EX-99.2 3 exh992earningsrelease1q1.htm EXHIBIT 99.2
Earnings Presentation First Quarter 2018 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. 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 nature, are inherently uncertain and outside of 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 possibility that any of the anticipated benefits of the Company‟s recent merger with MainSource Financial Group, Inc. will not be realized or will not be realized within the expected time period, or that integration of MainSource's operations with those of the Company will be materially delayed or will be more costly or difficult than expected; (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, 2017, as well as its other filings with the SEC, which are available on the SEC website at www.sec.gov. 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, the Company does not assume any obligation to update any forward-looking statement. . Forward Looking Statement Disclosure

3 1Q 2018 Highlights – 110th Consecutive Quarter of Profitability Total assets increased $1.5 million compared to the linked quarter to $8.9 billion. EOP loans increased $88.8 million, or 6.0% annualized, compared to the linked quarter. EOP deposits increased $115.5 million, or 6.8% annualized, compared to the linked quarter. EOP investment securities decreased $10.4 million, or 2.0% annualized, compared to the linked quarter. Balance Sheet Profitability Asset Quality Income Statement Capital Noninterest income = $16.9 million. Noninterest expense = $52.3 million; $49.9 million1 as adjusted for significant items impacting quarterly performance. Efficiency ratio = 56.4%. Adjusted efficiency ratio = 53.8%1 Effective tax rate of 20.1%. Adjusted effective tax rate of 20.1%1 Net interest income = $75.8 million, a $0.2 million increase compared to the linked quarter. Net interest margin of 3.80% on a GAAP basis; 3.84% on a fully tax equivalent basis, a 2 bp increase from the linked quarter. Average earning assets grew 4.19% on an annualized basis. Net income = $30.5 million or $0.49 per diluted share. Adjusted net income = $32.4 million or $0.52 per diluted share1 Return on average assets = 1.40%. Adjusted return on average assets = 1.49%1 Return on average shareholders‟ equity = 13.31%. Adjusted return on average shareholders‟ equity = 14.14%1 Return on average tangible common equity = 17.17%1. Adjusted return on average tangible common equity = 18.24%1 Provision expense = $2.3 million. Net charge offs = $1.9 million. NCOs / Avg. Loans = 0.13% annualized. Nonperforming Loans / Total Loans = 0.74%. Nonperforming Assets / Total Assets = 0.52%. ALLL / Nonaccrual Loans = 179.57 % . ALLL / Total Loans = 0.89%. Classified Assets / Total Assets = 0.98%. Total capital ratio = 13.17%. Tier 1 capital ratio = 10.77%. Tangible common equity ratio = 8.41%. Tangible book value per share = $11.75. 1) See Appendix for non-GAAP reconciliation and Slide 4 for Adjusted Earnings detail.

4 Adjusted Net Income1 1 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. 53.8% 58.0% 57.0% 59.7% 59.6% 1Q184Q173Q172Q171Q17 Adjusted Efficiency Ratio $0.52 $0.45 $0.39 $0.36 $0.39 1Q184Q173Q172Q171Q17 Adjusted EPS 1.49% 1.26% 1.11% 1.06% 1.16% 1Q184Q173Q172Q171Q17 Adjusted ROA 18.2% 15.5% 13.9% 13.4% 14.7% 1Q184Q173Q172Q171Q17 Adjusted ROTCE 1Q 2018 As Reported Adjusted Net interest income $ 75,812 $ 75,812 Provision for loan and lease losses $ 2,303 $ 2,303 Noninterest income $ 16,938 $ 16,938 Total noninterest income $ 16,938 $ 16,938 Noninterest expense $ 52,288 $ 52,288 less: merger-related expenses 1,985 A less: final loss share settlement 527 A less: other (113) A Total noninterest expense $ 52,288 $ 49,889 Income before income taxes $ 38,159 $ 40,558 Income tax expense $ 7,653 $ 7,653 plus: tax effect of adjustments (A) @ 21% statutory rate 504 Total income tax expense $ 7,653 $ 8,157 Net income $ 30,506 $ 32,401 Net earnings per share - diluted $ 0.49 $ 0.52

5 Profitability Net Income & Diluted EPS Return on Average Assets Return on Tangible Common Equity1 1 Non-GAAP financial measure; see Appendix for non-GAAP reconciliation All dollars shown in millions, except per share data $30.5 $24.8 $24.8 $22.7 $24.4 $0.49 $0.40 $0.40 $0.37 $0.39 1Q184Q173Q172Q171Q17 Net Income EPS - diluted $8,830 $8,732 $8,717 $8,583 $8,409 1.40% 1.13% 1.13% 1.06% 1.18% 1Q184Q173Q172Q171Q17 Average Assets ROAA $720 $711 $698 $680 $661 17.17% 13.85% 14.10% 13.42% 14.98% 1Q184Q173Q172Q171Q17 Average Tangible Equity ROATCE

6 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 $75.8 $75.6 $70.5 $68.5 $68.9 3.84% 3.82% 3.57% 3.56% 3.70% 1Q184Q173Q172Q171Q17 Net Interest Income Net Interest Margin (FTE) $2,043 $2,020 $2,042 $2,035 $1,907 3.04% 2.90% 2.85% 2.77% 2.76% 1Q184Q173Q172Q171Q17 Average Investment Securities Investment Securities Yield 23% 24% 23% 23% 23% 21% 22% 22% 23% 23% 36% 37% 37% 37% 35% 21% 17% 18% 18% 19% $6,903 $6,840 $6,680 $6,570 $6,442 0.60% 0.54% 0.61% 0.53% 0.44% 1Q184Q173Q172Q171Q17 Avg NIB Demand Avg IB Demand Avg Savings Avg Time Cost of Deposits $6,018 $5,960 $5,911 $5,800 $5,748 5.05% 4.90% 4.71% 4.61% 4.64% 1Q184Q173Q172Q171Q17 Gross Loans Loan Yield

7 Net Interest Margin Net Interest Margin (FTE) 1Q18 NIM (FTE) Progression 3.69% 3.58% 3.43% 3.41% 3.48% 0.15% 0.24% 0.14% 0.15% 0.22% 3.84% 3.82% 3.57% 3.56% 3.70% 1Q184Q173Q172Q171Q17 Basic Margin (FTE) Loan Fees 4Q17 3.82% Asset Yields 0.17% Rising interest rates and yield expansion Covered/formerly covered loans 0.04% Loss share termination Loan Fees -0.09% Higher 4Q17 prepayment fees Asset Drivers 0.12% Funding Costs -0.05% Increased wholesale funding and deposit costs Funding Mix -0.05% Mix shift toward higher wholesale funding balances Liability Drivers -0.10% Other 0.03% Day count FTE Adjustment -0.03% Impact from tax reform 1Q18 3.84%

8 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 33% 33% 33% 33% 32% 11% 11% 12% 12% 12% 31% 30% 30% 30% 29% 8% 8% 7% 8% 8% 17% 18% 18% 18% 18% $6,102 $6,013 $5,977 $5,874 $5,754 1Q184Q173Q172Q171Q17 Commercial & Leasing Owner Occupied CRE Investor CRE Construction Consumer Lending* -$11.6 $42.0 -$18.7 -$3.7 $65.5 $30.6 -$15.3 Commercial & Leasing Commercial Finance Owner Occupied CRE Owner Occupied Construction Investor CRE Investor Construction Consumer Lending* Total C&I $8.0

9 Asset Quality Nonperforming Assets / Total Assets Classified Assets / Total Assets Allowance / Total Loans Net Charge Offs & Provision Expense All dollars shown in millions $87.6 $87.3 $94.3 $98.4 $114.6 0.98% 0.98% 1.08% 1.13% 1.34% 1Q184Q173Q172Q171Q17 Classified Assets Classified Assets / Total Assets $46.3 $44.4 $52.9 $62.7 $68.4 0.52% 0.50% 0.60% 0.72% 0.80% 1Q184Q173Q172Q171Q17 NPAs NPAs / Total Assets $54.4 $54.0 $54.5 $54.9 $56.3 0.89% 0.90% 0.91% 0.93% 0.98% 1Q184Q173Q172Q171Q17 Allowance for Loan Losses ALLL / Total Loans $2.0 $1.9 $3.3 $0.3 $1.9 $0.4 $0.5 $3.0 -$0.2 $2.3 0.13% 0.02% 0.22% 0.13% 0.14% 1Q17 2Q17 3Q17 4Q17 1Q18 NCOs Provision Expense NCOs / Average Loans

10 Capital Tier 1 Common Equity Tangible Book Value Total Capital Tangible Common Equity All capital numbers are considered preliminary All dollars shown in millions $730.9 $721.3 $705.2 $688.1 $669.7 $11.75 $11.62 $11.36 $11.07 $10.78 1Q184Q173Q172Q171Q17 Tangible Book Value Tangible Book Value per Share $730.9 $721.3 $705.2 $688.1 $669.7 8.41% 8.30% 8.25% 8.09% 8.05% 1Q184Q173Q172Q171Q17 Tangible Book Value Tangible Common Ratio $953.2 $929.1 $920.6 $905.2 $892.2 13.17% 13.07% 12.98% 13.05% 13.19% 12.50% 1Q184Q173Q172Q171Q17 Total Capital Total Capital Ratio Target $779.5 $755.7 $746.7 $731.0 $716.7 10.77% 10.63% 10.53% 10.54% 10.59% 10.50% 1Q184Q173Q172Q171Q17 Tier 1 Common Equity Tier 1 Common Ratio Target

11 MSFG Standalone 1Q 2018 Highlights1 Total assets decreased $95.0, to $4.6 billion, or 8.3% annualized, compared to the linked quarter. EOP loans decreased $58.9 million, to $3.0 billion, compared to linked quarter EOP deposits decreased $66.5 million, to $3.4 billion, compared to linked quarter EOP investment securities of $1.1 billion Balance Sheet Profitability2 Asset Quality Income Statement Capital Noninterest income = $12.5 million. Noninterest expense = $30.0 million2. Efficiency ratio = 59.3%2. Net interest income = $37.0 million, a $0.7 million decrease compared to the linked quarter. Net interest margin of 3.71% on a fully tax equivalent basis, a 7 bp decrease from the linked quarter driven by the lower FTE adjustment due to tax reform. Net income = $16.4 million or $0.63 per diluted share Return on average assets = 1.45% Return on average shareholders‟ equity = 12.6% Return on average tangible common equity = 17.6% Provision expense = $0.4 million. Net charge offs = $3.7 million. Nonperforming loans declined $4.3 million to $14.3 million Nonperforming Loans / Total Loans = 0.47%. Nonperforming Assets / Total Assets = 0.29%. ALLL / Nonaccrual Loans = 161.97%. ALLL / Total Loans = 0.64%. Classified Assets / Total Assets = 0.70%. EOP Total Equity of $519.3 million Tangible common equity ratio = 8.38%. Tangible book value per share = $14.40. 1 MainSource merged with First Financial on April 1, 2018. The Highlights on this page provide selected financial data prepared by management for the quarter ended March 31, 2018. First Financial will file an amendment to Form 8-K on or before June 10, 2018 that will include financial statements for MainSource and combined pro forma financial information for First Financial and MainSource as if the Merger was effective on March 31, 2018. The pro forma financial information will reflect various adjustments required by applicable acquisition accounting rules that are not reflected in these Highlights. 2 Adjusted for merger-related expenses.

12 Outlook – Combined Company1 Taxes Annualized loan growth expected to be in the mid-single digits on a percentage basis, excluding divestitures and purchase accounting adjustments No significant deposit attrition expected, excluding divestitures and market exits Projected to be 3.85% - 3.90% on a GAAP basis based on static interest rates Includes estimated purchase accounting adjustments of 16 basis points Does not include FTE adjustment of approximately 7 basis points Modestly asset sensitive balance sheet, though benefits from future rate increases could be muted by market competition on deposit pricing Expected 2Q18 noninterest expense of $80 million Does not include not reflect fully phased in cost savings Quarterly noninterest expense base of $75 - $77 million by end of 2018 Fully phased in efficiency ratio of 50 – 52% Noninterest Expense2 Net Interest Margin Balance Sheet Effective tax rate of approximately 19.5% Credit Stable credit outlook, no systemic credit issues are anticipated Capital Target dividend payout ratio of 35 – 40% All capital ratios expected to exceed current internal targets Noninterest income2 Estimated to be $29 - $31 million on a quarterly basis Mortgage headwinds expected due to market conditions 1 See Forward Looking Statement Disclosure on page 2 of this presentation for a discussion of factors that could affect management‟s expectations and results in future periods 2 Excludes merger-related activities

13 Merger Integration Update Governance Merger Integration Financial Considerations Executive management team transition complete Combined Board of Directors in place Phase 1 complete Technology Assessment – Complete Organizational Structure / Staffing Assessment – Complete Phase 2 ongoing Action teams actively engaged across all functional areas Contract Negotiations / Terminations – In Process; mostly complete Branch divestiture – In Process; target close mid-May Targeted cost saves expected to be realized by the end of 2018 Loan Marks: Credit mark of 1.25% - 1.75% Rate mark of 2.25% - 2.75% Core deposit intangible between 1.75% - 2.00% Branch network – 41 banking centers consolidated by conversion with additional consolidations expected prior to year end, in addition to 5 branch divestitures Merger Timeline Merger finalized on 4/1/2018 System and brand conversions remain on target for late May

14 Appendix: Non-GAAP to GAAP Reconciliation Net interest income and net interest margin - fully tax equivalent Three months ended Mar. 31, Dec. 31, Sep. 30, June 30, Mar. 31, 2018 2017 2017 2017 2017 Net interest income $ 75,812 $ 75,614 $ 70,479 $ 68,520 $ 68,932 Tax equivalent adjustment 718 1,387 1,353 1,294 1,225 Net interest income - tax equivalent $ 76,530 $ 77,001 $ 71,832 $ 69,814 $ 70,157 Average earning assets $ 8,087,848 $ 8,005,100 $ 7,989,969 $ 7,855,564 $ 7,695,717 Net interest margin* 3.80 % 3.75 % 3.50 % 3.50 % 3.63 % Net interest margin (fully tax equivalent)* 3.84 % 3.82 % 3.57 % 3.56 % 3.70 % * Margins are calculated using net interest income annualized divided by average earning assets. This presentation includes certain non-GAAP ratios, including 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 21% tax rate for 2018 and a 35% tax rate for 2017. 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.

15 Appendix: Non-GAAP to GAAP Reconciliation Additional non-GAAP ratios Mar. 31, Dec. 31, Sep. 30, June 30, Mar. 31, (Dollars in thousands, except per share data) 2018 2017 2017 2017 2017 Net income (a) 30,506$ 24,811$ 24,826$ 22,736$ 24,414$ Average total shareholders' equity 929,474 920,194 908,057 889,604 871,215 Less: Goodw ill and other intangibles (209,053) (209,379) (209,730) (210,045) (210,324) Average tangible equity (b) 720,421 710,815 698,327 679,559 660,891 Total shareholders' equity 939,985 930,664 914,954 898,117 880,065 Less: Goodw ill and other intangibles (209,053) (209,379) (209,730) (210,045) (210,324) Ending tangible equity (c) 730,932 721,285 705,224 688,072 669,741 Total assets 8,898,429 8,896,923 8,761,689 8,710,042 8,531,170 Less: Goodw ill and other intangibles (209,053) (209,379) (209,730) (210,045) (210,324) Ending tangible assets (d) 8,689,376 8,687,544 8,551,959 8,499,997 8,320,846 Risk-w eighted assets (e) 7,240,731 7,108,629 7,090,714 6,936,665 6,765,336 Total average assets 8,830,176 8,731,956 8,716,917 8,582,961 8,409,071 Less: Goodw ill and other intangibles (209,053) (209,379) (209,730) (210,045) (210,324) Average tangible assets (f) 8,621,123$ 8,522,577$ 8,507,187$ 8,372,916$ 8,198,747$ Ending shares outstanding (g) 62,213,823 62,069,087 62,061,465 62,141,071 62,134,285 Ratios Return on average tangible shareholders' equity (a)/(b) 17.17% 13.85% 14.10% 13.42% 14.98% Ending tangible equity as a percent of: Ending tangible assets (c)/(d) 8.41% 8.30% 8.25% 8.09% 8.05% Risk-w eighted assets (c)/(e) 10.09% 10.15% 9.95% 9.92% 9.90% Average tangible equity as a percent of average tangible assets (b)/(f) 8.36% 8.34% 8.21% 8.12% 8.06% Tangible book value per share (c)/(g) 11.75$ 11.62$ 11.36$ 11.07$ 10.78$ Three months ended This presentation includes 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 to facilitate a better understanding of the Company's capital structure and f inancial condition.

16 Appendix: Non-GAAP to GAAP Reconciliation Additional non-GAAP ratios 3Q17 2Q17 1Q17 As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted Net interest income (f) 75,812$ 75,812$ 75,614$ 75,614$ 70,479$ 70,479$ 68,520$ 68,520$ 68,932$ 68,932$ Provision for loan and lease losses 2,303 2,303 (205) (205) 2,953 2,953 467 467 367 367 plus: provision expense adjustment 799 Noninterest income 16,938 16,938 18,382 18,382 22,942 22,942 17,454 17,454 17,364 17,364 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) 16,938 16,938 18,382 18,363 22,942 16,903 17,454 16,735 17,364 16,848 Noninterest expense 52,288 52,288 82,898 82,898 54,443 54,443 51,556 51,556 51,045 51,045 less: severance expense 3,818 533 less: charter conversion expenses less: historic tax credit investment w rite-dow n 11,328 less: merger-related expenses 1,985 8,444 800 less: indemnification asset impairment 1 527 5,055 less: charitable foundation contribution 3,000 less: other (113) 577 154 (92) Total noninterest expense (e) 52,288 49,889 82,898 54,494 54,443 49,825 51,556 50,869 51,045 51,137 Income before income taxes (i) 38,159 40,558 11,303 39,688 36,025 35,403 33,951 33,919 34,884 34,276 Income tax expense 7,653 7,653 (13,508) (13,508) 11,199 11,199 11,215 11,215 10,470 10,470 plus: tax effect of adjustments 504 9,935 (178) (11) (213) 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) 7,653 8,157 (13,508) 11,981 11,199 11,021 11,215 11,204 10,470 10,257 Net income (a) 30,506$ 32,401$ 24,811$ 27,707$ 24,826$ 24,382$ 22,736$ 22,715$ 24,414$ 24,019$ Average diluted shares (b) 62,181 62,181 62,132 62,132 62,190 62,190 62,234 62,234 62,140 62,140 Average assets (c) 8,830,176 8,830,176 8,731,956 8,731,956 8,716,917 8,716,917 8,582,961 8,582,961 8,409,071 8,409,071 Average shareholders' equity 929,474 929,474 920,194 920,194 908,057 908,057 889,604 889,604 871,215 871,215 Less: Goodw ill and other intangibles (209,053) (209,053) (209,379) (209,379) (209,730) (209,730) (210,045) (210,045) (210,324) (210,324) Average tangible equity (d) 720,421 720,421 710,815 710,815 698,327 698,327 679,559 679,559 660,891 660,891 1 - Impairment charge related to preliminary agreement to terminate FDIC loss sharing agreements. Ratios Net earnings per share - diluted (a)/(b) 0.49$ 0.52$ 0.40$ 0.45$ 0.40$ 0.39$ 0.37$ 0.37$ 0.39$ 0.40$ Return on average assets - (a)/(c) 1.40% 1.49% 1.13% 1.26% 1.13% 1.11% 1.06% 1.06% 1.18% 1.16% Return on average tangible shareholders' equity - (a)/(d) 17.17% 18.24% 13.85% 15.46% 14.10% 13.85% 13.42% 13.41% 14.98% 14.74% Efficiency ratio - (e)/((f)+(g)) 56.4% 53.8% 88.2% 58.0% 58.3% 57.0% 60.0% 59.7% 59.2% 59.6% Effective tax rate - (h)/(i) 20.1% 20.1% -119.5% 30.2% 31.1% 31.1% 33.0% 33.0% 30.0% 29.9% (Dollars in thousands, except per share data) 1Q18 4Q17

17