For: Immediate Release Contact: Larry Lentych
July 24, 2008 Andrea Short
574 235 2000
1ST SOURCE CORPORATION REPORTS 2ND QUARTER EARNINGS,
DIVIDEND ANNOUNCED
South Bend, IN -- 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today reported net income of $7.25 million for the second quarter of 2008 compared to the $8.06 million reported in the second quarter of 2007. For the first six months of 2008, net income for 1st Source Corporation was $16.60 million, relatively even with the $16.58 million reported for the same period in 2007.
Diluted net income per common share for the second quarter of 2008 amounted to $0.30 compared with $0.34 reported for the second quarter of 2007. Diluted net income per share for the first two quarters of 2008 was $0.68 compared to $0.72 reported for the same period a year ago.
Christopher J. Murphy III, Chairman and Chief Executive Officer, reported at its July meeting, the Board of Directors approved a cash dividend of $0.14 per share. The cash dividend will be payable to shareholders of record on August 5, 2008 and paid on August 15, 2008.
Mr. Murphy commented, “I am pleased with the results of the quarter as we strengthened reserves; had very low charge-offs; built capital; added customers, loans and investment assets; and completed the merger of our operations in Valparaiso. As we look across the industry, especially at what is happening to the large commercial and investment banks, I am thankful that we stuck to strong and basic lending principles. We have no Alt A or sub-prime mortgages; a very large majority of the mortgages we have made are in the communities we serve. We have not been a large lender in the residential or commercial real estate development business. Our commercial and business mortgage portfolio is primarily owner occupied in the Midwest markets we know.”
“1st Source entered the quarter with strong reserves and experienced low charge-offs. Always mindful of the problems impacting our customers, we further built our reserve for loan and lease losses to 2.16% at the end of the quarter compared to 2.00% in the same period a year ago. Charge-offs from loans and leases were only 0.03% for the quarter and 0.06% for the first half of 2008. While there was an increase in our non-performing asset ratio, it only rose to 0.83% of loans and leases and our over 30 day delinquencies were a low 0.37%. So the addition to the reserve, an impairment charge in Freddie Mac preferred stock, and costs associated with our merger led to a slightly lower quarter. Having said that, much was accomplished that positions us well for the future,” Mr. Murphy concluded.
As of June 30, 2008, the 1st Source common equity-to-assets ratio was 9.82 percent compared to 9.45 percent a year ago. Total assets at June 30, 2008, were $4.48 billion, basically even with a year ago. Total loans and leases were $3.31 billion, up 5.73 percent from June 30, 2007. Total deposits were $3.37 billion, down 6.15 percent from the comparable figures at June 30, 2007.
1st Source’s reserve for loan and lease losses as of June 30, 2008, was 2.16 percent of total loans and leases compared to 2.00 percent at June 30, 2007. Net charge-offs were $0.22 million in the second quarter 2008, compared to net recoveries of $0.52 million for the same quarter a year ago. Year-to-date net charge-offs of $0.94 million have been recorded in 2008, compared to net recoveries of $1.04 million for the first half of 2007. The ratio of nonperforming assets to net loans and leases was 0.83 percent on June 30, 2008, compared to 0.49 percent on June 30, 2007.
The net interest margin improved and was 3.38 percent for the second quarter of 2008 versus 3.16 percent for the same period in 2007. The net interest margin was 3.35 percent for the six months ending June 30, 2008, versus 3.17 percent for the same period in 2007. Tax-equivalent net interest income was $34.03 million for the second quarter of 2008, up 14.94 percent from 2007’s second quarter. For the first six months of 2008, tax-equivalent net interest income was $67.25 million compared to $56.58 million for the first six months of 2007, an increase of 18.87 percent.
Noninterest income for the second quarter of 2008 was $20.37 million, up 6.80 percent from the same period in 2007. For the first six months, noninterest income was $41.39 million, up 13.23 percent from 2007. Noninterest income increased in most categories for the second quarter and year-to-date 2008 as compared to the same periods in 2007. The only significant category that decreased for the second quarter and year-to-date 2008 as compared to the same periods in 2007 was investment securities and other investment (losses) gains due to the $0.94 million in impairment charges on investments in FHLMC (Freddie Mac) preferred stock taken in the second quarter of 2008.
Noninterest expense was $38.40 million for the second quarter of 2008, compared with $34.45 million for the second quarter of 2007. For the first six months, noninterest expense was $76.30 million, compared with $66.25 million for the same period in 2007. The leading factor in the change was increased expenses in all categories in 2008 due to the May 31, 2007 acquisition of First National Bank, Valparaiso.
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, 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 79 banking centers in 17 counties, 24 locations nationwide for the 1st Source Bank Specialty Finance Group, seven Trust and Wealth Management locations plus six 1st Source Insurance offices. 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."
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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2nd QUARTER 2008 FINANCIAL HIGHLIGHTS | | | | | | | | | | | | | | | |
(Unaudited - Dollars in thousands, except for per share data) | | | | | | | | | | | | | | | |
| | Three Months Ended June 30 | | | | Six Months Ended June 30 | |
| |
| | 2008 | | | | 2007 | | | | 2008 | | | | 2007 | |
END OF PERIOD BALANCES | | | | | | | | | | | | | | | |
Assets | | | | | | | | | | $ | 4,477,614 | | | | $ | 4,504,650 | |
Loans and leases | | | | | | | | | | | 3,313,642 | | | | | 3,134,170 | |
Deposits | | | | | | | | | | | 3,365,066 | | | | | 3,585,441 | |
Reserve for loan and lease losses | | | | | | | | | | | 71,698 | | | | | 62,682 | |
Intangible assets | | | | | | | | | | | 92,535 | | | | | 91,196 | |
Common shareholders' equity | | | | | | | | | | | 439,622 | | | | | 425,526 | |
| | | | | | | | | | | | | | | | | |
AVERAGE BALANCES | | | | | | | | | | | | | | | | | |
Assets | | $ | 4,389,923 | | | | $ | 4,024,910 | | | | $ | 4,375,830 | | | | $ | 3,854,301 | |
Earning assets | | | 4,055,366 | | | | | 3,752,861 | | | | | 4,032,770 | | | | | 3,603,069 | |
Investments | | | 730,281 | | | | | 692,434 | | | | | 747,203 | | | | | 673,889 | |
Loans and leases | | | 3,253,147 | | | | | 2,899,340 | | | | | 3,215,371 | | | | | 2,803,434 | |
Deposits | | | 3,389,977 | | | | | 3,192,247 | | | | | 3,383,851 | | | | | 3,042,150 | |
Interest bearing liabilities | | | 3,485,877 | | | | | 3,195,122 | | | | | 3,480,721 | | | | | 3,062,164 | |
Common shareholders' equity | | | 445,509 | | | | | 396,173 | | | | | 442,629 | | | | | 385,244 | |
| | | | | | | | | | | | | | | | | | | |
INCOME STATEMENT DATA | | | | | | | | | | | | | | | | | | | |
Net interest income | | $ | 33,124 | | | | $ | 28,871 | | | | $ | 65,421 | | | | $ | 55,143 | |
Net interest income - FTE | | | 34,034 | | | | | 29,611 | | | | | 67,250 | | | | | 56,576 | |
Provision for (recovery of) loan and lease losses | | | 4,493 | | | | | 1,247 | | | | | 6,032 | | | | | 624 | |
Noninterest income | | | 20,367 | | | | | 19,070 | | | | | 41,394 | | | | | 36,556 | |
Noninterest expense | | | 38,395 | | | | | 34,446 | | | | | 76,296 | | | | | 66,246 | |
Net income | | | 7,245 | | | | | 8,060 | | | | | 16,599 | | | | | 16,583 | |
| | | | | | | | | | | | | | | | | | | |
PER SHARE DATA | | | | | | | | | | | | | | | | | | | |
Basic net income per common share | | $ | 0.30 | | | | $ | 0.35 | | | | $ | 0.69 | | | | $ | 0.73 | |
Diluted net income per common share | | | 0.30 | | | | | 0.34 | | | | | 0.68 | | | | | 0.72 | |
Cash dividends paid per common share | | | 0.14 | | | | | 0.14 | | | | | 0.28 | | | | | 0.28 | |
Book value per common share | | | 18.23 | | | | | 17.43 | | | | | 18.23 | | | | | 17.43 | |
Market value - High | | | 22.62 | | | | | 27.92 | | | | | 22.62 | | | | | 32.62 | |
Market value - Low | | | 16.10 | | | | | 23.32 | | | | | 15.13 | | | | | 23.32 | |
Basic weighted average common shares outstanding | | | 24,105,746 | | | | | 23,127,790 | | | | | 24,101,010 | | | | | 22,818,015 | |
Diluted weighted average common shares outstanding | | | 24,386,218 | | | | | 23,423,121 | | | | | 24,384,170 | | | | | 23,113,159 | |
| | | | | | | | | | | | | | | | | | | |
KEY RATIOS | | | | | | | | | | | | | | | | | | | |
Return on average assets | | | 0.66 | % | | | | 0.80 | % | | | | 0.76 | % | | | | 0.87 | % |
Return on average common shareholders' equity | | | 6.54 | | | | | 8.16 | | | | | 7.54 | | | | | 8.68 | |
Average common shareholders' equity to average assets | | | 10.15 | | | | | 9.84 | | | | | 10.12 | | | | | 10.00 | |
End of period tangible common equity to tangible assets | | | 7.92 | | | | | 7.58 | | | | | 7.92 | | | | | 7.58 | |
Net interest margin | | | 3.38 | | | | | 3.16 | | | | | 3.35 | | | | | 3.17 | |
Efficiency: expense to revenue | | | 66.43 | | | | | 68.15 | | | | | 67.16 | | | | | 68.60 | |
Net charge-offs to average loans and leases | | | 0.03 | | | | | (0.07 | ) | | | | 0.06 | | | | | (0.07 | ) |
Loan and lease loss reserve to loans and leases | | | 2.16 | | | | | 2.00 | | | | | 2.16 | | | | | 2.00 | |
Nonperforming assets to loans and leases | | | 0.83 | | | | | 0.49 | | | | | 0.83 | | | | | 0.49 | |
| | | | | | | | | | | | | | | | | | | |
ASSET QUALITY | | | | | | | | | | | | | | | | | | | |
Loans and leases past due 90 days or more | | | | | | | | | | | | $ | 929 | | | | $ | 205 | |
Nonaccrual and restructured loans and leases | | | | | | | | | | | | | 20,807 | | | | | 10,274 | |
Other real estate | | | | | | | | | | | | | 1,079 | | | | | 2,856 | |
Former bank premises held for sale | | | | | | | | | | | | | 4,181 | | | | | - | |
Repossessions | | | | | | | | | | | | | 1,091 | | | | | 2,183 | |
Equipment owned under operating leases | | | | | | | | | | | | | 57 | | | | | 170 | |
Total nonperforming assets | | | | | | | | | | | | | 28,144 | | | | | 15,688 | |
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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | | | | | | |
(Unaudited - Dollars in thousands) | | | | | | |
| | June 30, 2008 | | | June 30, 2007 | |
ASSETS | | | | | | |
Cash and due from banks | | $ | 126,208 | | | $ | 97,691 | |
Federal funds sold and | | | | | | | | |
interest bearing deposits with other banks | | | 29,116 | | | | 196,232 | |
Investment securities available-for-sale | | | | | | | | |
(amortized cost of $710,264 and $782,903 at | | | | | | | | |
June 30, 2008 and 2007, respectively) | | | 712,436 | | | | 779,667 | |
Other investments | | | 18,612 | | | | 14,937 | |
Trading account securities | | | 150 | | | | - | |
Mortgages held for sale | | | 35,883 | | | | 25,599 | |
| | | | | | | | |
Loans and leases, net of unearned discount: | | | | | | | | |
Commercial and agricultural loans | | | 669,867 | | | | 567,932 | |
Auto, light truck and environmental equipment | | | 349,182 | | | | 350,254 | |
Medium and heavy duty truck | | | 270,141 | | | | 329,103 | |
Aircraft financing | | | 579,131 | | | | 535,362 | |
Construction equipment financing | | | 398,888 | | | | 362,654 | |
Loans secured by real estate | | | 908,364 | | | | 834,153 | |
Consumer loans | | | 138,069 | | | | 154,712 | |
Total loans and leases | | | 3,313,642 | | | | 3,134,170 | |
Reserve for loan and lease losses | | | (71,698 | ) | | | (62,682 | ) |
Net loans and leases | | | 3,241,944 | | | | 3,071,488 | |
| | | | | | | | |
Equipment owned under operating leases, net | | | 82,517 | | | | 79,082 | |
Net premises and equipment | | | 40,888 | | | | 50,847 | |
Goodwill and intangible assets | | | 92,535 | | | | 91,196 | |
Accrued income and other assets | | | 97,325 | | | | 97,911 | |
| | | | | | | | |
Total assets | | $ | 4,477,614 | | | $ | 4,504,650 | |
| | | | | | | | |
LIABILITIES | | | | | | | | |
Deposits: | | | | | | | | |
Noninterest bearing | | $ | 385,967 | | | $ | 380,681 | |
Interest bearing | | | 2,979,099 | | | | 3,204,760 | |
Total deposits | | | 3,365,066 | | | | 3,585,441 | |
| | | | | | | | |
Federal funds purchased and securities | | | | | | | | |
sold under agreements to repurchase | | | 228,853 | | | | 241,578 | |
Other short-term borrowings | | | 257,141 | | | | 22,874 | |
Long-term debt and mandatorily redeemable securities | | | 34,825 | | | | 44,199 | |
Subordinated notes | | | 89,692 | | | | 100,260 | |
Accrued expenses and other liabilities | | | 62,415 | | | | 84,772 | |
Total liabilities | | | 4,037,992 | | | | 4,079,124 | |
| | | | | | | | |
SHAREHOLDERS' EQUITY | | | | | | | | |
Preferred stock; no par value | | | - | | | | - | |
Common stock; no par value | | | 342,976 | | | | 342,840 | |
Retained earnings | | | 127,328 | | | | 110,220 | |
Cost of common stock in treasury | | | (32,031 | ) | | | (25,524 | ) |
Accumulated other comprehensive income (loss) | | | 1,349 | | | | (2,010 | ) |
Total shareholders' equity | | | 439,622 | | | | 425,526 | |
| | | | | | | | |
Total liabilities and shareholders' equity | | $ | 4,477,614 | | | $ | 4,504,650 | |
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CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | | | |
(Unaudited - Dollars in thousands) | | | | | | | | | | | | |
| | Three Months Ended June 30 | | | Six Months Ended June 30 | |
| | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Interest income: | | | | | | | | | | | | |
Loans and leases | | $ | 50,348 | | | $ | 53,078 | | | $ | 103,611 | | | $ | 101,352 | |
Investment securities, taxable | | | 5,945 | | | | 5,991 | | | | 12,392 | | | | 11,721 | |
Investment securities, tax-exempt | | | 1,926 | | | | 1,721 | | | | 4,031 | | | | 3,138 | |
Other | | | 360 | | | | 1,542 | | | | 669 | | | | 2,074 | |
| | | | | | | | | | | | | | | | |
Total interest income | | | 58,579 | | | | 62,332 | | | | 120,703 | | | | 118,285 | |
| | | | | | | | | | | | | | | | |
Interest expense: | | | | | | | | | | | | | | | | |
Deposits | | | 21,649 | | | | 28,795 | | | | 46,769 | | | | 54,065 | |
Short-term borrowings | | | 1,798 | | | | 2,572 | | | | 4,179 | | | | 5,262 | |
Subordinated notes | | | 1,647 | | | | 1,296 | | | | 3,419 | | | | 2,390 | |
Long-term debt and mandatorily redeemable securities | | | 361 | | | | 798 | | | | 915 | | | | 1,425 | |
| | | | | | | | | | | | | | | | |
Total interest expense | | | 25,455 | | | | 33,461 | | | | 55,282 | | | | 63,142 | |
| | | | | | | | | | | | | | | | |
Net interest income | | | 33,124 | | | | 28,871 | | | | 65,421 | | | | 55,143 | |
Provision for loan and lease losses | | | 4,493 | | | | 1,247 | | | | 6,032 | | | | 624 | |
| | | | | | | | | | | | | | | | |
Net interest income after provision for loan and lease losses | | | 28,631 | | | | 27,624 | | | | 59,389 | | | | 54,519 | |
| | | | | | | | | | | | | | | | |
Noninterest income: | | | | | | | | | | | | | | | | |
Trust fees | | | 4,954 | | | | 3,871 | | | | 9,216 | | | | 7,514 | |
Service charges on deposit accounts | | | 5,764 | | | | 5,226 | | | | 10,872 | | | | 9,796 | |
Mortgage banking income | | | 1,417 | | | | 1,059 | | | | 2,534 | | | | 1,630 | |
Insurance commissions | | | 1,092 | | | | 938 | | | | 3,038 | | | | 2,576 | |
Equipment rental income | | | 5,760 | | | | 5,287 | | | | 11,509 | | | | 10,385 | |
Other income | | | 2,446 | | | | 2,482 | | | | 4,668 | | | | 4,201 | |
Investment securities and other investment (losses) gains | | | (1,066 | ) | | | 207 | | | | (443 | ) | | | 454 | |
| | | | | | | | | | | | | | | | |
Total noninterest income | | | 20,367 | | | | 19,070 | | | | 41,394 | | | | 36,556 | |
| | | | | | | | | | | | | | | | |
Noninterest expense: | | | | | | | | | | | | | | | | |
Salaries and employee benefits | | | 19,065 | | | | 18,153 | | | | 39,699 | | | | 35,719 | |
Net occupancy expense | | | 2,481 | | | | 2,149 | | | | 4,957 | | | | 4,085 | |
Furniture and equipment expense | | | 3,883 | | | | 3,748 | | | | 7,861 | | | | 6,842 | |
Depreciation - leased equipment | | | 4,609 | | | | 4,243 | | | | 9,225 | | | | 8,319 | |
Professional fees | | | 2,522 | | | | 1,267 | | | | 3,680 | | | | 2,168 | |
Supplies and communication | | | 1,682 | | | | 1,512 | | | | 3,351 | | | | 2,784 | |
Business development and marketing expense | | | 1,000 | | | | 1,416 | | | | 1,643 | | | | 2,274 | |
Other expense | | | 3,153 | | | | 1,958 | | | | 5,880 | | | | 4,055 | |
| | | | | | | | | | | | | | | | |
Total noninterest expense | | | 38,395 | | | | 34,446 | | | | 76,296 | | | | 66,246 | |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 10,603 | | | | 12,248 | | | | 24,487 | | | | 24,829 | |
Income tax expense | | | 3,358 | | | | 4,188 | | | | 7,888 | | | | 8,246 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 7,245 | | | $ | 8,060 | | | $ | 16,599 | | | $ | 16,583 | |
| | | | | | | | | | | | | | | | |
The Nasdaq Global Select Market Symbol: "SRCE" (CUSIP #336901 10 3) | | | | | | | | | | | | | | | | |
Please contact us at shareholder@1stsource.com | | | | | | | | | | | | | | | | |