1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today reports net income of $14.87 million for the second quarter of 2011, an increase of 90.70% over the $7.80 million reported in the second quarter of 2010. For the first six months of 2011, net income for 1st Source Corporation is $25.47 million, up 45.78% compared to $17.47 million reported for the same period in 2010. Diluted net income per common share for the second quarter amounts to $0.61 compared with $0.25, an increase of 144.00% over the second quarter of 2010. Diluted net income per common share for the first half of 2011 is $1.04, up 82.46% over the $0.57 earned a year earlier.

At its July meeting, the Board of Directors approved a cash dividend of $0.16 per common share, an increase of 6.67% over the third quarter a year ago. The dividend is payable to shareholders of record on August 5, 2011 and will be paid on August 15, 2011.

Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, “I am quite pleased with our performance this quarter. Our colleagues’ focus on working to ensure the success of our clients and providing distinctive convenience in our market has led to our strong performance. We are also benefiting from a focus on attracting new clients to the Bank by understanding their needs, offering sound advice during these unsettling times, ensuring our products and services are up-to-date and competitive, and always keeping our clients’ best interests in mind. We know our success is a mirror of our clients’ success so we continue to work hard to help make them successful.”

Mr. Murphy continued, “During the quarter, credit has continued to show improvement. Our non-performing assets decreased $11.22 million or 12.79% from the same period a year ago. We charged-off $1.22 million during the quarter which is down from second quarter last year. The net provision for loan and lease losses for the second quarter totaled $67,000 versus $5.80 million a year ago and the quarter end reserve for loan and lease losses is $85.01 million compared to a year end 2010 reserve of $86.87 million. Additionally, our net interest margin increased from 2010 levels to 3.72% for the quarter, while expenses have been held in check. The margin was positively impacted by interest recoveries on non-accrual loans and lower funding costs. Even with these good results, we still see choppy times ahead from the global economy and little to no growth in the national economy overall. As a result, we continue to keep a close watch on our loan portfolios and on our expenses. Moreover, the regulatory burden continues to grow and recent enactments will have a long range impact on the profitability of certain lines of business throughout the banking industry. As always, we will adjust accordingly,” Mr. Murphy concluded.

As of June 30, 2011, the 1st Source common equity-to-assets ratio is 11.61% compared to 10.68% a year ago and its tangible equity to assets ratio is 9.78% compared to 8.88% a year earlier. Total assets at June 30, 2011 are $4.35 billion, down 3.89% from a year earlier. Total loans and leases are $3.12 billion, down slightly from June 30, 2010. Total deposits are $3.52 billion, down 2.39% from the comparable figures at June 30, 2010.

The 1st Source reserve for loan and lease losses as of June 30, 2011 is 2.73% of total loans and leases compared to 2.81% at June 30, 2010. Net charge-offs are $1.22 million in the second quarter 2011, compared with net charge-offs of $5.61 million in the same quarter a year ago. Year-to-date, net charge-offs of $4.13 million have been recorded in 2011, compared to net charge-offs of $10.41 million for the first half of 2010. The ratio of nonperforming assets to net loans and leases is 2.39% as of June 30, 2011, down from 2.71% on June 30, 2010.

The net interest margin is 3.72% for the second quarter of 2011 versus 3.57% for the same period in 2010. The net interest margin is 3.72% for the six months ending June 30, 2011, versus 3.53% for the same period in 2010. Tax-equivalent net interest income is $38.23 million for the second quarter of 2011, compared to $37.11 million for 2010’s second quarter. For the first six months of 2011, tax-equivalent net interest income is $75.80 million, compared to $72.89 million for the first six months of 2010.

Noninterest income for the second quarter of 2011 is $21.42 million, up 3.99% from the same period in 2010. For the first six months, noninterest income is $40.38 million, down 2.76% from 2010. Noninterest income increased in the second quarter primarily as a result of gains on sale of investment securities offset by lower service charges on deposit accounts and lower equipment rental income. Noninterest income decreased for the first six months of 2011 due to declines in service charges on deposit accounts and lower equipment rental income.

Noninterest expense is $35.94 million for the second quarter of 2011, down 9.35% from the second quarter of 2010. For the first six months, noninterest expense is $74.42 million, down 3.05% compared with $76.76 million for the same period in 2010. The leading factors in the decrease are reduced loan and lease collection and repossession expense, depreciation expense on leased equipment, and FDIC 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 75 community banking centers in 17 counties, 22 specialty finance locations nationwide, 8 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

2nd QUARTER 2011 FINANCIAL HIGHLIGHTS

(Unaudited - Dollars in thousands, except for per share data)
   

Three Months Ended

June 30,
Six Months Ended

June 30,
   
2011 2010 2011 2010
END OF PERIOD BALANCES
Assets $ 4,354,951 $ 4,531,313
Loans and leases 3,118,157 3,131,749
Deposits 3,523,316 3,609,586
Reserve for loan and lease losses 85,010 88,014
Intangible assets 88,325 89,618
Common shareholders' equity 505,594 483,919
Total shareholders' equity 505,594 589,502
 
AVERAGE BALANCES
Assets $ 4,427,034 $ 4,517,624 $ 4,423,618 $ 4,501,598
Earning assets 4,116,791 4,174,376 4,112,789 4,160,120
Investments 911,678 917,151 933,999 904,946
Loans and leases 3,100,598 3,120,871 3,077,434 3,110,565
Deposits 3,597,533 3,592,827 3,598,767 3,583,529
Interest bearing liabilities 3,338,983 3,399,245 3,343,777 3,397,971
Common shareholders' equity 498,863 481,462 495,785 477,534
Total shareholders' equity 498,863 586,835 495,785 582,746
 
INCOME STATEMENT DATA
Net interest income $ 37,584 $ 36,249 $ 74,444 $ 71,151
Net interest income - FTE 38,232 37,113 75,798 72,890
Provision for loan and lease losses 67 5,798 2,265 10,186
Noninterest income 21,424 20,602 40,377 41,524
Noninterest expense 35,943 39,649 74,419 76,759
Net income 14,865 7,795 25,473 17,474
Net income available to common shareholders 14,865 6,078 25,473 14,046
 
PER SHARE DATA
Basic net income per common share $ 0.61 $ 0.25 $ 1.04 $ 0.57
Diluted net income per common share 0.61 0.25 1.04 0.57
Common cash dividends declared 0.16 0.15 0.32 0.30
Book value per common share 20.88 19.93 20.88 19.93
Tangible book value per common share 17.23 16.24 17.23 16.24
Market value - High 21.33 20.36 21.33 20.36
Market value - Low 19.10 16.58 17.86 14.25
Basic weighted average common shares outstanding 24,254,334 24,284,519 24,262,803 24,247,586
Diluted weighted average common shares outstanding 24,263,596 24,292,491 24,271,527 24,254,098
 
KEY RATIOS
Return on average assets 1.35

%

 
0.69

%

 
1.16

%

 

0.78

%
Return on average common shareholders' equity 11.95 5.06 10.36 5.93
Average common shareholders' equity to average assets 11.27 10.66 11.21 10.61
End of period tangible common equity to tangible assets 9.78 8.88 9.78 8.88
Risk-based capital - Tier 1 14.52 16.58 14.52 16.58
Risk-based capital - Total 15.82 17.87 15.82 17.87
Net interest margin 3.72 3.57 3.72 3.53
Efficiency: expense to revenue 59.10 66.70 62.70 65.27
Net charge-offs to average loans and leases 0.16 0.72 0.27 0.67
Loan and lease loss reserve to loans and leases 2.73 2.81 2.73 2.81
Nonperforming assets to loans and leases 2.39 2.71 2.39 2.71
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 337 $ 1,230
Nonaccrual loans and leases 64,920 68,433
Other real estate 7,878 6,673
Former bank premises held for sale 1,580 2,363
Repossessions 1,302 8,670
Equipment owned under operating leases 474 337
Total nonperforming assets 76,491 87,706
 
1st SOURCE CORPORATION    
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
 
June 30, 2011 June 30, 2010

ASSETS
Cash and due from banks $ 59,249 $ 65,337
Federal funds sold and
interest bearing deposits with other banks 100 41,099

Investment securities available-for-sale (amortized cost of $878,401 and $909,516 at June 30, 2011 and 2010, respectively)
902,742 932,583
Other investments 18,974 22,892
Trading account securities 143 113
Mortgages held for sale 7,805 59,084
 
Loans and leases, net of unearned discount:
Commercial and agricultural loans 551,820 539,003
Auto, light truck and environmental equipment 473,925 416,152
Medium and heavy duty truck 155,423 185,954
Aircraft financing 607,567 596,138
Construction equipment financing 274,968 308,602
Commercial real estate 568,226 581,392
Residential real estate 390,389 401,662
Consumer loans   95,839     102,846  
Total loans and leases 3,118,157 3,131,749
Reserve for loan and lease losses   (85,010 )   (88,014 )
Net loans and leases 3,033,147 3,043,735
 
Equipment owned under operating leases, net 77,102 91,288
Net premises and equipment 36,885 36,573
Goodwill and intangible assets 88,325 89,618
Accrued income and other assets   130,479     148,991  
 
Total assets $ 4,354,951   $ 4,531,313  
 

LIABILITIES
Deposits:
Noninterest bearing $ 516,189 $ 487,719
Interest bearing   3,007,127     3,121,867  
Total deposits   3,523,316     3,609,586  
 
Short-term borrowings:

Federal funds purchased and securities sold under agreements to repurchase
108,799 113,638
Other short-term borrowings   21,324     28,136  
Total short-term borrowings 130,123 141,774
Long-term debt and mandatorily redeemable securities 36,785 29,854
Subordinated notes 89,692 89,692
Accrued expenses and other liabilities   69,441     70,905  
Total liabilities 3,849,357 3,941,811
 

SHAREHOLDERS' EQUITY
Preferred stock; no par value - 105,583
Common stock; no par value 346,535 350,275
Retained earnings 175,374 149,799
Cost of common stock in treasury (31,437 ) (30,486 )
Accumulated other comprehensive income   15,122     14,331  
Total shareholders' equity   505,594     589,502  
 
Total liabilities and shareholders' equity $ 4,354,951   $ 4,531,313  
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
   
Three Months Ended

June 30,
Six Months Ended

June 30,
2011   2010 2011   2010
Interest income:    
Loans and leases $ 41,710 $ 43,099 $ 83,009 $ 85,369
Investment securities, taxable 4,912 5,279 9,394 10,680
Investment securities, tax-exempt 1,004 1,422 2,190 2,889
Other   247     250     490     524  
Total interest income 47,873 50,050 95,083 99,462
 
Interest expense:
Deposits 8,162 11,573 16,517 23,978
Short-term borrowings 74 206 163 394
Subordinated notes 1,648 1,647 3,295 3,294
Long-term debt and mandatorily redeemable securities   405     375     664     645  
Total interest expense   10,289     13,801     20,639     28,311  
 
Net interest income 37,584 36,249 74,444 71,151
Provision for loan and lease losses   67     5,798     2,265     10,186  
Net interest income after provision for loan and lease losses 37,517 30,451 72,179 60,965
 
Noninterest income:
Trust fees 4,411 4,062 8,403 7,807
Service charges on deposit accounts 4,638 5,275 8,874 9,895
Mortgage banking income 835 425 1,279 1,202
Insurance commissions 1,062 1,061 2,204 2,526
Equipment rental income 6,009 6,672 12,047 13,417
Other income 3,327 3,012 6,298 5,701
Investment securities and other investment gains   1,142     95     1,272     976  
Total noninterest income   21,424     20,602     40,377     41,524  
 
Noninterest expense:
Salaries and employee benefits 19,135 18,848 37,773 37,658
Net occupancy expense 2,051 1,939 4,371 4,426
Furniture and equipment expense 3,561 3,196 6,910 5,996
Depreciation - leased equipment 4,795 5,304 9,600 10,668
Professional fees 1,080 1,418 2,176 2,932
Supplies and communication 1,316 1,338 2,710 2,707
FDIC and other insurance 958 1,667 2,634 3,341
Business development and marketing expense 864 880 1,486 1,447
Loan and lease collection and respossession expense 1,500 3,267 2,824 4,373
Other expense   683     1,792     3,935     3,211  
Total noninterest expense   35,943     39,649     74,419     76,759  
 
Income before income taxes 22,998 11,404 38,137 25,730
Income tax expense   8,133     3,609     12,664     8,256  
 
Net income 14,865 7,795 25,473 17,474
Preferred stock dividends and discount accretion   -     (1,717 )   -     (3,428 )
Net income available to common shareholders $ 14,865   $ 6,078   $ 25,473   $ 14,046  
 
The Nasdaq Global Select Market Symbol: "SRCE" (CUSIP #336901 10 3)

Please contact us at shareholder@1stsource.com

Copyright Business Wire 2010

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