| For: | Immediate Release | | Contact: | | Larry Lentych |
| | October 25, 2007 | | | | 574 235 2000 |
| | | | | | | | |
| | | | | | | Andrea Short |
| | | | | | | 574 235 2000 |
1ST SOURCE REPORTS ON THIRD QUARTER,
DIVIDEND ANNOUNCED
South Bend, IN – 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank and First National Bank, Valparaiso, today reported net income of $6.13 million for the third quarter of 2007, a decrease from the $10.96 million for the third quarter of 2006. For the first nine months of 2007, net income for 1st Source Corporation was $22.71 million, down from the $31.17 million reported for the same period in 2006.
Diluted net income per share for the third quarter of 2007 amounted to $0.25 versus $0.48 reported for the same period last year. Diluted net income per common share for the first three quarters of 2007 was $0.96, a decrease from the $1.36 for the same period of 2006.
Christopher J. Murphy III, Chairman and Chief Executive Officer, announced that at its October meeting, that the Board of Directors approved a cash dividend of $0.14 per share. The cash dividend will be payable on November 15, 2007, to shareholders of record on November 5, 2007.
Mr. Murphy commented, “The third quarter was very challenging for 1st Source Corporation. We were down from a year earlier where we received $3.2 million on the sale of mortgage servicing rights, which did not recur this year. Additionally, the squeeze on the margin continues which exerts downward pressure on our earnings. We also provided $3.66 million to our loan loss reserve this quarter compared to a recovery of provision of $670,000 a year earlier. This reflects lower recoveries from previously charged off loans, increased loan volumes, and a slight decrease in loan quality. The difference in loan quality is not connected to the subprime mortgage mess reported in the headlines. Our mortgage business has always been conventional and conservative.”
“On the positive side, we completed the main installation of our new core computer system in mid-July. Although this contributed to higher costs for the quarter, the new core system should upgrade our effectiveness and efficiency in the long-term. It was an exhausting project for the hundreds of employees who were involved but went well according to those who have been involved in this kind of major installation at other financial institutions. We continue to work on completing the conversion and improving our service to customers, and will do so until all systems are working at the maximum capability as promised.”
“The acquisition of the First National Bank, Valparaiso, a $600 million bank, was completed in May. We are well into the process of training our new employees, meeting our new customers, and understanding our new market opportunities. Although the bank acquisition adds costs to the income statement which cannot be adequately reduced until next year, it’s a long-term investment in the future of 1st Source.” concluded Mr. Murphy.
Noninterest income for the three month period ended September 30, 2007 was $17.90 million, a decrease from the $20.82 million reported in the same period of 2006. For the first three quarters of 2007, noninterest income was $54.45 million versus $58.90 million for the first three quarters of 2006. Declines in mortgage banking income of $4.20 million and $7.43 million, respectively, for the three and nine month periods of 2007 compared to 2006 was the primary factor in the overall decline in noninterest income. The third quarter 2006 bulk sale of mortgage servicing rights combined with the second quarter 2006 bulk sale of mortgage servicing rights of $1.25 million, resulted in a 2006 year-to-date gain of $4.45 million, pre-tax.
Noninterest expense for the third quarter was $37.44 million, an increase from the $31.82 million reported in the third quarter a year earlier. Noninterest expense for the first nine months was $103.69 million versus $93.62 million for the same period of 2006. Salaries and employee benefits increased $2.60 million and $5.93 million, respectively, for the third quarter and 2007 year-to-date compared to a year earlier. The majority of this increase was due to the acquisition of First National Bank, Valparaiso which added $2.49 million to salaries and employee benefit expense for the third quarter of 2007, and $3.28 million since the date of acquisition on May 31, 2007. Additionally, during the first quarter of 2006 we benefited from the reversal of previously recognized stock-based compensation expense under historical accounting methods related to the estimated forfeiture of prior years stock awards. This one-time reversal, combined with the adoption of SFAS No. 123(R) estimated forfeiture accounting requirements, resulted in a reduction in stock-based compensation of $2.07 million, pre-tax.
Average net loans and leases at the close of the third quarter were $3.2 billion, up 21.59 percent from a year earlier. 1st Source’s reserve for loan and lease losses as of September 30, 2007, was 2.02 percent of total loans and leases compared to 2.25 percent at September 30, 2006. 1st Source’s provision for losses was $3.66 million this quarter compared to a recovery of provision for losses of $0.67 million for the third quarter of 2006. Net charge-offs were $1.68 million for the third quarter 2007 compared to net recoveries of $0.47 million for the same quarter last year. The ratio of nonperforming assets to net loans and leases was 0.52 percent on September 30, 2007, compared to 0.54 percent on September 30, 2006.
As of September 30, 2007, the 1st Source common equity-to-assets ratio was 9.68 percent compared to 10.04 percent a year ago. Common shareholders' equity was $427.20 million, up 17.54 percent from the $363.45 million reported a year ago. Total assets at the end of the third quarter of 2007 were $4.41 billion, up 21.84 percent from a year ago. Total loans and leases were up 21.87 percent and total deposits were up 18.37 percent over the comparable figures at the end of the third quarter of 2006.
1st Source Corporation is the largest locally controlled financial institution serving the northern Indiana-southwestern Michigan area. While delivering a comprehensive range of consumer and commercial banking services, 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, construction and environmental equipment. As of mid-October, the Corporation has over 80 banking centers in 17 counties, 6 1st Source Insurance offices, plus 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 Global Select 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, Howe Barnes Investments, Bruyette & Woods, Incorporated; Lehman Brothers, Incorporated; Morgan Stanley & Company, Incorporated; Sandler O’Neill & Partners; Stifel, Nicolaus & Company; Susquehanna Capital Group; 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.
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.
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