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% 0.27% 2019 2020 2021 2022 2023 YTD Low Nonperforming Assets 0.10% 0.17% 0.16% 0.03% -0.02% 2019 2020 2021 2022 2023 YTD Limited Losses
Slide 21: Net Income & Earnings Per Share
21page 92.0 81.4 118.5 120.5 89.4 96.5 3.57 3.17 4.70 4.84 3.59 3.87 $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 136.0 142.3 150.6 170.0 123.7 129.1 $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% 1.54% 9.69% 11.09% 11.50% 9.41% 13.07% 13.81% 14.04% 11.00% 12.50% 12.85% 10.42% 14.40% 15.28% 15.45% 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 224.6 226.4 237.1 264.1 192.4 207.9 3.68% 3.39% 3.23% 3.45% 3.37% 3.51% 2.25% 3.25% 4.25% 5.25% $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” i
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 15% Insurance Commissions 8% Mortgage Banking 4% Equipment Rental 2% DIVERSE SOURCES OF NONINTEREST INCOME Fair Value of Assets Under Management of $5.0B * Note: Equipment ren
Slide 26: Operating Expenses
26page 163.9 167.2 172.5 174.7 128.4 143.2 54.7% 54.2% 53.5% 51.1% 51.2% 53.5% 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 leas
Slide 27: Strong Capital Position
14.90% 15.99% 16.76% 16.10% 16.12% 2019 2020 2021 2022 2023 YTD 27page 12.19% 12.15% 11.89% 12.63% 13.02% 2019 2020 2021 2022 2023 YTD STRONG CAPITAL POSITION Tier 1 Leverage Ratio 13.64% 14.73% 15.50% 14.84% 14.86% 2019 2020 2021 2022 2023 YTD Tier 1 Risk Based Ratio Total Risk Based Capital Ratio
Slide 28: Long History of Conservative Capital
28page 16.12% 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 29: Tangible Book Value Per Common Share
29page $22.75 $24.47 $26.30 $29.18 $31.62 $33.64 $31.63 $34.40 $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 30: Common Dividends Per Share
30page 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 YTD COMMON DIVIDENDS PER SHARE 35 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 – October 12, 2023
Slide 33: Performance Financial
PERFORMANCE FINANCIAL 2019-2023 KBW Bank Honor Roll Fifth consecutive year named among top 5% of banks with more than $500 million in total assets and ten consecutive years of increased earnings per share 2023 Piper Sandler Sm-All Stars One of 31 banks/thrifts identified as a top performing small-ca
Slide 34: Investment Considerations
INVESTMENT CONSIDERATIONS Consistent and superior financial performance with a focus on long-term earnings per share and tangible book value growth Experienced and proven team with significant investment in bank Diversification of product mix and geography with asset generation capability Leading ma
Slide 35: Contact Information
CONTACT INFORMATION Christopher J. Murphy III Chairman of the Board, CEO and President (574) 235-2711 Murphy-c@1stsource.com Brett A. Bauer CFO and Treasurer (574) 235-2638 bauerb@1stsource.com 35page
Slide 36: Appendix
APPENDIX
Slide 37: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET 37page (Dollars in millions) 2019 2020 2021 2022 2023 YTD Cash and cash equivalents 83$ 243$ 525$ 123$ 111$ Investment securities and other investments* 1,069 1,225 1,890 1,800 1,630 Loans and leases, net of unearned discount 5,106 5,502 5,360 6,015 6,357 Allowance for loa
Slide 38: Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT 38page (Dollars in millions) 2019 2020 2021 2022 2022 YTD 2023 YTD Net interest income 224$ 226$ 237$ 263$ 192$ 207$ Provision (recovery of provision) for credit losses 16 36 (4) 13 8 4 Noninterest income* 76 83 86 81 60 65 Noninterest expense* 164 167 172 174 128 143 I
Slide 39: Aircraft Portfolio Industries by NAICS
39page Transportation & Warehousing 17% Finance & Insurance and Real Estate 17% Services 19% Retail Trade 8% Construction 13% Manufacturing 9% Ag, Forestry, Fishing & Hunting 9% Wholesale Trade 4% Other* 4% * Other includes: Mining, Utilities, and Information AIRCRAFT PORTFOLIO INDUSTRIES BY NAICS
Slide 40: Asset Liability Management
64% 33% 3% 40page Positioned for higher interest rates • Variable rate loans reprice quickly — 90% of Variable reprice within 3 months • Fixed rate loans have short terms — 2.73 year weighted average remaining life — High proportion of equipment lending • Stable, low-cost deposit funding base — 1.63
Slide 41: Ownership Summary
41page OWNERSHIP SUMMARY Institutional 11,007,279 45.1% Insiders 7,867,874 32.2% Retail/Other 4,816,615 19.7% 1st Source ESOP 737,315 3.0% Total Shares Outstanding(1) 24,429,083 100.0% Institution (Top 10 Institutions) Shares % of Total Dimensional Fund Advisors LP 1,597,542 6.5% BlackRock Inc. 1,40
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) 2019 2020 2021 2022 2023 YTD (A) Loans and leases interest income (GAAP) 257,738$ 242,172$ 234,583$ 263,677$ 280,081$ (B) Plus: loans and leases fully tax-equivalent adjustments 375 3
Slide 43: Reconciliation of Non-GAAP Financial Measures
43page 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$ 206,556$ 302,336$ (B) Plus: fully tax-equivalent adjustments 686 543 459 628 413 575 (C)
Slide 44: Reconciliation of Non-GAAP Financial Measures
44page 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$ 192,014$ 207,317$ (B) Net interest income - FTE 224,552 226,363 237,097 264,097 192,427
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) 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