Exhibit 99.1 | | | | | | | | | | | |
|
| For: | Immediate Release | Contact: | Brett Bauer |
| April 20, 2023 | | 574-235-2000 |
1st Source Corporation Reports Strong First Quarter Results,
Cash Dividend Declared
QUARTERLY HIGHLIGHTS
•Net income was $31.12 million for the quarter, up $3.73 million or 13.63% from the first quarter of 2022. Diluted net income per common share was $1.25, up $0.15 or 13.64% from the prior year’s first quarter of $1.10.
•Cash dividend of $0.32 per common share was approved, up 3.23% from the cash dividend declared a year ago.
•Average loans and leases grew $195.61 million in the first quarter, up 3.35% (13.37% annualized growth) from the previous quarter and $711.86 million, up 13.37% from the first quarter of 2022.
•Tax-equivalent net interest income was $69.79 million, down $1.88 million or 2.62% from fourth quarter 2022 and up $10.07 million, or 16.85% from the first quarter a year ago. Tax-equivalent net interest margin was 3.60%, down nine basis points from the previous quarter and up 42 basis points from the first quarter a year ago.
•Non-recurring items during the quarter included a gain on sale of renewable energy tax equity investments of $1.11 million and a $1.08 million reduction to the legal fee reserve.
South Bend, IN - 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported quarterly net income of $31.12 million for the first quarter of 2023, up 13.63% from the $27.39 million reported in the first quarter a year ago. Diluted net income per common share for the first quarter of 2023 was $1.25, up 13.63% versus $1.10 in the first quarter of 2022.
At its April 2023 meeting, the Board of Directors approved a cash dividend of $0.32 per common share, up 3.23% from the $0.31 per common share declared a year ago. The cash dividend is payable to shareholders of record on May 2, 2023, and will be paid on May 12, 2023.
Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, “We are pleased we ended 2022 in a very strong position and have started 2023 in a similar manner. We are proud of the balanced way we manage the Bank in all of its aspects: capital, assets, liquidity, and credit. In the first quarter of 2023, average loans grew $195.61 million, up 3.35% while average deposits grew $110.55 million, up 1.64% from the previous quarter. Credit quality during the quarter remained steady as we had net recoveries of $0.19 million while nonperforming assets decreased to 0.30% of average loans and leases compared to 0.45% at December 31, 2022. Most importantly, our balance sheet remained strong during the quarter. Our liquidity position remained stable, our historically conservative capital position was maintained, and deposit balances decreased modestly at period end due to rate competition and expected seasonal trends. Our approach to balance sheet management gave us comfort during an unexpectedly turbulent environment in the financial services industry towards the end of the quarter.
“We were happy to learn during the first quarter that Forbes had named 1st Source among ‘America’s Best Midsize Employers’ for the third consecutive year. The list consists of 500 companies with 1,000 - 5,000 employees. This Forbes’ ranking was compiled via a survey in partnership with Statista. Forty-five thousand participants were asked to rate, on a scale of zero to 10, their willingness to recommend their employer to others. Respondents were also asked to rate their companies on factors such as working conditions, development opportunities and compensation. Throughout the years, it’s been an honor to witness the great work achieved by our talented 1st Source team, and I know my colleagues among the executive team and our Board feel the same. It has long been our goal to provide a values-based workplace and culture that makes every team member feel included and supported. We will do all we can to continue making this Company a special place with a client facing mission and a commitment to providing attractive career development opportunities for all our colleagues, leading to productive and rich lives,” Mr. Murphy concluded.
FIRST QUARTER 2023 FINANCIAL RESULTS
Loans
First quarter average loans and leases of $6.04 billion increased $195.61 million, up 3.35% from the previous quarter and increased $711.86 million, up 13.37% from the year ago quarter a year ago. Strong growth occurred primarily within our Auto and Light Truck and Construction Equipment portfolios.
We have traditionally maintained a conservative approach to commercial real estate loans and non-owner occupied properties. At March 31, 2023, 43% of our loans which are collateralized by commercial real estate are non-owner occupied. We have an immaterial amount of commercial real estate related to office buildings. All are performing as agreed and as expected.
Deposits
Average deposits of $6.87 billion, which include brokered deposits, grew $110.54 million, up 1.64% from the previous quarter and grew $252.14 million or 3.81% compared to the quarter ended March 31, 2022.
As shown in the Deposit Mix charts below, end of period deposits were $6.80 billion at March 31, 2023, compared to $6.93 billion at December 31, 2022. Balances were modestly lower primarily due to expected first quarter seasonal outflows which aligned with movements experienced in pre-pandemic years, greater utilization of excess funds by our business customers, drawdown of stimulus monies in consumer accounts, and a heightened rate sensitivity in our entire customer base given the overall level of market yields. Rate competition for deposits increased during the quarter from various areas including traditional bank and credit union competitors, money market funds, bond markets, and other non-bank alternatives.
Deposit Mix, Quarter-over-Quarter, End of Period:
As seen in the Deposit Mix charts above, our deposits are well-diversified with a stable profile which is largely representative of the local communities we serve in Northern Indiana and Southwestern Michigan. Our specialty finance niche, which operates among diverse industries nationally only accounted for 3.46% of total deposits at March 31, 2023. For the full bank, we had approximately 225,500 total accounts with an average balance of $30,150. Uninsured deposits net of public fund deposits represented 29.14% of total deposits at March 31, 2023 compared to 30.07% at December 31, 2022. Uninsured deposits as a percentage of total deposits, including public funds, was 45.95% at March 31, 2023, compared to 47.67% at December 31, 2022.
Net Interest Income and Net Interest Margin
First quarter 2023 tax-equivalent net interest income of $69.79 million declined $1.88 million, down 2.62% from the previous quarter and increased $10.07 million, up 16.85% from the first quarter a year ago.
First quarter 2023 net interest margin was 3.59%, a decline of nine basis points from the 3.68% in the previous quarter and an increase of 42 basis points from the same period in 2022. On a fully tax-equivalent basis, first quarter 2023 net interest margin was 3.60%, down by nine basis points compared to the 3.69% in the previous quarter and an increase of 42 basis points from the same period in 2022. The nine basis point decrease to the net interest margin from the prior quarter was primarily due to increased time deposit balances as clients took advantage of rate increases on certificate of deposit and higher short-term borrowings to meet loan funding needs.
Interest expense on mandatorily redeemable securities due to book value adjustments had a negative six basis point impact during the quarter compared to a positive five basis point impact during the first quarter of 2022, amounting to a net 11 basis point swing in the margin. Higher market rates due to multiple Federal Reserve rate increases during 2022 and 2023 contributed to net interest margin expansion compared to the previous year’s first quarter.
Noninterest Income
First quarter 2023 noninterest income of $23.32 million was relatively flat from the previous quarter and increased $0.18 million, or 0.77% from the first quarter a year ago.
The increase in noninterest income for the first quarter of 2023 compared to a year ago was mainly due to gains on the sale of renewable energy tax equity investments of $1.11 million offset by lower equipment rental income due to a decrease in the size of the average equipment rental portfolio and a reduction in mortgage banking income. Equipment rental income continued to shrink as demand for operating leases declined and elevated mortgage interest rates have negatively impacted origination volumes and housing affordability.
Noninterest Expense
First quarter 2023 noninterest expense of $49.42 million increased $1.04 million, or 2.16% from the prior quarter and increased $4.09 million, or 9.01% from the first quarter a year ago.
The increase in noninterest expense for the first quarter of 2023 was mainly the result of higher salaries from normal merit increases and an increase in the number of employees, a rise in group insurance claims, increased data processing on technology projects, higher FDIC insurance premiums due to a two basis-point increase in assessment rates during the first quarter 2023, and a rise in business development and marketing expense from marketing promotions. These increases were offset by a $1.08 million reversal of accrued legal fees and lower leased equipment depreciation.
Credit
The allowance for loan and lease losses as of March 31, 2023, was 2.33% of total loans and leases compared to 2.32% at December 31, 2022, and 2.41% at March 31, 2022. Excluding Paycheck Protection Program loans from the March 31, 2022 calculation results in an allowance of 2.43%. Net recoveries of $0.19 million were recorded for the first quarter of 2023 compared with $1.81 million of net charge-offs in the prior quarter and net recoveries of $0.23 million in the same quarter a year ago.
The provision for credit losses was $3.05 million for the first quarter of 2023, a decrease of $2.29 million from the previous quarter and an increase of $0.82 million compared with the same period in 2022. The decrease in provision for credit losses during the quarter was primarily due to lower loan growth compared to the previous quarter. The ratio of nonperforming assets to loans and leases was 0.30% as of March 31, 2023, compared to 0.45% on December 31, 2022, and 0.66% on March 31, 2022.
Capital
As of March 31, 2023, the common equity-to-assets ratio was 10.91%, compared to 10.36% at December 31, 2022, and 10.79% a year ago. The tangible common equity-to-tangible assets ratio was 10.01% at March 31, 2023, compared to 9.45% at December 31, 2022, and 9.85% a year earlier.
Book value per share increased to $36.81 primarily due to positive market value adjustments to our investment securities available-for-sale portfolio during the quarter. Market value adjustments of $20.23 million increased common shareholder's equity and were the result of market conditions subsequent to purchase.
During the first quarter of 2023, 16,359 shares were repurchased for treasury reducing common shareholder’s equity by $0.77 million.
We have a long history of maintaining conservative capital levels and our risk based capital ratios remained strong during the first quarter, even when adjusting for unrealized losses on the available-for-sale securities portfolio as shown below.
| | | | | | | | | | | |
| Ratio
As Reported | Ratio
Adjusted for Unrealized Losses on Available-for-Sale Securities | To Be Well Capitalized Under Prompt Corrective Actions Provisions |
| March 31, 2023 | | | |
| Total Capital (to Risk-Weighted Assets): | 16.41% | 14.61% | 10.00% |
| Tier 1 Capital (to Risk-Weighted Assets): | 15.15% | 13.35% | 8.00% |
| Common Equity Tier 1 Capital (to Risk-Weighted Assets): | 13.51% | 11.71% | 6.50% |
| Tier 1 Capital (to Average Assets): | 12.72% | 11.46% | 5.00% |
| | | |
| December 31, 2022 | | | |
| Total Capital (to Risk-Weighted Assets): | 16.10% | 14.01% | 10.00% |
| Tier 1 Capital (to Risk-Weighted Assets): | 14.84% | 12.75% | 8.00% |
| Common Equity Tier 1 Capital (to Risk-Weighted Assets): | 13.19% | 11.10% | 6.50% |
| Tier 1 Capital (to Average Assets): | 12.63% | 11.13% | 5.00% |
Liquidity
We maintain prudent strategies to support a strong liquidity position. The following table represents our expanded sources of liquidity as of March 31, 2023.
| | | | | | | | | | | |
| (Dollars in thousands) | Total Available | Utilized | Net Available |
| Internal Sources | | | |
| Free securities | $ | 1,713,480 | | $ | 284,671 | | $ | 1,428,809 | |
| External Sources | | | |
FHLB advances(1) | 631,811 | | 245,896 | | 385,915 | |
FRB borrowings(2) | 401,312 | | — | | 401,312 | |
Fed funds purchased(3) | 245,000 | | — | | 245,000 | |
Brokered deposits(4) | 833,491 | | 468,956 | | 364,535 | |
Listing services deposits(4) | 416,745 | | 24,197 | | 392,548 | |
| Total liquidity | $ | 4,241,839 | | $ | 1,023,720 | | $ | 3,218,119 | |
| % of Total deposits net brokered and listing services certificates of deposit. | 51.01 | % |
| (1) Availability contingent on the FHLB activity-based stock ownership requirement |
| (2) Includes access to discount window and Bank Term Funding Program |
| (3) Availability contingent on correspondent bank approvals at time of borrowing |
| (4) Availability contingent on internal borrowing guidelines |
External sources as listed in the table above were managed to approved guidelines by our Board of Directors. FHLB and FRB capacities were secured borrowings backed by pledged collateral primarily from our loan and lease portfolios. Total net available liquidity was $3.22 billion at March 31, 2023, which accounted for 51.01% of total deposits net of brokered and listing services certificates of deposit.
Our investment portfolio is managed with a prioritized focus on liquidity. Investment securities accounted for 20.57% of total assets at March 31, 2023, with the entirety of the portfolio classified as available-for-sale. We had no held-to-maturity securities therefore all market value adjustments resulting in unrealized gains and losses were reflected on our Consolidated Statements of Financial Condition. The sectors in our investment securities portfolio included U.S. Treasury and Federal agencies (57%), mortgage-backed securities (36%), highly rated municipals (6%), and highly rated corporates and foreign bonds (1%). Mortgage-backed securities only consisted of retail mortgage pools backed by a government-sponsored enterprise. There was no exposure to commercial real-estate in our investment portfolio. The modified duration of the total investment portfolio was calculated at 3.4 years. The ratio of accumulated other comprehensive loss to the fair value of the total investment portfolio improved to 6.78% at March 31, 2023, from 7.50% at December 31, 2022.
The following table shows the scheduled maturities and cash flows of securities available-for-sale at fair value as of March 31, 2023.
| | | | | | | | |
| (Dollars in thousands) | Fair Value | % of Total |
| 3 months or less | $ | 16,606 | | 0.97 | % |
| Over 3 months through 12 months | 80,596 | | 4.70 | % |
| Over 1 year through 3 years | 597,315 | | 34.86 | % |
| Over 3 years through 5 years | 367,195 | | 21.43 | % |
| Over 5 years through 15 years | 398,346 | | 23.25 | % |
| Over 15 years | 253,422 | | 14.79 | % |
| Total investment securities available-for-sale | $ | 1,713,480 | | 100.00 | % |
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 its clients, individuals, businesses and 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 79 banking centers, 19 1st Source Bank Specialty Finance Group locations nationwide, nine Wealth Advisory Services locations and 10 1st Source Insurance offices.
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,” “hope,” “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.
# # #
(charts attached)
| | | | | | | | | | | | | | | | | | | | |
| 1st SOURCE CORPORATION | | | | | | |
| 1st QUARTER 2023 FINANCIAL HIGHLIGHTS | | | | | | |
| (Unaudited - Dollars in thousands, except per share data) | | | | | | |
| Three Months Ended | | |
| March 31, | December 31, | March 31, | | | |
| 2023 | 2022 | 2022 | | | |
| AVERAGE BALANCES | | | | | | |
| Assets | $ | 8,323,431 | | $ | 8,171,095 | | $ | 8,008,738 | | | | |
| Earning assets | 7,864,595 | | 7,707,769 | | 7,620,248 | | | | |
| Investments | 1,768,621 | | 1,795,200 | | 1,887,055 | | | | |
| Loans and leases | 6,036,203 | | 5,840,593 | | 5,324,344 | | | | |
| Deposits | 6,869,006 | | 6,758,465 | | 6,616,869 | | | | |
| Interest bearing liabilities | 5,345,498 | | 5,086,446 | | 4,913,453 | | | | |
| Common shareholders’ equity | 890,294 | | 846,449 | | 910,793 | | | | |
| Total equity | 949,879 | | 906,613 | | 964,156 | | | | |
| INCOME STATEMENT DATA | | | | | | |
| Net interest income | $ | 69,565 | | $ | 71,455 | | $ | 59,618 | | | | |
Net interest income - FTE(1) | 69,791 | | 71,670 | | 59,726 | | | | |
| Provision for credit losses | 3,049 | | 5,342 | | 2,233 | | | | |
| Noninterest income | 23,323 | | 23,280 | | 23,145 | | | | |
| Noninterest expense | 49,421 | | 48,377 | | 45,336 | | | | |
| Net income | 31,131 | | 31,056 | | 27,401 | | | | |
| Net income available to common shareholders | 31,124 | | 31,068 | | 27,390 | | | | |
| PER SHARE DATA | | | | | | |
| Basic net income per common share | $ | 1.25 | | $ | 1.25 | | $ | 1.10 | | | | |
| Diluted net income per common share | 1.25 | | 1.25 | | 1.10 | | | | |
| Common cash dividends declared | 0.32 | | 0.32 | | 0.31 | | | | |
Book value per common share(2) | 36.81 | | 35.04 | | 34.97 | | | | |
Tangible book value per common share(1) | 33.42 | | 31.63 | | 31.57 | | | | |
| Market value - High | 53.85 | | 59.94 | | 52.70 | | | | |
| Market value - Low | 42.50 | | 46.40 | | 45.78 | | | | |
| Basic weighted average common shares outstanding | 24,687,087 | | 24,658,294 | | 24,743,790 | | | | |
| Diluted weighted average common shares outstanding | 24,687,087 | | 24,658,294 | | 24,743,790 | | | | |
| KEY RATIOS | | | | | | |
| Return on average assets | 1.52 | % | 1.51 | % | 1.39 | % | | | |
| Return on average common shareholders’ equity | 14.18 | | 14.56 | | 12.20 | | | | |
End of period long-term assets to total assets(3) | 17.40 | | 18.35 | | 21.08 | | | | |
| End of period loans to deposits | 89.93 | | 86.76 | | 80.83 | | | | |
| End of period available-for-sale securities to uninsured deposits | 54.83 | | 53.75 | | 58.88 | | | | |
| Average common shareholders’ equity to average assets | 10.70 | | 10.36 | | 11.37 | | | | |
End of period tangible common equity to tangible assets(1) | 10.01 | | 9.45 | | 9.85 | | | | |
End of period tangible common equity (excluding accumulated other comprehensive losses) to tangible assets(1) | 11.55 | | 11.24 | | 10.87 | | | | |
| End of period accumulated other comprehensive losses to investments | 6.78 | | 7.50 | | 4.10 | | | | |
| End of period accumulated other comprehensive losses to assets | 1.53 | | 1.77 | | 1.32 | | | | |
| End of period accumulated other comprehensive losses to tangible common equity | 15.45 | | 18.93 | | 10.31 | | | | |
Risk-based capital - Common Equity Tier 1(4) | 13.51 | | 13.19 | | 13.88 | | | | |
Risk-based capital - Tier 1(4) | 15.15 | | 14.84 | | 15.67 | | | | |
Risk-based capital - Total(4) | 16.41 | | 16.10 | | 16.93 | | | | |
| Net interest margin | 3.59 | | 3.68 | | 3.17 | | | | |
Net interest margin - FTE(1) | 3.60 | | 3.69 | | 3.18 | | | | |
| Efficiency ratio: expense to revenue | 53.20 | | 51.07 | | 54.78 | | | | |
Efficiency ratio: expense to revenue - adjusted(1) | 52.92 | | 51.05 | | 53.29 | | | | |
| Net (recoveries) charge offs to average loans and leases | (0.01) | | 0.12 | | (0.02) | | | | |
| Loan and lease loss allowance to loans and leases | 2.33 | | 2.32 | | 2.41 | | | | |
| Nonperforming assets to loans and leases | 0.30 | | 0.45 | | 0.66 | | | | |
| | | | | | | | | | | | | | | | | | | | |
| 1st SOURCE CORPORATION | | | | | | |
| 1st QUARTER 2023 FINANCIAL HIGHLIGHTS - CONTINUED | | | | | |
| (Unaudited - Dollars in thousands, except per share data) | | | | | | |
| March 31, | December 31, | September 30, | | June 30, | March 31, |
| 2023 | 2022 | 2022 | | 2022 | 2022 |
| END OF PERIOD BALANCES | | | | | | |
| Assets | $ | 8,329,803 | | $ | 8,339,416 | | $ | 8,097,486 | | | $ | 8,029,359 | | $ | 8,012,463 | |
| Loans and leases | 6,116,716 | | 6,011,162 | | 5,762,078 | | | 5,551,216 | | 5,394,003 | |
| Deposits | 6,801,464 | | 6,928,265 | | 6,621,231 | | | 6,744,896 | | 6,673,092 | |
| Allowance for loan and lease losses | 142,511 | | 139,268 | | 135,736 | | | 132,865 | | 129,959 | |
| Goodwill and intangible assets | 83,901 | | 83,907 | | 83,911 | | | 83,916 | | 83,921 | |
| Common shareholders’ equity | 909,159 | | 864,068 | | 826,059 | | | 856,251 | | 864,850 | |
| Total equity | 968,444 | | 923,766 | | 886,360 | | | 910,667 | | 919,470 | |
| ASSET QUALITY | | | | | | |
| Loans and leases past due 90 days or more | $ | 24 | | $ | 54 | | $ | 165 | | | $ | 50 | | $ | 274 | |
| Nonaccrual loans and leases | 18,062 | | 26,420 | | 27,813 | | | 33,490 | | 35,435 | |
| Other real estate | 117 | | 104 | | — | | | — | | — | |
| Repossessions | 445 | | 327 | | 26 | | | 102 | | 73 | |
| Equipment owned under operating leases | — | | 22 | | 1 | | | 43 | | 343 | |
| Total nonperforming assets | $ | 18,648 | | $ | 26,927 | | $ | 28,005 | | | $ | 33,685 | | $ | 36,125 | |
(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.
(2) Calculated as common shareholders’ equity divided by common shares outstanding at the end of the period.
(3) Calculated as the sum of available-for-sale securities and loan and leases that mature or reprice in over 5 years as a percent of total assets.
(4) Calculated under banking regulatory guidelines.
| | | | | | | | | | | | | | | | | | | | | | | |
| 1st SOURCE CORPORATION | | | | | | | |
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | | | | | | | |
| (Unaudited - Dollars in thousands) | | | | | | | |
| March 31, | | December 31, | | September 30, | | March 31, |
| 2023 | | 2022 | | 2022 | | 2022 |
| ASSETS | | | | | | | |
| Cash and due from banks | $ | 66,866 | | | $ | 84,703 | | | $ | 86,952 | | | $ | 69,195 | |
| Federal funds sold and interest bearing deposits with other banks | 27,171 | | | 38,094 | | | 30,652 | | | 347,697 | |
| Investment securities available-for-sale | 1,713,480 | | | 1,775,128 | | | 1,801,194 | | | 1,857,431 | |
| Other investments | 25,293 | | | 25,293 | | | 25,538 | | | 25,538 | |
| Mortgages held for sale | 2,068 | | | 3,914 | | | 3,058 | | | 4,757 | |
| Loans and leases, net of unearned discount: | | | | | | | |
| Commercial and agricultural | 795,429 | | | 812,031 | | | 835,762 | | | 869,093 | |
| Solar | 375,330 | | | 381,163 | | | 358,635 | | | 337,485 | |
| Auto and light truck | 875,564 | | | 808,117 | | | 743,324 | | | 629,780 | |
| Medium and heavy duty truck | 326,588 | | | 313,862 | | | 293,068 | | | 255,277 | |
| Aircraft | 1,056,829 | | | 1,077,722 | | | 997,995 | | | 957,040 | |
| Construction equipment | 991,412 | | | 938,503 | | | 878,692 | | | 775,972 | |
| Commercial real estate | 954,221 | | | 943,745 | | | 937,423 | | | 920,807 | |
| Residential real estate and home equity | 594,618 | | | 584,737 | | | 568,602 | | | 510,537 | |
| Consumer | 146,725 | | | 151,282 | | | 148,577 | | | 138,012 | |
| Total loans and leases | 6,116,716 | | | 6,011,162 | | | 5,762,078 | | | 5,394,003 | |
| Allowance for loan and lease losses | (142,511) | | | (139,268) | | | (135,736) | | | (129,959) | |
| Net loans and leases | 5,974,205 | | | 5,871,894 | | | 5,626,342 | | | 5,264,044 | |
| Equipment owned under operating leases, net | 30,083 | | | 31,700 | | | 32,964 | | | 41,792 | |
| Net premises and equipment | 44,034 | | | 44,773 | | | 44,837 | | | 45,960 | |
| Goodwill and intangible assets | 83,901 | | | 83,907 | | | 83,911 | | | 83,921 | |
| Accrued income and other assets | 362,702 | | | 380,010 | | | 362,038 | | | 272,128 | |
| Total assets | $ | 8,329,803 | | | $ | 8,339,416 | | | $ | 8,097,486 | | | $ | 8,012,463 | |
| LIABILITIES | | | | | | | |
| Deposits: | | | | | | | |
| Noninterest-bearing demand | $ | 1,815,123 | | | $ | 1,998,151 | | | $ | 2,047,328 | | | $ | 2,061,111 | |
| Interest-bearing deposits: | | | | | | | |
| Interest-bearing demand | 2,403,818 | | | 2,591,464 | | | 2,527,461 | | | 2,430,979 | |
| Savings | 1,171,418 | | | 1,198,191 | | | 1,267,531 | | | 1,328,981 | |
| Time | 1,411,105 | | | 1,140,459 | | | 778,911 | | | 852,021 | |
| Total interest-bearing deposits | 4,986,341 | | | 4,930,114 | | | 4,573,903 | | | 4,611,981 | |
| Total deposits | 6,801,464 | | | 6,928,265 | | | 6,621,231 | | | 6,673,092 | |
| Short-term borrowings: | | | | | | | |
| Federal funds purchased and securities sold under agreements to repurchase | 73,396 | | | 141,432 | | | 145,192 | | | 193,798 | |
| Other short-term borrowings | 229,640 | | | 74,097 | | | 195,270 | | | 5,360 | |
| Total short-term borrowings | 303,036 | | | 215,529 | | | 340,462 | | | 199,158 | |
| Long-term debt and mandatorily redeemable securities | 46,714 | | | 46,555 | | | 47,587 | | | 69,563 | |
| Subordinated notes | 58,764 | | | 58,764 | | | 58,764 | | | 58,764 | |
| Accrued expenses and other liabilities | 151,381 | | | 166,537 | | | 143,082 | | | 92,416 | |
| Total liabilities | 7,361,359 | | | 7,415,650 | | | 7,211,126 | | | 7,092,993 | |
| 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 March 31, 2023, December 31, 2022, September 30, 2022, and March 31, 2022, respectively | 436,538 | | | 436,538 | | | 436,538 | | | 436,538 | |
| Retained earnings | 719,495 | | | 694,862 | | | 671,541 | | | 624,503 | |
Cost of common stock in treasury (3,510,122, 3,543,388, 3,548,496, and 3,473,139 shares at March 31, 2023, December 31, 2022, September 30, 2022, and March 31, 2022, respectively) | (119,409) | | | (119,642) | | | (119,743) | | | (115,654) | |
| Accumulated other comprehensive loss | (127,465) | | | (147,690) | | | (162,277) | | | (80,537) | |
| Total shareholders’ equity | 909,159 | | | 864,068 | | | 826,059 | | | 864,850 | |
| Noncontrolling interests | 59,285 | | | 59,698 | | | 60,301 | | | 54,620 | |
| Total equity | 968,444 | | | 923,766 | | | 886,360 | | | 919,470 | |
| Total liabilities and equity | $ | 8,329,803 | | | $ | 8,339,416 | | | $ | 8,097,486 | | | $ | 8,012,463 | |
| | | | | | | | | | | | | | | | | | | | | |
| 1st SOURCE CORPORATION | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME | | | | | | | | | |
| (Unaudited - Dollars in thousands, except per share amounts) | | | | | | | | |
| Three Months Ended | | |
| March 31, | | December 31, | | March 31, | | | | |
| 2023 | | 2022 | | 2022 | | | | |
| Interest income: | | | | | | | | | |
| Loans and leases | $ | 86,689 | | | $ | 79,244 | | | $ | 55,208 | | | | | |
| Investment securities, taxable | 6,648 | | | 6,970 | | | 6,344 | | | | | |
| Investment securities, tax-exempt | 482 | | | 419 | | | 134 | | | | | |
| Other | 637 | | | 627 | | | 363 | | | | | |
| Total interest income | 94,456 | | | 87,260 | | | 62,049 | | | | | |
| Interest expense: | | | | | | | | | |
| Deposits | 21,263 | | | 12,746 | | | 2,376 | | | | | |
| Short-term borrowings | 1,393 | | | 1,070 | | | 24 | | | | | |
| Subordinated notes | 1,020 | | | 972 | | | 823 | | | | | |
| Long-term debt and mandatorily redeemable securities | 1,215 | | | 1,017 | | | (792) | | | | | |
| Total interest expense | 24,891 | | | 15,805 | | | 2,431 | | | | | |
| Net interest income | 69,565 | | | 71,455 | | | 59,618 | | | | | |
| Provision for credit losses | 3,049 | | | 5,342 | | | 2,233 | | | | | |
| Net interest income after provision for credit losses | 66,516 | | | 66,113 | | | 57,385 | | | | | |
| Noninterest income: | | | | | | | | | |
| Trust and wealth advisory | 5,679 | | | 5,608 | | | 5,914 | | | | | |
| Service charges on deposit accounts | 3,003 | | | 3,172 | | | 2,792 | | | | | |
| Debit card | 4,507 | | | 4,669 | | | 4,194 | | | | | |
| Mortgage banking | 802 | | | 819 | | | 1,377 | | | | | |
| Insurance commissions | 2,029 | | | 1,535 | | | 1,905 | | | | | |
| Equipment rental | 2,503 | | | 2,556 | | | 3,662 | | | | | |
| Losses on investment securities available-for-sale | (44) | | | (184) | | | — | | | | | |
| Other | 4,844 | | | 5,105 | | | 3,301 | | | | | |
| Total noninterest income | 23,323 | | | 23,280 | | | 23,145 | | | | | |
| Noninterest expense: | | | | | | | | | |
| Salaries and employee benefits | 28,597 | | | 27,695 | | | 25,467 | | | | | |
| Net occupancy | 2,622 | | | 2,811 | | | 2,811 | | | | | |
| Furniture and equipment | 1,307 | | | 1,397 | | | 1,295 | | | | | |
| Data processing | 6,157 | | | 5,963 | | | 5,208 | | | | | |
| Depreciation – leased equipment | 2,022 | | | 2,111 | | | 3,015 | | | | | |
| Professional fees | 682 | | | 2,039 | | | 1,608 | | | | | |
| FDIC and other insurance | 1,360 | | | 943 | | | 850 | | | | | |
| Business development and marketing | 1,972 | | | 1,471 | | | 1,268 | | | | | |
| | | | | | | | | |
| Other | 4,702 | | | 3,947 | | | 3,814 | | | | | |
| Total noninterest expense | 49,421 | | | 48,377 | | | 45,336 | | | | | |
| Income before income taxes | 40,418 | | | 41,016 | | | 35,194 | | | | | |
| Income tax expense | 9,287 | | | 9,960 | | | 7,793 | | | | | |
| Net income | 31,131 | | | 31,056 | | | 27,401 | | | | | |
| Net (income) loss attributable to noncontrolling interests | (7) | | | 12 | | | (11) | | | | | |
| Net income available to common shareholders | $ | 31,124 | | | $ | 31,068 | | | $ | 27,390 | | | | | |
| Per common share: | | | | | | | | | |
| Basic net income per common share | $ | 1.25 | | | $ | 1.25 | | | $ | 1.10 | | | | | |
| Diluted net income per common share | $ | 1.25 | | | $ | 1.25 | | | $ | 1.10 | | | | | |
| Cash dividends | $ | 0.32 | | | $ | 0.32 | | | $ | 0.31 | | | | | |
| Basic weighted average common shares outstanding | 24,687,087 | | | 24,658,294 | | | 24,743,790 | | | | | |
| Diluted weighted average common shares outstanding | 24,687,087 | | | 24,658,294 | | | 24,743,790 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1st SOURCE CORPORATION | | | | | | | | | | | | | | | | | |
| DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | |
| INTEREST RATES AND INTEREST DIFFERENTIAL | | | | | | | | | | |
| (Unaudited - Dollars in thousands) | | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | |
| March 31, 2023 | | December 31, 2022 | | March 31, 2022 |
| 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 | $ | 1,711,177 | | | $ | 6,648 | | | 1.58 | % | | $ | 1,742,567 | | | $ | 6,970 | | | 1.59 | % | | $ | 1,857,557 | | | $ | 6,344 | | | 1.39 | % |
Tax exempt(1) | 57,444 | | | 605 | | | 4.27 | % | | 52,633 | | | 525 | | | 3.96 | % | | 29,498 | | | 165 | | | 2.27 | % |
| Mortgages held for sale | 2,410 | | | 32 | | | 5.38 | % | | 2,834 | | | 40 | | | 5.60 | % | | 8,791 | | | 67 | | | 3.09 | % |
Loans and leases, net of unearned discount(1) | 6,036,203 | | | 86,760 | | | 5.83 | % | | 5,840,593 | | | 79,313 | | | 5.39 | % | | 5,324,344 | | | 55,218 | | | 4.21 | % |
| Other investments | 57,361 | | | 637 | | | 4.50 | % | | 69,142 | | | 627 | | | 3.60 | % | | 400,058 | | | 363 | | | 0.37 | % |
Total earning assets(1) | 7,864,595 | | | 94,682 | | | 4.88 | % | | 7,707,769 | | | 87,475 | | | 4.50 | % | | 7,620,248 | | | 62,157 | | | 3.31 | % |
| Cash and due from banks | 71,921 | | | | | | | 76,843 | | | | | | | 77,063 | | | | | |
| Allowance for loan and lease losses | (141,054) | | | | | | | (137,350) | | | | | | | (128,647) | | | | | |
| Other assets | 527,969 | | | | | | | 523,833 | | | | | | | 440,074 | | | | | |
| Total assets | $ | 8,323,431 | | | | | | | $ | 8,171,095 | | | | | | | $ | 8,008,738 | | | | | |
| | | | | | | | | | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | |
| Interest-bearing deposits | $ | 4,988,093 | | | $ | 21,263 | | | 1.73 | % | | $ | 4,718,303 | | | $ | 12,746 | | | 1.07 | % | | $ | 4,587,242 | | | $ | 2,376 | | | 0.21 | % |
| Short-term borrowings: | | | | | | | | | | | | | | | | | |
| Securities sold under agreements to repurchase | 134,501 | | | 40 | | | 0.12 | % | | 137,248 | | | 18 | | | 0.05 | % | | 192,108 | | | 23 | | | 0.05 | % |
| Other short-term borrowings | 118,760 | | | 1,353 | | | 4.62 | % | | 125,078 | | | 1,052 | | | 3.34 | % | | 5,372 | | | 1 | | | 0.08 | % |
| Subordinated notes | 58,764 | | | 1,020 | | | 7.04 | % | | 58,764 | | | 972 | | | 6.56 | % | | 58,764 | | | 823 | | | 5.68 | % |
| Long-term debt and mandatorily redeemable securities | 45,380 | | | 1,215 | | | 10.86 | % | | 47,053 | | | 1,017 | | | 8.58 | % | | 69,967 | | | (792) | | | (4.59) | % |
| Total interest-bearing liabilities | 5,345,498 | | | 24,891 | | | 1.89 | % | | 5,086,446 | | | 15,805 | | | 1.23 | % | | 4,913,453 | | | 2,431 | | | 0.20 | % |
| Noninterest-bearing deposits | 1,880,913 | | | | | | | 2,040,162 | | | | | | | 2,029,627 | | | | | |
| Other liabilities | 147,141 | | | | | | | 137,874 | | | | | | | 101,502 | | | | | |
| Shareholders’ equity | 890,294 | | | | | | | 846,449 | | | | | | | 910,793 | | | | | |
| Noncontrolling interests | 59,585 | | | | | | | 60,164 | | | | | | | 53,363 | | | | | |
| Total liabilities and equity | $ | 8,323,431 | | | | | | | $ | 8,171,095 | | | | | | | $ | 8,008,738 | | | | | |
| Less: Fully tax-equivalent adjustments | | | (226) | | | | | | | (215) | | | | | | | (108) | | | |
Net interest income/margin (GAAP-derived)(1) | | | $ | 69,565 | | | 3.59 | % | | | | $ | 71,455 | | | 3.68 | % | | | | $ | 59,618 | | | 3.17 | % |
| Fully tax-equivalent adjustments | | | 226 | | | | | | | 215 | | | | | | | 108 | | | |
Net interest income/margin - FTE(1) | | | $ | 69,791 | | | 3.60 | % | | | | $ | 71,670 | | | 3.69 | % | | | | $ | 59,726 | | | 3.18 | % |
| (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 | | |
| | March 31, | December 31, | March 31, | | | |
| | 2023 | 2022 | 2022 | | | |
| Calculation of Net Interest Margin | | | | | | |
| (A) | Interest income (GAAP) | $ | 94,456 | | $ | 87,260 | | $ | 62,049 | | | | |
| Fully tax-equivalent adjustments: | | | | | | |
| (B) | – Loans and leases | 103 | | 109 | | 77 | | | | |
| (C) | – Tax exempt investment securities | 123 | | 106 | | 31 | | | | |
| (D) | Interest income – FTE (A+B+C) | 94,682 | | 87,475 | | 62,157 | | | | |
| (E) | Interest expense (GAAP) | 24,891 | | 15,805 | | 2,431 | | | | |
| (F) | Net interest income (GAAP) (A-E) | 69,565 | | 71,455 | | 59,618 | | | | |
| (G) | Net interest income - FTE (D-E) | 69,791 | | 71,670 | | 59,726 | | | | |
| (H) | Annualization factor | 4.056 | | 3.967 | | 4.056 | | | | |
| (I) | Total earning assets | $ | 7,864,595 | | $ | 7,707,769 | | $ | 7,620,248 | | | | |
| Net interest margin (GAAP-derived) (F*H)/I | 3.59 | % | 3.68 | % | 3.17 | % | | | |
| Net interest margin – FTE (G*H)/I | 3.60 | % | 3.69 | % | 3.18 | % | | | |
| | | | | | | |
| Calculation of Efficiency Ratio | | | | | | |
| (F) | Net interest income (GAAP) | $ | 69,565 | | $ | 71,455 | | $ | 59,618 | | | | |
| (G) | Net interest income – FTE | 69,791 | | 71,670 | | 59,726 | | | | |
| (J) | Plus: noninterest income (GAAP) | 23,323 | | 23,280 | | 23,145 | | | | |
| (K) | Less: gains/losses on investment securities and partnership investments | (1,522) | | (2,216) | | (444) | | | | |
| (L) | Less: depreciation – leased equipment | (2,022) | | (2,111) | | (3,015) | | | | |
| (M) | Total net revenue (GAAP) (F+J) | 92,888 | | 94,735 | | 82,763 | | | | |
| (N) | Total net revenue – adjusted (G+J–K–L) | 89,570 | | 90,623 | | 79,412 | | | | |
| (O) | Noninterest expense (GAAP) | 49,421 | | 48,377 | | 45,336 | | | | |
| (L) | Less:depreciation – leased equipment | (2,022) | | (2,111) | | (3,015) | | | | |
| | | | | | | |
| (P) | Noninterest expense – adjusted (O–L) | 47,399 | | 46,266 | | 42,321 | | | | |
| Efficiency ratio (GAAP-derived) (O/M) | 53.20 | % | 51.07 | % | 54.78 | % | | | |
| Efficiency ratio – adjusted (P/N) | 52.92 | % | 51.05 | % | 53.29 | % | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | |
| 1st SOURCE CORPORATION | | | | | |
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - CONTINUED | | | | | |
| (Unaudited - Dollars in thousands, except per share data) | | | | |
| | End of Period | | | |
| | March 31, | December 31, | March 31, | | | |
| | 2023 | 2022 | 2022 | | | |
| Calculation of Tangible Common Equity-to-Tangible Assets Ratio | | | | | |
| (Q) | Total common shareholders’ equity (GAAP) | $ | 909,159 | | $ | 864,068 | | $ | 864,850 | | | | |
| (R) | Less: goodwill and intangible assets | (83,901) | | (83,907) | | (83,921) | | | | |
| (S) | Total tangible common shareholders’ equity (Q–R) | $ | 825,258 | | $ | 780,161 | | $ | 780,929 | | | | |
| (T) | Total assets (GAAP) | 8,329,803 | | 8,339,416 | | 8,012,463 | | | | |
| (R) | Less: goodwill and intangible assets | (83,901) | | (83,907) | | (83,921) | | | | |
| (U) | Total tangible assets (T–R) | $ | 8,245,902 | | $ | 8,255,509 | | $ | 7,928,542 | | | | |
| Common equity-to-assets ratio (GAAP-derived) (Q/T) | 10.91 | % | 10.36 | % | 10.79 | % | | | |
| Tangible common equity-to-tangible assets ratio (S/U) | 10.01 | % | 9.45 | % | 9.85 | % | | | |
| | | | | | | |
| Calculation of Tangible Common Equity (excluding Accumulated Other Comprehensive Losses)-to-Tangible Assets | | | |
| (Q) | Total common shareholders’ equity (GAAP) | $ | 909,159 | | $ | 864,068 | | $ | 864,850 | | | | |
| (R) | Less: goodwill and intangible assets | (83,901) | | (83,907) | | (83,921) | | | | |
| (V) | Less: accumulated other comprehensive losses | (127,465) | | (147,690) | | (80,537) | | | | |
| (W) | Total tangible common shareholders’ equity (excluding accumulated other comprehensive losses)
(Q-R-V) | 952,723 | | 927,851 | | 861,466 | | | | |
| (T) | Total assets (GAAP) | 8,329,803 | | 8,339,416 | | 8,012,463 | | | | |
| (R) | Less: goodwill and intangible assets | (83,901) | | (83,907) | | (83,921) | | | | |
| (U) | Total tangible assets (T–R) | 8,245,902 | | 8,255,509 | | 7,928,542 | | | | |
| Common equity-to-assets ratio (GAAP-derived) (Q/T) | 10.91 | % | 10.36 | % | 10.79 | % | | | |
| Tangible common equity (excluding accumulated other comprehensive losses)-
to-tangible assets ratio (W/U) | 11.55 | % | 11.24 | % | 10.87 | % | | | |
| | | | | | | |
| Calculation of Tangible Book Value per Common Share | | | | | | |
| (Q) | Total common shareholders’ equity (GAAP) | $ | 909,159 | | $ | 864,068 | | $ | 864,850 | | | | |
| (X) | Actual common shares outstanding | 24,695,552 | | 24,662,286 | | 24,732,535 | | | | |
| Book value per common share (GAAP-derived) (Q/X)*1000 | $ | 36.81 | | $ | 35.04 | | $ | 34.97 | | | | |
| Tangible common book value per share (S/X)*1000 | $ | 33.42 | | $ | 31.63 | | $ | 31.57 | | | | |
The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com
