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Section 1: 8-K (8-K 1ST QTR 2019 EARNINGS RELEASE)

Wdesk | Document



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
 
 
FORM 8-K
 
 
 
CURRENT REPORT
 
 
 
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
Date of Report (Date of earliest event reported): April 18, 2019
 
 397576740_a1stsourcecorplogo2a07.jpg
 
1st Source Corporation
(Exact name of registrant as specified in its charter)
 
 
 
Indiana
0-6233
35-1068133
(State or other jurisdiction of incorporation)
(Commission File No.)
(I.R.S. Employer Identification No.)
 
 
 
100 North Michigan Street, South Bend, Indiana 46601
(Address of principal executive offices)     (Zip Code)
 
 
 
574-235-2000
(Registrant's telephone number, including area code)
 
 
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





ITEM 2.02    Results of Operations and Financial Condition.

On April 18, 2019, 1st Source Corporation issued a press release that announced its first quarter earnings for 2019. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

ITEM 9.01    Financial Statements and Exhibits.
 
Exhibit 99.1: Press release dated April 18, 2019, with respect to 1st Source Corporation’s financial results for the first quarter ended March 31, 2019.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
1st SOURCE CORPORATION
 
 
(Registrant)
 
 
 
 
 
 
Date: April 18, 2019
 
/s/ CHRISTOPHER J. MURPHY III
 
 
Christopher J. Murphy III
 
 
Chairman of the Board and CEO
 
 
 
 
 
 
Date: April 18, 2019
 
/s/ ANDREA G. SHORT
 
 
Andrea G. Short
 
 
Treasurer and Chief Financial Officer
 
 
Principal Accounting Officer



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Section 2: EX-99.1 (EXHIBIT 99.1 EARNINGS RELEASE)

Wdesk | Exhibit


Exhibit 99.1

For:
Immediate Release
Contact:
Andrea Short
 
April 18, 2019
 
574-235-2000

1st Source Corporation Reports Record First Quarter Results,
Increased Cash Dividend Declared
QUARTERLY HIGHLIGHTS
Net income was a record $22.20 million, up 16.11% over the first quarter of 2018. Diluted net income per common share was also a record of $0.86, up from the prior year’s first quarter of $0.73.
Return on average assets increased to 1.43% and return on average common shareholders’ equity increased to 11.61% from 1.31% and 10.67%, respectively in the first quarter of 2018.
Net charge-offs of $3.54 million and nonperforming assets to loans and leases of 0.49% compared to $0.34 million and 0.74%, respectively in the first quarter of 2018.
Average loans and leases grew $269.40 million, up 5.87% from the first quarter of 2018.
Average deposits grew $350.92 million, up 7.45% from the first quarter of 2018.
Net interest income increased $4.42 million, up 8.74% from the first quarter of 2018.
Noninterest income increased $0.32 million, up 1.33% from the first quarter of 2018 (increased 1.27% excluding leased equipment depreciation).
Noninterest expenses decreased $0.35 million, down 0.77% from the first quarter of 2018 (decreased 1.15% excluding leased equipment depreciation).
South Bend, IN - 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported a record high net income of $22.20 million for the first quarter of 2019, an improvement of 16.11% compared to $19.12 million reported in the first quarter a year ago. The net income comparison was positively impacted by increased net interest income of $4.42 million primarily due to higher loan rates and higher average loan and lease balances. It was negatively impacted by a $1.13 million increase in the provision for loan and lease losses to cover loan and lease growth along with higher net charge-offs. Non-recurring 2019 items included a negative $1.10 million valuation adjustment on a repossessed asset and $1.32 million gain on the sale of our former headquarters building.
Diluted net income per common share for the first quarter of 2019 was a record high of $0.86, versus $0.73 in the first quarter of 2018.
At its April 2019 meeting, the Board of Directors approved a cash dividend of $0.27 per common share, up 12.5% from the $0.24 per common share declared a year ago. The cash dividend is payable to shareholders of record on May 6, 2019 and will be paid on May 15, 2019.

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According to Christopher J. Murphy III, Chairman, “1st Source Corporation had a strong first quarter. We continue to achieve steady growth in net income and see healthy increases in loans, leases, and deposits. Our biggest credit challenge in the quarter was due to a further charge-off of $3.0 million on the large syndicated aircraft account which I have mentioned previously. The remaining balance is less than $1 million, payment of which is anticipated to come from a final settlement of escrowed funds. The cost of resolving the complex issues of this bankruptcy from legal, investment banking, and consulting fees has proven to be exceedingly high. This reminds us we should be wary of complex lending structures.”
“At 1st Source, we value integrity, teamwork, superior quality, outstanding client service, community leadership, true relationship banking and operating with strong capital and reserves. We believe it is these values that differentiate us from our competition, and it seems others have taken notice. In March, we once again received the BauerFinancial ‘Superior’ Five-Star rating - the highest rating possible. BauerFinancial bases its rating on capital ratio, profitability/loss trend, credit quality and CRA ratings. We would not be able to achieve high scores in such categories without conducting our daily business with those values at the core of what we do.”
“Our focus on smaller businesses continues to receive recognition across the state of Indiana. For the sixth year in a row, we were honored with the ‘Gold Level Award’ in the Community Lender’s category by the Small Business Administration. This award honors 1st Source Bank as #1 among Indiana Community Banks with less than $10 billion in assets for making the greatest number of SBA loans during 2018. We have devoted over 155 years to serving small businesses and maintain a dedicated SBA department to ensure the highest level of service to our clients, and this recognition confirms our strategic focus is successful.”
FIRST QUARTER 2019 FINANCIAL RESULTS
Loans
Average loans and leases of $4.86 billion increased $269.40 million, up 5.87% in the first quarter of 2019 from the year ago quarter and have increased $22.19 million, up 0.46% from the fourth quarter of 2018.
Deposits
Average deposits of $5.06 billion grew $350.92 million, up 7.45% for the quarter ended March 31, 2019 from the year ago quarter and have decreased $28.59 million, down 0.56% compared to the fourth quarter of 2018.
Net Interest Income and Net Interest Margin
First quarter 2019 net interest income of $54.95 million increased $4.42 million, up 8.74% from the first quarter a year ago and decreased $0.90 million, down 1.60% from the prior quarter.
First quarter 2019 net interest margin was 3.78%, an improvement of nine basis points from the 3.69% for the same period in 2018 and increased one basis point from the fourth quarter of 2018. First quarter 2019 net interest margin on a fully tax-equivalent basis was 3.79%, an increase of eight basis points from the 3.71% for the same period in 2018 and was higher by one basis point compared to the prior quarter. With the Federal Reserve announcing rate increases will be put on hold, interest margins may have reached their peak. Also, there is significant competition for deposits with many local market participants increasing their rates and there is considerable price competition for loans.

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Noninterest Income
First quarter 2019 noninterest income of $24.12 million increased $0.32 million, up 1.33% from the first quarter a year ago and was relatively flat from the fourth quarter of 2018.
Noninterest income during the three months ended March 31, 2019 was higher compared to a year ago mainly from increased equipment rental income from an increase in the average lease portfolio, higher insurance commissions primarily from increased business and higher contingent commissions, and higher debit card income from increased customer use. These positives were offset by reduced net gains on partnership investments and lower trust and wealth advisory fees resulting from a lower value of assets under management due to stock market movements.
Noninterest Expense
First quarter 2019 noninterest expense of $45.20 million was down slightly from the first quarter a year ago and decreased $2.49 million, down 5.21% from the prior quarter. Excluding depreciation on leased equipment, noninterest expenses were down 1.15% from the first quarter a year ago and down 5.97% from the prior quarter.
The decrease in noninterest expense from the fourth quarter was primarily the result of higher gains on the sale of fixed assets, reduced professional fees from consulting services, and fewer group insurance claims offset by higher repossessed asset valuation adjustments and lower gains on the sale of repossessed assets.
Credit
The reserve for loan and lease losses as of March 31, 2019 was 2.07% of total loans and leases compared to 2.08% at December 31, 2018 and 2.10% at March 31, 2018. Net charge-offs of $3.54 million were recorded for the first quarter of 2019 compared with net charge-offs of $0.34 million in the same quarter a year ago and up from the $2.53 million of net charge-offs in the fourth quarter. The majority of the first quarter charge-offs was related to one relationship within the aircraft portfolio. This account had experienced significant charge-offs during the second half of 2018.
The provision for loan and lease losses was $4.92 million for the first quarter of 2019, an increase of $1.13 million compared with the same period in 2018 and an increase of $0.22 million from the fourth quarter. The ratio of nonperforming assets to loans and leases was an improved 0.49% as of March 31, 2019, compared to 0.71% on December 31, 2018 and 0.74% on March 31, 2018.
Capital
As of March 31, 2019, the common equity-to-assets ratio was 12.20%, compared to 12.11% at December 31, 2018 and 11.99% a year ago. The tangible common equity-to-tangible assets ratio was 11.03% at March 31, 2019 compared to 10.92% at December 31, 2018 and 10.75% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 12.28% at March 31, 2019 compared to 12.38% at December 31, 2018 and 12.22% a year ago.
ABOUT 1ST SOURCE CORPORATION
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 its clients, individuals, businesses and the communities it serves. For more information, visit www.1stsource.com.

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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 80 banking centers, 19 1st Source Bank Specialty Finance Group locations nationwide, eight Wealth Advisory Services locations and ten 1st Source Insurance offices.
FORWARD LOOKING STATEMENTS
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.
NON-GAAP FINANCIAL MEASURES
The accounting and reporting policies of 1st Source conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures are used by management to evaluate and measure the Company’s performance. Although these non-GAAP financial measures are frequently used by investors to evaluate a financial institution, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. These include taxable-equivalent net interest income (including its individual components), net interest margin (including its individual components), the efficiency ratio, tangible common equity-to-tangible assets ratio and tangible book value per common share. Management believes that these measures provide users of the Company’s financial information a more meaningful view of the performance of the interest-earning assets and interest-bearing liabilities and of the Company’s operating efficiency. Other financial holding companies may define or calculate these measures differently.

- 4 -



Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses and lease depreciation), measures how much it costs to produce one dollar of revenue. Securities gains or losses and lease depreciation are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity-to-tangible assets ratio and tangible book value per common share as useful measurements of the Company’s equity.
See the table marked “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of certain non-GAAP financial measures used by the Company with their most closely related GAAP measures.
# # #
(charts attached)

- 5 -



1st SOURCE CORPORATION
 
 
 
 
 
 
1st QUARTER 2019 FINANCIAL HIGHLIGHTS
 
 
 
 
 
 
(Unaudited - Dollars in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31,
December 31,
March 31,
 
 
 
 
2019
2018
2018
 
 
 
AVERAGE BALANCES
 
 
 
 
 
 
Assets
$
6,290,386

$
6,270,544

$
5,939,574

 
 
 
Earning assets
5,896,697

5,873,476

5,552,779

 
 
 
Investments
987,593

976,856

916,979

 
 
 
Loans and leases
4,858,183

4,835,995

4,588,782

 
 
 
Deposits
5,059,362

5,087,948

4,708,439

 
 
 
Interest bearing liabilities
4,315,545

4,304,067

4,154,214

 
 
 
Common shareholders’ equity
775,657

758,450

726,242

 
 
 
   Total equity
777,217

759,220

726,242

 
 
 
INCOME STATEMENT DATA
 
 
 
 
 
 
Net interest income
$
54,948

$
55,843

$
50,532

 
 
 
Net interest income - FTE(1)
55,130

56,034

50,744

 
 
 
Provision for loan and lease losses
4,918

4,702

3,786

 
 
 
Noninterest income
24,124

24,160

23,807

 
 
 
Noninterest expense
45,204

47,691

45,557

 
 
 
Net income
22,196

21,446

19,116

 
 
 
   Net income available to common shareholders
22,196

21,446

19,116

 
 
 
PER SHARE DATA
 
 
 
 
 
 
Basic net income per common share
$
0.86

$
0.82

$
0.73

 
 
 
Diluted net income per common share
0.86

0.82

0.73

 
 
 
Common cash dividends declared
0.27

0.25

0.22

 
 
 
Book value per common share(2)
30.33

29.56

27.96

 
 
 
Tangible book value per common share(1)
27.05

26.30

24.72

 
 
 
Market value - High
50.15

54.30

54.65

 
 
 
Market value - Low
39.11

38.44

48.26

 
 
 
Basic weighted average common shares outstanding
25,759,186

25,876,687

25,950,386

 
 
 
Diluted weighted average common shares outstanding
25,759,186

25,876,687

25,950,386

 
 
 
KEY RATIOS
 
 
 
 
 
 
Return on average assets
1.43
%
1.36
%
1.31
%
 
 
 
Return on average common shareholders’ equity
11.61

11.22

10.67

 
 
 
Average common shareholders’ equity to average assets
12.33

12.10

12.23

 
 
 
End of period tangible common equity to tangible assets(1)
11.03

10.92

10.75

 
 
 
Risk-based capital - Common Equity Tier 1(3)
12.28

12.38

12.22

 
 
 
Risk-based capital - Tier 1(3)
13.32

13.42

13.29

 
 
 
Risk-based capital - Total(3)
14.58

14.68

14.54

 
 
 
Net interest margin
3.78

3.77

3.69

 
 
 
Net interest margin - FTE(1)
3.79

3.78

3.71

 
 
 
Efficiency ratio: expense to revenue
57.17

59.61

61.28

 
 
 
Efficiency ratio: expense to revenue - adjusted(1)
53.20

55.90

57.47

 
 
 
Net charge offs to average loans and leases
0.30

0.21

0.03

 
 
 
Loan and lease loss reserve to loans and leases
2.07

2.08

2.10

 
 
 
Nonperforming assets to loans and leases
0.49

0.71

0.74

 
 
 
 
 
 
 
 
 
 
 
March 31,
December 31,
September 30,
 
June 30,
March 31,
 
2019
2018
2018
 
2018
2018
END OF PERIOD BALANCES
 
 
 
 
 
 
Assets
$
6,379,086

$
6,293,745

$
6,293,169

 
$
6,320,058

$
6,051,463

Loans and leases
4,926,187

4,835,464

4,825,553

 
4,839,823

4,691,097

Deposits
5,124,091

5,122,322

5,061,977

 
5,108,439

4,781,325

Reserve for loan and lease losses
101,852

100,469

98,300

 
103,007

98,331

Goodwill and intangible assets
83,992

83,998

84,097

 
84,104

84,124

Common shareholders’ equity
778,422

762,082

750,437

 
740,277

725,609

   Total equity
781,101

763,590

750,437

 
740,277

725,609

ASSET QUALITY
 
 
 
 
 
 
Loans and leases past due 90 days or more
$
178

$
366

$
125

 
$
263

$
123

Nonaccrual loans and leases
13,622

27,859

36,028

 
34,582

25,360

Other real estate
417

299

432

 
133

1,184

Repossessions
10,411

6,666

13,041

 
9,389

9,432

Equipment owned under operating leases
64

126

48

 

2

Total nonperforming assets
$
24,692

$
35,316

$
49,674

 
$
44,367

$
36,101

(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.
(2) Calculated as common shareholders’ equity divided by common shares outstanding at the end of the period.
(3) Calculated under banking regulatory guidelines.

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1st SOURCE CORPORATION
 
 
 
 
 
 
 
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
 
 
 
 
 
 
 
(Unaudited - Dollars in thousands)
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
September 30,
 
March 31,
 
2019
 
2018
 
2018
 
2018
ASSETS
 
 
 
 
 
 
 
Cash and due from banks
$
64,619

 
$
94,907

 
$
68,362

 
$
29,404

Federal funds sold and interest bearing deposits with other banks
3,062

 
4,172

 
45,514

 
21,748

Investment securities available-for-sale
1,002,809

 
990,129

 
972,172

 
942,076

Other investments
28,404

 
28,404

 
28,159

 
27,265

Mortgages held for sale
9,210

 
11,290

 
11,149

 
8,626

Loans and leases, net of unearned discount:
 
 
 
 
 
 
 
Commercial and agricultural
1,146,031

 
1,073,205

 
1,062,907

 
1,011,700

Auto and light truck
554,078

 
559,987

 
562,546

 
511,051

Medium and heavy duty truck
285,631

 
283,544

 
271,601

 
280,010

Aircraft
830,437

 
803,111

 
836,458

 
868,419

Construction equipment
641,035

 
645,239

 
654,605

 
619,219

Commercial real estate
818,459

 
809,886

 
781,093

 
748,926

Residential real estate and home equity
514,719

 
523,855

 
523,391

 
518,130

Consumer
135,797

 
136,637

 
132,952

 
133,642

Total loans and leases
4,926,187

 
4,835,464

 
4,825,553

 
4,691,097

Reserve for loan and lease losses
(101,852
)
 
(100,469
)
 
(98,300
)
 
(98,331
)
Net loans and leases
4,824,335

 
4,734,995

 
4,727,253

 
4,592,766

Equipment owned under operating leases, net
131,594

 
134,440

 
137,492

 
144,129

Net premises and equipment
51,357

 
52,139

 
53,479

 
54,841

Goodwill and intangible assets
83,992

 
83,998

 
84,097

 
84,124

Accrued income and other assets
179,704

 
159,271

 
165,492

 
146,484

Total assets
$
6,379,086

 
$
6,293,745

 
$
6,293,169

 
$
6,051,463

 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
Noninterest-bearing demand
$
1,146,647

 
$
1,217,120

 
$
1,151,573

 
$
1,030,902

Interest-bearing deposits:
 
 
 
 
 
 
 
Interest-bearing demand
1,560,840

 
1,614,959

 
1,606,462

 
1,514,299

Savings
851,564

 
822,477

 
822,246

 
855,729

Time
1,565,040

 
1,467,766

 
1,481,696

 
1,380,395

Total interest-bearing deposits
3,977,444

 
3,905,202

 
3,910,404

 
3,750,423

Total deposits
5,124,091

 
5,122,322

 
5,061,977

 
4,781,325

Short-term borrowings:
 
 
 
 
 
 
 
Federal funds purchased and securities sold under agreements to repurchase
149,172

 
113,627

 
124,630

 
143,913

Other short-term borrowings
106,216

 
85,717

 
166,077

 
212,051

Total short-term borrowings
255,388

 
199,344

 
290,707

 
355,964

Long-term debt and mandatorily redeemable securities
71,439

 
71,123

 
70,919

 
71,335

Subordinated notes
58,764

 
58,764

 
58,764

 
58,764

Accrued expenses and other liabilities
88,303

 
78,602

 
60,365

 
58,466

Total liabilities
5,597,985

 
5,530,155

 
5,542,732

 
5,325,854

 
 
 
 
 
 
 
 
SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Preferred stock; no par value
Authorized 10,000,000 shares; none issued or outstanding

 

 

 

Common stock; no par value
Authorized 40,000,000 shares; issued 28,205,674 shares at March 31, 2019, December 31, 2018, September 30, 2018, and March 31, 2018, respectively
436,538

 
436,538

 
436,538

 
436,538

Retained earnings
414,428

 
398,980

 
383,943

 
354,608

Cost of common stock in treasury (2,537,741, 2,421,946, 2,239,928, and 2,250,503 shares at March 31,2019, December 31, 2018, September 30, 2018, and March 31, 2018, respectively)
(69,136
)
 
(62,760
)
 
(54,369
)
 
(54,602
)
Accumulated other comprehensive loss
(3,408
)
 
(10,676
)
 
(15,675
)
 
(10,935
)
Total shareholders’ equity
778,422

 
762,082

 
750,437

 
725,609

Noncontrolling interests
2,679

 
1,508

 

 

Total equity
781,101

 
763,590

 
750,437

 
725,609

Total liabilities and equity
$
6,379,086

 
$
6,293,745

 
$
6,293,169

 
$
6,051,463



- 7 -



1st SOURCE CORPORATION
 
 
 
 
 
CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
(Unaudited - Dollars in thousands, except per share amounts)
 
 
 
 
 
Three Months Ended
 
March 31,
 
December 31,
 
March 31,
 
2019
 
2018
 
2018
Interest income:
 
 
 
 
 
Loans and leases
$
62,683

 
$
62,283

 
$
53,691

Investment securities, taxable
5,515

 
5,363

 
4,608

Investment securities, tax-exempt
385

 
419

 
531

Other
438

 
452

 
408

Total interest income
69,021

 
68,517

 
59,238

Interest expense:
 
 
 
 
 
Deposits
11,470

 
10,345

 
6,562

Short-term borrowings
931

 
718

 
776

Subordinated notes
928

 
916

 
883

Long-term debt and mandatorily redeemable securities
744

 
695

 
485

Total interest expense
14,073

 
12,674

 
8,706

Net interest income
54,948

 
55,843

 
50,532

Provision for loan and lease losses
4,918

 
4,702

 
3,786

Net interest income after provision for loan and lease losses
50,030

 
51,141

 
46,746

Noninterest income:
 
 
 
 
 
Trust and wealth advisory
4,858

 
4,974

 
5,188

Service charges on deposit accounts
2,498

 
2,778

 
2,484

Debit card
3,220

 
3,462

 
3,103

Mortgage banking
936

 
962

 
884

Insurance commissions
2,174

 
1,477

 
1,958

Equipment rental
7,982

 
7,957

 
7,755

Losses on investment securities available-for-sale

 

 
(345
)
Other
2,456

 
2,550

 
2,780

Total noninterest income
24,124

 
24,160

 
23,807

Noninterest expense:
 
 
 
 
 
Salaries and employee benefits
23,495

 
24,466

 
22,531

Net occupancy
2,772

 
2,537

 
2,866

Furniture and equipment
6,024

 
6,491

 
5,455

Depreciation – leased equipment
6,524

 
6,556

 
6,428

Professional fees
1,598

 
2,052

 
2,017

Supplies and communication
1,493

 
1,633

 
1,553

FDIC and other insurance
645

 
656

 
698

Business development and marketing
949

 
1,191

 
1,533

Loan and lease collection and repossession
1,361

 
296

 
951

Other
343

 
1,813

 
1,525

Total noninterest expense
45,204

 
47,691

 
45,557

Income before income taxes
28,950

 
27,610

 
24,996

Income tax expense
6,754

 
6,164

 
5,880

Net income
22,196

 
21,446

 
19,116

Net (income) loss attributable to noncontrolling interests

 

 

Net income available to common shareholders
$
22,196

 
$
21,446

 
$
19,116

Per common share:
 
 
 
 
 
Basic net income per common share
$
0.86

 
$
0.82

 
$
0.73

Diluted net income per common share
$
0.86

 
$
0.82

 
$
0.73

Cash dividends
$
0.27

 
$
0.25

 
$
0.22

Basic weighted average common shares outstanding
25,759,186

 
25,876,687

 
25,950,386

Diluted weighted average common shares outstanding
25,759,186

 
25,876,687

 
25,950,386


- 8 -





1st SOURCE CORPORATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
INTEREST RATES AND INTEREST DIFFERENTIAL
 
 
 
 
 
 
 
 
 
 
(Unaudited - Dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
March 31, 2019
 
December 31, 2018
 
March 31, 2018
 
Average
Balance
 
Interest Income/Expense
 
Yield/
Rate
 
Average
Balance
 
Interest Income/Expense
 
Yield/
Rate
 
Average
Balance
 
Interest Income/Expense
 
Yield/
Rate
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Taxable
$
909,422

 
$
5,515

 
2.46
%
 
$
895,204

 
$
5,363

 
2.38
%
 
$
813,144

 
$
4,608

 
2.30
%
Tax exempt(1)
78,171

 
472

 
2.45
%
 
81,652

 
516

 
2.51
%
 
103,835

 
655

 
2.56
%
Mortgages held for sale
8,826

 
101

 
4.64
%
 
9,018

 
107

 
4.71
%
 
7,719

 
80

 
4.20
%
Loans and leases, net of unearned discount(1)
4,858,183

 
62,677

 
5.23
%
 
4,835,995

 
62,270

 
5.11
%
 
4,588,782

 
53,699

 
4.75
%
Other investments
42,095

 
438

 
4.22
%
 
51,607

 
452

 
3.47
%
 
39,299

 
408

 
4.21
%
Total earning assets(1)
5,896,697

 
69,203

 
4.76
%
 
5,873,476

 
68,708

 
4.64
%
 
5,552,779

 
59,450

 
4.34
%
Cash and due from banks
63,886

 
 
 
 
 
67,437

 
 
 
 

 
61,395

 
 

 
 

Reserve for loan and lease losses
(101,697
)
 
 
 
 
 
(99,182
)
 
 
 
 

 
(95,707
)
 
 

 
 

Other assets
431,500

 
 
 
 
 
428,813

 
 
 
 

 
421,107

 
 

 
 

Total assets
$
6,290,386

 
 
 
 
 
$
6,270,544

 
 
 
 

 
$
5,939,574

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 

 
 
 
 

 
 

 
 

 
 

Interest-bearing deposits
$
3,934,921

 
$
11,470

 
1.18
%
 
$
3,932,453

 
$
10,345

 
1.04
%
 
$
3,702,882

 
$
6,562

 
0.72
%
Short-term borrowings
251,379

 
931

 
1.50
%
 
241,979

 
718

 
1.18
%
 
322,257

 
776

 
0.98
%
Subordinated notes
58,764

 
928

 
6.40
%
 
58,764

 
916

 
6.18
%
 
58,764

 
883

 
6.09
%
Long-term debt and mandatorily redeemable securities
70,481

 
744

 
4.28
%
 
70,871

 
695

 
3.89
%
 
70,311

 
485

 
2.80
%
Total interest-bearing liabilities
4,315,545

 
14,073

 
1.32
%
 
4,304,067

 
12,674

 
1.17
%
 
4,154,214

 
8,706

 
0.85
%
Noninterest-bearing deposits
1,124,441

 
 

 
 

 
1,155,495

 
 

 
 

 
1,005,557

 
 

 
 

Other liabilities
73,183

 
 

 
 

 
51,762

 
 

 
 

 
53,561

 
 

 
 

Shareholders’ equity
775,657

 
 

 
 

 
758,450

 
 

 
 

 
726,242

 
 

 
 

   Noncontrolling interests
1,560

 
 
 
 
 
770

 
 
 
 
 

 
 
 
 
Total liabilities and equity
$
6,290,386

 
 

 
 

 
$
6,270,544

 
 

 
 

 
$
5,939,574

 
 

 
 

Less: Fully tax-equivalent adjustments
 
 
(182
)
 
 
 
 
 
(191
)
 
 
 
 
 
(212
)
 
 
Net interest income/margin (GAAP-derived)(1)
 

 
$
54,948

 
3.78
%
 
 

 
$
55,843

 
3.77
%
 
 

 
$
50,532

 
3.69
%
Fully tax-equivalent adjustments
 
 
182

 
 
 
 
 
191

 
 
 
 
 
212

 
 
Net interest income/margin - FTE(1)
 

 
$
55,130

 
3.79
%
 
 

 
$
56,034

 
3.78
%
 
 

 
$
50,744

 
3.71
%
(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.

 
 
 
 
 
 
 
 
 
 
 
 


- 9 -



1st SOURCE CORPORATION
 
 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
 
(Unaudited - Dollars in thousands, except per share data)
 
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31,
December 31,
March 31,
 
 
2019
2018
2018
Calculation of Net Interest Margin
 
 
 
(A)
Interest income (GAAP)
$
69,021

$
68,517

$
59,238

 
Fully tax-equivalent adjustments:
 
 
 
(B)
 – Loans and leases
95

94

88

(C)
 – Tax exempt investment securities
87

97

124

(D)
Interest income – FTE (A+B+C)
69,203

68,708

59,450

(E)
Interest expense (GAAP)
14,073

12,674

8,706

(F)
Net interest income (GAAP) (A-E)
54,948

55,843

50,532

(G)
Net interest income - FTE (D-E)
55,130

56,034

50,744

(H)
Annualization factor
4.056

3.967

4.056

(I)
Total earning assets
$
5,896,697

$
5,873,476

$
5,552,779

 
Net interest margin (GAAP-derived) (F*H)/I
3.78
%
3.77
%
3.69
%
 
Net interest margin – FTE (G*H)/I
3.79
%
3.78
%
3.71
%
 
 
 
 
 
Calculation of Efficiency Ratio
 
 
 
(F)
Net interest income (GAAP)
$
54,948

$
55,843

$
50,532

(G)
Net interest income – FTE
55,130

56,034

50,744

(J)
Plus: noninterest income (GAAP)
24,124

24,160

23,807

(K)
Less: gains/losses on investment securities and partnership investments
(17
)
(57
)
(32
)
(L)
Less: depreciation – leased equipment
(6,524
)
(6,556
)
(6,428
)
(M)
Total net revenue (GAAP) (F+J)
79,072

80,003

74,339

(N)
Total net revenue – adjusted (G+J–K–L)
72,713

73,581

68,091

(O)
Noninterest expense (GAAP)
45,204

47,691

45,557

(L)
Less:depreciation – leased equipment
(6,524
)
(6,556
)
(6,428
)
(Q)
Noninterest expense – adjusted (O–L)
38,680

41,135

39,129

 
Efficiency ratio (GAAP-derived) (O/M)
57.17
%
59.61
%
61.28
%
 
Efficiency ratio – adjusted (Q/N)
53.20
%
55.90
%
57.47
%
 
 
 
 
 
 
 
End of Period
 
 
March 31,
December 31,
March 31,
 
 
2019
2018
2018
Calculation of Tangible Common Equity-to-Tangible Assets Ratio
 
 
(R)
Total common shareholders’ equity (GAAP)
$
778,422

$
762,082

$
725,609

(S)
Less: goodwill and intangible assets
(83,992
)
(83,998
)
(84,124
)
(T)
Total tangible common shareholders’ equity (R–S)
$
694,430

$
678,084

$
641,485

(U)
Total assets (GAAP)
6,379,086

6,293,745

6,051,463

(S)
Less: goodwill and intangible assets
(83,992
)
(83,998
)
(84,124
)
(V)
Total tangible assets (U–S)
$
6,295,094

$
6,209,747

$
5,967,339

 
Common equity-to-assets ratio (GAAP-derived) (R/U)
12.20
%
12.11
%
11.99
%
 
Tangible common equity-to-tangible assets ratio (T/V)
11.03
%
10.92
%
10.75
%
 
 
 
 
 
Calculation of Tangible Book Value per Common Share
 
 
 
(R)
Total common shareholders’ equity (GAAP)
$
778,422

$
762,082

$
725,609

(W)
Actual common shares outstanding
25,667,933

25,783,728

25,955,171

 
Book value per common share (GAAP-derived) (R/W)*1000
$
30.33

$
29.56

$
27.96

 
Tangible common book value per share (T/W)*1000
$
27.05

$
26.30

$
24.72


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