Exhibit 99.1
For: Immediate Release Contact: Larry Lentych
October 28, 2004 574 235 2000
Andrea Short
574 235 2000
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 $3.31 million for the third
quarter of 2004, a 28.75 percent decrease over the $4.64 million for the third
quarter of 2003. Diluted net income per common share for the third quarter of
2004 amounted to $0.16, down 27.27 percent compared to $0.22 for the third
quarter of 2003. Overall, the Bank's underlying core businesses remained stable.
The third quarter, however, was impacted by a write-down of Federal Home Loan
Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA)
preferred stocks in the investment portfolio and by continued volatility in the
value of mortgage servicing rights.
For the first nine months of 2004, net income was $17.11 million, up
24.01 percent over the $13.79 million reported for the same period in 2003,
while diluted net income per common share for the first three quarters of 2004
was up 26.15 percent over the same period a year ago to $0.82 compared to $0.65
in 2003.
Christopher J. Murphy III, Chairman and Chief Executive Officer,
reported that at its October meeting, the Board of Directors approved a cash
dividend for the third quarter of $0.11 per share. The cash dividend will be
payable on November 15, 2004 to shareholders of record on November 8, 2004. The
cash dividend is a 10.00 percent increase over the third quarter cash dividend
in 2003.
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1st Source Corporation
October 28, 2004
"While we are pleased with the fact that our year-to-date earnings are
up by 24 percent over the prior year, we are not pleased with the volatility of
the earnings," Mr. Murphy commented. "This was particularly evident when we made
the decision to recognize through the income statement the impairment of $3.67
million related to our holdings of FHLMC and FNMA preferred stock. Gains and
losses on these securities had previously been recognized in the equity section
of the balance sheet. Due to a number of factors, including recent public
disclosures about these companies and our cost in relation to their market
value, we concluded the securities were impaired and reflected the loss in our
income statement. We continue to hold these securities due to their positive
income characteristics."
Mr. Murphy continued, "We also recognized further impairment in the
value of our mortgage servicing rights due to decreasing long term interest
rates at the close of the quarter. This caused a charge of $2.51 million,
pre-tax for the quarter compared to a recovery of $2.82 million in the same
quarter a year ago. We continue to look for ways to reduce the volatility. In
addition, we are encouraged by the improvements in our net charge-offs and
nonperforming assets compared to a year ago."
Noninterest income for the third quarter of 2004 was $10.41 million,
down 44.81 percent from the third quarter of 2003. For the first nine months of
2004, noninterest income was $44.65 million, down 26.58 percent from 2003. Third
quarter charges to income, the impairments mentioned above, coupled with a
reduction in loan servicing and sale income and decreased equipment leasing
income were the predominant factors in the decline of noninterest income.
As announced earlier in the quarter, 1st Source decided to redeem
$27.5 million in 9.00 percent trust preferred securities, which resulted in the
pre-tax write-off of capitalized debt issuance costs of $0.75 million and the
issuance of $30.00 million in 7.66 percent per annum fixed rate trust preferred
securities. In addition, 1st Source recognized a $1.54 million tax benefit
related to dividend received deductions claimed for the period starting in 2000
through third quarter 2004.
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1st Source Corporation
October 28, 2004
Noninterest expense was down slightly for the quarter, while for the
first nine months, noninterest expense was $96.66 million, compared to $104.78
million for the same period in 2003. In general, the reduction in year-over-year
noninterest expense was primarily attributable to decreased salaries and
employee benefits, leased equipment depreciation, and loan collection and
repossession expense, which were slightly offset by an increase in professional
fees and the write-off of capitalized issuance costs of trust preferred
securities.
The provision for loan losses was $0.24 million in the third quarter of
2004 compared to $4.08 million in the third quarter of 2003. 1st Source's
reserve for loan losses as of September 30, 2004, was $68.19 million or 3.00
percent of total loans compared to $70.05 million or 3.14 percent at the end of
the second quarter, 2004 and $63.22 million or 3.13 percent at the end of the
third quarter a year ago.
Net charge-offs were $2.09 million for the third quarter 2004, compared
to $4.05 million in the same quarter last year. The ratio of nonperforming
assets to net loans and leases continued to improve and was 1.55 percent on
September 30, 2004, compared to 2.18 percent on September 30, 2003.
As of September 30, 2004, the 1st Source common equity-to-assets ratio
was 9.53 percent compared to 9.76 percent a year ago. Common shareholders'
equity was $323.06 million, up 3.22 percent from the $312.97 million reported a
year ago. Total assets at the end of the third quarter of 2004 were $3.39
billion, up 5.75 percent from the same time last year. Total loans were up 12.60
percent while total deposits were down 1.56 percent over the comparable figures
at the end of the third quarter of 2003.
1st Source Corporation 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 innovative products and
highly personalized services. 1st Source also competes for business nationally
by offering specialized financing services for new and used private and cargo
aircraft,
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1st Source Corporation
October 28, 2004
automobiles for leasing and rental agencies, medium and heavy duty trucks,
construction and environmental equipment. The corporation includes 61 banking
centers in fifteen counties, 6 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 Citigroup Global
Markets, Incorporated; Crowell, Weedon & Company; Goldman, Sachs & Company; FTN
Midwest Research Securities; Keefe, Bruyette & Woods, Incorporated; Merrill
Lynch, Pierce, Fenner; Morgan Stanley & Company; Prudential Equity Group,
Incorporated; RBC Capital Markets; Sandler O'Neill & Partners; Schwab Capital
Markets; Stifel, Nicolaus & Company, Incorporated; and William Blair & Company.
1st Source's floating rate cumulative trust preferred security is
traded on the NASDAQ stock market under the symbol "SRCEO". The rate for the
fourth quarter, 2004 is 3.97 percent. Marketmakers in those securities are
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
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1st Source Corporation
October 28, 2004
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.
# # #
(charts attached)
1ST SOURCE CORPORATION PAGE 6
3RD QUARTER 2004 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except for per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
2004 2003 2004 2003
----------- -------------- -------------- ---------------
END OF PERIOD BALANCES
Assets $ 3,390,538 $ 3,206,248
Loans 2,275,231 2,020,621
Deposits 2,454,221 2,493,037
Reserve for loan losses 68,189 63,222
Intangible assets 24,246 26,386
Common shareholders' equity 323,058 312,971
AVERAGE BALANCES
Assets $ 3,333,607 $ 3,282,485 $ 3,280,847 $ 3,285,343
Earning assets 3,110,200 3,013,994 3,052,403 3,001,550
Investments 785,920 696,463 754,988 674,420
Loans 2,245,291 2,069,261 2,212,015 2,110,811
Deposits 2,417,473 2,591,080 2,421,117 2,599,827
Interest bearing liabilities 2,574,304 2,471,157 2,526,257 2,495,989
Common shareholders' equity 318,236 310,190 317,872 312,641
INCOME STATEMENT DATA
Net interest income $ 24,223 $ 24,544 $ 75,319 $ 77,840
Net interest income - FTE 24,899 25,285 77,389 80,101
Provision for loan losses 237 4,078 820 14,529
Noninterest income 10,406 18,854 44,646 60,811
Noninterest expense 32,374 32,704 96,661 104,781
Net income 3,308 4,643 17,105 13,793
PER SHARE DATA
Basic net income per common share $ 0.16 $ 0.23 $ 0.83 $ 0.66
Diluted net income per common share 0.16 0.22 0.82 0.65
Cash dividends per common share 0.110 0.090 0.310 0.270
Book value per common share 15.59 15.13 15.59 15.13
Market value - High 26.040 21.800 26.040 21.800
Market value - Low 22.300 17.000 20.350 12.570
Basic weighted average common shares outstanding 20,682,707 20,677,678 20,703,344 20,915,465
Diluted weighted average common shares outstanding 20,953,401 21,036,474 20,968,643 21,246,855
KEY RATIOS
Return on average assets 0.39 % 0.56 % 0.70 % 0.56 %
Return on average common shareholders' equity 4.14 5.94 7.19 5.90
Average common shareholders' equity to average assets 9.55 9.45 9.69 9.52
End of period tangible common equity to tangible assets 8.88 9.01 8.88 9.01
Net interest margin 3.18 3.33 3.39 3.57
Efficiency: expense to revenue 81.21 65.71 74.23 69.23
Net charge-offs to average loans 0.37 0.78 0.16 0.67
Loan loss reserve to loans 3.00 3.13 3.00 3.13
Nonperforming assets to loans and leases 1.55 2.18 1.55 2.18
ASSET QUALITY
Loans past due 90 days or more $ 361 $ 353
Nonaccrual loans 30,958 32,865
Other real estate 2,117 3,111
Repossessions 2,516 9,369
Equipment owned under operating leases 20 305
Total nonperforming assets 35,972 46,003
1st SOURCE CORPORATION Page 7
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
September 30, 2004 September 30, 2003
------------------ ------------------
ASSETS
- ------
Cash and due from banks $ 69,842 $ 103,256
Federal funds sold and
interest bearing deposits with other banks 52,934 66,109
Investment securities available-for-sale 777,553 760,865
(amortized cost of $774,626 and $754,106 at
September 30, 2004 and 2003, respectively)
Trading account securities 4,926 10,822
Mortgages held for sale 74,253 67,496
Loans, net of unearned discount:
Commercial and agricultural loans 446,185 406,096
Auto, light truck and environmental equipment 267,818 263,190
Medium and heavy duty truck 249,090 217,006
Aircraft financing 450,785 273,149
Construction equipment financing 204,576 241,945
Loans secured by real estate 559,460 522,852
Consumer loans 97,317 96,383
------------------ ------------------
Total Loans 2,275,231 2,020,621
Reserve for loan losses (68,189) (63,222)
------------------ ------------------
Net Loans 2,207,042 1,957,399
Equipment owned under operating leases 47,454 74,916
(net of accumulated depreciation)
Premises and equipment 37,577 38,488
Accrued income and other assets 118,957 126,897
------------------ ------------------
Total assets $ 3,390,538 $ 3,206,248
================== ==================
LIABILITIES
- -----------
Deposits:
Noninterest bearing $ 380,536 $ 404,544
Interest bearing 2,073,685 2,088,493
------------------ ------------------
Total deposits 2,454,221 2,493,037
Federal funds purchased and securities sold 368,370 223,405
under agreements to repurchase
Other short-term borrowings 109,642 43,533
Long-term debt and mandatorily redeemable securities 22,973 22,891
Subordinated notes 59,022 56,444
Accrued expenses and other liabilities 53,252 53,967
------------------ ------------------
Total Liabilities 3,067,480 2,893,277
SHAREHOLDERS' EQUITY
- --------------------
Preferred stock; no par value - -
Common stock; no par value 7,578 7,578
Capital surplus 214,001 214,001
Retained earnings 110,244 97,573
Cost of common stock in treasury (10,571) (10,351)
Accumulated other comprehensive income 1,806 4,170
------------------ ------------------
Total shareholders' equity 323,058 312,971
------------------ ------------------
Total liabilities and shareholders' equity $ 3,390,538 $ 3,206,248
================== ==================
1st SOURCE CORPORATION Page 8
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
Three Months Ended Nine Months Ended
September 30 September 30
2004 2003 2004 2003
----------- ----------- ------------ -----------
Interest income:
Loans $ 32,144 $ 33,063 $ 96,502 $105,776
Investment securities, taxable 3,793 4,205 12,188 13,449
Investment securities, tax-exempt 1,260 1,386 3,835 4,266
Other 23 337 134 782
----------- ----------- ------------ -----------
Total interest income 37,220 38,991 112,659 124,273
Interest expense:
Deposits 9,833 11,919 29,253 38,877
Short-term borrowings 1,826 1,386 4,366 4,148
Subordinated notes 975 961 2,898 2,842
Long-term debt and mandatorily redeemable securities 363 181 823 566
----------- ----------- ------------ -----------
Total interest expense 12,997 14,447 37,340 46,433
----------- ----------- ------------ -----------
Net interest income 24,223 24,544 75,319 77,840
Provision for loan losses 237 4,078 820 14,529
----------- ----------- ------------ -----------
Net interest income after provision for loan losses 23,986 20,466 74,499 63,311
Noninterest income:
Trust fees 3,072 2,643 9,302 8,019
Service charges on deposit accounts 4,272 4,010 12,093 11,656
Mortgage banking (loss)/income (828) 6,453 4,517 15,795
Equipment rental income 4,270 6,217 15,021 19,443
Other income 3,364 2,665 7,747 9,587
Investment securities and other investment losses (3,744) (3,134) (4,034) (3,689)
----------- ----------- ------------ -----------
Total noninterest income 10,406 18,854 44,646 60,811
----------- ----------- ------------ -----------
Noninterest expense:
Salaries and employee benefits 16,622 17,195 48,242 52,732
Net occupancy expense 1,764 1,726 5,322 5,375
Furniture and equipment expense 2,416 2,601 7,697 7,919
Depreciation - leased equipment 3,533 4,789 11,952 15,197
Supplies and communication 1,396 1,532 4,279 4,601
Loan collection and repossession expense 1,313 295 3,189 5,861
Other expense 5,330 4,566 15,980 13,096
----------- ----------- ------------ -----------
Total noninterest expense 32,374 32,704 96,661 104,781
----------- ----------- ------------ -----------
Income before income taxes 2,018 6,616 22,484 19,341
Income tax (benefit)/expense (1,290) 1,973 5,379 5,548
----------- ----------- ------------ -----------
Net income $ 3,308 $ 4,643 $ 17,105 $ 13,793
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The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com