1st Source Corp (SRCE) Announces Record Annual Earnings Amidst Market Challenges
Annual Net Income: Record $124.93 million in 2023, up 3.67% from 2022.
Quarterly Net Income: $28.43 million for Q4 2023, down 13.69% from the previous quarter and 8.49% from Q4 2022.
Diluted EPS: Record $5.03 for 2023, up 3.93% from 2022; $1.15 for Q4 2023, down 8.00% from Q4 2022.
Cash Dividend: Increased to $0.34 per common share, up 6.25% from the previous year.
Loan and Lease Growth: Average loans and leases grew by $637.16 million in 2023, an 11.45% increase from 2022.
Net Interest Margin: Tax-equivalent net interest margin was 3.51% for 2023, up six basis points from 2022.
Investment Repositioning: Sold $40 million of securities at 1.10% yield, purchasing securities at 4.80% yield, resulting in a $2.88 million loss.
On January 18, 2024, 1st Source Corp (NASDAQ:SRCE) released its 8-K filing, detailing a year of financial resilience and strategic maneuvers. The company, which operates through its subsidiary 1st Source Bank, offers a diverse range of banking services including commercial, agricultural, and real estate loans, consumer services, trust and wealth advisory services, and specialized finance group services.
The record annual earnings of $124.93 million for 2023 represent a 3.67% increase from the previous year, marking a significant achievement for the company. This performance is particularly noteworthy given the 8.49% decrease in net income for the fourth quarter of 2023 compared to the same quarter in 2022. The dip in quarterly performance was primarily attributed to the repositioning of the investment securities portfolio and a charitable contribution to the 1st Source Foundation.
Despite the quarterly setback, 1st Source Corp (NASDAQ:SRCE) continued its tradition of increasing dividends, declaring a cash dividend of $0.34 per common share, which is a 6.25% increase from the previous year. This marks the 36th consecutive year of dividend growth, underscoring the company's commitment to shareholder returns.
Financial Performance and Strategic Initiatives
The company's loan and lease portfolio saw robust growth, with an 11.45% increase in average loans and leases for the year. The tax-equivalent net interest margin also improved, rising to 3.51% for 2023, which reflects the company's effective management of interest-earning assets and liabilities.
1st Source Corp (NASDAQ:SRCE) undertook strategic repositioning of its investment securities portfolio, resulting in a $2.88 million loss from the sale of available-for-sale securities. However, this move was aimed at improving future earnings, as the sold securities with an average yield of 1.10% were replaced with securities yielding approximately 4.80%.
The company also recognized gains on the sale of renewable energy tax equity investments amounting to $3.43 million during 2023, which partially offset the impact of the investment portfolio repositioning.
Christopher J. Murphy III, Chairman and Chief Executive Officer, expressed pride in the company's ability to achieve positive results amidst the challenges of 2023. He highlighted the company's expansion efforts, including the opening of a loan production office in Lake County, Indiana, and the continued growth of the commercial banking footprint in Indianapolis.
We are pleased to announce record net income for the third year in a row and we reached our 36th consecutive year of dividend growth. We were able to grow average loans and leases by $637.16 million or 11.45% from 2022. Our tax-equivalent net interest margin expanded during 2023 to 3.51% from 3.45% in 2022," said Mr. Murphy.
1st Source Corp (NASDAQ:SRCE) also received recognition for its community lending efforts, receiving the Gold Level Award in the Community Lender category from the U.S. Small Business Administration (SBA) for the 11th consecutive year.
The company's balance sheet remains solid, with a common equity-to-assets ratio of 11.34% as of December 31, 2023. The tangible common equity-to-tangible assets ratio also improved to 10.48%, reflecting a strong capital position.
In conclusion, 1st Source Corp (NASDAQ:SRCE) has demonstrated financial resilience and strategic foresight in its operations throughout 2023. The company's commitment to growth, community involvement, and shareholder returns positions it well for future success. Investors and stakeholders can look forward to the company's continued performance in the dynamic banking industry.
Explore the complete 8-K earnings release (here) from 1st Source Corp for further details.
This article first appeared on GuruFocus.
