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Section 1: 10-Q (10-Q SRCE 2ND QUARTER 2019)

Wdesk | Document
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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission file number 0-6233
398795859_corplogo3a02a13.jpg
1st Source Corporation
(Exact name of registrant as specified in its charter)
Indiana
 
35-1068133
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
100 North Michigan Street
 
 
South Bend,
IN
 
46601
(Address of principal executive offices)
 
(Zip Code)
 
(574) 235-2000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock - without par value
 
SRCE
 
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes  o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  x Yes  o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
x
 
Accelerated filer
 
 
 
 
 
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
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 Section13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  x No
Number of shares of common stock outstanding as of July 12, 201925,535,212 shares
 


Table of Contents

TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EXHIBITS
 
 
 
 
 
 
 
 
 


2

Table of Contents



1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
 
June 30,
2019
 
December 31,
2018
ASSETS
 

 
 

Cash and due from banks
$
71,910

 
$
94,907

Federal funds sold and interest bearing deposits with other banks
24,578

 
4,172

Investment securities available-for-sale
1,021,786

 
990,129

Other investments
28,404

 
28,404

Mortgages held for sale
19,178

 
11,290

Loans and leases, net of unearned discount:
 

 
 
Commercial and agricultural
1,173,000

 
1,073,205

Auto and light truck
635,100

 
559,987

Medium and heavy duty truck
300,042

 
283,544

Aircraft
811,163

 
803,111

Construction equipment
686,633

 
645,239

Commercial real estate
835,919

 
809,886

Residential real estate and home equity
529,749

 
523,855

Consumer
137,731

 
136,637

Total loans and leases
5,109,337

 
4,835,464

Reserve for loan and lease losses
(104,911
)
 
(100,469
)
Net loans and leases
5,004,426

 
4,734,995

Equipment owned under operating leases, net
126,502

 
134,440

Net premises and equipment
51,570

 
52,139

Goodwill and intangible assets
83,985

 
83,998

Accrued income and other assets
217,766

 
159,271

Total assets
$
6,650,105

 
$
6,293,745

 
 
 
 
LIABILITIES
 

 
 

Deposits:
 

 
 

Noninterest-bearing demand
$
1,238,604

 
$
1,217,120

Interest-bearing deposits:
 
 
 
Interest-bearing demand
1,665,456

 
1,614,959

Savings
810,122

 
822,477

Time
1,689,663

 
1,467,766

Total interest-bearing deposits
4,165,241

 
3,905,202

Total deposits
5,403,845

 
5,122,322

Short-term borrowings:
 

 
 

Federal funds purchased and securities sold under agreements to repurchase
119,781

 
113,627

Other short-term borrowings
66,228

 
85,717

Total short-term borrowings
186,009

 
199,344

Long-term debt and mandatorily redeemable securities
71,542

 
71,123

Subordinated notes
58,764

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                    
Commission file number 0-6233
398795859_corplogo3a02a13.jpg
1st Source Corporation
(Exact name of registrant as specified in its charter)
Indiana
 
35-1068133
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
100 North Michigan Street
 
 
South Bend,
IN
 
46601
(Address of principal executive offices)
 
(Zip Code)
 
(574) 235-2000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock - without par value
 
SRCE
 
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes  o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  x Yes  o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
x
 
Accelerated filer
 
 
 
 
 
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
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 Section13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  x No
Number of shares of common stock outstanding as of July 12, 201925,535,212 shares
 



TABLE OF CONTENTS

 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EXHIBITS
 
 
 
 
 
 
 
 
 


2




1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
 
June 30,
2019
 
December 31,
2018
ASSETS
 

 
 

Cash and due from banks
$
71,910

 
$
94,907

Federal funds sold and interest bearing deposits with other banks
24,578

 
4,172

Investment securities available-for-sale
1,021,786

 
990,129

Other investments
28,404

 
28,404

Mortgages held for sale
19,178

 
11,290

Loans and leases, net of unearned discount:
 

 
 
Commercial and agricultural
1,173,000

 
1,073,205

Auto and light truck
635,100

 
559,987

Medium and heavy duty truck
300,042

 
283,544

Aircraft
811,163

 
803,111

Construction equipment
686,633

 
645,239

Commercial real estate
835,919

 
809,886

Residential real estate and home equity
529,749

 
523,855

Consumer
137,731

 
136,637

Total loans and leases
5,109,337

 
4,835,464

Reserve for loan and lease losses
(104,911
)
 
(100,469
)
Net loans and leases
5,004,426

 
4,734,995

Equipment owned under operating leases, net
126,502

 
134,440

Net premises and equipment
51,570

 
52,139

Goodwill and intangible assets
83,985

 
83,998

Accrued income and other assets
217,766

 
159,271

Total assets
$
6,650,105

 
$
6,293,745

 
 
 
 
LIABILITIES
 

 
 

Deposits:
 

 
 

Noninterest-bearing demand
$
1,238,604

 
$
1,217,120

Interest-bearing deposits:
 
 
 
Interest-bearing demand
1,665,456

 
1,614,959

Savings
810,122

 
822,477

Time
1,689,663

 
1,467,766

Total interest-bearing deposits
4,165,241

 
3,905,202

Total deposits
5,403,845

 
5,122,322

Short-term borrowings:
 

 
 

Federal funds purchased and securities sold under agreements to repurchase
119,781

 
113,627

Other short-term borrowings
66,228

 
85,717

Total short-term borrowings
186,009

 
199,344

Long-term debt and mandatorily redeemable securities
71,542

 
71,123

Subordinated notes
58,764

 
58,764

Accrued expenses and other liabilities
125,259

 
78,602

Total liabilities
5,845,419

 
5,530,155

 
 
 
 
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 at June 30, 2019 and December 31, 2018
436,538

 
436,538

Retained earnings
431,091

 
398,980

Cost of common stock in treasury (2,670,462 shares at June 30, 2019 and 2,421,946 shares at December 31, 2018)
(75,380
)
 
(62,760
)
Accumulated other comprehensive income (loss)
2,413

 
(10,676
)
Total shareholders’ equity
794,662

 
762,082

Noncontrolling interests
$
10,024

 
$
1,508

Total equity
$
804,686

 
$
763,590

Total liabilities and equity
$
6,650,105

 
$
6,293,745


The accompanying notes are a part of the consolidated financial statements.

3


1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands, except per share amounts)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Interest income:
 

 
 

 
 

 
 

Loans and leases
$
65,599

 
$
58,520

 
$
128,282

 
$
112,211

Investment securities, taxable
5,186

 
4,473

 
10,701

 
9,081

Investment securities, tax-exempt
353

 
475

 
738

 
1,006

Other
499

 
397

 
937

 
805

Total interest income
71,637

 
63,865

 
140,658

 
123,103

Interest expense:
 

 
 

 
 

 
 

Deposits
12,978

 
8,319

 
24,448

 
14,881

Short-term borrowings
540

 
826

 
1,471

 
1,602

Subordinated notes
928

 
908

 
1,856

 
1,791

Long-term debt and mandatorily redeemable securities
764

 
643

 
1,508

 
1,128

Total interest expense
15,210

 
10,696

 
29,283

 
19,402

Net interest income
56,427

 
53,169

 
111,375

 
103,701

Provision for loan and lease losses
4,247

 
4,817

 
9,165

 
8,603

Net interest income after provision for loan and lease losses
52,180

 
48,352

 
102,210

 
95,098

Noninterest income:
 

 
 

 
 

 
 

Trust and wealth advisory
5,583

 
5,800

 
10,441

 
10,988

Service charges on deposit accounts
2,785

 
2,625

 
5,283

 
5,109

Debit card
3,669

 
3,427

 
6,889

 
6,530

Mortgage banking
999

 
1,073

 
1,935

 
1,957

Insurance commissions
1,518

 
1,487

 
3,692

 
3,445

Equipment rental
7,809

 
8,104

 
15,791

 
15,859

Losses on investment securities available-for-sale

 

 

 
(345
)
Other
3,301

 
2,507

 
5,757

 
5,287

Total noninterest income
25,664

 
25,023

 
49,788

 
48,830

Noninterest expense:
 

 
 

 
 

 
 

Salaries and employee benefits
23,787

 
23,696

 
47,282

 
46,227

Net occupancy
2,481

 
2,115

 
5,253

 
4,981

Furniture and equipment
6,289

 
5,718

 
12,313

 
11,173

Depreciation – leased equipment
6,400

 
6,684

 
12,924

 
13,112

Professional fees
1,706

 
1,728

 
3,304

 
3,745

Supplies and communication
1,608

 
1,499

 
3,101

 
3,052

FDIC and other insurance
608

 
714

 
1,253

 
1,412

Business development and marketing
1,678

 
1,725

 
2,627

 
3,258

Loan and lease collection and repossession
230

 
565

 
1,591

 
1,516

Other
2,566

 
1,433

 
2,909

 
2,958

Total noninterest expense
47,353

 
45,877

 
92,557

 
91,434

Income before income taxes
30,491

 
27,498

 
59,441

 
52,494

Income tax expense
7,074

 
5,534

 
13,828

 
11,414

Net income
$
23,417

 
$
21,964

 
$
45,613

 
$
41,080

Net (income) loss attributable to noncontrolling interests
(32
)
 

 
(32
)
 

Net income available to common shareholders
23,385

 
21,964

 
45,581

 
41,080

Per common share:
 

 
 

 
 

 
 

Basic net income per common share
$
0.91

 
$
0.84

 
$
1.76

 
$
1.57

Diluted net income per common share
$
0.91

 
$
0.84

 
$
1.76

 
$
1.57

Cash dividends
$
0.27

 
$
0.24

 
$
0.54

 
$
0.46

Basic weighted average common shares outstanding
25,615,718

 
25,958,128

 
25,687,056

 
25,954,278

Diluted weighted average common shares outstanding
25,615,718

 
25,958,128

 
25,687,056

 
25,954,278


The accompanying notes are a part of the consolidated financial statements.

4


1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited - Dollars in thousands)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
23,417

 
$
21,964

 
$
45,613

 
$
41,080

Other comprehensive income (loss):
 

 
 

 
 

 
 

Unrealized appreciation (depreciation) of available-for-sale securities
7,668

 
(1,949
)
 
17,241

 
(11,363
)
Reclassification adjustment for realized losses included in net income

 

 

 
345

Income tax effect
(1,847
)
 
469

 
(4,152
)
 
2,653

Other comprehensive income (loss), net of tax
5,821

 
(1,480
)
 
13,089

 
(8,365
)
Comprehensive income
29,238

 
20,484

 
$
58,702

 
$
32,715

Comprehensive (income) loss attributable to noncontrolling interests
(32
)
 

 
(32
)
 

Comprehensive income available to common shareholders
$
29,206

 
$
20,484

 
$
58,670

 
$
32,715

The accompanying notes are a part of the consolidated financial statements.


5


1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited - Dollars in thousands, except per share amounts)
 
Three Months Ended
 
Preferred
Stock
 
Common
Stock
 
Retained
Earnings
 
Cost of
Common
Stock
in Treasury
 
Accumulated
Other
Comprehensive
Income (Loss), Net
 
Total Shareholders’ Equity
 
Noncontrolling Interests