QUARTERLY HIGHLIGHTS
- Net income increased to $17.18 million,
20.46% over the third quarter of 2016 and diluted net income per
common share increased to $0.66 from the prior year’s quarter of
$0.55.
- Return on average assets increased to
1.19% and return on average common shareholders’ equity of 9.61%
from 1.05% and 8.47% in the third quarter of 2016.
- Net charge-offs of $0.16 million and
nonperforming assets to loans and leases of 0.64% were considerably
lower compared to $4.63 million and 0.68% in the third quarter of
2016.
- Average loans and leases grew $198.41
million or 4.74% from the third quarter of 2016.
- Average deposits grew $175.01 million
or 4.02% from the third quarter of 2016.
- Net interest income increased $4.54
million or 10.62% from the third quarter of 2016.
- Noninterest income increased $2.93
million or 12.91% from the third quarter of 2016 (increased 11.30%
excluding leased equipment depreciation).
- Noninterest expenses increased $3.32
million or 8.06% from the third quarter of 2016 (increased 6.52%
excluding leased equipment depreciation).
1st Source Corporation (NASDAQ: SRCE), parent company of 1st
Source Bank, today reported a record high net income of $17.18
million for the third quarter of 2017, an increase of 20.46%
compared to $14.26 million reported in the third quarter a year
ago, bringing the 2017 year-to-date net income to $50.06 million
compared to $42.56 million in 2016, an increase of 17.61%. The
year-to-date net income comparison was positively impacted by gains
on the sale of investment securities available-for-sale of $2.76
million. Also, gains on the sale of fixed assets and leased
equipment of $0.86 million and solar tax equity investment gains of
$0.32 million added additional income. These increases were
partially offset by costs on repossessed aircraft of $0.74 million,
the writedown of fixed assets of $0.60 million and a contribution
to the 1st Source Foundation of $0.50 million.
Diluted net income per common share for the third quarter of
2017 was a record high at $0.66, versus $0.55 in the third quarter
of 2016. Diluted net income per common share for the first nine
months of 2017 was also a record at $1.92 compared to the $1.63 a
year earlier.
At its October 2017 meeting, the Board of Directors approved a
cash dividend increase to $0.20 per common share from $0.19. The
cash dividend is payable to shareholders of record on November 6,
2017 and will be paid on November 15, 2017. This brings
year-to-date dividends in 2017 to $0.76 per common share, an
increase of 5.56% compared to $0.72 per common share at the same
time last year.
According to Christopher J. Murphy III, Chairman, “1st Source
Corporation had a strong third quarter. We continue to achieve
record net income and see healthy growth in loans, leases, and
deposits. Credit quality remains favorable with year-to-date net
charge-offs of only $529,000 or 0.02% of average loans and leases.
Average loans and leases were up a solid 4.74% for the quarter
compared to the same period last year. Average deposits grew 4.02%
from the third quarter of 2016. Net interest income has increased
10.62% from the third quarter 2016, along with noninterest income
increasing 12.91%. Noninterest expenses increased 8.06% from the
same quarter of 2016.”
“We believe Hurricanes Harvey and Irma will have little to no
impact on our financial results. We are however, working
proactively to help our banking and specialty finance clients that
live and operate businesses in the affected areas of Texas,
Florida, and St. Thomas in the U.S. Virgin Islands. In order to
provide relief and aid in recovery, we have offered interest only
or deferred payments on loans based on the customer's preference
and level of damage.” Mr. Murphy concluded.
THIRD QUARTER 2017 FINANCIAL RESULTS
Loans
Average loans and leases of $4.39 billion increased $198.41
million, or 4.74% in the third quarter of 2017 from the year ago
quarter and have increased $79.47 million or 1.84% from the second
quarter. Year-to-date average loans and leases of $4.30 billion
increased $193.87 million, or 4.73% from the first nine months of
2016.
Deposits
Average deposits of $4.53 billion grew $175.01 million, or 4.02%
for the quarter ended September 30, 2017 from the year ago quarter
and have increased $73.29 million, or 1.65% compared to the second
quarter. Average deposits for the first nine months of 2017 were
$4.43 billion, an increase of $158.96 million or 3.72% from the
same period a year ago.
Net Interest Income and Net Interest Margin
Third quarter 2017 net interest income of $47.23 million
increased $4.54 million, or 10.62% from the third quarter of 2016
and increased $1.37 million, or 2.98% from the second quarter.
For the first nine months of 2017, tax-equivalent net interest
income was $138.18 million, an increase of $10.53 million, or 8.25%
compared to the same period a year ago.
Third quarter 2017 net interest margin was 3.53%, an improvement
of 18 basis points from the 3.35% for the same period in 2016 and
was unchanged from the second quarter. Third quarter 2017 net
interest margin on a fully tax-equivalent basis was 3.57%, an
increase of 18 basis points from the 3.39% for the same period in
2016 and was unchanged from the second quarter.
Net interest margin for the first nine months of 2017 was 3.52%,
an increase of 13 basis points from the 3.39% for the same period
in 2016. Net interest margin on a fully tax-equivalent basis for
the first nine months of 2017 was 3.56%, an increase of 13 basis
points over 3.43% for the same period in 2016.
Noninterest Income
Noninterest income increased $2.93 million or 12.91% and $6.45
million or 9.68% in the three and nine month periods ended
September 30, 2017, respectively over the same periods a year ago.
The growth in noninterest income during the third quarter and
year-to-date compared to the same period a year ago was mainly due
to higher equipment rental income resulting from an increase in the
average lease portfolio, increased trust and wealth advisory fees,
customer swap fees, and gains on the sale of available-for-sale
equity securities, which were offset by reduced partnership gains
resulting from the liquidation of an investment during 2016 and
lower mutual fund income.
Noninterest Expense
Noninterest expense increased $3.32 million or 8.06% and $4.80
million or 3.94% for the three and nine months ended September 30,
2017, respectively over the comparable periods a year ago.
Excluding depreciation on leased equipment, noninterest expenses
were up 6.52% and 2.24% for the third quarter and first nine months
of 2017, respectively. The increase in noninterest expense from the
same quarter a year ago was primarily due to higher depreciation on
leased equipment, increased collection and repossession expenses,
the writedown of a repossessed asset and higher consulting fees
offset by reduced salaries and ATM losses that occurred during
2016.
The increase in noninterest expense for the first nine months of
2017 compared to the first nine months of 2016 was mainly due to
higher depreciation on leased equipment, additional marketing
promotions, increased consulting fees, and increased charitable
contributions offset by reduced group insurance claims, lower FDIC
insurance assessments and gains on the sale of leased
equipment.
Noninterest expense increased from the second quarter of 2017
primarily as a result of higher group insurance costs, the
writedown of a repossessed asset and lower gains on the sale of
leased equipment, offset by a reduction in marketing expenses.
Credit
The reserve for loan and lease losses as of September 30, 2017
and June 30, 2017 was 2.10% of total loans and leases compared to
2.13% at September 30, 2016. Net charge-offs of $0.16 million were
recorded for the third quarter of 2017 compared with net
charge-offs of $4.63 million in the same quarter a year ago and
$0.94 million of net charge-offs in the second quarter.
Year-to-date net charge-offs of $0.53 million have been recorded in
2017, compared to net charge-offs of $4.31 million for the first
nine months of 2016.
The ratio of nonperforming assets to loans and leases was 0.64%
as of September 30, 2017, comparable to the 0.68% on September 30,
2016 and the 0.66% on June 30, 2017.
Capital
As of September 30, 2017, the common equity-to-assets ratio was
12.24%, compared to 12.29% at June 30, 2017 and 12.30% a year ago.
The tangible common equity-to-tangible assets ratio was 10.95% at
September 30, 2017 and 10.98% at June 30, 2017 compared to 10.93% a
year earlier. The Common Equity Tier 1 ratio, calculated under
banking regulatory guidelines, was 12.52% at September 30, 2017
compared to 12.43% at June 30, 2017 and 12.35% 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 3rd QUARTER 2017 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended September
30, June 30, September 30, September 30,
September 30, 2017 2017
2016 2017 2016
AVERAGE BALANCES Assets $ 5,706,072 $ 5,586,192 $ 5,425,530
$ 5,577,489 $ 5,326,670 Earning assets 5,300,838 5,205,508
5,066,375 5,194,745 4,972,604 Investments 858,572 836,915 821,068
844,994 806,976 Loans and leases 4,387,748 4,308,276 4,189,340
4,295,153 4,101,284 Deposits 4,528,267 4,454,975 4,353,253
4,428,242 4,269,284 Interest bearing liabilities 3,937,159
3,882,915 3,734,322 3,856,635 3,683,863 Common shareholders’ equity
709,276 697,229 670,006 696,812 659,603
INCOME STATEMENT
DATA Net interest income $ 47,229 $ 45,861 $ 42,694 $ 136,817 $
126,276 Net interest income - FTE(1) 47,670 46,319 43,144 138,177
127,647 Provision for loan and lease losses 1,620 2,738 2,067 5,358
5,091 Noninterest income 25,592 24,136 22,665 73,035 66,589
Noninterest expense 44,460 41,105 41,145 126,684 121,884 Net income
17,182 16,669 14,264 50,057 42,561
PER SHARE DATA
Basic net income per common share $ 0.66 $ 0.64 $ 0.55 $ 1.92 $
1.63 Diluted net income per common share 0.66 0.64 0.55 1.92 1.63
Common cash dividends declared 0.19 0.19 0.18 0.56 0.54 Book value
per common share 27.39 26.96 25.91 27.39 25.91 Tangible book value
per common share(1) 24.16 23.73 22.65 24.16 22.65 Market value -
High 51.80 50.78 35.99 51.80 35.99 Market value - Low 44.59 43.58
31.50 42.15 27.01 Basic weighted average common shares outstanding
25,935,867 25,927,032 25,867,169 25,922,218 25,881,360 Diluted
weighted average common shares outstanding 25,935,867 25,927,032
25,867,169 25,922,218 25,881,360
KEY RATIOS Return on
average assets 1.19 % 1.20 % 1.05 % 1.20 % 1.07 % Return on average
common shareholders’ equity 9.61 9.59 8.47 9.60 8.62 Average common
shareholders’ equity to average assets 12.43 12.48 12.35 12.49
12.38 End of period tangible common equity to tangible assets(1)
10.95 10.98 10.93 10.95 10.93 Risk-based capital - Common Equity
Tier 1(2) 12.52 12.43 12.35 12.52 12.35 Risk-based capital - Tier
1(2) 13.65 13.58 13.56 13.65 13.56 Risk-based capital - Total(2)
14.94 14.88 14.87 14.94 14.87 Net interest margin 3.53 3.53 3.35
3.52 3.39 Net interest margin - FTE(1) 3.57 3.57 3.39 3.56 3.43
Efficiency ratio: expense to revenue 61.05 58.72 62.95 60.37 63.20
Efficiency ratio: expense to revenue - adjusted(1) 57.98 54.66
60.10 56.81 60.36 Net charge offs to average loans and leases 0.01
0.09 0.44 0.02 0.14 Loan and lease loss reserve to loans and leases
2.10 2.10 2.13 2.10 2.13 Nonperforming assets to loans and leases
0.64 0.66 0.68 0.64 0.68
September 30, June
30, March 31, December 31, September 30,
2017 2017 2017
2016 2016 END OF PERIOD
BALANCES Assets $ 5,806,735 $ 5,687,230 $ 5,501,526 $ 5,486,268
$ 5,447,911 Loans and leases 4,436,718 4,381,314 4,234,862
4,188,071 4,179,417 Deposits 4,573,712 4,482,036 4,336,976
4,333,760 4,377,038 Reserve for loan and lease losses 93,372 91,914
90,118 88,543 88,897 Goodwill and intangible assets 83,795 83,848
83,960 84,102 84,244 Common shareholders’ equity 710,497 699,202
685,934 672,650 670,259
ASSET QUALITY Loans and
leases past due 90 days or more $ 208 $ 178 $ 344 $ 416 $ 611
Nonaccrual loans and leases 15,066 15,923 18,090 19,907 19,922
Other real estate 1,341 710 916 704 551 Repossessions 12,913 13,052
8,121 9,373 8,089 Equipment owned under operating leases 14
21 27 34
43 Total nonperforming assets $ 29,542
$ 29,884 $ 27,498 $
30,434 $ 29,216 (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)
September
30, June 30, December 31, September 30,
2017 2017 2016
2016
ASSETS
Cash and due from banks $ 64,636 $ 63,473 $ 58,578 $ 65,724 Federal
funds sold and interest bearing deposits with other banks 34,788
12,561 49,726 30,100 Investment securities available-for-sale
893,973 850,314 850,467 828,615 Other investments 25,953 24,238
22,458 22,458 Mortgages held for sale 11,000 16,204 15,849 19,986
Loans and leases, net of unearned discount: Commercial and
agricultural 893,174 876,404 812,264 786,167 Auto and light truck
505,126 512,021 411,764 400,809 Medium and heavy duty truck 287,975
290,687 294,790 271,478 Aircraft 816,120 787,516 802,414 836,977
Construction equipment 541,838 539,097 495,925 498,086 Commercial
real estate 740,345 720,078 719,170 744,972 Residential real estate
and home equity 524,071 526,592 521,931 512,597 Consumer 128,069
128,919 129,813 128,331
Total loans and leases 4,436,718 4,381,314 4,188,071
4,179,417 Reserve for loan and lease losses (93,372 )
(91,914 ) (88,543 ) (88,897 )
Net loans and
leases 4,343,346 4,289,400 4,099,528 4,090,520 Equipment owned
under operating leases, net 145,975 144,509 118,793 117,883 Net
premises and equipment 53,324 54,783 56,708 54,654 Goodwill and
intangible assets 83,795 83,848 84,102 84,244 Accrued income and
other assets 149,945 147,900 130,059
133,727
Total assets $ 5,806,735
$ 5,687,230 $ 5,486,268 $
5,447,911
LIABILITIES
Deposits: Noninterest-bearing demand $ 1,019,106 $ 979,801 $
991,256 $ 992,776 Interest-bearing deposits: Interest-bearing
demand 1,493,187 1,519,419 1,471,526 1,417,692 Savings 825,147
832,341 814,326 799,891 Time 1,236,272 1,150,475
1,056,652 1,166,679
Total
interest-bearing deposits 3,554,606 3,502,235
3,342,504 3,384,262
Total
deposits 4,573,712 4,482,036
4,333,760 4,377,038 Short-term borrowings:
Federal funds purchased and securities sold under agreements to
repurchase 148,001 148,109 162,913 167,029 Other short-term
borrowings 168,764 158,474 129,030
48,978
Total short-term borrowings
316,765 306,583 291,943
216,007 Long-term debt and mandatorily redeemable securities
70,482 70,438 74,308 64,760 Subordinated notes 58,764 58,764 58,764
58,764 Accrued expenses and other liabilities 76,515
70,207 54,843 61,083
Total
liabilities 5,096,238 4,988,028
4,813,618 4,777,652
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 September 30, 2017, June 30, 2017, December
31, 2016, and September 30, 2016, respectively
436,538 436,538 436,538 436,538 Retained earnings 327,149
314,889 290,824 280,335 Cost of common stock in treasury
(2,269,544, 2,270,350, 2,329,909, and 2,338,581 shares at September
30, 2017, June 30, 2017, December 31, 2016, and September 30, 2016,
respectively) (54,643 ) (54,662 ) (56,056 ) (56,262 )
Accumulated other comprehensive income 1,453 2,437
1,344 9,648
Total
shareholders’ equity 710,497 699,202
672,650 670,259
Total liabilities
and shareholders’ equity $ 5,806,735 $ 5,687,230
$ 5,486,268 $ 5,447,911
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited - Dollars in
thousands, except per share amounts)
Three Months
Ended Nine Months Ended September 30, June
30, September 30, September 30, September
30, 2017 2017
2016 2017 2016 Interest income:
Loans and leases $ 50,429 $ 48,032 $ 44,965 $ 143,345 $ 131,592
Investment securities, taxable 3,048 3,370 2,384 9,932 8,504
Investment securities, tax-exempt 628 677 672 1,988 2,061 Other
325 319 279 935
879
Total interest income 54,430
52,398 48,300 156,200
143,036 Interest expense: Deposits 5,186 4,511 3,879 13,431
11,440 Short-term borrowings 396 272 150 895 430 Subordinated notes
1,022 1,055 1,055 3,132 3,165 Long-term debt and mandatorily
redeemable securities 597 699
522 1,925 1,725
Total interest
expense 7,201 6,537 5,606
19,383 16,760
Net interest
income 47,229 45,861 42,694 136,817 126,276 Provision for loan
and lease losses 1,620 2,738
2,067 5,358 5,091
Net interest
income after provision for loan and lease losses 45,609
43,123 40,627 131,459
121,185 Noninterest income: Trust and wealth advisory
5,037 5,627 4,691 15,665 14,422 Service charges on deposit accounts
2,468 2,464 2,366 7,171 6,749 Debit card 2,983 2,986 2,745 8,719
8,160 Mortgage banking 1,486 1,304 1,334 3,737 3,495 Insurance
commissions 1,429 1,310 1,350 4,506 4,146 Equipment rental 7,917
7,586 6,657 22,335 19,247 Gains on investment securities
available-for-sale 1,007 465 989 2,757 790 Other 3,265
2,394 2,533 8,145
9,580
Total noninterest income 25,592
24,136 22,665 73,035
66,589 Noninterest expense: Salaries and employee benefits
22,016 20,712 22,136 64,073 64,681 Net occupancy 2,806 2,368 2,435
7,768 7,243 Furniture and equipment 5,363 5,108 4,898 15,264 14,499
Depreciation - leased equipment 6,565 6,296 5,570 18,541 16,115
Professional fees 1,765 1,672 1,244 4,514 3,653 Supplies and
communication 1,316 1,345 1,256 3,911 4,138 FDIC and other
insurance 693 573 647 1,889 2,437 Business development and
marketing 1,199 1,501 1,263 4,352 3,268 Loan and lease collection
and repossession 1,093 329 324 2,058 1,136 Other 1,644
1,201 1,372 4,314
4,714
Total noninterest expense 44,460
41,105 41,145 126,684
121,884 Income before income taxes 26,741 26,154 22,147
77,810 65,890 Income tax expense 9,559 9,485
7,883 27,753 23,329
Net income $ 17,182 $ 16,669
$ 14,264 $ 50,057 $ 42,561 Per
common share: Basic net income per common share $ 0.66
$ 0.64 $ 0.55 $ 1.92
$ 1.63 Diluted net income per common share $
0.66 $ 0.64 $ 0.55 $ 1.92
$ 1.63 Cash dividends $ 0.19 $
0.19 $ 0.18 $ 0.56 $ 0.54
Basic weighted average common shares outstanding 25,935,867
25,927,032 25,867,169
25,922,218 25,881,360 Diluted weighted average common
shares outstanding 25,935,867 25,927,032
25,867,169 25,922,218
25,881,360
1st SOURCE CORPORATION DISTRIBUTION OF ASSETS,
LIABILITIES AND SHAREHOLDERS’ EQUITY INTEREST RATES AND
INTEREST DIFFERENTIAL (Unaudited - Dollars in thousands)
Three Months Ended September 30, 2017 June 30,
2017 September 30, 2016 Interest Interest
Interest Average Income/ Yield/
Average Income/ Yield/ Average
Income/ Yield/ Balance
Expense Rate Balance
Expense Rate Balance
Expense Rate
ASSETS
Investment securities available-for-sale: Taxable $ 733,471 $ 3,048
1.65 % $ 707,373 $ 3,370 1.91 % $ 690,867 $ 2,384 1.37 % Tax
exempt(1) 125,101 917 2.91 % 129,542 983 3.04 % 130,201 973 2.97 %
Mortgages held for sale 12,832 126 3.90 % 11,325 115 4.07 % 14,681
134 3.63 % Loans and leases, net of unearned discount(1) 4,387,748
50,455 4.56 % 4,308,276 48,069 4.48 % 4,189,340 44,980 4.27 % Other
investments 41,686 325 3.09 %
48,992 319 2.61 % 41,286
279 2.69 % Total earning assets(1) 5,300,838
54,871 4.11 % 5,205,508 52,856 4.07 % 5,066,375 48,750 3.83 % Cash
and due from banks 62,373 61,801 60,665 Reserve for loan and lease
losses (93,162 ) (91,044 ) (92,237 ) Other assets 436,023
409,927
390,727
Total assets $ 5,706,072
$ 5,586,192 $ 5,425,530
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Interest-bearing deposits 3,543,037 5,186 0.58 % 3,503,444 4,511
0.52 % 3,393,457 3,879 0.45 % Short-term borrowings 265,014 396
0.59 % 236,716 272 0.46 % 217,460 150 0.27 % Subordinated notes
58,764 1,022 6.90 % 58,764 1,055 7.20 % 58,764 1,055 7.14 %
Long-term debt and mandatorily redeemable securities 70,344
597 3.37 % 83,991 699
3.34 % 64,641 522
3.21 % Total interest-bearing liabilities 3,937,159 7,201 0.73 %
3,882,915 6,537 0.68 % 3,734,322 5,606 0.60 % Noninterest-bearing
deposits 985,230 951,531 959,796 Other liabilities 74,407 54,517
61,406 Shareholders’ equity 709,276
697,229
670,006 Total liabilities and
shareholders’ equity $ 5,706,072
$ 5,586,192 $
5,425,530 Less: Fully
tax-equivalent adjustments (441 ) (458 ) (450 ) Net interest
income/margin (GAAP-derived)(1) $ 47,229
3.53 % $ 45,861 3.53 %
$ 42,694 3.35 % Fully
tax-equivalent adjustments 441 458 450 Net interest income/margin -
FTE(1) $ 47,670 3.57 %
$ 46,319 3.57 % $ 43,144
3.39 % (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)
Nine
Months Ended September 30, 2017 September 30,
2016 Interest Interest Average
Income/ Yield/ Average Income/
Yield/ Balance Expense
Rate Balance Expense
Rate
ASSETS
Investment securities available-for-sale: Taxable $ 716,457 $ 9,932
1.85 % $ 680,606 $ 8,504 1.67 % Tax exempt(1) 128,537 2,894 3.01 %
126,370 2,998 3.17 % Mortgages held for sale 10,788 322 3.99 %
11,650 339 3.89 % Loans and leases, net of unearned discount(1)
4,295,153 143,477 4.47 % 4,101,284 131,687 4.29 % Other investments
43,810 935 2.85 % 52,694
879 2.23 % Total earning assets(1) 5,194,745
157,560 4.06 % 4,972,604 144,407 3.88 % Cash and due from banks
61,389 60,103 Reserve for loan and lease losses
(91,487 )
(90,403 ) Other assets
412,842
384,366 Total assets $ 5,577,489
$ 5,326,670
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Interest-bearing deposits
3,464,773
13,431 0.52 %
3,342,828
11,440 0.46 % Short-term borrowings
256,507
895 0.47 %
217,920
430 0.26 % Subordinated notes
58,764
3,132 7.13 %
58,764
3,165 7.19 % Long-term debt and mandatorily redeemable securities
76,591
1,925 3.36 %
64,351
1,725 3.58 % Total interest-bearing liabilities
3,856,635
19,383 0.67 %
3,683,863
16,760 0.61 % Noninterest-bearing deposits
963,469
926,456 Other liabilities
60,573
56,748 Shareholders’ equity
696,812
659,603 Total liabilities and
shareholders’ equity $ 5,577,489
$ 5,326,670 Less: Fully
tax-equivalent adjustments
(1,360 )
(1,371 ) Net interest income/margin (GAAP-derived)(1)
$ 136,817 3.52 % $ 126,276
3.39 % Fully tax-equivalent adjustments
1,360
1,371 Net interest income/margin - FTE(1) $ 138,177
3.56 % $ 127,647
3.43 % (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 Nine Months Ended
September 30, June 30, September 30,
September 30, September 30,
2017 2017 2016
2017 2016
Calculation of
Net Interest Margin
(A) Interest income (GAAP) $ 54,430 $ 52,398 $ 48,300 $ 156,200 $
143,036 Fully tax-equivalent adjustments: (B) - Loans and leases
152 152 150 454 434 (C) - Tax exempt investment securities
289 306 300
906 937 (D)
Interest income - FTE (A+B+C) 54,871 52,856 48,750 157,560 144,407
(E) Interest expense (GAAP) 7,201 6,537 5,606 19,383 16,760 (F)
Net interest income (GAAP) (A-E) 47,229
45,861 42,694
136,817 126,276 (G)
Net interest income - FTE (D-E) 47,670
46,319 43,144
138,177 127,647 (H)
Annualization factor 3.967 4.011 3.978 1.337 1.336 (I) Total
earning assets $ 5,300,838 $ 5,205,508 $ 5,066,375 $ 5,194,745 $
4,972,604 Net interest margin (GAAP-derived) (F*H)/I 3.53 % 3.53 %
3.35 % 3.52 % 3.39 % Net interest margin - FTE (G*H)/I 3.57 % 3.57
% 3.39 % 3.56 % 3.43 %
Calculation of
Efficiency Ratio
(F) Net interest income (GAAP) $ 47,229 $ 45,861 $ 42,694 $ 136,817
$ 126,276 (G) Net interest income - FTE 47,670 46,319 43,144
138,177 127,647 (J) Plus: noninterest income (GAAP) 25,592 24,136
22,665 73,035 66,589 (K) Less: gains/losses on investment
securities and partnership investments (1,336 ) (477 ) (1,046 )
(3,128 ) (2,899 ) (L) Less: depreciation - leased equipment
(6,565 ) (6,296 ) (5,570
) (18,541 ) (16,115 ) (M)
Total net revenue (GAAP) (F+J) 72,821
69,997 65,359
209,852 192,865 (N) Total
net revenue - adjusted (G+J–K–L) 65,361
63,682 59,193
189,543 175,222 (O) Noninterest
expense (GAAP) 44,460 41,105 41,145 126,684 121,884 (L)
Less:depreciation - leased equipment (6,565 ) (6,296 ) (5,570 )
(18,541 ) (16,115 ) (P) Less: contribution expense limited
to gains on investment securities in (K) —
—
— (462 )
— (Q) Noninterest expense - adjusted (O–L–P) 37,895
34,809 35,575 107,681 105,769 Efficiency ratio (GAAP-derived) (O/M)
61.05 % 58.72 % 62.95 % 60.37 %
63.20
%
Efficiency ratio - adjusted (Q/N) 57.98 % 54.66 %
60.10
%
56.81 % 60.36 %
End of Period September 30,
June 30, September 30,
2017 2017 2016
Calculation of
Tangible Common Equity-to-Tangible Assets Ratio
(R) Total common shareholders’ equity (GAAP) $ 710,497 $ 699,202 $
670,259 (S) Less: goodwill and intangible assets
(83,795 ) (83,848 ) (84,244 )
(T) Total tangible common shareholders’ equity (R–S)
$ 626,702 $ 615,354 $ 586,015
(U) Total assets (GAAP) 5,806,735 5,687,230 5,447,911 (S)
Less: goodwill and intangible assets (83,795 )
(83,848 ) (84,244 ) (V) Total tangible
assets (U–S) $ 5,722,940 $ 5,603,382
$ 5,363,667 Common equity-to-assets ratio
(GAAP-derived) (R/U) 12.24 % 12.29 %
12.30
%
Tangible common equity-to-tangible assets ratio (T/V) 10.95 % 10.98
% 10.93 %
Calculation of
Tangible Book Value per Common Share
(R) Total common shareholders’ equity (GAAP) $ 710,497 $ 699,202 $
670,259 (W) Actual common shares outstanding
25,936,130 25,935,324
25,867,093 Book value per common share (GAAP-derived)
(R/W)*1000 $ 27.39 $ 26.96 $ 25.91 Tangible common book value per
share (T/W)*1000 $ 24.16 $ 23.73 $ 22.65
The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP
#336901 10 3)Please contact us at shareholder@1stsource.com
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1st Source CorporationAndrea Short, 574-235-2000
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