Exhibit 99.1
For: Immediate Release Contact: Larry Lentych
October 30, 2003 574 235 2702
Andrea Short
574 235 2348
THIRD QUARTER EARNINGS, CASH DIVIDEND ANNOUNCED
FOR 1ST SOURCE CORPORATION
South Bend, IN -- 1st Source Corporation (Nasdaq:SRCE), parent company of
1st Source Bank, today reported net income of $4.64 million for the third
quarter of 2003, a 120.99 percent increase over the $2.10 million for the third
quarter of 2002. During the first nine months of 2003, net income for 1st Source
Corporation was $13.79 million, up 51.97 percent over the $9.08 million reported
for the same period in 2002.
Diluted net income per common share for the third quarter of 2003 amounted
to $0.22, up 120.00 percent compared to $0.10 for the third quarter of 2002.
Diluted net income per common share for the first three quarters of 2003 was
$0.65 versus $0.43, an increase of 51.16 percent over the same period a year
ago.
Earnings for the third quarter of 2003 represent a return on average common
shareholders' equity of 5.83 percent, compared to 2.68 percent for the third
quarter of 2002. Return on average total assets for the third quarter of 2003
was 0.56 percent, compared to 0.25 percent for the third quarter of 2002.
Christopher J. Murphy III, Chairman and Chief Executive Officer, reported
that at its October meeting, the Board of Directors approved a cash dividend
increase for the third quarter to $0.10 per share. The cash dividend will be
payable on November 17, 2003 to shareholders of record on November 10, 2003. The
cash dividend is an 11.11 percent increase over the third quarter cash dividend
in 2002.
Mr. Murphy commented, "While we are pleased with the improvement in our
earnings and credit quality for the quarter over last year, we are still quite
cautious about the future. Interest rate margins have tightened and loan growth
is almost non-existent. This has permitted us to allow wholesale funding to
mature and roll off. As a result, we have very strong liquidity and rely on
almost no brokered CDs, public funds, or other wholesale funding. Today,
virtually everything on our balance sheet in the deposit or funding categories
is essentially core funding. On the credit side, we have seen improvements in
the market for used aircraft, and cash flows have improved somewhat for many of
our equipment customers. For the quarter, our charge-offs and provisions were
down significantly and our ratio of nonperforming assets to net loans and leases
improved nicely."
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Mr. Murphy continued, "Our branches are performing well, and based on
recent market studies, we continue to enjoy dominant market deposit share in our
15 county area. Also, recently released government data highlights our continued
strength in the small business, home improvement and mortgage financing sectors
of our market. One of the most exciting things for us this past quarter was the
introduction of InfoSource Online, our free online service for personal checking
account customers. The overwhelmingly positive response of our customers to the
new service reinforces our strategy of keeping our customers' best interests in
mind and providing straight talk and sound advice."
The provision for loan losses was $4.08 million in the third quarter of
2003 compared to $8.77 million in the third quarter of 2002. 1st Source's
reserve for loan losses as of September 30, 2003 was 3.13 percent of total
loans, compared to 2.60 percent as of September 30, 2002. Net charge-offs were
$4.05 million for the third quarter 2003, compared to $7.24 million in the same
quarter last year. The ratio of nonperforming assets to net loans and leases was
2.20 percent on September 30, 2003 compared to 3.44 percent on September 30,
2002.
Noninterest income for the third quarter of 2003 was $18.85 million, up
20.79 percent from the third quarter of 2002. For the first nine months of 2003,
noninterest income was $60.81 million, up 16.42 percent from 2002. The
predominant factor behind the growth in 2003 was mortgage loan servicing and
sale income, which reached near record levels in the first nine months of 2003.
This increase was partially offset by a decrease in equipment rental income and
the recording of $2.74 million of securitization impairment. The majority of
this impairment is due to a change during the quarter in assumptions concerning
the timing of future cash flows from the 1998 1st Source Master Trust
Securitization to 1st Source Bank, as recorded under SFAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.
Noninterest expense was $32.70 million for the third quarter, compared to
$33.51 million for the third quarter of 2002. For the first nine months,
noninterest expense was $104.78 million, compared to $99.42 million for the same
period in 2002. In general, year to date 2003 noninterest expense reflects
higher personnel expense and an increase in expenses related to loan collection
and repossessions.
As of September 30, 2003, the 1st Source common equity-to-assets ratio was
9.95 percent compared to 9.08 percent a year ago. Common shareholders' equity
was $318.87 million, up 2.53 percent from the $310.99 million reported a year
ago. Total assets at the end of the third quarter of 2003 were $3.21 billion,
down 6.36 percent from the same time last year. Total deposits were down 9.72
percent while total loans were down 10.72 percent over the comparable figures at
the end of the third quarter of 2002.
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1st Source Corporation takes pride in its identification as the largest
locally owned financial institution headquartered in the Northern
Indiana-Southwestern Michigan area. While delivering a comprehensive range of
consumer and commercial banking services, 1st Source Bank has distinguished
itself with innovative products and highly personalized services. 1st Source
also competes for business nationally by offering specialized financing services
for used private and cargo aircraft, automobiles for leasing and rental
agencies, heavy duty trucks, construction and environmental equipment. The
corporation includes 60 banking centers in fifteen counties, 7 Trustcorp
Mortgage offices in Indiana, Ohio and Michigan, and 22 locations nationwide for
the 1st Source Bank Specialty Finance Group. With a history dating back to 1863,
1st Source has a tradition of providing superior service to customers while
playing a leadership role in the continued development of the communities in
which it serves.
1st Source may be accessed on its home page at "www.1stsource.com." Its
common stock is traded on the NASDAQ Stock Market under "SRCE" and appears in
the National Market System tables in many daily newspapers under the code name
"1st Src." Marketmakers in 1st Source common shares are Dain Rauscher, Inc.;
Goldman, Sachs & Company; Howe Barnes Investments, Inc.; Keefe, Bruyette &
Woods, Inc.; Merrill Lynch, Pierce, Fenner; Morgan Stanley & Company; NatCity
Investments; Sandler O'Neill & Partners; Schwab Capital Markets; Stifel,
Nicolaus & Company, Incorporated; and William Blair & Company.
1st Source's fixed and floating rate cumulative trust preferred securities
are traded on the NASDAQ stock market under the symbols "SRCEP" and "SRCEO",
respectively. The rate on the fixed rate securities is 9.0 percent and the rate
for the fourth quarter, 2003 on the floating rate securities is 3.19 percent.
Marketmakers in those securities are Goldman, Sachs & Company; Howe, Barnes
Investments, Inc.; Schwab Capital Markets; and Stifel, Nicolaus & Company,
Incorporated.
Except for historical information contained herein, the matters discussed
in this document express "forward-looking statements." Generally, the words
"believe," "expect," "intend," "estimate," "anticipate," "project," "will" and
similar expressions indicate forward-looking statements. Those statements,
including statements, projections, estimates or assumptions concerning future
events or performance, and other statements that are other than statements of
historical fact, are subject to material risks and uncertainties. 1st Source
cautions readers not to place undue reliance on any forward-looking statements,
which speak only as of the date made. 1st Source may make other written or oral
forward-looking statements from time to time. Readers are advised that various
important factors could cause 1st Source's actual results or circumstances for
future periods to differ materially from those anticipated or projected in such
forward-looking statements. Such factors, among others, include changes in laws,
regulations or accounting principles generally accepted in the United States;
1st Source's competitive position within its markets served; increasing
consolidation within the banking industry; unforeseen changes in interest rates;
unforeseen downturns in the local, regional or national economies or in the
industries in which 1st Source has credit concentrations; and other risks
discussed in 1st Source's filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K, which filings are available from the
SEC. 1st Source undertakes no obligation to publicly update or revise any
forward-looking statements.
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1ST SOURCE CORPORATION
3rd QUARTER 2003 FINANCIAL HIGHLIGHTS
(Unaudited-Dollars in thousands except Per Share Data)
3 Months Ended 9 Months Ended
September September
2003 2002 2003 2002
END OF PERIOD BALANCES
Assets $ 3,206,248 $ 3,424,104
Loans 2,020,621 2,263,357
Deposits 2,493,037 2,761,384
Reserve for Loan Losses 63,222 58,946
Intangible Assets 26,386 28,624
Common Shareholders' Equity 318,868 310,986
AVERAGE BALANCES
Assets $ 3,282,485 $ 3,396,561 $ 3,285,343 $ 3,454,035
Earning Assets 3,013,994 3,079,337 3,001,550 3,138,744
Investments 696,463 630,098 674,420 640,717
Loans 2,069,261 2,320,707 2,110,811 2,369,284
Deposits 2,591,080 2,699,788 2,599,827 2,751,175
Interest Bearing Liabilities 2,465,260 2,672,602 2,494,002 2,743,578
Common Shareholders' Equity 316,086 311,451 314,628 310,754
INCOME STATEMENT DATA
Net Interest Income $ 24,544 $ 29,142 $ 77,840 $ 89,635
Net Interest Income - FTE 25,285 29,903 80,101 91,997
Provision for Loan Losses 4,078 8,765 14,529 31,324
Noninterest Income 18,854 15,609 60,811 52,233
Noninterest Expense 32,704 33,512 104,781 99,420
Net Income 4,643 2,101 13,793 9,076
PER SHARE DATA
Basic Net Income Per Common Share $ 0.23 $ 0.10 $ 0.66 $ 0.43
Diluted Net Income per Common Share 0.22 0.10 0.65 0.43
Cash Dividends 0.090 0.090 0.270 0.270
Book Value Per Common Share 15.13 14.84 15.13 14.84
Market Value - High 21.800 24.575 21.800 26.890
Market Value - Low 17.000 13.540 12.570 13.540
Basic Weighted Average Common Shares Outstanding 21,076,921 20,963,707 21,050,008 20,927,734
Diluted Weighted Average Common Shares Outstanding 21,435,717 21,346,977 21,381,398 21,316,672
KEY RATIOS
Return on Average Assets 0.56% 0.25% 0.56% 0.35%
Return on Average Common Shareholders' Equity 5.83 2.68 5.86 3.90
Average Common Shareholders' Equity to Average Assets 9.63 9.17 9.58 9.00
End of Period Tangible Common Equity to Tangible Assets 9.20 8.32 9.20 8.32
Net Interest Margin 3.33 3.85 3.57 3.92
Efficiency: Expense to Revenue 65.71 68.79 69.23 63.99
Net Charge Offs to Average Loans 0.78 1.24 0.67 1.69
Loan Loss Reserve to Loans 3.13 2.60 3.13 2.60
Nonperforming Assets to Loans and Leases 2.20 3.44 2.20 3.44
ASSET QUALITY
Loans Past Due 90 Days or More $ 353 $ 309
Non-accrual Loans 32,865 54,685
Other Real Estate 3,111 4,873
Repossessions 9,369 19,536
Equipment Owned Under Operating Leases 305 1,888
Total Nonperforming Assets 46,003 81,291
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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
1ST SOURCE CORPORATION AND SUBSIDIARIES
(UNAUDITED - DOLLARS IN THOUSANDS)
September 30, September 30,
2003 2002
-------------------------------
ASSETS
Cash and due from banks $ 103,256 $ 118,762
Federal funds sold and
interest bearing deposits with other banks 66,109 61,162
Investment securities available-for-sale
(amortized cost of $754,106 and $620,169
at September 30, 2003 and September 30, 2002,
respectively) 760,865 628,261
Trading account securities 10,822 --
Mortgages held for sale 67,496 128,061
Loans - net of unearned discount
Commercial and agricultural 406,096 442,297
Truck and automobile financing 480,196 435,961
Aircraft financing 273,149 352,206
Construction equipment financing 241,945 324,822
Loans secured by real estate 522,852 593,310
Consumer loans 96,383 114,761
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Total loans 2,020,621 2,263,357
Reserve for loan losses (63,222) (58,946)
-------------------------------
Net loans 1,957,399 2,204,411
Equipment owned under operating leases,
net of accumulated depreciation 74,916 101,560
Net premises and equipment 38,488 42,077
Other assets 126,897 139,810
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Total assets $3,206,248 $3,424,104
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LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 404,544 $ 399,848
Interest bearing 2,088,493 2,361,536
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Total deposits 2,493,037 2,761,384
Federal funds purchased and securities
sold under agreements to repurchase 223,405 203,457
Other short-term borrowings 43,533 48,466
Long-term debt 16,994 11,698
Subordinated notes 56,444 44,750
Other liabilities 53,967 43,363
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Total liabilities 2,887,380 3,113,118
Shareholders' equity:
Preferred stock-no par value - -
Common stock-no par value 7,578 7,579
Capital surplus 214,001 214,001
Retained earnings 98,528 91,853
Cost of common stock in treasury (5,409) (7,462)
Accumulated other comprehensive income 4,170 5,015
-------------------------------
Total shareholders' equity 318,868 310,986
-------------------------------
Total liabilities and shareholders' equity $3,206,248 $3,424,104
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CONSOLIDATED STATEMENTS OF INCOME
1ST SOURCE CORPORATION AND SUBSIDIARIES
(UNAUDITED - DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ -------------------------
2003 2002 2003 2002
------------------------ -------------------------
Interest and Fee Income:
Loans $ 33,063 $ 42,233 $ 105,776 $ 130,557
Investment securities:
Taxable 4,205 5,122 13,449 16,444
Tax-exempt 1,386 1,463 4,266 4,555
Other 337 41 782 239
------------------------ -------------------------
TOTAL INTEREST INCOME 38,991 48,859 124,273 151,795
Interest Expense:
Deposits 11,919 17,129 38,877 55,035
Short-term borrowings 1,386 1,586 4,148 4,114
Subordinated notes 961 789 2,842 2,374
Long-term debt 181 213 566 637
------------------------ -------------------------
TOTAL INTEREST EXPENSE 14,447 19,717 46,433 62,160
------------------------ -------------------------
NET INTEREST INCOME 24,544 29,142 77,840 89,635
Provision for loan losses 4,078 8,765 14,529 31,324
------------------------ -------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 20,466 20,377 63,311 58,311
Noninterest Income:
Trust fees 2,643 2,606 8,019 7,927
Service charges on deposit accounts 4,010 3,833 11,656 10,988
Loan servicing and sale income 5,786 (1,025) 13,437 2,554
Equipment rental income 6,217 7,157 19,443 21,901
Other income 3,332 3,638 11,945 9,951
Investment securities and
other investment losses (3,134) (600) (3,689) (1,088)
------------------------ -------------------------
TOTAL NONINTEREST INCOME 18,854 15,609 60,811 52,233
------------------------ -------------------------
Noninterest Expense:
Salaries and employee benefits 17,195 16,792 52,732 49,787
Net occupancy expense 1,726 1,745 5,375 5,125
Furniture and equipment expense 2,601 2,537 7,919 7,892
Depreciation - leased equipment 4,789 5,744 15,197 17,857
Supplies and communication 1,532 1,614 4,601 4,875
Loan collection and repossession expense 291 1,224 5,861 3,099
Other 4,570 3,856 13,096 10,785
------------------------ -------------------------
TOTAL NONINTEREST EXPENSE 32,704 33,512 104,781 99,420
------------------------ -------------------------
INCOME BEFORE INCOME TAXES 6,616 2,474 19,341 11,124
Income taxes 1,973 373 5,548 2,048
------------------------ -------------------------
NET INCOME $ 4,643 $ 2,101 $ 13,793 $ 9,076
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The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3).
Please contact us at Shareholder@1stsource.com.
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