EX-99.2 3 exh992earningsrelease4q1.htm EXHIBIT 99.2
Earnings Presentation Fourth Quarter 2017 Exhibit 99.2

2 Certain statements contained in this report which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, certain plans, expectations, goals, projections and benefits relating to the transaction between the Company and MainSource, which are subject to numerous assumptions, risks and uncertainties. Words such as „„believes,‟‟ „„anticipates,‟‟ “likely,” “expected,” “estimated,” „„intends‟‟ and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Examples of forward-looking statements include, but are not limited to, statements we make about (i) our future operating or financial performance, including revenues, income or loss and earnings or loss per share, (ii) future common stock dividends, (iii) our capital structure, including future capital levels, (iv) our plans, objectives and strategies, and (v) the assumptions that underlie our forward-looking statements. As with any forecast or projection, forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that may cause actual results to differ materially from those set forth in the forward-looking statements. Forward-looking statements are not historical facts but instead express only management‟s beliefs regarding future results or events, many of which, by their na ture, are inherently uncertain and outside of the management‟s control. It is possible that actual results and outcomes may differ, possibly materially, from the anticipated results or outcomes indicated in these forward-looking statements. Important factors that could cause actual results to differ materially from those in our forward-looking statements include the following, without limitation: (i) economic, market, liquidity, credit, interest rate, operational and technological risks associated with the Company‟s business; (ii) the effect of and changes in policies and laws or regulatory agencies, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and other legislation and regulation relating to the banking industry; (iii) management‟s ability to effectively execute its business plans; (iv) mergers and acquisitions, including costs or difficulties related to the integration of acquired companies; (v) the Company‟s ability to comply with the terms of loss sharing agreements with the FDIC; (vi) the effect of changes in accounting policies and practices; (vii) changes in consumer spending, borrowing and saving and changes in unemployment; (viii) changes in customers‟ performance and creditworthiness; and (ix) the costs and effects of litigation and of unexpected or adverse outcomes in such litigation. Additional factors that may cause our actual results to differ materially from those described in our forward-looking statements can be found in the Form 10-K for the year ended December 31, 2016, as well as its other filings with the SEC, which are available on the SEC website at www.sec.gov. Statements concerning the potential merger of the Company and MainSource may also be forward-looking statements. Please refer to each of the Company‟s and MainSource‟s Annual Report on Form 10-K for the year ended December 31, 2016, as well as their other filings with the SEC, for a more detailed discussion of risks, uncertainties and factors that could cause actual results to differ from those discussed in the forward-looking statements. In addition to factors previously disclosed in reports filed by the Company and MainSource with the SEC, risks and uncertainties for the Company, MainSource and the combined company include, but are not limited to: the possibility that any of the anticipated benefits of the proposed Merger will not be realized or will not be realized within the expected time period; the risk that integration of MainSource's operations with those of the Company will be materially delayed or will be more costly or difficult than expected; the inability to close the Merger in a timely manner; diversion of management's attention from ongoing business operations and opportunities; the failure to satisfy other conditions to completion of the , including receipt of required regulatory and other approvals; the failure of the proposed Merger to close for any other reason; the challenges of integrating and retaining key employees; the effect of the announcement of the Merger on the Company‟s, MainSource‟s or the combined company's respective customer relationships and operating results; the possibility that the Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; and general competitive, economic, political and market conditions and fluctuations. All forward-looking statements included in this filing are made as of the date hereof and are based on information available at the time of the filing. Except as required by law, neither the Company nor MainSource assumes any obligation to update any forward-looking statement. Forward Looking Statement Disclosure

3 4Q 2017 Highlights – 109th Consecutive Quarter of Profitability Total assets increased $135.2 million, to $8.9 billion, or 6.1% annualized, compared to the linked quarter. EOP loans increased $36.1 million, or 2.4% annualized, compared to the linked quarter. EOP deposits increased $169.0 million, or 10.0% annualized, compared to the linked quarter. EOP investment securities increased $46.8 million, or 9.2% annualized, compared to the linked quarter. Balance Sheet Profitability Asset Quality Income Statement Capital Noninterest income = $18.4 million. Noninterest expense = $82.9 million. Efficiency ratio = 88.2%. Adjusted efficiency ratio = 58.0%2 Effective tax rate of (119.5)%. Adjusted effective tax rate of 30.2%2 Net interest income = $75.6 million, a $5.1 million increase compared to the linked quarter. Net interest margin of 3.75% on a GAAP basis; 3.82% on a fully tax equivalent basis, a 25 bp increase from the linked quarter. Average earning assets grew 4.8% on an annualized basis. Net income = $24.8 million or $0.40 per diluted share. Adjusted net income = $27.7 million or $0.45 per diluted share2 Return on average assets = 1.13%. Adjusted return on average assets = 1.26%2 Return on average shareholders‟ equity = 10.70%. Adjusted return on average shareholders‟ equity = 11.95%2 Return on average tangible common equity = 13.85%1. Adjusted return on average tangible common equity = 15.46%2 Provision expense = $(0.2) million. Net charge offs = $0.3 million. NCOs / Avg. Loans = 0.02% annualized. Nonperforming Loans / Total Loans = 0.69%. Nonperforming Assets / Total Assets = 0.50%. ALLL / Nonaccrual Loans = 224.32%. ALLL / Total Loans = 0.90%. Classified Assets / Total Assets = 0.98%. Total capital ratio = 13.02%. Tier 1 capital ratio = 10.59%. Tangible common equity ratio = 8.30%. Tangible book value per share = $11.62. 1) See Appendix for non-GAAP reconciliation 2) See Slide 4 for Adjusted Earnings detail.

4 Adjusted Net Income* * See appendix for non-GAAP reconciliation All dollars shown in thousands, except per share amounts The table below lists certain items that we believe are significant to understanding our quarterly performance. 4Q 2017 As Reported Adjusted Net interest income $ 75,614 $ 75,614 Provision for loan and lease losses $ (205) $ (205) Noninterest income $ 18,382 $ 18,382 less: gains on sale of investment securities 19 A Total noninterest income $ 18,382 $ 18,363 Noninterest expense $ 82,898 $ 82,898 less: historic tax credit investment write-down 11,328 A less: merger-related expenses 8,444 A less: indemnification asset impairment 1 5,055 A less: charitable foundation contribution 3,000 A less: branch consolidation acitivities 577 A Total noninterest expense $ 82,898 $ 54,494 Income before income taxes $ 11,303 $ 39,688 Income tax expense $ (13,508) $ (13,508) plus: tax effect of adjustments (A) @ 35% statutory rate 9,935 plus: tax reform impact on DTLs & tax partnerships 8,191 plus: after-tax impact of historic tax credit write-down @ 35% 7,363 Total income tax expense $ (13,508) $ 11,981 Net income $ 24,811 $ 27,707 Net earnings per share - diluted $ 0.40 $ 0.45 1 - Impairment charge related to preliminary agreement to terminate FDIC loss sharing agreements. $0.45 $0.39 $0.36 $0.39 $0.38 4Q173Q172Q171Q174Q16 Adjusted EPS 1.26% 1.11% 1.06% 1.16% 1.11% 4Q173Q172Q171Q174Q16 Adjusted ROA 15.5% 13.9% 13.4% 14.7% 14.2% 4Q173Q172Q171Q174Q16 Adjusted ROTCE 58.0% 57.0% 59.7% 59.6% 57.4% 4Q173Q172Q171Q174Q16 Adjusted Efficiency Ratio

5 Net Interest Income / Net Interest Margin 1 Gross loans include loans held for sale & FDIC indemnification asset All dollars shown in millions Net Interest Income Average Loans1 Average Securities Average Deposits 1 $75.6 $70.5 $68.5 $68.9 $70.2 3.82% 3.57% 3.56% 3.70% 3.71% 4Q173Q172Q171Q174Q16 Net Interest Income Net Interest Margin (FTE) $5,960 $5,911 $5,800 $5,748 $5,794 4.90% 4.71% 4.61% 4.64% 4.57% 4Q173Q172Q171Q174Q16 Gross Loans Loan Yield $2,020 $2,042 $2,035 $1,907 $1,817 2.90% 2.85% 2.77% 2.76% 2.58% 4Q173Q172Q171Q174Q16 Average Investment Securities Investment Securities Yield 24% 23% 23% 23% 24% 22% 22% 23% 23% 23% 37% 37% 37% 35% 32% 17% 18% 18% 19% 21% $6,840 $6,680 $6,570 $6,442 $6,557 0.54% 0.61% 0.53% 0.44% 0.37% 4Q173Q172Q171Q174Q16 Avg NIB Demand Avg IB Demand Avg Savings Avg Time Cost of Deposits

6 Net Interest Margin Net Interest Margin (FTE) 4Q17 NIM (FTE) Progression 3.58% 3.43% 3.41% 3.48% 3.48% 0.24% 0.14% 0.15% 0.22% 0.23% 3.82% 3.57% 3.56% 3.70% 3.71% 4Q173Q172Q171Q174Q16 Basic Margin (FTE) Loan Fees 3Q17 3.57% Earning asset mix 0.05% Interest recapture 0.02% Interest recapture from loans previously classified as nonaccrual Loan fees 0.10% Predominately loan prepayment fees Asset Drivers 0.17% Deposit Cost 0.06% Impact from deposit pricing strategies implemented in 3Q17 Funding Mix 0.02% Favorable mix shift toward lower cost deposits Liability Drivers 0.08% 4Q17 3.82%

7 Loan Portfolio Loan Product Mix (EOP) Net Loan Change (Linked Quarter) * Includes residential mortgage, home equity, installment, & credit card loans. All dollars shown in millions Net Loan Change (Year-over-year) 33% 33% 33% 32% 33% 11% 12% 12% 12% 13% 30% 30% 30% 29% 29% 8% 7% 8% 8% 7% 18% 18% 18% 18% 18% $6,013 $5,977 $5,874 $5,754 $5,757 4Q173Q172Q171Q174Q16 Commercial & Leasing Owner Occupied CRE Investor CRE Construction Consumer Lending* $30.0 -$18.4 $3.1 -$14.9 $43.7 -$7.3 Commercial & Leasing Owner Occupied CRE Owner Occupied Construction Investor CRE Investor Construction Consumer Lending* $127.0 -$65.2 -$18.1 $127.7 $86.4 -$2.1 Commercial & Leasing Owner Occupied CRE Owner Occupied Construction Investor CRE Investor Construction Consumer Lending*

8 Asset Quality Nonperforming Assets / Total Assets Classified Assets / Total Assets Allowance / Total Loans Net Charge Offs & Provision Expense All dollars shown in millions $87.3 $94.3 $98.4 $114.6 $125.2 0.98% 1.08% 1.13% 1.34% 1.48% 4Q173Q172Q171Q174Q16 Classified Assets Classified Assets / Total Assets $44.4 $52.9 $62.7 $68.4 $54.3 0.50% 0.60% 0.72% 0.80% 0.64% 4Q173Q172Q171Q174Q16 NPAs NPAs / Total Assets $54.0 $54.5 $54.9 $56.3 $58.0 0.90% 0.91% 0.93% 0.98% 1.01% 4Q173Q172Q171Q174Q16 Allowance for Loan Losses ALLL / Total Loans $0.3 $3.3 $1.9 $2.0 $2.4 -$0.2 $3.0 $0.5 $0.4 $2.8 0.02% 0.22% 0.13% 0.14% 0.17% 4Q173Q172Q171Q174Q16 NCOs Provision Expense NCOs / Average Loans

9 Capital Tier 1 Common Equity Tangible Book Value Total Capital Tangible Common Equity All capital numbers are considered preliminary All dollars shown in millions $929.1 $920.6 $905.2 $892.2 $881.2 13.02% 12.98% 13.05% 13.19% 13.10% 12.50% 4Q173Q172Q171Q174Q16 Total Capital Total Capital Ratio Target $755.7 $746.7 $731.0 $716.7 $703.9 10.59% 10.53% 10.54% 10.59% 10.46% 4Q173Q172Q171Q174Q16 Tier 1 Common Equity Tier 1 Common Ratio Target $721.3 $705.2 $688.1 $669.7 $654.6 $11.62 $11.36 $11.07 $10.78 $10.56 4Q173Q172Q171Q174Q16 Tangible Book Value Tangible Book Value per Share $721.3 $705.2 $688.1 $669.7 $654.6 8.30% 8.25% 8.09% 8.05% 7.96% 4Q173Q172Q171Q174Q16 Tangible Book Value Tangible Common Ratio

10 Outlook Taxes Full year 2018 loan growth expected to be in the mid-single digits on a percentage basis 1Q18 NIM (FTE) projected to be 3.70% – 3.75% Includes lower FTE adjustment due to tax reform 1Q18 loan fees likely to approximate 2Q17 & 3Q17 levels 1Q18 interest income will reflect 2 fewer days vs. 4Q17 Asset sensitive balance sheet, realization dependent on loan & deposit competition Noninterest expense base of approximately $51 million near-term, excluding one time expenses 4Q17 noninterest expense includes approximately $4 million related to higher incentive compensation and performance based 401(k) contribution Noninterest Expense Net Interest Margin Balance Sheet Preliminary full year 2018 effective tax rate of approximately 21% Will continue to refine as tax reform guidance becomes available 4Q17 adjusted earnings1 included $1.1 million net, after-tax benefit from historic tax credit investment realized during the period Credit Stable credit outlook Loan losses expected to revert to historical levels over time 1 See slide 4 for further detail.

11 MainSource Merger Update Regulatory & Shareholder Approval Merger Integration Financial Considerations Shareholders approved on December 4, 2017 Regulatory applications completed – September 2017 Phase 1 substantially complete Technology Assessment – Complete Organization Structure / Staffing Assessment – Complete Contract Negotiations / Terminations – In Process; mostly complete Phase 2 ongoing Cross-company action teams actively engaged across all functional areas Formed First Financial Foundation in December 2017 $3 million contribution to First Financial Foundation in 4Q 2017 Community Investment Plan No significant changes to financial considerations at this time Merger Timeline Expected close 1Q 2018 Expected conversion mid to late 2Q 2018

12 Appendix: Non-GAAP to GAAP Reconciliation Net interest income and net interest margin - fully tax equivalent Dec. 31, Sep. 30, June 30, Mar. 31, Dec. 31, Dec. 31, Dec. 31, 2017 2017 2017 2017 2016 2017 2016 Net interest income 75,614$ 70,479$ 68,520$ 68,932$ 70,166$ 283,545$ 272,671$ Tax equivalent adjustment 1,387 1,353 1,294 1,225 1,077 5,259 4,215 Net interest income - tax equivalent 77,001$ 71,832$ 69,814$ 70,157$ 71,243$ 288,804$ 276,886$ Average earning assets 8,005,100$ 7,989,969$ 7,855,564$ 7,695,717$ 7,630,148$ 7,887,718$ 7,524,233$ Net interest margin* 3.75 % 3.50 % 3.50 % 3.63 % 3.66 % 3.59 % 3.62 % Net interest margin (fully tax equivalent)* 3.82 % 3.57 % 3.56 % 3.70 % 3.71 % 3.66 % 3.68 % Three months ended YTD * Margins are calculated using net interest income annualized divided by average earning assets. The earnings press release and accompanying presentation include certain non-GAAP ratios, such as net interest income-tax equivalent. The tax equivalent adjustment to net interest income recognizes the income tax savings when comparing taxable and tax-exempt assets and assumes a 35% tax rate. Management believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully tax equivalent basis. Therefore, management believes these measures provide useful information to investors by allowing them to make peer comparisons. Management also uses these measures to make peer comparisons.

13 Appendix: Non-GAAP to GAAP Reconciliation Additional non-GAAP ratios Dec. 31, Sep. 30, June 30, Mar. 31, Dec. 31, Dec. 31, Dec. 31, (Dollars in thousands, except per share data) 2017 2017 2017 2017 2016 2017 2016 Net income (a) 24,811$ 24,826$ 22,736$ 24,414$ 23,294$ 96,787$ 88,526$ Average total shareholders' equity 920,194 908,057 889,604 871,215 863,509 897,431 844,784 Less: Goodw ill and other intangibles (209,379) (209,730) (210,045) (210,324) (210,625) (209,379) (210,625) Average tangible equity (b) 710,815 698,327 679,559 660,891 652,884 688,052 634,159 Total shareholders' equity 930,664 914,954 898,117 880,065 865,224 930,664 865,224 Less: Goodw ill and other intangibles (209,379) (209,730) (210,045) (210,324) (210,625) (209,379) (210,625) Ending tangible equity (c) 721,285 705,224 688,072 669,741 654,599 721,285 654,599 Total assets 8,896,923 8,761,689 8,710,042 8,531,170 8,437,967 8,896,923 8,437,967 Less: Goodw ill and other intangibles (209,379) (209,730) (210,045) (210,324) (210,625) (209,379) (210,625) Ending tangible assets (d) 8,687,544 8,551,959 8,499,997 8,320,846 8,227,342 8,687,544 8,227,342 Risk-w eighted assets (e) 7,134,085 7,090,714 6,936,665 6,765,336 6,728,737 7,134,085 6,728,737 Total average assets 8,731,956 8,716,917 8,582,961 8,409,071 8,359,912 8,611,403 8,251,703 Less: Goodw ill and other intangibles (209,379) (209,730) (210,045) (210,324) (210,625) (209,379) (210,625) Average tangible assets (f) 8,522,577$ 8,507,187$ 8,372,916$ 8,198,747$ 8,149,287$ 8,402,024$ 8,041,078$ Ending shares outstanding (g) 62,069,087 62,061,465 62,141,071 62,134,285 61,979,552 62,069,087 61,979,552 Ratios Return on average tangible shareholders' equity (a)/(b) 13.85% 14.10% 13.42% 14.98% 14.19% 14.07% 13.96% Ending tangible equity as a percent of: Ending tangible assets (c)/(d) 8.30% 8.25% 8.09% 8.05% 7.96% 8.30% 7.96% Risk-w eighted assets (c)/(e) 10.11% 9.95% 9.92% 9.90% 9.73% 10.11% 9.73% Average tangible equity as a percent of average tangible assets (b)/(f) 8.34% 8.21% 8.12% 8.06% 8.01% 8.19% 7.89% Tangible book value per share (c)/(g) 11.62$ 11.36$ 11.07$ 10.78$ 10.56$ 11.62$ 10.56$ Three months ended YTD The earnings press release and accompanying presentation include certain non-GAAP ratios. These ratios include: (1) Return on average tangible shareholders' equity; (2) Ending tangible shareholders' equity as a percent of ending tangible assets; (3) Ending tangible shareholders' equity as a percent of risk-w eighted assets; (4) Average tangible shareholders' equity as a percent of average tangible assets; and (5) Tangible book value per share. The Company considers these critical metrics w ith w hich to analyze banks. The ratios have been included in the earnings press release to facilitate a better understanding of the Company's capital structure and f inancial condition.

14 Appendix: Non-GAAP to GAAP Reconciliation Additional non-GAAP ratios As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted Net interest income (f) 75,614$ 75,614$ 70,479$ 70,479$ 68,520$ 68,520$ 68,932$ 68,932$ 70,166$ 70,166$ Provision for loan and lease losses (205) (205) 2,953 2,953 467 467 367 367 2,761 2,761 plus: provision expense adjustment 799 Noninterest income 18,382 18,382 22,942 22,942 17,454 17,454 17,364 17,364 16,946 16,946 less: gains from the redemption of off balance sheet securitizations 5,764 less: tax related adjustment to a limited partnership investment (119) less: gains on sale of investment securities 19 275 838 516 Total noninterest income (g) 18,382 18,363 22,942 16,903 17,454 16,735 17,364 16,848 16,946 16,946 Noninterest expense 82,898 82,898 54,443 54,443 51,556 51,556 51,045 51,045 50,163 50,163 less: severance expense 3,818 533 less: charter conversion expenses 86 less: historic tax credit investment w rite-dow n 11,328 less: merger-related expenses 8,444 800 less: indemnification asset impairment 1 5,055 less: charitable foundation contribution 3,000 less: branch consolidation acitivities 577 154 (92) Total noninterest expense (e) 82,898 54,494 54,443 49,825 51,556 50,869 51,045 51,137 50,163 50,077 Income before income taxes (i) 11,303 39,688 36,025 35,403 33,951 33,919 34,884 34,276 34,188 34,274 Income tax expense (13,508) (13,508) 11,199 11,199 11,215 11,215 10,470 10,470 10,894 10,894 plus: tax effect of adjustments 9,935 (178) (11) (213) 31 plus: tax reform impact on DTLs & tax partnerships 8,191 plus: after-tax impact of historic tax credit w rite-dow n @ 35% 7,363 - Total income tax expense (h) (13,508) 11,981 11,199 11,021 11,215 11,204 10,470 10,257 10,894 10,925 Net income (a) 24,811$ 27,707$ 24,826$ 24,382$ 22,736$ 22,715$ 24,414$ 24,019$ 23,294$ 23,349$ Average diluted shares (b) 62,132 62,132 62,190 62,190 62,234 62,234 62,140 62,140 62,081 62,081 Average assets (c) 8,731,956 8,731,956 8,716,917 8,716,917 8,582,961 8,582,961 8,409,071 8,409,071 8,359,912 8,359,912 Average shareholders' equity 920,194 920,194 908,057 908,057 889,604 889,604 871,215 871,215 863,509 863,509 Less: Goodw ill and other intangibles (209,379) (209,379) (209,730) (209,730) (210,045) (210,045) (210,324) (210,324) (210,625) (210,625) Average tangible equity (d) 710,815 710,815 698,327 698,327 679,559 679,559 660,891 660,891 652,884 652,884 1 - Impairment charge related to preliminary agreement to terminate FDIC loss sharing agreements. Ratios Net earnings per share - diluted (a)/(b) 0.40$ 0.45$ 0.40$ 0.39$ 0.37$ 0.37$ 0.39$ 0.40$ 0.38$ 0.39$ Return on average assets - (a)/(c) 1.13% 1.26% 1.13% 1.11% 1.06% 1.06% 1.18% 1.16% 1.11% 1.11% Return on average tangible shareholders' equity - (a)/(d) 13.85% 15.46% 14.10% 13.85% 13.42% 13.41% 14.98% 14.74% 14.19% 14.23% Efficiency ratio - (e)/((f)+(g)) 88.19% 57.99% 58.28% 57.02% 59.97% 59.67% 59.15% 59.61% 57.58% 57.49% Effective tax rate - (h)/(i) -119.5% 30.2% 31.1% 31.1% 33.0% 33.0% 30.0% 29.9% 31.9% 31.9% (Dollars in thousands, except per share data) 4Q164Q17 3Q17 2Q17 1Q17

15