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1st Source Corporation Reports Record First Quarter Results, Cash Dividend Increased

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QUARTERLY HIGHLIGHTS

  • Net income was a record $28.11 million for the quarter, up 71.24% from the first quarter of 2020. Diluted net income per common share was also a record at $1.10, up from the prior year’s first quarter of $0.64.

  • Cash dividend of $0.30 per common share approved, up 7.14% from the $0.28 per common share declared a year ago.

  • Return on average assets of 1.55% and return on average common shareholders’ equity of 12.74% compared to 1.00% and 7.81%, respectively in the first quarter of 2020.

  • Average loans and leases were relatively flat from the previous quarter and up $400.61 million or 7.86% from the first quarter of 2020. Excluding the Paycheck Protection Program, average loans and leases increased slightly from the previous quarter and the decreased slightly from the first quarter of 2020.

  • Average deposits were stable from the previous quarter and grew $708.10 million or 13.43% from the first quarter of 2020.

  • Net charge-offs were $3.50 million and nonperforming assets to loans and leases were 1.12% compared to $1.81 million and 0.68%, respectively in the first quarter of 2020.

  • Provision for credit losses of $2.40 million compared to $11.35 million in the first quarter of 2020.

  • Net interest income increased $2.57 million, or 4.68% from the first quarter of 2020.

  • Noninterest income increased $1.25 million, or 5.06% from the first quarter of 2020. Excluding leased equipment depreciation, noninterest income increased 15.11%.

  • Noninterest expenses decreased $2.40 million, down 5.15% from the first quarter of 2020. Excluding leased equipment depreciation, noninterest expense decreased 1.80%.

1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported record quarterly net income of $28.11 million for the first quarter of 2021, up 71.24% from the $16.41 million reported in the first quarter a year ago. The net income comparison was positively impacted by a $8.96 million reduction in the provision for credit losses primarily due to stabilizing economic conditions compared to the start of the pandemic a year ago. Although loan growth occurred during the quarter, the majority of the growth was Paycheck Protection Program (PPP) loans which have minimal credit risk.

Diluted net income per common share for the first quarter of 2021 was up 71.88% to $1.10 versus $0.64 in the first quarter of 2020.

At its April 2021 meeting, the Board of Directors approved an increase in the cash dividend to $0.30 per common share, up 7.14% from the $0.28 per common share declared a year ago. The cash dividend is payable to shareholders of record on May 4, 2021 and will be paid on May 14, 2021.

Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, "Throughout the first quarter, our team has been dedicated to serving the needs of our small business clients with their Paycheck Protection Program (PPP) needs. The PPP funds made available through the American Rescue Plan have been vital to the success of small businesses across the Nation, and our team has worked tirelessly to ensure our communities received those dollars and support while available. We made a specific effort to focus on serving minority- and women-owned businesses with this latest round of PPP support, as data shows such businesses were underserved nationally in the previous round of PPP funding. We’re proud to say we have been able to fulfill that objective, and we were able to secure loans for over 400 minority- and women-owned businesses, which represents approximately 15% of our overall efforts in this latest round of PPP funding.

"We were pleased to learn during the first quarter that Forbes had named 1st Source among ‘America’s Best Mid-size Employers,’ as we were one of only 10 Indiana-based companies to be included among the list of 500 companies with over 1,000 employees. This ranking was compiled via survey in partnership with Statista. Fifty thousand participants were asked to rate, on a scale of zero to 10, their willingness to recommend their own employers to friends and family, to nominate organizations other than their own, and to list companies they would not recommend. It’s long been our goal to provide a values-based workplace and culture among our colleagues of which they are all proud, and the achievement of being named among the top mid-size employers in the country lets us know our efforts are making a difference.

"Additionally, we were also honored to receive the ‘Gold Level Award’ in the Community Lender category for the eighth year in a row from the Indiana District of the U.S. Small Business Administration (SBA). The award honors 1st Source Bank for delivering the greatest number of SBA loans in the state of Indiana in 2020 among Community Banks with less than $10 billion in assets, excluding loans associated with PPP. As an organization, we have devoted over 156 years to serving small businesses and we maintain a dedicated SBA Department to ensure the highest level of service to our clients. We’re honored to receive this award for an eighth consecutive year, and we’re also honored that our clients have chosen us as their trusted financial partner. This award is welcome confirmation that we earned that trust through hard work and client support, and we’re committed to continuing that well into the future.

"Throughout the pandemic, our focus has remained on keeping our clients, our colleagues and families safe so we can deliver the highest level of service. As vaccines have rolled out in recent months, and as we closely monitor local infection rates and information from local health officials, we have made the strategic decision to quietly and measuredly relax our by-appointment-only model for visits to our banking center lobbies. Doors are unlocked, and clients are now able to visit with their bankers – masked and socially distanced of course – more spontaneously than has been the case in the last year. We’re confident we are doing our best to ensure the safety and well-being of all those we employ and interact with while also getting back to a sense of "business as usual" for our clients, who have expressed their eagerness to conduct their banking needs in person without making an appointment in advance. As always, we will continue to review and analyze data from local health departments to make the best decisions possible for the health and safety of our team members, clients and communities.

"Lastly, let me comment on our performance in the first quarter. While we are very pleased with our record earnings, a number of items coincided in the quarter which improved our results that may not occur in the future. We received $132.91 million in PPP forgiveness providing $3.98 million in accelerated fee income. Mortgage volumes remained strong and people in our markets received stimulus support from the government. As mentioned earlier, our credit risks reduced substantially due to improvements in the economy and the assistance of PPP to many of our clients. Whether those benefits are sustainable are dependent on the continuing vaccination of people in the communities and businesses we serve, the true opening up of the economy and manufacturing supply chains and housing availability improving," Mr. Murphy concluded.

FIRST QUARTER 2021 FINANCIAL RESULTS

Loans

Average loans and leases of $5.50 billion increased $400.61 million, up 7.86% in the first quarter of 2021 from the year ago quarter and were relatively flat from the previous quarter. Loan growth is primarily from PPP originations when compared to the first quarter of 2020. During the first quarter 2021, PPP originations totaled $232.44 million which was offset by SBA forgiveness of $132.91 million.

Deposits

Average deposits of $5.98 billion grew $708.10 million for the quarter ended March 31, 2021, up 13.43% from the year ago quarter and were stable from the previous quarter. Deposit growth is primarily from PPP loan fundings and increased consumer deposit levels compared to 2020.

Net Interest Income and Net Interest Margin

First quarter 2021 tax-equivalent net interest income of $57.53 million increased $2.54 million, or 4.61% from the first quarter a year ago and decreased $4.70 million, or 7.55% from the fourth quarter of 2020.

First quarter 2021 net interest margin was 3.35%, a decrease of 22 basis points from the 3.57% for the same period in 2020 and decreased 19 basis points from the previous quarter. First quarter 2021 net interest margin on a fully tax-equivalent basis was 3.35%, a decrease of 23 basis points from the 3.58% for the same period in 2020 and was lower by 20 basis points compared to the previous quarter. The margin continues to experience pressure from the low interest rate environment. PPP loans had a positive impact on the net interest margin of a net 10 basis points for the quarter due to accelerated PPP loan origination fee amortization as a result of SBA forgiveness. We recognized $3.98 million in PPP loan fees during the first quarter of 2021. During the prior quarter, PPP loans had a positive impact on the net interest margin of a net 27 basis points and we recognized $7.84 million in PPP loan fees.

Noninterest Income

First quarter 2021 noninterest income of $25.87 million increased $1.25 million, or 5.06% from the first quarter a year ago and was relatively flat from the fourth quarter of 2020.

Noninterest income during the three months ended March 31, 2021 was higher compared to a year ago mainly from improved mortgage banking income driven by gains on a higher volume of loan sales, increased debit card income, and higher trust and wealth advisory fees as market values improved on assets under management offset by less equipment rental income as demand for leases declined and lower service charges on deposit accounts due to fewer overdraft and non-sufficient fund transactions.

Noninterest Expense

First quarter 2021 noninterest expense of $44.14 million decreased $2.40 million, or 5.15% from the first quarter a year ago and decreased $4.82 million, or 9.85% from the prior quarter. Excluding depreciation on leased equipment, noninterest expenses were down 1.80% from the first quarter a year ago and down 8.31% from the prior quarter.

The decrease in noninterest expense during the first quarter compared to a year ago was mainly due to lower leased equipment depreciation as the average equipment rental portfolio continues to decline, a decreased valuation provision for interest rate swaps with customers, and reduced business development expenses as travel and entertainment continue to be curtailed due to the pandemic offset by higher salaries and wages due to incentive awards and normal merit increases, and increased FDIC insurance premiums due to FDIC assessment credits received in the first quarter of 2020 which was not present in 2021.

The decrease in noninterest expense from the prior quarter was primarily the result of lower salaries and wages was due to a one-time special award made to most employees at the end of 2020 and higher deferred salary expense on PPP loan originations during the quarter, lower leased equipment depreciation as the average equipment rental portfolio continues to decline, decreased group insurance costs on lower seasonal claims, and a lower valuation provision for interest rate swaps with customers.

Credit

The allowance for loan and lease losses as of March 31, 2021 was 2.53% of total loans and leases compared to 2.56% at December 31, 2020 and 2.35% at March 31, 2020 (incurred loss method). The allowance calculation includes PPP loans which are guaranteed by the SBA. Excluding these loans from the calculation results in an allowance of 2.74% at March 31, 2021 compared to 2.73% at December 31, 2020. Net charge-offs of $3.50 million were recorded for the first quarter of 2021 compared with net charge-offs of $1.81 million in the same quarter a year ago and $3.72 million of net charge-offs in the prior quarter. The majority of charge-offs in 2021 were related to the bus division of the auto and light truck portfolio which continues to be impacted by the pandemic shutdowns of events and tourism.

The provision for credit losses was $2.40 million for the first quarter of 2021, a decrease of $8.96 million compared with the same period in 2020 and a decrease of $2.57 million from the fourth quarter of 2020. The ratio of nonperforming assets to loans and leases was 1.12% as of March 31, 2021, compared to 1.16% on December 31, 2020 and 0.68% on March 31, 2020. Excluding PPP loans, the ratio of non-performing assets to loans and leases was 1.22% at March 31, 2021 and 1.24% at December 31, 2020.

Capital

As of March 31, 2021, the common equity-to-assets ratio was 11.87%, compared to 12.12% at December 31, 2020 and 12.63% a year ago. The tangible common equity-to-tangible assets ratio was 10.87% at March 31, 2021 compared to 11.10% at December 31, 2020 and 11.53% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 13.43% at March 31, 2021 compared to 13.06% at December 31, 2020 and 12.57% a year ago. During the first quarter of 2021, 155,457 shares were repurchased for treasury reducing common shareholders’ equity by $6.62 million.

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 79 banking centers, 18 1st Source Bank Specialty Finance Group locations nationwide, nine Wealth Advisory Services locations and 10 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.

Category: Earnings

(charts attached)

1st SOURCE CORPORATION

1st QUARTER 2021 FINANCIAL HIGHLIGHTS

(Unaudited - Dollars in thousands, except per share data)

Three Months Ended

March 31,

December 31,

March 31,

2021

2020

2020

AVERAGE BALANCES

Assets

$

7,350,413

$

7,402,431

$

6,611,121

Earning assets

6,960,551

6,981,460

6,181,794

Investments

1,230,977

1,098,072

1,030,640

Loans and leases

5,499,009

5,517,707

5,098,397

Deposits

5,980,471

5,969,776

5,272,376

Interest bearing liabilities

4,577,664

4,635,661

4,415,552

Common shareholders’ equity

894,553

884,530

844,724

Total equity

938,451

921,913

867,605

INCOME STATEMENT DATA

Net interest income

$

57,412

$

62,107

$

54,844

Net interest income - FTE(1)

57,533

62,234

54,995

Provision for credit losses

2,398

4,970

11,353

Noninterest income

25,869

25,985

24,622

Noninterest expense

44,140

48,964

46,535

Net income

28,106

26,463

16,418

Net income available to common shareholders

28,105

26,464

16,413

PER SHARE DATA

Basic net income per common share

$

1.10

$

1.03

$

0.64

Diluted net income per common share

1.10

1.03

0.64

Common cash dividends declared

0.29

0.28

0.29

Book value per common share(2)

35.27

34.93

33.32

Tangible book value per common share(1)

31.95

31.62

30.03

Market value - High

50.38

41.10

52.16

Market value - Low

38.73

30.33

26.07

Basic weighted average common shares outstanding

25,320,930

25,492,140

25,523,356

Diluted weighted average common shares outstanding

25,320,930

25,492,140

25,523,356

KEY RATIOS

Return on average assets

1.55

%

1.42

%

1.00

%

Return on average common shareholders’ equity

12.74

11.90

7.81

Average common shareholders’ equity to average assets

12.17

11.95

12.78

End of period tangible common equity to tangible assets(1)

10.87

11.10

11.53

Risk-based capital - Common Equity Tier 1(3)

13.43

13.06

12.57

Risk-based capital - Tier 1(3)

15.12

14.73

13.97

Risk-based capital - Total(3)

16.39

15.99

15.23

Net interest margin

3.35

3.54

3.57

Net interest margin - FTE(1)

3.35

3.55

3.58

Efficiency ratio: expense to revenue

53.00

55.58

58.56

Efficiency ratio: expense to revenue - adjusted(1)

50.99

53.32

55.79

Net charge offs to average loans and leases

0.26

0.27

0.14

Loan and lease loss allowance to loans and leases

2.53

2.56

2.35

Nonperforming assets to loans and leases

1.12

1.16

0.68

March 31,

December 31,

September,

June 30,

March 31,

2021

2020

2020

2020

2020

END OF PERIOD BALANCES

Assets

$

7,511,931

$

7,316,411

$

7,290,949

$

7,365,146

$

6,735,118

Loans and leases

5,523,085

5,489,301

5,627,036

5,692,322

5,129,514

Deposits

6,131,341

5,946,028

5,896,855

5,993,456

5,275,911

Allowance for loan and lease losses

139,550

140,654

136,817

131,283

120,798

Goodwill and intangible assets

83,942

83,948

83,953

83,959

83,964

Common shareholders’ equity

891,295

886,845

877,754

864,995

850,897

Total equity

935,759

930,670

915,015

901,653

877,302

ASSET QUALITY

Loans and leases past due 90 days or more

$

66

$

115

$

81

$

256

$

191

Nonaccrual loans and leases

58,513

60,388

70,595

62,800

26,301

Other real estate

369

359

303

303

362

Repossessions

2,214

1,976

4,639

6,132

9,020

Equipment owned under operating leases

1,647

1,695

136

57

Total nonperforming assets

$

62,809

$

64,533

$

75,754

$

69,548

$

35,874

(1) See "Reconciliation of Non-GAAP Financial Measures" for more information on this performance measure/ratio.
(2) Calculated as common shareholders’ equity divided by common shares outstanding at the end of the period.
(3) Calculated under banking regulatory guidelines.

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited - Dollars in thousands)

March 31,

December 31,

September 30,

March 31,

2021

2020

2020

2020

ASSETS

Cash and due from banks

$

69,683

$

74,186

$

62,575

$

72,756

Federal funds sold and interest bearing deposits with other banks

266,271

168,861

91,641

49,543

Investment securities available-for-sale

1,291,340

1,197,467

1,083,427

1,057,169

Other investments

27,429

27,429

27,674

28,414

Mortgages held for sale

9,351

12,885

20,990

13,449

Loans and leases, net of unearned discount:

Commercial and agricultural

1,238,708

1,186,118

1,418,047

988,115

Solar

296,124

292,604

263,472

178,347

Auto and light truck

552,676

542,369

527,582

577,757

Medium and heavy duty truck

268,636

279,172

271,248

278,076

Aircraft

873,770

861,460

806,162

773,132

Construction equipment

705,744

714,888

723,596

718,307

Commercial real estate

975,383

969,864

961,550

930,757

Residential real estate and home equity

486,156

511,379

519,881

545,606

Consumer

125,888

131,447

135,498

139,417

Total loans and leases

5,523,085

5,489,301

5,627,036

5,129,514

Allowance for loan and lease losses*

(139,550

)

(140,654

)

(136,817

)

(120,798

)

Net loans and leases

5,383,535

5,348,647

5,490,219

5,008,716

Equipment owned under operating leases, net

61,395

65,040

79,703

101,238

Net premises and equipment

48,288

49,373

49,933

52,431

Goodwill and intangible assets

83,942

83,948

83,953

83,964

Accrued income and other assets

270,697

288,575

300,834

267,438

Total assets

$

7,511,931

$

7,316,411

$

7,290,949

$

6,735,118

LIABILITIES

Deposits:

Noninterest-bearing demand

$

1,833,116

$

1,636,684

$

1,720,768

$

1,219,327

Interest-bearing deposits:

Interest-bearing demand

2,068,382

2,059,139

1,885,771

1,591,419

Savings

1,148,823

1,082,848

992,320

840,606

Time

1,081,020

1,167,357

1,297,996

1,624,559

Total interest-bearing deposits

4,298,225

4,309,344

4,176,087

4,056,584

Total deposits

6,131,341

5,946,028

5,896,855

5,275,911

Short-term borrowings:

Federal funds purchased and securities sold under agreements to repurchase

173,302

143,564

158,834

135,942

Other short-term borrowings

7,299

7,077

6,740

146,903

Total short-term borrowings

180,601

150,641

165,574

282,845

Long-term debt and mandatorily redeemable securities

81,722

81,864

81,659

81,877

Subordinated notes

58,764

58,764

58,764

58,764

Accrued expenses and other liabilities

123,744

148,444

173,082

158,419

Total liabilities

6,576,172

6,385,741

6,375,934

5,857,816

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 March 31, 2021, December 31, 2020, September 30, 2020, and March 31, 2020, respectively

436,538

436,538

436,538

436,538

Retained earnings

535,737

514,176

497,419

472,911

Cost of common stock in treasury (2,936,987, 2,816,557, 2,652,030, and 2,670,290 shares at March 31, 2021, December 31, 2020, September 30, 2020, and

March 31, 2020, respectively)

(88,223

)

(82,240

)

(75,861

)

(76,203

)

Accumulated other comprehensive income

7,243

18,371

19,658

17,651

Total shareholders’ equity

891,295

886,845

877,754

850,897

Noncontrolling interests

44,464

43,825

37,261

26,405

Total equity

935,759

930,670

915,015

877,302

Total liabilities and equity

$

7,511,931

$

7,316,411

$

7,290,949

$

6,735,118

*ASU 2016-13 adopted during the fourth quarter of 2020 therefore September 30, 2020 and March 31, 2020 allowance amounts reflect the incurred loss method.

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited - Dollars in thousands, except per share amounts)

Three Months Ended

March 31,

December 31,

March 31,

2021

2020

2020

Interest income:

Loans and leases

$

57,864

$

64,113

$

61,526

Investment securities, taxable

3,988

3,940

5,550

Investment securities, tax-exempt

174

192

264

Other

266

333

346

Total interest income

62,292

68,578

67,686

Interest expense:

Deposits

3,526

4,811

10,851

Short-term borrowings

36

90

254

Subordinated notes

818

824

884

Long-term debt and mandatorily redeemable securities

500

746

853

Total interest expense

4,880

6,471

12,842

Net interest income

57,412

62,107

54,844

Provision for credit losses*

2,398

4,970

11,353

Net interest income after provision for loan and lease losses

55,014

57,137

43,491

Noninterest income:

...

Trust and wealth advisory

5,481

5,524

4,848

Service charges on deposit accounts

2,447

2,634

2,605

Debit card

4,182

3,990

3,373

Mortgage banking

3,901

3,549

2,336

Insurance commissions

2,152

1,624

1,881

Equipment rental

4,629

5,167

6,630

Gains on investment securities available-for-sale

280

Other

3,077

3,497

2,669

Total noninterest income

25,869

25,985

24,622

Noninterest expense:

Salaries and employee benefits

25,196

27,547

24,401

Net occupancy

2,719

2,539

2,721

Furniture and equipment

6,458

6,776

6,407

Depreciation – leased equipment

3,773

4,940

5,427

Professional fees

1,613

1,576

1,442

Supplies and communication

1,475

1,234

1,634

FDIC and other insurance

665

851

288

Business development and marketing

997

754

1,359

Loan and lease collection and repossession

129

444

763

Other

1,115

2,303

2,093

Total noninterest expense

44,140

48,964

46,535

Income before income taxes

36,743

34,158

21,578

Income tax expense

8,637

7,695

5,160

Net income

28,106

26,463

16,418

Net (income) loss attributable to noncontrolling interests

(1

)

1

(5

)

Net income available to common shareholders

$

28,105

$

26,464

$

16,413

Per common share:

Basic net income per common share

$

1.10

$

1.03

$

0.64

Diluted net income per common share

$

1.10

$

1.03

$

0.64

Cash dividends

$

0.29

$

0.28

$

0.29

Basic weighted average common shares outstanding

25,320,930

25,492,140

25,523,356

Diluted weighted average common shares outstanding

25,320,930

25,492,140

25,523,356

*ASU 2016-13 adopted during the fourth quarter of 2020 therefore March 31, 2020 provision amount reflects the incurred loss method.

1st SOURCE CORPORATION

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY

INTEREST RATES AND INTEREST DIFFERENTIAL

(Unaudited - Dollars in thousands)

Three Months Ended

March 31, 2021

December 31, 2020

March 31, 2020

Average
Balance

Interest
Income/Expense

Yield/
Rate

Average
Balance

Interest
Income/Expense

Yield/
Rate

Average
Balance

Interest
Income/Expense

Yield/
Rate

ASSETS

Investment securities available-for-sale:

Taxable

$

1,193,583

$

3,987

1.35

%

$

1,056,727

$

3,940

1.48

%

$

973,421

$

5,550

2.29

%

Tax exempt(1)

37,394

214

2.32

%

41,345

237

2.28

%

57,219

325

2.28

%

Mortgages held for sale

14,285

86

2.44

%

17,844

120

2.68

%

11,294

96

3.42

%

Loans and leases, net of unearned discount(1)

5,499,009

57,860

4.27

%

5,517,707

64,075

4.62

%

5,098,397

61,520

4.85

%

Other investments

216,280

266

0.50

%

347,837

333

0.38

%

41,463

346

3.36

%

Total earning assets(1)

6,960,551

62,413

3.64

%

6,981,460

68,705

3.92

%

6,181,794

67,837

4.41

%

Cash and due from banks

75,178

75,055

65,407

Allowance for loan and lease losses

(143,206

)

(143,888

)

(112,239

)

Other assets

457,890

489,804

476,159

Total assets

$

7,350,413

$

7,402,431

$

6,611,121

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing deposits

$

4,261,207

$

3,526

0.34

%

$

4,272,622

$

4,811

0.45

%

$

4,076,270

$

10,851

1.07

%

Short-term borrowings

176,726

36

0.08

%

222,699

90

0.16

%

202,545

254

0.50

%

Subordinated notes

58,764

818

5.65

%

58,764

824

5.58

%

58,764

884

6.05

%

Long-term debt and mandatorily redeemable securities

80,967

500

2.50

%

81,576

746

3.64

%

77,973

853

4.40

%

Total interest-bearing liabilities

4,577,664

4,880

0.43

%

4,635,661

6,471

0.56

%

4,415,552

12,842

1.17

%

Noninterest-bearing deposits

1,719,264

1,697,154

1,196,106

Other liabilities

115,034

147,703

131,858

Shareholders’ equity

894,553

884,530

844,724

Noncontrolling interests

43,898

37,383

22,881

Total liabilities and equity

$

7,350,413

$

7,402,431

$

6,611,121

Less: Fully tax-equivalent adjustments

(121

)

(127

)

(151

)

Net interest income/margin (GAAP-derived)(1)

$

57,412

3.35

%

$

62,107

3.54

%

$

54,844

3.57

%

Fully tax-equivalent adjustments

121

127

151

Net interest income/margin - FTE(1)

$

57,533

3.35

%

$

62,234

3.55

%

$

54,995

3.58

%

(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

March 31,

December 31,

March 31,

2021

2020

2020

Calculation of Net Interest Margin

(A)

Interest income (GAAP)

$

62,292

$

68,578

$

67,686

Fully tax-equivalent adjustments:

(B)

– Loans and leases

81

82

90

(C)

– Tax exempt investment securities

40

45

61

(D)

Interest income – FTE (A+B+C)

62,413

68,705

67,837

(E)

Interest expense (GAAP)

4,880

6,471

12,842

(F)

Net interest income (GAAP) (A-E)

57,412

62,107

54,844

(G)

Net interest income - FTE (D-E)

57,533

62,234

54,995

(H)

Annualization factor

4.056

3.978

4.022

(I)

Total earning assets

$

6,960,551

$

6,981,460

$

6,181,794

Net interest margin (GAAP-derived) (F*H)/I

3.35

%

3.54

%

3.57

%

Net interest margin – FTE (G*H)/I

3.35

%

3.55

%

3.58

%

Calculation of Efficiency Ratio

(F)

Net interest income (GAAP)

$

57,412

$

62,107

$

54,844

(G)

Net interest income – FTE

57,533

62,234

54,995

(J)

Plus: noninterest income (GAAP)

25,869

25,985

24,622

(K)

Less: gains/losses on investment securities and partnership investments

(460

)

(714

)

(513

)

(L)

Less: depreciation – leased equipment

(3,773

)

(4,940

)

(5,427

)

(M)

Total net revenue (GAAP) (F+J)

83,281

88,092

79,466

(N)

Total net revenue – adjusted (G+J–K–L)

79,169

82,565

73,677

(O)

Noninterest expense (GAAP)

44,140

48,964

46,535

(L)

Less:depreciation – leased equipment

(3,773

)

(4,940

)

(5,427

)

(P)

Noninterest expense – adjusted (O–L)

40,367

44,024

41,108

Efficiency ratio (GAAP-derived) (O/M)

53.00

%

55.58

%

58.56

%

Efficiency ratio – adjusted (P/N)

50.99

%

53.32

%

55.79

%

End of Period

March 31,

December 31,

March 31,

2021

2020

2020

Calculation of Tangible Common Equity-to-Tangible Assets Ratio

(Q)

Total common shareholders’ equity (GAAP)

$

891,295

$

886,845

$

850,897

(R)

Less: goodwill and intangible assets

(83,942

)

(83,948

)

(83,964

)

(S)

Total tangible common shareholders’ equity (Q–R)

$

807,353

$

802,897

$

766,933

(T)

Total assets (GAAP)

7,511,931

7,316,411

6,735,118

(R)

Less: goodwill and intangible assets

(83,942

)

(83,948

)

(83,964

)

(U)

Total tangible assets (T–R)

$

7,427,989

$

7,232,463

$

6,651,154

Common equity-to-assets ratio (GAAP-derived) (Q/T)

11.87

%

12.12

%

12.63

%

Tangible common equity-to-tangible assets ratio (S/U)

10.87

%

11.10

%

11.53

%

Calculation of Tangible Book Value per Common Share

(Q)

Total common shareholders’ equity (GAAP)

$

891,295

$

886,845

$

850,897

(V)

Actual common shares outstanding

25,268,687

25,389,117

25,535,384

Book value per common share (GAAP-derived) (Q/V)*1000

$

35.27

$

34.93

$

33.32

Tangible common book value per share (S/V)*1000

$

31.95

$

31.62

$

30.03

The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
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View source version on businesswire.com: https://www.businesswire.com/news/home/20210422005687/en/

Contacts

Andrea Short
574-235-2000