1st Source Corporation Reports First Quarter Results, Cash Dividend Declared
1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported net income of $16.41 million for the first quarter of 2020, a decrease of 26.05% compared to $22.20 million reported in the first quarter a year ago. The net income comparison was negatively impacted by an increased provision for loan and lease losses of $6.44 million primarily due to a sizeable impairment on one account, the likely negative economic impact on our portfolio from COVID-19, higher special attention outstandings in the quarter and increased loan and lease balances. Non-recurring 2020 items included $0.45 million in FDIC insurance premium credits received.
Diluted net income per common share for the first quarter of 2020 was down 25.58% to $0.64, versus $0.86 in the first quarter of 2019.
At its April 2020 meeting, the Board of Directors approved a cash dividend of $0.28 per common share, up 3.70% from the $0.27 per common share declared a year ago. The cash dividend is payable to shareholders of record on May 5, 2020 and will be paid on May 15, 2020.
Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, “While this has been a tough quarter, we are pleased that we have been able to help our customers navigate through the uncertainties presented by the current coronavirus (COVID-19) pandemic and we will continue to do so. We are well-positioned for the long term, are well-capitalized, have appropriate reserves, and have a strong balance sheet. That said, the near-term level of uncertainty is unprecedented as to the severity and length of the economic downturn tied to the coronavirus offset possibly by the effectiveness of the government’s enormous stimulus efforts. The continuation of shelter-in-place in our markets for prolonged periods of time, the inability to control the virus, and its possible return in the fall or winter could have serious negative impact on our clients and the markets we serve. In this environment of uncertainty, it is hard to predict what can or will happen and the impact it will have on us.
“As the current pandemic continues to negatively impact the economy, resulting in layoffs and rising unemployment in our local community banking markets and stresses among our specialty finance clients, we are working proactively to support our clients through this difficult period with a heightened sense of purpose and determination to deliver exceptional service to them. To date, we have approved and processed more than $494 million of loan modifications across our loan portfolios. The largest volume of loan modifications has been in the Auto and Light Truck, Construction and Commercial loan portfolios where business operations were directly impacted early-on by the pandemic. In addition, we are participating in the Small Business Administration Paycheck Protection Program (PPP) and have processed 2,061 small business PPP loans totaling more than $554 million to date. The PPP is a loan program designed to help small businesses keep their workforces employed during the coronavirus crisis and is one of a number of stimulus initiatives we have stood up and are delivering to our business and consumer clients. While these are tumultuous times, we will continue our longstanding practice of providing straight talk, sound advice, always keeping our clients’ best interests in mind for the long-term.
“On a more positive note, our residential mortgage loan business has been booming. We are seeing high production volumes and profitable results. Prior year Lean initiatives to streamline and hone our mortgage loan processes have allowed us to keep pace with the surging demand.
“In late January, we opened our newly constructed stand-alone banking center in the Middlebury, Ind. community. Our prior location there, where we had been a tenant for many years, was not consistent with the atmosphere our customers have come to know and expect from our banking centers. The new banking center features our signature side-by-side banking experience, as well as drive up teller service lanes and ATM. A few weeks after that, we opened the doors to our new banking center in downtown Auburn, Ind. We entered this community outside Fort Wayne strategically, and we have received a tremendous response from the people and businesses there. We have of course joined with our clients and the communities we serve to adjust the experience in all our banking centers to “flatten the curve” and support our first responders and health-care professionals in this unprecedented global response to an invisible enemy.
“In closing, I’d like to reassure you that 1st Source is committed to the essential work we do in the banking industry and for our clients. We have put many precautions in place so that we may continue to serve our clients through this difficult time while also ensuring their health and well-being as well as the health and well-being of our employees and all of our families and the communities we serve. Teams have been split up so that infection cannot spread across entire departments, disrupting the important work our employees do. We are encouraging virtual meetings and conference calls in place of in-person meetings, including our annual shareholders meeting which will be held virtually this year. Additionally, travel has been restricted, and we are promoting social distancing, frequent hand washing and thorough disinfection of all surfaces. We have a dedicated executive pandemic response team that meets daily and is closely monitoring developments and providing guidance for additional precautions and initiatives. We are resolute in our commitment to serve our clients and communities just as we have for over 156 years and will do so for many years to come.” Mr. Murphy concluded.
FIRST QUARTER 2020 FINANCIAL RESULTS
Loans
Average loans and leases of $5.10 billion increased $240.21 million, up 4.94% in the first quarter of 2020 from the year ago quarter and have increased $51.76 million, up 1.03% from the fourth quarter of 2019.
Deposits
Average deposits of $5.27 billion grew $213.01 million for the quarter ended March 31, 2020, up 4.21% from the year ago quarter and have decreased $142.05 million, or 2.62% compared to the fourth quarter of 2019.
Net Interest Income and Net Interest Margin
First quarter 2020 net interest income of $54.84 million was relatively flat from the first quarter a year ago and decreased $0.45 million, down 0.82% from the fourth quarter of 2019.
First quarter 2020 net interest margin was 3.57%, a decrease of 21 basis points from the 3.78% for the same period in 2019 and increased six basis points from the fourth quarter of 2019. First quarter 2020 net interest margin on a fully tax-equivalent basis was 3.58%, a decrease of 21 basis points from the 3.79% for the same period in 2019 and was higher by six basis points compared to the previous quarter. The margin continues to experience pressure from the numerous Federal Reserve interest rate decreases during the second half of 2019 and the first three months of 2020. Interest-bearing deposit repricing and a shift in the deposit mix during the first quarter of 2020 resulted in a positive margin impact when compared to the year end margin.
Noninterest Income
First quarter 2020 noninterest income of $24.62 million increased $0.50 million, up 2.06% from the first quarter a year ago and decreased $0.96 million, or 3.73% from the fourth quarter of 2019.
Noninterest income during the three months ended March 31, 2020 was higher compared to a year ago mainly from improved mortgage banking income driven by gains on a higher volume of loan sales, increased gains on the sale of available-for-sale securities, increased gains on partnership investments, higher debit card income and increased service charges on deposit accounts. These positives were offset by lower equipment rental income due to a reduction in the size of the average equipment rental portfolio, reduced insurance commissions due to a decline in contingent commissions received and decreased customer swap fees.
The decrease in noninterest income from the fourth quarter of 2019 was primarily the result of lower equipment rental income due to a reduction in the size of the average equipment rental portfolio, decreased trust and wealth advisory fees, reduced brokerage fees and commissions, and decreased customer swap fees. These negatives were offset by higher mortgage banking income on a higher volume of loan sales and increased insurance commissions on property and casualty policies.
Noninterest Expense
First quarter 2020 noninterest expense of $46.54 million increased $1.33 million, or 2.94% from the first quarter a year ago and decreased $2.81 million, down 5.70% from the prior quarter. Excluding depreciation on leased equipment, noninterest expenses were up 6.28% from the first quarter a year ago and down 5.15% from the prior quarter.
The increase in noninterest expense during the first quarter compared to a year ago was mainly due to reduced gains on the sale of fixed assets, higher salaries as a result of normal merit increases and slightly increased staffing levels, a rise in the valuation provision for interest rate swaps with customers, and higher business development and marketing expenses due to marketing promotions. These increases were offset by fewer valuation adjustments on repossessed assets, lower leased equipment depreciation resulting from a reduction in the average equipment rental portfolio, a decrease in executive cash incentives, reduced insurance costs due to FDIC assessment credits and higher gains on the sale of off-lease operating equipment.
The decrease in noninterest expense from the prior quarter was primarily the result of decreased group insurance costs on lower claims, fewer valuation adjustments on repossessed assets, a decrease in executive cash incentives, a decline in employee commissions and awards, reduced leased equipment depreciation, and fewer professional consulting fees. These decreases were offset by an increased valuation provision for interest rate swaps with customers and higher collection and repossession expenses.
Credit
The reserve for loan and lease losses as of March 31, 2020 was 2.35% of total loans and leases compared to 2.19% at December 31, 2019 and 2.07% at March 31, 2019. Net charge-offs of $1.81 million were recorded for the first quarter of 2020 compared with net charge-offs of $3.54 million in the same quarter a year ago and $0.64 million of net charge-offs in the prior quarter.
The provision for loan and lease losses was $11.35 million for the first quarter of 2020, an increase of $6.44 million compared with the same period in 2019 and an increase of $8.40 million from the fourth quarter of 2019. The ratio of nonperforming assets to loans and leases was 0.68% as of March 31, 2020, compared to 0.37% on December 31, 2019 and 0.49% on March 31, 2019.
Capital
As of March 31, 2020, the common equity-to-assets ratio was 12.63%, compared to 12.51% at December 31, 2019 and 12.20% a year ago. The tangible common equity-to-tangible assets ratio was 11.53% at March 31, 2020 compared to 11.38% at December 31, 2019 and 11.03% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 12.57% at March 31, 2020 compared to 12.55% at December 31, 2019 and 12.28% a year ago. There were no shares repurchased for treasury during 2020.
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 80 banking centers, 15 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.
1st SOURCE CORPORATION
1st QUARTER 2020 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
Three Months Ended
March 31,
2020
December 31,
2019
March 31,
2019
AVERAGE BALANCES
Assets
$
6,611,121
$
6,708,475
$
6,290,386
Earning assets
6,181,794
6,258,938
5,896,697
Investments
1,030,640
1,044,917
987,593
Loans and leases
5,098,397
5,046,639
4,858,183
Deposits
5,272,376
5,414,423
5,059,362
Interest bearing liabilities
4,415,552
4,483,686
4,315,545
Common shareholders’ equity
844,724
824,361
775,657
Total equity
867,605
844,447
777,217
INCOME STATEMENT DATA
Net interest income
$
54,844
$
55,296
$
54,948
Net interest income - FTE(1)
54,995
55,456
55,130
Provision for loan and lease losses
11,353
2,951
4,918
Noninterest income
24,622
25,577
24,124
Noninterest expense
46,535
49,346
45,204
Net income
16,418
21,954
22,196
Net income available to common shareholders
16,413
21,941
22,196
PER SHARE DATA
Basic net income per common share
$
0.64
$
0.86
$
0.86
Diluted net income per common share
0.64
0.86
0.86
Common cash dividends declared
0.29
0.29
0.27
Book value per common share(2)
33.32
32.47
30.33
Tangible book value per common share(1)
30.03
29.18
27.05
Market value - High
52.16
53.42
50.15
Market value - Low
26.07
44.12
39.11
Basic weighted average common shares outstanding
25,523,356
25,509,240
25,759,186
Diluted weighted average common shares outstanding
25,523,356
25,509,240
25,759,186
KEY RATIOS
Return on average assets
1.00
%
1.30
%
1.43
%
Return on average common shareholders’ equity
7.81
10.56
11.61
Average common shareholders’ equity to average assets
12.78
12.29
12.33
End of period tangible common equity to tangible assets(1)
11.53
11.38
11.03
Risk-based capital - Common Equity Tier 1(3)
12.57
12.55
12.28
Risk-based capital - Tier 1(3)
13.97
13.64
13.32
Risk-based capital - Total(3)
15.23
14.90
14.58
Net interest margin
3.57
3.51
3.78
Net interest margin - FTE(1)
3.58
3.52
3.79
Efficiency ratio: expense to revenue
58.56
61.02
57.17
Efficiency ratio: expense to revenue - adjusted(1)
55.79
57.87
53.20
Net charge offs to average loans and leases
0.14
0.05
0.30
Loan and lease loss reserve to loans and leases
2.35
2.19
2.07
Nonperforming assets to loans and leases
0.68
0.37
0.49
March 31,
2020
December 31,
2019
September 30,
2019
June 30,
2019
March 31,
2019
END OF PERIOD BALANCES
Assets
$
6,735,118
$
6,622,776
$
6,691,070
$
6,650,105
$
6,379,086
Loans and leases
5,129,514
5,085,527
5,099,546
5,109,337
4,926,187
Deposits
5,275,911
5,357,326
5,391,679
5,403,845
5,124,091
Reserve for loan and lease losses
120,798
111,254
108,941
104,911
101,852
Goodwill and intangible assets
83,964
83,971
83,978
83,985
83,992
Common shareholders’ equity
850,897
828,277
813,167
794,662
778,422
Total equity
877,302
848,636
833,042
804,686
781,101
ASSET QUALITY
Loans and leases past due 90 days or more
$
191
$
309
$
311
$
156
$
178
Nonaccrual loans and leases
26,301
9,789
10,188
12,212
13,622
Other real estate
362
522
629
543
417
Repossessions
9,020
8,623
6,610
8,799
10,411
Equipment owned under operating leases
—
—
—
—
64
Total nonperforming assets
$
35,874
$
19,243
$
17,738
$
21,710
$
24,692
(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,
2020
December 31,
2019
September 30,
2019
March 31,
2019
ASSETS
Cash and due from banks
$
72,756
$
67,215
$
94,160
$
64,619
Federal funds sold and interest bearing deposits with other banks
49,543
16,150
33,325
3,062
Investment securities available-for-sale
1,057,169
1,040,583
1,032,185
1,002,809
Other investments
28,414
28,414
28,404
28,404
Mortgages held for sale
13,449
20,277
28,654
9,210
Loans and leases, net of unearned discount:
Commercial and agricultural
1,166,462
1,132,791
1,175,936
1,146,031
Auto and light truck
577,757
588,807
612,921
554,078
Medium and heavy duty truck
278,076
294,824
289,925
285,631
Aircraft
773,132
784,040
805,568
830,437
Construction equipment
718,307
705,451
685,696
641,035
Commercial real estate
930,757
908,177
858,402
818,459
Residential real estate and home equity
545,606
532,003
531,630
514,719
Consumer
139,417
139,434
139,468
135,797
Total loans and leases
5,129,514
5,085,527
5,099,546
4,926,187
Reserve for loan and lease losses
(120,798)
(111,254)
(108,941)
(101,852)
Net loans and leases
5,008,716
4,974,273
4,990,605
4,824,335
Equipment owned under operating leases, net
101,238
111,684
119,171
131,594
Net premises and equipment
52,431
52,219
51,680
51,357
Goodwill and intangible assets
83,964
83,971
83,978
83,992
Accrued income and other assets
267,438
227,990
228,908
179,704
Total assets
$
6,735,118
$
6,622,776
$
6,691,070
$
6,379,086
LIABILITIES
Deposits:
Noninterest-bearing demand
$
1,219,327
$
1,216,834
$
1,246,063
$
1,146,647
Interest-bearing deposits:
Interest-bearing demand
1,591,419
1,677,200
1,605,602
1,560,840
Savings
840,606
814,794
820,409
851,564
Time
1,624,559
1,648,498
1,719,605
1,565,040
Total interest-bearing deposits
4,056,584
4,140,492
4,145,616
3,977,444
Total deposits
5,275,911
5,357,326
5,391,679
5,124,091
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase
135,942
120,459
139,417
149,172
Other short-term borrowings
146,903
25,434
57,734
106,216
Total short-term borrowings
282,845
145,893
197,151
255,388
Long-term debt and mandatorily redeemable securities
81,877
71,639
71,520
71,439
Subordinated notes
58,764
58,764
58,764
58,764
Accrued expenses and other liabilities
158,419
140,518
138,914
88,303
Total liabilities
5,857,816
5,774,140
5,858,028
5,597,985
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, 2020, December 31, 2019, September 30, 2019, and March 31, 2019, respectively
436,538
436,538
436,538
436,538
Retained earnings
472,911
463,269
448,715
414,428
Cost of common stock in treasury (2,670,290, 2,696,200, 2,696,918, and 2,537,741 shares at March 31, 2020, December 31, 2019, September 30, 2019, and
March 31, 2019, respectively)
(76,203)
(76,702)
(76,716)
(69,136)
Accumulated other comprehensive income (loss)
17,651
5,172
4,630
(3,408)
Total shareholders’ equity
850,897
828,277
813,167
778,422
Noncontrolling interests
26,405
20,359
19,875
2,679
Total equity
877,302
848,636
833,042
781,101
Total liabilities and equity
$
6,735,118
$
6,622,776
$
6,691,070
$
6,379,086
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands, except per share amounts)
Three Months Ended
March 31,
2020
December 31,
2019
March 31,
2019
Interest income:
Loans and leases
$
61,526
$
63,259
$
62,683
Investment securities, taxable
5,550
5,189
5,515
Investment securities, tax-exempt
264
297
385
Other
346
798
438
Total interest income
67,686
69,543
69,021
Interest expense:
Deposits
10,851
12,523
11,470
Short-term borrowings
254
170
931
Subordinated notes
884
907
928
Long-term debt and mandatorily redeemable securities
853
647
744
Total interest expense
12,842
14,247
14,073
Net interest income
54,844
55,296
54,948
Provision for loan and lease losses
11,353
2,951
4,918
Net interest income after provision for loan and lease losses
43,491
52,345
50,030
Noninterest income:
Trust and wealth advisory
4,848
5,269
4,858
Service charges on deposit accounts
2,605
2,835
2,498
Debit card
3,373
3,593
3,220
Mortgage banking
2,336
1,401
936
Insurance commissions
1,881
1,466
2,174
Equipment rental
6,630
7,372
7,982
Gains on investment securities available-for-sale
280
—
—
Other
2,669
3,641
2,456
Total noninterest income
24,622
25,577
24,124
Noninterest expense:
Salaries and employee benefits
24,401
25,382
23,495
Net occupancy
2,721
2,640
2,772
Furniture and equipment
6,407
6,475
6,024
Depreciation – leased equipment
5,427
6,006
6,524
Professional fees
1,442
2,045
1,598
Supplies and communication
1,634
1,710
1,493
FDIC and other insurance
288
282
645
Business development and marketing
1,359
1,832
949
Loan and lease collection and repossession
763
1,114
1,361
Other
2,093
1,860
343
Total noninterest expense
46,535
49,346
45,204
Income before income taxes
21,578
28,576
28,950
Income tax expense
5,160
6,622
6,754
Net income
16,418
21,954
22,196
Net (income) loss attributable to noncontrolling interests
(5)
(13)
—
Net income available to common shareholders
$
16,413
$
21,941
$
22,196
Per common share:
Basic net income per common share
$
0.64
$
0.86
$
0.86
Diluted net income per common share
$
0.64
$
0.86
$
0.86
Cash dividends
$
0.29
$
0.29
$
0.27
Basic weighted average common shares outstanding
25,523,356
25,509,240
25,759,186
Diluted weighted average common shares outstanding
25,523,356
25,509,240
25,759,186
1st SOURCE CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited - Dollars in thousands)
Three Months Ended
March 31, 2020
December 31, 2019
March 31, 2019
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
$
973,421
$
5,550
2.29
%
$
982,839
$
5,189
2.09
%
$
909,422
$
5,515
2.46
%
Tax exempt(1)
57,219
325
2.28
%
62,078
365
2.33
%
78,171
472
2.45
%
Mortgages held for sale
11,294
96
3.42
%
21,489
192
3.54
%
8,826
101
4.64
%
Loans and leases, net of unearned discount(1)
5,098,397
61,520
4.85
%
5,046,639
63,159
4.97
%
4,858,183
62,677
5.23
%
Other investments
41,463
346
3.36
%
145,893
798
2.17
%
42,095
438
4.22
%
Total earning assets(1)
6,181,794
67,837
4.41
%
6,258,938
69,703
4.42
%
5,896,697
69,203
4.76
%
Cash and due from banks
65,407
73,438
63,886
Reserve for loan and lease losses
(112,239)
(110,209)
(101,697)
Other assets
476,159
486,308
431,500
Total assets
$
6,611,121
$
6,708,475
$
6,290,386
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
$
4,076,270
$
10,851
1.07
%
$
4,170,250
$
12,523
1.19
%
$
3,934,921
$
11,470
1.18
%
Short-term borrowings
202,545
254
0.50
%
183,244
170
0.37
%
251,379
931
1.50
%
Subordinated notes
58,764
884
6.05
%
58,764
907
6.12
%
58,764
928
6.40
%
Long-term debt and mandatorily redeemable securities
77,973
853
4.40
%
71,428
647
3.59
%
70,481
744
4.28
%
Total interest-bearing liabilities
4,415,552
12,842
1.17
%
4,483,686
14,247
1.26
%
4,315,545
14,073
1.32
%
Noninterest-bearing deposits
1,196,106
1,244,173
1,124,441
Other liabilities
131,858
136,169
73,183
Shareholders’ equity
844,724
824,361
775,657
Noncontrolling interests
22,881
20,086
1,560
Total liabilities and equity
$
6,611,121
$
6,708,475
$
6,290,386
Less: Fully tax-equivalent adjustments
(151)
(160)
(182)
Net interest income/margin (GAAP-derived)(1)
$
54,844
3.57
%
$
55,296
3.51
%
$
54,948
3.78
%
Fully tax-equivalent adjustments
151
160
182
Net interest income/margin - FTE(1)
$
54,995
3.58
%
$
55,456
3.52
%
$
55,130
3.79
%
(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,
2020
December 31,
2019
March 31,
2019
Calculation of Net Interest Margin
(A)
Interest income (GAAP)
$
67,686
$
69,543
$
69,021
Fully tax-equivalent adjustments:
(B)
– Loans and leases
90
92
95
(C)
– Tax exempt investment securities
61
68
87
(D)
Interest income – FTE (A+B+C)
67,837
69,703
69,203
(E)
Interest expense (GAAP)
12,842
14,247
14,073
(F)
Net interest income (GAAP) (A-E)
54,844
55,296
54,948
(G)
Net interest income - FTE (D-E)
54,995
55,456
55,130
(H)
Annualization factor
4.022
3.967
4.056
(I)
Total earning assets
$
6,181,794
$
6,258,938
$
5,896,697
Net interest margin (GAAP-derived) (F*H)/I
3.57
%
3.51
%
3.78
%
Net interest margin – FTE (G*H)/I
3.58
%
3.52
%
3.79
%
Calculation of Efficiency Ratio
(F)
Net interest income (GAAP)
$
54,844
$
55,296
$
54,948
(G)
Net interest income – FTE
54,995
55,456
55,130
(J)
Plus: noninterest income (GAAP)
24,622
25,577
24,124
(K)
Less: gains/losses on investment securities and partnership investments
(513)
(132)
(17)
(L)
Less: depreciation – leased equipment
(5,427)
(6,006)
(6,524)
(M)
Total net revenue (GAAP) (F+J)
79,466
80,873
79,072
(N)
Total net revenue – adjusted (G+J–K–L)
73,677
74,895
72,713
(O)
Noninterest expense (GAAP)
46,535
49,346
45,204
(L)
Less:depreciation – leased equipment
(5,427)
(6,006)
(6,524)
(P)
Noninterest expense – adjusted (O–L)
41,108
43,340
38,680
Efficiency ratio (GAAP-derived) (O/M)
58.56
%
61.02
%
57.17
%
Efficiency ratio – adjusted (P/N)
55.79
%
57.87
%
53.20
%
End of Period
March 31,
2020
December 31,
2019
March 31,
2019
Calculation of Tangible Common Equity-to-Tangible Assets Ratio
(Q)
Total common shareholders’ equity (GAAP)
$
850,897
$
828,277
$
778,422
(R)
Less: goodwill and intangible assets
(83,964)
(83,971)
(83,992)
(S)
Total tangible common shareholders’ equity (Q–R)
$
766,933
$
744,306
$
694,430
(T)
Total assets (GAAP)
6,735,118
6,622,776
6,379,086
(R)
Less: goodwill and intangible assets
(83,964)
(83,971)
(83,992)
(U)
Total tangible assets (T–R)
$
6,651,154
$
6,538,805
$
6,295,094
Common equity-to-assets ratio (GAAP-derived) (Q/T)
12.63
%
12.51
%
12.20
%
Tangible common equity-to-tangible assets ratio (S/U)
11.53
%
11.38
%
11.03
%
Calculation of Tangible Book Value per Common Share
(Q)
Total common shareholders’ equity (GAAP)
$
850,897
$
828,277
$
778,422
(V)
Actual common shares outstanding
25,535,384
25,509,474
25,667,933
Book value per common share (GAAP-derived) (Q/V)*1000
$
33.32
$
32.47
$
30.33
Tangible common book value per share (S/V)*1000
$
30.03
$
29.18
$
27.05
The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP #336901 10 3)
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