EX-99.2 3 exh992earningsrelease2q1.htm EXHIBIT 99.2
Exhibit 99.2 Earnings Presentation Second Quarter 2019

Forward Looking Statement Disclosure 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 merger with MainSource Financial Group, Inc. will not be realized or will not be realized within the expected time period; (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, 2018, as well as our 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. . 2

2Q 2019 Results 115th Consecutive Quarter of Profitability Net income = $52.7 million or $0.53 per diluted share. Adjusted1 net income = $57.4 million or $0.58 per diluted share,2. Profitability Return on average assets = 1.50%. Adjusted1 return on average assets = 1.63%. Return on average shareholders’ equity = 9.85%. Adjusted1 return on average shareholders’ equity = 10.72%. Return on average tangible common equity = 17.33%1. Adjusted1 return on average tangible common equity = 18.87%. Net interest income = $122.3 million. Net interest margin of 3.99% on a GAAP basis; 4.04% on a fully tax equivalent basis1. Noninterest income = $34.6 million; $34.6 million 1 as adjusted. Income Statement Noninterest expense = $84.4 million; $78.9 million1 as adjusted for merger related items. Efficiency ratio = 53.76%. Adjusted 1 efficiency ratio = 50.26%. Effective tax rate of 20.0%. Adjusted 1 effective tax rate of 19.6%. EOP assets increased $363.4 million compared to the linked quarter to $14.4 billion. EOP loans increased $171.6 million compared to the linked quarter to $9.0 billion. Balance Sheet Average deposits increased $28.7 million compared to the linked quarter to $10.1 billion. EOP investment securities increased $46.9 million compared to the linked quarter. Provision expense = $6.7 million. Net charge-offs = $1.8 million. NCOs / Avg. Loans = 0.08% annualized. Asset Quality Nonperforming Loans / Total Loans = 0.99%. Nonperforming Assets / Total Assets = 0.62%. ALLL / Nonaccrual Loans = 119.86%. ALLL / Total Loans = 0.69%. Classified Assets / Total Assets = 1.02%. Total capital ratio = 14.21%. Capital Tier 1 common equity ratio = 12.02%. Tangible common equity ratio = 9.34%. Tangible book value per share = $12.79. 1 Non-GAAP financial measure which management believes facilitates a better understanding of the Company’s financial condition. See Appendix for Non-GAAP reconciliation. 2 See Slide 5 for Adjusted Earnings detail. 3

2Q 2019 Highlights Solid quarterly earnings Adjusted1 earnings per share - $0.58 Adjusted1 return on assets – 1.63% Adjusted1 return on average tangible common equity – 18.87% Net income reduced by $5.2 million of severance and merger related expenses Strong loan growth Loan balances increased $171.6 million compared to the linked quarter Strong growth surpassed expectations; driven by ICRE and mortgage banking Modest deposit growth primarily in public funds and retail CDs Seasonal public fund growth and higher retail CDs more than offset declines in money markets and brokered CDs Net interest margin in line with expectations Decline driven by higher funding costs and day count Strong fee income growth $7.8 million, or 29.1% increase in fee income compared to the linked quarter Driven by record client derivative fees and strong mortgage banking activity in addition to higher bankcard and service charge income Disciplined expense management Adjusted1 noninterest expense of $78.9 million; Includes $0.8 million contribution to the First Financial Foundation Stable credit quality continues to be affected by franchise relationship discussed in the first quarter Provision expense of $6.7 million; $4.0 million of additional reserves related to the franchise relationship Strong Capital ratios Total capital of 14.21%; Tier 1 common equity of 12.02%; Tangible common equity of 9.34% Tangible book value increased to $12.79 1 Non-GAAP financial measure which management believes facilitates a better understanding of the Company’s financial condition. See Appendix for Non-GAAP reconciliations. 4

Adjusted1 Net Income The table below lists certain adjustments that the Company believes is significant to understanding our quarterly performance. 2Q 2019 1Q 2019 As Reported Adjusted As Reported Adjusted Net interest income $ 122,302 $ 122,302 $ 121,515 $ 121,515 Provision for loan and lease losses $ 6,658 $ 6,658 $ 14,083 $ 14,083 Noninterest income $ 34,638 $ 34,638 $ 26,827 $ 26,827 less: gains (losses) on investment securities - 52 A - (34) A Total noninterest income $ 34,638 $ 34,586 $ 26,827 $ 26,861 Noninterest expense $ 84,378 $ 84,378 $ 78,499 $ 78,499 less: severance and merger-related expenses - 5,187 A - 1,734 A less: other - 336 A - 78 A Total noninterest expense $ 84,378 $ 78,855 $ 78,499 $ 76,687 Income before income taxes $ 65,904 $ 71,375 $ 55,760 $ 57,606 Income tax expense $ 13,201 $ 13,201 $ 9,921 $ 9,921 less: tax effect of executive compensation - 365 - - plus: tax effect of adjustments (A) @ 21% statutory rate - 1,150 - 388 Total income tax expense $ 13,201 $ 13,986 $ 9,921 $ 10,309 Net income $ 52,703 $ 57,389 $ 45,839 $ 47,297 Net earnings per share - diluted $ 0.53 $ 0.58 $ 0.47 $ 0.48 Pre-tax, pre-provision return on average assets 2.06% 2.22% 2.03% 2.08% 1 Non-GAAP financial measure which management believes facilitates a better understanding of the Company’s financial condition. See Appendix for Non-GAAP reconciliations. All dollars shown in thousands, except per share amounts. 5

Profitability Diluted EPS Return on Average Assets 1.64% 1.72% 1.63% $0.61 1.60% $0.57 $0.58 $0.58 1.38% $0.48 1.59% $0.56 1.45% 1.50% $0.51 $0.53 1.33% $0.47 1.05% $0.37 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 1 1 Diluted EPS Adjusted EPS ROA Adjusted ROA Return on Avg Tangible Common Equity Efficiency Ratio 21.00% 20.83% 21.29% 18.87% 67.5% 56.1% 53.6% 52.9% 53.8% 16.45% 51.6% 51.1% 49.3% 51.7% 50.3% 18.5% 19.6% 17.3% 16.0% 13.7% 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 1 1 ROATCE Adjusted ROATCE Efficiency Ratio Adjusted Efficiency Ratio 1 Non-GAAP financial measure which management believes facilitates a better understanding of the Company’s financial condition. See Appendix for Non-GAAP reconciliation. 6

Net Interest Margin Net Interest Margin (FTE) 2Q19 NIM (FTE) Progression 1Q19 4.10% 4.21% 4.15% 4.12% 4.10% 4.04% Asset yield and mix -0.01% 0.29% 0.29% 0.29% 0.23% 0.23% Loan fees 0.01% 0.17% 0.11% 0.15% 0.13% 0.12% Funding costs and mix -0.05% 3.75% 3.76% 3.71% 3.70% 3.69% Purchase accounting 0.01% Day count -0.02% 2Q18 3Q18 4Q18 1Q19 2Q19 Basic Margin (FTE) Loan Fees Purchase accounting 2Q19 4.04% 7

Average Balance Sheet Average Loans Average Deposits 5.73% 5.69% 5.53% 5.73% 5.49% 0.78% 0.82% 0.68% 0.57% 0.59% $8,933 $8,849 $8,766 $8,773 $8,853 $10,383 $9,888 $10,050 $10,068 $10,096 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 Gross Loans Loan Yield (Gross)1 Total Deposits Cost of Deposits Average Securities 3.44% 3.30% 3.29% 3.16% 3.21% $3,157 $3,168 $3,205 $3,356 $3,409 2Q18 3Q18 4Q18 1Q19 2Q19 Average Investment Securities Investment Securities Yield All dollars shown in millions 1 Includes loans fees and purchase accounting accretion 8

Loan Portfolio Loan LOB Mix (EOP) Net Loan Change-LOB (Linked Quarter) Total $9.0 Billion ICRE $189.8 $1,100 Commercial -$21.3 12% 1 $2,950 Small Business Banking -$27.9 $1,065 33% 12% Consumer -$7.3 $884 Mortgage $47.9 10% Commercial Finance -$7.5 $1,221 $1,761 13% 20% Other -$2.1 ICRE Commercial Small Business Banking Consumer Total growth/(decline): Mortgage1 Commercial Finance $171.6 million 1 Decline primarily related to commercial real estate loans All dollars shown in millions. 9

Deposits Deposit Product Mix (Avg) 2Q19 Average Deposit Progression Total $10.1 billion Interest-bearing demand -$1.4 $1,353 $2,316 13% 23% Public Funds $112.8 $1,565 16% Savings $1.3 $688 7% Money Markets -$74.2 $892 $1,443 9% Retail Time Deposits $41.0 14% $1,839 18% Brokered CDs -$42.9 Interest-bearing demand Public Funds Noninterest-bearing -$7.9 Savings Money Markets Retail Time Deposits Brokered CDs Noninterest-bearing Total growth/(decline): $28.7 million All dollars shown in millions. 10

Asset Quality Classified Assets / Total Assets Nonperforming Assets / Total Assets 1.00% 1.00% 1.01% 1.02% 0.94% 0.63% 0.60% 0.62% $147.8 0.46% 0.47% $139.3 $138.9 $142.0 $131.7 $90.2 $88.2 $83.9 $64.2 $64.6 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 Classified Assets Classified Assets / Total Assets NPAs NPAs / Total Assets Allowance / Total Loans Net Charge Offs & Provision Expense 0.64% 0.18% 0.29% -0.02% $13.9$14.1 0.08% 0.65% 0.64% 0.64% 0.69% 0.61% $61.5 $54.1 $57.7 $56.5 $56.7 $6.7 $6.5 $5.3 $4.0 $3.7 $3.2 -$0.4 $1.8 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 Allowance for Loan Losses ALLL / Total Loans NCOs Provision Expense NCOs / Average Loans All dollars shown in millions. 11

Capital Total Capital Ratio Tier 1 Common Equity Ratio 14.10% 14.24% 14.21% 11.87% 12.03% 12.02% 13.36% 13.77% 11.52% 12.50% 10.50% 11.15% 2Q18 3Q18 4Q18 1Q19 2Q19 2Q18 3Q18 4Q18 1Q19 2Q19 Total Capital Ratio Target Tier 1 Common Equity Ratio Target Tangible Common Equity Ratio 9.15% 9.34% 8.79% 8.53% 8.30% 7.50% 2Q18 3Q18 4Q18 1Q19 2Q19 Tangible Common Equity Ratio Target All capital numbers are considered preliminary. 12

Capital Strategy & Deployment Tangible Book Value Per Share Strategy & Deployment 2Q19 share repurchase inactivity $12.79 primarily due to previously announced Bannockburn acquisition $12.19 $11.72 Board of directors approved $0.01 $11.25 $11.01 increase in dividend to $0.23; results in a 3.8% dividend yield Targeted dividend payout ratio remains 35-40% 2Q18 3Q18 4Q18 1Q19 2Q19 Tangible Book Value per Share 13

3Q19 Outlook1 Annualized loan growth expected to be in the mid single digits on a percentage Balance Sheet basis NIM (FTE) 3.70 - 3.75%, excluding purchase accounting impact Net Interest Margin Compares to 3.81% in 2Q19 Credit Credit outlook remains stable Noninterest income2 $27 - $29 million Includes $3 million expected impact from Durbin Noninterest Expense2 $77 - $79 million Efficiency ratio of 51 – 53% Capital All capital ratios expected to exceed current internal targets Flexibility to evaluate additional deployment opportunities Taxes Effective tax rate of approximately 19.5% M&A Update Bannockburn expected to close in late third quarter 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 Management’s estimated outlook excludes merger-related activities. 14

Appendix: Non-GAAP Measures The Company’s earnings release and accompanying presentation contain certain financial information determined by methods other than in accordance with accounting principles generally accepted in the United States (GAAP). Such non-GAAP financial information should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. However, we believe that non-GAAP reporting provides meaningful information and therefore we use it to supplement our GAAP information. We have chosen to provide this supplemental information to investors, analysts and other interested parties to enable them to perform additional analyses of operating results, to illustrate the results of operations giving effect to the non-GAAP adjustments and to provide an additional measure of performance. We believe this information is helpful in understanding the results of operations separate and apart from items that may, or could, have a disproportional positive or negative impact in any given period. For a reconciliation of the differences between the non-GAAP financial measures and the most comparable GAAP measures, please refer to the following reconciliation tables. to GAAP Reconciliation 15

Appendix: Non-GAAP to GAAP Reconciliation Net interest income and net interest margin - fully tax equivalent Three months ended June 30, Mar. 31, Dec. 31, Sep. 30, June 30, 2019 2019 2018 2018 2018 Net interest income $ 122,302 $ 121,515 $ 125,959 $ 123,485 $ 123,979 Tax equivalent adjustment 1,416 1,523 1,442 1,567 1,420 Net interest income - tax equivalent $ 123,718 $ 123,038 $ 127,401 $ 125,052 $ 125,399 Average earning assets $ 12,294,911 $ 12,163,751 $ 12,003,073 $ 12,056,627 $ 12,120,000 Net interest margin1 3.99 % 4.05 % 4.16 % 4.06 % 4.10 % Net interest margin (fully tax equivalent)1 4.04 % 4.10 % 4.21 % 4.12 % 4.15 % 1 Margins are calculated using net interest income annualized divided by average earning assets. 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. 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. All dollars shown in thousands. 16

Appendix: Non-GAAP to GAAP Reconciliation Additional non-GAAP ratios Three months ended June 30, Mar. 31, Dec. 31, Sep. 30, June 30, (Dollars in thousands, except per share data) 2019 2019 2018 2018 2018 Net income (a) $ 52,703 $ 45,839 $ 55,014 $ 50,657 $ 36,418 Average total shareholders' equity 2,146,997 2,094,234 2,042,884 2,021,400 2,000,093 Less: Goodwill (879,726) (878,541) (878,669) (882,917) (883,179) Other intangibles (37,666) (39,900) (42,305) (43,830) (44,383) MSR's (9,906) (9,896) (9,986) (9,183) (9,895) Average tangible equity (b) 1,219,699 1,165,897 1,111,924 1,085,470 1,062,636 Total shareholders' equity 2,188,189 2,130,419 2,078,249 2,035,520 2,012,937 Less: Goodwill (879,727) (879,727) (880,251) (881,033) (883,025) Other intangibles (36,349) (38,571) (40,805) (43,356) (42,891) MSR's (10,086) (9,891) (9,974) (9,971) (8,740) Ending tangible equity (c) 1,262,027 1,202,230 1,147,219 1,101,160 1,078,281 Total assets 14,437,663 14,074,263 13,986,660 13,842,667 13,920,167 Less: Goodwill (879,727) (879,727) (880,251) (881,033) (883,025) Other intangibles (36,349) (38,571) (40,805) (43,356) (42,891) MSR's (10,086) (9,891) (9,974) (9,971) (8,740) Ending tangible assets (d) 13,511,501 13,146,074 13,055,630 12,908,307 12,985,511 Risk-weighted assets (e) 10,663,459 10,358,805 10,241,159 10,222,466 10,251,147 Total average assets 14,102,733 13,952,551 13,768,958 13,822,675 13,956,360 Less: Goodwill (879,726) (878,541) (878,669) (882,917) (883,179) Other intangibles (37,666) (39,900) (42,305) (43,830) (44,383) MSR's (9,906) (9,896) (9,986) (9,183) (9,895) Average tangible assets (f) $ 13,175,435 $ 13,024,214 $ 12,837,998 $ 12,886,745 $ 13,018,903 Ending shares outstanding (g) 98,647,690 98,613,872 97,894,286 97,914,526 97,904,897 Ratios Return on average tangible shareholders' equity (a)/(b) 17.33% 15.95% 19.63% 18.52% 13.75% Ending tangible equity as a percent of: Ending tangible assets (c)/(d) 9.34% 9.15% 8.79% 8.53% 8.30% Risk-weighted assets (c)/(e) 11.84% 11.61% 11.20% 10.77% 10.52% Average tangible equity as a percent of average tangible assets (b)/(f) 9.26% 8.95% 8.66% 8.42% 8.16% Tangible book value per share (c)/(g) $ 12.79 $ 12.19 $ 11.72 $ 11.25 $ 11.01 All dollars shown in thousands. 17

Appendix: Non-GAAP to GAAP Reconciliation Additional non-GAAP measures 2Q19 1Q19 4Q18 3Q18 2Q18 (Dollars in thousands, except per share data) As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted As Reported Adjusted Net interest income (f) $ 122,302 $ 122,302 $ 121,515 $ 121,515 $ 125,959 $ 125,959 $ 123,485 $ 123,485 $ 123,979 $ 123,979 Provision for loan and lease losses (j) 6,658 6,658 14,083 14,083 5,310 5,310 3,238 3,238 3,735 3,735 plus: provision expense adjustment Noninterest income 34,638 34,638 26,827 26,827 29,504 29,504 28,684 28,684 28,256 28,256 less: gains from the redemption of off balance sheet securitizations (1,645) plus: Bankcard interchange 340 341 less: gains (losses) on sale of investment securities 52 (34) (60) (279) (30) Total noninterest income (g) 34,638 34,586 26,827 26,861 29,504 27,919 28,684 29,303 28,256 28,627 Noninterest expense 84,378 84,378 78,499 78,499 83,352 83,352 85,415 85,415 102,755 102,755 less: severance and merger-related expenses 5,187 1,734 7,485 7,405 23,943 less: other 336 78 Total noninterest expense (e) 84,378 78,855 78,499 76,687 83,352 75,867 85,415 78,010 102,755 78,812 Income before income taxes (i) 65,904 71,375 55,760 57,606 66,801 72,701 63,516 71,540 45,745 70,059 Income tax expense 13,201 13,201 9,921 9,921 11,787 11,787 12,859 12,859 9,327 9,327 plus: tax effect of adjustments 785 388 1,239 1,685 5,106 Total income tax expense (h) 13,201 13,986 9,921 10,309 11,787 13,026 12,859 14,544 9,327 14,433 Net income (a) $ 52,703 $ 57,389 $ 45,839 $ 47,297 $ 55,014 $ 59,675 $ 50,657 $ 56,996 $ 36,418 $ 55,626 Average diluted shares (b) 98,648 98,648 98,436 98,436 98,468 98,468 98,484 98,484 98,432 98,432 Average assets (c) 14,102,733 14,102,733 13,952,551 13,952,551 13,768,958 13,768,958 13,822,675 13,822,675 13,956,360 13,956,360 Average shareholders' equity 2,146,997 2,146,997 2,094,234 2,094,234 2,042,884 2,042,884 2,021,400 2,021,400 2,000,093 2,000,093 Less: Goodwill and other intangibles (927,298) (927,298) (928,337) (928,337) (930,960) (930,960) (935,930) (935,930) (937,457) (937,457) Average tangible equity (d) 1,219,699 1,219,699 1,165,897 1,165,897 1,111,924 1,111,924 1,085,470 1,085,470 1,062,636 1,062,636 Ratios Net earnings per share - diluted (a)/(b) $ 0.53 $ 0.58 $ 0.47 $ 0.48 $ 0.56 $ 0.61 $ 0.51 $ 0.58 $ 0.37 $ 0.57 Return on average assets - (a)/(c) 1.50% 1.63% 1.33% 1.38% 1.59% 1.72% 1.45% 1.64% 1.05% 1.60% Pre-tax, pre-provision return on average assets - ((a)+(j)+(h))/(c) 2.06% 2.22% 2.03% 2.08% 2.08% 2.25% 1.92% 2.15% 1.42% 2.12% Return on average tangible shareholders' equity - (a)/(d) 17.33% 18.87% 15.95% 16.45% 19.63% 21.29% 18.52% 20.83% 13.75% 21.00% Efficiency ratio - (e)/((f)+(g)) 53.8% 50.3% 52.9% 51.7% 53.6% 49.3% 56.1% 51.1% 67.5% 51.6% Effective tax rate - (h)/(i) 20.0% 19.6% 17.8% 17.9% 17.6% 17.9% 20.2% 20.3% 20.4% 20.6% 18

Update -New colors 19