Press Release

1st Source Corporation Reports First Quarter Results, Cash Dividend Declared

Company Release - 4/23/2020 9:20 AM ET

QUARTERLY HIGHLIGHTS

  • Net income was $16.41 million, down 26.05% from the first quarter of 2019. Diluted net income per common share was $0.64, down from the prior year’s first quarter of $0.86.
  • Cash dividend of $0.28 per common share approved, up 3.70% from the $0.27 per common share declared a year ago.
  • Return on average assets of 1.00% and return on average common shareholders’ equity of 7.81% compared to 1.43% and 11.61%, respectively in the first quarter of 2019.
  • Average loans and leases grew $51.76 million, up 1.03% from the previous quarter and $240.21 million, up 4.94% from the first quarter of 2019.
  • Average deposits decreased $142.05 million, or 2.62% from the previous quarter and grew $213.01 million, up 4.21% from the first quarter of 2019.
  • Net charge-offs were $1.81 million and nonperforming assets to loans and leases were 0.68% compared to net charge-offs of $3.54 million and 0.49%, respectively in the first quarter of 2019.
  • Provision was made to the loan and lease losses reserve of $11.35 million compared to $4.92 million in the first quarter of 2019.
  • Net interest income decreased $0.10 million, or 0.19% from the first quarter of 2019.
  • Noninterest income increased $0.50 million, up 2.06% from the first quarter of 2019 (increased 9.06% excluding leased equipment depreciation).
  • Noninterest expenses increased $1.33 million, up 2.94% from the first quarter of 2019 (increased 6.28% excluding leased equipment depreciation).

SOUTH BEND, Ind.--(BUSINESS WIRE)-- 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported net income of $16.41 million for the first quarter of 2020, a decrease of 26.05% compared to $22.20 million reported in the first quarter a year ago. The net income comparison was negatively impacted by an increased provision for loan and lease losses of $6.44 million primarily due to a sizeable impairment on one account, the likely negative economic impact on our portfolio from COVID-19, higher special attention outstandings in the quarter and increased loan and lease balances. Non-recurring 2020 items included $0.45 million in FDIC insurance premium credits received.

Diluted net income per common share for the first quarter of 2020 was down 25.58% to $0.64, versus $0.86 in the first quarter of 2019.

At its April 2020 meeting, the Board of Directors approved a cash dividend of $0.28 per common share, up 3.70% from the $0.27 per common share declared a year ago. The cash dividend is payable to shareholders of record on May 5, 2020 and will be paid on May 15, 2020.

Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, “While this has been a tough quarter, we are pleased that we have been able to help our customers navigate through the uncertainties presented by the current coronavirus (COVID-19) pandemic and we will continue to do so. We are well-positioned for the long term, are well-capitalized, have appropriate reserves, and have a strong balance sheet. That said, the near-term level of uncertainty is unprecedented as to the severity and length of the economic downturn tied to the coronavirus offset possibly by the effectiveness of the government’s enormous stimulus efforts. The continuation of shelter-in-place in our markets for prolonged periods of time, the inability to control the virus, and its possible return in the fall or winter could have serious negative impact on our clients and the markets we serve. In this environment of uncertainty, it is hard to predict what can or will happen and the impact it will have on us.

“As the current pandemic continues to negatively impact the economy, resulting in layoffs and rising unemployment in our local community banking markets and stresses among our specialty finance clients, we are working proactively to support our clients through this difficult period with a heightened sense of purpose and determination to deliver exceptional service to them. To date, we have approved and processed more than $494 million of loan modifications across our loan portfolios. The largest volume of loan modifications has been in the Auto and Light Truck, Construction and Commercial loan portfolios where business operations were directly impacted early-on by the pandemic. In addition, we are participating in the Small Business Administration Paycheck Protection Program (PPP) and have processed 2,061 small business PPP loans totaling more than $554 million to date. The PPP is a loan program designed to help small businesses keep their workforces employed during the coronavirus crisis and is one of a number of stimulus initiatives we have stood up and are delivering to our business and consumer clients. While these are tumultuous times, we will continue our longstanding practice of providing straight talk, sound advice, always keeping our clients’ best interests in mind for the long-term.

“On a more positive note, our residential mortgage loan business has been booming. We are seeing highproduction volumes and profitable results. Prior year Lean initiatives to streamline and hone our mortgage loan processes have allowed us to keep pace with the surging demand.

“In late January, we opened our newly constructed stand-alone banking center in the Middlebury, Ind. community. Our prior location there, where we had been a tenant for many years, was not consistent with the atmosphere our customers have come to know and expect from our banking centers. The new banking center features our signature side-by-side banking experience, as well as drive up teller service lanes and ATM. A few weeks after that, we opened the doors to our new banking center in downtown Auburn, Ind. We entered this community outside Fort Wayne strategically, and we have received a tremendous response from the people and businesses there. We have of course joined with our clients and the communities we serve to adjust the experience in all our banking centers to “flatten the curve” and support our first responders and health-care professionals in this unprecedented global response to an invisible enemy.

“In closing, I’d like to reassure you that 1st Source is committed to the essential work we do in the banking industry and for our clients. We have put many precautions in place so that we may continue to serve our clients through this difficult time while also ensuring their health and well-being as well as the health and well-being of our employees and all of our families and the communities we serve. Teams have been split up so that infection cannot spread across entire departments, disrupting the important work our employees do. We are encouraging virtual meetings and conference calls in place of in-person meetings, including our annual shareholders meeting which will be held virtually this year. Additionally, travel has been restricted, and we are promoting social distancing, frequent hand washing and thorough disinfection of all surfaces. We have a dedicated executive pandemic response team that meets daily and is closely monitoring developments and providing guidance for additional precautions and initiatives. We are resolute in our commitment to serve our clients and communities just as we have for over 156 years and will do so for many years to come.” Mr. Murphy concluded.

FIRST QUARTER 2020 FINANCIAL RESULTS

Loans

Average loans and leases of $5.10 billion increased $240.21 million, up 4.94% in the first quarter of 2020 from the year ago quarter and have increased $51.76 million, up 1.03% from the fourth quarter of 2019.

Deposits

Average deposits of $5.27 billion grew $213.01 million for the quarter ended March 31, 2020, up 4.21% from the year ago quarter and have decreased $142.05 million, or 2.62% compared to the fourth quarter of 2019.

Net Interest Income and Net Interest Margin

First quarter 2020 net interest income of $54.84 million was relatively flat from the first quarter a year ago and decreased $0.45 million, down 0.82% from the fourth quarter of 2019.

First quarter 2020 net interest margin was 3.57%, a decrease of 21 basis points from the 3.78% for the same period in 2019 and increased six basis points from the fourth quarter of 2019. First quarter 2020 net interest margin on a fully tax-equivalent basis was 3.58%, a decrease of 21 basis points from the 3.79% for the same period in 2019 and was higher by six basis points compared to the previous quarter. The margin continues to experience pressure from the numerous Federal Reserve interest rate decreases during the second half of 2019 and the first three months of 2020. Interest-bearing deposit repricing and a shift in the deposit mix during the first quarter of 2020 resulted in a positive margin impact when compared to the year end margin.

Noninterest Income

First quarter 2020 noninterest income of $24.62 million increased $0.50 million, up 2.06% from the first quarter a year ago and decreased $0.96 million, or 3.73% from the fourth quarter of 2019.

Noninterest income during the three months ended March 31, 2020 was higher compared to a year ago mainly from improved mortgage banking income driven by gains on a higher volume of loan sales, increased gains on the sale of available-for-sale securities, increased gains on partnership investments, higher debit card income and increased service charges on deposit accounts. These positives were offset by lower equipment rental income due to a reduction in the size of the average equipment rental portfolio, reduced insurance commissions due to a decline in contingent commissions received and decreased customer swap fees.

The decrease in noninterest income from the fourth quarter of 2019 was primarily the result of lower equipment rental income due to a reduction in the size of the average equipment rental portfolio, decreased trust and wealth advisory fees, reduced brokerage fees and commissions, and decreased customer swap fees. These negatives were offset by higher mortgage banking income on a higher volume of loan sales and increased insurance commissions on property and casualty policies.

Noninterest Expense

First quarter 2020 noninterest expense of $46.54 million increased $1.33 million, or 2.94% from the first quarter a year ago and decreased $2.81 million, down 5.70% from the prior quarter. Excluding depreciation on leased equipment, noninterest expenses were up 6.28% from the first quarter a year ago and down 5.15% from the prior quarter.

The increase in noninterest expense during the first quarter compared to a year ago was mainly due to reduced gains on the sale of fixed assets, higher salaries as a result of normal merit increases and slightly increased staffing levels, a rise in the valuation provision for interest rate swaps with customers, and higher business development and marketing expenses due to marketing promotions. These increases were offset by fewer valuation adjustments on repossessed assets, lower leased equipment depreciation resulting from a reduction in the average equipment rental portfolio, a decrease in executive cash incentives, reduced insurance costs due to FDIC assessment credits and higher gains on the sale of off-lease operating equipment.

The decrease in noninterest expense from the prior quarter was primarily the result of decreased group insurance costs on lower claims, fewer valuation adjustments on repossessed assets, a decrease in executive cash incentives, a decline in employee commissions and awards, reduced leased equipment depreciation, and fewer professional consulting fees. These decreases were offset by an increased valuation provision for interest rate swaps with customers and higher collection and repossession expenses.

Credit

The reserve for loan and lease losses as of March 31, 2020 was 2.35% of total loans and leases compared to 2.19% at December 31, 2019 and 2.07% at March 31, 2019. Net charge-offs of $1.81 million were recorded for the first quarter of 2020 compared with net charge-offs of $3.54 million in the same quarter a year ago and $0.64 million of net charge-offs in the prior quarter.

The provision for loan and lease losses was $11.35 million for the first quarter of 2020, an increase of $6.44 million compared with the same period in 2019 and an increase of $8.40 million from the fourth quarter of 2019. The ratio of nonperforming assets to loans and leases was 0.68% as of March 31, 2020, compared to 0.37% on December 31, 2019 and 0.49% on March 31, 2019.

Capital

As of March 31, 2020, the common equity-to-assets ratio was 12.63%, compared to 12.51% at December 31, 2019 and 12.20% a year ago. The tangible common equity-to-tangible assets ratio was 11.53% at March 31, 2020 compared to 11.38% at December 31, 2019 and 11.03% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 12.57% at March 31, 2020 compared to 12.55% at December 31, 2019 and 12.28% a year ago. There were no shares repurchased for treasury during 2020.

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.

1st SOURCE CORPORATION
1st QUARTER 2020 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,
2020

December 31,
2019

March 31,
2019

 

 

 

AVERAGE BALANCES

 

 

 

 

 

 

Assets

$

6,611,121

 

$

6,708,475

 

$

6,290,386

 

 

 

 

Earning assets

6,181,794

 

6,258,938

 

5,896,697

 

 

 

 

Investments

1,030,640

 

1,044,917

 

987,593

 

 

 

 

Loans and leases

5,098,397

 

5,046,639

 

4,858,183

 

 

 

 

Deposits

5,272,376

 

5,414,423

 

5,059,362

 

 

 

 

Interest bearing liabilities

4,415,552

 

4,483,686

 

4,315,545

 

 

 

 

Common shareholders’ equity

844,724

 

824,361

 

775,657

 

 

 

 

Total equity

867,605

 

844,447

 

777,217

 

 

 

 

INCOME STATEMENT DATA

 

 

 

 

 

 

Net interest income

$

54,844

 

$

55,296

 

$

54,948

 

 

 

 

Net interest income - FTE(1)

54,995

 

55,456

 

55,130

 

 

 

 

Provision for loan and lease losses

11,353

 

2,951

 

4,918

 

 

 

 

Noninterest income

24,622

 

25,577

 

24,124

 

 

 

 

Noninterest expense

46,535

 

49,346

 

45,204

 

 

 

 

Net income

16,418

 

21,954

 

22,196

 

 

 

 

Net income available to common shareholders

16,413

 

21,941

 

22,196

 

 

 

 

PER SHARE DATA

 

 

 

 

 

 

Basic net income per common share

$

0.64

 

$

0.86

 

$

0.86

 

 

 

 

Diluted net income per common share

0.64

 

0.86

 

0.86

 

 

 

 

Common cash dividends declared

0.29

 

0.29

 

0.27

 

 

 

 

Book value per common share(2)

33.32

 

32.47

 

30.33

 

 

 

 

Tangible book value per common share(1)

30.03

 

29.18

 

27.05

 

 

 

 

Market value - High

52.16

 

53.42

 

50.15

 

 

 

 

Market value - Low

26.07

 

44.12

 

39.11

 

 

 

 

Basic weighted average common shares outstanding

25,523,356

 

25,509,240

 

25,759,186

 

 

 

 

Diluted weighted average common shares outstanding

25,523,356

 

25,509,240

 

25,759,186

 

 

 

 

KEY RATIOS

 

 

 

 

 

 

Return on average assets

1.00

%

1.30

%

1.43

%

 

 

 

Return on average common shareholders’ equity

7.81

 

10.56

 

11.61

 

 

 

 

Average common shareholders’ equity to average assets

12.78

 

12.29

 

12.33

 

 

 

 

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

11.53

 

11.38

 

11.03

 

 

 

 

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

12.57

 

12.55

 

12.28

 

 

 

 

Risk-based capital - Tier 1(3)

13.97

 

13.64

 

13.32

 

 

 

 

Risk-based capital - Total(3)

15.23

 

14.90

 

14.58

 

 

 

 

Net interest margin

3.57

 

3.51

 

3.78

 

 

 

 

Net interest margin - FTE(1)

3.58

 

3.52

 

3.79

 

 

 

 

Efficiency ratio: expense to revenue

58.56

 

61.02

 

57.17

 

 

 

 

Efficiency ratio: expense to revenue - adjusted(1)

55.79

 

57.87

 

53.20

 

 

 

 

Net charge offs to average loans and leases

0.14

 

0.05

 

0.30

 

 

 

 

Loan and lease loss reserve to loans and leases

2.35

 

2.19

 

2.07

 

 

 

 

Nonperforming assets to loans and leases

0.68

 

0.37

 

0.49

 

 

 

 

 

 

 

 

 

 

 

 

March 31,
2020

December 31,
2019

September 30,
2019

 

June 30,
2019

March 31,
2019

END OF PERIOD BALANCES

 

 

 

 

 

 

Assets

$

6,735,118

 

$

6,622,776

 

$

6,691,070

 

 

$

6,650,105

 

$

6,379,086

 

Loans and leases

5,129,514

 

5,085,527

 

5,099,546

 

 

5,109,337

 

4,926,187

 

Deposits

5,275,911

 

5,357,326

 

5,391,679

 

 

5,403,845

 

5,124,091

 

Reserve for loan and lease losses

120,798

 

111,254

 

108,941

 

 

104,911

 

101,852

 

Goodwill and intangible assets

83,964

 

83,971

 

83,978

 

 

83,985

 

83,992

 

Common shareholders’ equity

850,897

 

828,277

 

813,167

 

 

794,662

 

778,422

 

Total equity

877,302

 

848,636

 

833,042

 

 

804,686

 

781,101

 

ASSET QUALITY

 

 

 

 

 

 

Loans and leases past due 90 days or more

$

191

 

$

309

 

$

311

 

 

$

156

 

$

178

 

Nonaccrual loans and leases

26,301

 

9,789

 

10,188

 

 

12,212

 

13,622

 

Other real estate

362

 

522

 

629

 

 

543

 

417

 

Repossessions

9,020

 

8,623

 

6,610

 

 

8,799

 

10,411

 

Equipment owned under operating leases

 

 

 

 

 

64

 

Total nonperforming assets

$

35,874

 

$

19,243

 

$

17,738

 

 

$

21,710

 

$

24,692

 

(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)

 

 

 

 

 

 

 

 

March 31,
2020

 

December 31,
2019

 

September 30,
2019

 

March 31,
2019

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

$

72,756

 

 

$

67,215

 

 

$

94,160

 

 

$

64,619

 

Federal funds sold and interest bearing deposits with other banks

49,543

 

 

16,150

 

 

33,325

 

 

3,062

 

Investment securities available-for-sale

1,057,169

 

 

1,040,583

 

 

1,032,185

 

 

1,002,809

 

Other investments

28,414

 

 

28,414

 

 

28,404

 

 

28,404

 

Mortgages held for sale

13,449

 

 

20,277

 

 

28,654

 

 

9,210

 

Loans and leases, net of unearned discount:

 

 

 

 

 

 

 

Commercial and agricultural

1,166,462

 

 

1,132,791

 

 

1,175,936

 

 

1,146,031

 

Auto and light truck

577,757

 

 

588,807

 

 

612,921

 

 

554,078

 

Medium and heavy duty truck

278,076

 

 

294,824

 

 

289,925

 

 

285,631

 

Aircraft

773,132

 

 

784,040

 

 

805,568

 

 

830,437

 

Construction equipment

718,307

 

 

705,451

 

 

685,696

 

 

641,035

 

Commercial real estate

930,757

 

 

908,177

 

 

858,402

 

 

818,459

 

Residential real estate and home equity

545,606

 

 

532,003

 

 

531,630

 

 

514,719

 

Consumer

139,417

 

 

139,434

 

 

139,468

 

 

135,797

 

Total loans and leases

5,129,514

 

 

5,085,527

 

 

5,099,546

 

 

4,926,187

 

Reserve for loan and lease losses

(120,798)

 

 

(111,254)

 

 

(108,941)

 

 

(101,852)

 

Net loans and leases

5,008,716

 

 

4,974,273

 

 

4,990,605

 

 

4,824,335

 

Equipment owned under operating leases, net

101,238

 

 

111,684

 

 

119,171

 

 

131,594

 

Net premises and equipment

52,431

 

 

52,219

 

 

51,680

 

 

51,357

 

Goodwill and intangible assets

83,964

 

 

83,971

 

 

83,978

 

 

83,992

 

Accrued income and other assets

267,438

 

 

227,990

 

 

228,908

 

 

179,704

 

Total assets

$

6,735,118

 

 

$

6,622,776

 

 

$

6,691,070

 

 

$

6,379,086

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing demand

$

1,219,327

 

 

$

1,216,834

 

 

$

1,246,063

 

 

$

1,146,647

 

Interest-bearing deposits:

 

 

 

 

 

 

 

Interest-bearing demand

1,591,419

 

 

1,677,200

 

 

1,605,602

 

 

1,560,840

 

Savings

840,606

 

 

814,794

 

 

820,409

 

 

851,564

 

Time

1,624,559

 

 

1,648,498

 

 

1,719,605

 

 

1,565,040

 

Total interest-bearing deposits

4,056,584

 

 

4,140,492

 

 

4,145,616

 

 

3,977,444

 

Total deposits

5,275,911

 

 

5,357,326

 

 

5,391,679

 

 

5,124,091

 

Short-term borrowings:

 

 

 

 

 

 

 

Federal funds purchased and securities sold under agreements to repurchase

135,942

 

 

120,459

 

 

139,417

 

 

149,172

 

Other short-term borrowings

146,903

 

 

25,434

 

 

57,734

 

 

106,216

 

Total short-term borrowings

282,845

 

 

145,893

 

 

197,151

 

 

255,388

 

Long-term debt and mandatorily redeemable securities

81,877

 

 

71,639

 

 

71,520

 

 

71,439

 

Subordinated notes

58,764

 

 

58,764

 

 

58,764

 

 

58,764

 

Accrued expenses and other liabilities

158,419

 

 

140,518

 

 

138,914

 

 

88,303

 

Total liabilities

5,857,816

 

 

5,774,140

 

 

5,858,028

 

 

5,597,985

 

 

 

 

 

 

 

 

 

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, 2020, December 31, 2019, September 30, 2019, and March 31, 2019, respectively

436,538

 

 

436,538

 

 

436,538

 

 

436,538

 

Retained earnings

472,911

 

 

463,269

 

 

448,715

 

 

414,428

 

Cost of common stock in treasury (2,670,290, 2,696,200, 2,696,918, and 2,537,741 shares at March 31, 2020, December 31, 2019, September 30, 2019, and

March 31, 2019, respectively)

(76,203)

 

 

(76,702)

 

 

(76,716)

 

 

(69,136)

 

Accumulated other comprehensive income (loss)

17,651

 

 

5,172

 

 

4,630

 

 

(3,408)

 

Total shareholders’ equity

850,897

 

 

828,277

 

 

813,167

 

 

778,422

 

Noncontrolling interests

26,405

 

 

20,359

 

 

19,875

 

 

2,679

 

Total equity

877,302

 

 

848,636

 

 

833,042

 

 

781,101

 

Total liabilities and equity

$

6,735,118

 

 

$

6,622,776

 

 

$

6,691,070

 

 

$

6,379,086

 

1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands, except per share amounts)

 

 

 

 

 

 

Three Months Ended

 

March 31,
2020

 

December 31,
2019

 

March 31,
2019

Interest income:

 

 

 

 

 

Loans and leases

$

61,526

 

 

$

63,259

 

 

$

62,683

 

Investment securities, taxable

5,550

 

 

5,189

 

 

5,515

 

Investment securities, tax-exempt

264

 

 

297

 

 

385

 

Other

346

 

 

798

 

 

438

 

Total interest income

67,686

 

 

69,543

 

 

69,021

 

Interest expense:

 

 

 

 

 

Deposits

10,851

 

 

12,523

 

 

11,470

 

Short-term borrowings

254

 

 

170

 

 

931

 

Subordinated notes

884

 

 

907

 

 

928

 

Long-term debt and mandatorily redeemable securities

853

 

 

647

 

 

744

 

Total interest expense

12,842

 

 

14,247

 

 

14,073

 

Net interest income

54,844

 

 

55,296

 

 

54,948

 

Provision for loan and lease losses

11,353

 

 

2,951

 

 

4,918

 

Net interest income after provision for loan and lease losses

43,491

 

 

52,345

 

 

50,030

 

Noninterest income:

 

 

 

 

 

Trust and wealth advisory

4,848

 

 

5,269

 

 

4,858

 

Service charges on deposit accounts

2,605

 

 

2,835

 

 

2,498

 

Debit card

3,373

 

 

3,593

 

 

3,220

 

Mortgage banking

2,336

 

 

1,401

 

 

936

 

Insurance commissions

1,881

 

 

1,466

 

 

2,174

 

Equipment rental

6,630

 

 

7,372

 

 

7,982

 

Gains on investment securities available-for-sale

280

 

 

 

 

 

Other

2,669

 

 

3,641

 

 

2,456

 

Total noninterest income

24,622

 

 

25,577

 

 

24,124

 

Noninterest expense:

 

 

 

 

 

Salaries and employee benefits

24,401

 

 

25,382

 

 

23,495

 

Net occupancy

2,721

 

 

2,640

 

 

2,772

 

Furniture and equipment

6,407

 

 

6,475

 

 

6,024

 

Depreciation – leased equipment

5,427

 

 

6,006

 

 

6,524

 

Professional fees

1,442

 

 

2,045

 

 

1,598

 

Supplies and communication

1,634

 

 

1,710

 

 

1,493

 

FDIC and other insurance

288

 

 

282

 

 

645

 

Business development and marketing

1,359

 

 

1,832

 

 

949

 

Loan and lease collection and repossession

763

 

 

1,114

 

 

1,361

 

Other

2,093

 

 

1,860

 

 

343

 

Total noninterest expense

46,535

 

 

49,346

 

 

45,204

 

Income before income taxes

21,578

 

 

28,576

 

 

28,950

 

Income tax expense

5,160

 

 

6,622

 

 

6,754

 

Net income

16,418

 

 

21,954

 

 

22,196

 

Net (income) loss attributable to noncontrolling interests

(5)

 

 

(13)

 

 

 

Net income available to common shareholders

$

16,413

 

 

$

21,941

 

 

$

22,196

 

Per common share:

 

 

 

 

 

Basic net income per common share

$

0.64

 

 

$

0.86

 

 

$

0.86

 

Diluted net income per common share

$

0.64

 

 

$

0.86

 

 

$

0.86

 

Cash dividends

$

0.29

 

 

$

0.29

 

 

$

0.27

 

Basic weighted average common shares outstanding

25,523,356

 

 

25,509,240

 

 

25,759,186

 

Diluted weighted average common shares outstanding

25,523,356

 

 

25,509,240

 

 

25,759,186

 

1st SOURCE CORPORATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

INTEREST RATES AND INTEREST DIFFERENTIAL

 

 

 

 

 

 

 

 

 

 

(Unaudited - Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

 

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

$

973,421

 

 

$

5,550

 

 

2.29

%

 

$

982,839

 

 

$

5,189

 

 

2.09

%

 

$

909,422

 

 

$

5,515

 

 

2.46

%

Tax exempt(1)

57,219

 

 

325

 

 

2.28

%

 

62,078

 

 

365

 

 

2.33

%

 

78,171

 

 

472

 

 

2.45

%

Mortgages held for sale

11,294

 

 

96

 

 

3.42

%

 

21,489

 

 

192

 

 

3.54

%

 

8,826

 

 

101

 

 

4.64

%

Loans and leases, net of unearned discount(1)

5,098,397

 

 

61,520

 

 

4.85

%

 

5,046,639

 

 

63,159

 

 

4.97

%

 

4,858,183

 

 

62,677

 

 

5.23

%

Other investments

41,463

 

 

346

 

 

3.36

%

 

145,893

 

 

798

 

 

2.17

%

 

42,095

 

 

438

 

 

4.22

%

Total earning assets(1)

6,181,794

 

 

67,837

 

 

4.41

%

 

6,258,938

 

 

69,703

 

 

4.42

%

 

5,896,697

 

 

69,203

 

 

4.76

%

Cash and due from banks

65,407

 

 

 

 

 

 

73,438

 

 

 

 

 

 

63,886

 

 

 

 

 

Reserve for loan and lease losses

(112,239)

 

 

 

 

 

 

(110,209)

 

 

 

 

 

 

(101,697)

 

 

 

 

 

Other assets

476,159

 

 

 

 

 

 

486,308

 

 

 

 

 

 

431,500

 

 

 

 

 

Total assets

$

6,611,121

 

 

 

 

 

 

$

6,708,475

 

 

 

 

 

 

$

6,290,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits

$

4,076,270

 

 

$

10,851

 

 

1.07

%

 

$

4,170,250

 

 

$

12,523

 

 

1.19

%

 

$

3,934,921

 

 

$

11,470

 

 

1.18

%

Short-term borrowings

202,545

 

 

254

 

 

0.50

%

 

183,244

 

 

170

 

 

0.37

%

 

251,379

 

 

931

 

 

1.50

%

Subordinated notes

58,764

 

 

884

 

 

6.05

%

 

58,764

 

 

907

 

 

6.12

%

 

58,764

 

 

928

 

 

6.40

%

Long-term debt and mandatorily redeemable securities

77,973

 

 

853

 

 

4.40

%

 

71,428

 

 

647

 

 

3.59

%

 

70,481

 

 

744

 

 

4.28

%

Total interest-bearing liabilities

4,415,552

 

 

12,842

 

 

1.17

%

 

4,483,686

 

 

14,247

 

 

1.26

%

 

4,315,545

 

 

14,073

 

 

1.32

%

Noninterest-bearing deposits

1,196,106

 

 

 

 

 

 

1,244,173

 

 

 

 

 

 

1,124,441

 

 

 

 

 

Other liabilities

131,858

 

 

 

 

 

 

136,169

 

 

 

 

 

 

73,183

 

 

 

 

 

Shareholders’ equity

844,724

 

 

 

 

 

 

824,361

 

 

 

 

 

 

775,657

 

 

 

 

 

Noncontrolling interests

22,881

 

 

 

 

 

 

20,086

 

 

 

 

 

 

1,560

 

 

 

 

 

Total liabilities and equity

$

6,611,121

 

 

 

 

 

 

$

6,708,475

 

 

 

 

 

 

$

6,290,386

 

 

 

 

 

Less: Fully tax-equivalent adjustments

 

 

(151)

 

 

 

 

 

 

(160)

 

 

 

 

 

 

(182)

 

 

 

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

 

 

$

54,844

 

 

3.57

%

 

 

 

$

55,296

 

 

3.51

%

 

 

 

$

54,948

 

 

3.78

%

Fully tax-equivalent adjustments

 

 

151

 

 

 

 

 

 

160

 

 

 

 

 

 

182

 

 

 

Net interest income/margin - FTE(1)

 

 

$

54,995

 

 

3.58

%

 

 

 

$

55,456

 

 

3.52

%

 

 

 

$

55,130

 

 

3.79

%

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

1st SOURCE CORPORATION

 

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

 

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

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31,
2020

December 31,
2019

March 31,
2019

Calculation of Net Interest Margin

 

 

 

(A)

Interest income (GAAP)

$

67,686

 

$

69,543

 

$

69,021

 

 

Fully tax-equivalent adjustments:

 

 

 

(B)

– Loans and leases

90

 

92

 

95

 

(C)

– Tax exempt investment securities

61

 

68

 

87

 

(D)

Interest income – FTE (A+B+C)

67,837

 

69,703

 

69,203

 

(E)

Interest expense (GAAP)

12,842

 

14,247

 

14,073

 

(F)

Net interest income (GAAP) (A-E)

54,844

 

55,296

 

54,948

 

(G)

Net interest income - FTE (D-E)

54,995

 

55,456

 

55,130

 

(H)

Annualization factor

4.022

 

3.967

 

4.056

 

(I)

Total earning assets

$

6,181,794

 

$

6,258,938

 

$

5,896,697

 

 

Net interest margin (GAAP-derived) (F*H)/I

3.57

%

3.51

%

3.78

%

 

Net interest margin – FTE (G*H)/I

3.58

%

3.52

%

3.79

%

 

 

 

 

 

Calculation of Efficiency Ratio

 

 

 

(F)

Net interest income (GAAP)

$

54,844

 

$

55,296

 

$

54,948

 

(G)

Net interest income – FTE

54,995

 

55,456

 

55,130

 

(J)

Plus: noninterest income (GAAP)

24,622

 

25,577

 

24,124

 

(K)

Less: gains/losses on investment securities and partnership investments

(513)

 

(132)

 

(17)

 

(L)

Less: depreciation – leased equipment

(5,427)

 

(6,006)

 

(6,524)

 

(M)

Total net revenue (GAAP) (F+J)

79,466

 

80,873

 

79,072

 

(N)

Total net revenue – adjusted (G+J–K–L)

73,677

 

74,895

 

72,713

 

(O)

Noninterest expense (GAAP)

46,535

 

49,346

 

45,204

 

(L)

Less:depreciation – leased equipment

(5,427)

 

(6,006)

 

(6,524)

 

(P)

Noninterest expense – adjusted (O–L)

41,108

 

43,340

 

38,680

 

 

Efficiency ratio (GAAP-derived) (O/M)

58.56

%

61.02

%

57.17

%

 

Efficiency ratio – adjusted (P/N)

55.79

%

57.87

%

53.20

%

 

 

 

 

 

 

 

End of Period

 

 

March 31,
2020

December 31,
2019

March 31,
2019

Calculation of Tangible Common Equity-to-Tangible Assets Ratio

 

 

(Q)

Total common shareholders’ equity (GAAP)

$

850,897

 

$

828,277

 

$

778,422

 

(R)

Less: goodwill and intangible assets

(83,964)

 

(83,971)

 

(83,992)

 

(S)

Total tangible common shareholders’ equity (Q–R)

$

766,933

 

$

744,306

 

$

694,430

 

(T)

Total assets (GAAP)

6,735,118

 

6,622,776

 

6,379,086

 

(R)

Less: goodwill and intangible assets

(83,964)

 

(83,971)

 

(83,992)

 

(U)

Total tangible assets (T–R)

$

6,651,154

 

$

6,538,805

 

$

6,295,094

 

 

Common equity-to-assets ratio (GAAP-derived) (Q/T)

12.63

%

12.51

%

12.20

%

 

Tangible common equity-to-tangible assets ratio (S/U)

11.53

%

11.38

%

11.03

%

 

 

 

 

 

Calculation of Tangible Book Value per Common Share

 

 

 

(Q)

Total common shareholders’ equity (GAAP)

$

850,897

 

$

828,277

 

$

778,422

 

(V)

Actual common shares outstanding

25,535,384

 

25,509,474

 

25,667,933

 

 

Book value per common share (GAAP-derived) (Q/V)*1000

$

33.32

 

$

32.47

 

$

30.33

 

 

Tangible common book value per share (S/V)*1000

$

30.03

 

$

29.18

 

$

27.05

 

The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP #336901 10 3)

Please contact us at shareholder@1stsource.com

Andrea Short
574-235-2000

Source: 1st Source Corp.

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