1st Source Increases Third Quarter Income

Thu Oct 25, 2012 4:05pm EDT

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1st Source Increases Third Quarter Income

Dividend Announced

1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced third quarter net income of $13.01 million, an increase of 12.69% over the $11.54 million in the third quarter of 2011. For the first three quarters of the year, net income was $37.29 million versus $37.01 million a year earlier, a 0.74% increase. Diluted net income per common share for the third quarter of 2012 was $0.53 versus $0.47, up 12.77% over the same period in 2011. Diluted net income per common share for the first three quarters was $1.51 in 2012 and 2011.

At the October meeting, the Board of Directors approved a cash dividend of $0.17 per common share, an increase of 6.25% over the third quarter a year ago. The dividend is payable on November 15, 2012 to shareholders of record on November 5, 2012.

Christopher J. Murphy III, Chairman of 1st Source, commented, “It was another good quarter for 1st Source Corporation. From a year ago, our quarterly net income was up 12.7%, we had nice growth in loans and deposits, our nonperforming assets continued to decline, and our net charge-offs were down allowing for a lower provision for loan and lease losses. We are, however, seeing more margin pressure due to the Federal Reserve’s efforts to lower interest rates. The spread between the income on loans and the cost of deposits continues to narrow as deposit rates reach their floors. Also, the government has put enormous pressure on fees and costs.

“This was also a quarter to grow our market. We broke ground on two new banking centers in Indiana – Nappanee and Columbia City. We enhanced our online banking product making it easier to navigate, adding great features such as purchase rewards and the ability to include outside accounts giving a clearer financial picture for our client. We are upgrading our ATM network with more features and branding elements; and we continue to hone our processes, making them quicker, smoother and more in touch with the client’s point of view. Our client focus is strong - providing distinctive convenience, straight talk and sound advice, always keeping our clients’ best interests in mind,” Mr. Murphy concluded.

As of September 30, 2012, the 1st Source common equity-to-assets ratio was 12.34% compared to 12.00% a year ago and the tangible common equity to tangible assets ratio was 10.59% compared to 10.17% a year earlier. Common shareholders' equity was $553.67 million, up 7.12% from the $516.88 million reported a year ago. Total assets at the end of the third quarter of 2012 were $4.49 billion, up 4.23% from a year ago. Total loans and leases were $3.27 billion, up 6.00% from September 30, 2011. Total deposits were $3.57 billion, up 3.51% from the comparable figures at September 30, 2011.

The reserve for loan and lease losses as of September 30, 2012 was 2.55% of total loans and leases compared to 2.73% at September 30, 2011. Net charge-offs were $0.45 million in the third quarter 2012, compared with net charge-offs of $2.06 million in the same quarter a year ago. Year-to-date, net charge-offs of $3.10 million have been recorded in 2012, compared to net charge-offs of $6.19 million through September 30, 2011. The ratio of nonperforming assets to net loans and leases was 1.51% as of September 30, 2012, down from 2.43% on September 30, 2011.

Noninterest income for the third quarter was $20.31 million, compared to $20.23 million for the same period in 2011. For the nine months, noninterest income was $60.62 million, versus $60.61 million from 2011. Increased mortgage banking income for the third quarter and year-to-date was offset by decreased equipment rental income resulting in relatively flat noninterest income during 2012 as compared to 2011.

Noninterest expense for the third quarter was $37.19 million compared to $37.15 million reported in the third quarter a year earlier. Noninterest expense for the first nine months of 2012 was $111.82 million versus $111.57 million for the same period of 2011. Increased salary and employee benefit expenses were offset by decreased depreciation on leased equipment causing noninterest expense to remain relatively flat during 2012 as compared to 2011.

1st Source serves the northern half of Indiana and southwest Michigan with its community banking, insurance and wealth management services, and nationally and internationally with specialty financing and leasing services. 1st Source distinguishes itself with highly personalized service and a comprehensive range of consumer and commercial banking services delivered through its community bank offices. 1st Source Bank provides services for businesses nationally by offering specialized financing of automobiles for leasing and rental agencies, medium and heavy duty trucks, construction and environmental equipment, and nationally and internationally, for new and used private and cargo aircraft. The Corporation includes 75 community banking centers, 9 trust and wealth management locations, and 8 1st Source Insurance offices located within 17 counties of northern Indiana and southwestern Michigan and 22 specialty finance locations nationwide. With a history dating back to 1863, 1st Source Bank has a tradition of providing superior service to clients while playing a leadership role in assuring a strong social safety net and continued economic development in the communities it serves.

In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. 1st Source Corporation believes that providing non-GAAP financial measures provides investors with information useful to understanding our financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on “tangible equity” which is “common shareholders’ equity” excluding intangible assets.

1st Source may be accessed on its home page at “www.1stsource.com.” Its common stock is traded on the Nasdaq Global Select Market under "SRCE" and appears in the National Market System tables in many daily newspapers under the code name "1st Src". Except for historical information contained herein, the matters discussed in this document express “forward-looking statements.” Generally, the words “believe,” “contemplate,” “seek,” “plan,” “possible,” “assume,” “expect,” “intend,” “targeted,” “continue,” “remain,” “estimate,” “anticipate,” “project,” “will,” “should,” “indicate,” “would,” “may” and similar expressions indicate forward-looking statements. Those statements, including statements, projections, estimates or assumptions concerning future events or performance, and other statements that are other than statements of historical fact, are subject to material risks and uncertainties. 1st Source cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made.

1st Source may make other written or oral forward-looking statements from time to time. Readers are advised that various important factors could cause 1st Source’s actual results or circumstances for future periods to differ materially from those anticipated or projected in such forward-looking statements. Such factors, among others, include changes in laws, regulations or accounting principles generally accepted in the United States; 1st Source’s competitive position within its markets served; increasing consolidation within the banking industry; unforeseen changes in interest rates; unforeseen downturns in the local, regional or national economies or in the industries in which 1st Source has credit concentrations; and other risks discussed in 1st Source’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, which filings are available from the SEC. 1st Source undertakes no obligation to publicly update or revise any forward-looking statements.

             
 
1st SOURCE CORPORATION
3rd QUARTER 2012 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011
END OF PERIOD BALANCES
Assets $ 4,488,219 $ 4,305,941
Loans and leases 3,268,413 3,083,294
Deposits 3,568,668 3,447,585
Reserve for loan and lease losses 83,499 84,210
Intangible assets 87,796 88,000
Common shareholders' equity 553,668 516,879
 
AVERAGE BALANCES
Assets $ 4,499,425 $ 4,342,406 $ 4,447,453 $ 4,396,250
Earning assets 4,206,982 4,033,723 4,145,500 4,086,144
Investments 854,994 873,753 876,183 913,696
Loans and leases 3,268,304 3,096,168 3,189,526 3,083,747
Deposits 3,583,174 3,477,448 3,553,531 3,557,883
Interest bearing liabilities 3,243,445 3,211,939 3,230,802 3,299,348
Common shareholders' equity 549,963 513,556 541,040 501,774
 
INCOME STATEMENT DATA
Net interest income $ 37,907 $ 36,626 $ 113,267 $ 111,070
Net interest income - FTE 38,420 37,216 114,840 113,014
Provision for loan and lease losses 650 1,260 4,959 3,525
Noninterest income 20,305 20,230 60,618 60,607
Noninterest expense 37,193 37,148 111,819 111,567
Net income 13,005 11,540 37,287 37,013
 
PER SHARE DATA
Basic net income per common share $ 0.53 $ 0.47 $ 1.52 $ 1.51
Diluted net income per common share 0.53 0.47 1.51 1.51
Common cash dividends declared 0.17 0.16 0.49 0.48
Book value per common share 22.80 21.35 22.80 21.35
Tangible book value per common share 19.19 17.71 19.19 17.71
Market value - High 23.97 24.00 26.79 24.00
Market value - Low 21.40 19.36 20.51 17.86
Basic weighted average common shares outstanding 24,279,178 24,213,063 24,267,535 24,246,041
Diluted weighted average common shares outstanding 24,289,495 24,223,432 24,278,160 24,255,357
 
KEY RATIOS
Return on average assets 1.15

%

 

1.05

%

 

1.12

%

 

1.13 %
Return on average common shareholders' equity 9.41 8.92 9.21 9.86
Average common shareholders' equity to average assets 12.22 11.83 12.17 11.41
End of period tangible common equity to tangible assets 10.59 10.17 10.59 10.17
Risk-based capital - Tier 1 15.10 14.96 15.10 14.96
Risk-based capital - Total 16.42 16.26 16.42 16.26
Net interest margin 3.63 3.66 3.70 3.70
Efficiency: expense to revenue 61.98 63.25 62.43 62.89
Net charge offs to average loans 0.05 0.26 0.13 0.27
Loan and lease loss reserve to loans and leases 2.55 2.73 2.55 2.73
Nonperforming assets to loans and leases 1.51 2.43 1.51 2.43
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 477 $ 624
Nonaccrual loans and leases 42,756 61,549
Other real estate 4,842 8,032
Former bank premises held for sale 1,101 1,514
Repossessions 1,248 4,918
Equipment owned under operating leases 32 389
Total nonperforming assets 50,456 77,026
 
           
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
 
September 30, 2012 September 30, 2011

ASSETS

Cash and due from banks $ 54,635 $ 57,986
Federal funds sold and
interest bearing deposits with other banks 17,179 25,064
Investment securities available-for-sale
(amortized cost of $832,951 and $820,336 at
September 30, 2012 and 2011, respectively) 868,312 850,507
Other investments 22,364 18,974
Trading account securities 145 119
Mortgages held for sale 22,853 13,219
 
Loans and leases, net of unearned discount:
Commercial and agricultural loans 584,996 557,392
Auto, light truck and environmental equipment 456,665 442,127
Medium and heavy duty truck 167,709 152,703
Aircraft financing 685,800 613,706
Construction equipment financing 276,270 260,241
Commercial real estate 548,921 556,287
Residential real estate 436,909 404,063
Consumer loans   111,143     96,775  
Total loans and leases 3,268,413 3,083,294
Reserve for loan and lease losses   (83,499 )   (84,210 )
Net loans and leases 3,184,914 2,999,084
 
Equipment owned under operating leases, net 58,496 75,096
Net premises and equipment 43,172 40,958
Goodwill and intangible assets 87,796 88,000
Accrued income and other assets   128,353     136,934  
 
Total assets $ 4,488,219   $ 4,305,941  
 

LIABILITIES

Deposits:
Noninterest bearing $ 634,795 $ 560,932
Interest bearing   2,933,873     2,886,653  
Total deposits 3,568,668 3,447,585
 
Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase 119,749 124,779
Other short-term borrowings   16,886     16,159  
Total short-term borrowings 136,635 140,938
Long-term debt and mandatorily redeemable securities 66,964 37,064
Subordinated notes 89,692 89,692
Accrued expenses and other liabilities   72,592     73,783  
Total liabilities   3,934,551     3,789,062  
 

SHAREHOLDERS' EQUITY

Preferred stock; no par value - -
Common stock; no par value 346,535 346,535
Retained earnings 215,647 183,007

Cost of common stock in treasury

(30,360 ) (31,408 )
Accumulated other comprehensive income   21,846     18,745  
Total shareholders' equity   553,668     516,879  
 
Total liabilities and shareholders' equity $ 4,488,219   $ 4,305,941  
 
                   
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
 
Three Months Ended Nine Months Ended
September 30 September 30
2012 2011 2012 2011
Interest income:
Loans and leases $ 40,610 $ 40,741 $ 120,824 $ 123,750
Investment securities, taxable 3,913 4,694 12,574 14,088
Investment securities, tax-exempt 826 934 2,526 3,124
Other   231   217   688   707
Total interest income 45,580 46,586 136,612 141,669
 
Interest expense:
Deposits 5,419 7,756 16,868 24,273
Short-term borrowings 36 77 136 240
Subordinated notes 1,647 1,647 4,942 4,942
Long-term debt and mandatorily redeemable securities   571   480   1,399   1,144
Total interest expense   7,673   9,960   23,345   30,599
 
Net interest income 37,907 36,626 113,267 111,070
Provision for loan and lease losses   650   1,260   4,959   3,525
Net interest income after provision for
loan and lease losses 37,257 35,366 108,308 107,545
 
Noninterest income:
Trust fees 4,055 3,902 12,407 12,305
Service charges on deposit accounts 4,708 4,748 14,028 13,622
Mortgage banking income 2,020 1,056 5,464 2,335
Insurance commissions 1,483 1,212 4,051 3,416
Equipment rental income 4,604 5,814 14,620 17,861
Other income 3,346 3,084 9,556 9,382
Investment securities and other investment gains   89   414   492   1,686
Total noninterest income   20,305   20,230   60,618   60,607
 
Noninterest expense:
Salaries and employee benefits 20,982 19,476 61,668 57,249
Net occupancy expense 1,652 2,237 5,660 6,608
Furniture and equipment expense 3,817 3,519 11,155 10,429
Depreciation - leased equipment 3,795 4,650 11,909 14,250
Professional fees 1,385 1,326 4,232 3,502
Supplies and communication 1,387 1,312 4,165 4,022
FDIC and other insurance 913 874 2,716 3,508
Business development and marketing expense 1,008 968 2,925 2,454
Loan and lease collection and repossession expense 1,866 1,387 4,346 4,211
Other expense   388   1,399   3,043   5,334
Total noninterest expense   37,193   37,148   111,819   111,567
 
Income before income taxes 20,369 18,448 57,107 56,585
Income tax expense   7,364   6,908   19,820   19,572
 
Net income $ 13,005 $ 11,540 $ 37,287 $ 37,013
 
 
The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)

Please contact us at shareholder@1stsource.com.

 

1st Source Corporation
Larry Lentych or Andrea Short, 574-235-2000