Second Quarter Earnings Increase At 1st Source Corporation, Dividend Declared

1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today reported net income of $14.49 million for the second quarter of 2014, up 3.96% over the $13.94 million earned in the second quarter of 2013. Year to date, net income was $28.13 million, up 6.76% compared to the first six months of last year. Diluted net income per common share for the second quarter amounted to $0.59, up 5.36% compared to $0.56 for the second quarter of 2013. Diluted net income per common share for the first half of 2014 was $1.15, an increase of 7.48%, compared to the $1.07 earned a year earlier.

At its July meeting, the Board of Directors approved a cash dividend of $0.18 per common share. The dividend is payable to shareholders of record on August 5, 2014 and will be paid on August 15, 2014.

According to Christopher J. Murphy, III, Chairman, "1st Source Corporation turned in a solid performance in the second quarter. Loan growth was healthy, up $145.97 million this quarter over the previous quarter, and up $230.15 million over the same quarter a year ago. In spite of somewhat lower yields, we have successfully maintained our net interest margin which held steady at 3.59%. Similar to national trends, in our markets we are seeing a consolidation of clients and a return of some of our competitors to loan structure and pricing practices that were prominent before the financial market meltdown in 2008. If this continues, it could put further pressure on interest margins and adversely impact credit quality across the country."

"Also, we opened a new banking center at the University of Notre Dame, along with the installation of 5 additional ATMs on the campus. This enhances our ability to better serve students, faculty and staff, as well as the University's administrative offices. We are remodeling some of the banking centers in our system to serve our clients more conveniently and effectively. Four of the banking centers have been completed and more are scheduled to finish in September," Mr. Murphy concluded.

Total assets were $4.93 billion, up 6.19% from a year earlier. Total loans and leases were $3.72 billion, up 6.59% from June 30, 2013. Total deposits were $3.82 billion, up 3.11% from the comparable figures at June 30, 2013. As of June 30, 2014, the common equity-to-assets ratio was 12.06%, down from 12.24% a year ago and the tangible common equity-to-tangible assets ratio was 10.50% compared to 10.56% a year earlier.

The net interest margin was 3.59% for the second quarter of 2014 versus 3.65% for the same period in 2013. The net interest margin was 3.59% for the six months ended June 30, 2014, versus 3.64% for the same period in 2013. Tax-equivalent net interest income was $40.62 million for the second quarter of 2014, compared to the $39.32 million from 2013's second quarter. For the first six months of 2014, tax-equivalent net interest income was $79.71 million, compared to $77.54 million for the first six months of 2013.

The reserve for loan and lease losses as of June 30, 2014 was 2.38% of total loans and leases compared to 2.45% at June 30, 2013. Net recoveries of $1.22 million were recorded for the second quarter of 2014, compared with net recoveries of $0.39 million in the same quarter a year ago. Year-to-date, net recoveries of $1.92 million have been recorded in 2014, compared to net recoveries of $0.33 million for the first half of 2013. The provision for loan and lease losses was $2.54 million for the second quarter of 2014, compared with $1.29 million from the same period in 2013. For the first six months of 2014, the provision for loan and lease losses was $3.35 million compared with $2.05 million for the first six months of 2013. The ratio of nonperforming assets to net loans and leases was 1.08% as of June 30, 2014 up from 1.01% on June 30, 2013.

Noninterest income for the second quarter of 2014 was $19.22 million, down 4.47% from same period in 2013. The decrease for the quarter was mainly attributed to lower mortgage banking income. For the first six months of 2014, noninterest income was $38.62 million, down 1.15% compared to 2013 primarily as a result of lower mortgage banking income and losses on partnership investments.

Noninterest expense was $34.42 million for the second quarter of 2014, down 3.69% from the second quarter of 2013. For the first six months of 2014, noninterest expense was $70.40 million, down 2.63% compared with $72.29 million for the same period in 2013. Noninterest expense decreased primarily as a result of lower loan and lease collection and repossession expenses and reduced salaries and benefits.

1st Source 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.” Since 1863, 1st Source has been committed to the success of the communities it serves. For more information, visit www.1stsource.com.

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 78 community banking centers in 17 counties, 9 trust and wealth management locations, 8 1st Source Insurance offices, as well as 21 specialty finance locations nationwide. Celebrating 150 years, 1st Source has a history dating back to 1863. The 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 2014 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
   
Three Months Ended June 30, Six Months Ended June 30,
2014   2013 2014   2013
END OF PERIOD BALANCES
Assets $ 4,925,727 $ 4,638,811
Loans and leases 3,723,535 3,493,385
Deposits 3,815,735 3,700,799
Reserve for loan and lease losses 88.776 85,690
Intangible assets 85,796 86,915
Common shareholders' equity 594,218 567,753
 
AVERAGE BALANCES
Assets $ 4,831,313 $ 4,611,953 $ 4,765,107 $ 4,577,806
Earning assets 4,539,093 4,326,264 4,477,086 4,294,509
Investments 835,755 843,870 833,688 850,425
Loans and leases 3,662,156 3,419,723 3,603,016 3,381,093
Deposits 3,764,043 3,719,007 3,717,259 3,691,791
Interest bearing liabilities 3,451,752 3,305,196 3,396,660 3,284,762
Common shareholders' equity 599,292 574,867 597,002 570,220
 
INCOME STATEMENT DATA
Net interest income $ 40,162 $ 38,871 $ 78,780 $ 76,625
Net interest income - FTE 40,622 39,324 79,709 77,544
Provision for loan and lease losses 2,543 1,293 3,347 2,050
Noninterest income 19,221 20,121 38,619 39,069
Noninterest expense 34,424 35,744 70,396 72,294
Net income 14,494 13,942 28,126 26,346
 
PER SHARE DATA
Basic net income per common share $ 0.59 $ 0.56 $ 1.15 $ 1.07
Diluted net income per common share 0.59 0.56 1.15 1.07
Common cash dividends declared 0.18 0.17 0.35 0.34
Book value per common share 24.89 23.29 24.89 23.29
Tangible book value per common share 21.30 19.73 21.30 19.73
Market value - High 33.21 25.25 33.21 25.25
Market value - Low 28.76 22.65 27.56 21.88
Basic weighted average common shares outstanding 24,077,990 24,367,529 24,197,057 24,344,882
Diluted weighted average common shares outstanding 24,077,990 24,368,973 24,197,057 24,346,053
 
KEY RATIOS
Return on average assets 1.20 % 1.21 % 1.19 % 1.16 %
Return on average common shareholders' equity 9.70 9.73 9.50 9.32
Average common shareholders' equity to average assets 12.40 12.46 12.53 12.46
End of period tangible common equity to tangible assets 10.50 10.56 10.50 10.56
Risk-based capital - Tier 1 13.97 14.23 13.97 14.23
Risk-based capital - Total 15.28 15.55 15.28 15.55
Net interest margin 3.59 3.65 3.59 3.64
Efficiency: expense to revenue 55.59 59.00 57.01 61.03
Net charge offs to average loans and leases (0.13 ) (0.05 ) (0.11 ) (0.02 )
Loan and lease loss reserve to loans and leases 2.38 2.45 2.38 2.45
Nonperforming assets to loans and leases 1.08 1.01 1.08 1.01
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 475 $ 184
Nonaccrual loans and leases 32,486 29,318
Other real estate 1,853 5,455
Former bank premises held for sale 801 951
Repossessions 5,455 137
Equipment owned under operating leases 23      
Total nonperforming assets $ 41,093   $ 36,045    
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
   
June 30, 2014 June 30, 2013

ASSETS
Cash and due from banks $ 110,933 $ 64,850
Federal funds sold and interest bearing deposits with other banks 6,445 3,171
Investment securities available-for-sale (amortized cost of $798,708 and $815,626 at June 30, 2014 and 2013, respectively) 815,056 828,312
Other investments 23,597 22,409
Trading account securities 198 166
Mortgages held for sale 19,034 10,849
 
Loans and leases, net of unearned discount:
Commercial and agricultural loans 720,226 660,380
Auto and light truck 471,080 475,209
Medium and heavy duty truck 243,358 213,947
Aircraft financing 733,194 677,510
Construction equipment financing 369,755 311,135
Commercial real estate 602,321 576,810
Residential real estate 454,845 454,983
Consumer loans 128,756   123,411  
Total loans and leases 3,723,535 3,493,385
Reserve for loan and lease losses (88,776 ) (85,690 )
Net loans and leases 3,634,759 3,407,695
 
Equipment owned under operating leases, net 63,350 52,856
Net premises and equipment 45,840 46,027
Goodwill and intangible assets 85,796 86,915
Accrued income and other assets 120,719   115,561  
 
Total assets $ 4,925,727   $ 4,638,811  
 

LIABILITIES
Deposits:
Noninterest bearing $ 768,710 $ 698,389
Interest bearing 3,047,025   3,002,410  
Total deposits 3,815,735 3,700,799
 
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase 191,545 162,778
Other short-term borrowings 158,457   39,126  
Total short-term borrowings 350,002 201,904
Long-term debt and mandatorily redeemable securities 59,726 58,216
Subordinated notes 58,764 58,764
Accrued expenses and other liabilities 47,282   51,375  
Total liabilities 4,331,509   4,071,058  
 

SHAREHOLDERS' EQUITY
Preferred stock; no par value
Common stock; no par value 346,535 346,535
Retained earnings 280,917 241,401
Cost of common stock in treasury (43,445 ) (28,021 )
Accumulated other comprehensive income 10,211   7,838  
Total shareholders' equity 594,218   567,753  
 
Total liabilities and shareholders' equity $ 4,925,727   $ 4,638,811  
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
   
Three Months Ended June 30, Six Months Ended June 30,
2014   2013 2014   2013
Interest income:    
Loans and leases $ 40,401 $ 40,112 $ 79,316 $ 79,282
Investment securities, taxable 3,401 3,498 6,746 7,193
Investment securities, tax-exempt 816 760 1,635 1,531
Other 232     241   509     483
Total interest income 44,850 44,611 88,206 88,489
 
Interest expense:
Deposits 2,994 4,412 5,965 8,954
Short-term borrowings 169 45 306 77
Subordinated notes 1,055 1,055 2,110 2,110
Long-term debt and mandatorily redeemable securities 470     228   1,045     723
Total interest expense 4,688     5,740   9,426     11,864
 
Net interest income 40,162 38,871 78,780 76,625
Provision for loan and lease losses 2,543     1,293   3,347     2,050
Net interest income after provision for loan and lease losses 37,619 37,578 75,433 74,575
 
Noninterest income:
Trust fees 4,955 4,439 9,431 8,540
Service charges on deposit accounts 2,207 2,325 4,273 4,564
Debit card income 2,463 2,344 4,695 4,409
Mortgage banking income 1,181 1,936 2,515 3,564
Insurance commissions 1,288 1,393 2,851 2,839
Equipment rental income 4,098 4,086 8,180 8,098
Gains on investment securities available-for-sale 963
Other income 3,029     3,598   5,711     7,055
Total noninterest income 19,221     20,121   38,619     39,069
 
Noninterest expense:
Salaries and employee benefits 18,827 19,176 38,309 39,112
Net occupancy expense 2,235 2,147 4,672 4,354
Furniture and equipment expense 4,413 3,909 8,650 7,808
Depreciation - leased equipment 3,290 3,274 6,539 6,499
Professional fees 1,062 1,310 2,190 2,665
Supplies and communication 1,337 1,499 2,729 3,035
FDIC and other insurance 850 927 1,714 1,805
Business development and marketing expense 899 932 2,583 1,705
Loan and lease collection and repossession expense (17 ) 1,095 (512 ) 1,852
Other expense 1,528     1,475   3,522     3,459
Total noninterest expense 34,424     35,744   70,396     72,294
 
Income before income taxes 22,416 21,955 43,656 41,350
Income tax expense 7,922     8,013   15,530     15,004
 
Net income $ 14,494     $ 13,942   $ 28,126     $ 26,346
 

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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