1st Source Posts Strong Third Quarter

1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced third quarter net income of $14.90 million, an increase of 14.54% over the $13.01 million in the third quarter of 2012. For the first three quarters of the year, net income was $41.24 million versus $37.29 million a year earlier, a 10.61% increase. Diluted net income per common share for the third quarter of 2013 was $0.60 versus $0.53, up 13.21% over the same period in 2012. Diluted net income per common share for the first three quarters was $1.67 in 2013 compared to $1.51, up 10.60% over the previous year.

At the October meeting, the Board of Directors approved a cash dividend of $0.17 per common share. The dividend is payable on November 15, 2013 to shareholders of record on November 5, 2013.

Christopher J. Murphy III, Chairman of 1st Source, commented, “This was an excellent quarter for 1st Source Corporation and I’m pleased we continue to grow organically, one client at a time. The Bank broke ground on a new location in Lafayette, Indiana, our consumer loan area had robust demand although new mortgage production slowed, and our year to date average deposits and loans and leases increased 3.95% and 7.09% respectively.”

“Credit was a major contributor to the strong quarterly financial performance. We saw the direct benefit of operating with strong capital and reserves giving us the capability of working through problems with our customers over the long term. During the quarter we recovered $2.07 million in interest payments and expense recoveries from clients we have been working with for as long as 10 or more years as they restored their businesses to strong operating positions. Our financial strength is an advantage for our clients as it gives us the ability to work with troubled businesses over the long term - helping them return to health, retain jobs, and make the communities we serve stronger. We believe this is another distinct advantage of 1st Source. Our overall credit quality continues to improve, leading to a recovery of loan and lease loss provision for the quarter. Of course, we are ever mindful of the volatility in markets around the world that can have an adverse impact on our clients here, and of the increased pressure on interest rate margins.”

Mr. Murphy continued, “Lastly, I’m quite proud of my colleagues for the recent honor we received. 1st Source Corporation was named to the prestigious Sandler O’Neill Bank and Thrift Sm-All Starts list, a select group of 31 top performing U.S. publicly traded banks and thrifts with a market cap under $2.5 billion. Those honored were evaluated using the criteria of growth, profitability, credit quality and capital strength.”

“We continue to focus on providing outstanding client service and strong credit quality, which allows us to maintain steady and profitable growth.” Mr. Murphy concluded.

As of September 30, 2013, the 1st Source common equity-to-assets ratio was 12.44% compared to 12.34% a year ago and the tangible common equity to tangible assets ratio was 10.77% compared to 10.59% a year earlier. Common shareholders' equity was $578.23 million, up 4.44% from the $553.67 million reported a year ago. Total assets at the end of the third quarter of 2013 were $4.65 billion, up 3.60% from a year ago. Total loans and leases were $3.47 billion, up 6.11% from September 30, 2012. Total deposits were $3.68 billion, up 3.10% from the comparable figures at September 30, 2012.

The reserve for loan and lease losses as of September 30, 2013 was 2.44% of total loans and leases compared to 2.55% at September 30, 2012. Net charge-offs were $0.76 million in the third quarter 2013, compared with net charge-offs of $0.45 million in the same quarter a year ago. Year-to-date, net charge-offs of $0.44 million have been recorded in 2013, compared to net charge-offs of $3.10 million through September 30, 2012. The ratio of nonperforming assets to net loans and leases was 1.14% as of September 30, 2013, compared to 1.51% on September 30, 2012.

Noninterest income for the third quarter was $20.16 million, compared to $20.31 million for the same period in 2012. For the nine months, noninterest income was $59.23 million, versus $60.62 million from 2012.

Noninterest expense for the third quarter was $38.43 million compared to $37.19 million reported in the third quarter a year earlier. Noninterest expense for the first nine months of 2013 was $110.72 million versus $111.82 million for the same period of 2012.

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 76 community banking centers, 9 trust and wealth management locations, and 9 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 2013 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
END OF PERIOD BALANCES
Assets $ 4,649,961 $ 4,488,219
Loans and leases 3,468,118 3,268,413
Deposits 3,679,416 3,568,668
Reserve for loan and lease losses 84,507 83,499
Intangible assets 86,629 87,796
Common shareholders' equity 578,229 553,668
 
AVERAGE BALANCES
Assets $ 4,625,957 $ 4,499,425 $ 4,594,032 $ 4,447,453
Earning assets 4,351,583 4,206,982 4,313,742 4,145,500
Investments 825,476 854,994 842,017 876,183
Loans and leases 3,483,942 3,268,304 3,415,752 3,189,526
Deposits 3,697,869 3,583,174 3,693,839 3,553,531
Interest bearing liabilities 3,295,163 3,243,445 3,288,267 3,230,802
Common shareholders' equity 574,589 549,963 571,692 541,040
 
INCOME STATEMENT DATA
Net interest income $ 41,158 $ 37,907 $ 117,783 $ 113,267
Net interest income - FTE 41,604 38,420 119,148 114,840
(Recovery of) provision for loan and lease losses (419) 650 1,631 4,959
Noninterest income 20,158 20,305 59,227 60,618
Noninterest expense 38,430 37,193 110,724 111,819
Net income 14,896 13,005 41,242 37,287
 
PER SHARE DATA
Basic net income per common share $ 0.60 $ 0.53 $ 1.67 $ 1.52
Diluted net income per common share 0.60 0.53 1.67 1.51
Common cash dividends declared 0.17 0.17 0.51 0.49
Book value per common share 23.77 22.80 23.77 22.80
Tangible book value per common share 20.21 19.19 20.21 19.19
Market value - High 28.82 23.97 28.82 26.79
Market value - Low 23.87 21.40 21.88 20.51
Basic weighted average common shares outstanding 24,366,220 24,279,178 24,352,073 24,267,535
Diluted weighted average common shares outstanding 24,367,109 24,289,495 24,352,854 24,278,160
 
KEY RATIOS
Return on average assets 1.28

%

 
1.15

%

 
1.20

%

 
1.12 %
Return on average common shareholders' equity 10.29 9.41 9.65 9.21
Average common shareholders' equity to average assets 12.42 12.22 12.44 12.17
End of period tangible common equity to tangible assets 10.77 10.59 10.77 10.59
Risk-based capital - Tier 1 14.57 15.10 14.57 15.10
Risk-based capital - Total 15.89 16.42 15.89 16.42
Net interest margin 3.79 3.63 3.69 3.70
Efficiency: expense to revenue 61.55 61.98 61.21 62.43
Net charge offs to average loans 0.09 0.05 0.02 0.13
Loan and lease loss reserve to loans and leases 2.44 2.55 2.44 2.55
Nonperforming assets to loans and leases 1.14 1.51 1.14 1.51
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 245 $ 477
Nonaccrual loans and leases 31,325 42,756
Other real estate 5,002 4,842
Former bank premises held for sale 951 1,101
Repossessions 2,811 1,248
Equipment owned under operating leases - 32
Total nonperforming assets 40,334 50,456
 
           
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
 
September 30, 2013 September 30, 2012

ASSETS
Cash and due from banks $ 90,090 $ 54,635

Federal funds sold and interest bearing deposits with other banks
1,676 17,179

Investment securities available-for-sale (amortized cost of $819,918 and $832,951 at September 30, 2013 and 2012, respectively)
834,348 868,312
Other investments 22,409 22,364
Trading account securities 177 145
Mortgages held for sale 7,157 22,853
 
Loans and leases, net of unearned discount:
Commercial and agricultural loans 652,180 584,996
Auto, light truck and environmental equipment 452,405 456,665
Medium and heavy duty truck 192,974 167,709
Aircraft financing 704,072 685,800
Construction equipment financing 315,346 276,270
Commercial real estate 574,279 548,921
Residential real estate 455,327 436,909
Consumer loans   121,535     111,143  
Total loans and leases 3,468,118 3,268,413
Reserve for loan and lease losses   (84,507 )   (83,499 )
Net loans and leases 3,383,611 3,184,914
 
Equipment owned under operating leases, net 61,160 58,496
Net premises and equipment 45,466 43,172
Goodwill and intangible assets 86,629 87,796
Accrued income and other assets   117,238     128,353  
 
Total assets $ 4,649,961   $ 4,488,219  
 

LIABILITIES
Deposits:
Noninterest bearing $ 725,263 $ 634,795
Interest bearing   2,954,153     2,933,873  
Total deposits 3,679,416 3,568,668
 
Short-term borrowings:

Federal funds purchased and securities sold under agreements to repurchase
147,991 119,749
Other short-term borrowings   73,451     16,886  
Total short-term borrowings 221,442 136,635
Long-term debt and mandatorily redeemable securities 58,440 66,964
Subordinated notes 58,764 89,692
Accrued expenses and other liabilities   53,670     72,592  
Total liabilities   4,071,732     3,934,551  
 

SHAREHOLDERS' EQUITY
Preferred stock; no par value - -
Common stock; no par value 346,535 346,535
Retained earnings 252,043 215,647
Cost of common stock in treasury (29,362 ) (30,360 )
Accumulated other comprehensive income   9,013     21,846  
Total shareholders' equity   578,229     553,668  
 
Total liabilities and shareholders' equity $ 4,649,961   $ 4,488,219  
 
               
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
 
Three Months Ended Nine Months Ended
September 30 September 30
2013 2012 2013 2012
Interest income:
Loans and leases $ 42,392 $ 40,610 $ 121,674 $ 120,824
Investment securities, taxable 3,581 3,913 10,774 12,574
Investment securities, tax-exempt 764 826 2,295 2,526
Other   229     231   712   688
Total interest income 46,966 45,580 135,455 136,612
 
Interest expense:
Deposits 4,089 5,419 13,043 16,868
Short-term borrowings 72 36 149 136
Subordinated notes 1,055 1,647 3,165 4,942
Long-term debt and mandatorily redeemable securities   592     571   1,315   1,399
Total interest expense   5,808     7,673   17,672   23,345
 
Net interest income 41,158 37,907 117,783 113,267
(Recovery of) provision for loan and lease losses   (419 )   650   1,631   4,959

Net interest income after provision for loan and lease losses
41,577 37,257 116,152 108,308
 
Noninterest income:
Trust fees 5,260 4,055 13,800 12,407
Service charges on deposit accounts 2,364 2,688 6,928 7,747
Debit card income 2,343 2,020 6,752 6,281
Mortgage banking income 1,103 2,020 4,667 5,464
Insurance commissions 1,292 1,483 4,131 4,051
Equipment rental income 4,000 4,604 12,098 14,620
Investment securities and other investment gains 258 89 469 492
Other income   3,538     3,346   10,382   9,556
Total noninterest income   20,158     20,305   59,227   60,618
 
Noninterest expense:
Salaries and employee benefits 20,441 20,982 59,553 61,668
Net occupancy expense 2,126 1,652 6,480 5,660
Furniture and equipment expense 4,477 3,817 12,285 11,155
Depreciation - leased equipment 3,246 3,795 9,745 11,909
Professional fees 1,178 1,385 3,843 4,232
Supplies and communication 1,330 1,387 4,365 4,165
FDIC and other insurance 874 913 2,679 2,716
Business development and marketing expense 1,306 1,008 3,011 2,925
Loan and lease collection and repossession expense 1,530 1,866 3,382 4,346
Other expense   1,922     388   5,381   3,043
Total noninterest expense   38,430     37,193   110,724   111,819
 
Income before income taxes 23,305 20,369 64,655 57,107
Income tax expense   8,409     7,364   23,413   19,820
 
Net income $ 14,896   $ 13,005 $ 41,242 $ 37,287
 
 
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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