1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced third quarter net income of $11.20 million, an increase of 66.39% over the $6.73 million in the third quarter 2009. For the first three quarters of the year, net income was $28.68 million versus $19.27 million a year earlier, a 48.84% increase. Diluted net income per common share for the third quarter of 2010 was $0.39 versus $0.21, up 85.71% over the same period in 2009. Diluted net income per common share for the first three quarters was $0.96, an increase of 60.00% compared to $0.60 in 2009.

At the October meeting, the Board of Directors approved a cash dividend of $0.16 per common share, payable on November 15, 2010 to shareholders of record on November 5, 2010.

Christopher J. Murphy III, Chairman of 1st Source, commented, “We continue to see improvement in our performance as we focus on the basics in these challenging times. We have concentrated on taking care of our clients, and on offering advice and information to help them weather the downturn.”

“Credit continues to be challenging. During the quarter, we provided $5.58 million to our loan and lease loss reserve, net-charge-offs were $4.08 million, and our nonperforming assets increased somewhat. Our reserve for loan and lease losses was 2.88% of loans and leases compared to 2.76% a year earlier as we continue to maintain strong reserves.”

“Although pleased with the bank's performance, which is one of the best quarters in our history, we are disappointed that the economy has not improved more quickly and are very concerned about the mounting federal deficit and the impact it all will have on future interest rates. Trying to plan how best to position our investment portfolios with remarkably low rates now, with the probability of dramatically higher rates in the future, is challenging at best. We also worry about the unintended consequences of increasing regulation on community banks. While well intended, each new law and regulation increases costs of serving our clients and makes it more difficult to do so. All of us in banking are being painted with the same brush. We are a community bank focused on meeting the needs of our clients now and for future generations. Our success is built on long-lasting relationships. It is that focus that kept us out of sub-prime lending and offering exotic mortgage instruments. In spite of anything happening in Washington, good or bad, we stay focused on providing outstanding client service, watching expenses, and concentrating on credit quality,” concluded Mr. Murphy.

As of September 30, 2010, the 1st Source common equity-to-assets ratio was 10.82% compared to 10.64% a year ago and the tangible common equity to tangible assets ratio was 9.03% compared to 8.77% a year earlier. Common shareholders' equity was $490.41 million, up 4.40% from the $469.72 million reported a year ago. Total assets at the end of the third quarter of 2010 were $4.53 billion, up 2.70% from a year ago. Total loans and leases were $3.11 billion, relatively flat and total deposits were $3.57 billion, up 2.28% over the comparable figures at the end of the third quarter of 2009.

Noninterest income for the third quarter was $22.75 million, up 12.32% from the same period in 2009. For the nine months, noninterest income was $64.28 million, an increase of 1.20% from 2009. The increase in noninterest income for the third quarter was due to higher mortgage banking income from gains on loan sales and increased refinance activity. The year-to-date increase was primarily due to higher investment securities and other income investment gains offset by lower mortgage banking income in the first six months of the year.

Noninterest expense for the third quarter was $37.81 million, a 3.39% increase from the $36.57 million reported in the third quarter a year earlier. Noninterest expense for the first nine months of 2010 was $114.57 million versus $112.56 million for the same period of 2009. The leading factors in the change were higher employee benefits, professional fees and loan and lease collection and repossession expense offset by reduced furniture and equipment expense and FDIC (special assessment costs occurred in the second quarter of last year) and other insurance expense.

1st Source serves the northern half of Indiana and southwest Michigan and is the largest locally controlled financial institution headquartered in the area. While delivering a comprehensive range of consumer and commercial banking services through its community bank offices, 1st Source has distinguished itself with highly personalized services. 1st Source Bank also competes for business nationally by offering specialized financing services for new and used private and cargo aircraft, automobiles for leasing and rental agencies, medium and heavy duty trucks, construction and environmental equipment. The Corporation includes 76 community banking centers in 17 counties, 22 specialty finance locations nationwide, 7 trust and wealth management locations, and 7 1st Source Insurance offices. 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 the continued development of 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 2010 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
END OF PERIOD BALANCES
Assets $ 4,532,313 $ 4,413,160
Loans and leases 3,112,179 3,094,030
Deposits 3,566,194 3,486,714
Reserve for loan and lease losses 89,509 85,504
Intangible assets 89,287 90,669
Common shareholders' equity 490,406 469,718
Total shareholders' equity 596,323 574,330
 
AVERAGE BALANCES
Assets $ 4,518,393 $ 4,463,324 $ 4,507,258 $ 4,508,202
Earning assets 4,182,332 4,159,318 4,167,605 4,206,498
Investments 895,743 826,468 901,844 818,498
Loans and leases 3,129,445 3,130,362 3,116,927 3,184,394
Deposits 3,568,428 3,536,013 3,578,440 3,571,280
Interest bearing liabilities 3,357,917 3,390,440 3,384,473 3,453,618
Common shareholders' equity 492,025 469,409 482,418 467,351
Total shareholders' equity 597,728 573,819 587,795 563,163
 
INCOME STATEMENT DATA
Net interest income $ 37,184 $ 32,046 $ 108,335 $ 94,681
Net interest income - FTE 38,019 33,029 110,909 97,512
Provision for loan and lease losses 5,578 6,469 15,764 22,741
Noninterest income 22,751 20,256 64,275 63,510

Noninterest expense
37,810 36,570 114,569 112,559
Net income 11,203 6,733 28,677 19,267
Net income available to common shareholders 9,482 5,032 23,528 14,557
 
PER SHARE DATA
Basic net income per common share $ 0.39 $ 0.21 $ 0.96 $ 0.60
Diluted net income per common share 0.39 0.21 0.96 0.60
Common cash dividends declared 0.15 0.15 0.45 0.43
Book value per common share 20.26 19.46 20.26 19.46
Tangible book value per common share 16.57 15.70 16.57 15.70
Market value - High 18.99 17.94 20.36 23.92
Market value - Low 15.98 14.52 14.25 14.16
Basic weighted average common shares outstanding 24,247,236 24,164,884 24,247,468 24,166,887
Diluted weighted average common shares outstanding 24,253,883 24,212,042 24,254,026 24,215,542
 
KEY RATIOS
Return on average assets 0.98 % 0.60 % 0.85 % 0.57 %
Return on average common shareholders' equity 7.65 4.25 6.52 4.16
Average common shareholders' equity to average assets 10.89 10.52 10.70 10.37
End of period tangible common equity to tangible assets 9.03 8.77 9.03 8.77
Risk-based capital - Tier 1 16.86 16.14 16.86 16.14
Risk-based capital - Total 18.15 17.43 18.15 17.43
Net interest margin 3.61 3.15 3.56 3.10
Efficiency: expense to revenue 60.70 66.90 63.68 67.59
Net charge offs to average loans 0.52 0.52 0.62 0.71
Loan and lease loss reserve to loans and leases 2.88 2.76 2.88 2.76
Nonperforming assets to loans and leases 3.09 2.95 3.09 2.95
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 1,104 $ 1,125
Nonaccrual and restructured loans and leases 79,094 80,361
Other real estate 7,010 4,074
Former bank premises held for sale 2,190 3,095
Repossessions 9,665 5,672
Equipment owned under operating leases 311 74
Total nonperforming assets 99,374 94,401
 
           
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
 
September 30, September 30,
2010 2009

ASSETS
Cash and due from banks $ 60,395 $ 56,408
Federal funds sold and
interest bearing deposits with other banks 79,082 65,307
Investment securities available-for-sale
(amortized cost of $848,409 and $871,266
at September 30, 2010 and 2009, respectively) 874,514 886,777
Other investments 21,012 21,012
Trading account securities 125 117
Mortgages held for sale 114,947 39,364
 
Loans and leases - net of unearned discount:
Commercial and agricultural loans 535,874 567,476
Auto, light truck and environmental equipment 397,297 313,808
Medium and heavy duty truck 174,459 219,762
Aircraft financing 620,996 633,552
Construction equipment financing 304,035 326,858
Loans secured by real estate 979,442 917,754
Consumer loans   100,076     114,820  
Total loans and leases 3,112,179 3,094,030
Reserve for loan and lease losses   (89,509 )   (85,504 )
Net loans and leases 3,022,670 3,008,526
 
Equipment owned under operating leases, net 84,430 91,538
Net premises and equipment 36,133 38,552
Goodwill and intangible assets 89,287 90,669
Accrued income and other assets   149,718     114,890  
 
Total assets $ 4,532,313   $ 4,413,160  
 

LIABILITIES
Deposits:
Noninterest bearing $ 495,778 $ 425,742
Interest bearing   3,070,416     3,060,972  
Total deposits 3,566,194 3,486,714
 
Federal funds purchased and securities
sold under agreements to repurchase 145,887 129,707
Other short-term borrowings 26,337 25,272
Long-term debt and mandatorily redeemable securities 34,987 20,046
Subordinated notes 89,692 89,692
Accrued expenses and other liabilities   72,893     87,399  
Total liabilities 3,935,990 3,838,830
 
 

SHAREHOLDERS' EQUITY
Preferred stock; no par value 105,917 104,612
Common stock; no par value 350,278 350,266
Retained earnings 155,633 141,758
Cost of common stock in treasury (31,723 ) (31,943 )
Accumulated other comprehensive income   16,218     9,637  
Total shareholders' equity   596,323     574,330  
 
Total liabilities and shareholders' equity $ 4,532,313   $ 4,413,160  
 
           
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
 
Three Months Ended Nine Months Ended
September 30 September 30
2010 2009 2010 2009
Interest income:
Loans and leases $ 43,722 $ 43,436 $ 129,091 $ 132,507
Investment securities, taxable 4,931 4,357 15,611 12,600
Investment securities, tax-exempt 1,369 1,651 4,258 5,046
Other   219     297     743     894  
Total interest income 50,241 49,741 149,703 151,047
 
Interest expense:
Deposits 10,790 15,460 34,768 49,662
Short-term borrowings 219 265 613 909
Subordinated notes 1,648 1,648 4,942 4,942
Long-term debt and mandatorily redeemable securities   400     322     1,045     853  
Total interest expense   13,057     17,695     41,368     56,366  
 
Net interest income 37,184 32,046 108,335 94,681
Provision for loan and lease losses   5,578     6,469     15,764     22,741  
Net interest income after provision for
loan and lease losses 31,606 25,577 92,571 71,940
 
Noninterest income:
Trust fees 3,870 3,782 11,677 11,473
Service charges on deposit accounts 4,918 5,402 14,813 15,367
Mortgage banking income 2,549 965 3,751 6,874
Insurance commissions 1,180 1,022 3,706 3,614
Equipment rental income 6,495 6,347 19,912 18,896
Other income 2,656 2,022 8,357 6,613
Investment securities and other investment gains   1,083     716     2,059     673  
Total noninterest income   22,751     20,256     64,275     63,510  
 
Noninterest expense:
Salaries and employee benefits 18,980 18,425 56,638 55,340
Net occupancy expense 2,200 2,221 6,626 7,095
Furniture and equipment expense 3,227 3,241 9,223 10,487
Depreciation - leased equipment 5,173 5,021 15,841 15,065
Professional fees 1,563 1,020 4,495 2,897
Supplies and communication 1,387 1,473 4,094 4,468
FDIC and other insurance 1,420 1,582 4,761 6,851
Business development and marketing expense 845 655 2,292 1,934
Loan and lease collection and repossession expense 1,449 1,147 5,822 2,776
Other expense   1,566     1,785     4,777     5,646  
Total noninterest expense   37,810     36,570     114,569     112,559  
 
Income before income taxes 16,547 9,263 42,277 22,891
Income tax expense   5,344     2,530     13,600     3,624  
 
Net income 11,203 6,733 28,677 19,267
Preferred stock dividends and discount accretion   (1,721 )   (1,701 )   (5,149 )   (4,710 )
Net income available to common shareholders $ 9,482   $ 5,032   $ 23,528   $ 14,557  
 
 
The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)

Please contact us at shareholder@1stsource.com.
 

Copyright Business Wire 2010