| FOR: | Immediate Release | | Contact: | | Larry Lentych |
| | January 21, 2010 | | | | 574 235 2000 |
| | | | | | | | |
| | | | | | | Andrea Short |
| | | | | | | 574 235 2000 |
1st Source Corporation Announces Fourth Quarter, Year End Results
Dividend Declared
South Bend, IN - 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced fourth quarter net income of $6.22 million, compared to $12.32 million in the fourth quarter of 2008. For the year, net income was $25.49 million versus $33.39 million reported in 2008. The previous year’s fourth quarter and annual net income results were positively impacted by the sale of certain assets of 1st Source Corporation Investment Advisors to Wasatch Advisors, Inc. which resulted in an $11.49 million pre-tax (after-tax $7.14 million) gain.
Diluted net income per common share for the fourth quarter of 2009 was $0.19 compared to the $0.50 per common share reported in the fourth quarter of 2008. Diluted net income per common share for 2009 was $0.79 versus the $1.37 per common share for 2008. Diluted net income per common share was reduced by $0.07 for the fourth quarter of 2009 and $0.26 for the year ending December 31, 2009, due to the preferred stock dividends and the accretion of the discount on the preferred stock issued to the U.S. Government under the TARP Program. The preferred stock was issued in January 2009 and therefore did not impact the three or twelve month periods ending December 31, 2008.
At the January 2010 meeting, the Board of Directors approved a fourth quarter cash dividend of $0.15 per common share, up 7.14 percent over the dividend declared in the same period a year earlier. The cash dividend is payable on February 16, 2010 to shareholders of record on February 8, 2010.
Christopher J. Murphy, III, Chairman of 1st Source, commented, "We are pleased we are performing better than most in our industry, but it still has been a challenging year. Our earnings were adequate in this environment but not at all what we would like to achieve. We were proactive throughout the year in working with our clients through difficult situations and in recognizing credit problems as they occurred and we continued to increase our loan and lease loss reserves while taking substantial charge-offs. As always, we will continue to work with clients helping them deal with the challenges of this economy. We have always believed in providing straight talk and sound advice and keeping our client’s best interests in mind and this has led to the development of some excellent new relationships."
Mr. Murphy continued, "1st Source is based in the heart of the Midwest, an area of manufacturing and durable goods production impacted strongly by the economic downturn. Unemployment remains high and our clients are affected. Our nonperforming assets have slowly climbed to 3.15 percent of total loans and leases, although net charge-offs to average loans and leases remain at a manageable 0.72 percent for the year. While our overall client counts increased, our loan outstandings decreased due to lower client demand for loans. Even with the slower economy, we had loan origination volume of $478.02 million in the fourth quarter 2009 compared to $500.87 million in the fourth quarter 2008. For the full year of 2009, our loan origination volume was $1.86 billion compared to $2.27 billion for 2008 reflecting the change in the growth rates of the local economy. Our capital ratios remain strong - even without the TARP funds we exceed the regulatory "well capitalized" minimums. Our overall expenses are down and we continue to provide clients with credit. Throughout 1st Source, we remain focused on keeping a sharp eye on the credit situation, watching our expenses carefully, and most importantly, helping our clients with excellent personal service and sound advice for these unusual times," concluded Mr. Murphy.
1st Source’s reserve for loan and lease losses as of December 31, 2009 was 2.85 percent of total loans and leases, compared to 2.42 percent as of December 31, 2008. Net charge-offs were $5.63 million for the fourth quarter 2009, compared to $2.88 million in the fourth quarter 2008. Net charge-offs for the full year were $22.64 million in 2009 compared to $3.47 million in 2008. The ratio of nonperforming assets to net loans and leases was 3.15 percent on December 31, 2009, compared to 1.30 percent on December 31, 2008.
The net interest margin was 3.27 percent for the fourth quarter of 2009 versus 3.30 percent for the same period in 2008. The net interest margin was 3.14 percent for the year ending December 31, 2009, versus 3.34 percent for the same period in 2008. Tax-equivalent net interest income was $34.49 million for the fourth quarter of 2009, compared to $34.24 million for 2008’s fourth quarter. For the twelve months of 2009, tax-equivalent net interest income was $132.00 million, compared to $135.75 million for the twelve months of 2008.
As of December 31, 2009, the 1st Source common equity-to-assets ratio was 10.25 percent, compared to 10.16 percent at December 31, 2008 and its tangible common equity-to-tangible assets ratio was 8.43 percent at December 31, 2009 compared to 8.28 percent at December 31, 2008. Common shareholders’ equity was $465.39 million, up from $453.66 million a year ago. Total assets at the end of 2009 were $4.54 billion, up 1.75 percent compared to the same period last year. Total loans and leases at December 31, 2009 were $3.09 billion, down 6.22 percent and total deposits at December 31, 2009 were $3.65 billion, up 3.92 percent from the comparable figures at the end of 2008.
Noninterest income for the fourth quarter of 2009 was $22.02 million, compared to $30.23 million for the fourth quarter of 2008. The predominate factors causing the decrease was the sale of certain assets of 1st Source Corporation Investment Advisors for a gain of $11.49 million in 2008, as mentioned above, offset by increases of $1.88 million in mortgage banking income and $1.75 million in investment
securities gains. For the year, noninterest income was $85.53 million versus $84.00 million in 2008, as the decrease due to the sale of certain assets of 1st Source Corporation Investment Advisors was largely offset by decreased impairment on the Fannie Mae and Freddie Mac preferred equities.
Noninterest expense for the fourth quarter of 2009 was $38.56 million, compared to $38.50 million for the fourth quarter of 2008. For the year ending December 31, 2009, noninterest expense was $151.12 million, down from $153.11 million one year ago. The decrease was primarily due to lower salaries and benefits and professional fees and offset by higher FDIC insurance premiums.
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, construction and environmental equipment. The Corporation includes 76 community banking centers in 17 counties, 23 specialty finance locations nationwide, 7 trust and wealth management locations, and 7 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 it serves.
In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. 1st Source Corporation believes that providing non-GAAP financial measures provides investors with information useful to understanding our financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on “tangible equity” which is “common shareholders’ equity” excluding intangible assets.
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,” “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.
# # #
(charts attached)
| | | | | | | | | |
| 4th QUARTER 2009 FINANCIAL HIGHLIGHTS | | | | | | | | | |
| (Unaudited - Dollars in thousands, except per share data) | | | |
| | | Three Months Ended | | Twelve Months Ended | |
| | | December 31 | | December 31 | |
| | | 2009 | | 2008 | | 2009 | | 2008 | |
| END OF PERIOD BALANCES | | | | | | | | | |
| Assets | | | | | $ | 4,542,100 | $ | 4,464,174 | |
| Loans and leases | | | | | | 3,093,150 | | 3,298,212 | |
| Deposits | | | | | | 3,652,464 | | 3,514,542 | |
| Reserve for loan and lease losses | | | | | | 88,236 | | 79,776 | |
| Intangible assets | | | | | | 90,222 | | 91,691 | |
| Common shareholders' equity | | | | | | 465,390 | | 453,664 | |
| Total shareholders' equity | | | | | | 570,320 | | 453,664 | |
| | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | |
| Assets | $ | 4,498,879 | $ | 4,449,887 | $ | 4,505,852 | $ | 4,400,523 | |
| Earning assets | | 4,178,782 | | 4,132,596 | | 4,199,512 | | 4,068,614 | |
| Investments | | 884,068 | | 679,595 | | 835,025 | | 713,812 | |
| Loans and leases | | 3,067,062 | | 3,298,351 | | 3,154,820 | | 3,263,276 | |
| Deposits | | 3,580,674 | | 3,388,553 | | 3,573,648 | | 3,374,270 | |
| Interest bearing liabilities | | 3,407,214 | | 3,557,059 | | 3,441,922 | | 3,509,112 | |
| Common shareholders' equity | | 471,535 | | 447,085 | | 468,405 | | 444,148 | |
| Total shareholders' equity | | 576,257 | | 447,085 | | 566,464 | | 444,148 | |
| | | | | | | | | | |
| INCOME STATEMENT DATA | | | | | | | | | |
| Net interest income | $ | 33,531 | $ | 33,342 | $ | 128,212 | $ | 132,160 | |
| Net interest income - FTE | | 34,487 | | 34,239 | | 131,999 | | 135,747 | |
| Provision for loan and lease losses | | 8,360 | | 7,045 | | 31,101 | | 16,648 | |
| Noninterest income | | 22,020 | | 30,229 | | 85,530 | | 84,003 | |
| Noninterest expense | | 38,564 | | 38,501 | | 151,123 | | 153,114 | |
| Net income | | 6,223 | | 12,315 | | 25,490 | | 33,386 | |
| Net income available to common shareholders | | 4,517 | | 12,315 | | 19,074 | | 33,386 | |
| | | | | | | | | | |
| PER SHARE DATA | | | | | | | | | |
| Basic net income per common share | $ | 0.19 | $ | 0.51 | $ | 0.79 | $ | 1.38 | |
| Diluted net income per common share | | 0.19 | | 0.50 | | 0.79 | | 1.37 | |
| Common cash dividends declared | | 0.16 | | 0.16 | | 0.59 | | 0.58 | |
| Book value per common share | | 19.30 | | 18.82 | | 19.30 | | 18.82 | |
| Tangible book value per common share | | 15.56 | | 15.01 | | 15.56 | | 15.01 | |
| Market value - High | | 16.60 | | 25.56 | | 23.92 | | 30.00 | |
| Market value - Low | | 13.84 | | 12.61 | | 13.84 | | 12.61 | |
| Basic weighted average common shares outstanding | | 24,126,225 | | 24,110,930 | | 24,157,179 | | 24,105,753 | |
| Diluted weighted average common shares outstanding | | 24,130,517 | | 24,390,637 | | 24,163,689 | | 24,387,732 | |
| | | | | | | | | | |
| KEY RATIOS | | | | | | | | | |
| Return on average assets | | 0.55 | % | 1.10 | % | 0.57 | % | 0.76 | % |
| Return on average common shareholders' equity | | 3.80 | | 10.96 | | 4.07 | | 7.52 | |
| Average common shareholders' equity to average assets | | 10.48 | | 10.05 | | 10.40 | | 10.09 | |
| End of period tangible common equity to tangible assets | | 8.43 | | 8.28 | | 8.43 | | 8.28 | |
| Risk-based capital - Tier 1 | | 16.43 | | 11.97 | | 16.43 | | 11.97 | |
| Risk-based capital - Total | | 17.72 | | 13.26 | | 17.72 | | 13.26 | |
| Net interest margin | | 3.27 | | 3.30 | | 3.14 | | 3.34 | |
| Efficiency: expense to revenue | | 67.61 | | 68.65 | | 67.59 | | 67.23 | |
| Net charge-offs to average loans and leases | | 0.73 | | 0.35 | | 0.72 | | 0.11 | |
| Loan and lease loss reserve to loans and leases | | 2.85 | | 2.42 | | 2.85 | | 2.42 | |
| Nonperforming assets to loans and leases | | 3.15 | | 1.30 | | 3.15 | | 1.30 | |
| | | | | | | | | | |
| ASSET QUALITY | | | | | | | | | |
| Loans and leases past due 90 days or more | | | | | $ | 628 | $ | 1,022 | |
| Nonaccrual and restructured loans and leases | | | | | | 83,537 | | 36,555 | |
| Other real estate | | | | | | 4,039 | | 1,381 | |
| Former bank premises held for sale | | | | | | 2,490 | | 3,356 | |
| Repossessions | | | | | | 10,165 | | 1,669 | |
| Equipment owned under operating leases | | | | | | 154 | | 185 | |
| Total nonperforming assets | | | | | | 101,013 | | 44,168 | |
| | | | | | |
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | | | | | | |
| (Unaudited - Dollars in thousands) | | | | | | |
| | | December 31, 2009 | | | December 31, 2008 | |
| ASSETS | | | | | | |
| Cash and due from banks | | $ | 72,872 | | | $ | 119,771 | |
| Federal funds sold and interest bearing deposits with other banks | | | 141,166 | | | | 6,951 | |
| Investment securities available-for-sale | | | | | | | | |
| (amortized cost of $893,439 and $715,380 at | | | | | | | | |
| December 31, 2009 and 2008, respectively) | | | 901,638 | | | | 724,754 | |
| Other investments | | | 21,012 | | | | 18,612 | |
| Trading account securities | | | 125 | | | | 100 | |
| Mortgages held for sale | | | 26,649 | | | | 46,686 | |
| | | | | | | | | |
| Loans and leases, net of unearned discount: | | | | | | | | |
| Commercial and agricultural loans | | | 546,222 | | | | 643,440 | |
| Auto, light truck and environmental equipment | | | 349,741 | | | | 353,838 | |
| Medium and heavy duty truck | | | 204,545 | | | | 243,375 | |
| Aircraft financing | | | 617,384 | | | | 632,121 | |
| Construction equipment financing | | | 313,300 | | | | 375,983 | |
| Loans secured by real estate | | | 952,223 | | | | 918,749 | |
| Consumer loans | | | 109,735 | | | | 130,706 | |
| Total loans and leases | | | 3,093,150 | | | | 3,298,212 | |
| Reserve for loan and lease losses | | | (88,236 | ) | | | (79,776 | ) |
| Net loans and leases | | | 3,004,914 | | | | 3,218,436 | |
| | | | | | | | | |
| Equipment owned under operating leases, net | | | 97,004 | | | | 83,062 | |
| Net premises and equipment | | | 37,907 | | | | 40,491 | |
| Goodwill and intangible assets | | | 90,222 | | | | 91,691 | |
| Accrued income and other assets | | | 148,591 | | | | 113,620 | |
| | | | | | | | | |
| Total assets | | $ | 4,542,100 | | | $ | 4,464,174 | |
| | | | | | | | | |
| LIABILITIES | | | | | | | | |
| Deposits: | | | | | | | | |
| Noninterest bearing | | $ | 450,608 | | | $ | 416,960 | |
| Interest bearing | | | 3,201,856 | | | | 3,097,582 | |
| Total deposits | | | 3,652,464 | | | | 3,514,542 | |
| | | | | | | | | |
| Federal funds purchased and securities sold | | | | | | | | |
| under agreements to purchase | | | 123,787 | | | | 272,529 | |
| Other short-term borrowings | | | 26,323 | | | | 23,646 | |
| Long-term debt and mandatorily redeemable securities | | | 19,761 | | | | 29,832 | |
| Subordinated notes | | | 89,692 | | | | 89,692 | |
| Accrued expenses and other liabilities | | | 59,753 | | | | 80,269 | |
| Total liabilities | | | 3,971,780 | | | | 4,010,510 | |
| | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | |
| Preferred stock; no par value | | | 104,930 | | | | - | |
| Common stock; no par value | | | 350,269 | | | | 342,982 | |
| Retained earnings | | | 142,407 | | | | 136,877 | |
| Cost of common stock in treasury | | | (32,380 | ) | | | (32,019 | ) |
| Accumulated other comprehensive income | | | 5,094 | | | | 5,824 | |
| Total shareholders' equity | | | 570,320 | | | | 453,664 | |
| | | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 4,542,100 | | | $ | 4,464,174 | |
| | | | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | | | | |
| (Unaudited - Dollars in thousands) | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Interest income: | | | | | | | | | | | | |
| Loans and leases | | $ | 42,378 | | | $ | 49,416 | | | $ | 174,885 | | | $ | 204,006 | |
| Investment securities, taxable | | | 4,994 | | | | 4,882 | | | | 17,594 | | | | 22,170 | |
| Investment securities, tax-exempt | | | 1,659 | | | | 1,803 | | | | 6,705 | | | | 7,707 | |
| Other | | | 334 | | | | 439 | | | | 1,228 | | | | 1,425 | |
| Total interest income | | | 49,365 | | | | 56,540 | | | | 200,412 | | | | 235,308 | |
| | | | | | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | |
| Deposits | | | 13,859 | | | | 19,787 | | | | 63,521 | | | | 86,903 | |
| Short-term borrowings | | | 206 | | | | 1,192 | | | | 1,115 | | | | 7,626 | |
| Subordinated notes | | | 1,647 | | | | 1,647 | | | | 6,589 | | | | 6,714 | |
| Long-term debt and mandatorily redeemable securities | | | 122 | | | | 572 | | | | 975 | | | | 1,905 | |
| Total interest expense | | | 15,834 | | | | 23,198 | | | | 72,200 | | | | 103,148 | |
| | | | | | | | | | | | | | | | | |
| Net interest income | | | 33,531 | | | | 33,342 | | | | 128,212 | | | | 132,160 | |
| Provision for loan and lease losses | �� | | 8,360 | | | | 7,045 | | | | 31,101 | | | | 16,648 | |
| Net interest income after provision for | | | | | | | | | | | | | | | | |
| loan and lease losses | | | 25,171 | | | | 26,297 | | | | 97,111 | | | | 115,512 | |
| | | | | | | | | | | | | | | | | |
| Noninterest income: | | | | | | | | | | | | | | | | |
| Trust fees | | | 3,563 | | | | 4,444 | | | | 15,036 | | | | 18,599 | |
| Service charges on deposit accounts | | | 5,278 | | | | 5,402 | | | | 20,645 | | | | 22,035 | |
| Mortgage banking income (loss) | | | 1,377 | | | | (499 | ) | | | 8,251 | | | | 2,994 | |
| Insurance commissions | | | 1,316 | | | | 1,241 | | | | 4,930 | | | | 5,363 | |
| Equipment rental income | | | 6,861 | | | | 6,430 | | | | 25,757 | | | | 24,224 | |
| Other income | | | 2,611 | | | | 2,457 | | | | 9,224 | | | | 9,293 | |
| Gain on sale of certain Investment Advisor assets | | | - | | | | 11,492 | | | | - | | | | 11,492 | |
| Investment securities and other investment gains (losses) | | | 1,014 | | | | (738 | ) | | | 1,687 | | | | (9,997 | ) |
| Total noninterest income | | | 22,020 | | | | 30,229 | | | | 85,530 | | | | 84,003 | |
| | | | | | | | | | | | | | | | | |
| Noninterest expense: | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 17,143 | | | | 17,969 | | | | 72,483 | | | | 76,965 | |
| Net occupancy expense | | | 2,090 | | | | 2,409 | | | | 9,185 | | | | 9,698 | |
| Furniture and equipment expense | | | 3,493 | | | | 3,540 | | | | 13,980 | | | | 15,095 | |
| Depreciation - leased equipment | | | 5,450 | | | | 5,184 | | | | 20,515 | | | | 19,450 | |
| Professional fees | | | 1,502 | | | | 1,993 | | | | 4,399 | | | | 8,446 | |
| Supplies and communication | | | 1,448 | | | | 1,619 | | | | 5,916 | | | | 6,782 | |
| FDIC and other insurance | | | 1,511 | | | | 1,205 | | | | 8,362 | | | | 2,601 | |
| Business development and marketing expense | | | 1,554 | | | | 1,225 | | | | 3,488 | | | | 3,749 | |
| Loan and lease collection and repossession expense | | | 1,507 | | | | 490 | | | | 4,283 | | | | 1,162 | |
| Other expense | | | 2,866 | | | | 2,867 | | | | 8,512 | | | | 9,166 | |
| Total noninterest expense | | | 38,564 | | | | 38,501 | | | | 151,123 | | | | 153,114 | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 8,627 | | | | 18,025 | | | | 31,518 | | | | 46,401 | |
| Income tax expense | | | 2,404 | | | | 5,710 | | | | 6,028 | | | | 13,015 | |
| | | | | | | | | | | | | | | | | |
| Net income | | | 6,223 | | | | 12,315 | | | | 25,490 | | | | 33,386 | |
| Preferred stock dividends and discount accretion | | | (1,706 | ) | | | - | | | | (6,416 | ) | | | - | |
| Net income available to common shareholders | | $ | 4,517 | | | $ | 12,315 | | | $ | 19,074 | | | $ | 33,386 | |
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| The NASDAQ Global Select National Market Symbol: "SRCE" (CUSIP #336901 10 3) | | | | | | | | | | | | | |
| Please contact us at shareholder@1stsource.com | | | | | | | | | | | | | |
