For: Immediate Release Contact: Larry Lentych
April 27, 2004 574 235 2702
Andrea Short
574 235 2348
1ST SOURCE INCOME UP 13.88 PERCENT IN FIRST QUARTER,
DIVIDEND REPORTED
South Bend, IN -- 1st Source Corporation (Nasdaq: SRCE), parent company of
1st Source Bank, today reported net income of $5.08 million for the first
quarter of 2004, up 13.88 percent over the $4.46 million in the first quarter of
2003.
Diluted net income per share of common stock for the first quarter of
2004 amounted to $0.24 compared with $0.21 for the first quarter of 2003, an
increase of 14.29 percent. Return on average common shareholders' equity for 1st
Source Corporation was 6.43 percent compared to 5.80 percent for the first
quarter of 2003, and return on average total assets was 0.63 percent compared to
0.55 percent a year ago.
At their April meeting, the Board of Directors approved a first quarter
cash dividend of $0.10 per common share. The cash dividend will be payable on
May 17, 2004, to shareholders of record May 10, 2004, and is an increase of
11.11 percent over the first quarter cash dividend in 2003.
Christopher J. Murphy III, Chairman and Chief Executive Officer,
commented on the first quarter by saying, "We are pleased with the gradual
improvement in our earnings and are particularly gratified by the improvement in
our nonperforming assets. We have spent the last year and a half working through
the collection and sale of both aircraft and automobiles from troubled
customers. While we have not completed all reconditioning and sale of our
nonperforming assets, the markets have stabilized and we see some improvement
among customers
Page 2 - April 27, 2004
1st Source Corporation
in the air cargo and aircraft sales businesses as well as with our rental car
customers. Margins remain tight and we continue to see significant volatility in
the valuation of our mortgage servicing rights due to the variability of
historically low mortgage rates and the resulting high mortgage refinance
volumes," Murphy concluded.
As of March 31, 2004, the common equity-to-assets ratio for 1st Source
was 9.93 percent, up from 9.57 percent a year ago. Common shareholders' equity
was $319.86 million, up 2.02 percent from March 31, 2003. At the end of the
first quarter of 2004, total assets were $3.22 billion, down 1.62 percent from a
year ago. Loans increased 2.80 percent and deposits decreased 7.43 percent from
a year ago.
For the first quarter of 2004, 1st Source's provision for loan losses
was $0.10 million as compared to $5.55 million for the first quarter of 2003.
Net charge-offs were $0.10 million for the first quarter of 2004 compared to
$2.93 million in the first quarter of 2003. The resulting reserve for loan
losses as of March 31, 2004, was 3.22 percent of total loans, compared to 2.92
percent as of March 31, 2003. The ratio of nonperforming assets to net loans and
leases was 1.45 percent on March 31, 2004, compared to 3.13 percent for the same
period last year.
Tax-equivalent net interest income was $26.48 million for the first
quarter, down 3.06 percent from 2003's first quarter, and the net interest
margin was 3.53 percent versus 3.72 percent in the first quarter of 2003.
Noninterest income for the first quarter 2004 was $14.02 million, down
30.04 percent from the first quarter of 2003. The predominant factor behind the
decrease was a reduction of loan servicing and sale income. Loan servicing and
sale income decreased due to a reduction in mortgage origination volumes,
decreased gains on sales of mortgage loans into the secondary market and
increased mortgage servicing rights impairment. Mortgage servicing rights
impairment was $3.23 million in the first quarter of 2004 versus $1.78 million
for the same period in 2003.
Noninterest expense was $32.34 million for the first quarter 2004, down
7.07 percent from the first quarter of 2003, primarily due to decreased salaries
and employee benefits, and decreased loan collection and repossession expense,
which were offset by increased professional fees.
Page 3 - April 27, 2004
1st Source Corporation
Salaries and employee benefits decreased mainly because of the
capitalization of $1.26 million in salaries and benefits in connection with the
deferral of loan origination costs in the first quarter of 2004 and decreased
mortgage commissions. These decreases were partially offset by higher executive
incentive accruals and increased group insurance costs.
Loan collection and repossession expense decreased as valuation
adjustments and other expenses related to repossessed assets decreased.
1st Source is the largest locally controlled 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 highly personalized services. 1st
Source Bank also competes for business nationally by offering specialized
financing services for used private and cargo aircraft, automobiles for leasing
and rental agencies, medium and heavy duty trucks, construction and
environmental equipment. The corporation includes 61 banking centers in 15
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 Bank 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 FTN Midwest Research
Securities; Goldman, Sachs & Company; Keefe, Bruyette & Woods, Inc.; Morgan
Stanley & Company, Inc.; NatCity Investments, Inc.; Prudential Equity Group,
Inc.; RBC Dain Rauscher, Inc.; Sandler O'Neill & Partners; Stifel, Nicolaus &
Company, Inc.; and William Blair & Company.
A portion of 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 first quarter 2004 on the floating rate securities
is 3.21 percent. Marketmakers in those securities are Goldman, Sachs & Company;
Howe, Barnes Investments, Inc.; Schwab Capital Markets; and Stifel, Nicolaus &
Company, Incorporated.
Page 4 - April 27, 2004
1st Source Corporation
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.
1ST SOURCE CORPORATION PAGE 5
1ST QUARTER 2004 FINANCIAL HIGHLIGHTS
(UNAUDITED-DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
3 MONTHS ENDED
MARCH 31
2004 2003
----------- -----------
END OF PERIOD BALANCES
Assets $ 3,222,713 $3,275,846
Loans 2,176,113 2,116,913
Deposits 2,403,990 2,597,056
Reserve for loan losses 70,045 61,843
Intangible assets 25,561 27,691
Common shareholders' equity 319,860 313,542
AVERAGE BALANCES
Assets $ 3,250,559 $3,273,880
Earning assets 3,016,130 2,976,799
Investments 740,804 656,181
Loans 2,199,040 2,151,832
Deposits 2,413,793 2,582,992
Interest bearing liabilities 2,514,040 2,516,345
Common shareholders' equity 317,571 311,818
INCOME STATEMENT DATA
Net interest income $ 25,762 $ 26,556
Net interest income - FTE 26,475 27,312
Provision for loan losses 101 5,550
Noninterest income 14,019 20,039
Noninterest expense 32,342 34,802
Net income 5,079 4,460
PER SHARE DATA
Basic net income per common share $ 0.25 $ 0.21
Diluted net income per common share 0.24 0.21
Cash dividends 0.100 0.090
Book value per common share 15.42 14.88
Market value - High 24.900 17.520
Market value - Low 20.960 12.800
Basic weighted average common shares outstanding 20,727,035 21,000,317
Diluted weighted average common shares outstanding 21,035,918 21,331,419
KEY RATIOS
Return on average assets 0.63% 0.55%
Return on average common shareholders' equity 6.43 5.80
Average common shareholders'
equity to average assets 9.77 9.52
End of period tangible common
equity to tangible assets 9.21 8.80
Net interest margin 3.53 3.72
Efficiency: expense to revenue 76.79 69.65
Net charge offs to average loans 0.02 0.55
Loan loss reserve to loans 3.22 2.92
Nonperforming assets to loans and leases 1.45 3.13
ASSET QUALITY
Loans past due 90 days or more $ 230 $ 569
Non-accrual loans 23,356 39,297
Other real estate owned 2,541 5,667
Repossessions 6,235 22,734
Equipment owned under operating leases 280 1,563
Total nonperforming assets 32,642 69,830
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION PAGE 6
1st Source Corporation and Subsidiaries
(Unaudited-Dollars in thousands)
March 31, March 31,
2004 2003
----------------------------
ASSETS
Cash and due from banks $ 78,134 $ 125,880
Federal funds sold and
interest bearing deposits with other banks 1,055 1,693
Investment securities available-for-sale
(amortized cost of $723,011 and $651,935
at March 31, 2004 and 2003, respectively) 729,924 659,010
Trading account securities - 13,539
Mortgages held for sale 81,650 146,932
Loans - net of unearned discount
Commercial and agricultural 407,166 430,379
Auto , light truck and environmental equipment 244,444 249,076
Medium and heavy duty truck 224,912 201,498
Aircraft financing 458,788 295,428
Construction equipment financing 211,388 290,341
Loans secured by real estate 538,066 548,487
Consumer loans 91,349 101,704
------------ -------------
Total loans 2,176,113 2,116,913
Reserve for loan losses (70,045) (61,843)
------------ -------------
Net loans 2,106,068 2,055,070
Equipment owned under operating leases,
net of accumulated depreciation 62,994 87,157
Premises and equipment 38,093 40,120
Accrued income and other assets 124,795 146,445
------------ -------------
Total assets $ 3,222,713 $ 3,275,846
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing $ 378,209 $ 425,924
Interest bearing 2,025,781 2,171,132
------------ -------------
Total deposits 2,403,990 2,597,056
Federal funds purchased and securities
sold under agreements to repurchase 248,779 199,538
Other short-term borrowings 109,842 40,327
Long-term debt and mandatorily redeemable securities 23,181 17,390
Subordinated notes 56,444 54,750
Accrued expenses and other liabilities 60,617 53,243
------------ -------------
Total liabilities 2,902,853 2,962,304
Shareholders' equity:
Preferred stock-no par value - -
Common stock-no par value 7,578 7,578
Capital surplus 214,001 214,001
Retained earnings 103,529 93,123
Cost of common stock in treasury (9,512) (5,552)
Accumulated other comprehensive income 4,264 4,392
------------ -------------
Total shareholders' equity 319,860 313,542
------------ -------------
Total liabilities and shareholders' equity $ 3,222,713 $ 3,275,846
============ =============
1ST SOURCE CORPORATION PAGE 7
CONSOLIDATED STATEMENTS OF INCOME
1st Source Corporation and Subsidiaries
(Unaudited - Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
2004 2003
-----------------------------
INTEREST AND FEE INCOME:
Loans $ 32,454 $ 36,610
Investment securities:
Taxable 4,289 4,534
Tax-exempt 1,317 1,435
Other 65 150
-----------------------------
Total interest income 38,125 42,729
INTEREST EXPENSE:
Deposits 9,823 13,771
Short-term borrowings 1,257 1,264
Subordinated notes 961 940
Long-term debt and
mandatorily redeemable securities 322 198
-----------------------------
Total interest expense 12,363 16,173
-----------------------------
Net interest income 25,762 26,556
Provision for loan losses 101 5,550
-----------------------------
Net interest income after
provision for loan losses 25,661 21,006
NONINTEREST INCOME:
Trust fees 3,090 2,640
Service charges on deposit accounts 3,706 3,724
Loan servicing and sale income (1,785) 3,206
Equipment rental income 5,824 6,771
Other income 3,436 3,978
Investment securities and
other investment losses (252) (280)
-----------------------------
Total noninterest income 14,019 20,039
-----------------------------
NONINTEREST EXPENSE:
Salaries and employee benefits 15,754 17,247
Net occupancy expense 1,833 1,864
Furniture and equipment expense 2,584 2,641
Depreciation - leased equipment 4,536 5,358
Supplies and communication 1,432 1,511
Loan collection and repossession expense 1,055 1,871
Other expense 5,148 4,310
-----------------------------
Total noninterest expense 32,342 34,802
-----------------------------
Income before taxes 7,338 6,243
Income tax expense 2,259 1,783
-----------------------------
NET INCOME $ 5,079 $ 4,460
=============================
The Nasdaq Stock Market Symbol: "SRCE" (CUSIP # 336901 10 3)
Please contact us at shareholder@1stsource.com