Exhibit 99.1
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| | | |
For: | Immediate Release | Contact: | Andrea Short |
| October 20, 2016 | | 574-235-2000 |
1st Source Corporation Announces Third Quarter Earnings,
Cash Dividend Declared
QUARTERLY HIGHLIGHTS
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• | Net income improved to $14.26 million and diluted net income per common share improved to $0.55 from the prior year's quarter. |
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• | Return on average assets of 1.05% and return on average common shareholders' equity of 8.47%. |
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• | Net charge-offs of $4.63 million and nonperforming assets to loans and leases of 0.68%. |
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• | Average loans and leases grew $278.36 million or 7.12% from the third quarter of 2015. |
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• | Average deposits grew $357.46 million or 8.95% from the third quarter of 2015. |
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• | Net interest income increased $0.49 million or 1.15% from the third quarter of 2015. |
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• | Noninterest income increased $1.53 million or 7.25% from the third quarter of 2015 (increased 4.96% excluding equipment rental income). |
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• | Noninterest expenses increased slightly from the third quarter of 2015 (decreased 1.75% excluding leased equipment depreciation). |
South Bend, IN - 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported net income of $14.26 million for the third quarter of 2016, compared to $13.93 million reported in the third quarter a year ago bringing the 2016 year-to-date net income to $42.56 million compared to $43.07 million in 2015. The year-to-date net income comparison was negatively impacted by a reduction in net interest recoveries of $1.45 million, a higher provision for loan and lease losses of $2.93 million, and by the writedown of an available-for-sale equity investment. These negatives were partially offset by gains of $1.86 million on a Volcker Rule required liquidation of a partnership investment and gains of $0.99 million on the sale of investment securities available-for-sale.
Diluted net income per common share for the third quarter of 2016 was $0.55, versus $0.53 in the third quarter of 2015. Diluted net income per common share was $1.63 for the first nine months of 2016 and 2015.
At its October 2016 meeting, the Board of Directors approved a cash dividend of $0.18 per common share. The cash dividend is payable to shareholders of record on November 1, 2016 and will be paid on November 11, 2016. This brings dividends this year to $0.720 per common share compared to $0.671 per common share at the same time last year.
According to Christopher J. Murphy III, Chairman, “We again saw healthy growth in loans, leases and deposits this quarter as we continued to add new clients to the bank. Average loans and leases were up a solid 7.12% from a year ago along with a strong average deposit increase of 8.95% during that same period. We had a steady performance overall, with expenses held flat and net income up slightly for the quarter compared to third quarter 2015.”
“While we are pleased with this growth, recent consolidation of clients in some of the industries we serve is likely to lead to payoffs and reduced opportunities in these industries. Also, continued low interest rates are a challenge to holding our net interest margin stable.”
“Earlier this month, we opened our 81st banking center in a fast growing area of Elkhart, Indiana, and next month we will open a new larger office in the heart of downtown Warsaw, Indiana, replacing our current downtown location. As always, we remain committed to helping our clients achieve security, build wealth and realize their dreams by giving straight talk and sound advice, keeping their best interests in mind for the long term.” Mr. Murphy concluded.
THIRD QUARTER 2016 FINANCIAL RESULTS
Loans
Average loans and leases of $4.19 billion increased $278.36 million, or 7.12% in the third quarter of 2016 from the year ago quarter and have increased $84.23 million, or 2.05% from the second quarter. Year to date average loans and leases of $4.10 billion increased $305.36 million, or 8.04% from the first nine months of 2015.
Deposits
Average deposits of $4.35 billion grew $357.46 million, or 8.95% for the quarter ended September 30, 2016 from the year ago quarter and have increased $52.85 million, or 1.23% compared to the second quarter. Average deposits for the first nine months of 2016 were $4.27 billion an increase of $355.35 million or 9.08% from the same period a year ago.
Net Interest Income and Net Interest Margin
Third quarter 2016 net interest income of $42.69 million increased $0.49 million, or 1.15% from the third quarter a year ago and increased $0.40 million, or 0.95% from the second quarter.
For the first nine months of 2016, net interest income was $126.28 million, an increase of $2.97 million, or 2.41% compared to the same period a year ago. Net interest recoveries for the first nine months of 2016 were down $1.45 million from the first nine months of 2015, resulting in a 4 basis point reduction to the net interest margin.
Third quarter 2016 net interest margin was 3.35%, a decrease of 19 basis points from the 3.54% for the same period in 2015 and decreased 6 basis points from the 3.41% in the second quarter. Third quarter 2016 net interest margin on a fully tax-equivalent basis was 3.39%, a decrease of 18 basis points from the 3.57% for the same period in 2015 and decreased 6 basis points from the 3.45% in the second quarter.
Net interest margin for the first nine months of 2016 was 3.39%, a decrease of 17 basis points from the 3.56% for the same period in 2015. Net interest margin on a fully tax-equivalent basis for the first nine months of 2016 was 3.43%, a decrease of 17 basis points from the 3.60% for the same period in 2015.
Noninterest Income
Noninterest income increased $1.53 million or 7.25% and $4.18 million or 6.69% in the three and nine month periods ended September 30, 2016, respectively over the same periods a year ago. The increase in noninterest income during the third quarter was mainly due to higher equipment rental income related to an increase in the average equipment rental portfolio and gains on the sale of available-for-sale equity securities, which was offset by lower monogram fund income and decreased customer swap fees. The increase in noninterest income during the first nine months of 2016 was primarily due to higher equipment rental income related to an increase in the average equipment rental portfolio, gains on the liquidation of a partnership investment required by the Volcker Rule and gains on the sale of available-for-sale equity securities, which was offset by lower monogram fund income, an other than temporary writedown on an available-for-sale equity security and decreased customer swap fees.
Noninterest Expense
Noninterest expense was flat for the quarter ended September 30, 2016 and increased $4.51 million or 3.85% for the first nine months of 2016, respectively over the comparable periods a year ago. The increase in noninterest expense was primarily due to higher depreciation on leased equipment, furniture and equipment and increased loan and lease collection and repossession expenses offset by reduced residential mortgage foreclosure expenses, business development and marketing and lower FDIC insurance assessments. Depreciation on leased equipment was higher as a result of an increase in the average equipment rental portfolio. Excluding depreciation on leased equipment, noninterest expenses were up 1.67%. Furniture and equipment expense was higher due to increased software maintenance costs, depreciation on new equipment with banking center remodels and computer processing charges. Loan and lease collection and repossession expenses increased mainly due to lower recoveries on repurchased mortgage loans, fewer gains on the sale of other real estate owned and repossessions.
Credit
The reserve for loan and lease losses as of September 30, 2016 was 2.13% of total loans and leases compared to 2.20% at June 30, 2016 and 2.22% at September 30, 2015. Net charge-offs of $4.63 million were recorded for the third quarter of 2016 compared with net recoveries of $0.04 million in the same quarter a year ago. Year to date, net charge-offs of $4.31 million have been recorded in 2016, compared to net recoveries of $0.39 million for the first nine months of 2015.
Due primarily to an increase in loan and lease outstandings, the provision for loan and lease losses for the third quarter 2016 increased $1.08 million compared with the same period in 2015 and was comparable to the second quarter. The provision for loan and lease losses for the first nine months of 2016 was $5.09 million up $2.93 million from the same period in 2015.
The ratio of nonperforming assets to net loans and leases was 0.68% as of September 30, 2016, comparable to the 0.66% on September 30, 2015 and up from the 0.49% on June 30, 2016.
Capital
As of September 30, 2016 and June 30, 2016, the common equity-to-assets ratio was 12.30%, compared to 12.52% a year ago. The tangible common equity-to-tangible assets ratio was 10.93% at September 30, 2016 and 10.90% at June 30, 2016 compared to 11.04% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 12.35% at September 30, 2016 compared to 12.20% at June 30, 2016 and 12.48% a year ago. During 2016, the Company repurchased $8.03 million of common stock in several open market transactions.
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 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 81 community banking centers in 17 counties, 8 trust and wealth management locations, 10 1st Source Insurance offices, as well as 22 specialty finance locations nationwide.
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.
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(charts attached)
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1st SOURCE CORPORATION | | | | | | |
3rd QUARTER 2016 FINANCIAL HIGHLIGHTS | | | | | | |
(Unaudited - Dollars in thousands, except per share data) | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | June 30, | September 30, | | September 30, | September 30, |
| 2016 | 2016 | 2015 | | 2016 | 2015 |
AVERAGE BALANCES | | | | | | |
Assets | $ | 5,425,530 |
| $ | 5,343,630 |
| $ | 5,061,350 |
| | $ | 5,326,670 |
| $ | 4,946,899 |
|
Earning assets | 5,066,375 |
| 4,986,635 |
| 4,733,336 |
| | 4,972,604 |
| 4,627,111 |
|
Investments | 821,068 |
| 804,856 |
| 781,971 |
| | 806,976 |
| 787,343 |
|
Loans and leases | 4,189,340 |
| 4,105,111 |
| 3,910,981 |
| | 4,101,284 |
| 3,795,929 |
|
Deposits | 4,353,253 |
| 4,300,402 |
| 3,995,795 |
| | 4,269,284 |
| 3,913,931 |
|
Interest bearing liabilities | 3,734,322 |
| 3,709,706 |
| 3,489,505 |
| | 3,683,863 |
| 3,435,444 |
|
Common shareholders’ equity | 670,006 |
| 659,092 |
| 638,965 |
| | 659,603 |
| 631,611 |
|
| | | | | | |
INCOME STATEMENT DATA | | | | | | |
Net interest income | $ | 42,694 |
| $ | 42,293 |
| $ | 42,209 |
| | $ | 126,276 |
| $ | 123,310 |
|
Net interest income - FTE(1) | 43,144 |
| 42,753 |
| 42,625 |
| | 127,647 |
| 124,551 |
|
Provision for loan and lease losses | 2,067 |
| 2,049 |
| 992 |
| | 5,091 |
| 2,160 |
|
Noninterest income | 22,665 |
| 22,297 |
| 21,132 |
| | 66,589 |
| 62,414 |
|
Noninterest expense | 41,145 |
| 40,034 |
| 41,068 |
| | 121,884 |
| 117,370 |
|
Net income | 14,264 |
| 14,479 |
| 13,928 |
| | 42,561 |
| 43,069 |
|
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PER SHARE DATA | | | | | | |
Basic net income per common share | $ | 0.55 |
| $ | 0.56 |
| $ | 0.53 |
| | $ | 1.63 |
| $ | 1.63 |
|
Diluted net income per common share | 0.55 |
| 0.56 |
| 0.53 |
| | 1.63 |
| 1.63 |
|
Common cash dividends declared | 0.180 |
| 0.180 |
| 0.164 |
| | 0.540 |
| 0.491 |
|
Book value per common share | 25.91 |
| 25.59 |
| 24.51 |
| | 25.91 |
| 24.51 |
|
Tangible book value per common share(1) | 22.65 |
| 22.32 |
| 21.26 |
| | 22.65 |
| 21.26 |
|
Market value - High | 35.99 |
| 34.83 |
| 32.37 |
| | 35.99 |
| 32.37 |
|
Market value - Low | 31.50 |
| 30.32 |
| 28.06 |
| | 27.01 |
| 26.95 |
|
Basic weighted average common shares outstanding | 25,867,169 |
| 25,853,537 |
| 26,164,646 |
| | 25,881,360 |
| 26,211,630 |
|
Diluted weighted average common shares outstanding | 25,867,169 |
| 25,853,537 |
| 26,164,646 |
| | 25,881,360 |
| 26,211,630 |
|
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KEY RATIOS | | | | | | |
Return on average assets | 1.05 | % | 1.09 | % | 1.09 | % | | 1.07 | % | 1.16 | % |
Return on average common shareholders’ equity | 8.47 |
| 8.84 |
| 8.65 |
| | 8.62 |
| 9.12 |
|
Average common shareholders’ equity to average assets | 12.35 |
| 12.33 |
| 12.62 |
| | 12.38 |
| 12.77 |
|
End of period tangible common equity to tangible assets(1) | 10.93 |
| 10.90 |
| 11.04 |
| | 10.93 |
| 11.04 |
|
Risk-based capital - Common Equity Tier 1(2) | 12.35 |
| 12.20 |
| 12.48 |
| | 12.35 |
| 12.48 |
|
Risk-based capital - Tier 1(2) | 13.56 |
| 13.41 |
| 13.77 |
| | 13.56 |
| 13.77 |
|
Risk-based capital - Total(2) | 14.87 |
| 14.73 |
| 15.08 |
| | 14.87 |
| 15.08 |
|
Net interest margin | 3.35 |
| 3.41 |
| 3.54 |
| | 3.39 |
| 3.56 |
|
Net interest margin - FTE(1) | 3.39 |
| 3.45 |
| 3.57 |
| | 3.43 |
| 3.60 |
|
Efficiency ratio: expense to revenue | 62.95 |
| 61.98 |
| 64.84 |
| | 63.20 |
| 63.20 |
|
Efficiency ratio: expense to revenue - adjusted(1) | 60.10 |
| 58.76 |
| 61.98 |
| | 60.36 |
| 60.57 |
|
Net charge offs to average loans and leases | 0.44 |
| (0.01 | ) | — |
| | 0.14 |
| (0.01 | ) |
Loan and lease loss reserve to loans and leases | 2.13 |
| 2.20 |
| 2.22 |
| | 2.13 |
| 2.22 |
|
Nonperforming assets to loans and leases | 0.68 |
| 0.49 |
| 0.66 |
| | 0.68 |
| 0.66 |
|
| | | | | | |
| September 30, | June 30, | March 31, | | December 31, | September 30, |
| 2016 | 2016 | 2016 | | 2015 | 2015 |
END OF PERIOD BALANCES | | | | | | |
Assets | $ | 5,447,911 |
| $ | 5,379,938 |
| $ | 5,245,610 |
| | $ | 5,187,916 |
| $ | 5,105,584 |
|
Loans and leases | 4,179,417 |
| 4,152,763 |
| 4,031,975 |
| | 3,994,692 |
| 3,955,550 |
|
Deposits | 4,377,038 |
| 4,325,084 |
| 4,225,148 |
| | 4,139,186 |
| 4,019,156 |
|
Reserve for loan and lease losses | 88,897 |
| 91,458 |
| 89,296 |
| | 88,112 |
| 87,616 |
|
Goodwill and intangible assets | 84,244 |
| 84,386 |
| 84,530 |
| | 84,676 |
| 84,822 |
|
Common shareholders’ equity | 670,259 |
| 661,756 |
| 649,973 |
| | 644,053 |
| 639,221 |
|
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ASSET QUALITY | | | | | | |
Loans and leases past due 90 days or more | $ | 611 |
| $ | 275 |
| $ | 728 |
| | $ | 122 |
| $ | 411 |
|
Nonaccrual loans and leases | 19,922 |
| 12,579 |
| 12,982 |
| | 12,718 |
| 18,985 |
|
Other real estate | 551 |
| 452 |
| 330 |
| | 736 |
| 232 |
|
Former bank premises held for sale | — |
| — |
| — |
| | — |
| 515 |
|
Repossessions | 8,089 |
| 7,619 |
| 7,201 |
| | 6,927 |
| 6,602 |
|
Equipment owned under operating leases | 43 |
| 107 |
| 113 |
| | 121 |
| 146 |
|
Total nonperforming assets | $ | 29,216 |
| $ | 21,032 |
| $ | 21,354 |
| | $ | 20,624 |
| $ | 26,891 |
|
(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.
(2) Calculated under banking regulatory guidelines.
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1st SOURCE CORPORATION | | | | | | | |
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | | | | | | | |
(Unaudited - Dollars in thousands) | | | | | | | |
| September 30, | | June 30, | | December 31, | | September 30, |
| 2016 | | 2016 | | 2015 | | 2015 |
ASSETS | | | | | | | |
Cash and due from banks | $ | 65,724 |
| | $ | 58,944 |
| | $ | 65,171 |
| | $ | 61,124 |
|
Federal funds sold and interest bearing deposits with other banks | 30,100 |
| | 14,297 |
| | 14,550 |
| | 3,065 |
|
Investment securities available-for-sale | 828,615 |
| | 814,258 |
| | 791,727 |
| | 784,585 |
|
Other investments | 22,458 |
| | 21,973 |
| | 21,973 |
| | 21,728 |
|
Mortgages held for sale | 19,986 |
| | 15,924 |
| | 9,825 |
| | 9,187 |
|
Loans and leases, net of unearned discount: | | | | | | | |
Commercial and agricultural | 786,167 |
| | 759,175 |
| | 744,749 |
| | 750,780 |
|
Auto and light truck | 400,809 |
| | 457,586 |
| | 425,236 |
| | 423,147 |
|
Medium and heavy duty truck | 271,478 |
| | 273,674 |
| | 278,254 |
| | 264,784 |
|
Aircraft | 836,977 |
| | 822,842 |
| | 778,012 |
| | 794,129 |
|
Construction equipment | 498,086 |
| | 484,354 |
| | 455,565 |
| | 450,112 |
|
Commercial real estate | 744,972 |
| | 715,932 |
| | 700,268 |
| | 658,589 |
|
Residential real estate and home equity | 490,186 |
| | 482,979 |
| | 464,129 |
| | 463,824 |
|
Consumer | 150,742 |
| | 156,221 |
| | 148,479 |
| | 150,185 |
|
Total loans and leases | 4,179,417 |
| | 4,152,763 |
| | 3,994,692 |
| | 3,955,550 |
|
Reserve for loan and lease losses | (88,897 | ) | | (91,458 | ) | | (88,112 | ) | | (87,616 | ) |
Net loans and leases | 4,090,520 |
| | 4,061,305 |
| | 3,906,580 |
| | 3,867,934 |
|
Equipment owned under operating leases, net | 117,883 |
| | 119,312 |
| | 110,371 |
| | 95,785 |
|
Net premises and equipment | 54,654 |
| | 54,506 |
| | 53,191 |
| | 51,252 |
|
Goodwill and intangible assets | 84,244 |
| | 84,386 |
| | 84,676 |
| | 84,822 |
|
Accrued income and other assets | 133,727 |
| | 135,033 |
| | 129,852 |
| | 126,102 |
|
Total assets | $ | 5,447,911 |
| | $ | 5,379,938 |
| | $ | 5,187,916 |
| | $ | 5,105,584 |
|
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LIABILITIES | | | | | | | |
Deposits: | | | | | | | |
Noninterest bearing | $ | 992,776 |
| | $ | 944,626 |
| | $ | 902,364 |
| | $ | 914,152 |
|
Interest-bearing deposits: | | | | | | | |
Interest-bearing demand | 1,417,692 |
| | 1,391,823 |
| | 1,350,417 |
| | 1,315,809 |
|
Savings | 799,891 |
| | 779,899 |
| | 745,661 |
| | 735,710 |
|
Time | 1,166,679 |
| | 1,208,736 |
| | 1,140,744 |
| | 1,053,485 |
|
Total interest-bearing deposits | 3,384,262 |
| | 3,380,458 |
| | 3,236,822 |
| | 3,105,004 |
|
Total deposits | 4,377,038 |
| | 4,325,084 |
| | 4,139,186 |
| | 4,019,156 |
|
Short-term borrowings: | | | | | | | |
Federal funds purchased and securities sold under agreements to repurchase | 167,029 |
| | 161,826 |
| | 130,662 |
| | 139,414 |
|
Other short-term borrowings | 48,978 |
| | 44,150 |
| | 102,567 |
| | 144,096 |
|
Total short-term borrowings | 216,007 |
| | 205,976 |
| | 233,229 |
| | 283,510 |
|
Long-term debt and mandatorily redeemable securities | 64,760 |
| | 64,738 |
| | 57,379 |
| | 57,577 |
|
Subordinated notes | 58,764 |
| | 58,764 |
| | 58,764 |
| | 58,764 |
|
Accrued expenses and other liabilities | 61,083 |
| | 63,620 |
| | 55,305 |
| | 47,356 |
|
Total liabilities | 4,777,652 |
| | 4,718,182 |
| | 4,543,863 |
| | 4,466,363 |
|
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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 September 30, 2016, June 30, 2016, December 31, 2015 and September 30, 2015, respectively | 436,538 |
| | 436,538 |
| | 436,538 |
| | 436,538 |
|
Retained earnings | 280,335 |
| | 270,744 |
| | 251,812 |
| | 242,102 |
|
Cost of common stock in treasury (2,338,581, 2,342,904, 2,178,090, and 2,123,527 shares at September 30, 2016, June 30, 2016, December 31, 2015, and September 30, 2015, respectively) | (56,262 | ) | | (56,357 | ) | | (50,852 | ) | | (49,120 | ) |
Accumulated other comprehensive income | 9,648 |
| | 10,831 |
| | 6,555 |
| | 9,701 |
|
Total shareholders’ equity | 670,259 |
| | 661,756 |
| | 644,053 |
| | 639,221 |
|
Total liabilities and shareholders’ equity | $ | 5,447,911 |
| | $ | 5,379,938 |
| | $ | 5,187,916 |
| | $ | 5,105,584 |
|
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| | | | | | | | | | | | | | | | | | | |
1st SOURCE CORPORATION | | | | | | | | | |
CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | |
(Unaudited - Dollars in thousands, except per share amounts) | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | June 30, | | September 30, | | September 30, | | September 30, |
| 2016 | | 2016 | | 2015 | | 2016 | | 2015 |
Interest income: | | | | | | | | | |
Loans and leases | $ | 44,965 |
| | $ | 43,891 |
| | $ | 42,560 |
| | $ | 131,592 |
| | $ | 124,747 |
|
Investment securities, taxable | 2,384 |
| | 3,040 |
| | 3,277 |
| | 8,504 |
| | 8,929 |
|
Investment securities, tax-exempt | 672 |
| | 697 |
| | 738 |
| | 2,061 |
| | 2,261 |
|
Other | 279 |
| | 309 |
| | 246 |
| | 879 |
| | 730 |
|
Total interest income | 48,300 |
| | 47,937 |
| | 46,821 |
| | 143,036 |
| | 136,667 |
|
Interest expense: | | | | | | | | | |
Deposits | 3,879 |
| | 3,790 |
| | 2,874 |
| | 11,440 |
| | 8,271 |
|
Short-term borrowings | 150 |
| | 119 |
| | 147 |
| | 430 |
| | 381 |
|
Subordinated notes | 1,055 |
| | 1,055 |
| | 1,055 |
| | 3,165 |
| | 3,165 |
|
Long-term debt and mandatorily redeemable securities | 522 |
| | 680 |
| | 536 |
| | 1,725 |
| | 1,540 |
|
Total interest expense | 5,606 |
| | 5,644 |
| | 4,612 |
| | 16,760 |
| | 13,357 |
|
Net interest income | 42,694 |
| | 42,293 |
| | 42,209 |
| | 126,276 |
| | 123,310 |
|
Provision for loan and lease losses | 2,067 |
| | 2,049 |
| | 992 |
| | 5,091 |
| | 2,160 |
|
Net interest income after provision for loan and lease losses | 40,627 |
| | 40,244 |
| | 41,217 |
| | 121,185 |
| | 121,150 |
|
Noninterest income: | | | | | | | | | |
Trust fees | 4,691 |
| | 5,108 |
| | 4,634 |
| | 14,422 |
| | 14,438 |
|
Service charges on deposit accounts | 2,366 |
| | 2,276 |
| | 2,413 |
| | 6,749 |
| | 6,977 |
|
Debit card | 2,745 |
| | 2,816 |
| | 2,583 |
| | 8,160 |
| | 7,610 |
|
Mortgage banking | 1,334 |
| | 1,115 |
| | 969 |
| | 3,495 |
| | 3,459 |
|
Insurance commissions | 1,350 |
| | 1,233 |
| | 1,460 |
| | 4,146 |
| | 4,147 |
|
Equipment rental | 6,657 |
| | 6,517 |
| | 5,881 |
| | 19,247 |
| | 16,302 |
|
Gains (losses) on investment securities available-for-sale | 989 |
| | (209 | ) | | — |
| | 790 |
| | 4 |
|
Other | 2,533 |
| | 3,441 |
| | 3,192 |
| | 9,580 |
| | 9,477 |
|
Total noninterest income | 22,665 |
| | 22,297 |
| | 21,132 |
| | 66,589 |
| | 62,414 |
|
Noninterest expense: | | | | | | | | | |
Salaries and employee benefits | 22,136 |
| | 21,194 |
| | 21,835 |
| | 64,681 |
| | 63,554 |
|
Net occupancy | 2,435 |
| | 2,307 |
| | 2,496 |
| | 7,243 |
| | 7,302 |
|
Furniture and equipment | 4,898 |
| | 4,811 |
| | 4,604 |
| | 14,499 |
| | 13,471 |
|
Depreciation - leased equipment | 5,570 |
| | 5,444 |
| | 4,858 |
| | 16,115 |
| | 13,342 |
|
Professional fees | 1,244 |
| | 1,190 |
| | 1,237 |
| | 3,653 |
| | 3,215 |
|
Supplies and communication | 1,256 |
| | 1,374 |
| | 1,307 |
| | 4,138 |
| | 4,122 |
|
FDIC and other insurance | 647 |
| | 911 |
| | 848 |
| | 2,437 |
| | 2,544 |
|
Business development and marketing | 1,263 |
| | 1,025 |
| | 1,244 |
| | 3,268 |
| | 3,507 |
|
Loan and lease collection and repossession | 324 |
| | 385 |
| | 416 |
| | 1,136 |
| | 485 |
|
Other | 1,372 |
| | 1,393 |
| | 2,223 |
| | 4,714 |
| | 5,828 |
|
Total noninterest expense | 41,145 |
| | 40,034 |
| | 41,068 |
| | 121,884 |
| | 117,370 |
|
Income before income taxes | 22,147 |
| | 22,507 |
| | 21,281 |
| | 65,890 |
| | 66,194 |
|
Income tax expense | 7,883 |
| | 8,028 |
| | 7,353 |
| | 23,329 |
| | 23,125 |
|
Net income | $ | 14,264 |
| | $ | 14,479 |
| | $ | 13,928 |
| | $ | 42,561 |
| | $ | 43,069 |
|
Per common share: | | | | | | | | | |
Basic net income per common share | $ | 0.55 |
| | $ | 0.56 |
| | $ | 0.53 |
| | $ | 1.63 |
| | $ | 1.63 |
|
Diluted net income per common share | $ | 0.55 |
| | $ | 0.56 |
| | $ | 0.53 |
| | $ | 1.63 |
| | $ | 1.63 |
|
Cash dividends | $ | 0.180 |
| | $ | 0.180 |
| | $ | 0.164 |
| | $ | 0.540 |
| | $ | 0.491 |
|
Basic weighted average common shares outstanding | 25,867,169 |
| | 25,853,537 |
| | 26,164,646 |
| | 25,881,360 |
| | 26,211,630 |
|
Diluted weighted average common shares outstanding | 25,867,169 |
| | 25,853,537 |
| | 26,164,646 |
| | 25,881,360 |
| | 26,211,630 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1st SOURCE CORPORATION | | | | | | | | | | | | | | | | | |
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | |
INTEREST RATES AND INTEREST DIFFERENTIAL | | | | | | | | | | |
(Unaudited - Dollars in thousands) | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | |
| September 30, 2016 | | June 30, 2016 | | September 30, 2015 |
| 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 | $ | 690,867 |
| | $ | 2,384 |
| | 1.37 | % | | $ | 678,849 |
| | $ | 3,040 |
| | 1.80 | % | | $ | 660,921 |
| | $ | 3,277 |
| | 1.97 | % |
Tax exempt(1) | 130,201 |
| | 973 |
| | 2.97 | % | | 126,007 |
| | 1,012 |
| | 3.23 | % | | 121,050 |
| | 1,087 |
| | 3.56 | % |
Mortgages held for sale | 14,681 |
| | 134 |
| | 3.63 | % | | 11,100 |
| | 110 |
| | 3.99 | % | | 9,610 |
| | 100 |
| | 4.13 | % |
Loans and leases, net of unearned discount(1) | 4,189,340 |
| | 44,980 |
| | 4.27 | % | | 4,105,111 |
| | 43,926 |
| | 4.30 | % | | 3,910,981 |
| | 42,527 |
| | 4.31 | % |
Other investments | 41,286 |
| | 279 |
| | 2.69 | % | | 65,568 |
| | 309 |
| | 1.90 | % | | 30,774 |
| | 246 |
| | 3.17 | % |
Total earning assets(1) | 5,066,375 |
| | 48,750 |
| | 3.83 | % | | 4,986,635 |
| | 48,397 |
| | 3.90 | % | | 4,733,336 |
| | 47,237 |
| | 3.96 | % |
Cash and due from banks | 60,665 |
| | | | | | 60,786 |
| | | | |
| | 59,172 |
| | |
| | |
|
Reserve for loan and lease losses | (92,237 | ) | | | | | | (90,107 | ) | | | | |
| | (87,109 | ) | | |
| | |
|
Other assets | 390,727 |
| | | | | | 386,316 |
| | | | |
| | 355,951 |
| | |
| | |
|
Total assets | $ | 5,425,530 |
| | | | | | $ | 5,343,630 |
| | | | |
| | $ | 5,061,350 |
| | |
| | |
|
| | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
| | | | |
| | |
| | |
| | |
|
Interest-bearing deposits | 3,393,457 |
| | 3,879 |
| | 0.45 | % | | 3,380,208 |
| | 3,790 |
| | 0.45 | % | | 3,107,108 |
| | 2,874 |
| | 0.37 | % |
Short-term borrowings | 217,460 |
| | 150 |
| | 0.27 | % | | 204,828 |
| | 119 |
| | 0.23 | % | | 266,201 |
| | 147 |
| | 0.22 | % |
Subordinated notes | 58,764 |
| | 1,055 |
| | 7.14 | % | | 58,764 |
| | 1,055 |
| | 7.22 | % | | 58,764 |
| | 1,055 |
| | 7.12 | % |
Long-term debt and mandatorily redeemable securities | 64,641 |
| | 522 |
| | 3.21 | % | | 65,906 |
| | 680 |
| | 4.15 | % | | 57,432 |
| | 536 |
| | 3.70 | % |
Total interest-bearing liabilities | 3,734,322 |
| | 5,606 |
| | 0.60 | % | | 3,709,706 |
| | 5,644 |
| | 0.61 | % | | 3,489,505 |
| | 4,612 |
| | 0.52 | % |
Noninterest-bearing deposits | 959,796 |
| | |
| | |
| | 920,194 |
| | |
| | |
| | 888,687 |
| | |
| | |
|
Other liabilities | 61,406 |
| | |
| | |
| | 54,638 |
| | |
| | |
| | 44,193 |
| | |
| | |
|
Shareholders’ equity | 670,006 |
| | |
| | |
| | 659,092 |
| | |
| | |
| | 638,965 |
| | |
| | |
|
Total liabilities and shareholders’ equity | $ | 5,425,530 |
| | |
| | |
| | $ | 5,343,630 |
| | |
| | |
| | $ | 5,061,350 |
| | |
| | |
|
Less: Fully tax-equivalent adjustments | | | (450 | ) | | | | | | (460 | ) | | | | | | (416 | ) | | |
Net interest income/margin (GAAP-derived)(1) | |
| | $ | 42,694 |
| | 3.35 | % | | |
| | $ | 42,293 |
| | 3.41 | % | | |
| | $ | 42,209 |
| | 3.54 | % |
Fully tax-equivalent adjustments | | | 450 |
| | | | | | 460 |
| | | | | | 416 |
| | |
Net interest income/margin - FTE(1) | |
| | $ | 43,144 |
| | 3.39 | % | | |
| | $ | 42,753 |
| | 3.45 | % | | |
| | $ | 42,625 |
| | 3.57 | % |
(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.
|
| | | | | | | | | | | | | | | | | | | | | |
1st SOURCE CORPORATION | | | | | | | | | | | |
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | |
INTEREST RATES AND INTEREST DIFFERENTIAL | | | | | |
(Unaudited - Dollars in thousands) | | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2016 | | September 30, 2015 |
| Average Balance | | Interest Income/Expense | | Yield/ Rate | | Average Balance | | Interest Income/Expense | | Yield/ Rate |
ASSETS | | | | | | | | | | | |
Investment securities available-for-sale: | | | | | | | | | | | |
Taxable | $ | 680,606 |
| | $ | 8,504 |
| | 1.67 | % | | $ | 664,787 |
| | $ | 8,929 |
| | 1.80 | % |
Tax exempt(1) | 126,370 |
| | 2,998 |
| | 3.17 | % | | 122,556 |
| | 3,332 |
| | 3.63 | % |
Mortgages held for sale | 11,650 |
| | 339 |
| | 3.89 | % | | 12,010 |
| | 351 |
| | 3.91 | % |
Loans and leases, net of unearned discount(1) | 4,101,284 |
| | 131,687 |
| | 4.29 | % | | 3,795,929 |
| | 124,566 |
| | 4.39 | % |
Other investments | 52,694 |
| | 879 |
| | 2.23 | % | | 31,829 |
| | 730 |
| | 3.07 | % |
Total earning assets(1) | 4,972,604 |
| | 144,407 |
| | 3.88 | % | | 4,627,111 |
| | 137,908 |
| | 3.98 | % |
Cash and due from banks | 60,103 |
| | | | | | 61,047 |
| | |
| | |
|
Reserve for loan and lease losses | (90,403 | ) | | | | | | (86,321 | ) | | |
| | |
|
Other assets | 384,366 |
| | | | | | 345,062 |
| | |
| | |
|
Total assets | $ | 5,326,670 |
| | | | | | $ | 4,946,899 |
| | |
| | |
|
| | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | |
| | |
| | |
|
Interest-bearing deposits | 3,342,828 |
| | 11,440 |
| | 0.46 | % | | 3,077,922 |
| | 8,271 |
| | 0.36 | % |
Short-term borrowings | 217,920 |
| | 430 |
| | 0.26 | % | | 241,570 |
| | 381 |
| | 0.21 | % |
Subordinated notes | 58,764 |
| | 3,165 |
| | 7.19 | % | | 58,764 |
| | 3,165 |
| | 7.20 | % |
Long-term debt and mandatorily redeemable securities | 64,351 |
| | 1,725 |
| | 3.58 | % | | 57,188 |
| | 1,540 |
| | 3.60 | % |
Total interest-bearing liabilities | 3,683,863 |
| | 16,760 |
| | 0.61 | % | | 3,435,444 |
| | 13,357 |
| | 0.52 | % |
Noninterest-bearing deposits | 926,456 |
| | |
| | |
| | 836,009 |
| | |
| | |
|
Other liabilities | 56,748 |
| | |
| | |
| | 43,835 |
| | |
| | |
|
Shareholders’ equity | 659,603 |
| | |
| | |
| | 631,611 |
| | |
| | |
|
Total liabilities and shareholders’ equity | $ | 5,326,670 |
| | |
| | |
| | $ | 4,946,899 |
| | |
| | |
|
Less: Fully tax-equivalent adjustments | | | (1,371 | ) | | | | | | (1,241 | ) | | |
Net interest income/margin (GAAP-derived)(1) | |
| | $ | 126,276 |
| | 3.39 | % | | |
| | $ | 123,310 |
| | 3.56 | % |
Fully tax-equivalent adjustments | | | 1,371 |
| | | | | | 1,241 |
| | |
Net interest income/margin - FTE(1) | |
| | $ | 127,647 |
| | 3.43 | % | | |
| | $ | 124,551 |
| | 3.60 | % |
(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 | | Nine Months Ended |
| | September 30, | June 30, | September 30, | | September 30, | September 30, |
| | 2016 | 2016 | 2015 | | 2016 | 2015 |
Calculation of Net Interest Margin | | | | | | |
(A) | Interest income (GAAP) | $ | 48,300 |
| $ | 47,937 |
| $ | 46,821 |
| | $ | 143,036 |
| $ | 136,667 |
|
| Fully tax-equivalent adjustments: | | | | | | |
(B) | - Loans and leases | 150 |
| 145 |
| 67 |
| | 434 |
| 170 |
|
(C) | - Tax-exempt investment securities | 300 |
| 315 |
| 349 |
| | 937 |
| 1,071 |
|
(D) | Interest income - FTE (A+B+C) | 48,750 |
| 48,397 |
| 47,237 |
| | 144,407 |
| 137,908 |
|
(E) | Interest expense (GAAP) | 5,606 |
| 5,644 |
| 4,612 |
| | 16,760 |
| 13,357 |
|
(F) | Net interest income (GAAP) (A-E) | 42,694 |
| 42,293 |
| 42,209 |
| | 126,276 |
| 123,310 |
|
(G) | Net interest income - FTE (D-E) | 43,144 |
| 42,753 |
| 42,625 |
| | 127,647 |
| 124,551 |
|
(H) | Annualization factor | 3.978 |
| 4.022 |
| 3.967 |
| | 1.336 |
| 1.337 |
|
(I) | Total earning assets | $ | 5,066,375 |
| $ | 4,986,635 |
| $ | 4,733,336 |
| | $ | 4,972,604 |
| $ | 4,627,111 |
|
| Net interest margin (GAAP-derived) (F*H)/I | 3.35 | % | 3.41 | % | 3.54 | % | | 3.39 | % | 3.56 | % |
| Net interest margin - FTE (G*H)/I | 3.39 | % | 3.45 | % | 3.57 | % | | 3.43 | % | 3.60 | % |
| | | | | | | |
Calculation of Efficiency Ratio | | | | | | |
(F) | Net interest income (GAAP) | $ | 42,694 |
| $ | 42,293 |
| $ | 42,209 |
| | $ | 126,276 |
| $ | 123,310 |
|
(G) | Net interest income - FTE | 43,144 |
| 42,753 |
| 42,625 |
| | 127,647 |
| 124,551 |
|
(J) | Plus: noninterest income (GAAP) | 22,665 |
| 22,297 |
| 21,132 |
| | 66,589 |
| 62,414 |
|
(K) | Less: gains/losses on investment securities and partnership investments | (1,046 | ) | (743 | ) | (477 | ) | | (2,899 | ) | (1,881 | ) |
(L) | Less: depreciation - leased equipment | (5,570 | ) | (5,444 | ) | (4,858 | ) | | (16,115 | ) | (13,342 | ) |
(M) | Total net revenue (GAAP) (F+J) | 65,359 |
| 64,590 |
| 63,341 |
| | 192,865 |
| 185,724 |
|
(N) | Total net revenue - adjusted (G+J-K-L) | 59,193 |
| 58,863 |
| 58,422 |
| | 175,222 |
| 171,742 |
|
(O) | Noninterest expense (GAAP) | 41,145 |
| 40,034 |
| 41,068 |
| | 121,884 |
| 117,370 |
|
(L) | Less: depreciation - leased equipment | (5,570 | ) | (5,444 | ) | (4,858 | ) | | (16,115 | ) | (13,342 | ) |
(P) | Noninterest expense - adjusted (O+L) | 35,575 |
| 34,590 |
| 36,210 |
| | 105,769 |
| 104,028 |
|
| Efficiency ratio (GAAP-derived) (O/M) | 62.95 | % | 61.98 | % | 64.84 | % | | 63.20 | % | 63.20 | % |
| Efficiency ratio - adjusted (P/N) | 60.10 | % | 58.76 | % | 61.98 | % | | 60.36 | % | 60.57 | % |
| | | | | | | |
| | End of Period | | | |
| | September 30, | June 30, | September 30, | | | |
| | 2016 | 2016 | 2015 | | | |
Calculation of Tangible Common Equity-to-Tangible Assets Ratio | | | | | |
(Q) | Total shareholders’ equity (GAAP) | $ | 670,259 |
| $ | 661,756 |
| $ | 639,221 |
| | | |
(R) | Less: goodwill and intangible assets | (84,244 | ) | (84,386 | ) | (84,822 | ) | | | |
(S) | Total tangible common shareholders’ equity (Q+R) | $ | 586,015 |
| $ | 577,370 |
| $ | 554,399 |
| | | |
(T) | Total assets (GAAP) | 5,447,911 |
| 5,379,938 |
| 5,105,584 |
| | | |
(R) | Less: goodwill and intangible assets | (84,244 | ) | (84,386 | ) | (84,822 | ) | | | |
(U) | Total tangible assets (T+R) | $ | 5,363,667 |
| $ | 5,295,552 |
| $ | 5,020,762 |
| | | |
| Common equity-to-assets ratio (GAAP-derived) (Q/T) | 12.30 | % | 12.30 | % | 12.52 | % | | | |
| Tangible common equity-to-tangible assets ratio (S/U) | 10.93 | % | 10.90 | % | 11.04 | % | | | |
| | | | | | | |
Calculation of Tangible Book Value per Common Share | | | | | | |
(Q) | Total shareholders’ equity (GAAP) | $ | 670,259 |
| $ | 661,756 |
| $ | 639,221 |
| | | |
(V) | Actual common shares outstanding | 25,867,093 |
| 25,862,770 |
| 26,082,147 |
| | | |
| Book value per common share (GAAP-derived) (Q/V)*1000 | $ | 25.91 |
| $ | 25.59 |
| $ | 24.51 |
| | | |
| Tangible common book value per share (S/V)*1000 | $ | 22.65 |
| $ | 22.32 |
| $ | 21.26 |
| | | |
The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP #336901 10 3)
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