1st Source Corporation Announces Record Earnings For Year, Increased Dividend Declared

1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced fourth quarter net income of $12.57 million, up 101.94% compared to $6.22 million in the fourth quarter of 2009. For the year of 2010, net income was $41.24 million, an increase of 61.80% over the $25.49 million reported in 2009. The annual net income sets a record as the highest in corporate history.

Diluted net income per common share for the fourth quarter was $0.25, up 31.58% compared to $0.19 per common share reported in the fourth quarter of the previous year. Diluted net income per common share for the year was $1.21, an increase of 53.16% over the $0.79 per common share a year earlier. Diluted net income per common share for the fourth quarter and for the year was negatively impacted by the preferred stock dividends and the accretion of discount on the preferred stock issued to the US Treasury under the TARP program in January 2009 and repurchased in December 2010. Adjusting for these, the diluted net income would have been $0.52 per common share for the fourth quarter of 2010, and $1.70 per common share for the year.

At the January 2011 meeting, the Board of Directors approved a cash dividend of $0.16 per common share, up 6.67% over the dividend declared in the same period a year earlier. The cash dividend is payable on February 15, 2011 to shareholders of record on February 4, 2011.

Christopher J. Murphy, III, Chairman of 1st Source, commented, "I could not be more pleased with our $12.6 million net income for the quarter and $41.2 million for the year, an annual net income record for 1st Source Corporation."

"The quarter was exceptionally busy. We repaid the $111 million Capital Purchase Program investment to the US Treasury with no conditions attached. Many others who paid back TARP funds were required to raise additional capital in the market which in most cases was dilutive to their present shareholders. We did not have to do that, attesting to the strength of the company and the Bank. We are pleased the economy has improved to the point where this extra insurance is no longer needed, and we continue to maintain strong capital and reserve ratios as always. The TARP repayment will save the company $5.55 million annually in after tax dollars, previously paid out in preferred dividends.”

“Also in the quarter, we closed on a new 10-year lease on our downtown South Bend main office that allows us to reduce our space in the building and lower our financial commitment for the term of the contract."

"Credit has improved but is still problematic going forward. We have seen slight improvement in the past year but the economy still has challenges for our personal and business banking clients, as well as some of our specialty finance markets. With that said, business seems to be slowly improving. In the coming year, we will continue to focus on providing advice and counsel to help our clients navigate this complicated financial world we live in, and will provide outstanding customer service. We pride ourselves on being a community bank and have always focused on the basics of providing deposit, investment, insurance and lending services to our neighbors, individuals, businesses, community organizations and local governments. I thank my colleagues and our loyal clients for a good year," Mr. Murphy concluded.

1st Source’s reserve for loan and lease losses as of December 31, 2010 was 2.83% of total loans and leases, compared to 2.85% as of December 31, 2009. Net charge-offs were $6.08 million for the fourth quarter 2010, compared to $5.63 million in the fourth quarter 2009. Net charge-offs for the full year were $20.57 million in 2010 compared to $22.64 million in 2009. The ratio of nonperforming assets to net loans and leases was 2.81% on December 31, 2010, compared to 3.15% on December 31, 2009.

The net interest margin was 3.67% for the fourth quarter of 2010 versus 3.27% for the same period in 2009. The net interest margin was 3.59% for the year ending December 31, 2010, versus 3.14% for the same period in 2009. Tax-equivalent net interest income was $39.96 million for the fourth quarter of 2010, compared to $34.49 million for 2009’s fourth quarter. For the twelve months of 2010, tax-equivalent net interest income was $150.87 million, compared to $132.00 million for the twelve months of 2009.

As of December 31, 2010, the 1st Source common equity-to-assets ratio was 10.94%, compared to 10.25% at December 31, 2009 and its tangible common equity-to-tangible assets ratio was 9.12% at December 31, 2010 compared to 8.43% at December 31, 2009. Common shareholders’ equity was $486.38 million, up from $465.39 million a year ago. Total assets at the end of 2010 were $4.45 billion, down 2.13% compared to the same period last year. Total loans and leases at December 31, 2010 were $3.07 billion, down 0.73% and total deposits at December 31, 2010 were $3.62 billion, down 0.81% from the comparable figures at the end of 2009.

Noninterest income for the fourth quarter of 2010 was $22.42 million, up 1.80% compared to $22.02 million for the fourth quarter of 2009. The predominate factors in the fourth quarter change were higher mortgage banking income and other income offset by lower service charges on deposit accounts, equipment rental income and investment securities and other investment gains. For the year, noninterest income was $86.69 million, up 1.36% from the $85.53 million in 2009. The annual increase was primarily due to higher trust fees and other income offset by lower service charges on deposit accounts and mortgage banking income.

Noninterest expense for the fourth quarter of 2010 was $39.94 million, up 3.56% compared to $38.56 million for the fourth quarter of 2009. The leading factors for the fourth quarter increase were higher salaries and employee benefits expense offset by lower loan and lease collection and repossession expense. For the year ending December 31, 2010, noninterest expense was $154.51 million, up 2.24% from $151.12 million one year ago. The annual increase was a result of higher employee salaries and benefits, professional fees, and loan and lease collection and repossession expense offset by reduced FDIC and other insurance (one time FDIC special assessment in 2009) and furniture and equipment 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  
4th QUARTER 2010 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31 December 31
2010   2009 2010   2009
END OF PERIOD BALANCES
Assets $ 4,445,281 $ 4,542,100
Loans and leases 3,070,623 3,093,150
Deposits 3,622,745 3,652,464
Reserve for loan and lease losses 86,874 88,236
Intangible assets 88,955 90,222
Common shareholders' equity 486,383 465,390
Total shareholders' equity 486,383 570,320
 
AVERAGE BALANCES
Assets $ 4,651,845 $ 4,498,879 $ 4,543,702 $ 4,505,852
Earning assets 4,325,823 4,178,782 4,207,485 4,199,512
Investments 951,074 884,068 914,253 835,025
Loans and leases 3,087,494 3,067,062 3,109,508 3,154,820
Deposits 3,684,587 3,580,674 3,605,195 3,573,648
Interest bearing liabilities 3,454,799 3,407,214 3,402,199 3,441,922
Common shareholders' equity 495,808 471,535 485,793 468,405
Total shareholders' equity 598,383 576,257 590,464 566,464
 
INCOME STATEMENT DATA
Net interest income $ 39,162 $ 33,531 $ 147,497 $ 128,212
Net interest income - FTE 39,963 34,487 150,872 131,999
Provision for loan and lease losses 3,443 8,360 19,207 31,101
Noninterest income 22,416 22,020 86,691 85,530
Noninterest expense 39,936 38,564 154,505 151,123
Net income 12,567 6,223 41,244 25,490
Net income available to common shareholders 6,127 4,517 29,655 19,074
 
PER SHARE DATA
Basic net income per common share $ 0.25 $ 0.19 $ 1.21 $ 0.79
Diluted net income per common share 0.25 0.19 1.21 0.79
Common cash dividends declared 0.16 0.16 0.61 0.59
Book value per common share 20.12 19.30 20.12 19.30
Tangible book value per common share 16.44 15.56 16.44 15.56
Market value - High 20.75 16.60 20.75 23.92
Market value - Low 17.01 13.84 14.25 13.84
Basic weighted average common shares outstanding 24,186,469 24,126,225 24,232,092 24,157,179
Diluted weighted average common shares outstanding 24,195,208 24,130,517 24,239,194 24,163,689
 
KEY RATIOS
Return on average assets 1.07 % 0.55 % 0.91 % 0.57 %
Return on average common shareholders' equity 4.90 3.80 6.10 4.07
Average common shareholders' equity to average assets 10.66 10.48 10.69 10.40
End of period tangible common equity to tangible assets 9.12 8.43 9.12 8.43
Risk-based capital - Tier 1 14.05 16.43 14.05 16.43
Risk-based capital - Total 15.34 17.72 15.34 17.72
Net interest margin 3.67 3.27 3.59 3.14
Efficiency: expense to revenue 62.10 67.61 63.26 67.59
Net charge-offs to average loans and leases 0.78 0.73 0.66 0.72
Loan and lease loss reserve to loans and leases 2.83 2.85 2.83 2.85
Nonperforming assets to loans and leases 2.81 3.15 2.81 3.15
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 361 $ 628
Nonaccrual loans and leases 74,853 83,537
Other real estate 6,392 4,039
Former bank premises held for sale 1,200 2,490
Repossessions 5,670 10,165
Equipment owned under operating leases 236 154
Total nonperforming assets 88,712 101,013
1st SOURCE CORPORATION    
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
December 31, 2010 December 31, 2009

ASSETS
Cash and due from banks $ 62,313 $ 72,872
Federal funds sold and interest bearing deposits with other banks 36,394 141,166
Investment securities available-for-sale
(amortized cost of $952,101 and $893,439 at
December 31, 2010 and 2009, respectively) 969,018 901,638
Other investments 19,508 21,012
Trading account securities 138 125
Mortgages held for sale 32,599 26,649
 
Loans and leases, net of unearned discount:
Commercial and agricultural loans 530,228 546,222
Auto, light truck and environmental equipment 396,500 349,741
Medium and heavy duty truck 162,824 204,545
Aircraft financing 614,357 617,384
Construction equipment financing 285,634 313,300
Commercial real estate 594,729 580,709
Residential real estate 390,951 371,514
Consumer loans   95,400     109,735  
Total loans and leases 3,070,623 3,093,150
Reserve for loan and lease losses   (86,874 )   (88,236 )
Net loans and leases 2,983,749 3,004,914
 
Equipment owned under operating leases, net 78,138 97,004
Net premises and equipment 33,881 37,907
Goodwill and intangible assets 88,955 90,222
Accrued income and other assets   140,588     148,591  
 
Total assets $ 4,445,281   $ 4,542,100  
 

LIABILITIES
Deposits:
Noninterest bearing $ 524,564 $ 450,608
Interest bearing   3,098,181     3,201,856  
Total deposits 3,622,745 3,652,464
 
Federal funds purchased and securities sold
under agreements to purchase 136,028 123,787
Other short-term borrowings 19,961 26,323
Long-term debt and mandatorily redeemable securities 24,816 19,761
Subordinated notes 89,692 89,692
Accrued expenses and other liabilities   65,656     59,753  
Total liabilities 3,958,898 3,971,780
 

SHAREHOLDERS' EQUITY
Preferred stock; no par value - 104,930
Common stock; no par value 350,282 350,269
Retained earnings 157,875 142,407
Cost of common stock in treasury (32,284 ) (32,380 )
Accumulated other comprehensive income   10,510     5,094  
Total shareholders' equity   486,383     570,320  
 
Total liabilities and shareholders' equity $ 4,445,281   $ 4,542,100  
1st SOURCE CORPORATION        
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2010   2009 2010   2009
Interest income:
Loans and leases $ 44,435 $ 42,378 $ 173,526 $ 174,885
Investment securities, taxable 4,855 4,994 20,466 17,594
Investment securities, tax-exempt 1,315 1,659 5,573 6,705
Other   318       334     1,061       1,228  
Total interest income   50,923       49,365     200,626       200,412  
 
Interest expense:
Deposits 9,837 13,859 44,605 63,521
Short-term borrowings 187 206 800 1,115
Subordinated notes 1,647 1,647 6,589 6,589
Long-term debt and mandatorily redeemable securities   90       122     1,135       975  
Total interest expense   11,761       15,834     53,129       72,200  
 
Net interest income 39,162 33,531 147,497 128,212
Provision for loan and lease losses   3,443       8,360     19,207       31,101  
Net interest income after provision for
loan and lease losses 35,719 25,171 128,290 97,111
 
Noninterest income:
Trust fees 4,161 3,563 15,838 15,036
Service charges on deposit accounts 4,510 5,278 19,323 20,645
Mortgage banking income 2,467 1,377 6,218 8,251
Insurance commissions 1,368 1,316 5,074 4,930
Equipment rental income 6,124 6,861 26,036 25,757
Other income 3,552 2,611 11,909 9,224
Investment securities and other investment gains   234       1,014     2,293       1,687  
Total noninterest income   22,416       22,020     86,691       85,530  
 
Noninterest expense:
Salaries and employee benefits 19,177 17,143 75,815 72,483
Net occupancy expense 2,162 2,090 8,788 9,185
Furniture and equipment expense 3,320 3,493 12,543 13,980
Depreciation - leased equipment 4,874 5,450 20,715 20,515
Professional fees 1,858 1,502 6,353 4,399
Supplies and communication 1,405 1,448 5,499 5,916
FDIC and other insurance 1,495 1,511 6,256 8,362
Business development and marketing expense 1,482 1,554 3,774 3,488
Loan and lease collection and repossession expense 405 1,507 6,227 4,283
Other expense   3,758       2,866     8,535       8,512  
Total noninterest expense   39,936       38,564     154,505       151,123  
 
Income before income taxes 18,199 8,627 60,476 31,518
Income tax expense   5,632       2,404     19,232       6,028  
 
Net income 12,567 6,223 41,244 25,490
Preferred stock dividends and discount accretion   (6,440 )     (1,706 )   (11,589 )     (6,416 )
Net income available to common shareholders $ 6,127     $ 4,517   $ 29,655     $ 19,074  
 
 
The NASDAQ Global Select National Market Symbol: "SRCE" (CUSIP #336901 10 3)

Please contact us at shareholder@1stsource.com

Copyright Business Wire 2010

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