Exhibit 99.1
For: Immediate Release Contact: Larry Lentych
July 27, 2006 574 235 2000
Andrea Short
574 235 2000
1ST SOURCE CORPORATION EARNINGS INCREASE IN 2ND QUARTER,
STOCK AND CASH DIVIDENDS ANNOUNCED
South Bend, IN -- 1st Source Corporation (Nasdaq:SRCE), parent company
of 1st Source Bank, today reported net income of $10.28 million for the second
quarter of 2006, an increase of 24.92 percent compared to the $8.23 million
reported in the second quarter of 2005. For the first six months of 2006, net
income for 1st Source Corporation was $20.21 million, a 33.21 percent increase
over the $15.17 million reported for the same period in 2005.
Diluted net income per common share for the second quarter of 2006
amounted to $0.45, up 25.00 percent compared with $0.36 reported in the second
quarter of 2005. Diluted net income per share for the first two quarters of 2006
was $0.88, an increase of 33.33 percent over the $0.66 reported in the same
period a year ago. (All share and per share information has been adjusted for a
10% stock dividend declared on July 27, 2006, unless otherwise noted.)
Christopher J. Murphy III, Chairman and Chief Executive Officer,
reported that at the July meeting, the Board of Directors approved a ten percent
(10%) stock dividend of 1st Source common stock. The stock dividend will be
payable to shareholders of record on August 7, 2006. The Board also approved a
cash dividend increase to $0.14 per share, up 28.44 percent over the second
quarter cash dividend in 2005. The cash dividend will be payable to shareholders
of record on August 8, 2006. Both the stock dividend and cash dividend will be
paid on August 15, 2006.
Mr. Murphy commented, "It's been an especially good second quarter for
1st Source. Our loans grew steadily, and deposits were up. Credit quality
remains very strong with net recoveries received during the quarter. Our net
interest margin is slowly beginning to improve, but still remains pressured in
1
this challenging interest rate environment, and expenses are being tightly
controlled. We continue to execute on our long range plans including the
investment in new systems and facilities. The discipline and attention to detail
are beginning to pay off."
Mr. Murphy continued, "We were pleased that our 1st Source Corporation
stock (SRCE) has been included in the NASDAQ Global Select Market. The new
NASDAQ classification has the highest initial listing standards of any exchange
in the world based on financial and liquidity requirements. We are honored to be
listed among such a strong group of growing companies."
1st Source's reserve for loan and lease losses as of June 30, 2006, was
2.26 percent of total loans and leases compared to 2.50 percent at June 30,
2005. Net recoveries of $1.77 million were recorded for the second quarter 2006,
compared to net recoveries of $0.31 million for the same quarter a year ago.
Year-to-date net recoveries of $2.47 million have been recorded in 2006,
compared to net charge-offs of $0.29 million for the first half of 2005. The
ratio of nonperforming assets to net loans and leases was 0.57 percent on June
30, 2006, compared to 0.91 percent on June 30, 2005.
Improvement in the net interest margin was reflective of the growth in
loans and leases and yields on the loan and lease portfolios. The net interest
margin was 3.44 percent for the second quarter of 2006 versus 3.18 percent for
the same period in 2005. The net interest margin was 3.36 percent for the six
months ending June 30, 2006, versus 3.16 percent for the same period in 2005.
Tax-equivalent net interest income was $27.81 million for the second quarter of
2006, up 11.76 percent from 2005's second quarter. For the first six months of
2006, tax-equivalent interest income was $53.53 million compared to $49.14
million for the first six months of 2005, an increase of 8.94 percent.
Noninterest income for the second quarter 2006 was $19.07 million, up
23.83 percent from the second quarter of 2005. For the first six months of 2006,
noninterest income was $38.07 million up 15.05 percent from 2005. During the
second quarter of 2006, mortgage banking income increased primarily due to a
gain of $1.25 million on sale of mortgage servicing rights. Equipment rental
income increased during the second quarter of 2006 mainly due to an increase in
the operating lease portfolio and rental recoveries. Service charges on deposit
accounts increased as a result of growth in the number of retail deposit
accounts and increased overdraft and NSF fees.
2
Trust fees and insurance commissions increased in both the three and
six month periods ended June 30, 2006, over the same periods in 2005. Trust fees
increased due to growth in assets under management and an increase in IRA
custodian revenue. Insurance commissions increased due to growth in commercial
lines and higher premiums. Gains on venture partnership investments due to
market value adjustments were significantly higher as compared to the first six
months of 2005.
Noninterest expense was $32.39 million for the second quarter of 2006,
compared with $30.63 million for the second quarter of 2005. For the first six
months, noninterest expense was $61.79 million, compared with $62.30 million for
the same period in 2005. The overall decrease in noninterest expense was mainly
reflected in salaries and employee benefits on a year-over-year basis which was
primarily due to a one-time reduction in the accrual for stock-based
compensation expense taken in the first quarter of 2006 related to the adoption
of a new accounting standard.
As of June 30, 2006, leased equipment depreciation increased on a
year-over-year basis, primarily due to the increase in the operating lease
portfolio. Professional fees increased mostly due to higher audit and regulatory
examination fees. Other expenses were higher at June 30, 2006, as compared to
one year ago as a result of higher legal contingency expenses and losses related
to an employee defalcation. Furniture and equipment expense increased on a
year-over-year basis due to increased software costs, expenses related to the
core system conversion project and other processing charges. Supplies and
communication and business development and marketing expense remained comparable
to 2005 levels.
As of June 30, 2006, the 1st Source common equity-to-assets ratio was
9.76 percent compared to 9.67 percent a year ago. Common shareholders' equity
was $352.31 million, up 5.60 percent from the $333.61 million a year ago. Total
assets at the end of the second quarter of 2006 were $3.61 billion, up 4.56
percent from the same time last year. Total deposits were up 2.82 percent and
total loans and leases grew 9.85 percent over the comparable figures at the end
of the second quarter of 2005.
1st Source is the largest locally controlled financial institution
headquartered and serving 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
3
financing services for new and used private and cargo aircraft, automobiles for
leasing and rental agencies, medium and heavy duty trucks, construction and
environmental equipment. The Corporation includes 65 banking centers in 15
counties, 4 Trustcorp Mortgage offices in Indiana and Ohio, and 24 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 clients 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; FTN Midwest Securities Corp.;
Goldman, Sachs & Company; Keefe, Bruyette & Woods, Incorporated; Lehman
Brothers, Incorporated; Morgan Stanley & Company, Incorporated; Prudential
Equity Group, Incorporated; Sandler O'Neill & Partners; Stifel, Nicolaus &
Company; Susquehanna Capital Group; and UBS Securities LLC.
1st Source's floating rate cumulative trust preferred security is
traded on the Nasdaq stock market under the symbol "SRCEO." The rate for the
third quarter 2006 is 7.26 percent. Marketmakers in those securities are Howe
Barnes Investments, Inc.; Stifel, Nicolaus & Company; and UBS Securities LLC.
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," "should," 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
4
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.
# # #
5
1ST SOURCE CORPORATION PAGE 6
2nd QUARTER 2006 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except for per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2006 2005 2006 2005
----------- ----------- ----------- ------------
END OF PERIOD BALANCES
Assets $ 3,608,526 $ 3,451,131
Loans and leases 2,615,152 2,380,614
Deposits 2,814,609 2,737,329
Reserve for loan and lease losses 59,197 59,547
Intangible assets 20,056 22,755
Common shareholders' equity 352,312 333,613
AVERAGE BALANCES
Assets $ 3,482,532 $ 3,359,880 $ 3,444,006 $ 3,349,332
Earning assets 3,246,329 3,142,248 3,209,319 3,133,547
Investments 627,317 723,162 630,560 750,202
Loans and leases 2,542,118 2,325,183 2,499,834 2,301,846
Deposits 2,706,707 2,603,590 2,660,751 2,596,381
Interest bearing liabilities 2,698,097 2,581,021 2,665,772 2,580,970
Common shareholders' equity 352,149 328,347 350,734 327,943
INCOME STATEMENT DATA
Net interest income $ 27,145 $ 24,202 $ 52,244 $ 47,806
Net interest income - FTE 27,807 24,882 53,530 49,135
Recovery of provision for loan and lease losses (1,671) (3,411) (1,971) (3,832)
Noninterest income 19,067 15,398 38,072 33,093
Noninterest expense 32,386 30,626 61,792 62,300
Net income 10,277 8,227 20,210 15,171
PER SHARE DATA*
Basic net income per common share $ 0.46 $ 0.36 $ 0.90 $ 0.67
Diluted net income per common share 0.45 0.36 0.88 0.66
Cash dividends paid per common share 0.127 0.109 0.255 0.218
Book value per common share 15.67 14.67 15.67 14.67
Market value - High 30.809 21.636 30.809 23.491
Market value - Low 24.682 17.645 22.636 17.645
Basic weighted average common shares outstanding 22,505,875 22,754,331 22,576,338 22,772,502
Diluted weighted average common shares outstanding 22,810,923 23,047,293 22,876,839 23,069,981
KEY RATIOS
Return on average assets 1.18 % 0.98 % 1.18 % 0.91 %
Return on average common shareholders' equity 11.71 10.05 11.62 9.33
Average common shareholders' equity to average assets 10.11 9.77 10.18 9.79
End of period tangible common equity to tangible assets 9.26 9.07 9.26 9.07
Net interest margin 3.44 3.18 3.36 3.16
Efficiency: expense to revenue 66.79 73.98 66.55 74.57
Net charge-offs to average loans and leases (0.28) (0.05) (0.20) 0.03
Loan and lease loss reserve to loans and leases 2.26 2.50 2.26 2.50
Nonperforming assets to loans and leases 0.57 0.91 0.57 0.91
ASSET QUALITY
Loans and leases past due 90 days or more $ 278 $ 52
Nonaccrual and restructured loans and leases 13,252 19,447
Other real estate 819 1,067
Repossessions 1,082 411
Equipment owned under operating leases 0 1,088
Total nonperforming assets 15,431 22,065
*Per share figures have been adjusted for 10% stock dividend declared July 27,
2006.
1ST SOURCE CORPORATION Page 7
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
JUNE 30, 2006 JUNE 30, 2005
------------- -------------
ASSETS
Cash and due from banks $ 118,884 $ 95,215
Federal funds sold and interest bearing deposits with other banks 2,320 19,122
Investment securities available-for-sale, at fair value 628,366 707,494
(amortized cost of $635,176 and $710,632 at
June 30, 2006 and 2005, respectively)
Trading account securities 300 -
Mortgages held for sale 82,018 104,537
Loans and leases, net of unearned discount:
Commercial and agricultural loans 491,334 438,880
Auto, light truck and environmental equipment 337,497 311,746
Medium and heavy duty truck 319,845 290,597
Aircraft financing 453,470 447,089
Construction equipment financing 273,621 209,785
Loans secured by real estate 618,204 575,125
Consumer loans 121,181 107,392
------------ ------------
TOTAL LOANS AND LEASES 2,615,152 2,380,614
Reserve for loan and lease losses (59,197) (59,547)
------------ ------------
NET LOANS AND LEASES 2,555,955 2,321,067
Equipment owned under operating leases 67,647 47,232
(net of accumulated depreciation)
Premises and equipment 37,414 38,214
Accrued income and other assets 115,622 118,250
------------ ------------
TOTAL ASSETS $ 3,608,526 $ 3,451,131
============ ============
LIABILITIES
Deposits:
Noninterest bearing $ 379,230 $ 409,450
Interest bearing 2,435,379 2,327,879
------------ ------------
TOTAL DEPOSITS 2,814,609 2,737,329
Federal funds purchased and securities sold 217,923 186,837
under agreements to purchase
Other short-term borrowings 67,799 56,602
Long-term debt and mandatorily redeemable securities 33,554 18,119
Subordinated notes 59,022 59,022
Accrued expenses and other liabilities 63,307 59,609
------------ ------------
TOTAL LIABILITIES 3,256,214 3,117,518
SHAREHOLDERS' EQUITY
Preferred stock; no par value - -
Common stock; no par value 7,578 7,578
Capital surplus 214,001 214,001
Retained earnings 154,339 126,183
Cost of common stock in treasury (19,405) (12,213)
Accumulated other comprehensive loss (4,201) (1,936)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 352,312 333,613
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,608,526 $ 3,451,131
============ ============
1st SOURCE CORPORATION Page 8
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
--------- ---------- ---------- ---------
Interest income:
Loans and leases $ 44,421 $ 35,465 $ 85,309 $ 69,102
Investment securities, taxable 4,797 3,915 8,722 7,733
Investment securities, tax-exempt 1,292 1,336 2,559 2,600
Other 271 127 587 204
--------- ---------- ---------- ---------
Total interest income 50,781 40,843 97,177 79,639
Interest expense:
Deposits 19,283 13,330 36,316 25,646
Short-term borrowings 2,822 2,006 5,582 3,708
Subordinated notes 1,080 1,000 2,130 1,964
Long-term debt and mandatorily redeemable securities 451 305 905 515
--------- ---------- ---------- ---------
Total interest expense 23,636 16,641 44,933 31,833
--------- ---------- ---------- ---------
Net interest income 27,145 24,202 52,244 47,806
Recovery of provision for loan and lease losses (1,671) (3,411) (1,971) (3,832)
--------- ---------- ---------- ---------
Net interest income after recovery of
provision for loan and lease losses 28,816 27,613 54,215 51,638
Noninterest income:
Trust fees 3,658 3,285 7,049 6,531
Service charges on deposit accounts 4,917 4,251 9,303 8,214
Mortgage banking income 3,105 1,551 4,862 4,318
Insurance commissions 932 833 2,614 1,997
Equipment rental income 4,658 3,927 8,878 7,942
Other income 1,647 1,546 3,133 3,182
Investment securities and other investment gains 150 5 2,233 909
--------- ---------- ---------- ---------
Total noninterest income 19,067 15,398 38,072 33,093
--------- ---------- ---------- ---------
Noninterest expense:
Salaries and employee benefits 16,873 17,090 32,387 35,634
Net occupancy expense 1,860 1,732 3,727 3,834
Furniture and equipment expense 2,959 2,844 6,093 5,486
Depreciation - leased equipment 3,547 3,194 6,929 6,517
Supplies and communication 1,307 1,321 2,670 2,664
Other expense 5,840 4,445 9,986 8,165
--------- ---------- ---------- ---------
Total noninterest expense 32,386 30,626 61,792 62,300
--------- ---------- ---------- ---------
Income before income taxes 15,497 12,385 30,495 22,431
Income tax expense 5,220 4,158 10,285 7,260
--------- ---------- ---------- ---------
Net income $ 10,277 $ 8,227 $ 20,210 $ 15,171
========= ========== ========== =========
The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com