U.S. Markets open in 1 hr 18 mins

1st Source Corporation Reports Consecutive Record Quarterly Earnings, Cash Dividend Declared

SOUTH BEND, Ind.--(BUSINESS WIRE)--

1st Source Corporation (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

View source version on businesswire.com: http://www.businesswire.com/news/home/20171019006479/en/