Third Quarter Earnings Steady at 1st Source Corporation, Cash Dividend Declared

SOUTH BEND, Ind.--()--1st Source Corporation (NASDAQ:SRCE), parent company of 1st Source Bank, today reported net income of $13.93 million for the third quarter of 2015, down $1.02 million or 6.82% from the $14.95 million earned in the third quarter of 2014. Year to date, net income was $43.07 million, stable compared to the first nine months of last year. The single largest factor in the difference between 2015 and 2014 was a one-time income tax benefit of $1.18 million in the third quarter of 2014. Diluted net income per common share for the third quarter amounted to $0.53, down 5.36% compared to the $0.56 in the third quarter of 2014. Diluted net income per common share for the first three quarters of 2015 was $1.63, an increase of 1.24% compared to the $1.61 earned a year earlier. (All share and per share information has been adjusted for a 10% stock dividend declared on July 22, 2015 and issued on August 14, 2015, unless otherwise noted.)

At its October 2015 meeting, the Board of Directors approved a cash dividend of $0.18 per common share. The cash dividend is payable to shareholders of record on November 3, 2015 and will be paid on November 13, 2015.

"Overall it was a steady quarter for 1st Source as we continued to see pressure on our earnings due to the ongoing low interest rate environment, the impact from our investments in future growth and increases in health care costs," said Christopher J. Murphy, III, Chairman. "Despite these challenges, at the close of the quarter we had strong loan growth and we have continued to add new clients and grow deposits. We remain focused on the long-term by investing in our banking centers, information technology and our people, while delivering on our mission of helping our clients achieve security, build wealth and realize their dreams."

"Earlier this month The MSR Group, a top research firm specializing in customer experience in retail banking, identified 1st Source as offering the best customer experience in its banking centers in the Midwest. To award this recognition they interviewed thousands of customers of their clients and of the top 50 banks in the country. We are very proud that this award confirms our commitment shared and practiced by all of our colleagues to deliver outstanding client service. We also celebrated the grand opening of new banking centers in New Haven, Indiana and Portage, Michigan, and we broke ground on a new banking center in Valparaiso, Indiana. Additionally, we rolled out new products like Apple Pay® and Popmoney® giving clients more flexibility in how they make purchases and pay other people," Mr. Murphy concluded.

The net interest margin was down slightly to 3.57% for the third quarter of 2015 versus 3.58% for the same period in 2014. The net interest margin was 3.60% for the nine months ended September 30, 2015, versus 3.59% for the same period in 2014. Tax-equivalent net interest income was $42.63 million for the third quarter of 2015, compared to the $41.17 million for 2014’s third quarter. For the first nine months of 2015, tax equivalent net interest income was $124.55 million, compared to $120.88 million for the first nine months of 2014.

The reserve for loan and lease losses as of September 30, 2015 was 2.22% of total loans and leases compared to 2.39% at September 30, 2014. Net recoveries of $0.04 million were recorded for the third quarter of 2015 compared with net charge-offs of $2.58 million in the same quarter a year ago. Year to date, net recoveries of $0.39 million have been recorded in 2015, compared to net charge-offs of $0.66 million for the first nine months of 2014. The provision for loan and lease losses was $0.99 million for the third quarter of 2015, compared with $1.21 million for the same period in 2014. For the first nine months of 2015, the provision for loan and lease losses was $2.16 million compared with $4.55 million for the first nine months of 2014. The ratio of nonperforming assets to net loans and leases improved to 0.66% as of September 30, 2015, compared to 0.94% on September 30, 2014.

Total assets at the end of the third quarter of 2015 were $5.11 billion, up 5.91% from the $4.82 billion a year ago. Total loans and leases were $3.96 billion, up 8.24% from September 30, 2014. Total deposits were $4.02 billion, up 4.78% from the comparable figure at September 30, 2014. As of September 30, 2015, the common equity-to-assets ratio was 12.52%, compared to 12.51% a year ago and the tangible common equity-to-tangible assets ratio was 11.04% compared to 10.93% a year earlier.

Noninterest income for the third quarter of 2015 was $21.13 million, an increase of 8.97% from the same period in 2014. For the first nine months of 2015, noninterest income was $62.41 million, up 7.59% compared to 2014. Noninterest income increased primarily as a result of higher equipment rental income.

Noninterest expense was $41.07 million for the third quarter of 2015, up 9.07% from the third quarter of 2014. For the nine months ended September 30, 2015, noninterest expense was $117.37 million, up 8.63% compared with $108.05 million for the same period in 2014. Noninterest expense increased primarily as a result of higher salary and employee benefits expense, depreciation on leased equipment and other expenses. Salaries expense increased due to more full-time equivalent employees related to the opening of three new banking centers in 2014, two new banking centers in 2015 and temporary summer staffing. Employee benefits expense was up as a result of higher group insurance claims experience in 2015. Depreciation on leased equipment was higher as a result of an increase in the average equipment rental portfolio. Other expenses increased mainly due to higher residential mortgage foreclosure expenses, employment and relocation expenses, write-downs on fixed assets and increased debit card losses.

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, and construction equipment. The Corporation includes 82 community banking centers in 17 counties, 8 trust and wealth management locations, 10 1st Source Insurance offices, as well as 22 specialty finance locations nationwide.

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.

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.

(charts attached)

     
1st SOURCE CORPORATION
3rd QUARTER 2015 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
END OF PERIOD BALANCES
Assets $ 5,105,584 $ 4,820,793
Loans and leases 3,955,550 3,654,421
Deposits 4,019,156 3,835,972
Reserve for loan and lease losses 87,616 87,400
Intangible assets 84,822 85,583
Common shareholders’ equity 639,221 603,033
 
AVERAGE BALANCES
Assets $ 5,061,350 $ 4,856,167 $ 4,946,899 $ 4,795,794
Earning assets 4,733,336 4,562,720 4,627,111 4,505,944
Investments 781,971 808,591 787,343 825,230
Loans and leases 3,910,981 3,700,708 3,795,929 3,635,938
Deposits 3,995,795 3,830,243 3,913,931 3,755,334
Interest bearing liabilities 3,489,505 3,427,965 3,435,444 3,407,210
Common shareholders’ equity 638,965 601,444 631,611 598,499
 
INCOME STATEMENT DATA
Net interest income $ 42,209 $ 40,710 $ 123,310 $ 119,490
Net interest income - FTE 42,625 41,174 124,551 120,883
Provision for loan and lease losses 992 1,206 2,160 4,553
Noninterest income 21,132 19,392 62,414 58,011
Noninterest expense 41,068 37,653 117,370 108,049
Net income 13,928 14,947 43,069 43,073
 
PER SHARE DATA*
Basic net income per common share $ 0.53 $ 0.56 $ 1.63 $ 1.61
Diluted net income per common share 0.53 0.56 1.63 1.61
Common cash dividends declared 0.164 0.164 0.491 0.482
Book value per common share 24.51 22.97 24.51 22.97
Tangible book value per common share 21.26 19.71 21.26 19.71
Market value - High 32.37 29.02 32.37 30.19
Market value - Low 28.06 25.27 26.95 25.05
Basic weighted average common shares outstanding 26,164,646 26,262,864 26,211,630 26,497,500
Diluted weighted average common shares outstanding 26,164,646 26,262,864 26,211,630 26,497,500
 
KEY RATIOS
Return on average assets 1.09 % 1.22 % 1.16 % 1.20 %
Return on average common shareholders’ equity 8.65 9.86 9.12 9.62
Average common shareholders’ equity to average assets 12.62 12.39 12.77 12.48
End of period tangible common equity to tangible assets 11.04 10.93 11.04 10.93
Risk-based capital - Common Equity Tier 1 12.48 N/A 12.48 N/A
Risk-based capital - Tier 1 13.77 14.49 13.77 14.49
Risk-based capital - Total 15.08 15.80 15.08 15.80
Net interest margin 3.57 3.58 3.60 3.59
Efficiency: expense to revenue 61.98 60.72 60.57 58.26
Net charge offs (recoveries) to average loans and leases 0.28 (0.01 ) 0.02
Loan and lease loss reserve to loans and leases 2.22 2.39 2.22 2.39
Nonperforming assets to loans and leases 0.66 0.94 0.66 0.94
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 411 $ 750
Nonaccrual loans and leases 18,985 26,524
Other real estate 232 1,433
Former bank premises held for sale 515 801
Repossessions 6,602 5,421
Equipment owned under operating leases 146   15    
Total nonperforming assets $ 26,891   $ 34,944    
 
*Share and per share figures have been adjusted for 10% stock dividend declared July 22, 2015 and issued on August 14, 2015.
 
   
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
 
September 30, 2015 September 30, 2014

ASSETS

Cash and due from banks $ 61,124 $ 54,542
Federal funds sold and interest bearing deposits with other banks 3,065 27,169
Investment securities available-for-sale (amortized cost of $769,053 and $799,862 at

September 30, 2015 and 2014, respectively)

784,585 813,704
Other investments 21,728 23,017
Trading account securities 196
Mortgages held for sale 9,187 13,070
 
Loans and leases, net of unearned discount:
Commercial and agricultural 750,780 696,209
Auto and light truck 423,147 422,742
Medium and heavy duty truck 264,784 249,014
Aircraft financing 794,129 700,794
Construction equipment financing 450,112 375,069
Commercial real estate 658,589 615,420
Residential real estate 463,824 451,508
Consumer 150,185   143,665  
Total loans and leases 3,955,550 3,654,421
Reserve for loan and lease losses (87,616 ) (87,400 )
Net loans and leases 3,867,934 3,567,021
 
Equipment owned under operating leases, net 95,785 66,013
Net premises and equipment 51,252 47,350
Goodwill and intangible assets 84,822 85,583
Accrued income and other assets 126,102   123,128  
 
Total assets $ 5,105,584   $ 4,820,793  
 

LIABILITIES

Deposits:
Noninterest bearing $ 914,152 $ 818,679
Interest bearing 3,105,004   3,017,293  
Total deposits 4,019,156 3,835,972
 
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase 139,414 106,769
Other short-term borrowings 144,096   109,953  
Total short-term borrowings 283,510 216,722
Long-term debt and mandatorily redeemable securities 57,577 56,171
Subordinated notes 58,764 58,764
Accrued expenses and other liabilities 47,356   50,131  
Total liabilities 4,466,363   4,217,760  
 

SHAREHOLDERS’ EQUITY

Preferred stock; no par value
Common stock; no par value 436,538 346,535
Retained earnings 242,102 291,569
Cost of common stock in treasury (49,120 ) (43,716 )
Accumulated other comprehensive income 9,701   8,645  
Total shareholders’ equity 639,221   603,033  
 
Total liabilities and shareholders’ equity $ 5,105,584   $ 4,820,793  
 
       
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2015   2014 2015   2014
Interest income:
Loans and leases $ 42,560 $ 41,118 $ 124,747 $ 120,434
Investment securities, taxable 3,277 2,962 8,929 9,708
Investment securities, tax-exempt 738 831 2,261 2,466
Other 246     241   730     750
Total interest income 46,821 45,152 136,667 133,358
 
Interest expense:

Deposits

2,874 2,765 8,271 8,730
Short-term borrowings 147 134 381 440
Subordinated notes 1,055 1,055 3,165 3,165
Long-term debt and mandatorily redeemable securities 536     488   1,540     1,533
Total interest expense 4,612     4,442   13,357     13,868
 
Net interest income 42,209 40,710 123,310 119,490
Provision for loan and lease losses 992     1,206   2,160     4,553
Net interest income after provision for loan and lease losses 41,217 39,504 121,150 114,937
 
Noninterest income:
Trust fees 4,634 4,499 14,438 13,930
Service charges on deposit accounts 2,413 2,225 6,977 6,498
Debit card income 2,583 2,382 7,610 7,077
Mortgage banking income 969 1,446 3,459 3,961
Insurance commissions 1,460 1,317 4,147 4,168
Equipment rental income 5,881 4,361 16,302 12,541
Gains on investment securities available-for-sale 4 963
Other income 3,192     3,162   9,477     8,873
Total noninterest income 21,132     19,392   62,414     58,011
 
Noninterest expense:
Salaries and employee benefits 21,835 20,790 63,554 59,099
Net occupancy expense 2,496 2,252 7,302 6,924
Furniture and equipment expense 4,604 4,415 13,471 13,065
Depreciation - leased equipment 4,858 3,571 13,342 10,110
Professional fees 1,237 1,158 3,215 3,348
Supplies and communication 1,307 1,424 4,122 4,153
FDIC and other insurance 848 856 2,544 2,570
Business development and marketing expense 1,244 1,218 3,507 3,801
Loan and lease collection and repossession expense 416 652 485 140
Other expense 2,223     1,317   5,828     4,839
Total noninterest expense 41,068     37,653   117,370     108,049
 
Income before income taxes 21,281 21,243 66,194 64,899
Income tax expense 7,353     6,296   23,125     21,826
 
Net income $ 13,928     $ 14,947   $ 43,069     $ 43,073
 
 
The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com
 

Contacts

1st Source Corporation
Andrea Short, 574-235-2000

Release Summary

Third quarter earnings steady at 1st Source Corporation

Contacts

1st Source Corporation
Andrea Short, 574-235-2000