FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6233
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1st SOURCE CORPORATION
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(Exact name of registrant as specified in its charter)
INDIANA 35-1068133
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 North Michigan Street South Bend, Indiana 46601
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(Address of principal executive offices) (Zip Code)
(219) 235-2702
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Number of shares of common stock outstanding as of March 31, 2000 - 20,786,912
shares.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Page
Consolidated statements of financial condition -- 3
March 31, 2001, and December 31, 2000
Consolidated statements of income -- 4
three months ended March 31, 2001 and 2000
Consolidated statements of cash flows -- 5
three months ended March 31, 2001 and 2000
Notes to the Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
PART II.OTHER INFORMATION 14
SIGNATURES 15
- 2 -
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
1st Source Corporation and Subsidiaries
(Unaudited - Dollars in thousands)
March 31, December 31,
2001 2000
----------- -----------
ASSETS
Cash and due from banks .......................... $ 113,823 $ 118,123
Federal funds sold and
interest bearing deposits with other banks ..... 843 901
Investment securities:
Securities available-for-sale, at fair value
(amortized cost of $524,893 and $503,238
at March 31, 2001 and December 31, 2000)...... 530,108 503,910
Securities held-to-maturity, at amortized cost
(fair value of $0 and $60,332 at
March 31, 2001 and December 31, 2000) ........ -- 59,212
----------- -----------
Total investment securities ...................... 530,108 563,122
Loans - net of unearned discount ................. 2,413,433 2,309,062
Reserve for loan losses ........................ (48,189) (44,644)
----------- -----------
Net loans ........................................ 2,365,244 2,264,418
Equipment owned under operating leases,
net of accumulated depreciation 87,199 84,892
Premises and equipment,
net of accumulated depreciation ............... 34,636 33,583
Other assets ..................................... 122,726 117,142
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Total assets ..................................... $ 3,254,579 $ 3,182,181
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing ............................ $ 321,022 $ 293,564
Interest bearing ............................... 2,198,718 2,169,160
----------- -----------
Total deposits ................................... 2,519,740 2,462,724
Federal funds purchased and securities
sold under agreements to repurchase ............ 203,448 192,307
Other short-term borrowings ...................... 124,745 141,083
Long-term debt ................................... 12,166 12,060
Other liabilities ................................ 62,481 58,685
----------- -----------
Total liabilities ................................ 2,922,580 2,866,859
Guaranteed preferred beneficial interests
in 1st Source's subordinated debentures ........ 44,750 44,750
Shareholders' equity:
Common stock-no par value ...................... 7,227 7,227
Capital surplus ................................ 195,197 195,197
Retained earnings .............................. 92,059 80,881
Less cost of common stock in treasury .......... (12,895) (14,954)
Accumulated other comprehensive income ......... 5,661 2,221
----------- -----------
Total shareholders' equity ....................... 287,249 270,572
----------- -----------
Total liabilities and shareholders' equity ....... $ 3,254,579 $ 3,182,181
=========== ===========
The accompanying notes are a part of the consolidated financial statements.
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CONSOLIDATED STATEMENTS OF INCOME
1st Source Corporation and Subsidiaries
(Unaudited - Dollars in thousands, except per share amounts)
Three Months Ended
March 31
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2001 2000
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Interest and fee income:
Loans ...................................................... $ 53,839 $ 45,958
Investment securities:
Taxable ................................................ 5,842 5,061
Tax-exempt ............................................. 1,753 1,941
Other .................................................. 163 89
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Total interest income ....................................... 61,597 53,049
Interest expense:
Deposits ................................................. 28,959 23,165
Short-term borrowings .................................... 5,250 4,464
Long-term debt ........................................... 218 221
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Total interest expense ...................................... 34,427 27,850
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Net interest income ......................................... 27,170 25,199
Provision for loan losses ................................... 7,295 3,918
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Net interest income after
provision for loan losses ................................ 19,875 21,281
Noninterest income:
Trust fees ............................................... 2,468 2,321
Service charges on deposit accounts ...................... 2,439 1,809
Loan servicing and sale income ........................... 15,072 5,578
Equipment rental income .................................. 5,791 4,578
Other income ............................................. 3,402 2,331
Investment securities and other investment gains ......... 1,032 497
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Total noninterest income .................................... 30,204 17,114
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Noninterest expense:
Salaries and employee benefits ........................... 15,061 13,261
Net occupancy expense .................................... 1,561 1,382
Furniture and equipment expense .......................... 2,252 2,122
Depreciation - leased equipment .......................... 4,664 3,642
Supplies and communications .............................. 1,341 1,288
Business development and marketing expense ............... 843 743
Other expense ............................................ 2,295 1,848
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Total noninterest expense ................................... 28,017 24,286
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Income before income taxes and subsidiary trust distributions 22,062 14,109
Income taxes ................................................ 7,818 4,845
Distribution on preferred securities of
subsidiary trusts, net of income tax benefit .............. 601 579
------------ ------------
Net income .................................................. $ 13,643 $ 8,685
============ ============
Other comprehensive income, net of tax:
Change in unrealized appreciation (depreciation) of
available-for-sale securities ........................... 3,440 474
------------ ------------
Total comprehensive income .................................. $ 17,083 $ 9,159
============ ============
Per common share: (1)
Basic net income per common share ......................... $ 0.66 $ 0.42
============ ============
Diluted net income per common share ....................... $ 0.65 $ 0.41
============ ============
Dividends ................................................. $ 0.086 $ 0.081
============ ============
Basic weighted average common shares outstanding ............ 20,721,957 20,831,266
============ ============
Diluted weighted average common shares outstanding .......... 21,099,979 21,081,675
============ ============
(1) The computation of per share data gives retroactive recognition to a 5%
stock dividend declared on April 24, 2001 and a 5% stock dividend declared
on July 18, 2000.
The accompanying notes are a part of the consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
1st Source Corporation and Subsidiaries
(Unaudited - Dollars in thousands)
Three Months Ended March 31
2001 2000
--------- ---------
Operating activities:
Net income .................................... $ 13,643 $ 8,685
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses ..................... 7,295 3,918
Depreciation of premises and equipment ........ 5,813 4,730
Amortization of investment security premiums
and accretion of discounts, net ............. 225 379
Amortization of mortgage servicing rights ..... 1,131 1,464
Deferred income taxes ......................... 2,106 539
Realized investment securities gains .......... (1,032) (497)
Realized gains on securitized loans ........... (2,214) (2,597)
Decrease (increase) in interest receivable .... 1,208 (451)
(Decrease) increase in interest payable ....... (2,207) 2,493
Other ......................................... (15,793) (4,826)
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Net cash provided by operating activities ....... 10,175 13,837
Investing activities:
Proceeds from sales and maturities
of investment securities .................... 52,622 67,148
Purchases of investment securities ............ (14,408) (55,848)
Net decrease in short-term investments ........ 58 292
Loans sold or participated to others .......... 62,355 83,531
Increase in loans net of principal collections. (170,503) (170,732)
Net increase (decrease) in equipment owned
under operating leases ...................... 1,204 (5,936)
Purchases of premises and equipment ........... (1,477) (575)
Increase in other assets ...................... 6,834 661
Other ......................................... (768) (437)
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Net cash used in investing activities ........... (64,083) (81,896)
Financing activities:
Net (decrease) increase in demand deposits, NOW
accounts and savings accounts ............... (78,113) 6,950
Net increase in certificates of deposit ....... 135,129 130,434
Net decrease in short-term borrowings ......... (5,197) (80,590)
Proceeds from issuance of long-term debt ...... 158 250
Payments on long-term debt .................... (52) (72)
Acquisition of treasury stock ................. (544) (2,349)
Cash dividends ................................ (1,773) (1,702)
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Net cash provided by financing activities ....... 49,608 52,921
Decrease in cash and cash equivalents ........... (4,300) (15,138)
Cash and cash equivalents, beginning of period .. 118,123 101,911
--------- ---------
Cash and cash equivalents, end of period ........ $ 113,823 $ 86,773
========= =========
The accompanying notes are a part of the consolidated financial statements.
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1ST SOURCE CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The unaudited consolidated condensed financial statements have been
prepared in accordance with the instructions for Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. The information furnished herein
reflects all adjustments (all of which are normal and recurring in nature) which
are, in the opinion of management, necessary for a fair presentation of the
results for the interim periods for which this report is submitted. The 2000 1st
Source Corporation Annual Report on Form 10-K should be read in conjunction with
these statements.
Note 2. New Accounting Pronouncements
On January 1, 2001, 1st Source adopted Statement of Financial Accounting
Standards No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and
Hedging Activities", as amended. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on the
intended use of the derivative and its resulting designation.
On adoption, it was permitted to transfer held-to-maturity debt securities
to available-for-sale or trading securities without calling into question the
intent of management to hold other debt securities to maturity in the future. In
conjunction with the adoption of SFAS No. 133, 1st Source transferred the
held-to-maturity portfolio with an amortized cost of $59.2 million and a gross
unrealized gain of $1.1 million into the available-for-sale portfolio at January
1, 2001.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities", which
replaces SFAS No. 125. This statement revises the standards for accounting for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures, but carries over most of the provisions of SFAS
No. 125 without reconsideration. SFAS No. 140 is effective for transfers
occurring after March 31, 2001 and for disclosures relating to securitization
transactions and collateral for fiscal years ending after December 15, 2000.
This statement is not expected to have a material effect on 1st Source's
financial position or results of operations.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis is presented to provide
information concerning the financial condition of 1st Source as of March 31,
2001, as compared to March 31, 2000 and December 31, 2000, and the results of
operations for the three months ended March 31, 2001 and 2000.
This discussion and analysis should be read in conjunction with 1st
Source's consolidated condensed financial statements and the financial and
statistical data appearing elsewhere in this report and the 2000 1st Source
Corporation Annual Report on Form 10-K.
Except for historical information contained herein, the matters discussed
in this document, and other information contained in 1st Source's SEC filings,
may express "forward-looking statements." Those statements may involve risk and
uncertainties, including statements concerning future events, performance and
assumptions and other statements that are other than statements of historical
facts. 1st Source cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date made. Readers are
advised that various factors - including, but not limited to, changes in laws,
regulations or generally accepted accounting principles; 1st Source's
competitive position within the markets served; increasing consolidation within
the banking industry; unforeseen changes in interest rates; unforeseen downturns
in the local, regional or national economies - could cause 1st Source's actual
results or circumstances for future periods to differ materially from those
anticipated or projected.
1st Source does not undertake, and specifically disclaims any obligation,
to publicly release the result of any revisions that may be made to any
forward-looking statements to reflect the occurrence of unanticipated events or
circumstances after the date of such statements.
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FINANCIAL CONDITION
1st Source's assets at March 31, 2001 were $3.25 billion, up 10.7% from the
same time last year. Total loans were up 12.4% and total deposits increased
11.3% over the comparable figures at the end of the first quarter of 2000.
Shareholders' equity was $287.2 million, up 16.8% from the $245.9 million one
year ago. As of March 31, 2001, the 1st Source equity-to-assets ratio was 8.8%,
compared to 8.4% a year ago.
Nonperforming assets at March 31, 2001, were $25,005,000 compared to
$24,462,000 at December 31, 2000, an increase of 2.22%. At March 31, 2001,
nonperforming assets were 1.04% of net loans compared to 1.06% at December 31,
2000.
Loans are reported at the principal amount outstanding, net of unearned
income. Loans identified as held-for- sale are carried at the lower of cost or
market determined on an aggregate basis. Loans held-for-sale were $114.3 million
and $54.4 million at March 31, 2001 and 2000, respectively.
Included in Other Assets are capitalized mortgage servicing rights. The
costs of purchasing the rights to service mortgage loans originated by others
are deferred and amortized as reductions of mortgage servicing fee income over
the estimated servicing period in proportion to the estimated servicing income
to be received. SFAS No. 140 allows companies that sell originated or purchased
loans and retain the related servicing rights, to allocate a portion of the
total costs of the loans to servicing rights, based on estimated fair value.
Fair value is estimated based on market prices, when available, or the present
value of future net servicing income, adjusted for such factors as discount and
prepayment rates.
In the first quarter of 2001, 1st Source completed the sale of $1.0 billion
in principal value of its mortgage servicing rights held by its Trustcorp
Mortgage Company subsidiary. This servicing sale was in addition to normal
quarterly sales levels, and was made possible by favorable market conditions.
Pre-tax income of $11.06 million ($6.87 million, net of tax) was recorded in the
first quarter, 2001 on this transaction. As of March 31, 2001 and 2000, the
carrying value of mortgage servicing rights was $12.3 million and $21.2 million,
respectively.
CAPITAL RESOURCES
The banking regulators have established guidelines for leverage capital
requirements, expressed in terms of Tier 1 or core capital as a percentage of
average assets, to measure the soundness of a financial institution. These
guidelines require all banks to maintain a minimum leverage capital ratio of
4.00% for adequately capitalized banks and 5.00% for well-capitalized banks. 1st
Source's leverage capital ratio was 10.17% at March 31, 2001.
The Federal Reserve Board has established risk-based capital guidelines for
U.S. banking organizations. The guidelines established a conceptual framework
calling for risk weights to be assigned to on and off-balance sheet items in
arriving at risk-adjusted total assets, with the resulting ratio compared to a
minimum standard to determine whether a bank has adequate capital. The minimum
standard risk-based capital ratios effective in 2001 are 4.00% for adequately
capitalized banks and 6.00% for well-capitalized banks for Tier 1 risk-based
capital and 8.00% and 10.00%, respectively, for total risk-based capital. 1st
Source's Tier 1 risk-based capital ratio on March 31, 2001 was 11.95% and the
total risk-based capital ratio was 13.21%.
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LIQUIDITY AND INTEREST RATE SENSITIVITY
Asset and liability management includes the management of interest rate
sensitivity and the maintenance of an adequate liquidity position. The purpose
of liquidity management is to match the sources and uses of funds to anticipated
customers' deposits and withdrawals, to anticipate borrowing requirements and to
provide for the cash flow needs of 1st Source. The purpose of interest rate
sensitivity management is to stabilize net interest income during periods of
changing interest rates.
Close attention is given to various interest rate sensitivity gaps and
interest rate spreads. Maturities of rate sensitive assets are carefully
maintained relative to the maturities of rate sensitive liabilities and interest
rate forecasts. At March 31, 2001, the consolidated statement of financial
condition was rate sensitive by $238,579,000 more liabilities than assets
scheduled to reprice within one year or 87.90%. Management adjusts the
composition of its assets and liabilities to manage the interest rate
sensitivity gap based upon its expectations of interest rate fluctuations.
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RESULTS OF OPERATIONS
NET INCOME
Net income for the three month period ended March 31, 2001, was $13,643,000
compared to $8,685,000 for the equivalent period in 2000. The primary reason for
the increase was the gain on the sale of the $1.0 billion mortgage servicing
rights in the first quarter, 2001, offset by an increased loan loss provision.
Diluted net income per common share increased to $0.65 for the three month
period ended March 31, 2001, from $0.41 in 2000. Return on average common
shareholders' equity was 19.91% for the three months ended March 31, 2001,
compared to 14.46% in 2000. The return on total average assets was 1.73% for the
three months ended March 31, 2001, compared to 1.22% in 2000.
NET INTEREST INCOME
The taxable equivalent net interest income for the three month period ended
March 31, 2001, was $27,990,000, an increase of 7.21% over the same period in
2000. The net interest margin on a fully taxable equivalent basis was 3.90% for
the three month period ended March 31, 2001 compared to 4.05% for the three
month period ended March 31, 2000 and 3.82% for the three month period ended
December 31, 2000. The net interest margin has declined in the past year due to
the costs of funds rising more than the yield on interest earning assets; in
part, due to the greater reliance on brokered, negotiated rate deposits and
jumbo certificates of deposits to meet funding needs.
Total average earning assets increased 12.05% for the three month period
ended March 31, 2001, over the comparative period in 2000. Total average
investment securities increased 3.66% for the three month period over one year
ago primarily due to an increase of investments in U.S. Government Securities.
Average loans increased by 13.96% for the three month period, compared to the
same period in 2000, due to growth in loan volume in commercial and agriculture,
commercial loans secured by transportation and construction equipment and loans
secured by real estate. The taxable equivalent yields on total average earning
assets were 8.70% and 8.36% for the three month periods ended March 31, 2001,
and 2000, respectively.
Average deposits increased 11.05% for the three month period over the same
period from 2000. The cost rate on average interest-bearing funds was 5.55% and
4.97% for the three months ended March 31, 2001, and 2000. The majority of the
growth in deposits from last year has occurred in certificates of deposits with
maturities greater than one year, brokered certificates of deposits and NOW
accounts.
The following table sets forth consolidated information regarding average
balances and rates.
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DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Dollars in thousands)
Three Months Ended March 31
------------------------------------
2001 2000
--------------------------------------------------------
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
ASSETS:
Investment securities:
Taxable ................. $ 385,573 $ 5,842 6.15% $ 355,040 $ 5,060 5.73%
Tax exempt (1)........... 151,827 2,507 6.70% 163,379 2,804 6.90%
Net loans (2)(3)........... 2,358,805 53,904 9.27% 2,069,887 46,004 8.94%
Other investments ......... 11,902 164 5.58% 7,175 90 5.02%
---------- -------- ----- ---------- -------- -----
Total earning assets 2,908,107 62,417 8.70% 2,595,481 53,958 8.36%
Cash and due from banks ... 89,421 102,470
Reserve for loan losses ... (45,971) (40,027)
Other assets .............. 237,678 204,977
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Total ..................... $3,189,235 $2,862,901
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest bearing deposits $2,142,886 $28,959 5.48% $1,916,483 $23,165 4.86%
Short-term borrowings ... 359,721 5,250 5.92% 326,530 4,464 5.50%
Long-term debt .......... 12,160 218 7.28% 12,188 221 7.30%
---------- ------- ----- ---------- ------- -----
Total interest bearing
liabilities ............. 2,514,767 34,427 5.55% 2,255,201 27,850 4.97%
Noninterest bearing deposits 289,542 273,887
Other liabilities ....... 107,058 92,206
Shareholders' equity .... 277,868 241,607
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Total ..................... $3,189,235 $2,862,901
========== ==========
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Net interest income ....... $27,990 $26,108
======= =======
Net yield on earning assets on a taxable ----- -----
equivalent basis ........ 3.90% 4.05%
===== =====
(1) Interest income includes the effects of taxable equivalent adjustments,
using a 35% rate. Tax equivalent adjustments were $755 in 2001 and $863 in
2000.
(2) Loan income includes fees of $1,295 in 2001 and $1,479 in 2000. Loan income
also includes the effects of taxable equivalent adjustments, using a 35%
rate for 2001 and 2000. The tax equivalent adjustments were $65 in 2001 and
$46 in 2000.
(3) For purposes of this computation, non-accruing loans are included in the
daily average loan amounts outstanding.
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PROVISION AND RESERVE FOR LOAN LOSSES
The provision for loan losses for the first quarter of 2001 increased to
$7,295,000 as compared to $3,918,000 for the first quarter of 2000. The increase
is primarily due to increased charge-offs over the past two quarters and to an
increase in loan delinquencies to 2.13% at March 31, 2001 as compared to 0.54%
at March 31, 2000 and 1.03% at the end of 2000. Net Charge-offs of $3,065,000
have been recorded in the first quarter 2001, compared to Net Charge-offs of
$3,348,000 in the first quarter 2000 and $2,204,000 in the fourth quarter of
2000. A summary of loan loss experience during the three months ended March 31,
2001 and 2000 and for year ended December 31, 2000 is provided below.
Summary of Reserve for Loan Losses
------------------------------------
(Dollars in Thousands)
Three Months Ended Year Ended
March 31 December 31
2001 2000 2000
--------- --------- ---------
Reserve for loan losses - beginning balance $ 44,644 $ 40,210 $ 40,210
Charge-offs (3,218) (3,486) (9,075)
Recoveries 153 138 1,673
--------- --------- ---------
Net charge-offs (3,065) (3,348) (7,402)
Provision for loan losses 7,295 3,918 14,877
Recaptured reserve due to loan securitizations (685) (870) (3,041)
--------- --------- ---------
Reserve for loan losses - ending balance $ 48,189 $ 39,910 $ 44,644
========= ========= =========
Loans outstanding at end of period 2,413,433 2,146,444 2,309,062
Average loans outstanding during period 2,358,805 2,069,887 2,207,382
Reserve for loan losses as a percentage of
loans outstanding at end of period 2.00% 1.86% 1.93%
Ratio of net charge-offs during period to
average loans outstanding 0.53% 0.65% 0.34%
It is management's opinion that the reserve for loan losses is adequate to
absorb losses inherent in the loan portfolio as of March 31, 2001.
NONINTEREST INCOME
Noninterest income for the three month periods ended March 31, 2001, and
2000 was $30,204,000 and $17,114,000, respectively, an increase of 76.49%. Trust
fees increased 6.33%, service charges on deposit accounts increased 34.83%, loan
servicing and sale income increased 170.20%, equipment rental income increased
26.50% and other income increased 45.95%. Service charges on deposits increased
due to the implementation of an overdraft protection program during 2000.
Servicing and sale income increased due to the $1 billion sale of mortgage
servicing rights in the first quarter, 2001. The increase in equipment rental
income was primarily due to growth in operating leases. Investment Security and
other net gains for March 31, 2001, were $1,032,000 compared to net gains of
$497,000 in 2000, an increase of 107.65%. The net gains for both years were
primarily attributed to certain partnership and venture capital investments.
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NONINTEREST EXPENSE
Noninterest expense for the three month period ended March 31, 2001, was
$28,017,000, an increase of 15.36% over the same period in 2000 and 4.31% over
the prior quarter ended December 31, 2000. Salaries and employee benefits
increased 13.57% and 14.15% from the three month periods ended March 31, 2000
and December 31, 2000, respectively, primarily due to an increase in base
salaries in the first quarter, 2001. Base salaries increased partially due to
increased mortgage loan commissions and to fewer open positions within the
organization. Net occupancy expense increased 12.95%, furniture and equipment
expense increased 6.13%, depreciation on leased equipment increased 28.06%,
supplies and communications expense increased 4.11%, business development and
marketing expense increased 13.46%, and miscellaneous other expenses increased
24.19% over the same period in 2000. The increase in depreciation of leased
equipment is due to a significant volume increase from the prior year. The
miscellaneous other expense increase from one year ago is attributed primarily
to an increase in professional fees.
INCOME TAXES
The provision for income taxes for the three month period ended March 31,
2001, was $7,818,000 compared to $4,845,000 for the comparable period in 2000.
The provision for income taxes for the three months ended March 31, 2001, and
2000, is at a rate which management believes approximates the effective rate for
the year.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in market risk exposures that affect
the "Quantitative and Qualitative Disclosures" presented in 1st Source's annual
report on Form 10-K for the year ended December 31, 2000. See the discussion of
interest rate sensitivity beginning on page 13 of the Annual Report to
Shareholders.
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None
ITEM 2. Changes in Securities.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information.
None
ITEM 6. Exhibits and Reports on Form 8-K.
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
1st Source Corporation
-------------------
DATE 5/10/01 /s/ Christopher J. Murphy III
---------- ----------------------------------------
(Signature)
Christopher J. Murphy III
Chairman of the Board, President and CEO
DATE 5/10/01 /s/ Larry E. Lentych
---------- ----------------------------------------
(Signature)
Larry E. Lentych
Treasurer and Chief Financial Officer
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