1st Source Announces Third Quarter Income Increase; Dividend Announced

1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced third quarter net income of $11.54 million, an increase of 3.01% over the $11.20 million in the third quarter 2010. For the first three quarters of the year, net income was $37.01 million versus $28.68 million a year earlier, a 29.07% increase. Diluted net income per common share for the third quarter of 2011 was $0.47 versus $0.39, up 20.51% over the same period in 2010. Diluted net income per common share for the first three quarters was $1.51, an increase of 57.29% compared to $0.96 in 2010.

At the October meeting, the Board of Directors approved a cash dividend of $0.16 per common share, payable on November 14, 2011 to shareholders of record on November 4, 2011.

Christopher J. Murphy III, Chairman of 1st Source, commented, “This was a solid quarter for 1st Source - no fireworks, just a sound performance as we continue to see the economy and our clients in a holding pattern. Our loan and lease loss provision for the third quarter was $1.26 million, up compared to $67,000 last quarter, and down from $5.58 million a year ago. Our nonperforming loans and leases were up slightly, and our third quarter net interest margin dropped a bit from last quarter to 3.66% from 3.72%.”

Mr. Murphy continued, “With the uproar over Wall Street and the investment banks, 1st Source remains a community bank and has stayed true to our clients by always keeping their best interests in mind. Our conservative approach to managing the balance sheet and our business has resulted in our strong earnings. As an example, we never participated in low or no doc mortgages, sub-prime or Alt-A credit that have hurt so many banks across the country and led to the mortgage meltdown. Our goal has always been to provide value to our clients. We strive to be the most convenient place to bank, whether it is in person, online, over the phone, text banking, whatever the client prefers. We provide financial guidance to help our clients get ahead, and keep their best interests in mind with long-term thinking, the right products and services, and no surprises. Very personal, very straightforward, and very convenient. During this long down turn in the economy, we have concentrated on taking care of our clients, and helping them and our communities work through these tough times.”

As of September 30, 2011, the 1st Source common equity-to-assets ratio was 12.00% compared to 10.82% a year ago and the tangible common equity to tangible assets ratio was 10.17% compared to 9.03% a year earlier. Common shareholders' equity was $516.88 million, up 5.40% from the $490.41 million reported a year ago. Total assets at the end of the third quarter of 2011 were $4.31 billion, down 4.99% from a year ago. Total loans and leases were $3.08 billion, relatively flat from a year ago and total deposits were $3.45 billion, down slightly from September 30, 2010.

The 1st Source reserve for loan and lease losses as of September 30, 2011 is 2.73% of total loans and leases compared to 2.88% at September 30, 2010. Net charge-offs are $2.06 million in the third quarter 2011, compared with net charge-offs of $4.08 million in the same quarter a year ago. Year-to-date, net charge-offs of $6.19 million have been recorded in 2011, compared to net charge-offs of $14.49 million through September 30, 2010. The ratio of nonperforming assets to net loans and leases is 2.43% as of September 30, 2011, down from 3.09% on September 30, 2010.

Noninterest income for the third quarter was $20.23 million, down 11.08% from the same period in 2010. For the nine months, noninterest income was $60.61 million, a decrease of 5.71% from 2010. The decrease in noninterest income for the third quarter and year-to-date was primarily due to a reduction in mortgage banking income and equipment rental income.

Noninterest expense for the third quarter was $37.15 million, a 1.75% decrease from the $37.81 million reported in the third quarter a year earlier. Noninterest expense for the first nine months of 2011 was $111.57 million versus $114.57 million for the same period of 2010. The leading factors in the decrease are reduced loan and lease collection and repossession expense, depreciation 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
3rd QUARTER 2011 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
 
        Three Months Ended     Nine Months Ended
September 30, September 30,
2011   2010 2011   2010
END OF PERIOD BALANCES
Assets $ 4,305,941 $ 4,532,313
Loans and leases 3,083,294 3,112,179
Deposits 3,447,585 3,566,194
Reserve for loan and lease losses 84,210 89,509
Intangible assets 88,000 89,287
Common shareholders' equity 516,879 490,406
Total shareholders' equity 516,879 596,323
 
AVERAGE BALANCES
Assets $ 4,342,406 $ 4,518,393 $ 4,396,250 $ 4,507,258
Earning assets 4,033,723 4,182,332 4,086,144 4,167,605
Investments 873,753 895,743 913,696 901,844
Loans and leases 3,096,168 3,129,445 3,083,747 3,116,927
Deposits 3,477,448 3,568,428 3,557,883 3,578,440
Interest bearing liabilities 3,211,939 3,357,917 3,299,348 3,384,473
Common shareholders' equity 513,556 492,025 501,774 482,418
Total shareholders' equity 513,556 597,728 501,774 587,795
 
INCOME STATEMENT DATA
Net interest income $ 36,626 $ 37,184 $ 111,070 $ 108,335
Net interest income - FTE 37,216 38,019 113,014 110,909
Provision for loan and lease losses 1,260 5,578 3,525 15,764
Noninterest income 20,230 22,751 60,607 64,275
Noninterest expense 37,148 37,810 111,567 114,569
Net income 11,540 11,203 37,013 28,677
Net income available to common shareholders 11,540 9,482 37,013 23,528
 
PER SHARE DATA
Basic net income per common share $ 0.47 $ 0.39 $ 1.51 $ 0.96
Diluted net income per common share 0.47 0.39 1.51 0.96
Common cash dividends declared 0.16 0.15 0.48 0.45
Book value per common share 21.35 20.26 21.35 20.26
Tangible book value per common share 17.71 16.57 17.71 16.57
Market value - High 24.00 18.99 24.00 20.36
Market value - Low 19.36 15.98 17.86 14.25
Basic weighted average common shares outstanding 24,213,063 24,247,236 24,246,041 24,247,468
Diluted weighted average common shares outstanding 24,223,432 24,253,883 24,255,357 24,254,026
 
KEY RATIOS
Return on average assets 1.05

%

 
0.98

%

 
1.13

%

 
0.85 %
Return on average common shareholders' equity 8.92 7.65 9.86 6.52
Average common shareholders' equity to average assets 11.83 10.89 11.41 10.70
End of period tangible common equity to tangible assets 10.17 9.03 10.17 9.03
Risk-based capital - Tier 1 14.96 16.86 14.96 16.86
Risk-based capital - Total 16.26 18.15 16.26 18.15
Net interest margin 3.66 3.61 3.70 3.56
Efficiency: expense to revenue 63.25 60.70 62.89 63.68
Net charge offs to average loans 0.26 0.52 0.27 0.62
Loan and lease loss reserve to loans and leases 2.73 2.88 2.73 2.88
Nonperforming assets to loans and leases 2.43 3.09 2.43 3.09
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 624 $ 1,104
Nonaccrual loans and leases 61,549 79,094
Other real estate 8,032 7,010
Former bank premises held for sale 1,514 2,190
Repossessions 4,918 9,665
Equipment owned under operating leases 389 311
Total nonperforming assets 77,026 99,374
 
           
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
 
September 30, 2011 September 30, 2010

ASSETS
Cash and due from banks $ 57,986 $ 60,395

Federal funds sold and interest bearing deposits with other banks
25,064 78,047

Investment securities available-for-sale (amortized cost of $820,336 and $848,409 at September 30, 2011 and 2010, respectively)
850,507 874,514
Other investments 18,974 22,047
Trading account securities 119 125
Mortgages held for sale 13,219 114,947
 
Loans and leases, net of unearned discount:
Commercial and agricultural loans 557,392 535,874
Auto, light truck and environmental equipment 442,127 397,297
Medium and heavy duty truck 152,703 174,459
Aircraft financing 613,706 620,996
Construction equipment financing 260,241 304,035
Commercial real estate 556,287 584,108
Residential real estate 404,063 395,334
Consumer loans   96,775     100,076  
Total loans and leases 3,083,294 3,112,179
Reserve for loan and lease losses   (84,210 )   (89,509 )
Net loans and leases 2,999,084 3,022,670
 
Equipment owned under operating leases, net 75,096 84,430
Net premises and equipment 40,958 36,133
Goodwill and intangible assets 88,000 89,287
Accrued income and other assets   136,934     149,718  
 
Total assets $ 4,305,941   $ 4,532,313  
 

LIABILITIES
Deposits:
Noninterest bearing $ 560,932 $ 495,778
Interest bearing   2,886,653     3,070,416  
Total deposits   3,447,585     3,566,194  
 
Short-term borrowings:

Federal funds purchased and securities sold under agreements to repurchase
124,779 145,887
Other short-term borrowings   16,159     26,337  
Total short-term borrowings 140,938 172,224
Long-term debt and mandatorily redeemable securities 37,064 34,987
Subordinated notes 89,692 89,692
Accrued expenses and other liabilities   73,783     72,893  
Total liabilities 3,789,062 3,935,990

 

SHAREHOLDERS' EQUITY
Preferred stock; no par value - 105,917
Common stock; no par value 346,535 350,278
Retained earnings 183,007 155,633
Cost of common stock in treasury (31,408 ) (31,723 )
Accumulated other comprehensive income   18,745     16,218  
Total shareholders' equity   516,879     596,323  
 
Total liabilities and shareholders' equity $ 4,305,941   $ 4,532,313  
 
               
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
 
Three Months Ended Nine Months Ended
September 30 September 30
2011 2010 2011 2010
Interest income:
Loans and leases $ 40,741 $ 43,722 $ 123,750 $ 129,091
Investment securities, taxable 4,694 4,931 14,088 15,611
Investment securities, tax-exempt 934 1,369 3,124 4,258
Other   217   219     707   743  
Total interest income 46,586 50,241 141,669 149,703
 
Interest expense:
Deposits 7,756 10,790 24,273 34,768
Short-term borrowings 77 219 240 613
Subordinated notes 1,647 1,648 4,942 4,942
Long-term debt and mandatorily redeemable securities   480   400     1,144   1,045  
Total interest expense   9,960   13,057     30,599   41,368  
 
Net interest income 36,626 37,184 111,070 108,335
Provision for loan and lease losses   1,260   5,578     3,525   15,764  

Net interest income after provision for loan and lease losses
35,366 31,606 107,545 92,571
 
Noninterest income:
Trust fees 3,902 3,870 12,305 11,677
Service charges on deposit accounts 4,748 4,918 13,622 14,813
Mortgage banking income 1,056 2,549 2,335 3,751
Insurance commissions 1,212 1,180 3,416 3,706
Equipment rental income 5,814 6,495 17,861 19,912
Other income 3,084 2,656 9,382 8,357
Investment securities and other investment gains   414   1,083     1,686   2,059  
Total noninterest income   20,230   22,751     60,607   64,275  
 
Noninterest expense:
Salaries and employee benefits 19,476 18,980 57,249 56,638
Net occupancy expense 2,237 2,200 6,608 6,626
Furniture and equipment expense 3,519 3,227 10,429 9,223
Depreciation - leased equipment 4,650 5,173 14,250 15,841
Professional fees 1,326 1,563 3,502 4,495
Supplies and communication 1,312 1,387 4,022 4,094
FDIC and other insurance 874 1,420 3,508 4,761
Business development and marketing expense 968 845 2,454 2,292
Loan and lease collection and repossession expense 1,387 1,449 4,211 5,822
Other expense   1,399   1,566     5,334   4,777  
Total noninterest expense   37,148   37,810     111,567   114,569  
 
Income before income taxes 18,448 16,547 56,585 42,277
Income tax expense   6,908   5,344     19,572   13,600  
 
Net income 11,540 11,203 37,013 28,677
Preferred stock dividends and discount accretion   -   (1,721 )   -   (5,149 )
Net income available to common shareholders $ 11,540 $ 9,482   $ 37,013 $ 23,528  
 
 

The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP #336901 10 3)Please contact us at shareholder@1stsource.com

Copyright Business Wire 2010

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