1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported a record high net income of $16.67 million for the second quarter of 2017, an increase of 15.13% compared to $14.48 million reported in the second quarter a year ago, bringing the 2017 year-to-date net income to $32.88 million compared to $28.30 million in 2016, an increase of 16.18%. The year-to-date net income comparison was positively impacted by gains on the sale of investment securities available-for-sale of $1.94 million net of an other than temporary impairment loss of $0.19 million and gains on the sale of fixed assets and leased equipment of $0.59 million. These increases were partially offset by the writedown of fixed assets of $0.41 million and a contribution to the 1st Source Foundation of $0.50 million.
Diluted net income per common share for the second quarter of 2017 was also a record high at $0.64, versus $0.56 in the second quarter of 2016. Diluted net income per common share for the first half of 2017 was $1.26 compared to the $1.08 earned a year earlier.
At its July 2017 meeting, the Board of Directors approved a cash dividend of $0.19 per common share. The cash dividend is payable to shareholders of record on August 7, 2017 and will be paid on August 15, 2017. This brings year-to-date dividends in 2017 to $0.56 per common share, an increase of 3.70% compared to $0.54 per common share at the same time last year.
According to Christopher J. Murphy III, Chairman, “We are very pleased with our record net income in the second quarter as 1st Source Corporation continues to experience healthy growth in loans and leases and deposits. Credit quality remains stable with year-to-date net charge-offs of $367,000 or 0.02% of average loans and leases. Average loans and leases were up a solid 4.95% for the quarter compared to the same period a year ago. Average deposits have held steady with a 3.59% increase from this time last year. Net interest income has increased 8.44% from the second quarter 2016, along with noninterest income increasing 8.25% while noninterest expense growth was held to a 2.68% increase over the same quarter of 2016.”
“In April, we announced an exciting partnership with the South Bend Cubs. 1st Source Bank has a five-year sponsorship of the South Bend Cubs’ Performance Center located at Four Winds Field. This collaboration is an investment for the bank intended to produce new primary relationships and opportunities for growth in our home market.”
“Moreover, we recently completed the reopening of the North Calumet banking center on July 17, 2017. This new branch is a significant rebuild and an enhancement to the client experience and our service offerings in the Valparaiso market.”
“As always, we will continue to help our clients achieve security, build wealth and realize their dreams,” Mr. Murphy concluded.
SECOND QUARTER 2017 FINANCIAL RESULTS
Loans
Average loans and leases of $4.31 billion increased $203.17 million, or 4.95% in the second quarter of 2017 from the year ago quarter and have increased $121.05 million from the first quarter. Year-to-date average loans and leases of $4.25 billion increased $191.32 million, or 4.72% from the first six months of 2016.
Deposits
Average deposits of $4.45 billion grew $154.57 million, or 3.59% for the quarter ended June 30, 2017 from the year ago quarter and have increased $156.01 million, or 3.63% compared to the first quarter. Average deposits for the first six months of 2017 were $4.38 billion, an increase of $150.56 million or 3.56% from the same period a year ago.
Net Interest Income and Net Interest Margin
Second quarter 2017 net interest income of $45.86 million increased $3.57 million, or 8.44% from the second quarter a year ago and increased $2.13 million, or 4.88% from the first quarter.
For the first six months of 2017, tax-equivalent net interest income was $90.51 million, an increase of $6.00 million, or 7.11% compared to the same period a year ago.
Second quarter 2017 net interest margin was 3.53%, an improvement of 12 basis points from the 3.41% for the same period in 2016 and increased 4 basis points from the 3.49% in the first quarter. Second quarter 2017 net interest margin on a fully tax-equivalent basis was 3.57%, an increase of 12 basis points from the 3.45% for the same period in 2016 and improved 4 basis points from the 3.53% in the first quarter.
Net interest margin for the first six months of 2017 was 3.51%, an increase of 10 basis points from the 3.41% for the same period in 2016. Net interest margin on a fully tax-equivalent basis for the first six months of 2017 was 3.55%, an increase of 10 basis points from the 3.45% for the same period in 2016.
Noninterest Income
Noninterest income increased $1.84 million or 8.25% and $3.52 million or 8.01% in the three and six month periods ended June 30, 2017, respectively over the same periods a year ago. The growth in noninterest income during the second quarter and first six months of 2017 from the same periods a year ago was mainly due to gains on the sale of available-for-sale equity securities, higher equipment rental income related to an increase in the average equipment rental portfolio and increased trust and wealth advisory fees, which was offset by reduced partnership gains, resulting from the liquidation of an investment during 2016, lower mutual fund income and monogram fund income and decreased customer swap fees. The rise in noninterest income from the first quarter of 2017 was primarily a result of higher equipment rental income related to an increase in the average equipment rental portfolio, increased trust and wealth advisory fees and an improvement in mortgage banking income offset by a reduction in gains on the sale of available-for-sale equity securities and lower insurance contingent commissions.
Noninterest Expense
Noninterest expense increased $1.07 million or 2.68% and $1.49 million or 1.84% for the three and six months ended June 30, 2017, respectively over the comparable periods a year ago. Excluding depreciation on leased equipment, noninterest expenses were relatively flat for the second quarter and first six months of 2017. The increase in noninterest expense from the same quarter a year ago was primarily due to higher depreciation on leased equipment, increased professional fees and marketing promotions, offset by reduced group insurance claims, lower FDIC insurance assessments and gains on the sale of leased equipment. The increase in noninterest expense for the first six months of 2017 compared to the first six months of 2016 was mainly due to higher depreciation on leased equipment, increased charitable contributions and marketing promotions, and increased professional fees, offset by lower FDIC insurance assessments, reduced group insurance claims, fewer writedowns on fixed assets and gains on the sale of leased equipment.
Credit
The reserve for loan and lease losses as of June 30, 2017 was 2.10% of total loans and leases compared to 2.13% at March 31, 2017 and 2.20% at June 30, 2016. Net charge-offs of $0.94 million were recorded for the second quarter of 2017 compared with net recoveries of $0.11 million in the same quarter a year ago and $0.58 million of net recoveries in the first quarter. Year-to-date net charge-offs of $0.37 million have been recorded in 2017, compared to net recoveries of $0.32 million for the first half of 2016.
The ratio of nonperforming assets to loans and leases was 0.66% as of June 30, 2017, comparable to the 0.49% on June 30, 2016 and the 0.63% on March 31, 2017.
Capital
As of June 30, 2017, the common equity-to-assets ratio was 12.29%, compared to 12.47% at March 31, 2017 and 12.30% a year ago. The tangible common equity-to-tangible assets ratio was 10.98% at June 30, 2017 and 11.11% at March 31, 2017 compared to 10.90% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 12.43% at June 30, 2017 compared to 12.69% at March 31, 2017 and 12.20% a year ago.
ABOUT 1ST SOURCE CORPORATION
1st Source common stock is traded on the NASDAQ Global Select Market under “SRCE” and appears in the National Market System tables in many daily newspapers under the code name “1st Src.” Since 1863, 1st Source has been committed to the success of the communities it serves. For more information, visit www.1stsource.com.
1st Source serves the northern half of Indiana and southwest Michigan and is the largest locally controlled financial institution headquartered in the area. While delivering a comprehensive range of consumer and commercial banking services through its community bank offices, 1st Source has distinguished itself with highly personalized services. 1st Source Bank also competes for business nationally by offering specialized financing services for new and used private and cargo aircraft, automobiles for leasing and rental agencies, medium and heavy duty trucks, and construction equipment. The Corporation includes 79 banking centers, 23 1st Source Bank Specialty Finance Group locations nationwide, eight Wealth Advisory Services locations and ten 1st Source Insurance offices.
FORWARD LOOKING STATEMENTS
Except for historical information contained herein, the matters discussed in this document express “forward-looking statements.” Generally, the words “believe,” “contemplate,” “seek,” “plan,” “possible,” “assume,” “expect,” “intend,” “targeted,” “continue,” “remain,” “estimate,” “anticipate,” “project,” “will,” “should,” “indicate,” “would,” “may” 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.
NON-GAAP FINANCIAL MEASURES
The accounting and reporting policies of 1st Source conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures are used by management to evaluate and measure the Company’s performance. Although these non-GAAP financial measures are frequently used by investors to evaluate a financial institution, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. These include taxable-equivalent net interest income (including its individual components), net interest margin (including its individual components), the efficiency ratio, tangible common equity-to-tangible assets ratio and tangible book value per common share. Management believes that these measures provide users of the Company’s financial information a more meaningful view of the performance of the interest-earning assets and interest-bearing liabilities and of the Company’s operating efficiency. Other financial holding companies may define or calculate these measures differently.
Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses and lease depreciation), measures how much it costs to produce one dollar of revenue. Securities gains or losses and lease depreciation are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity-to-tangible assets ratio and tangible book value per common share as useful measurements of the Company’s equity.
See the table marked “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of certain non-GAAP financial measures used by the Company with their most closely related GAAP measures.
(charts attached)
| 1st SOURCE CORPORATION | ||||||||||||||||||||
| 2nd QUARTER 2017 FINANCIAL HIGHLIGHTS | ||||||||||||||||||||
| (Unaudited - Dollars in thousands, except per share data) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| AVERAGE BALANCES | ||||||||||||||||||||
| Assets | $ | 5,586,192 | $ | 5,437,247 | $ | 5,343,630 | $ | 5,512,131 | $ | 5,276,697 | ||||||||||
| Earning assets | 5,205,508 | 5,075,410 | 4,986,635 | 5,140,819 | 4,925,204 | |||||||||||||||
| Investments | 836,915 | 839,283 | 804,856 | 838,093 | 799,853 | |||||||||||||||
| Loans and leases | 4,308,276 | 4,187,231 | 4,105,111 | 4,248,088 | 4,056,772 | |||||||||||||||
| Deposits | 4,454,975 | 4,298,964 | 4,300,402 | 4,377,400 | 4,226,838 | |||||||||||||||
| Interest bearing liabilities | 3,882,915 | 3,747,752 | 3,709,706 | 3,815,706 | 3,658,357 | |||||||||||||||
| Common shareholders’ equity | 697,229 | 683,647 | 659,092 | 690,476 | 654,344 | |||||||||||||||
| INCOME STATEMENT DATA | ||||||||||||||||||||
| Net interest income | $ | 45,861 | $ | 43,727 | $ | 42,293 | $ | 89,588 | $ | 83,582 | ||||||||||
| Net interest income - FTE(1) | 46,319 | 44,188 | 42,753 | 90,507 | 84,503 | |||||||||||||||
| Provision for loan and lease losses | 2,738 | 1,000 | 2,049 | 3,738 | 3,024 | |||||||||||||||
| Noninterest income | 24,136 | 23,307 | 22,297 | 47,443 | 43,924 | |||||||||||||||
| Noninterest expense | 41,105 | 41,119 | 40,034 | 82,224 | 80,739 | |||||||||||||||
| Net income | 16,669 | 16,206 | 14,479 | 32,875 | 28,297 | |||||||||||||||
| PER SHARE DATA | ||||||||||||||||||||
| Basic net income per common share | $ | 0.64 | $ | 0.62 | $ | 0.56 | $ | 1.26 | $ | 1.08 | ||||||||||
| Diluted net income per common share | 0.64 | 0.62 | 0.56 | 1.26 | 1.08 | |||||||||||||||
| Common cash dividends declared | 0.19 | 0.18 | 0.18 | 0.37 | 0.36 | |||||||||||||||
| Book value per common share | 26.96 | 26.46 | 25.59 | 26.96 | 25.59 | |||||||||||||||
| Tangible book value per common share(1) | 23.73 | 23.22 | 22.32 | 23.73 | 22.32 | |||||||||||||||
| Market value - High | 50.78 | 49.11 | 34.83 | 50.78 | 34.83 | |||||||||||||||
| Market value - Low | 43.58 | 42.15 | 30.32 | 42.15 | 27.01 | |||||||||||||||
| Basic weighted average common shares outstanding | 25,927,032 | 25,903,397 | 25,853,537 | 25,915,280 | 25,888,534 | |||||||||||||||
| Diluted weighted average common shares outstanding | 25,927,032 | 25,903,397 | 25,853,537 | 25,915,280 | 25,888,534 | |||||||||||||||
| KEY RATIOS | ||||||||||||||||||||
| Return on average assets | 1.20 | % | 1.21 | % | 1.09 | % | 1.20 | % | 1.08 | % | ||||||||||
| Return on average common shareholders’ equity | 9.59 | 9.61 | 8.84 | 9.60 | 8.70 | |||||||||||||||
| Average common shareholders’ equity to average assets | 12.48 | 12.57 | 12.33 | 12.53 | 12.40 | |||||||||||||||
| End of period tangible common equity to tangible assets(1) | 10.98 | 11.11 | 10.90 | 10.98 | 10.90 | |||||||||||||||
| Risk-based capital - Common Equity Tier 1(2) | 12.43 | 12.69 | 12.20 | 12.43 | 12.20 | |||||||||||||||
| Risk-based capital - Tier 1(2) | 13.58 | 13.88 | 13.41 | 13.58 | 13.41 | |||||||||||||||
| Risk-based capital - Total(2) | 14.88 | 15.18 | 14.73 | 14.88 | 14.73 | |||||||||||||||
| Net interest margin | 3.53 | 3.49 | 3.41 | 3.51 | 3.41 | |||||||||||||||
| Net interest margin - FTE(1) | 3.57 | 3.53 | 3.45 | 3.55 | 3.45 | |||||||||||||||
| Efficiency ratio: expense to revenue | 58.72 | 61.34 | 61.98 | 60.00 | 63.32 | |||||||||||||||
| Efficiency ratio: expense to revenue - adjusted(1) | 54.66 | 57.81 | 58.76 | 56.20 | 60.50 | |||||||||||||||
| Net charge offs to average loans and leases | 0.09 | (0.06 | ) | (0.01 | ) | 0.02 | (0.02 | ) | ||||||||||||
| Loan and lease loss reserve to loans and leases | 2.10 | 2.13 | 2.20 | 2.10 | 2.20 | |||||||||||||||
| Nonperforming assets to loans and leases | 0.66 | 0.63 | 0.49 | 0.66 | 0.49 | |||||||||||||||
| June 30, | March 31, | December 31, | September 30, | June 30, | ||||||||||||||||
| 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||||||||
| END OF PERIOD BALANCES | ||||||||||||||||||||
| Assets | $ | 5,687,230 | $ | 5,501,526 | $ | 5,486,268 | $ | 5,447,911 | $ | 5,379,938 | ||||||||||
| Loans and leases | 4,381,314 | 4,234,862 | 4,188,071 | 4,179,417 | 4,152,763 | |||||||||||||||
| Deposits | 4,482,036 | 4,336,976 | 4,333,760 | 4,377,038 | 4,325,084 | |||||||||||||||
| Reserve for loan and lease losses | 91,914 | 90,118 | 88,543 | 88,897 | 91,458 | |||||||||||||||
| Goodwill and intangible assets | 83,848 | 83,960 | 84,102 | 84,244 | 84,386 | |||||||||||||||
| Common shareholders’ equity | 699,202 | 685,934 | 672,650 | 670,259 | 661,756 | |||||||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Loans and leases past due 90 days or more | $ | 178 | $ | 344 | $ | 416 | $ | 611 | $ | 275 | ||||||||||
| Nonaccrual loans and leases | 15,923 | 18,090 | 19,907 | 19,922 | 12,579 | |||||||||||||||
| Other real estate | 710 | 916 | 704 | 551 | 452 | |||||||||||||||
| Repossessions | 13,052 | 8,121 | 9,373 | 8,089 | 7,619 | |||||||||||||||
| Equipment owned under operating leases | 21 | 27 | 34 | 43 | 107 | |||||||||||||||
| Total nonperforming assets | $ | 29,884 | $ | 27,498 | $ | 30,434 | $ | 29,216 | $ | 21,032 | ||||||||||
| (1) | See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio. | |
| (2) | Calculated under banking regulatory guidelines. | |
| 1st SOURCE CORPORATION | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ||||||||||||||||
| (Unaudited - Dollars in thousands) | ||||||||||||||||
| June 30, | March 31, | December 31, | June 30, | |||||||||||||
| 2017 | 2017 | 2016 | 2016 | |||||||||||||
ASSETS | ||||||||||||||||
| Cash and due from banks | $ | 63,473 | $ | 58,429 | $ | 58,578 | $ | 58,944 | ||||||||
| Federal funds sold and interest bearing deposits with other banks | 12,561 | 33,687 | 49,726 | 14,297 | ||||||||||||
| Investment securities available-for-sale | 850,314 | 836,682 | 850,467 | 814,258 | ||||||||||||
| Other investments | 24,238 | 22,458 | 22,458 | 21,973 | ||||||||||||
| Mortgages held for sale | 16,204 | 8,409 | 15,849 | 15,924 | ||||||||||||
| Loans and leases, net of unearned discount: | ||||||||||||||||
| Commercial and agricultural | 876,404 | 843,757 | 812,264 | 759,175 | ||||||||||||
| Auto and light truck | 512,021 | 430,489 | 411,764 | 457,586 | ||||||||||||
| Medium and heavy duty truck | 290,687 | 290,167 | 294,790 | 273,674 | ||||||||||||
| Aircraft | 787,516 | 783,523 | 802,414 | 822,842 | ||||||||||||
| Construction equipment | 539,097 | 512,545 | 495,925 | 484,354 | ||||||||||||
| Commercial real estate | 720,078 | 723,623 | 719,170 | 715,932 | ||||||||||||
| Residential real estate and home equity | 526,592 | 522,772 | 521,931 | 506,369 | ||||||||||||
| Consumer | 128,919 | 127,986 | 129,813 | 132,831 | ||||||||||||
| Total loans and leases | 4,381,314 | 4,234,862 | 4,188,071 | 4,152,763 | ||||||||||||
| Reserve for loan and lease losses | (91,914 | ) | (90,118 | ) | (88,543 | ) | (91,458 | ) | ||||||||
| Net loans and leases | 4,289,400 | 4,144,744 | 4,099,528 | 4,061,305 | ||||||||||||
| Equipment owned under operating leases, net | 144,509 | 127,323 | 118,793 | 119,312 | ||||||||||||
| Net premises and equipment | 54,783 | 55,167 | 56,708 | 54,506 | ||||||||||||
| Goodwill and intangible assets | 83,848 | 83,960 | 84,102 | 84,386 | ||||||||||||
| Accrued income and other assets | 147,900 | 130,667 | 130,059 | 135,033 | ||||||||||||
| Total assets | $ | 5,687,230 | $ | 5,501,526 | $ | 5,486,268 | $ | 5,379,938 | ||||||||
LIABILITIES | ||||||||||||||||
| Deposits: | ||||||||||||||||
| Noninterest-bearing demand | $ | 979,801 | $ | 966,903 | $ | 991,256 | $ | 944,626 | ||||||||
| Interest-bearing deposits: | ||||||||||||||||
| Interest-bearing demand | 1,519,419 | 1,418,395 | 1,471,526 | 1,391,823 | ||||||||||||
| Savings | 832,341 | 839,257 | 814,326 | 779,899 | ||||||||||||
| Time | 1,150,475 | 1,112,421 | 1,056,652 | 1,208,736 | ||||||||||||
| Total interest-bearing deposits | 3,502,235 | 3,370,073 | 3,342,504 | 3,380,458 | ||||||||||||
| Total deposits | 4,482,036 | 4,336,976 | 4,333,760 | 4,325,084 | ||||||||||||
| Short-term borrowings: | ||||||||||||||||
| Federal funds purchased and securities sold under agreements to repurchase | 148,109 | 176,079 | 162,913 | 161,826 | ||||||||||||
| Other short-term borrowings | 158,474 | 103,666 | 129,030 | 44,150 | ||||||||||||
| Total short-term borrowings | 306,583 | 279,745 | 291,943 | 205,976 | ||||||||||||
| Long-term debt and mandatorily redeemable securities | 70,438 | 85,479 | 74,308 | 64,738 | ||||||||||||
| Subordinated notes | 58,764 | 58,764 | 58,764 | 58,764 | ||||||||||||
| Accrued expenses and other liabilities | 70,207 | 54,628 | 54,843 | 63,620 | ||||||||||||
| Total liabilities | 4,988,028 | 4,815,592 | 4,813,618 | 4,718,182 | ||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||
| Preferred stock; no par value | ||||||||||||||||
Authorized 10,000,000 shares; none issued or outstanding | — | — | — | — | ||||||||||||
| Common stock; no par value | ||||||||||||||||
Authorized 40,000,000 shares; issued 28,205,674 shares at June 30, 2017, March 31, 2017, December 31, 2016, and June 30, 2016, respectively | 436,538 | 436,538 | 436,538 | 436,538 | ||||||||||||
| Retained earnings | 314,889 | 303,009 | 290,824 | 270,744 | ||||||||||||
| Cost of common stock in treasury (2,270,350, 2,282,044, 2,329,909, and 2,342,904 shares at June 30, 2017, March 31, 2017, December 31, 2016, and June 30, 2016, respectively) | (54,662 | ) | (54,940 | ) | (56,056 | ) | (56,357 | ) | ||||||||
| Accumulated other comprehensive income | 2,437 | 1,327 | 1,344 | 10,831 | ||||||||||||
| Total shareholders’ equity | 699,202 | 685,934 | 672,650 | 661,756 | ||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,687,230 | $ | 5,501,526 | $ | 5,486,268 | $ | 5,379,938 | ||||||||
| 1st SOURCE CORPORATION | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
| (Unaudited - Dollars in thousands, except per share amounts) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
| Interest income: | ||||||||||||||||||||
| Loans and leases | $ | 48,032 | $ | 44,884 | $ | 43,891 | $ | 92,916 | $ | 86,627 | ||||||||||
| Investment securities, taxable | 3,370 | 3,514 | 3,040 | 6,884 | 6,120 | |||||||||||||||
| Investment securities, tax-exempt | 677 | 683 | 697 | 1,360 | 1,389 | |||||||||||||||
| Other | 319 | 291 | 309 | 610 | 600 | |||||||||||||||
| Total interest income | 52,398 | 49,372 | 47,937 | 101,770 | 94,736 | |||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Deposits | 4,511 | 3,734 | 3,790 | 8,245 | 7,561 | |||||||||||||||
| Short-term borrowings | 272 | 227 | 119 | 499 | 280 | |||||||||||||||
| Subordinated notes | 1,055 | 1,055 | 1,055 | 2,110 | 2,110 | |||||||||||||||
| Long-term debt and mandatorily redeemable securities | 699 | 629 | 680 | 1,328 | 1,203 | |||||||||||||||
| Total interest expense | 6,537 | 5,645 | 5,644 | 12,182 | 11,154 | |||||||||||||||
| Net interest income | 45,861 | 43,727 | 42,293 | 89,588 | 83,582 | |||||||||||||||
| Provision for loan and lease losses | 2,738 | 1,000 | 2,049 | 3,738 | 3,024 | |||||||||||||||
| Net interest income after provision for loan and lease losses | 43,123 | 42,727 | 40,244 | 85,850 | 80,558 | |||||||||||||||
| Noninterest income: | ||||||||||||||||||||
| Trust and wealth advisory | 5,627 | 5,001 | 5,108 | 10,628 | 9,731 | |||||||||||||||
| Service charges on deposit accounts | 2,464 | 2,239 | 2,276 | 4,703 | 4,383 | |||||||||||||||
| Debit card | 2,986 | 2,750 | 2,816 | 5,736 | 5,415 | |||||||||||||||
| Mortgage banking | 1,304 | 947 | 1,115 | 2,251 | 2,161 | |||||||||||||||
| Insurance commissions | 1,310 | 1,767 | 1,233 | 3,077 | 2,796 | |||||||||||||||
| Equipment rental | 7,586 | 6,832 | 6,517 | 14,418 | 12,590 | |||||||||||||||
| Gains (losses) on investment securities available-for-sale | 465 | 1,285 | (209 | ) | 1,750 | (199 | ) | |||||||||||||
| Other | 2,394 | 2,486 | 3,441 | 4,880 | 7,047 | |||||||||||||||
| Total noninterest income | 24,136 | 23,307 | 22,297 | 47,443 | 43,924 | |||||||||||||||
| Noninterest expense: | ||||||||||||||||||||
| Salaries and employee benefits | 20,712 | 21,345 | 21,194 | 42,057 | 42,545 | |||||||||||||||
| Net occupancy | 2,368 | 2,594 | 2,307 | 4,962 | 4,808 | |||||||||||||||
| Furniture and equipment | 5,108 | 4,793 | 4,811 | 9,901 | 9,601 | |||||||||||||||
| Depreciation - leased equipment | 6,296 | 5,680 | 5,444 | 11,976 | 10,545 | |||||||||||||||
| Professional fees | 1,672 | 1,077 | 1,190 | 2,749 | 2,409 | |||||||||||||||
| Supplies and communication | 1,345 | 1,250 | 1,374 | 2,595 | 2,882 | |||||||||||||||
| FDIC and other insurance | 573 | 623 | 911 | 1,196 | 1,790 | |||||||||||||||
| Business development and marketing | 1,501 | 1,652 | 1,025 | 3,153 | 2,005 | |||||||||||||||
| Loan and lease collection and repossession | 329 | 636 | 385 | 965 | 812 | |||||||||||||||
| Other | 1,201 | 1,469 | 1,393 | 2,670 | 3,342 | |||||||||||||||
| Total noninterest expense | 41,105 | 41,119 | 40,034 | 82,224 | 80,739 | |||||||||||||||
| Income before income taxes | 26,154 | 24,915 | 22,507 | 51,069 | 43,743 | |||||||||||||||
| Income tax expense | 9,485 | 8,709 | 8,028 | 18,194 | 15,446 | |||||||||||||||
| Net income | $ | 16,669 | $ | 16,206 | $ | 14,479 | $ | 32,875 | $ | 28,297 | ||||||||||
| Per common share: | ||||||||||||||||||||
| Basic net income per common share | $ | 0.64 | $ | 0.62 | $ | 0.56 | $ | 1.26 | $ | 1.08 | ||||||||||
| Diluted net income per common share | $ | 0.64 | $ | 0.62 | $ | 0.56 | $ | 1.26 | $ | 1.08 | ||||||||||
| Cash dividends | $ | 0.19 | $ | 0.18 | $ | 0.18 | $ | 0.37 | $ | 0.36 | ||||||||||
| Basic weighted average common shares outstanding | 25,927,032 | 25,903,397 | 25,853,537 | 25,915,280 | 25,888,534 | |||||||||||||||
| Diluted weighted average common shares outstanding | 25,927,032 | 25,903,397 | 25,853,537 | 25,915,280 | 25,888,534 | |||||||||||||||
| 1st SOURCE CORPORATION | |||||||||||||||||||||||||||||||||
| DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||
| INTEREST RATES AND INTEREST DIFFERENTIAL | |||||||||||||||||||||||||||||||||
| (Unaudited - Dollars in thousands) | |||||||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||||||
| June 30, 2017 | March 31, 2017 | June 30, 2016 | |||||||||||||||||||||||||||||||
| Average Balance | Interest | Yield/ Rate | Average Balance | Interest | Yield/ Rate | Average Balance | Interest | Yield/ Rate | |||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||||||||
| Investment securities available-for-sale: | |||||||||||||||||||||||||||||||||
| Taxable | $ | 707,373 | $ | 3,370 | 1.91 | % | $ | 708,249 | $ | 3,514 | 2.01 | % | $ | 678,849 | $ | 3,040 | 1.80 | % | |||||||||||||||
| Tax exempt(1) | 129,542 | 983 | 3.04 | % | 131,034 | 994 | 3.08 | % | 126,007 | 1,012 | 3.23 | % | |||||||||||||||||||||
| Mortgages held for sale | 11,325 | 115 | 4.07 | % | 8,155 | 81 | 4.03 | % | 11,100 | 110 | 3.99 | % | |||||||||||||||||||||
| Loans and leases, net of unearned discount(1) | 4,308,276 | 48,069 | 4.48 | % | 4,187,231 | 44,953 | 4.35 | % | 4,105,111 | 43,926 | 4.30 | % | |||||||||||||||||||||
| Other investments | 48,992 | 319 | 2.61 | % | 40,741 | 291 | 2.90 | % | 65,568 | 309 | 1.90 | % | |||||||||||||||||||||
| Total earning assets(1) | 5,205,508 | 52,856 | 4.07 | % | 5,075,410 | 49,833 | 3.98 | % | 4,986,635 | 48,397 | 3.90 | % | |||||||||||||||||||||
| Cash and due from banks | 61,801 | 59,967 | 60,786 | ||||||||||||||||||||||||||||||
| Reserve for loan and lease losses | (91,044 | ) | (90,222 | ) | (90,107 | ) | |||||||||||||||||||||||||||
| Other assets | 409,927 | 392,092 | 386,316 | ||||||||||||||||||||||||||||||
| Total assets | $ | 5,586,192 | $ | 5,437,247 | $ | 5,343,630 | |||||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||
| Interest-bearing deposits | 3,503,444 | 4,511 | 0.52 | % | 3,345,670 | 3,734 | 0.45 | % | 3,380,208 | 3,790 | 0.45 | % | |||||||||||||||||||||
| Short-term borrowings | 236,716 | 272 | 0.46 | % | 267,823 | 227 | 0.34 | % | 204,828 | 119 | 0.23 | % | |||||||||||||||||||||
| Subordinated notes | 58,764 | 1,055 | 7.20 | % | 58,764 | 1,055 | 7.28 | % | 58,764 | 1,055 | 7.22 | % | |||||||||||||||||||||
| Long-term debt and mandatorily redeemable securities | 83,991 | 699 | 3.34 | % | 75,495 | 629 | 3.38 | % | 65,906 | 680 | 4.15 | % | |||||||||||||||||||||
| Total interest-bearing liabilities | 3,882,915 | 6,537 | 0.68 | % | 3,747,752 | 5,645 | 0.61 | % | 3,709,706 | 5,644 | 0.61 | % | |||||||||||||||||||||
| Noninterest-bearing deposits | 951,531 | 953,294 | 920,194 | ||||||||||||||||||||||||||||||
| Other liabilities | 54,517 | 52,554 | 54,638 | ||||||||||||||||||||||||||||||
| Shareholders’ equity | 697,229 | 683,647 | 659,092 | ||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,586,192 | $ | 5,437,247 | $ | 5,343,630 | |||||||||||||||||||||||||||
| Less: Fully tax-equivalent adjustments | (458 | ) | (461 | ) | (460 | ) | |||||||||||||||||||||||||||
| Net interest income/margin (GAAP-derived)(1) | $ | 45,861 | 3.53 | % | $ | 43,727 | 3.49 | % | $ | 42,293 | 3.41 | % | |||||||||||||||||||||
| Fully tax-equivalent adjustments | 458 | 461 | 460 | ||||||||||||||||||||||||||||||
| Net interest income/margin - FTE(1) | $ | 46,319 | 3.57 | % | $ | 44,188 | 3.53 | % | $ | 42,753 | 3.45 | % | |||||||||||||||||||||
| (1) | See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio. | |
| 1st SOURCE CORPORATION | ||||||||||||||||||||||
| DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||
| INTEREST RATES AND INTEREST DIFFERENTIAL | ||||||||||||||||||||||
| (Unaudited - Dollars in thousands) | ||||||||||||||||||||||
| Six Months Ended | ||||||||||||||||||||||
| June 30, 2017 | June 30, 2016 | |||||||||||||||||||||
| Average Balance | Interest | Yield/ Rate | Average Balance | Interest | Yield/ Rate | |||||||||||||||||
ASSETS | ||||||||||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||||||||
| Taxable | $ | 707,809 | $ | 6,884 | 1.96 | % | $ | 675,419 | $ | 6,120 | 1.82 | % | ||||||||||
| Tax exempt(1) | 130,284 | 1,977 | 3.06 | % | 124,434 | 2,025 | 3.27 | % | ||||||||||||||
| Mortgages held for sale | 9,748 | 196 | 4.05 | % | 10,119 | 205 | 4.07 | % | ||||||||||||||
| Loans and leases, net of unearned discount(1) | 4,248,088 | 93,022 | 4.42 | % | 4,056,772 | 86,707 | 4.30 | % | ||||||||||||||
| Other investments | 44,890 | 610 | 2.74 | % | 58,460 | 600 | 2.06 | % | ||||||||||||||
| Total earning assets(1) | 5,140,819 | 102,689 | 4.03 | % | 4,925,204 | 95,657 | 3.91 | % | ||||||||||||||
| Cash and due from banks | 60,889 | 59,818 | ||||||||||||||||||||
| Reserve for loan and lease losses | (90,635 | ) | (89,476 | ) | ||||||||||||||||||
| Other assets | 401,058 | 381,151 | ||||||||||||||||||||
| Total assets | $ | 5,512,131 | $ | 5,276,697 | ||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||
| Interest-bearing deposits | 3,424,992 | 8,245 | 0.49 | % | 3,317,235 | 7,561 | 0.46 | % | ||||||||||||||
| Short-term borrowings | 252,183 | 499 | 0.40 | % | 218,153 | 280 | 0.26 | % | ||||||||||||||
| Subordinated notes | 58,764 | 2,110 | 7.24 | % | 58,764 | 2,110 | 7.22 | % | ||||||||||||||
| Long-term debt and mandatorily redeemable securities | 79,767 | 1,328 | 3.36 | % | 64,205 | 1,203 | 3.77 | % | ||||||||||||||
| Total interest-bearing liabilities | 3,815,706 | 12,182 | 0.64 | % | 3,658,357 | 11,154 | 0.61 | % | ||||||||||||||
| Noninterest-bearing deposits | 952,408 | 909,603 | ||||||||||||||||||||
| Other liabilities | 53,541 | 54,393 | ||||||||||||||||||||
| Shareholders’ equity | 690,476 | 654,344 | ||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,512,131 | $ | 5,276,697 | ||||||||||||||||||
| Less: Fully tax-equivalent adjustments | (919 | ) | (921 | ) | ||||||||||||||||||
| Net interest income/margin (GAAP-derived)(1) | $ | 89,588 | 3.51 | % | $ | 83,582 | 3.41 | % | ||||||||||||||
| Fully tax-equivalent adjustments | 919 | 921 | ||||||||||||||||||||
| Net interest income/margin - FTE(1) | $ | 90,507 | 3.55 | % | $ | 84,503 | 3.45 | % | ||||||||||||||
| (1) | See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio. | |
| 1st SOURCE CORPORATION | ||||||||||||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||||||||||||||||
| (Unaudited - Dollars in thousands, except per share data) | ||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| June 30, | March 31, | June 30, | June 30, | June 30, | ||||||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
Calculation of Net Interest Margin | ||||||||||||||||||||||
| (A) | Interest income (GAAP) | $ | 52,398 | $ | 49,372 | $ | 47,937 | $ | 101,770 | $ | 94,736 | |||||||||||
| Fully tax-equivalent adjustments: | ||||||||||||||||||||||
| (B) | - Loans and leases | 152 | 150 | 145 | 302 | 285 | ||||||||||||||||
| (C) | - Tax exempt investment securities | 306 | 311 | 315 | 617 | 636 | ||||||||||||||||
| (D) | Interest income - FTE (A+B+C) | 52,856 | 49,833 | 48,397 | 102,689 | 95,657 | ||||||||||||||||
| (E) | Interest expense (GAAP) | 6,537 | 5,645 | 5,644 | 12,182 | 11,154 | ||||||||||||||||
| (F) | Net interest income (GAAP) (A-E) | 45,861 | 43,727 | 42,293 | 89,588 | 83,582 | ||||||||||||||||
| (G) | Net interest income - FTE (D-E) | 46,319 | 44,188 | 42,753 | 90,507 | 84,503 | ||||||||||||||||
| (H) | Annualization factor | 4.011 | 4.056 | 4.022 | 2.017 | 2.011 | ||||||||||||||||
| (I) | Total earning assets | $ | 5,205,508 | $ | 5,075,410 | $ | 4,986,635 | $ | 5,140,819 | $ | 4,925,204 | |||||||||||
| Net interest margin (GAAP-derived) (F*H)/I | 3.53 | % | 3.49 | % | 3.41 | % | 3.51 | % | 3.41 | % | ||||||||||||
| Net interest margin - FTE (G*H)/I | 3.57 | % | 3.53 | % | 3.45 | % | 3.55 | % | 3.45 | % | ||||||||||||
Calculation of Efficiency Ratio | ||||||||||||||||||||||
| (F) | Net interest income (GAAP) | $ | 45,861 | $ | 43,727 | $ | 42,293 | $ | 89,588 | $ | 83,582 | |||||||||||
| (G) | Net interest income - FTE | 46,319 | 44,188 | 42,753 | 90,507 | 84,503 | ||||||||||||||||
| (J) | Plus: noninterest income (GAAP) | 24,136 | 23,307 | 22,297 | 47,443 | 43,924 | ||||||||||||||||
| (K) | Less: gains/losses on investment securities and partnership investments | (477 | ) | (1,314 | ) | (743 | ) | (1,791 | ) | (1,853 | ) | |||||||||||
| (L) | Less: depreciation - leased equipment | (6,296 | ) | (5,680 | ) | (5,444 | ) | (11,976 | ) | (10,545 | ) | |||||||||||
| (M) | Total net revenue (GAAP) (F+J) | 69,997 | 67,034 | 64,590 | 137,031 | 127,506 | ||||||||||||||||
| (N) | Total net revenue - adjusted (G+J–K–L) | 63,682 | 60,501 | 58,863 | 124,183 | 116,029 | ||||||||||||||||
| (O) | Noninterest expense (GAAP) | 41,105 | 41,119 | 40,034 | 82,224 | 80,739 | ||||||||||||||||
| (L) | Less:depreciation - leased equipment | (6,296 | ) | (5,680 | ) | (5,444 | ) | (11,976 | ) | (10,545 | ) | |||||||||||
| (P) | Less: contribution expense limited to gains on investment securities in (K) | — | (462 | ) | — | (462 | ) | — | ||||||||||||||
| (Q) | Noninterest expense - adjusted (O–L–P) | 34,809 | 34,977 | 34,590 | 69,786 | 70,194 | ||||||||||||||||
| Efficiency ratio (GAAP-derived) (O/M) | 58.72 | % | 61.34 | % | 61.98 | % | 60.00 | % | 63.32 | % | ||||||||||||
| Efficiency ratio - adjusted (Q/N) | 54.66 | % | 57.81 | % | 58.76 | % | 56.20 | % | 60.50 | % | ||||||||||||
| End of Period | ||||||||||||||||||||||
| June 30, | March 31, | June 30, | ||||||||||||||||||||
| 2017 | 2017 | 2016 | ||||||||||||||||||||
Calculation of Tangible Common Equity-to-Tangible Assets Ratio | ||||||||||||||||||||||
| (R) | Total common shareholders’ equity (GAAP) | $ | 699,202 | $ | 685,934 | $ | 661,756 | |||||||||||||||
| (S) | Less: goodwill and intangible assets | (83,848 | ) | (83,960 | ) | (84,386 | ) | |||||||||||||||
| (T) | Total tangible common shareholders’ equity (R–S) | $ | 615,354 | $ | 601,974 | $ | 577,370 | |||||||||||||||
| (U) | Total assets (GAAP) | 5,687,230 | 5,501,526 | 5,379,938 | ||||||||||||||||||
| (S) | Less: goodwill and intangible assets | (83,848 | ) | (83,960 | ) | (84,386 | ) | |||||||||||||||
| (V) | Total tangible assets (U–S) | $ | 5,603,382 | $ | 5,417,566 | $ | 5,295,552 | |||||||||||||||
| Common equity-to-assets ratio (GAAP-derived) (R/U) | 12.29 | % | 12.47 | % | 12.30 | % | ||||||||||||||||
| Tangible common equity-to-tangible assets ratio (T/V) | 10.98 | % | 11.11 | % | 10.90 | % | ||||||||||||||||
Calculation of Tangible Book Value per Common Share | ||||||||||||||||||||||
| (R) | Total common shareholders’ equity (GAAP) | $ | 699,202 | $ | 685,934 | $ | 661,756 | |||||||||||||||
| (W) | Actual common shares outstanding | 25,935,324 | 25,923,630 | 25,862,770 | ||||||||||||||||||
| Book value per common share (GAAP-derived) (R/W)*1000 | $ | 26.96 | $ | 26.46 | $ | 25.59 | ||||||||||||||||
| Tangible common book value per share (T/W)*1000 | $ | 23.73 | $ | 23.22 | $ | 22.32 | ||||||||||||||||
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