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UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
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FORM 8-K |
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CURRENT REPORT |
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PURSUANT TO SECTION 13 OR 15(d) OF |
THE SECURITIES EXCHANGE ACT OF 1934 |
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Date of Report (Date of earliest event reported): July 23, 2015 |
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1st Source Corporation |
(Exact name of registrant as specified in its charter) |
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Indiana | 0-6233 | 35-1068133 |
(State or other jurisdiction of incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) |
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100 North Michigan Street, South Bend, Indiana 46601 |
(Address of principal executive offices) (Zip Code) |
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574-235-2000 |
(Registrant's telephone number, including area code) |
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Not Applicable |
(Former name or former address, if changed since last report) |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |
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[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 Results of Operations and Financial Condition.
On July 23, 2015, 1st Source Corporation issued a press release that announced its second quarter earnings for 2015. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.
ITEM 9.01 Financial Statements and Exhibits.
Exhibit 99.1: Press release dated July 23, 2015, with respect to 1st Source Corporation’s financial results for the second quarter ended June 30, 2015.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | 1st SOURCE CORPORATION |
| | (Registrant) |
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Date: July 23, 2015 | | /s/ CHRISTOPHER J. MURPHY III |
| | Christopher J. Murphy III |
| | Chairman of the Board and CEO |
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Date: July 23, 2015 | | /s/ ANDREA G. SHORT |
| | Andrea G. Short |
| | Treasurer and Chief Financial Officer |
| | Principal Accounting Officer |
Exhibit 99.1
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For: | Immediate Release | Contact: | Andrea Short |
| July 23, 2015 | | 574-235-2000 |
Record Second Quarter Earnings at 1st Source Corporation,
Cash and Stock Dividends Declared
South Bend, IN - 1st Source Corporation (NASDAQ:SRCE), parent company of 1st Source Bank, today reported net income of $15.63 million for the second quarter of 2015, up 7.84% over the $14.49 million earned in the second quarter of 2014. Year to date, net income was $29.14 million, up 3.61% compared to the first six months of last year. Diluted net income per common share for the second quarter amounted to $0.59, up 9.26% compared to the $0.54 in the second quarter of 2014. Diluted net income per common share for the first half of 2015 was $1.10, an increase of 5.77% compared to the $1.04 earned a year earlier. (All share and per share information has been adjusted for a 10% stock dividend declared on July 22, 2015, unless otherwise noted.)
At its July 2015 meeting, the Board of Directors approved a cash dividend of $0.18 per common share (unadjusted). The cash dividend is payable to shareholders of record on August 4, 2015. The Board also approved a ten percent (10%) stock dividend of 1st Source common stock. The stock dividend is payable to shareholders of record on August 5, 2015. Both the cash and the stock dividend will be paid on August 14, 2015.
According to Christopher J. Murphy, III, Chairman, "It was a solid quarter for 1st Source as we achieved record quarterly net income of $15.63 million, up 7.84% from one year ago. Credit quality continues to be strong with nonperforming assets reduced by 47.14% to $21.72 million from $41.09 million a year ago and we saw steady growth in loans and deposits. The quarter also benefited from net interest recoveries. We look forward to the remainder of 2015 as the economy continues to improve."
"This quarter we opened our 81st banking center in a high traffic area of Elkhart, Indiana, and we started construction on a new banking center in the heart of downtown New Haven, Indiana. Additionally, next week we will open a location in Portage, Michigan, our second banking center in the greater Kalamazoo, Michigan market. We continue to add new clients every day by staying true to our mission of helping our clients achieve security, build wealth and realize their dreams and by giving straight talk and sound advice, keeping their best interests in mind for the long term."
The net interest margin was 3.64% for the second quarter of 2015 versus 3.59% for the same period in 2014. The net interest margin was 3.61% for the six months ended June 30, 2015, versus 3.59% for the same period in 2014. Tax-equivalent net interest income was $42.07 million for the second quarter of 2015, compared to the $40.62 million from 2014’s second quarter. For the first six months of 2015, tax equivalent net interest income was $81.93 million, compared to $79.71 million for the first six months of 2014.
The reserve for loan and lease losses as of June 30, 2015 was 2.25% of total loans and leases compared to 2.38% at June 30, 2014. Net recoveries of $0.68 million were recorded for the second quarter of 2015 compared with net
recoveries of $1.22 million in the same quarter a year ago. Year to date, net recoveries of $0.35 million have been recorded in 2015, compared to net recoveries of $1.92 million for the first half of 2014. The provision for loan and lease losses was $0.81 million for the second quarter of 2015, compared with $2.54 million for the same period in 2014. For the first six months of 2015, the provision for loan and lease losses was $1.17 million compared with $3.35 million for the first six months of 2014. The ratio of nonperforming assets to net loans and leases improved to 0.55% as of June 30, 2015, compared to 1.08% on June 30, 2014.
Total assets at the end of the second quarter of 2015 were $5.01 billion, up 1.79% from the $4.93 billion a year ago. Total loans and leases were $3.85 billion, up 3.47% from June 30, 2014. Total deposits were $3.96 billion, up 3.85% from the comparable figure at June 30, 2014. As of June 30, 2015, the common equity-to-assets ratio was 12.60%, compared to 12.06% a year ago and the tangible common equity-to-tangible assets ratio was 11.09% compared to 10.50% a year earlier.
Noninterest income for the second quarter of 2015 was $21.53 million, an increase of 12.02% from the same period in 2014. For the first six months of 2015, noninterest income was $41.28 million, up 6.90% compared to 2014. Noninterest income increased primarily as a result of increased equipment rental income and trust fees.
Noninterest expense was $38.24 million for the second quarter of 2015, up 11.09% from the second quarter of 2014. For the six months ended June 30, 2015, noninterest expense was $76.30 million, up 8.39% compared with $70.40 million for the same period in 2014. Noninterest expense increased primarily as a result of higher salary expense, group insurance costs and depreciation on leased equipment.
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 81 community banking centers in 17 counties, 8 trust and wealth management locations, 8 1st Source Insurance offices, as well as 22 specialty finance locations nationwide.
In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. 1st Source Corporation believes that providing non-GAAP financial measures provides investors with information useful to understanding our financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on “tangible equity” which is “common shareholders’ equity” excluding intangible assets.
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.
# # #
(charts attached)
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1st SOURCE CORPORATION | | | | | | | | | | |
2nd QUARTER 2015 FINANCIAL HIGHLIGHTS | | | | | | | | | |
(Unaudited - Dollars in thousands, except per share data) | | | | | | | | |
| | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| | 2015 | 2014 | | 2015 | 2014 |
END OF PERIOD BALANCES | | | | | | | | | | |
Assets | | | | | | | $ | 5,014,023 |
| | $ | 4,925,727 |
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Loans and leases | | | | | | | 3,852,699 |
| | 3,723,535 |
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Deposits | | | | | | | 3,962,585 |
| | 3,815,735 |
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Reserve for loan and lease losses | | | | | | | 86,588 |
| | 88,776 |
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Intangible assets | | | | | | | 84,967 |
| | 85,796 |
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Common shareholders’ equity | | | | | | | 631,631 |
| | 594,218 |
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AVERAGE BALANCES | | | | | | | | | | |
Assets | | $ | 4,956,246 |
| | $ | 4,831,313 |
| | | $ | 4,888,724 |
| | $ | 4,765,107 |
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Earning assets | | 4,634,091 |
| | 4,539,093 |
| | | 4,573,117 |
| | 4,477,086 |
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Investments | | 791,569 |
| | 835,755 |
| | | 790,073 |
| | 833,688 |
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Loans and leases | | 3,800,120 |
| | 3,662,156 |
| | | 3,737,449 |
| | 3,603,016 |
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Deposits | | 3,927,077 |
| | 3,764,043 |
| | | 3,872,320 |
| | 3,717,259 |
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Interest bearing liabilities | | 3,450,830 |
| | 3,451,752 |
| | | 3,407,965 |
| | 3,396,660 |
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Common shareholders’ equity | | 632,300 |
| | 599,292 |
| | | 627,873 |
| | 597,002 |
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INCOME STATEMENT DATA | | | | | | | | | | |
Net interest income | | $ | 41,665 |
| | $ | 40,162 |
| | | $ | 81,101 |
| | $ | 78,780 |
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Net interest income - FTE | | 42,072 |
| | 40,622 |
| | | 81,926 |
| | 79,709 |
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Provision for loan and lease losses | | 811 |
| | 2,543 |
| | | 1,168 |
| | 3,347 |
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Noninterest income | | 21,531 |
| | 19,221 |
| | | 41,282 |
| | 38,619 |
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Noninterest expense | | 38,241 |
| | 34,424 |
| | | 76,302 |
| | 70,396 |
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Net income | | 15,630 |
| | 14,494 |
| | | 29,141 |
| | 28,126 |
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PER SHARE DATA* | | | | | | | | | | |
Basic net income per common share | | $ | 0.59 |
| | $ | 0.54 |
| | | $ | 1.10 |
| | $ | 1.04 |
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Diluted net income per common share | | 0.59 |
| | 0.54 |
| | | 1.10 |
| | 1.04 |
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Common cash dividends declared | | 0.164 |
| | 0.164 |
| | | 0.327 |
| | 0.318 |
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Book value per common share | | 24.11 |
| | 22.63 |
| | | 24.11 |
| | 22.63 |
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Tangible book value per common share | | 20.87 |
| | 19.36 |
| | | 20.87 |
| | 19.36 |
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Market value - High | | 31.75 |
| | 30.19 |
| | | 31.75 |
| | 30.19 |
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Market value - Low | | 27.69 |
| | 26.15 |
| | | 26.95 |
| | 25.05 |
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Basic weighted average common shares outstanding | | 26,212,999 |
| | 26,485,789 |
| | | 26,235,511 |
| | 26,616,762 |
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Diluted weighted average common shares outstanding | | 26,212,999 |
| | 26,485,789 |
| | | 26,235,511 |
| | 26,616,762 |
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KEY RATIOS | | | | | | | | | | |
Return on average assets | | 1.26 |
| % | 1.20 |
| % | | 1.20 |
| % | 1.19 |
| % |
Return on average common shareholders’ equity | | 9.91 |
| | 9.70 |
| | | 9.36 |
| | 9.50 |
| |
Average common shareholders’ equity to average assets | | 12.76 |
| | 12.40 |
| | | 12.84 |
| | 12.53 |
| |
End of period tangible common equity to tangible assets | | 11.09 |
| | 10.50 |
| | | 11.09 |
| | 10.50 |
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Risk-based capital - Common Equity Tier 1 | | 12.72 |
| | N/A |
| | | 12.72 |
| | N/A |
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Risk-based capital - Tier 1 | | 14.05 |
| | 13.97 |
| | | 14.05 |
| | 13.97 |
| |
Risk-based capital - Total | | 15.36 |
| | 15.28 |
| | | 15.36 |
| | 15.28 |
| |
Net interest margin | | 3.64 |
| | 3.59 |
| | | 3.61 |
| | 3.59 |
| |
Efficiency: expense to revenue | | 57.74 |
| | 55.59 |
| | | 59.85 |
| | 57.01 |
| |
Net charge offs to average loans and leases | | (0.07 | ) | | (0.13 | ) | | | (0.02 | ) | | (0.11 | ) | |
Loan and lease loss reserve to loans and leases | | 2.25 |
| | 2.38 |
| | | 2.25 |
| | 2.38 |
| |
Nonperforming assets to loans and leases | | 0.55 |
| | 1.08 |
| | | 0.55 |
| | 1.08 |
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ASSET QUALITY | | | | | | | | | | |
Loans and leases past due 90 days or more | | | | | | | $ | 278 |
| | $ | 475 |
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Nonaccrual loans and leases | | | | | | | 15,082 |
| | 32,486 |
| |
Other real estate | | | | | | | 301 |
| | 1,853 |
| |
Former bank premises held for sale | | | | | | | 626 |
| | 801 |
| |
Repossessions | | | | | | | 5,433 |
| | 5,455 |
| |
Equipment owned under operating leases | | | | | | | — |
| | 23 |
| |
Total nonperforming assets | | | | | | | $ | 21,720 |
| | $ | 41,093 |
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*Per share figures have been adjusted for 10% stock dividend declared July 22, 2015. |
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1st SOURCE CORPORATION | | | | |
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | | | | |
(Unaudited - Dollars in thousands) | | | | |
| | June 30, 2015 | | June 30, 2014 |
ASSETS | | | | |
Cash and due from banks | | $ | 66,302 |
| | $ | 110,933 |
|
Federal funds sold and interest bearing deposits with other banks | | 11,396 |
| | 6,445 |
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Investment securities available-for-sale (amortized cost of $773,195 and $798,708 at June 30, 2015 and 2014, respectively) | | 786,471 |
| | 815,056 |
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Other investments | | 20,743 |
| | 23,597 |
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Trading account securities | | 211 |
| | 198 |
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Mortgages held for sale | | 14,782 |
| | 19,034 |
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Loans and leases, net of unearned discount: | | | | |
Commercial and agricultural | | 719,972 |
| | 720,226 |
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Auto and light truck | | 446,731 |
| | 471,080 |
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Medium and heavy duty truck | | 250,045 |
| | 243,358 |
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Aircraft financing | | 751,665 |
| | 733,194 |
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Construction equipment financing | | 445,479 |
| | 369,755 |
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Commercial real estate | | 641,205 |
| | 602,321 |
|
Residential real estate | | 454,730 |
| | 454,845 |
|
Consumer | | 142,872 |
| | 128,756 |
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Total loans and leases | | 3,852,699 |
| | 3,723,535 |
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Reserve for loan and lease losses | | (86,588 | ) | | (88,776 | ) |
Net loans and leases | | 3,766,111 |
| | 3,634,759 |
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Equipment owned under operating leases, net | | 93,875 |
| | 63,350 |
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Net premises and equipment | | 50,931 |
| | 45,840 |
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Goodwill and intangible assets | | 84,967 |
| | 85,796 |
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Accrued income and other assets | | 118,234 |
| | 120,719 |
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Total assets | | $ | 5,014,023 |
| | $ | 4,925,727 |
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LIABILITIES | | | | |
Deposits: | | | | |
Noninterest bearing | | $ | 857,079 |
| | $ | 768,710 |
|
Interest bearing | | 3,105,506 |
| | 3,047,025 |
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Total deposits | | 3,962,585 |
| | 3,815,735 |
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Short-term borrowings: | | | | |
Federal funds purchased and securities sold under agreements to repurchase | | 122,658 |
| | 191,545 |
|
Other short-term borrowings | | 139,529 |
| | 158,457 |
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Total short-term borrowings | | 262,187 |
| | 350,002 |
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Long-term debt and mandatorily redeemable securities | | 57,488 |
| | 59,726 |
|
Subordinated notes | | 58,764 |
| | 58,764 |
|
Accrued expenses and other liabilities | | 41,368 |
| | 47,282 |
|
Total liabilities | | 4,382,392 |
| | 4,331,509 |
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SHAREHOLDERS’ EQUITY | | | | |
Preferred stock; no par value | | — |
| | — |
|
Common stock; no par value* | | 436,538 |
| | 346,535 |
|
Retained earnings* | | 232,507 |
| | 280,917 |
|
Cost of common stock in treasury | | (45,706 | ) | | (43,445 | ) |
Accumulated other comprehensive income | | 8,292 |
| | 10,211 |
|
Total shareholders’ equity | | 631,631 |
| | 594,218 |
|
| | | | |
Total liabilities and shareholders’ equity | | $ | 5,014,023 |
| | $ | 4,925,727 |
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*June 30, 2015 common stock and retained earnings gives retrospective recognition to a 10% stock dividend declared July 22, 2015. |
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1st SOURCE CORPORATION | | | | | | | |
CONSOLIDATED STATEMENTS OF INCOME | | | | | | | |
(Unaudited - Dollars in thousands) | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2015 | | 2014 | | 2015 | | 2014 |
Interest income: | | | | | | | |
Loans and leases | $ | 42,583 |
| | $ | 40,401 |
| | $ | 82,187 |
| | $ | 79,316 |
|
Investment securities, taxable | 2,648 |
| | 3,401 |
| | 5,652 |
| | 6,746 |
|
Investment securities, tax-exempt | 754 |
| | 816 |
| | 1,523 |
| | 1,635 |
|
Other | 229 |
| | 232 |
| | 484 |
| | 509 |
|
Total interest income | 46,214 |
| | 44,850 |
| | 89,846 |
| | 88,206 |
|
| | | | | | | |
Interest expense: | | | | | | | |
Deposits | 2,838 |
| | 2,994 |
| | 5,397 |
| | 5,965 |
|
Short-term borrowings | 131 |
| | 169 |
| | 234 |
| | 306 |
|
Subordinated notes | 1,055 |
| | 1,055 |
| | 2,110 |
| | 2,110 |
|
Long-term debt and mandatorily redeemable securities | 525 |
| | 470 |
| | 1,004 |
| | 1,045 |
|
Total interest expense | 4,549 |
| | 4,688 |
| | 8,745 |
| | 9,426 |
|
| | | | | | | |
Net interest income | 41,665 |
| | 40,162 |
| | 81,101 |
| | 78,780 |
|
Provision for loan and lease losses | 811 |
| | 2,543 |
| | 1,168 |
| | 3,347 |
|
Net interest income after provision for loan and lease losses | 40,854 |
| | 37,619 |
| | 79,933 |
| | 75,433 |
|
| | | | | | | |
Noninterest income: | | | | | | | |
Trust fees | 5,247 |
| | 4,955 |
| | 9,804 |
| | 9,431 |
|
Service charges on deposit accounts | 2,367 |
| | 2,207 |
| | 4,564 |
| | 4,273 |
|
Debit card income | 2,628 |
| | 2,463 |
| | 5,027 |
| | 4,695 |
|
Mortgage banking income | 1,239 |
| | 1,181 |
| | 2,490 |
| | 2,515 |
|
Insurance commissions | 1,382 |
| | 1,288 |
| | 2,687 |
| | 2,851 |
|
Equipment rental income | 5,342 |
| | 4,098 |
| | 10,421 |
| | 8,180 |
|
Gains on investment securities available-for-sale | 4 |
| | — |
| | 4 |
| | 963 |
|
Other income | 3,322 |
| | 3,029 |
| | 6,285 |
| | 5,711 |
|
Total noninterest income | 21,531 |
| | 19,221 |
| | 41,282 |
| | 38,619 |
|
| | | | | | | |
Noninterest expense: | | | | | | | |
Salaries and employee benefits | 20,794 |
| | 18,827 |
| | 41,719 |
| | 38,309 |
|
Net occupancy expense | 2,345 |
| | 2,235 |
| | 4,806 |
| | 4,672 |
|
Furniture and equipment expense | 4,531 |
| | 4,413 |
| | 8,867 |
| | 8,650 |
|
Depreciation - leased equipment | 4,396 |
| | 3,290 |
| | 8,484 |
| | 6,539 |
|
Professional fees | 1,108 |
| | 1,062 |
| | 1,978 |
| | 2,190 |
|
Supplies and communication | 1,409 |
| | 1,337 |
| | 2,815 |
| | 2,729 |
|
FDIC and other insurance | 847 |
| | 850 |
| | 1,696 |
| | 1,714 |
|
Business development and marketing expense | 1,214 |
| | 899 |
| | 2,263 |
| | 2,583 |
|
Loan and lease collection and repossession expense | (294 | ) | | (17 | ) | | 69 |
| | (512 | ) |
Other expense | 1,891 |
| | 1,528 |
| | 3,605 |
| | 3,522 |
|
Total noninterest expense | 38,241 |
| | 34,424 |
| | 76,302 |
| | 70,396 |
|
| | | | | | | |
Income before income taxes | 24,144 |
| | 22,416 |
| | 44,913 |
| | 43,656 |
|
Income tax expense | 8,514 |
| | 7,922 |
| | 15,772 |
| | 15,530 |
|
| | | | | | | |
Net income | $ | 15,630 |
| | $ | 14,494 |
| | $ | 29,141 |
| | $ | 28,126 |
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The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3) | | | | | | |
Please contact us at shareholder@1stsource.com | | | | | | | |
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