Press Release

1st Source Corporation Reports Continuing Record Earnings in 2019, History of Increased Dividends Continues

Company Release - 1/23/2020 4:00 PM ET

FULL YEAR AND QUARTERLY HIGHLIGHTS

  • Net income improved to $91.96 million for the year of 2019, up 11.58% from 2018 and improved to $21.94 million for the fourth quarter of 2019, up 2.31% over the fourth quarter of 2018.
  • Diluted net income per common share improved to $3.57 for the year of 2019, up 12.97% from 2018 and improved to $0.86 for the fourth quarter of 2019, up 4.88% from the prior year’s fourth quarter of $0.82.
  • Return on average assets increased to 1.41% and return on average common shareholders’ equity increased to 11.50% for the full year of 2019 from 1.34% and 11.09%, respectively in 2018. For the fourth quarter of 2019, return on average assets was 1.30% and return on average common shareholders’ equity was 10.56% down from 1.36% and 11.22%, respectively in the fourth quarter of 2018.
  • Net charge-offs of $5.05 million for the full year of 2019 compared to $13.88 million in 2018 and $0.64 million in the fourth quarter of 2019 compared to $2.53 million in the fourth quarter of 2018. Nonperforming assets to loans and leases of 0.37% at December 31, 2019 compared to 0.71% at December 31, 2018.
  • Average loans and leases grew $244.91 million in the full year of 2019, up 5.15% from 2018 and grew $210.64 million, up 4.36% from the fourth quarter of 2018.
  • Average deposits grew $313.07 million in the full year of 2019, up 6.31% from 2018 and grew $326.48 million, up 6.42% from the fourth quarter of 2018.
  • Net interest income increased $9.96 million in the full year of 2019, up 4.66% from 2018 and decreased $0.55 million, or 0.98% from the fourth quarter of 2018.
  • Noninterest income increased $4.08 million in the full year of 2019, up 4.20% from 2018 and increased $1.42 million, up 5.87% from the fourth quarter of 2018. Excluding leased depreciation, noninterest income increased 7.34% for the year and 11.17% for the quarter.
  • Noninterest expenses increased $2.54 million in the full year of 2019 or 1.36% from 2018 and increased $1.66 million or 3.47% from the fourth quarter of 2018. Excluding leased depreciation, noninterest expense increased 2.29% for the year and 5.36% for the quarter.

SOUTH BEND, Ind.--(BUSINESS WIRE)-- 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported a record high net income of $91.96 million for 2019, an improvement of 11.58% compared to $82.41 million earned in 2018. Fourth quarter net income was $21.94 million, an increase of 2.31% compared to $21.45 million earned in the fourth quarter of 2018. The annual net income comparison was positively impacted by increased net interest income of $9.96 million primarily due to rising lending rates during 2018 and higher average loan and lease balances and a $3.63 million decrease in the provision for loan and lease losses primarily due to fewer charge-offs during the year. Non-recurring 2019 items included $2.25 million ($0.83 million in the fourth quarter) of negative valuation adjustments on repossessed assets, a $1.31 million gain on the sale of our former headquarters building, $0.96 million ($0.64 million in the fourth quarter) in rental income from a repossessed asset and $0.88 million ($0.44 million in the fourth quarter) in FDIC insurance premium credits.

Diluted net income per common share for the year was a record high at $3.57, up 12.97% from the $3.16 earned a year earlier. Diluted net income per common share for the fourth quarter was $0.86, up 4.88% from the $0.82 earned in the fourth quarter of the previous year.

At its January 2020 meeting, the Board of Directors approved a cash dividend of $0.29 per common share, up 7.41% from the $0.27 per common share declared a year ago. The cash dividend is payable to shareholders of record on February 4, 2020 and will be paid on February 14, 2020.

According to Christopher J. Murphy III, Chairman and CEO, “1st Source Corporation again achieved record earnings in 2019 and it was our 32nd consecutive year of dividend growth. Sustained organic growth in average loans and leases and deposits combined with pragmatic and disciplined credit quality decisions continue to yield positive results. Early in the year, we benefited from higher net interest margins. However, due to several Federal Reserve reductions in interest rates during 2019, these margins decreased in the latter part of the year due to lower loan rates and continued competitive rate pressure on deposits.

“We ended the year with statewide recognition of our leadership in small business lending. For the seventh year in a row, the Indiana Small Business Administration (SBA) awarded 1st Source Bank with the Gold Level award in the Community Lender category. The award recognized the Bank’s production of the most SBA loans in the state of Indiana among banks with less than $10 billion in assets. This is a welcome affirmation of our commitment to small businesses throughout the communities we serve. 1st Source Bank was also honored as the first recipient of the inaugural Indiana Rural Lender of the Year award, which recognized us for making the most SBA loans in rural areas of the state. As a community bank with a mission of helping individuals directly or through their businesses realize their dreams, these awards are important proof that our efforts in supporting small businesses and small communities across northern Indiana have been successful, and that we are truly delivering on our mission through the work we do every day.

“I’m also pleased to report that our employees collectively volunteered more than 22,000 hours of their time during 2019 to help individuals and organizations. Community involvement is a pillar of the 1st Source culture, and the commitment our team members show toward the organizations and causes that they are passionate about is inspiring. It is through community leadership, teamwork, integrity, outstanding customer service, and superior quality in all that we do that we are able to help people achieve security, build wealth and realize their dreams.” Mr. Murphy concluded.

FULL YEAR AND FOURTH QUARTER 2019 FINANCIAL RESULTS

Loans

Annual average loans and leases of $5.00 billion increased $244.91 million, up 5.15% from the full year 2018. Quarterly average loans and leases of $5.05 billion increased $210.64 million, up 4.36% in the fourth quarter of 2019 from the year ago quarter and have decreased $44.72 million from the third quarter due to several large payoffs and a decline in seasonal activity in our specialty finance lending offsetting loan growth.

Deposits

Annual average deposits for 2019 were $5.28 billion, an increase of $313.07 million, up 6.31% from 2018. Quarterly average deposits of $5.41 billion grew $326.48 million, up 6.42% for the quarter ended December 31, 2019 compared to the year ago quarter and have increased $51.03 million, up 0.95% compared to the third quarter.

Net Interest Income and Net Interest Margin

For the twelve months of 2019, tax-equivalent net interest income was $224.55 million, an increase of $9.84 million, up 4.58% compared to the full year 2018. Fourth quarter 2019 tax-equivalent net interest income of $55.46 million decreased $0.58 million, or 1.03% from the fourth quarter a year ago and decreased $1.91 million, or 3.32% from the third quarter.

Net interest margin for the year ending December 31, 2019 was 3.67%, a decrease of four basis points from the 3.71% for the year ending December 31, 2018. Net interest margin on a tax-equivalent basis for the year ending December 31, 2019 was 3.68%, a decrease of five basis points from the 3.73% for the year ending December 31, 2018.

Fourth quarter 2019 net interest margin was 3.51%, a reduction of 26 basis points from the 3.77% for the same period in 2018 and a decrease of 16 basis points from the third quarter. Fourth quarter 2019 net interest margin on a fully tax-equivalent basis was 3.52%, a decrease of 26 basis points from the 3.78% for the same period in 2018 and a decrease of 16 basis points from the 3.68% in the third quarter. The decreased yield during the quarter was negatively impacted by one basis point due to zero net interest recoveries in the fourth quarter of 2019 vs. net interest recoveries of $0.31 million during the fourth quarter of 2018. Additionally, the margin continued to see pressure from deposit competition and Federal Reserve interest rate decreases. Loan rates have repriced at a faster pace than deposit rates.

Noninterest Income

Noninterest income for the twelve months ended December 31, 2019 was $101.13 million, up $4.08 million or 4.20% compared to the twelve months ended December 31, 2018. Fourth quarter 2019 noninterest income of $25.58 million increased $1.42 million, or 5.87% from the fourth quarter a year ago and decreased slightly from the third quarter.

Noninterest income during the twelve months ended December 31, 2019 was higher compared to a year ago mainly due to improved mortgage banking income driven by gains on a higher volume of loan sales, increased debit card income from increased customer use, fewer losses on the sale of available-for-sale securities, increased customer swap fees, higher claim proceeds on bank owned life insurance and nonrecurring rental income derived from a repossessed asset. These positives were offset by reduced equipment rental income due to a decrease in the size of the average equipment rental portfolio and less trust and wealth advisory fees resulting from a lower value of assets under management during the first nine months of 2019 compared to the same period in 2018.

The decrease in noninterest income from the third quarter was mainly due to less claim proceeds on bank owned life insurance, fewer partnership investment gains, a reduction in equipment rental income due to a decrease in the size of the average equipment rental portfolio, and decreased debit card income. These negatives were offset by nonrecurring rental income on a repossessed asset and an increase in trust and wealth advisory fees due to stock market recoveries which helped improve the market value of trust assets under management.

Noninterest Expense

Noninterest expense for the twelve months ended December 31, 2019 was $189.01 million, an increase of $2.54 million, or 1.36% compared to the same period a year ago. Fourth quarter 2019 noninterest expense of $49.35 million increased $1.66 million, or 3.47% from the fourth quarter a year ago and increased $2.24 million or 4.76% from the prior quarter. Excluding depreciation on leased equipment, noninterest expenses were up 5.36% and 2.29% for the fourth quarter and twelve months ended December 31, 2019, respectively.

The increase in noninterest expense for 2019 from 2018 was primarily due to higher salaries as a result of normal merit increases and a slight increase in full-time equivalent employees, increased group insurance costs, a rise in furniture and equipment expense due to increased software maintenance costs, and valuation adjustments on repossessed assets. These increases were offset by higher gains on the sale of fixed assets, reduced insurance expenses due to FDIC assessment credits, lower leased equipment depreciation resulting from a reduction in the average equipment rental portfolio, decreased incentive compensation from fewer vestings of share-based compensation arrangements and reduced professional fees from consulting services.

The increase in noninterest expense from the third quarter was mainly due to higher group insurance costs, increased professional fees from consulting services, valuation adjustments on repossessed assets and a rise in furniture and equipment expense due to increased software maintenance costs and computer processing charges. These increases were offset by a decrease in the interest rate swap valuation provision and lower leased equipment depreciation resulting from a reduction in the average equipment rental portfolio.

Credit

The reserve for loan and lease losses as of December 31, 2019 was 2.19% of total loans and leases compared to 2.14% at September 30, 2019 and 2.08% at December 31, 2018. Net charge-offs that have been recorded for the full year of 2019 were $5.05 million compared to net charge-offs of $13.88 million in 2018. The majority of the 2019 net charge-offs were related to one relationship within the aircraft portfolio and one relationship in the medium and heavy duty truck portfolio. Overall, Aircraft accounted for 38% and Medium and Heavy Duty Truck accounted for 22% of total net charge-offs for the year. Net charge-offs of $0.64 million were recorded for the fourth quarter of 2019 compared with net charge-offs of $2.53 million in the same quarter a year ago and up from the $0.31 million of net recoveries in the third quarter.

The provision for loan and lease losses was $15.83 million for the twelve months ended December 31, 2019 and $2.95 million for the fourth quarter of 2019, a decrease of $3.63 million and $1.75 million, respectively, compared with the same periods in 2018. The ratio of nonperforming assets to loans and leases was 0.37% as of December 31, 2019, compared to 0.34% on September 30, 2019 and 0.71% on December 31, 2018.

Capital

As of December 31, 2019, the common equity-to-assets ratio was 12.51%, compared to 12.15% at September 30, 2019 and 12.11% a year ago. The tangible common equity-to-tangible assets ratio was 11.38% at December 31, 2019 compared to 11.04% at September 30, 2019 and 10.92% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 12.55% at December 31, 2019 compared to 12.26% at September 30, 2019 and 12.38% a year ago. During 2019, 325,787 shares were repurchased for treasury reducing common shareholders’ equity by $15.09 million.

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.

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, 15 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.

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)

1st SOURCE CORPORATION

 

 

 

 

 

 

4th QUARTER 2019 FINANCIAL HIGHLIGHTS

 

 

 

 

 

 

(Unaudited - Dollars in thousands, except per share data)

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

September 30,

December 31,

 

December 31,

December 31,

 

2019

2019

2018

 

2019

2018

AVERAGE BALANCES

 

 

 

 

 

 

Assets

$

6,708,475

 

$

6,620,880

 

$

6,270,544

 

 

$

6,528,274

 

$

6,151,439

 

Earning assets

6,258,938

 

6,190,264

 

5,873,476

 

 

6,104,673

 

5,761,761

 

Investments

1,044,917

 

1,024,250

 

976,856

 

 

1,014,659

 

951,812

 

Loans and leases

5,046,639

 

5,091,358

 

4,835,995

 

 

5,000,161

 

4,755,256

 

Deposits

5,414,423

 

5,363,391

 

5,087,948

 

 

5,276,736

 

4,963,663

 

Interest bearing liabilities

4,483,686

 

4,493,376

 

4,304,067

 

 

4,440,905

 

4,288,617

 

Common shareholders’ equity

824,361

 

809,279

 

758,450

 

 

799,736

 

743,173

 

Total equity

844,447

 

819,734

 

759,220

 

 

808,785

 

743,367

 

INCOME STATEMENT DATA

 

 

 

 

 

 

Net interest income

$

55,296

 

$

57,195

 

$

55,843

 

 

$

223,866

 

$

213,906

 

Net interest income - FTE(1)

55,456

 

57,362

 

56,034

 

 

224,552

 

214,709

 

Provision for loan and lease losses

2,951

 

3,717

 

4,702

 

 

15,833

 

19,462

 

Noninterest income

25,577

 

25,765

 

24,160

 

 

101,130

 

97,050

 

Noninterest expense

49,346

 

47,106

 

47,691

 

 

189,009

 

186,467

 

Net income

21,954

 

24,448

 

21,446

 

 

92,015

 

82,414

 

Net income available to common shareholders

21,941

 

24,438

 

21,446

 

 

91,960

 

82,414

 

PER SHARE DATA

 

 

 

 

 

 

Basic net income per common share

$

0.86

 

$

0.95

 

$

0.82

 

 

$

3.57

 

$

3.16

 

Diluted net income per common share

0.86

 

0.95

 

0.82

 

 

3.57

 

3.16

 

Common cash dividends declared

0.29

 

0.27

 

0.25

 

 

1.10

 

0.96

 

Book value per common share(2)

32.47

 

31.88

 

29.56

 

 

32.47

 

29.56

 

Tangible book value per common share(1)

29.18

 

28.59

 

26.30

 

 

29.18

 

26.30

 

Market value - High

53.42

 

48.31

 

54.30

 

 

53.42

 

59.33

 

Market value - Low

44.12

 

42.31

 

38.44

 

 

39.11

 

38.44

 

Basic weighted average common shares outstanding

25,509,240

 

25,520,035

 

25,876,687

 

 

25,600,138

 

25,937,599

 

Diluted weighted average common shares outstanding

25,509,240

 

25,520,035

 

25,876,687

 

 

25,600,138

 

25,937,599

 

KEY RATIOS

 

 

 

 

 

 

Return on average assets

1.30

%

1.46

%

1.36

%

 

1.41

%

1.34

%

Return on average common shareholders’ equity

10.56

 

11.98

 

11.22

 

 

11.50

 

11.09

 

Average common shareholders’ equity to average assets

12.29

 

12.22

 

12.10

 

 

12.25

 

12.08

 

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

11.38

 

11.04

 

10.92

 

 

11.38

 

10.92

 

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

12.55

 

12.26

 

12.38

 

 

12.55

 

12.38

 

Risk-based capital - Tier 1(3)

13.64

 

13.33

 

13.42

 

 

13.64

 

13.42

 

Risk-based capital - Total(3)

14.90

 

14.59

 

14.68

 

 

14.90

 

14.68

 

Net interest margin

3.51

 

3.67

 

3.77

 

 

3.67

 

3.71

 

Net interest margin - FTE(1)

3.52

 

3.68

 

3.78

 

 

3.68

 

3.73

 

Efficiency ratio: expense to revenue

61.02

 

56.78

 

59.61

 

 

58.16

 

59.97

 

Efficiency ratio: expense to revenue - adjusted(1)

57.87

 

53.44

 

55.90

 

 

54.65

 

56.18

 

Net charge offs (recoveries) to average loans and leases

0.05

 

(0.02

)

0.21

 

 

0.10

 

0.29

 

Loan and lease loss reserve to loans and leases

2.19

 

2.14

 

2.08

 

 

2.19

 

2.08

 

Nonperforming assets to loans and leases

0.37

 

0.34

 

0.71

 

 

0.37

 

0.71

 

 

 

 

 

 

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

2019

 

2019

 

2019

 

2019

 

2018

END OF PERIOD BALANCES

 

 

 

 

 

 

Assets

$

6,622,776

 

$

6,691,070

 

$

6,650,105

 

 

$

6,379,086

 

$

6,293,745

 

Loans and leases

5,085,527

 

5,099,546

 

5,109,337

 

 

4,926,187

 

4,835,464

 

Deposits

5,357,326

 

5,391,679

 

5,403,845

 

 

5,124,091

 

5,122,322

 

Reserve for loan and lease losses

111,254

 

108,941

 

104,911

 

 

101,852

 

100,469

 

Goodwill and intangible assets

83,971

 

83,978

 

83,985

 

 

83,992

 

83,998

 

Common shareholders’ equity

828,277

 

813,167

 

794,662

 

 

778,422

 

762,082

 

Total equity

848,636

 

833,042

 

804,686

 

 

781,101

 

763,590

 

ASSET QUALITY

 

 

 

 

 

 

Loans and leases past due 90 days or more

$

309

 

$

311

 

$

156

 

 

$

178

 

$

366

 

Nonaccrual loans and leases

9,789

 

10,188

 

12,212

 

 

13,622

 

27,859

 

Other real estate

522

 

629

 

543

 

 

417

 

299

 

Repossessions

8,623

 

6,610

 

8,799

 

 

10,411

 

6,666

 

Equipment owned under operating leases

 

 

 

 

64

 

126

 

Total nonperforming assets

$

19,243

 

$

17,738

 

$

21,710

 

 

$

24,692

 

$

35,316

 

(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.

1st SOURCE CORPORATION

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

 

 

 

 

 

 

 

(Unaudited - Dollars in thousands)

 

 

 

 

 

 

 

 

December 31,

 

September 30,

 

June 30,

 

December 31,

 

2019

 

2019

 

2019

 

2018

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

$

67,215

 

 

$

94,160

 

 

$

71,910

 

 

$

94,907

 

Federal funds sold and interest bearing deposits with other banks

16,150

 

 

33,325

 

 

24,578

 

 

4,172

 

Investment securities available-for-sale

1,040,583

 

 

1,032,185

 

 

1,021,786

 

 

990,129

 

Other investments

28,414

 

 

28,404

 

 

28,404

 

 

28,404

 

Mortgages held for sale

20,277

 

 

28,654

 

 

19,178

 

 

11,290

 

Loans and leases, net of unearned discount:

 

 

 

 

 

 

 

Commercial and agricultural

1,132,791

 

 

1,175,936

 

 

1,173,000

 

 

1,073,205

 

Auto and light truck

588,807

 

 

612,921

 

 

635,100

 

 

559,987

 

Medium and heavy duty truck

294,824

 

 

289,925

 

 

300,042

 

 

283,544

 

Aircraft

784,040

 

 

805,568

 

 

811,163

 

 

803,111

 

Construction equipment

705,451

 

 

685,696

 

 

686,633

 

 

645,239

 

Commercial real estate

908,177

 

 

858,402

 

 

835,919

 

 

809,886

 

Residential real estate and home equity

532,003

 

 

531,630

 

 

529,749

 

 

523,855

 

Consumer

139,434

 

 

139,468

 

 

137,731

 

 

136,637

 

Total loans and leases

5,085,527

 

 

5,099,546

 

 

5,109,337

 

 

4,835,464

 

Reserve for loan and lease losses

(111,254

)

 

(108,941

)

 

(104,911

)

 

(100,469

)

Net loans and leases

4,974,273

 

 

4,990,605

 

 

5,004,426

 

 

4,734,995

 

Equipment owned under operating leases, net

111,684

 

 

119,171

 

 

126,502

 

 

134,440

 

Net premises and equipment

52,219

 

 

51,680

 

 

51,570

 

 

52,139

 

Goodwill and intangible assets

83,971

 

 

83,978

 

 

83,985

 

 

83,998

 

Accrued income and other assets

227,990

 

 

228,908

 

 

217,766

 

 

159,271

 

Total assets

$

6,622,776

 

 

$

6,691,070

 

 

$

6,650,105

 

 

$

6,293,745

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest bearing demand

$

1,216,834

 

 

$

1,246,063

 

 

$

1,238,604

 

 

$

1,217,120

 

Interest-bearing deposits:

 

 

 

 

 

 

 

Interest-bearing demand

1,677,200

 

 

1,605,602

 

 

1,665,456

 

 

1,614,959

 

Savings

814,794

 

 

820,409

 

 

810,122

 

 

822,477

 

Time

1,648,498

 

 

1,719,605

 

 

1,689,663

 

 

1,467,766

 

Total interest-bearing deposits

4,140,492

 

 

4,145,616

 

 

4,165,241

 

 

3,905,202

 

Total deposits

5,357,326

 

 

5,391,679

 

 

5,403,845

 

 

5,122,322

 

Short-term borrowings:

 

 

 

 

 

 

 

Federal funds purchased and securities sold under agreements to repurchase

120,459

 

 

139,417

 

 

119,781

 

 

113,627

 

Other short-term borrowings

25,434

 

 

57,734

 

 

66,228

 

 

85,717

 

Total short-term borrowings

145,893

 

 

197,151

 

 

186,009

 

 

199,344

 

Long-term debt and mandatorily redeemable securities

71,639

 

 

71,520

 

 

71,542

 

 

71,123

 

Subordinated notes

58,764

 

 

58,764

 

 

58,764

 

 

58,764

 

Accrued expenses and other liabilities

140,518

 

 

138,914

 

 

125,259

 

 

78,602

 

Total liabilities

5,774,140

 

 

5,858,028

 

 

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 shares at December 31, 2019, September 30, 2019, June 30, 2019, and December 31, 2018, respectively)

436,538

436,538

436,538

436,538

Retained earnings

463,269

 

 

448,715

 

 

431,091

 

 

398,980

 

Cost of common stock in treasury (2,696,200, 2,696,918, 2,670,462, and 2,421,946 shares at December 31, 2019, September 30, 2019, June 30, 2019, and December 31, 2018, respectively)

(76,702

)

 

(76,716

)

 

(75,380

)

 

(62,760

)

Accumulated other comprehensive income (loss)

5,172

 

 

4,630

 

 

2,413

 

 

(10,676

)

Total shareholders’ equity

828,277

 

 

813,167

 

 

794,662

 

 

762,082

 

Noncontrolling interests

20,359

 

 

19,875

 

 

10,024

 

 

1,508

 

Total equity

848,636

 

 

833,042

 

 

804,686

 

 

763,590

 

Total liabilities and equity

$

6,622,776

 

 

$

6,691,070

 

 

$

6,650,105

 

 

$

6,293,745

 

1st SOURCE CORPORATION

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF INCOME

 

 

 

 

 

 

 

 

 

(Unaudited - Dollars in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

2019

 

2019

 

2018

 

2019

 

2018

Interest income:

 

 

 

 

 

 

 

 

 

Loans and leases

$

63,259

 

 

$

66,807

 

 

$

62,283

 

 

$

258,348

 

 

$

234,455

 

Investment securities, taxable

5,189

 

 

5,056

 

 

5,363

 

 

20,946

 

 

19,356

 

Investment securities, tax-exempt

297

 

 

316

 

 

419

 

 

1,351

 

 

1,857

 

Other

798

 

 

497

 

 

452

 

 

2,232

 

 

1,648

 

Total interest income

69,543

 

 

72,676

 

 

68,517

 

 

282,877

 

 

257,316

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

12,523

 

 

13,524

 

 

10,345

 

 

50,495

 

 

34,631

 

Short-term borrowings

170

 

 

293

 

 

718

 

 

1,934

 

 

2,838

 

Subordinated notes

907

 

 

914

 

 

916

 

 

3,677

 

 

3,625

 

Long-term debt and mandatorily redeemable securities

647

 

 

750

 

 

695

 

 

2,905

 

 

2,316

 

Total interest expense

14,247

 

 

15,481

 

 

12,674

 

 

59,011

 

 

43,410

 

Net interest income

55,296

 

 

57,195

 

 

55,843

 

 

223,866

 

 

213,906

 

Provision for loan and lease losses

2,951

 

 

3,717

 

 

4,702

 

 

15,833

 

 

19,462

 

Net interest income after provision for loan and lease losses

52,345

 

 

53,478

 

 

51,141

 

 

208,033

 

 

194,444

 

Noninterest income:

 

 

 

 

 

 

 

 

 

Trust and wealth advisory

5,269

 

 

4,982

 

 

4,974

 

 

20,692

 

 

21,071

 

Service charges on deposit accounts

2,835

 

 

2,892

 

 

2,778

 

 

11,010

 

 

10,454

 

Debit card

3,593

 

 

3,727

 

 

3,462

 

 

14,209

 

 

13,369

 

Mortgage banking

1,401

 

 

1,362

 

 

962

 

 

4,698

 

 

3,844

 

Insurance commissions

1,466

 

 

1,603

 

 

1,477

 

 

6,761

 

 

6,502

 

Equipment rental

7,372

 

 

7,578

 

 

7,957

 

 

30,741

 

 

31,793

 

Losses on investment securities available-for-sale

 

 

 

 

 

 

 

 

(345

)

Other

3,641

 

 

3,621

 

 

2,550

 

 

13,019

 

 

10,362

 

Total noninterest income

25,577

 

 

25,765

 

 

24,160

 

 

101,130

 

 

97,050

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

25,382

 

 

24,434

 

 

24,466

 

 

97,098

 

 

93,857

 

Net occupancy

2,640

 

 

2,635

 

 

2,537

 

 

10,528

 

 

10,041

 

Furniture and equipment

6,475

 

 

6,027

 

 

6,491

 

 

24,815

 

 

23,433

 

Depreciation — leased equipment

6,006

 

 

6,198

 

 

6,556

 

 

25,128

 

 

26,248

 

Professional fees

2,045

 

 

1,603

 

 

2,052

 

 

6,952

 

 

7,680

 

Supplies and communication

1,710

 

 

1,643

 

 

1,633

 

 

6,454

 

 

6,320

 

FDIC and other insurance

282

 

 

260

 

 

656

 

 

1,795

 

 

2,923

 

Business development and marketing

1,832

 

 

1,844

 

 

1,191

 

 

6,303

 

 

6,112

 

Loan and lease collection and repossession

1,114

 

 

697

 

 

296

 

 

3,402

 

 

3,375

 

Other

1,860

 

 

1,765

 

 

1,813

 

 

6,534

 

 

6,478

 

Total noninterest expense

49,346

 

 

47,106

 

 

47,691

 

 

189,009

 

 

186,467

 

Income before income taxes

28,576

 

 

32,137

 

 

27,610

 

 

120,154

 

 

105,027

 

Income tax expense

6,622

 

 

7,689

 

 

6,164

 

 

28,139

 

 

22,613

 

Net income

21,954

 

 

24,448

 

 

21,446

 

 

92,015

 

 

82,414

 

Net (income) loss attributable to noncontrolling interests

(13

)

 

(10

)

 

 

 

(55

)

 

 

Net income available to common shareholders

$

21,941

 

 

$

24,438

 

 

$

21,446

 

 

$

91,960

 

 

$

82,414

 

Per common share:

 

 

 

 

 

 

 

 

 

Basic net income per common share

$

0.86

 

 

$

0.95

 

 

$

0.82

 

 

$

3.57

 

 

$

3.16

 

Diluted net income per common share

$

0.86

 

 

$

0.95

 

 

$

0.82

 

 

$

3.57

 

 

$

3.16

 

Cash dividends

$

0.29

 

 

$

0.27

 

 

$

0.25

 

 

$

1.10

 

 

$

0.96

 

Basic weighted average common shares outstanding

25,509,240

 

 

25,520,035

 

 

25,876,687

 

 

25,600,138

 

 

25,937,599

 

Diluted weighted average common shares outstanding

25,509,240

 

 

25,520,035

 

 

25,876,687

 

 

25,600,138

 

 

25,937,599

 

1st SOURCE CORPORATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

INTEREST RATES AND INTEREST DIFFERENTIAL

 

 

 

 

 

 

 

 

 

 

(Unaudited - Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

December 31, 2019

 

September 30, 2019

 

December 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

$

982,839

 

 

$

5,189

 

 

2.09

%

 

$

959,104

 

 

$

5,056

 

 

2.09

%

 

$

895,204

 

 

$

5,363

 

 

2.38

%

Tax-exempt(1)

62,078

 

 

365

 

 

2.33

%

 

65,146

 

 

388

 

 

2.36

%

 

81,652

 

 

516

 

 

2.51

%

Mortgages held for sale

21,489

 

 

192

 

 

3.54

%

 

19,888

 

 

190

 

 

3.79

%

 

9,018

 

 

107

 

 

4.71

%

Loans and leases, net of unearned discount(1)

5,046,639

 

 

63,159

 

 

4.97

%

 

5,091,358

 

 

66,712

 

 

5.20

%

 

4,835,995

 

 

62,270

 

 

5.11

%

Other investments

145,893

 

 

798

 

 

2.17

%

 

54,768

 

 

497

 

 

3.60

%

 

51,607

 

 

452

 

 

3.47

%

Total earning assets(1)

6,258,938

 

 

69,703

 

 

4.42

%

 

6,190,264

 

 

72,843

 

 

4.67

%

 

5,873,476

 

 

68,708

 

 

4.64

%

Cash and due from banks

73,438

 

 

 

 

 

 

66,046

 

 

 

 

 

 

67,437

 

 

 

 

 

Reserve for loan and lease losses

(110,209

)

 

 

 

 

 

(106,559

)

 

 

 

 

 

(99,182

)

 

 

 

 

Other assets

486,308

 

 

 

 

 

 

471,129

 

 

 

 

 

 

428,813

 

 

 

 

 

Total assets

$

6,708,475

 

 

 

 

 

 

$

6,620,880

 

 

 

 

 

 

$

6,270,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

$

4,170,250

 

 

$

12,523

 

 

1.19

%

 

$

4,174,746

 

 

$

13,524

 

 

1.29

%

 

$

3,932,453

 

 

$

10,345

 

 

1.04

%

Short-term borrowings

183,244

 

 

170

 

 

0.37

%

 

188,562

 

 

293

 

 

0.62

%

 

241,979

 

 

718

 

 

1.18

%

Subordinated notes

58,764

 

 

907

 

 

6.12

%

 

58,764

 

 

914

 

 

6.17

%

 

58,764

 

 

916

 

 

6.18

%

Long-term debt and mandatorily redeemable securities

71,428

 

 

647

 

 

3.59

%

 

71,304

 

 

750

 

 

4.17

%

 

70,871

 

 

695

 

 

3.89

%

Total interest-bearing liabilities

4,483,686

 

 

14,247

 

 

1.26

%

 

4,493,376

 

 

15,481

 

 

1.37

%

 

4,304,067

 

 

12,674

 

 

1.17

%

Noninterest-bearing deposits

1,244,173

 

 

 

 

 

 

1,188,645

 

 

 

 

 

 

1,155,495

 

 

 

 

 

Other liabilities

136,169

 

 

 

 

 

 

119,125

 

 

 

 

 

 

51,762

 

 

 

 

 

Shareholders’ equity

824,361

 

 

 

 

 

 

809,279

 

 

 

 

 

 

758,450

 

 

 

 

 

Noncontrolling interests

20,086

 

 

 

 

 

 

10,455

 

 

 

 

 

 

770

 

 

 

 

 

Total liabilities and equity

$

6,708,475

 

 

 

 

 

 

$

6,620,880

 

 

 

 

 

 

$

6,270,544

 

 

 

 

 

Less: Fully tax-equivalent adjustments

 

 

(160

)

 

 

 

 

 

(167

)

 

 

 

 

 

(191

)

 

 

Net interest income/margin (GAAP-derived)(1)

 

 

$

55,296

 

 

3.51

%

 

 

 

$

57,195

 

 

3.67

%

 

 

 

$

55,843

 

 

3.77

%

Fully tax-equivalent adjustments

 

 

160

 

 

 

 

 

 

167

 

 

 

 

 

 

191

 

 

 

Net interest income/margin - FTE(1)

 

 

$

55,456

 

 

3.52

%

 

 

 

$

57,362

 

 

3.68

%

 

 

 

$

56,034

 

 

3.78

%

(1)

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

1st SOURCE CORPORATION

 

 

 

 

 

 

 

 

 

 

 

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

INTEREST RATES AND INTEREST DIFFERENTIAL

 

 

 

 

 

(Unaudited - Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended

 

December 31, 2019

 

December 31, 2018

 

Average

Balance

 

Interest

Income/

Expense

 

Yield/

Rate

 

Average

Balance

 

Interest

Income/

Expense

 

Yield/

Rate

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Investment securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

Taxable

$

945,396

 

 

$

20,946

 

 

2.22

%

 

$

861,733

 

 

$

19,356

 

 

2.25

%

Tax-exempt(1)

69,263

 

 

1,662

 

 

2.40

%

 

90,079

 

 

2,293

 

 

2.55

%

Mortgages held for sale

15,601

 

 

610

 

 

3.91

%

 

8,190

 

 

372

 

 

4.54

%

Loans and leases, net of unearned discount(1)

5,000,161

 

 

258,113

 

 

5.16

%

 

4,755,256

 

 

234,450

 

 

4.93

%

Other investments

74,252

 

 

2,232

 

 

3.01

%

 

46,503

 

 

1,648

 

 

3.54

%

Total earning assets(1)

6,104,673

 

 

283,563

 

 

4.65

%

 

5,761,761

 

 

258,119

 

 

4.48

%

Cash and due from banks

67,726

 

 

 

 

 

 

64,853

 

 

 

 

 

Reserve for loan and lease losses

(105,340

)

 

 

 

 

 

(99,258

)

 

 

 

 

Other assets

461,215

 

 

 

 

 

 

424,083

 

 

 

 

 

Total assets

$

6,528,274

 

 

 

 

 

 

$

6,151,439

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

$

4,105,097

 

 

$

50,495

 

 

1.23

%

 

$

3,893,999

 

 

$

34,631

 

 

0.89

%

Short-term borrowings

205,911

 

 

1,934

 

 

0.94

%

 

265,041

 

 

2,838

 

 

1.07

%

Subordinated notes

58,764

 

 

3,677

 

 

6.26

%

 

58,764

 

 

3,625

 

 

6.17

%

Long-term debt and mandatorily redeemable securities

71,133

 

 

2,905

 

 

4.08

%

 

70,813

 

 

2,316

 

 

3.27

%

Total interest-bearing liabilities

4,440,905

 

 

59,011

 

 

1.33

%

 

4,288,617

 

 

43,410

 

 

1.01

%

Noninterest-bearing deposits

1,171,639

 

 

 

 

 

 

1,069,664