QUARTERLY HIGHLIGHTS
- Net income improved to $19.89 million,
up 15.75% over the third quarter of 2017. Diluted net income per
common share improved to $0.76 from the prior year’s third quarter
of $0.66.
- Return on average assets increased to
1.27% and return on average common shareholders’ equity increased
to 10.50% from 1.19% and 9.61%, respectively in the third quarter
of 2017.
- Net charge-offs of $10.86 million and
nonperforming assets to loans and leases of 1.00% compared to $0.16
million and 0.64%, respectively in the third quarter of 2017.
- Average loans and leases grew $434.68
million, up 9.91% from the third quarter of 2017.
- Average deposits grew $562.95 million,
up 12.43% from the third quarter of 2017.
- Net interest income increased $7.13
million, up 15.10% from the third quarter of 2017.
- Noninterest income decreased $1.53
million, or 5.99% from the third quarter of 2017 (decreased 8.13%
excluding leased equipment depreciation).
- Noninterest expenses increased $2.88
million or 6.48% from the third quarter of 2017 (increased 7.57%
excluding leased equipment depreciation).
1st Source Corporation (NASDAQ: SRCE), parent company of 1st
Source Bank, today reported third quarter net income of $19.89
million, an improvement of 15.75% compared to $17.18 million
reported in the third quarter a year ago. This brought 2018
year-to-date net income to a record of $60.97 million compared to
$50.06 million in 2017, an increase of 21.80%. Income before taxes
was $24.92 million compared to $26.74 million in the third quarter
of 2017 and $77.42 million for the first nine months of 2018
compared to $77.81 million for the same period in 2017. The
year-to-date pretax income comparison was positively impacted by
increased net interest income of $21.25 million primarily due to
rising lending rates, higher average loan and lease balances, and
recognition of a $0.62 million unaccreted purchase loan discount
and $0.41 million prepayment penalty on two separate early loan
payoffs. These positives were offset by a $9.40 million increase in
the provision for loan and lease losses to support loan and lease
growth along with higher charge-offs and a $12.09 million rise in
noninterest expense which includes a $1.29 million increase in
repossessed asset write downs. Non-recurring 2018 costs were
approximately $3.65 million.
Diluted net income per common share for the third quarter of
2018 was $0.76, versus $0.66 in the third quarter of 2017. Diluted
net income per common share for the first nine months of 2018 was
$2.33 compared to $1.92 earned a year earlier.
At its October 2018 meeting, the Board of Directors approved a
cash dividend of $0.25 per common share, up 25% from the $0.20 per
common share declared a year ago. The cash dividend is payable to
shareholders of record on November 5, 2018 and will be paid on
November 15, 2018.
According to Christopher J. Murphy III, Chairman, “We are
pleased with our increase in revenue in the third quarter as 1st
Source Corporation experienced growth in average loans and leases
and average deposits with some month end seasonal adjustments.
Average loans and leases were up a solid 9.91% for the quarter,
compared to the same period a year ago. Average deposits also
increased with strong growth of 12.43% from this time last year.
Net interest income has increased 15.10% from the third quarter
2017 while noninterest income decreased 5.99% and noninterest
expense increased by 6.48% over the same quarter in 2017.”
“Our biggest credit challenge in the quarter was with larger
charge-offs and write downs. We have written our assets down to
what we believe are realizable values. The majority of the
charge-offs is from one large syndicated aircraft account in which
we are a small participant. This credit is unique in both size and
complexity within our portfolio.”
“We were recently honored to be a part of the annual Jimmy and
Rosalynn Carter Work Project with Habitat for Humanity. Mishawaka,
Indiana was selected as the location for this week-long Carter
Build event, and 1st Source Bank sponsored one of the homes.
Members of our staff from across northern Indiana and southwestern
Michigan volunteered their time and talents to help build this home
for a deserving family. Community leadership is one of 1st Source’s
values and this was just one more way we demonstrate it.”
THIRD QUARTER 2018 FINANCIAL RESULTS
Loans
Average loans and leases of $4.82 billion increased $434.68
million, up 9.91% in the third quarter of 2018 from the year ago
quarter and have increased $52.07 million, up 1.09% from the second
quarter. Year-to-date average loans and leases of $4.73 billion
increased $432.89 million, up 10.08% from the first nine months of
2017.
Deposits
Average deposits of $5.09 billion grew $562.95 million, up
12.43% for the quarter ended September 30, 2018 from the year
ago quarter and have increased $129.75 million, up 2.62% compared
to the second quarter. Average deposits for the first nine months
of 2018 were $4.92 billion, an increase of $493.54 million, up
11.15% from the same period a year ago.
Net Interest Income and Net Interest Margin
Third quarter 2018 net interest income of $54.36 million
increased $7.13 million, up 15.10% from the third quarter a year
ago and increased $1.19 million, up 2.24% from the second quarter.
For the first nine months of 2018, tax-equivalent net interest
income was $158.68 million, an increase of $20.50 million, up
14.83% compared to the same period a year ago.
Third quarter 2018 net interest margin was 3.69%, an improvement
of 16 basis points from the 3.53% for the same period in 2017 and
remained stable with the second quarter. Third quarter 2018 net
interest margin on a fully tax-equivalent basis was 3.71%, an
increase of 14 basis points from the 3.57% for the same period in
2017 and also remained stable with the second quarter.
Net interest margin for the first nine months of 2018 was 3.69%,
an increase of 17 basis points from the 3.52% for the same period
in 2017. Net interest margin on a fully tax-equivalent basis for
the first nine months of 2018 was 3.71%, an increase of 15 basis
points from the 3.56% for the same period in 2017.
Noninterest Income
Third quarter 2018 noninterest income of $24.06 million
decreased $1.53 million, or 5.99% from the third quarter a year ago
and was lower by $0.96 million, or 3.85% from the second quarter.
For the first nine months of 2018, noninterest income was
relatively flat at $72.89 million compared to the same period a
year ago.
Noninterest income during the three and nine months ended
September 30, 2018 was lower compared to a year ago mainly due to
reduced gains on the sale of available-for-sale equity securities.
Other factors include decreased mortgage banking income, and lower
customer swap fees offset by higher equipment rental income
resulting from an increase in the average lease portfolio, improved
debit card income due to growth in those transactions, improved
insurance commissions due to new business, and increased trust and
wealth advisory fees.
Noninterest Expense
Third quarter 2018 noninterest expense of $47.34 million
increased $2.88 million or 6.48% from the third quarter a year ago
and increased $1.47 million or 3.19% from the prior quarter. For
the first nine months of 2018, noninterest expense was $138.78
million, an increase of $12.09 million, or 9.55% compared to the
same period a year ago. Excluding depreciation on leased equipment,
noninterest expenses were up 7.57% and 10.12% for the third quarter
and first nine months of 2018, respectively.
The increase in noninterest expense from the same periods a year
ago was primarily due to higher salaries as a result of normal
merit increases and incentive compensation, increased group
insurance costs, a rise in furniture, equipment, and technology
costs due to increased software maintenance and computer processing
charges, higher depreciation on leased equipment due to growth in
the lease portfolio and higher loan and lease collection expenses.
In addition, non-recurring 2018 costs were approximately $3.65
million due to consulting fees of $1.45 million for a customer
relationship management project, a regulatory compliance project,
and information technology projects, repossessed asset valuation
adjustments of $1.90 million, and trust losses of $0.30
million.
Credit
The reserve for loan and lease losses as of September 30,
2018 was 2.04% of total loans and leases compared to 2.13% at
June 30, 2018 and 2.10% at September 30, 2017. Net
charge-offs of $10.86 million were recorded for the third quarter
of 2018 compared with net charge-offs of $0.16 million in the same
quarter a year ago and up from the $0.14 million of net charge-offs
in the second quarter. The majority of the third quarter
charge-offs was related to one relationship within the aircraft
portfolio. Year-to-date net charge-offs of $11.34 million have been
recorded in 2018, compared to net charge-offs of $0.53 million for
the first nine months of 2017.
The provision for loan and lease losses was $6.16 million for
the third quarter and $14.76 million for the first nine months of
2018, an increase of $4.54 million and $9.40 million, respectively,
compared with the same periods in 2017. The ratio of nonperforming
assets to loans and leases was 1.00% as of September 30, 2018,
compared to 0.64% on September 30, 2017 and 0.89% on
June 30, 2018.
Capital
As of September 30, 2018, the common equity-to-assets ratio
was 11.92%, compared to 11.71% at June 30, 2018 and 12.24% a
year ago. The tangible common equity-to-tangible assets ratio was
10.73% at September 30, 2018 and 10.52% at June 30, 2018
compared to 10.95% a year earlier. The Common Equity Tier 1 ratio,
calculated under banking regulatory guidelines, was 12.38% at
September 30, 2018 compared to 12.15% at June 30, 2018
and 12.52% 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 its
clients, individuals, businesses and 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 80 banking
centers, 22 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.
1st SOURCE CORPORATION 3rd QUARTER 2018 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, 2018 2018
2017 2018
2017 AVERAGE BALANCES Assets $
6,224,187 $ 6,167,017 $ 5,706,072 $ 6,111,302
$ 5,577,489 Earning assets 5,839,588 5,776,822 5,300,838
5,724,114 5,194,745 Investments 964,281 948,335 858,572 943,372
844,994 Loans and leases 4,822,431 4,770,361 4,387,748 4,728,047
4,295,153 Deposits 5,091,221 4,961,473 4,528,267 4,921,780
4,428,242 Interest bearing liabilities 4,323,467 4,370,692
3,937,159 4,283,411 3,856,635 Common shareholders’ equity 751,248
736,310 709,276 738,025 696,812
INCOME STATEMENT DATA
Net interest income $ 54,362 $ 53,169 $ 47,229 $ 158,063 $ 136,817
Net interest income - FTE(1) 54,559 53,372 47,670 158,675 138,177
Provision for loan and lease losses 6,157 4,817 1,620 14,760 5,358
Noninterest income 24,060 25,023 25,592 72,890 73,035 Noninterest
expense 47,342 45,877 44,460 138,776 126,684 Net income 19,888
21,964 17,182 60,968 50,057
PER SHARE DATA Basic net
income per common share $ 0.76 $ 0.84 $ 0.66 $ 2.33 $ 1.92 Diluted
net income per common share 0.76 0.84 0.66 2.33 1.92 Common cash
dividends declared 0.25 0.24 0.19 0.71 0.56 Book value per common
share 28.90 28.51 27.39 28.90 27.39 Tangible book value per common
share(1) 25.66 25.27 24.16 25.66 24.16 Market value - High 59.33
56.77 51.80 59.33 51.80 Market value - Low 50.34 49.58 44.59 48.26
42.15 Basic weighted average common shares outstanding 25,965,694
25,958,128 25,935,867 25,958,125 25,922,218 Diluted weighted
average common shares outstanding 25,965,694 25,958,128 25,935,867
25,958,125 25,922,218
KEY RATIOS Return on average
assets 1.27 % 1.43 % 1.19 % 1.33 % 1.20 % Return on average common
shareholders’ equity 10.50 11.96 9.61 11.04 9.60 Average common
shareholders’ equity to average assets 12.07 11.94 12.43 12.08
12.49 End of period tangible common equity to tangible assets(1)
10.73 10.52 10.95 10.73 10.95 Risk-based capital - Common Equity
Tier 1(2) 12.38 12.15 12.52 12.38 12.52 Risk-based capital - Tier
1(2) 13.41 13.18 13.65 13.41 13.65 Risk-based capital - Total(2)
14.66 14.44 14.94 14.66 14.94 Net interest margin 3.69 3.69 3.53
3.69 3.52 Net interest margin - FTE(1) 3.71 3.71 3.57 3.71 3.56
Efficiency ratio: expense to revenue 60.37 58.67 61.05 60.09 60.37
Efficiency ratio: expense to revenue - adjusted(1) 56.71 54.71
57.98 56.28 56.81 Net charge offs to average loans and leases 0.89
0.01 0.01 0.32 0.02 Loan and lease loss reserve to loans and leases
2.04 2.13 2.10 2.04 2.10 Nonperforming assets to loans and leases
1.00 0.89 0.64 1.00 0.64
September 30, June
30, March 31, December 31, September 30,
2018 2018 2018
2017 2017 END
OF PERIOD BALANCES Assets $ 6,293,169 $ 6,320,058 $ 6,051,463 $
5,887,284 $ 5,806,735 Loans and leases 4,825,553 4,839,823
4,691,097 4,527,678 4,436,718 Deposits 5,061,977 5,108,439
4,781,325 4,752,730 4,573,712 Reserve for loan and lease losses
98,300 103,007 98,331 94,883 93,372 Goodwill and intangible assets
84,097 84,104 84,124 83,742 83,795 Common shareholders’ equity
750,437 740,277 725,609 718,537 710,497
ASSET QUALITY
Loans and leases past due 90 days or more $ 125 $ 263 $ 123 $ 459 $
208 Nonaccrual loans and leases 36,028 34,582 25,360 19,405 15,066
Other real estate 432 133 1,184 1,312 1,341 Repossessions 13,041
9,389 9,432 10,114 12,913 Equipment owned under operating leases
48 — 2
9 14 Total nonperforming assets
$ 49,674 $ 44,367
$ 36,101 $ 31,299
$ 29,542 (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,
2018 2018 2017
2017
ASSETS
Cash and due from banks $ 68,362 $ 71,102 $ 73,635 $ 64,636 Federal
funds sold and interest bearing deposits with other banks 45,514
73,358 4,398 34,788 Investment securities available-for-sale
972,172 968,349 904,033 893,973 Other investments 28,159 28,159
25,953 25,953 Mortgages held for sale 11,149 8,235 13,123 11,000
Loans and leases, net of unearned discount: Commercial and
agricultural 1,062,907 1,047,705 929,997 893,174 Auto and light
truck 562,546 580,045 496,816 505,126 Medium and heavy duty truck
271,601 276,273 296,935 287,975 Aircraft 836,458 863,496 844,657
816,120 Construction equipment 654,605 642,634 563,437 541,838
Commercial real estate 781,093 769,659 741,568 740,345 Residential
real estate and home equity 523,391 524,112 526,122 524,071
Consumer 132,952 135,899 128,146
128,069
Total loans and leases
4,825,553 4,839,823 4,527,678 4,436,718 Reserve for loan and lease
losses (98,300 ) (103,007 ) (94,883 )
(93,372 )
Net loans and leases 4,727,253 4,736,816 4,432,795
4,343,346 Equipment owned under operating leases, net 137,492
143,024 139,581 145,975 Net premises and equipment 53,479 53,363
54,612 53,324 Goodwill and intangible assets 84,097 84,104 83,742
83,795 Accrued income and other assets 165,492
153,548 155,412 149,945
Total
assets $ 6,293,169 $ 6,320,058
$ 5,887,284 $ 5,806,735
LIABILITIES
Deposits: Noninterest-bearing demand $ 1,151,573 $ 1,106,495 $
1,064,271 $ 1,019,106 Interest-bearing deposits: Interest-bearing
demand 1,606,462 1,651,533 1,554,898 1,493,187 Savings 822,246
843,558 863,588 825,147 Time 1,481,696
1,506,853 1,269,973 1,236,272
Total interest-bearing deposits 3,910,404
4,001,944 3,688,459 3,554,606
Total deposits 5,061,977
5,108,439 4,752,730 4,573,712
Short-term borrowings: Federal funds purchased and securities sold
under agreements to repurchase 124,630 106,861 205,834 148,001
Other short-term borrowings 166,077 170,233
8,761 168,764
Total
short-term borrowings 290,707 277,094
214,595 316,765 Long-term debt
and mandatorily redeemable securities 70,919 71,194 70,060 70,482
Subordinated notes 58,764 58,764 58,764 58,764 Accrued expenses and
other liabilities 60,365 64,290
72,598 76,515
Total liabilities
5,542,732 5,579,781 5,168,747
5,096,238
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, 2018, June 30, 2018, December
31, 2017, and September 30, 2017, respectively
436,538 436,538 436,538 436,538 Retained earnings 383,943 370,521
339,959 327,149
Cost of common stock in treasury
(2,239,928, 2,240,597, 2,268,910, and 2,269,544 shares at September
30, 2018, June 30, 2018, December 31, 2017, and September 30, 2017,
respectively)
(54,369 ) (54,367 ) (54,628 ) (54,643 ) Accumulated other
comprehensive (loss) income (15,675 ) (12,415 )
(3,332 ) 1,453
Total shareholders’
equity 750,437 740,277
718,537 710,497
Total liabilities and
shareholders’ equity $ 6,293,169 $
6,320,058 $ 5,887,284 $ 5,806,735
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, 2018 2018
2017 2018 2017 Interest income:
Loans and leases $ 59,961 $ 58,520 $ 50,429 $ 172,172 $ 143,345
Investment securities, taxable 4,873 4,428 3,048 13,869 9,932
Investment securities, tax-exempt 471 520 628 1,562 1,988 Other
391 397 325 1,196
935
Total interest income 65,696
63,865 54,430 188,799
156,200 Interest expense: Deposits 9,405 8,319 5,186 24,286
13,431 Short-term borrowings 518 826 396 2,120 895 Subordinated
notes 918 908 1,022 2,709 3,132 Long-term debt and mandatorily
redeemable securities 493 643
597 1,621 1,925
Total interest
expense 11,334 10,696 7,201
30,736 19,383
Net interest
income 54,362 53,169 47,229 158,063 136,817 Provision for loan
and lease losses 6,157 4,817
1,620 14,760 5,358
Net interest
income after provision for loan and lease losses 48,205
48,352 45,609 143,303
131,459 Noninterest income: Trust and wealth advisory
5,109 5,800 5,037 16,097 15,665 Service charges on deposit accounts
2,567 2,625 2,719 7,676 7,931 Debit card 3,377 3,427 2,983 9,907
8,719 Mortgage banking 925 1,073 1,486 2,882 3,737 Insurance
commissions 1,580 1,487 1,429 5,025 4,506 Equipment rental 7,977
8,104 7,917 23,836 22,335 Gains (losses) on investment securities
available-for-sale — — 1,007 (345 ) 2,757 Other 2,525
2,507 3,014 7,812
7,385
Total noninterest income 24,060
25,023 25,592 72,890
73,035 Noninterest expense: Salaries and employee benefits 23,164
23,696 22,016 69,391 64,073 Net occupancy 2,523 2,115 2,806 7,504
7,768 Furniture and equipment 5,769 5,718 5,363 16,942 15,264
Depreciation – leased equipment 6,580 6,684 6,565 19,692 18,541
Professional fees 1,883 1,728 1,765 5,628 4,514 Supplies and
communication 1,635 1,499 1,316 4,687 3,911 FDIC and other
insurance 855 714 693 2,267 1,889 Business development and
marketing 1,663 1,725 1,199 4,921 4,352 Loan and lease collection
and repossession 1,563 565 1,093 3,079 2,058 Other 1,707
1,433 1,644 4,665
4,314
Total noninterest expense 47,342
45,877 44,460 138,776
126,684 Income before income taxes 24,923 27,498 26,741
77,417 77,810 Income tax expense 5,035 5,534
9,559 16,449 27,753
Net income $ 19,888 $ 21,964
$ 17,182 $ 60,968 $ 50,057 Per
common share: Basic net income per common share $ 0.76
$ 0.84 $ 0.66 $ 2.33
$ 1.92 Diluted net income per common share $
0.76 $ 0.84 $ 0.66 $ 2.33
$ 1.92 Cash dividends $ 0.25 $
0.24 $ 0.19 $ 0.71 $ 0.56
Basic weighted average common shares outstanding 25,965,694
25,958,128 25,935,867
25,958,125 25,922,218 Diluted weighted average common
shares outstanding 25,965,694 25,958,128
25,935,867 25,958,125
25,922,218
1st SOURCE CORPORATION DISTRIBUTION OF
ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY INTEREST RATES
AND INTEREST DIFFERENTIAL (Unaudited - Dollars in thousands)
Three Months Ended September 30, 2018
June 30, 2018
September 30, 2017
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 $ 873,658 $ 4,873
2.21 % $ 851,348 $ 4,428 2.09 % $ 733,471 $ 3,048 1.65 % Tax
exempt(1) 90,623 572 2.50 % 96,987 634 2.62 % 125,101 917 2.91 %
Mortgages held for sale 9,016 93 4.09 % 6,985 92 5.28 % 12,832 126
3.90 % Loans and leases, net of unearned discount(1) 4,822,431
59,964 4.93 % 4,770,361 58,517 4.92 % 4,387,748 50,455 4.56 % Other
investments 43,860 391 3.54 %
51,141 397 3.11 % 41,686
325 3.09 % Total earning assets(1) 5,839,588
65,893 4.48 % 5,776,822 64,068 4.45 % 5,300,838 54,871 4.11 % Cash
and due from banks 64,622 65,895 62,373 Reserve for loan and lease
losses (102,790 ) (99,277 ) (93,162 ) Other assets 422,767
423,577
436,023
Total assets $ 6,224,187
$ 6,167,017
$ 5,706,072
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Interest-bearing deposits 3,986,576 9,405 0.94 % 3,950,546 8,319
0.84 % 3,543,037 5,186 0.58 % Short-term borrowings 207,225 518
0.99 % 290,220 826 1.14 % 265,014 396 0.59 % Subordinated notes
58,764 918 6.20 % 58,764 908 6.20 % 58,764 1,022 6.90 % Long-term
debt and mandatorily redeemable securities 70,902
493 2.76 % 71,162 643
3.62 % 70,344 597
3.37 % Total interest-bearing liabilities 4,323,467 11,334 1.04 %
4,370,692 10,696 0.98 % 3,937,159 7,201 0.73 % Noninterest-bearing
deposits 1,104,645 1,010,927 985,230 Other liabilities 44,827
49,088 74,407 Shareholders’ equity 751,248
736,310
709,276 Total
liabilities and shareholders’ equity $ 6,224,187
$ 6,167,017
$ 5,706,072
Less: Fully tax-equivalent adjustments (197 ) (203 ) (441 ) Net
interest income/margin (GAAP-derived)(1) $
54,362 3.69 % $ 53,169
3.69 % $ 47,229 3.53 %
Fully tax-equivalent adjustments 197 203 441 Net interest
income/margin - FTE(1) $ 54,559
3.71 % $ 53,372 3.71 %
$ 47,670 3.57 %
(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, 2018 September 30, 2017
Interest Interest Average Income/
Yield/ Average Income/ Yield/
Balance Expense Rate
Balance Expense Rate
ASSETS
Investment securities available-for-sale: Taxable $ 844,394 $
13,869 2.20 % $ 716,457 $ 9,932 1.85 % Tax exempt(1) 98,978 1,901
2.57 % 128,537 2,894 3.01 % Mortgages held for sale 7,911 265 4.48
% 10,788 322 3.99 % Loans and leases, net of unearned discount(1)
4,728,047 172,180 4.87 % 4,295,153 143,477 4.47 % Other investments
44,784 1,196 3.57 %
43,810 935 2.85 % Total earning
assets(1) 5,724,114 189,411 4.42 % 5,194,745 157,560 4.06 % Cash
and due from banks 63,983 61,389 Reserve for loan and lease losses
(99,284 ) (91,487 ) Other assets 422,489
412,842
Total assets $ 6,111,302
$ 5,577,489
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Interest-bearing deposits 3,881,040 24,286 0.84 % 3,464,773 13,431
0.52 % Short-term borrowings 272,813 2,120 1.04 % 256,507 895 0.47
% Subordinated notes 58,764 2,709 6.16 % 58,764 3,132 7.13 %
Long-term debt and mandatorily redeemable securities 70,794
1,621 3.06 % 76,591
1,925 3.36 % Total interest-bearing
liabilities 4,283,411 30,736 0.96 % 3,856,635 19,383 0.67 %
Noninterest-bearing deposits 1,040,740 963,469 Other liabilities
49,126 60,573 Shareholders’ equity 738,025
696,812
Total liabilities and shareholders’ equity $
6,111,302 $ 5,577,489
Less: Fully tax-equivalent
adjustments (612 ) (1,360 ) Net interest income/margin
(GAAP-derived)(1) $ 158,063 3.69
% $ 136,817 3.52 % Fully
tax-equivalent adjustments 612 1,360 Net interest income/margin -
FTE(1) $ 158,675 3.71 %
$ 138,177 3.56 % (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, 2018 2018
2017 2018 2017
Calculation of
Net Interest Margin
(A) Interest income (GAAP) $ 65,696 $ 63,865 $ 54,430 $ 188,799 $
156,200 Fully tax-equivalent adjustments: (B) – Loans and leases 96
89 152 273 454 (C) – Tax exempt investment securities
101 114 289 339
906 (D) Interest income – FTE (A+B+C) 65,893 64,068
54,871 189,411 157,560 (E) Interest expense (GAAP) 11,334 10,696
7,201 30,736 19,383 (F) Net interest income (GAAP) (A-E)
54,362 53,169 47,229
158,063 136,817 (G) Net interest
income - FTE (D-E) 54,559 53,372
47,670 158,675 138,177 (H)
Annualization factor 3.967 4.011 3.967 1.337 1.337 (I) Total
earning assets $ 5,839,588 $ 5,776,822 $ 5,300,838 $ 5,724,114 $
5,194,745 Net interest margin (GAAP-derived) (F*H)/I 3.69 % 3.69 %
3.53 % 3.69 % 3.52 % Net interest margin – FTE (G*H)/I 3.71 % 3.71
% 3.57 % 3.71 % 3.56 %
Calculation of
Efficiency Ratio
(F) Net interest income (GAAP) $ 54,362 $ 53,169 $ 47,229 $ 158,063
$ 136,817 (G) Net interest income – FTE 54,559 53,372 47,670
158,675 138,177 (J) Plus: noninterest income (GAAP) 24,060 25,023
25,592 72,890 73,035 (K) Less: gains/losses on investment
securities and partnership investments (155 ) (76 ) (1,336 ) (263 )
(3,128 ) (L) Less: depreciation – leased equipment
(6,580 ) (6,684 ) (6,565 ) (19,692 )
(18,541 ) (M) Total net revenue (GAAP) (F+J) 78,422
78,192 72,821 230,953
209,852 (N) Total net revenue –
adjusted (G+J–K–L) 71,884 71,635
65,361 211,610 189,543 (O)
Noninterest expense (GAAP) 47,342 45,877 44,460 138,776 126,684 (L)
Less:depreciation – leased equipment (6,580 ) (6,684 ) (6,565 )
(19,692 ) (18,541 ) (P) Less: contribution expense limited
to gains on investment securities in (K) — —
— — (462 ) (Q)
Noninterest expense – adjusted (O–L–P) 40,762 39,193 37,895 119,084
107,681 Efficiency ratio (GAAP-derived) (O/M) 60.37 % 58.67 % 61.05
% 60.09 % 60.37 % Efficiency ratio – adjusted (Q/N) 56.71 % 54.71 %
57.98 % 56.28 % 56.81 %
End of Period September
30, June 30, September 30,
2018 2018 2017
Calculation of
Tangible Common Equity-to-Tangible Assets Ratio
(R) Total common shareholders’ equity (GAAP) $ 750,437 $ 740,277 $
710,497 (S) Less: goodwill and intangible assets
(84,097 ) (84,104 ) (83,795 ) (T) Total
tangible common shareholders’ equity (R–S) $ 666,340
$ 656,173 $ 626,702 (U) Total assets
(GAAP) 6,293,169 6,320,058 5,806,735 (S) Less: goodwill and
intangible assets (84,097 ) (84,104 ) (83,795
) (V) Total tangible assets (U–S) $ 6,209,072
$ 6,235,954 $ 5,722,940 Common
equity-to-assets ratio (GAAP-derived) (R/U) 11.92 % 11.71 % 12.24 %
Tangible common equity-to-tangible assets ratio (T/V) 10.73 % 10.52
% 10.95 %
Calculation of
Tangible Book Value per Common Share
(R) Total common shareholders’ equity (GAAP) $ 750,437 $ 740,277 $
710,497 (W) Actual common shares outstanding
25,965,746 25,965,077 25,936,130
Book value per common share (GAAP-derived) (R/W)*1000 $ 28.90 $
28.51 $ 27.39 Tangible common book value per share (T/W)*1000 $
25.66 $ 25.27 $ 24.16
The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP
#336901 10 3)
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