1st Source Corporation Reports Record Annual Earnings, Cash Dividend Declared, History of Increased Dividends Continues

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FULL YEAR AND QUARTERLY HIGHLIGHTS

  • Net income was a record $124.93 million for the year of 2023, up 3.67% from 2022 and was $28.43 million for the fourth quarter of 2023, down 13.69% from the previous quarter and down 8.49% from the fourth quarter of 2022. Diluted net income per common share was a record $5.03 for the year of 2023, up 3.93% from 2022 and was $1.15 for the fourth quarter of 2023, down 12.88% from the previous quarter and down 8.00% from the prior year's fourth quarter due primarily to repositioning of the investment securities portfolio and a contribution to the 1st Source Foundation as described below.

  • Cash dividend of $0.34 per common share was approved, up 6.25% from the cash dividend declared a year ago.

  • Average loans and leases grew $637.16 million in 2023, up 11.45% from 2022 and grew $141.98 million during the fourth quarter, up 2.27% (9.08% annualized growth) from the previous quarter.

  • Tax-equivalent net interest margin was 3.51% for 2023, up six basis points from 2022 and was 3.51% for the fourth quarter of 2023, up five basis points from the prior quarter and down 18 basis points from the fourth quarter of 2022.

  • During the fourth quarter, repositioning of the investment securities portfolio resulted in losses of $2.88 million on the sale of available-for-sale securities. Approximately $40 million of securities with an average yield of 1.10% were sold and used to purchase approximately $40 million of securities with an average yield of 4.80%.

  • Charitable contribution of $1 million was made to the 1st Source Foundation during the fourth quarter.

  • During 2023, gains on the sale of renewable energy tax equity investments of $3.43 million were recognized - $1.11 million during the first quarter and $2.32 million during the third quarter.

South Bend, Indiana--(Newsfile Corp. - January 18, 2024) - 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported record net income of $124.93 million for 2023, an increase of 3.67% compared to $120.51 million earned in 2022. Fourth quarter net income was $28.43 million, a decrease of 8.49% compared to $31.07 million earned in the fourth quarter of 2022 after losses due to repositioning the Company's investment securities portfolio and a contribution to the 1st Source Foundation. Diluted net income per common share for the year was a record $5.03, up 3.93% from the $4.84 earned a year earlier. Diluted net income per common share for the fourth quarter was $1.15, down 8.00% from the $1.25 earned in the fourth quarter of the previous year.

At its January 2024 meeting, the Board of Directors approved a cash dividend of $0.34 per common share, up 6.25% from the $0.32 per common share declared a year ago. The cash dividend is payable to shareholders of record on February 5, 2024 and will be paid on February 15, 2024.

Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, "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. During the fourth quarter, we also experienced margin expansion of six basis points after experiencing slight compression during the third quarter. New loans at higher rates, variable rate loan repricing and management of deposit rates contributed to the improvement. Our credit quality remained very strong as we had net recoveries to average loans and leases of 0.04% in 2023 compared to net charge-offs to average loans and leases of only 0.03% in 2022. I am extremely proud my colleagues were able to achieve such positive results during the unique challenges of 2023.

"In addition, we were most pleased to learn that 1st Source Bank received the Gold Level Award in the Community Lender category from the U.S. Small Business Administration (SBA) for the 11th consecutive year. The award, which focused on community banks headquartered in Indiana with less than $10 billion in assets, recognizes 1st Source Bank for delivering the greatest number of SBA loans in the State of Indiana in 2023. Since the inception of the award, it has been an honor to see the great work done by our SBA team and it is a testament to 1st Source Bank's commitment to serving local small businesses in all our markets.

"In alignment with that commitment and our strategic initiative to grow 1st Source's commercial banking footprint, we opened a loan production office in Lake County, Indiana in early January 2024. It is currently open by appointment only and serves the community with small business loans and other commercial credit needs. We are thrilled to expand into Lake County to help businesses in the area grow. Also, in line with our growth initiative, we have been moving forward with our efforts in Indianapolis. We opened a loan production office in the second quarter of 2023, and we have been continuing to build our presence in this market.

"Finally, in an ongoing effort to help our clients and to continue investment in our traditional markets, we are happy to announce that our new Niles Banking Center located at 1401 S. 11th St. in Niles, Michigan is now open to serve our clients. Recognizing the need for a new space as well as a drive-thru in Niles, the location opened successfully on December 21, 2023, and we are welcoming clients to come and experience enhanced levels of convenience and service," Mr. Murphy concluded.

FULL YEAR AND FOURTH QUARTER 2023 FINANCIAL RESULTS

Loans

Annual average loans and leases of $6.20 billion increased $637.16 million, up 11.45% loans from the full year 2022. Quarterly average loans and leases of $6.39 billion increased $547.27 million, up 9.37% loans in the fourth quarter of 2023 from the year ago quarter and have increased $141.98 million, up 2.27% from the third quarter. Strong growth primarily within our Auto and Light Truck and Construction Equipment portfolios and selective growth in our Commercial Real Estate portfolio drove total average loans and leases higher during the year.

Deposits

Annual average deposits for 2023 were $6.96 billion, an increase of $245.87 million, up 3.66% from 2022. Quarterly average deposits of $7.07 billion grew $310.20 million, up 4.59% for the quarter ended December 31, 2023 compared to the year ago quarter and have increased $118.56 million, up 1.71% compared to the third quarter. Deposit growth over the last year came from increased time deposits, public funds, and brokered deposits. The deposit mix change from 2022 continued through 2023 with clients moving their funds from non-maturity accounts to higher yielding certificates of deposit and money market accounts due to the interest rate environment.

Net Interest Income and Net Interest Margin

For the twelve months of 2023, tax-equivalent net interest income was $279.39 million, an increase of $15.29 million, up 5.79% compared to the full year 2022. Fourth quarter 2023 tax-equivalent net interest income of $71.50 million decreased $0.17 million, down 0.24% from the fourth quarter a year ago and increased $2.09 million, or 3.01% from the third quarter.

Net interest margin for the year ending December 31, 2023 was 3.50%, an increase of six basis points from the 3.44% for the year ending December 31, 2022. Net interest margin on a tax-equivalent basis for the year ending December 31, 2023 was 3.51%, an increase of six basis points from the 3.45% for the year ending December 31, 2022. Net interest recoveries positively contributed two basis points to the tax-equivalent net interest margin compared to a positive three basis point impact during 2022.

Fourth quarter 2023 net interest margin was 3.51%, a decrease of 17 basis points from the 3.68% for the same period in 2022 and an increase of six basis points from the prior quarter. Fourth quarter 2023 net interest margin on a fully tax-equivalent basis was 3.51%, a decrease of 18 basis points from the 3.69% for the same period in 2022 and an increase of five basis points from the 3.46% in the prior quarter. Net interest recoveries had a positive four basis point impact on the fourth quarter net interest margin compared to a one basis point impact during the fourth quarter of 2022.

Noninterest Income

Noninterest income for the twelve months ended December 31, 2023 was $90.62 million, down $0.64 million or 0.70% compared to the twelve months ended December 31, 2022. Fourth quarter 2023 noninterest income of $20.08 million decreased $3.20 million, or 13.76% from the fourth quarter a year ago and decreased $4.38 million or 17.91% from the third quarter.

Noninterest income during the twelve months ended December 31, 2023 was lower compared to a year ago mainly from lower equipment rental income due to a decrease in the size of the equipment rental portfolio as demand for operating leases continues to decline. Also contributing to lower income was realized losses of $2.88 million from repositioning the available-for-sale investment securities portfolio during the fourth quarter. Noninterest income in 2023 was also impacted by reduced mortgage banking origination volumes resulting in lower income from loans sold into the secondary market. These decreases were offset by partnership investment gains on sale of renewable energy tax equity investments of $3.43 million, a rise in interest rate swap fees, and higher deposit account fees.

The decrease in noninterest income from the third quarter was mainly due to the losses on the sale of available-for-sale securities of $2.88 million as explained above and lower partnership investment gains mainly from the sale of renewable energy tax equity investments of $2.32 million during the third quarter. These were offset by increased trust and wealth advisory income primarily from the positive market performance during the quarter.

Noninterest Expense

Noninterest expense for the twelve months ended December 31, 2023 was $201.72 million, an increase of $17.03 million, or 9.22% compared to the same period a year ago. Fourth quarter 2023 noninterest expense of $52.97 million rose $4.60 million, or 9.50% from the fourth quarter a year ago and increased $2.81 million or 5.59% from the prior quarter.

The increase in noninterest expense for 2023 from 2022 was primarily due to higher base salaries as a result of normal merit increases, the impact of wage inflation and an increase in the number of employees filling prior open positions, lower turn-over and a rise in group insurance claims. There was also increased software maintenance costs related to technology projects, higher FDIC insurance premiums due to a two basis point increase in assessment rates during the first quarter of 2023, an increase in the provision for unfunded loan commitments and a $1 million charitable contribution. These increases were offset by lower leased equipment depreciation and a decrease in professional consulting fees.

The increase in noninterest expense from the third quarter was mainly due to the earlier mentioned $1 million charitable contribution, higher legal fees and increased computer equipment replacement expense. These increases were offset by a lower provision for unfunded loan commitments and reduced leased equipment depreciation.

Credit

The allowance for loan and lease losses as of December 31, 2023 was 2.26% of total loans and leases compared to 2.27% at September 30, 2023 and 2.32% at December 31, 2022.

Net recoveries that have been recorded for the full year of 2023 were $2.42 million compared to net charge-offs of $1.47 million in 2022. This resulted in net recoveries to average loans and leases of 0.04% for 2023 compared to a net charge off ratio of 0.03% for 2022. Net recoveries in the fourth quarter of 2023 were $1.57 million compared with net charge-offs of $1.81 million in the same quarter a year ago and $0.33 million of net charge-offs in the previous quarter.

The provision for credit losses was $5.87 million for the twelve months ended December 31, 2023 and included $1.91 million for the fourth quarter of 2023, a decrease of $7.38 million and $3.43 million, respectively, compared with the same periods in 2022. The decrease in the provision expense was mainly due to net recoveries. The ratio of nonperforming assets to loans and leases was 0.37% as of December 31, 2023, compared to 0.27% on September 30, 2023 and 0.45% on December 31, 2022.

Capital

As of December 31, 2023, the common equity-to-assets ratio was 11.34%, compared to 10.84% at September 30, 2023 and 10.36% a year ago. The tangible common equity-to-tangible assets ratio was 10.48% at December 31, 2023 compared to 9.96% at September 30, 2023 and 9.45% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 13.22% at December 31, 2023 compared to 13.31% at September 30, 2023 and 13.19% a year ago.

During 2023, 310,522 shares were repurchased for treasury reducing common shareholders' equity by $12.47 million. No shares were repurchased during the fourth quarter 2023.

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 78 banking centers, 18 1st Source Bank Specialty Finance Group locations nationwide, nine Wealth Advisory Services locations, 10 1st Source Insurance offices, and three loan production 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)

Category: Earnings

1st SOURCE CORPORATION

4th QUARTER 2023 FINANCIAL HIGHLIGHTS

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

Three Months Ended

Twelve Months Ended

December
31,

September
30,

December
31,

December
31,

December
31,

2023

2023

2022

2023

2022

AVERAGE BALANCES

  Assets

$

8,553,500

$

8,417,391

$

8,171,095

$

8,414,797

$

8,073,111

  Earning assets

8,071,861

7,963,537

7,707,769

7,956,604

7,661,168

  Investments

1,596,602

1,645,906

1,795,200

1,676,650

1,845,351

  Loans and leases

6,387,858

6,245,883

5,840,593

6,203,857

5,566,701

  Deposits

7,068,668

6,950,105

6,758,465

6,957,244

6,711,376

  Interest bearing liabilities

5,678,546

5,566,874

5,086,446

5,522,793

5,002,168

  Common shareholders' equity

949,939

940,544

846,449

926,935

872,721

  Total equity

1,013,114

999,552

906,613

987,196

929,321

INCOME STATEMENT DATA

 

 

 

 

 

  Net interest income

$

71,330

$

69,236

$

71,455

$

278,647

$

263,469

  Net interest income - FTE(1)

71,496

69,406

71,670

279,388

264,097

  Provision for credit losses

1,911

859

5,342

5,866

13,245

  Noninterest income

20,076

24,455

23,280

90,623

91,262

  Noninterest expense

52,972

50,166

48,377

201,724

184,699

  Net income

28,417

32,939

31,056

124,934

120,532

  Net income available to common shareholders

28,429

32,939

31,068

124,927

120,509

PER SHARE DATA

 

 

 

 

 

  Basic net income per common share

$

1.15

$

1.32

$

1.25

$

5.03

$

4.84

  Diluted net income per common share

1.15

1.32

1.25

5.03

4.84

  Common cash dividends declared

0.34

0.32

0.32

1.30

1.26

  Book value per common share(2)

40.50

37.83

35.04

40.50

35.04

  Tangible book value per common share(1)

37.06

34.40

31.63

37.06

31.63

  Market value - High

56.59

49.36

59.94

56.59

59.94

  Market value - Low

41.30

40.96

46.40

38.77

42.29

  Basic weighted average common shares outstanding

24,430,477

24,660,508

24,658,294

24,615,546

24,687,324

  Diluted weighted average common shares outstanding

24,430,477

24,660,508

24,658,294

24,615,546

24,687,324

KEY RATIOS

 

 

 

 

 

  Return on average assets

1.32 %

1.55 %

1.51 %

1.48 %

1.49 %

  Return on average common shareholders' equity

11.87

13.89

14.56

13.48

13.81

  Average common shareholders' equity to average assets

11.11

11.17

10.36

11.02

10.81

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

10.48

9.96

9.45

10.48

9.45

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

13.22

13.31

13.19

13.22

13.19

  Risk-based capital - Tier 1(3)

14.99

14.86

14.84

14.99

14.84

  Risk-based capital - Total(3)

16.25

16.12

16.10

16.25

16.10

  Net interest margin

3.51

3.45

3.68

3.50

3.44

  Net interest margin - FTE(1)

3.51

3.46

3.69

3.51

3.45

  Efficiency ratio: expense to revenue

57.95

53.54

51.07

54.63

52.07

  Efficiency ratio: expense to revenue - adjusted(1)

56.40

54.24

51.05

54.21

51.13

  Net (recoveries) charge offs to average loans and leases

(0.10

)

0.02

0.12

(0.04

)

0.03

  Loan and lease loss allowance to loans and leases

2.26

2.27

2.32

2.26

2.32

  Nonperforming assets to loans and leases

0.37

0.27

0.45

0.37

0.45

 

 

 

 

 

December
31,

September
30,

June
30,

March
31,

December
31,

2023

2023

2023

2023

2022

END OF PERIOD BALANCES

 

 

 

 

 

  Assets

$

8,727,958

$

8,525,058

$

8,414,818

$

8,329,803

$

8,339,416

  Loans and leases

6,518,505

6,353,648

6,215,343

6,116,716

6,011,162

  Deposits

7,038,581

6,967,492

6,976,518

6,801,464

6,928,265

  Allowance for loan and lease losses

147,552

144,074

143,542

142,511

139,268

  Goodwill and intangible assets

83,916

83,921

83,897

83,901

83,907

  Common shareholders' equity

989,568

924,250

921,020

909,159

864,068

  Total equity

1,068,263

982,997

980,087

968,444

923,766

ASSET QUALITY

 

 

 

 

 

  Loans and leases past due 90 days or more

$

149

$

154

$

56

$

24

$

54

  Nonaccrual loans and leases

23,381

16,617

20,481

18,062

26,420

  Other real estate

—

117

193

117

104

  Repossessions

705

233

47

445

327

  Equipment owned under operating leases

—

—

—

—

22

  Total nonperforming assets

$

24,235

$

17,121

$

20,777

$

18,648

$

26,927

 

(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 as the sum of available-for-sale securities and loan and leases that mature in over 5 years as a percent of total assets.

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited - Dollars in thousands)

December
31,

September
30,

June
30,

December
31,

2023

2023

2023

2022

ASSETS

Cash and due from banks

$

77,474

$

75,729

$

86,742

$

84,703

Federal funds sold and interest bearing deposits with other banks

52,194

35,406

25,933

38,094

Investment securities available-for-sale

1,622,600

1,605,242

1,661,405

1,775,128

Other investments

25,075

25,075

25,320

25,293

Mortgages held for sale

1,442

3,118

2,321

3,914

Loans and leases, net of unearned discount:

 

 

 

 

  Commercial and agricultural

766,223

763,051

797,188

812,031

  Renewable energy

399,708

364,949

376,905

381,163

  Auto and light truck

966,912

901,484

901,054

808,117

  Medium and heavy duty truck

311,947

323,202

319,634

313,862

  Aircraft

1,078,172

1,079,581

1,060,340

1,077,722

  Construction equipment

1,084,752

1,062,097

1,012,969

938,503

  Commercial real estate

1,129,861

1,088,199

985,323

943,745

  Residential real estate and home equity

637,973

627,515

617,495

584,737

  Consumer

142,957

143,570

144,435

151,282

Total loans and leases

6,518,505

6,353,648

6,215,343

6,011,162

  Allowance for loan and lease losses

(147,552

)

(144,074

)

(143,542

)

(139,268

)

Net loans and leases

6,370,953

6,209,574

6,071,801

5,871,894

Equipment owned under operating leases, net

20,366

24,096

26,582

31,700

Net premises and equipment

46,159

43,951

44,089

44,773

Goodwill and intangible assets

83,916

83,921

83,897

83,907

Accrued income and other assets

427,779

418,946

386,728

380,010

Total assets

$

8,727,958

$

8,525,058

$

8,414,818

$

8,339,416

 

 

 

 

LIABILITIES

 

 

 

 

Deposits:

 

 

 

 

  Noninterest bearing demand

$

1,655,728

$

1,680,725

$

1,721,947

$

1,998,151

  Interest-bearing deposits:

 

 

 

 

      Interest-bearing demand

2,430,833

2,416,864

2,528,231

2,591,464

      Savings

1,213,334

1,180,837

1,163,166

1,198,191

     Time

1,738,686

1,689,066

1,563,174

1,140,459

  Total interest-bearing deposits

5,382,853

5,286,767

5,254,571

4,930,114

Total deposits

7,038,581

6,967,492

6,976,518

6,928,265

Short-term borrowings:

 

 

 

 

  Federal funds purchased and securities sold under agreements to repurchase

55,809

48,335

69,308

141,432

  Other short-term borrowings

256,550

223,757

118,377

74,097

Total short-term borrowings

312,359

272,092

187,685

215,529

Long-term debt and mandatorily redeemable securities

47,911

46,533

46,649

46,555

Subordinated notes

58,764

58,764

58,764

58,764

Accrued expenses and other liabilities

202,080

197,180

165,115

166,537

Total liabilities

7,659,695

7,542,061

7,434,731

7,415,650

 

 

 

 

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 December 31, 2023, September 30, 2023, June 30, 2023, and December 31, 2022, respectively

436,538

436,538

436,538

436,538

Retained earnings

789,842

769,603

744,442

694,862

Cost of common stock in treasury (3,771,070, 3,776,591, 3,523,113, and 3,543,388 shares at December 31, 2023, September 30, 2023, June 30, 2023, and December 31, 2022, respectively)

(130,489

)

(130,579

)

(120,410

)

(119,642

)

Accumulated other comprehensive loss

(106,323

)

(151,312

)

(139,550

)

(147,690

)

Total shareholders' equity

989,568

924,250

921,020

864,068

Noncontrolling interests

78,695

58,747

59,067

59,698

Total equity

1,068,263

982,997

980,087

923,766

Total liabilities and equity

$

8,727,958

$

8,525,058

$

8,414,818

$

8,339,416

 

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

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

Three Months Ended

Twelve Months Ended

December
31,

September
30,

December
31,

December
31,

December
31,

2023

2023

2022

2023

2022

Interest income:

  Loans and leases

$

107,103

$

100,206

$

79,244

$

387,298

$

263,894

  Investment securities, taxable

5,989

5,918

6,970

24,501

26,294

  Investment securities, tax-exempt

314

319

419

1,445

1,049

  Other

1,165

883

627

3,663

2,579

Total interest income

114,571

107,326

87,260

416,907

293,816

Interest expense:

 

 

 

 

 

  Deposits

38,624

34,405

12,746

123,162

25,231

  Short-term borrowings

1,878

2,136

1,070

7,032

1,497

  Subordinated notes

1,066

1,060

972

4,174

3,550

  Long-term debt and mandatorily redeemable securities

1,673

489

1,017

3,892

69

Total interest expense

43,241

38,090

15,805

138,260

30,347

Net interest income

71,330

69,236

71,455

278,647

263,469

Provision for credit losses

1,911

859

5,342

5,866

13,245

Net interest income after provision for credit losses

69,419

68,377

66,113

272,781

250,224

Noninterest income:

 

 

 

 

 

  Trust and wealth advisory

5,912

5,648

5,608

23,706

23,107

  Service charges on deposit accounts

3,331

3,297

3,172

12,749

12,146

  Debit card

4,395

4,377

4,669

17,980

18,052

  Mortgage banking

772

971

819

3,471

4,122

  Insurance commissions

1,527

1,714

1,535

6,911

6,703

  Equipment rental

1,907

2,101

2,556

8,837

12,274

  Losses on investment securities available-for-sale

(2,882

)

—

(184

)

(2,926

)

(184

)

  Other

5,114

6,347

5,105

19,895

15,042

Total noninterest income

20,076

24,455

23,280

90,623

91,262

Noninterest expense:

 

 

 

 

 

  Salaries and employee benefits

29,913

28,866

27,695

115,612

105,110

  Net occupancy

2,925

2,867

2,811

11,090

10,728

  Furniture and equipment

1,715

1,217

1,397

5,653

5,448

  Data processing

6,341

6,289

5,963

25,055

22,375

  Depreciation — leased equipment

1,523

1,672

2,111

7,093

10,023

  Professional fees

2,556

1,763

2,039

6,705

7,280

  FDIC and other insurance

1,624

1,598

943

5,926

3,625

  Business development and marketing

2,335

1,201

1,471

7,157

5,823

  Other

4,040

4,693

3,947

17,433

14,287

Total noninterest expense

52,972

50,166

48,377

201,724

184,699

Income before income taxes

36,523

42,666

41,016

161,680

156,787

Income tax expense

8,106

9,727

9,960

36,746

36,255

Net income

28,417

32,939

31,056

124,934

120,532

Net loss (income) attributable to noncontrolling interests

12

—

12

(7

)

(23

)

Net income available to common shareholders

$

28,429

$

32,939

$

31,068

$

124,927

$

120,509

Per common share:

 

 

 

 

 

  Basic net income per common share

$

1.15

$

1.32

$

1.25

$

5.03

$

4.84

  Diluted net income per common share

$

1.15

$

1.32

$

1.25

$

5.03

$

4.84

  Cash dividends

$

0.34

$

0.32

$

0.32

$

1.30

$

1.26

Basic weighted average common shares outstanding

24,430,477

24,660,508

24,658,294

24,615,546

24,687,324

Diluted weighted average common shares outstanding

24,430,477

24,660,508

24,658,294

24,615,546

24,687,324

 

1st SOURCE CORPORATION

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY

INTEREST RATES AND INTEREST DIFFERENTIAL

(Unaudited - Dollars in thousands)

 

Three Months Ended

 

December 31, 2023

September 30, 2023

December 31, 2022

 

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

$

1,559,351

$

5,989

1.52 %

$

1,605,912

$

5,918

1.46 %

$

1,742,567

$

6,970

1.59 %

      Tax-exempt(1)

 

37,251

392

4.17 %

39,994

397

3.94 %

52,633

525

3.96 %

  Mortgages held for sale

 

2,010

41

8.09 %

3,169

54

6.76 %

2,834

40

5.60 %

  Loans and leases, net of unearned discount(1)

 

6,387,858

107,150

6.65 %

6,245,883

100,244

6.37 %

5,840,593

79,313

5.39 %

  Other investments

 

85,391

1,165

5.41 %

68,579

883

5.11 %

69,142

627

3.60 %

Total earning assets(1)

 

8,071,861

114,737

5.64 %

7,963,537

107,496

5.36 %

7,707,769

87,475

4.50 %

  Cash and due from banks

 

70,352

 

 

68,640

 

 

76,843

 

 

  Allowance for loan and lease losses

 

(146,076

)

 

 

(145,197

)

 

 

(137,350

)

 

 

  Other assets

 

557,363

 

 

530,411

 

 

523,833

 

 

Total assets

$

8,553,500

 

 

$

8,417,391

 

 

$

8,171,095

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

  Interest-bearing deposits

$

5,383,925

$

38,624

2.85 %

$

5,247,332

$

34,405

2.60 %

$

4,718,303

$

12,746

1.07 %

  Short-term borrowings:

 

 

 

 

 

 

 

 

 

     Securities sold under agreements to repurchase

 

52,278

29

0.22 %

60,736

35

0.23 %

137,248

18

0.05 %

     Other short-term borrowings

 

136,814

1,849

5.36 %

153,523

2,101

5.43 %

125,078

1,052

3.34 %

Subordinated notes

 

58,764

1,066

7.20 %

58,764

1,060

7.16 %

58,764

972

6.56 %

  Long-term debt and mandatorily redeemable securities

 

46,765

1,673

14.19 %

46,519

489

4.17 %

47,053

1,017

8.58 %

Total interest-bearing liabilities

 

5,678,546

43,241

3.02 %

5,566,874

38,090

2.71 %

5,086,446

15,805

1.23 %

Noninterest-bearing deposits

 

1,684,743

 

 

1,702,773

 

 

2,040,162

 

 

Other liabilities

 

177,097

 

 

148,192

 

 

137,874

 

 

Shareholders' equity

 

949,939

 

 

940,544

 

 

846,449

 

 

Noncontrolling interests

 

63,175

 

 

59,008

 

 

60,164

 

 

Total liabilities and equity

$

8,553,500

 

 

$

8,417,391

 

 

$

8,171,095

 

 

Less: Fully tax-equivalent adjustments

 

(166

)

 

 

(170

)

 

 

(215

)

 

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

 

$

71,330

3.51 %

 

$

69,236

3.45 %

 

$

71,455

3.68 %

Fully tax-equivalent adjustments

 

166

 

 

170

 

 

215

 

Net interest income/margin - FTE(1)

 

$

71,496

3.51 %

 

$

69,406

3.46 %

 

$

71,670

3.69 %

 

(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)

 

 

Twelve Months Ended

 

December 31, 2023

December 31, 2022

 

Average
Balance

Interest Income/
Expense

Yield/
Rate

Average
Balance

Interest Income/
Expense

Yield/
Rate

ASSETS

 

  Investment securities available-for-sale:

 

      Taxable

$

1,632,567

$

24,501

1.50 %

$

1,805,041

$

26,294

1.46 %

      Tax-exempt(1)

 

44,083

1,805

4.09 %

40,310

1,311

3.25 %

  Mortgages held for sale

 

2,368

155

6.55 %

5,178

217

4.19 %

  Loans and leases, net of unearned discount(1)

 

6,203,857

387,524

6.25 %

5,566,701

264,043

4.74 %

  Other investments

 

73,729

3,663

4.97 %

243,938

2,579

1.06 %

Total earning assets(1)

 

7,956,604

417,648

5.25 %

7,661,168

294,444

3.84 %

  Cash and due from banks

 

70,304

 

 

75,836

 

 

  Allowance for loan and lease losses

 

(144,183

)

 

 

(133,028

)

 

 

  Other assets

 

532,072

 

 

469,135

 

 

Total assets

$

8,414,797

 

 

$

8,073,111

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

  Interest-bearing deposits

$

5,204,095

$

123,162

2.37 %

$

4,673,494

$

25,231

0.54 %

  Short-term borrowings:

 

 

 

 

 

 

      Securities sold under agreements to repurchase

 

78,928

136

0.17 %

166,254

85

0.05 %

      Other short-term borrowings

 

134,683

6,896

5.12 %

48,716

1,412

2.90 %

  Subordinated notes

 

58,764

4,174

7.10 %

58,764

3,550

6.04 %

  Long-term debt and mandatorily redeemable securities

 

46,323

3,892

8.40 %

54,940

69

0.13 %

Total interest-bearing liabilities

 

5,522,793

138,260

2.50 %

5,002,168

30,347

0.61 %

  Noninterest-bearing deposits

 

1,753,149

 

 

2,037,882

 

 

  Other liabilities

 

151,659

 

 

103,740

 

 

  Shareholders' equity

 

926,935

 

 

872,721

 

 

  Noncontrolling interests

 

60,261

 

 

56,600

 

 

Total liabilities and equity

$

8,414,797

 

 

$

8,073,111

 

 

Less: Fully tax-equivalent adjustments

 

(741

)

 

 

(628

)

 

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

 

$

278,647

3.50 %

 

$

263,469

3.44 %

Fully tax-equivalent adjustments

 

741

 

 

628

 

Net interest income/margin - FTE(1)

 

$

279,388

3.51 %

 

$

264,097

3.45 %

 

(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

Twelve Months Ended

December
31,

September
30,

December
31,

December
31,

December
31,

2023

2023

2022

2023

2022

Calculation of Net Interest Margin

(A)

Interest income (GAAP)

$

114,571

$

107,326

$

87,260

$

416,907

$

293,816

  Fully tax-equivalent adjustments:

 

 

 

 

 

(B)

  - Loans and leases

88

92

109

381

366

(C)

  - Tax-exempt investment securities

78

78

106

360

262

(D)

  Interest income - FTE (A+B+C)

114,737

107,496

87,475

417,648

294,444

(E)

Interest expense (GAAP)

43,241

38,090

15,805

138,260

30,347

(F)

Net interest income (GAAP) (A-E)

71,330

69,236

71,455

278,647

263,469

(G)

  Net interest income - FTE (D-E)

71,496

69,406

71,670

279,388

264,097

(H)

Annualization factor

3.967

3.967

3.967

1.000

1.000

(I)

Total earning assets

$

8,071,861

$

7,963,637

$

7,707,769

$

7,956,604

$

7,661,168

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

3.51 %

3.45 %

3.68 %

3.50 %

3.44 %

  Net interest margin - FTE (G*H)/I

3.51 %

3.46 %

3.69 %

3.51 %

3.45 %

 

 

 

 

 

Calculation of Efficiency Ratio

 

 

 

 

 

(F)

Net interest income (GAAP)

$

71,330

$

69,236

$

71,455

$

278,647

$

263,469

(G)

Net interest income - FTE

71,496

69,406

71,670

279,388

264,097

(J)

Plus: noninterest income (GAAP)

20,076

24,455

23,280

90,623

91,262

(K)

Less: gains/losses on investment securities and partnership investments

1,173

(2,779

)

(2,216

)

(3,875

)

(3,714

)

(L)

Less: depreciation - leased equipment

(1,523

)

(1,672

)

(2,111

)

(7,093

)

(10,023

)

(M)

Total net revenue (GAAP) (F+J)

91,406

93,691

94,735

369,270

354,731

(N)

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

91,222

89,410

90,623

359,043

341,622

(O)

Noninterest expense (GAAP)

52,972

50,166

48,377

201,724

184,699

(L)

Less: depreciation - leased equipment

(1,523

)

(1,672

)

(2,111

)

(7,093

)

(10,023

)

(P)

Noninterest expense - adjusted (O-L)

51,449

48,494

46,266

194,631

174,676

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

57.95 %

53.54 %

51.07 %

54.63 %

52.07 %

  Efficiency ratio - adjusted (P/N)

56.40 %

54.24 %

51.05 %

54.21 %

51.13 %

 

 

 

 

 

End of Period

 

 

December
31,

September
30,

December
31,

 

 

2023

2023

2022

 

 

Calculation of Tangible Common Equity-to-Tangible Assets Ratio

 

 

 

 

(Q)

Total common shareholders' equity (GAAP)

$

989,568

$

924,250

$

864,068

 

 

(R)

Less: goodwill and intangible assets

(83,916

)

(83,921

)

(83,907

)

 

 

(S)

Total tangible common shareholders' equity (Q-R)

$

905,652

$

840,329

$

780,161

 

 

(T)

Total assets (GAAP)

8,727,958

8,525,058

8,339,416

 

 

(R)

Less: goodwill and intangible assets

(83,916

)

(83,921

)

(83,907

)

 

 

(U)

Total tangible assets (T-R)

$

8,644,042

$

8,441,137

$

8,255,509

 

 

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

11.34 %

10.84 %

10.36 %

 

 

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

10.48 %

9.96 %

9.45 %

 

 

 

 

 

 

 

Calculation of Tangible Book Value per Common Share

 

 

 

 

 

(Q)

Total common shareholders' equity (GAAP)

$

989,568

$

924,250

$

864,068

 

 

(V)

Actual common shares outstanding

24,434,604

24,429,083

24,662,286

 

 

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

$

40.50

$

37.83

$

35.04

 

 

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

$

37.06

$

34.40

$

31.63

 

 

 

The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com

Brett Bauer
574-235-2000

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/194727

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