Slide 1: Investor Presentation 4th Quarter 2022
INVESTOR PRESENTATION 4th Quarter 2022 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 $3.17 billion Community Bank Loans & Leases $2.88 billion
Slide 6: Business Mix
BUSINESS MIX Loans & Leases 6page COMMUNITY BANKING 48% SPECIALTY FINANCE 52% 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 $4.8 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% 16% 15% 14% 27% 25% 23% 0% 25% 50% 75% 100% Q4 20 Q4 21 Q4 22 Digital Adoption¹ Mobile & Online Online Only Non-Digital 13% 24% 48%23% 29% 26% 35% 23% 18%29% 24% 8% 0% 25% 50% 75% 100% Q4 20 Q4 21 Q4 22 Servic
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 39 business banking officers with an average 18 years each of lending experience and with 1st Source from 1 to 33 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 2021-2022 Forbes’ 500 Best Employers for Diversity 2022 Indianapolis Business Journal’s 250 Most Influential Business Leaders Christopher J. Murphy III CEO and Chairman of the Board Tracy D. Graham Boa
Slide 14: Financial Review
FINANCIAL REVIEW
Slide 15: Growing Loan Portfolio
15page 4755 5000 5463 5438 5567 4.93% 5.16% 4.44% 4.32% 4.74% 3.75% 4.25% 4.75% 5.25% 5.75% 6.25% 2000 3500 5000 6500 2018 2019 2020 2021 2022 Loans & Leases ($MM) Yield on Loans & Leases - FTE (%)* GROWING LOAN PORTFOLIO Total Average Loans & Leases * See “Reconciliation of non-GAAP Financial Measu
Slide 16: Diversified Loan Portfolio
16page Commercial Real Estate 17% Residential Real Estate 10% Consumer 3% Medium and Heavy Duty Truck 5% Auto and Light Truck 12%Construction Equipment 15% Aircraft 17% Solar 6% Commercial and Agriculture 15% DIVERSIFIED LOAN PORTFOLIO 2022 Average Loans by Type
Slide 17: Strong Credit Quality
17page 2.08% 2.19% 2.56% 2.38% 2.32% 2018 2019 2020 2021 2022 STRONG CREDIT QUALITY % of Net Loans and Leases Loan & Lease Loss Allowance 0.71% 0.37% 1.16% 0.77% 0.45% 2018 2019 2020 2021 2022 Low Nonperforming Assets 0.29% 0.10% 0.17% 0.16% 0.03% 2018 2019 2020 2021 2022 Limited Losses Nonperformin
Slide 18: Core Deposit Franchise
18page 4277 4502 5128 5987 6426 687 775 609 356 285 0.70% 0.96% 0.53% 0.19% 0.38% 0.00% 0.50% 1.00% 1.50% 2.00% 0 2,000 4,000 6,000 8,000 2018 2019 2020 2021 2022 Core Deposits ($MM) Non-core Deposits ($MM) Effective Rate on Deposits (%) CORE DEPOSIT FRANCHISE TOTAL AVERAGE DEPOSITS *Non-core deposi
Slide 19: Attractive Deposit Franchise
19page Noninterest Bearing Demand 30% CD and IRA 13% Savings and Interest Bearing Demand 57% ATTRACTIVE DEPOSIT FRANCHISE 2022 Average Deposits By Type
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 82.4 92.0 81.4 118.5 120.5 3.16 3.57 3.17 4.70 4.84 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $0 $15 $30 $45 $60 $75 $90 $105 $120 $135 2018 2019 2020 2021 2022 Net Income ($MM) EPCS (Diluted) NET INCOME & EARNINGS PER SHARE
Slide 22: Pre-Tax, Pre-Provision Income
22page 124.5 136.0 142.3 150.6 170.0 $0 $50 $100 $150 $200 2018 2019 2020 2021 2022 PRE-TAX, PRE-PROVISION INCOME ($MM) *See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 23: Income Performance Metrics
23page 1.08% 1.21% 1.34% 1.41% 1.14% 1.53% 1.49%8.71% 9.69% 11.09% 11.50% 9.41% 13.07% 13.81% 9.98% 11.00% 12.50% 12.85% 10.42% 14.40% 15.28% 4.00% 8.00% 12.00% 16.00% 0.60% 1.20% 1.80% 2.40% 3.00% 2016 2017 2018 2019 2020 2021 2022 R O AE a nd R O AT E R O AA Return on Average Assets Return on Aver
Slide 24: Net Interest Margin (FTE)
24page 214.7 224.6 226.4 237.1 264.1 3.73% 3.68% 3.39% 3.23% 3.45% 2.00% 3.00% 4.00% 5.00% $0 $60 $120 $180 $240 $300 2018 2019 2020 2021 2022 Net Interest Income ($MM) Net Interest Margin (%) NET INTEREST MARGIN (FTE)* * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 25: Diverse Sources of Noninterest Income
25page Trust, Wealth Advisory, and Retirement Plan Services 28% Other 19% Debit Card 22% Service Charges on Deposit Accounts 15% Insurance Commissions 8% Mortgage Banking 5% Equipment Rental 3% DIVERSE SOURCES OF NONINTEREST INCOME Fair Value of Assets Under Management of $4.8B * Note: Equipment ren
Slide 26: Operating Expenses
26page 160.2 163.9 167.2 172.5 174.7 56.2% 54.7% 54.2% 53.5% 51.1% 40.0% 50.0% 60.0% 70.0% 80.0% $0.0 $50.0 $100.0 $150.0 $200.0 2018 2019 2020 2021 2022 Noninterest Expense ($MM)* Efficiency - Adjusted (%)* OPERATING EXPENSES * Note: Noninterest expense is shown net of leased equipment depreciation
Slide 27: Strong Capital Position
14.68% 14.90% 15.99% 16.76% 16.10% 2018 2019 2020 2021 2022 27page 12.06% 12.19% 12.15% 11.89% 12.63% 2018 2019 2020 2021 2022 STRONG CAPITAL POSITION Tier 1 Leverage Ratio 13.42% 13.64% 14.73% 15.50% 14.84% 2018 2019 2020 2021 2022 Tier 1 Risk Based Ratio Total Risk Based Capital Ratio Tangible Com
Slide 28: Tangible Book Value per Common Share
28page $21.49 $22.75 $24.47 $26.30 $29.18 $31.62 $33.64 $31.63 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 2015 2016 2017 2018 2019 2020 2021 2022 TANGIBLE BOOK VALUE PER COMMON SHARE* * See “Reconciliation of non-GAAP Financial Measures” in Appendix.
Slide 29: Common Dividends per Share
29page 0.600 0.618 0.645 0.671 0.720 0.760 0.960 1.100 1.130 1.210 1.260 $0.000 $0.200 $0.400 $0.600 $0.800 $1.000 $1.200 $1.400 $1.600 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 COMMON DIVIDENDS PER SHARE 35 YEARS OF CONSECUTIVE DIVIDEND GROWTH
Slide 30: Delivering Returns to Shareholders
30page DELIVERING RETURNS TO SHAREHOLDERS Value of $100 Invested in 1st Source since 1971 Inception with Dividends Reinvested vs. Total Return of Stock Indices
Slide 31: Delivering Returns to Shareholders
31page DELIVERING RETURNS TO SHAREHOLDERS December 31, 2007 – January 20, 2023
Slide 32: Performance: Financial
PERFORMANCE FINANCIAL 2019-2022 KBW Bank Honor Roll Fourth 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 $50 billion in assets – Bank Performance Scorecard by
Slide 33: Investment Considerations
INVESTMENT CONSIDERATIONS Consistent and superior financial performance with a focus on long-term earnings per share and tangible book value growth Experienced and proven team with significant investment in bank Diversification of product mix and geography with asset generation capability Leading ma
Slide 34: Contact Information
CONTACT INFORMATION Christopher J. Murphy III Chairman of the Board, CEO and President (574) 235-2711 Murphy-c@1stsource.com Brett A. Bauer CFO and Treasurer (574) 235-2638 bauerb@1stsource.com 34page
Slide 35: Appendix
APPENDIX
Slide 36: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET 36page (Dollars in millions) 2018 2019 2020 2021 2022 Cash and cash equivalents 99$ 83$ 243$ 525$ 123$ Investment securities and other investments 1,019 1,069 1,225 1,890 1,800 Loans and leases, net of unearned discount 4,847 5,106 5,502 5,360 6,015 Allowance for loan and
Slide 37: Consolidated Income Statement
CONSOLIDATED INCOME STATEMENT 37page (Dollars in millions) 2018 2019 2020 2021 2022 Net interest income 214$ 224$ 226$ 237$ 263$ Provision (recovery of provision) for credit losses 19 16 36 (4) 13 Noninterest income* 70 76 83 86 81 Noninterest expense* 160 164 167 172 174 Income before income taxes
Slide 38: Aircraft Portfolio Industries by NAICS
38page Transportation & Warehousing 17% Finance & Insurance and Real Estate 18% Services 18% Retail Trade 7% Construction 13% Manufacturing 10% Ag, Forestry, Fishing & Hunting 10% Wholesale Trade 4% Other* 3% * Other includes: Mining, Utilities, and Information AIRCRAFT PORTFOLIO INDUSTRIES BY NAICS
Slide 39: Ownership Summary
39page OWNERSHIP SUMMARY Institutional 10,726,546 43.5% Insiders 7,816,220 31.7% Retail/Other 5,389,369 21.8% 1st Source ESOP 730,151 3.0% Total Shares Outstanding(1) 24,662,286 100.0% Institution (Top 10 Institutions) Shares % of Total Dimensional Fund Advisors LP 1,658,595 6.8% BlackRock Inc. 1,41
Slide 40: Asset Liability Management
65% 32% 3% 40page 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 — 2.82 year weighted average remaining life — High proportion of equipment len
Slide 41: Reconciliation of Non-GAAP Financial Measures
41page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Yield on Loans and Leases (Dollars in thousands) 2018 2019 2020 2021 2022 (A) Loans and leases interest income (GAAP) 234,083$ 257,738$ 242,172$ 234,583$ 263,677$ (B) Plus: loans and leases fully tax-equivalent adjustments 367 375 3
Slide 42: Reconciliation of Non-GAAP Financial Measures
42page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Net Interest Margin (Dollars in thousands) 2018 2019 2020 2021 2022 (A) Interest income (GAAP) 257,316$ 282,877$ 263,031$ 254,772$ 293,816$ (B) Plus: fully tax-equivalent adjustments 803 686 543 459 628 (C) Interest income - FTE (A+
Slide 43: Reconciliation of Non-GAAP Financial Measures
43page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Efficiency Ratio (Dollars in thousands) 2018 2019 2020 2021 2022 (A) Net interest income (GAAP) 213,906$ 223,866$ 225,820$ 236,638$ 263,469$ (B) Net interest income - FTE 214,709 224,552 226,363 237,097 264,097 (C) Plus: noninterest
Slide 44: Reconciliation of Non-GAAP Financial Measures
44page RECONCILIATION OF NON-GAAP FINANCIAL MEASURES Calculation of Tangible Book Value per Common Share (Dollars in thousands, except for per share data) 2015 2016 2017 2018 2019 2020 2021 2022 (A) Total common shareholders' equity (GAAP) 644,053$ 672,650$ 718,537$ 762,082$ 828,277$ 886,845$ 916,25