Exhibit 99.1
| News |  |
| Release |
| For: | Immediate Release | Contact: | Larry Lentych | ||
| October 26, 2006 | 574 235 2000 | ||||
| Andrea Short | |||||
| 574 235 2000 | |||||
1ST SOURCE INCREASES INCOME, DIVIDEND ANNOUNCED
South Bend, IN - 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today reported net income of $10.96 million for the third quarter of 2006, an increase of 15.64 percent over the $9.48 million in the third quarter of 2005. For the first nine months of 2006, net income for 1st Source Corporation was $31.17 million, an increase of 26.46 percent over the $24.65 million reported for the same period in 2005.
Diluted net income per share for the third quarter of 2006 amounted to $0.48 up 17.07 percent over the $0.41 for the same period last year. Diluted net income per common share for the first three quarters of 2006 was $1.36, up 27.10 percent over the $1.07 for the same period of 2005. (All share and per share information has been adjusted for a 10% stock dividend declared on July 27, 2006.)
Christopher J. Murphy III, Chairman and Chief Executive Officer, reported that at its October meeting, the Board of Directors approved a cash dividend of $0.14 per share, up 18.64 percent from the dividend announced a year ago. The cash dividend will be payable on November 15, 2006, to shareholders of record on November 6, 2006.
Mr. Murphy commented, “The Corporation continues to perform well. We were aided in the third quarter by a $3.20 million, pre-tax, gain on the sale of mortgage servicing rights by Trustcorp, our mortgage subsidiary. We continue to show improvement in the credit area with our nonperforming assets down 33.34 percent since year-end 2005, and net recoveries of $2.94 million year-to-date.”
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Mr. Murphy continued, “With our credit quality much improved, we can now refocus on margins and operational improvements. Much of this year has been focused on preparing for the conversion of our core systems in 2007. We look forward to the improved effectiveness and efficiencies the new systems will provide us in meeting the needs of our clients. It will also give us a platform for growth for years to come.”
Noninterest income for the three month periods ended September 30, 2006 and 2005, was $20.82 million and $17.87 million, respectively, and $58.90 million and $50.96 million for the nine month periods ended September 30, 2006 and 2005, respectively. During the third quarter of 2006, mortgage banking income increased primarily due to the $3.20 million, pre-tax, gain on the bulk sale of mortgage servicing rights related to both government and conventional loans. Equipment rental income, service charges on deposit accounts, and trust fees increased in both the three and nine month periods ended September 30, 2006. Insurance commissions decreased slightly during the third quarter of 2006 as compared to the same quarter of 2005; however, insurance commissions increased on a year-over-year basis.
Noninterest expense for the three month periods ended September 30, 2006 and 2005, was $31.82 million and $30.28 million, respectively, and $93.62 million and $92.58 million for the nine month periods ended September 30, 2006 and 2005, respectively. Leased equipment depreciation, business development and marketing expense, and other expense increased on a year-over-year and quarter-over-quarter basis. Professional fees and furniture and equipment expense increased on a year-over-year basis and decreased on a quarter-over-quarter basis.
Salaries and employee benefits decreased on a year-over-year basis primarily due to the first quarter 2006 reversal of previously recognized stock-based compensation expense under historical accounting methods related to the estimated forfeiture of stock awards. Intangible asset amortization decreased during the third quarter of 2006, while supplies and communication and net occupancy expense remained comparable to 2005 levels.
1st Source’s reserve for loan and lease losses as of September 30, 2006, was 2.25 percent of total loans and leases compared to 2.46 percent at September 30, 2005. 1st Source’s recovery of provision for loan and lease losses was $0.67 million this quarter compared to $1.30 million for the third quarter of 2005. Net recoveries were $0.47 million for the third quarter 2006 compared to $0.30 million for the same quarter last year. The ratio of nonperforming assets to net loans and leases was 0.54 percent on September 30, 2006, compared to 0.89 percent on September 30, 2005.
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As of September 30, 2006, the 1st Source common equity-to-assets ratio was 10.04 percent compared to 10.08 percent a year ago. Common shareholders' equity was $363.45 million, up 7.03 percent from the $339.57 million reported a year ago. Total assets at the end of the third quarter of 2006 were $3.62 billion up 7.45 percent from a year ago. Total loans and leases were up 10.39 percent and total deposits were up 11.19 percent over the comparable figures at the end of the third quarter of 2005.
1st Source is the largest locally controlled financial institution headquartered and serving the northern Indiana-southwestern Michigan area. While delivering a comprehensive range of consumer and commercial banking services, 1st Source Bank 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, construction and environmental equipment. The Corporation includes 65 banking centers in 15 counties, 3 Trustcorp Mortgage offices in Indiana and Ohio, and 24 locations nationwide for the 1st Source Bank Specialty Finance Group. With a history dating back to 1863, 1st Source Bank has a tradition of providing superior service to clients while playing a leadership role in the continued development of the communities in which it serves.
1st Source may be accessed on its home page at ���www.1stsource.com.” Its common stock is traded on the Nasdaq stock market under "SRCE" and appears in the National Market System tables in many daily newspapers under the code name "1st Src." Marketmakers in 1st Source common shares are Crowell, Weedon & Company; FTN Midwest Securities Corp.; Goldman, Sachs & Company; Keefe, Bruyette & Woods, Incorporated; Lehman Brothers, Incorporated; Morgan Stanley & Company, Incorporated; Sandler O’Neill & Partners; Stifel, Nicolaus & Company; Susquehanna Capital Group; and UBS Securities LLC.
1st Source’s floating rate cumulative trust preferred security is traded on the Nasdaq stock market under the symbol “SRCEO.” The rate for the fourth quarter 2006 is 7.12 percent. Marketmakers in those securities are Howe Barnes Investments, Inc.; Stifel, Nicolaus & Company; and UBS Securities LLC.
Except for historical information contained herein, the matters discussed in this document express “forward-looking statements.” Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “should,” 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.
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1st Source may make other written or oral forward-looking statements from time to time. Readers are advised that various important factors could cause 1st Source’s actual results or circumstances for future periods to differ materially from those anticipated or projected in such forward-looking statements. Such factors, among others, include changes in laws, regulations or accounting principles generally accepted in the United States; 1st Source’s competitive position within its markets served; increasing consolidation within the banking industry; unforeseen changes in interest rates; unforeseen downturns in the local, regional or national economies or in the industries in which 1st Source has credit concentrations; and other risks discussed in 1st Source’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, which filings are available from the SEC. 1st Source undertakes no obligation to publicly update or revise any forward-looking statements.
# # #
(charts attached)
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| Page 5 | |||||||||||||
3rd QUARTER 2006 FINANCIAL HIGHLIGHTS | |||||||||||||
(Unaudited - Dollars in thousands, except for per share data) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30 | September 30 | ||||||||||||
2006 | 2005 | 2006 | 2005 | ||||||||||
END OF PERIOD BALANCES | |||||||||||||
| Assets | $ | 3,621,633 | $ | 3,370,426 | |||||||||
| Loans and leases | 2,627,153 | 2,379,904 | |||||||||||
| Deposits | 2,885,268 | 2,594,801 | |||||||||||
| Reserve for loan and lease losses | 59,002 | 58,547 | |||||||||||
| Intangible assets | 19,639 | 22,087 | |||||||||||
| Common shareholders' equity | 363,446 | 339,572 | |||||||||||
AVERAGE BALANCES | |||||||||||||
| Assets | $ | 3,574,874 | $ | 3,403,606 | $ | 3,488,108 | $ | 3,367,622 | |||||
| Earning assets | 3,331,383 | 3,180,088 | 3,250,454 | 3,149,231 | |||||||||
| Investments | 633,851 | 673,990 | 631,669 | 724,519 | |||||||||
| Loans and leases | 2,614,743 | 2,382,251 | 2,538,558 | 2,328,942 | |||||||||
| Deposits | 2,790,506 | 2,609,322 | 2,704,478 | 2,600,742 | |||||||||
| Interest bearing liabilities | 2,802,797 | 2,603,261 | 2,711,949 | 2,588,482 | |||||||||
| Common shareholders' equity | 360,399 | 336,234 | 353,991 | 330,737 | |||||||||
INCOME STATEMENT DATA | |||||||||||||
| Net interest income | $ | 27,451 | $ | 25,299 | $ | 79,695 | $ | 73,105 | |||||
| Net interest income - FTE | 28,064 | 25,975 | 81,594 | 75,110 | |||||||||
| Recovery of provision for loan and lease losses | (667 | ) | (1,304 | ) | (2,638 | ) | (5,136 | ) | |||||
| Noninterest income | 20,823 | 17,866 | 58,895 | 50,959 | |||||||||
| Noninterest expense | 31,824 | 30,283 | 93,616 | 92,583 | |||||||||
| Net income | 10,964 | 9,481 | 31,174 | 24,652 | |||||||||
PER SHARE DATA* | |||||||||||||
| Basic net income per common share | $ | 0.49 | $ | 0.42 | $ | 1.38 | $ | 1.08 | |||||
| Diluted net income per common share | 0.48 | 0.41 | 1.36 | 1.07 | |||||||||
| Cash dividends paid per common share | 0.140 | 0.118 | 0.394 | 0.336 | |||||||||
| Book value per common share | 16.15 | 14.93 | 16.15 | 14.93 | |||||||||
| Market value - High | 31.330 | 23.536 | 31.330 | 23.536 | |||||||||
| Market value - Low | 28.460 | 20.055 | 22.636 | 17.645 | |||||||||
| Basic weighted average common shares outstanding | 22,497,930 | 22,737,088 | 22,549,914 | 22,760,567 | |||||||||
| Diluted weighted average common shares outstanding | 22,811,273 | 23,040,503 | 22,843,785 | 23,054,000 | |||||||||
KEY RATIOS | |||||||||||||
| Return on average assets | 1.22 | % | 1.11 | % | 1.19 | % | 0.98 | % | |||||
| Return on average common shareholders' equity | 12.07 | 11.19 | 11.77 | 9.97 | |||||||||
| Average common shareholders' equity to average assets | 10.08 | 9.88 | 10.15 | 9.82 | |||||||||
| End of period tangible common equity to tangible assets | 9.54 | 9.48 | 9.54 | 9.48 | |||||||||
| Net interest margin | 3.34 | 3.24 | 3.36 | 3.19 | |||||||||
| Efficiency: expense to revenue | 61.66 | 65.73 | 64.82 | 71.43 | |||||||||
| Net charge-offs to average loans and leases | (0.07 | ) | (0.05 | ) | (0.16 | ) | 0.00 | ||||||
| Loan and lease loss reserve to loans and leases | 2.25 | 2.46 | 2.25 | 2.46 | |||||||||
| Nonperforming assets to loans and leases | 0.54 | 0.89 | 0.54 | 0.89 | |||||||||
ASSET QUALITY | |||||||||||||
| Loans and leases past due 90 days or more | $ | 264 | $ | 373 | |||||||||
| Nonaccrual and restructured loans and leases | 11,248 | 19,909 | |||||||||||
| Other real estate | 759 | 940 | |||||||||||
| Repossessions | 2,356 | 368 | |||||||||||
| Equipment owned under operating leases | 66 | 57 | |||||||||||
| Total nonperforming assets | 14,693 | 21,647 | |||||||||||
| *Per share figures have been adjusted for 10% stock dividend declared July 27, 2006. | |||||||||||||
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| Page 6 | |||||||
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | |||||||
(Unaudited - Dollars in thousands) | |||||||
September 30, 2006 | September 30, 2005 | ||||||
ASSETS | |||||||
| Cash and due from banks | $ | 87,166 | $ | 78,538 | |||
| Federal funds sold and interest bearing deposits with other banks | 57,742 | 1,370 | |||||
| Investment securities available-for-sale | |||||||
| (amortized cost of $630,169 and $644,252 at | |||||||
| September 30, 2006 and 2005, respectively) | 628,691 | 639,628 | |||||
| Mortgages held for sale | 54,185 | 126,457 | |||||
| Loans and leases, net of unearned discount: | |||||||
| Commercial and agricultural loans | 490,612 | 426,316 | |||||
| Auto, light truck and environmental equipment | 323,671 | 316,882 | |||||
| Medium and heavy duty truck | 335,039 | 297,896 | |||||
| Aircraft financing | 453,975 | 431,883 | |||||
| Construction equipment financing | 287,172 | 206,220 | |||||
| Loans secured by real estate | 610,612 | 589,217 | |||||
| Consumer loans | 126,072 | 111,490 | |||||
Total loans and leases | 2,627,153 | 2,379,904 | |||||
| Reserve for loan and lease losses | (59,002 | ) | (58,547 | ) | |||
Net loans and leases | 2,568,151 | 2,321,357 | |||||
| Equipment owned under operating leases, net | 74,218 | 51,544 | |||||
| Net premises and equipment | 36,927 | 37,426 | |||||
| Accrued income and other assets | 114,553 | 114,106 | |||||
Total assets | $ | 3,621,633 | $ | 3,370,426 | |||
LIABILITIES | |||||||
| Deposits: | |||||||
| Noninterest bearing | $ | 334,319 | $ | 392,312 | |||
| Interest bearing | 2,550,949 | 2,202,489 | |||||
Total deposits | 2,885,268 | 2,594,801 | |||||
| Federal funds purchased and securities sold | |||||||
| under agreements to purchase | 184,726 | 187,507 | |||||
| Other short-term borrowings | 24,484 | 113,717 | |||||
| Long-term debt and mandatorily redeemable securities | 43,689 | 18,191 | |||||
| Subordinated notes | 59,022 | 59,022 | |||||
| Accrued expenses and other liabilities | 60,998 | 57,616 | |||||
Total liabilities | 3,258,187 | 3,030,854 | |||||
SHAREHOLDERS' EQUITY | |||||||
| Preferred stock; no par value | - | - | |||||
| Common stock; no par value | 8,336 | 7,578 | |||||
| Capital surplus | 280,827 | 214,001 | |||||
| Retained earnings | 94,595 | 133,188 | |||||
| Cost of common stock in treasury | (19,393 | ) | (12,343 | ) | |||
| Accumulated other comprehensive loss | (919 | ) | (2,852 | ) | |||
Total shareholders' equity | 363,446 | 339,572 | |||||
Total liabilities and shareholders' equity | $ | 3,621,633 | $ | 3,370,426 | |||
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| Page 7 | |||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
(Unaudited - Dollars in thousands) | |||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
September 30 | September 30 | ||||||||||||
2006 | 2005 | 2006 | 2005 | ||||||||||
| Interest income: | |||||||||||||
| Loans and leases | $ | 47,468 | $ | 38,781 | $ | 132,777 | $ | 107,883 | |||||
| Investment securities, taxable | 5,298 | 3,501 | 14,020 | 11,234 | |||||||||
| Investment securities, tax-exempt | 1,279 | 1,342 | 3,838 | 3,942 | |||||||||
| Other | 334 | 33 | 921 | 237 | |||||||||
Total interest income | 54,379 | 43,657 | 151,556 | 123,296 | |||||||||
| Interest expense: | |||||||||||||
| Deposits | 22,399 | 14,452 | 58,715 | 40,098 | |||||||||
| Short-term borrowings | 2,776 | 2,586 | 8,358 | 6,294 | |||||||||
| Subordinated notes | 1,098 | 1,015 | 3,228 | 2,979 | |||||||||
| Long-term debt and mandatorily redeemable securities | 655 | 305 | 1,560 | 820 | |||||||||
Total interest expense | 26,928 | 18,358 | 71,861 | 50,191 | |||||||||
| Net interest income | 27,451 | 25,299 | 79,695 | 73,105 | |||||||||
| Recovery of provision for loan and lease losses | (667 | ) | (1,304 | ) | (2,638 | ) | (5,136 | ) | |||||
Net interest income after recovery of provision | |||||||||||||
for loan and lease losses | 28,118 | 26,603 | 82,333 | 78,241 | |||||||||
| Noninterest income: | |||||||||||||
| Trust fees | 3,271 | 3,139 | 10,320 | 9,670 | |||||||||
| Service charges on deposit accounts | 5,020 | 4,656 | 14,323 | 12,870 | |||||||||
| Mortgage banking income | 4,971 | 3,816 | 9,833 | 8,134 | |||||||||
| Insurance commissions | 1,012 | 1,099 | 3,626 | 3,096 | |||||||||
| Equipment rental income | 5,032 | 4,108 | 13,910 | 12,050 | |||||||||
| Other income | 1,740 | 1,607 | 4,873 | 4,789 | |||||||||
| Investment securities and other investment (losses) gains | (223 | ) | (559 | ) | 2,010 | 350 | |||||||
Total noninterest income | 20,823 | 17,866 | 58,895 | 50,959 | |||||||||
| Noninterest expense: | |||||||||||||
| Salaries and employee benefits | 17,433 | 17,663 | 49,820 | 53,297 | |||||||||
| Net occupancy expense | 1,854 | 1,848 | 5,581 | 5,682 | |||||||||
| Furniture and equipment expense | 2,936 | 2,958 | 9,029 | 8,444 | |||||||||
| Depreciation - leased equipment | 4,031 | 3,207 | 10,960 | 9,724 | |||||||||
| Supplies and communication | 1,358 | 1,417 | 4,028 | 4,081 | |||||||||
| Other expense | 4,212 | 3,190 | 14,198 | 11,355 | |||||||||
Total noninterest expense | 31,824 | 30,283 | 93,616 | 92,583 | |||||||||
| Income before income taxes | 17,117 | 14,186 | 47,612 | 36,617 | |||||||||
| Income tax expense | 6,153 | 4,705 | 16,438 | 11,965 | |||||||||
Net income | $ | 10,964 | $ | 9,481 | $ | 31,174 | $ | 24,652 | |||||
| The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3) | |||||||||||||
| Please contact us at shareholder@1stsource.com | |||||||||||||
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