QUARTERLY HIGHLIGHTS
- Net income improved to $15.23 million
and diluted net income per common share improved to $0.58 from the
prior year's quarter.
- Return on average assets of 1.11% and
return on average common shareholders' equity of 8.96%.
- Net charge-offs of $1.10 million and
nonperforming assets to loans and leases of 0.70%.
- Average loans and leases grew $190.45
million or 4.81% from the fourth quarter of 2015.
- Average deposits grew $301.31 million
or 7.35% from the fourth quarter of 2015.
- Net interest income increased slightly
from the fourth quarter of 2015.
- Noninterest income increased $1.45
million or 6.96% from the fourth quarter of 2015 (increased 5.19%
excluding leased equipment depreciation).
- Noninterest expenses were comparable to
the fourth quarter of 2015 (decreased 1.65% excluding leased
equipment depreciation).
1st Source Corporation (NASDAQ: SRCE), parent company of 1st
Source Bank, today reported net income of $57.79 million for the
year of 2016, compared to $57.49 million in 2015. Fourth quarter
net income was $15.23 million, an increase of 5.60% compared to
$14.42 million in the fourth quarter of 2015. The year-to-date net
income comparison was positively impacted by net gains of $1.80
million on investment securities available-for-sale and gains of
$1.86 million on a partnership investment liquidation required by
the Volcker Rule. These positives were offset by a reduction in net
interest recoveries of $3.16 million and a higher provision for
loan and lease losses of $3.67 million.
Diluted net income per common share for the year improved to
$2.22 compared to $2.17 a year earlier. Diluted net income per
common share for the fourth quarter was $0.58, compared to $0.55
per common share reported in the fourth quarter of the previous
year.
At its January 2017 meeting, the 1st Source Board of Directors
approved a cash dividend of $0.18 per common share. The cash
dividend is payable to shareholders of record on February 6, 2017
and will be paid on February 15, 2017. Cash dividends for 2016
increased 7.30% over the previous year.
According to Christopher J. Murphy III, Chairman, “1st Source
Corporation had a steady fourth quarter and 2016 was our 29th year
of consecutive annual dividend growth. Credit quality remains
stable and we have seen average deposits increase 7.35% from a year
ago. Average loan and lease growth of 4.81% for the same quarterly
period was a strong increase considering the acquisitions of a
number of our clients. As an example, the consolidation occurring
in the recreational vehicle industry and the auto rental industry
has resulted in the sale of a number of our clients to
substantially larger companies. These sales and mergers have
resulted in loan payoffs as have the sale of local business
customers with aging owners who took advantage of the improved
economy to sell their businesses. For the year, average loans and
leases grew by 7.20%.”
“This past quarter we launched a new mobile responsive website
and smart watch apps for Android™ and Apple® watches. We also
opened a new expanded banking center in Warsaw, Indiana, replacing
our former downtown location and financed our first tax advantaged
renewable energy solar projects.”
“We were once again identified for providing the best banking
experience in the Midwest by The MSR Group, a top research firm
specializing in the customer experience in retail banking. To
determine this they interviewed thousands of customers of banks
including the top 50 banks in the country. We are proud to have
received this award for two consecutive years as it shows our
commitment to delivering outstanding client service. We are
committed to providing outstanding service to our clients whether
they prefer to bank in person, online or with their mobile device.”
Mr. Murphy concluded.
FOURTH QUARTER 2016 FINANCIAL
RESULTS
Loans
Average loans and leases of $4.15 billion increased $190.45
million, or 4.81% in the fourth quarter of 2016 from the year ago
quarter and have decreased slightly from the third quarter. Annual
average loans and leases of $4.11 billion increased $276.36
million, or 7.20% from the same period in 2015.
Deposits
Average deposits of $4.40 billion grew $301.31 million, or 7.35%
for the quarter ended December 31, 2016 from the year ago quarter
and have increased $48.97 million, or 1.12% compared to the third
quarter. Annual average deposits for 2016 were $4.30 billion an
increase of $341.64 million or 8.62% from 2015.
Net Interest Income and Net Interest Margin
Fourth quarter 2016 net interest income of $43.38 million
increased slightly from the fourth quarter a year ago and increased
$0.69 million, or 1.61% from the third quarter. Net interest
recoveries during the quarter were down $1.70 million from 2015,
resulting in a 14 basis point reduction to the net interest
margin.
Fourth quarter 2016 net interest margin was 3.39%, a decrease of
19 basis points from the 3.58% for the same period in 2015 and an
increase of 4 basis points from the 3.35% in the third quarter.
Fourth quarter 2016 net interest margin on a fully tax-equivalent
basis was 3.42%, a decrease of 19 basis points from the 3.61% for
the same period in 2015 and an increase of 3 basis points from the
3.39% in the third quarter.
For the twelve months of 2016, net interest income was $169.66
million, an increase of $3.14 million, or 1.88% compared to the
same period a year ago. Net interest recoveries for 2016 were down
$3.16 million from 2015, resulting in a 6 basis point reduction to
the net interest margin.
Net interest margin for the year ending December 31, 2016 was
3.39%, a decrease of 18 basis points from the 3.57% for the year
ending December 31, 2015. Net interest margin on a fully
tax-equivalent basis for the year ending December 31, 2016 was
3.43%, a decrease of 17 basis points from the 3.60% for the year
ending December 31, 2015.
Noninterest Income
Noninterest income increased $1.45 million or 6.96% and $5.63
million or 6.76% in the three and twelve month periods ended
December 31, 2016, respectively over the same periods a year ago.
The increase in noninterest income during the fourth quarter was
mainly due to higher equipment rental income related to an increase
in the average equipment rental portfolio and gains on the sale of
available-for-sale equity securities, which was offset by lower
monogram fund income. The increase in noninterest income during the
twelve months of 2016 was primarily due to higher equipment rental
income related to an increase in the average equipment rental
portfolio, improved debit card income due to growth in those
transactions, gains on the liquidation of a partnership investment
required by the Volcker Rule and gains on the sale of
available-for-sale equity securities, which was offset by lower
monogram fund income and decreased customer swap fees.
Noninterest Expense
Noninterest expense was flat for the quarter ended December 31,
2016 and increased $4.53 million or 2.85% for the twelve months of
2016, respectively over the comparable periods a year ago.
Excluding depreciation on leased equipment, annual noninterest
expenses were up $1.13 million or 0.80%. The 2016 increase in
noninterest expense was primarily due to higher depreciation on
leased equipment, furniture and equipment expense and increased
loan and lease collection and repossession expenses offset by
reduced residential mortgage foreclosure expenses, losses on the
sale of fixed assets and lower supplies and communication.
Depreciation on leased equipment was higher as a result of an
increase in the average equipment rental portfolio. Furniture and
equipment expense was higher due to increased software maintenance
costs, depreciation on new equipment with banking center remodels
and computer processing charges. Loan and lease collection and
repossession expenses increased mainly due to lower recoveries on
repurchased mortgage loans, fewer gains on the sale of other real
estate owned and repossessions and an increase in general
collection and repossession expenses. Supplies and communication
expense was lower primarily due to costs associated with replacing
debit cards with embedded EMV chip cards in 2015 and a reduction in
telephone charges. In addition, during the fourth quarter of 2016,
business development and marketing expenses included $0.53 million
of charitable contributions related to the gains on the sale of
available-for-sale securities.
Credit
The reserve for loan and lease losses as of December 31, 2016
was 2.11% of total loans and leases compared to 2.13% at September
30, 2016 and 2.21% at December 31, 2015. Net charge-offs of $1.10
million were recorded for the fourth quarter of 2016 compared with
net recoveries of $0.50 million in the same quarter a year ago. Net
charge-offs for the full year were $5.40 million in 2016, compared
to net recoveries of $0.88 in 2015.
The provision for loan and lease losses for the fourth quarter
and full year of 2016 increased $0.74 million and $3.67 million,
respectively compared with the same periods in 2015.
The ratio of nonperforming assets to net loans and leases was
0.70% as of December 31, 2016, up from the 0.50% on December 31,
2015 and comparable to the 0.68% on September 30, 2016.
Capital
As of December 31, 2016, the common equity-to-assets ratio was
12.26% compared to 12.30% at September 30, 2016 and 12.41% a year
ago. The tangible common equity-to-tangible assets ratio was 10.89%
at December 31, 2016 and 10.93% at September 30, 2016 compared to
10.96% a year earlier. The Common Equity Tier 1 ratio, calculated
under banking regulatory guidelines, was 12.59% at December 31,
2016 compared to 12.35% at September 30, 2016 and 12.39% a year
ago. During 2016, the Company repurchased $8.03 million of common
stock in several open market transactions. During the fourth
quarter of 2016, accumulated other comprehensive income decreased
$8.03 million as a result of the decrease in the market value of
our investment securities available-for-sale given current market
conditions. At December 31, 2016 approximately 53% of our
investment securities portfolio will reprice in the next three
years.
ABOUT 1ST SOURCE CORPORATION
1st Source common stock is traded on the NASDAQ Global Select
Market under “SRCE” and appears in the National Market System
tables in many daily newspapers under the code name “1st Src.”
Since 1863, 1st Source has been committed to the success of the
communities it serves. For more information, visit
www.1stsource.com.
1st Source serves the northern half of Indiana and southwest
Michigan and is the largest locally controlled financial
institution headquartered in the area. While delivering a
comprehensive range of consumer and commercial banking services
through its community bank offices, 1st Source has distinguished
itself with highly personalized services. 1st Source Bank also
competes for business nationally by offering specialized financing
services for new and used private and cargo aircraft, automobiles
for leasing and rental agencies, medium and heavy duty trucks, and
construction equipment. The Corporation includes 81 banking
centers, 22 1st Source Bank Specialty Finance Group locations
nationwide, eight Wealth Advisory Services locations and ten 1st
Source Insurance offices.
FORWARD LOOKING STATEMENTS
Except for historical information contained herein, the matters
discussed in this document express “forward-looking statements.”
Generally, the words “believe,” “contemplate,” “seek,” “plan,”
“possible,” “assume,” “expect,” “intend,” “targeted,” “continue,”
“remain,” “estimate,” “anticipate,” “project,” “will,” “should,”
“indicate,” “would,” “may” and similar expressions indicate
forward-looking statements. Those statements, including statements,
projections, estimates or assumptions concerning future events or
performance, and other statements that are other than statements of
historical fact, are subject to material risks and uncertainties.
1st Source cautions readers not to place undue reliance on any
forward-looking statements, which speak only as of the date
made.
1st Source may make other written or oral forward-looking
statements from time to time. Readers are advised that various
important factors could cause 1st Source’s actual results or
circumstances for future periods to differ materially from those
anticipated or projected in such forward-looking statements. Such
factors, among others, include changes in laws, regulations or
accounting principles generally accepted in the United States; 1st
Source’s competitive position within its markets served; increasing
consolidation within the banking industry; unforeseen changes in
interest rates; unforeseen downturns in the local, regional or
national economies or in the industries in which 1st Source has
credit concentrations; and other risks discussed in 1st Source’s
filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K, which filings are available from the
SEC. 1st Source undertakes no obligation to publicly update or
revise any forward-looking statements.
NON-GAAP FINANCIAL MEASURES
The accounting and reporting policies of 1st Source conform to
generally accepted accounting principles (“GAAP”) in the United
States and prevailing practices in the banking industry. However,
certain non-GAAP performance measures are used by management to
evaluate and measure the Company’s performance. Although these
non-GAAP financial measures are frequently used by investors to
evaluate a financial institution, they have limitations as
analytical tools, and should not be considered in isolation, or as
a substitute for analyses of results as reported under GAAP. These
include taxable-equivalent net interest income (including its
individual components), net interest margin (including its
individual components), the efficiency ratio, tangible common
equity-to-tangible assets ratio and tangible book value per common
share. Management believes that these measures provide users of the
Company’s financial information a more meaningful view of the
performance of the interest-earning assets and interest-bearing
liabilities and of the Company’s operating efficiency. Other
financial holding companies may define or calculate these measures
differently.
Management reviews yields on certain asset categories and the
net interest margin of the Company and its banking subsidiaries on
a fully taxable-equivalent (“FTE”) basis. In this non-GAAP
presentation, net interest income is adjusted to reflect tax-exempt
interest income on an equivalent before-tax basis. This measure
ensures comparability of net interest income arising from both
taxable and tax-exempt sources. Net interest income on a FTE basis
is also used in the calculation of the Company’s efficiency ratio.
The efficiency ratio, which is calculated by dividing non-interest
expense by total taxable-equivalent net revenue (less securities
gains or losses and lease depreciation), measures how much it costs
to produce one dollar of revenue. Securities gains or losses and
lease depreciation are excluded from this calculation to better
match revenue from daily operations to operational expenses.
Management considers the tangible common equity-to-tangible assets
ratio and tangible book value per common share as useful
measurements of the Company’s equity.
See the table marked “Reconciliation of Non-GAAP Financial
Measures” for a reconciliation of certain non-GAAP financial
measures used by the Company with their most closely related GAAP
measures.
(charts attached)
1st SOURCE CORPORATION
4th QUARTER 2016 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, 2016 2016
2015 2016 2015 AVERAGE
BALANCES Assets $ 5,461,990 $ 5,425,530 $ 5,134,594 $ 5,360,685
$ 4,994,208 Earning assets 5,097,192 5,066,375 4,792,553 5,003,922
4,668,811 Investments 828,955 821,068 785,903 812,501 786,980 Loans
and leases 4,149,913 4,189,340 3,959,468 4,113,508 3,837,149
Deposits 4,402,225 4,353,253 4,100,913 4,302,701 3,961,060 Interest
bearing liabilities 3,729,397 3,734,322 3,532,627 3,695,309
3,459,939 Common shareholders’ equity 675,915 670,006 647,027
663,703 635,497
INCOME STATEMENT DATA Net interest
income $ 43,383 $ 42.694 $ 43,211 $ 169,659 $ 166,521 Net interest
income - FTE(1) 43,837 43,144 43,668 171,484 168,219 Provision for
loan and lease losses 742 2,067 — 5,833 2,160 Noninterest income
22,356 22,665 20,902 88,945 83,316 Noninterest expense 41,761
41,145 41,744 163,645 159,114 Net income 15,225 14,264 14,417
57,786 57,486
PER SHARE DATA Basic net income per
common share $ 0.58 $ 0.55 $ 0.55 $ 2.22 $ 2.17 Diluted net income
per common share 0.58 0.55 0.55 2.22 2.17 Common cash dividends
declared 0.180 0.180 0.180 0.720 0.671 Book value per common share
26.00 25.91 24.75 26.00 24.75 Tangible book value per common
share(1) 22.75 22.65 21.49 22.75 21.49 Market value - High 45.61
35.99 34.35 45.61 34.35 Market value - Low 33.27 31.50 29.35 27.01
26.95 Basic weighted average common shares outstanding 25,873,552
25,867,169 26,059,762 25,879,397 26,173,351 Diluted weighted
average common shares outstanding 25,873,552 25,867,169 26,059,762
25,879,397 26,173,351
KEY RATIOS Return on average
assets 1.11 % 1.05 % 1.11 % 1.08 % 1.15 % Return on average common
shareholders’ equity 8.96 8.47 8.84 8.71 9.05 Average common
shareholders’ equity to average assets 12.37 12.35 12.60 12.38
12.72 End of period tangible common equity to tangible assets(1)
10.89 10.93 10.96 10.89 10.96 Risk-based capital - Common Equity
Tier 1(2) 12.59 12.35 12.39 12.59 12.39 Risk-based capital - Tier
1(2) 13.80 13.56 13.65 13.80 13.65 Risk-based capital - Total(2)
15.12 14.87 14.97 15.12 14.97 Net interest margin 3.39 3.35 3.58
3.39 3.57 Net interest margin - FTE(1) 3.42 3.39 3.61 3.43 3.60
Efficiency ratio: expense to revenue 63.53 62.95 65.11 63.28 63.69
Efficiency ratio: expense to revenue - adjusted(1) 59.87 60.10
61.98 60.24 60.93 Net charge offs to average loans and leases 0.11
0.44 (0.05 ) 0.13 (0.02 ) Loan and lease loss reserve to loans and
leases 2.11 2.13 2.21 2.11 2.21 Nonperforming assets to loans and
leases 0.70 0.68 0.50 0.70 0.50
December 31,
September 30, June 30, March 31, December
31, 2016 2016
2016 2016 2015 END OF PERIOD
BALANCES Assets $ 5,486,268 $ 5,447,911 $ 5,379,938 $ 5,245,610
$ 5,187,916 Loans and leases 4,188,071 4,179,417 4,152,763
4,031,975 3,994,692 Deposits 4,333,760 4,377,038 4,325,084
4,225,148 4,139,186 Reserve for loan and lease losses 88,543 88,897
91,458 89,296 88,112 Goodwill and intangible assets 84,102 84,244
84,386 84,530 84,676 Common shareholders’ equity 672,650 670,259
661,756 649,973 644,053
ASSET QUALITY Loans and
leases past due 90 days or more $ 416 $ 611 $ 275 $ 728 $ 122
Nonaccrual loans and leases 19,907 19,922 12,579 12,982 12,718
Other real estate 704 551 452 330 736 Repossessions 9,373 8,089
7,619 7,201 6,927 Equipment owned under operating leases 34
43 107 113
121 Total nonperforming assets $ 30,434
$ 29,216 $ 21,032 $ 21,354
$ 20,624
(1) See “Reconciliation of Non-GAAP
Financial Measures” for more information on this performance
measure/ratio.
(2) Calculated under banking regulatory
guidelines.
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited -
Dollars in thousands)
December 31, September
30, June 30, December 31,
2016 2016 2016
2015
ASSETS
Cash and due from banks $ 58,578 $ 65,724 $ 58,944 $ 65,171 Federal
funds sold and interest bearing deposits with other banks 49,726
30,100 14,297 14,550 Investment securities available-for-sale
850,467 828,615 814,258 791,727 Other investments 22,458 22,458
21,973 21,973 Mortgages held for sale 15,849 19,986 15,924 9,825
Loans and leases, net of unearned discount: Commercial and
agricultural 812,264 786,167 759,175 744,749 Auto and light truck
411,764 400,809 457,586 425,236 Medium and heavy duty truck 294,790
271,478 273,674 278,254 Aircraft 802,414 836,977 822,842 778,012
Construction equipment 495,925 498,086 484,354 455,565 Commercial
real estate 719,170 744,972 715,932 700,268 Residential real estate
and home equity 521,931 512,597 506,369 490,468 Consumer
129,813 128,331 132,831
122,140
Total loans and leases 4,188,071 4,179,417
4,152,763 3,994,692 Reserve for loan and lease losses
(88,543 ) (88,897 ) (91,458 ) (88,112 )
Net
loans and leases 4,099,528 4,090,520 4,061,305 3,906,580
Equipment owned under operating leases, net 118,793 117,883 119,312
110,371 Net premises and equipment 56,708 54,654 54,506 53,191
Goodwill and intangible assets 84,102 84,244 84,386 84,676 Accrued
income and other assets 130,059 133,727
135,033 129,852
Total assets
$ 5,486,268 $ 5,447,911 $
5,379,938 $ 5,187,916
LIABILITIES
Deposits: Noninterest bearing $ 991,256 $ 992,776 $ 944,626 $
902,364 Interest-bearing deposits: Interest-bearing demand
1,471,526 1,417,692 1,391,823 1,350,417 Savings 814,326 799,891
779,899 745,661 Time 1,056,652 1,166,679
1,208,736 1,140,744
Total
interest-bearing deposits 3,342,504
3,384,262 3,380,458 3,236,822
Total deposits 4,333,760 4,377,038
4,325,084 4,139,186 Short-term
borrowings: Federal funds purchased and securities sold under
agreements to repurchase 162,913 167,029 161,826 130,662 Other
short-term borrowings 129,030 48,978
44,150 102,567
Total short-term
borrowings 291,943 216,007
205,976 233,229 Long-term debt and mandatorily
redeemable securities 74,308 64,760 64,738 57,379 Subordinated
notes 58,764 58,764 58,764 58,764 Accrued expenses and other
liabilities 54,843 61,083 63,620
55,305
Total liabilities
4,813,618 4,777,652 4,718,182
4,543,863
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, 2016, September 30, 2016, June
30, 2016, and December 31, 2015, respectively
436,538 436,538 436,538 436,538 Retained earnings 290,824 280,335
270,744 251,812 Cost of common stock in treasury (2,329,909,
2,338,581, 2,342,904, and 2,178,090 shares at December 31, 2016,
September 30, 2016, June 30, 2016, and December 31, 2015,
respectively) (56,056 ) (56,262 ) (56,357 ) (50,852 ) Accumulated
other comprehensive income 1,344 9,648
10,831 6,555
Total shareholders’
equity 672,650 670,259
661,756 644,053
Total liabilities and
shareholders’ equity $ 5,486,268 $
5,447,911 $ 5,379,938 $ 5,187,916
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, 2016 2016
2015 2016 2015 Interest
income: Loans and leases $ 44,407 $ 44,965 $ 44,019 $ 175,999 $
168,766 Investment securities, taxable 3,273 2,384 3,000 11,777
11,929 Investment securities, tax-exempt 679 672 731 2,740 2,992
Other 365 279 267
1,244 997
Total interest income 48,724
48,300 48,017 191,760
184,684 Interest expense: Deposits 3,827 3,879 3,218
15,267 11,489 Short-term borrowings 95 150 103 525 484 Subordinated
notes 1,055 1,055 1,055 4,220 4,220 Long-term debt and mandatorily
redeemable securities 364 522
430 2,089 1,970
Total interest
expense 5,341 5,606 4,806
22,101 18,163
Net interest
income 43,383 42,694 43,211 169,659 166,521 Provision for loan
and lease losses 742 2,067 —
5,833 2,160
Net interest income
after provision for loan and lease losses 42,641
40,627 43,211 163,826
164,361 Noninterest income: Trust and wealth advisory 4,834
4,691 4,688 19,256 19,126 Service charges on deposit accounts 2,304
2,366 2,336 9,053 9,313 Debit card 2,727 2,745 2,607 10,887 10,217
Mortgage banking 1,001 1,334 1,111 4,496 4,570 Insurance
commissions 1,367 1,350 1,318 5,513 5,465 Equipment rental 6,616
6,657 6,000 25,863 22,302 Gains on investment securities
available-for-sale 1,006 989 — 1,796 4 Other 2,501
2,533 2,842 12,081
12,319
Total noninterest income 22,356
22,665 20,902 88,945
83,316 Noninterest expense: Salaries and employee benefits 22,156
22,136 22,579 86,837 86,133 Net occupancy 2,443 2,435 2,466 9,686
9,768 Furniture and equipment 5,001 4,898 4,877 19,500 18,348
Depreciation — leased equipment 5,563 5,570 4,938 21,678 18,280
Professional fees 1,508 1,244 1,467 5,161 4,682 Supplies and
communication 1,106 1,256 1,889 5,244 6,011 FDIC and other
insurance 710 647 868 3,147 3,412 Business development and
marketing 1,668 1,263 1,330 4,936 4,837 Loan and lease collection
and repossession 464 324 182 1,600 667 Other 1,142
1,372 1,148 5,856
6,976
Total noninterest expense 41,761
41,145 41,744 163,645
159,114 Income before income taxes 23,236 22,147 22,369 89,126
88,563 Income tax expense 8,011 7,883
7,952 31,340 31,077
Net
income $ 15,225 $ 14,264 $
14,417 $ 57,786 $ 57,486 Per common
share: Basic net income per common share $ 0.58
$ 0.55 $ 0.55 $ 2.22
$ 2.17 Diluted net income per common share $ 0.58
$ 0.55 $ 0.55 $ 2.22
$ 2.17 Cash dividends $ 0.180 $
0.180 $ 0.18 $ 0.720 $
0.671 Basic weighted average common shares outstanding
25,873,552 25,867,169 26,059,762
25,879,397 26,173,351 Diluted weighted average
common shares outstanding 25,873,552
25,867,169 26,059,762 25,879,397
26,173,351
1st SOURCE CORPORATION DISTRIBUTION
OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY INTEREST
RATES AND INTEREST DIFFERENTIAL (Unaudited - Dollars in
thousands)
Three Months Ended December 31,
2016 September 30, 2016 December 31, 2015
Interest Interest Interest Average
Income/ Yield/ Average Income/
Yield/ Average Income/ Yield/
Balance Expense Rate
Balance Expense Rate
Balance Expense Rate
ASSETS
Investment securities available-for-sale: Taxable $ 696,110 $ 3,273
1.87 % $ 690,867 $ 2,384 1.37 % $ 663,569 $ 3,000 1.79 %
Tax-exempt(1) 132,845 983 2.94 % 130,201 973 2.97 % 122,334 1,074
3.48 % Mortgages held for sale 14,615 128 3.48 % 14,681 134 3.63 %
8,392 88 4.16 % Loans and leases, net of unearned discount(1)
4,149,913 44,429 4.26 % 4,189,340 44,980 4.27 % 3,959,468 44,045
4.41 % Other investments 103,709 365
1.40 % 41,286 279 2.69 %
38,790 267 2.73 % Total earning
assets(1) 5,097,192 49,178 3.84 % 5,066,375 48,750 3.83 % 4,792,553
48,474 4.01 % Cash and due from banks 62,689 60,665 62,446 Reserve
for loan and lease losses (89,618 ) (92,237 ) (89,841 ) Other
assets 391,727
390,727 369,436
Total assets $ 5,461,990
$ 5,425,530
$ 5,134,594
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Interest-bearing deposits $ 3,406,478 $ 3,827 0.45 % $ 3,393,457 $
3,879 0.45 % $ 3,193,247 $ 3,218 0.40 % Short-term borrowings
189,895
95
0.20 % 217,460 150 0.27 % 223,202 103 0.18 % Subordinated notes
58,764 1,055 7.14 % 58,764 1,055 7.14 % 58,764 1,055 7.12 %
Long-term debt and mandatorily redeemable securities 74,260
364 1.95 % 64,641
522 3.21 % 57,414 430
2.97 % Total interest-bearing liabilities 3,729,397 5,341
0.57 % 3,734,322 5,606 0.60 % 3,532,627 4,806 0.54 %
Noninterest-bearing deposits 995,747 959,796 907,666 Other
liabilities 60,931 61,406 47,274 Shareholders’ equity
675,915 670,006
647,027
Total liabilities and shareholders’ equity $
5,461,990 $ 5,425,530
$ 5,134,594
Less: Fully tax-equivalent adjustments (454 )
(450 ) (457 ) Net interest income/margin (GAAP-derived)(1)
$ 43,383 3.39 % $
42,694 3.35 % $ 43,211
3.58 % Fully tax-equivalent adjustments 454 450 457 Net
interest income/margin - FTE(1) $ 43,837
3.42 % $ 43,144
3.39 % $ 43,668 3.61 %
(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, 2016 December 31,
2015 Interest Interest Average
Income/ Yield/ Average Income/
Yield/ Balance Expense
Rate Balance Expense
Rate
ASSETS
Investment securities available-for-sale: Taxable $ 684,503 $
11,777 1.72 % $ 664,480 $ 11,929 1.80 % Tax-exempt(1) 127,998 3,981
3.11 % 122,500 4,406 3.60 % Mortgages held for sale 12,396 467 3.77
% 11,099 439 3.96 % Loans and leases, net of unearned discount(1)
4,113,508 176,116 4.28 % 3,837,149 168,611 4.39 % Other investments
65,517 1,244 1.90 %
33,583 997 2.97 % Total earning
assets(1) 5,003,922 193,585 3.87 % 4,668,811 186,382 3.99 % Cash
and due from banks 60,753 61,400 Reserve for loan and lease losses
(90,206 ) (87,208 ) Other assets 386,216
351,205
Total assets $ 5,360,685
$ 4,994,208
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Interest-bearing deposits $ 3,358,827 $ 15,267 0.45 % $ 3,106,990 $
11,489 0.37 % Short-term borrowings 210,876 525 0.25 % 236,940 484
0.20 % Subordinated notes 58,764 4,220 7.18 % 58,764 4,220 7.18 %
Long-term debt and mandatorily redeemable securities 66,842
2,089 3.13 % 57,245
1,970 3.44 % Total interest-bearing
liabilities 3,695,309 22,101 0.60 % 3,459,939 18,163 0.52 %
Noninterest-bearing deposits 943,874 854,070 Other liabilities
57,799 44,702 Shareholders’ equity 663,703
635,497
Total liabilities and shareholders’ equity $
5,360,685 $ 4,994,208
Less: Fully tax-equivalent
adjustments (1,825 ) (1,698 ) Net interest income/margin
(GAAP-derived)(1) $ 169,659 3.39
% $ 166,521 3.57 % Fully
tax-equivalent adjustments 1,825 1,698 Net interest income/margin -
FTE(1) $ 171,484 3.43 %
$ 168,219 3.60 %
(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,
2016 2016 2015
2016 2015
Calculation of
Net Interest Margin
(A) Interest income (GAAP) $ 48,724 $ 48,300 $ 48,017 $ 191,760 $
184,684 Fully tax-equivalent adjustments: (B) - Loans and leases
150 150 113 584 284 (C) - Tax-exempt investment securities
304 300 344 1,241
1,414 (D) Interest income - FTE (A+B+C) 49,178
48,750 48,474 193,585 186,382 (E) Interest expense (GAAP) 5,341
5,606 4,806 22,101 18,163 (F) Net interest income (GAAP)
(A–E) 43,383 42,694 43,211
169,659 166,521 (G) Net
interest income - FTE (D–E) 43,837 43,144
43,668 171,484 168,219
(H) Annualization factor 3.978 3.978 3.967 1.000 1.000 (I)
Total earning assets $ 5,097,192 $ 5,066,375 $ 4,792,553 $
5,003,922 $ 4,668,811 Net interest margin (GAAP-derived) (F*H)/I
3.39 % 3.35 % 3.58 % 3.39 % 3.57 % Net interest margin - FTE
(G*H)/I 3.42 % 3.39 % 3.61 % 3.43 % 3.60 %
Calculation of
Efficiency Ratio
(F) Net interest income (GAAP) $ 43,383 $ 42,694 $ 43,211 $ 169,659
$ 166,521 (G) Net interest income - FTE 43,837 43,144 43,668
171,484 168,219 (J) Plus: noninterest income (GAAP) 22,356 22,665
20,902 88,945 83,316 (K) Less: gains/losses on investment
securities and partnership investments (974 ) (1,046 ) (249 )
(3,873 ) (2,130 ) (L) Less: depreciation - leased equipment
(5,563 ) (5,570 ) (4,938 ) (21,678 )
(18,280 ) (M) Total net revenue (GAAP) (F+J)
65,739 65,359 64,113
258,604 249,837 (N) Total net revenue -
adjusted (G+J–K–L) 59,656 59,193
59,383 234,878 231,125 (O)
Noninterest expense (GAAP) 41,761 41,145 41,744 163,645 159,114 (L)
Less: depreciation - leased equipment (5,563 ) (5,570 ) (4,938 )
(21,678 ) (18,280 ) (P) Less: contribution expense limited
to gains on investment securities in (K) (484 ) —
— (484 ) — (Q)
Noninterest expense - adjusted (O–L–P) 35,714 35,575 36,806 141,483
140,834 Efficiency ratio (GAAP-derived) (O/M) 63.53 % 62.95 % 65.11
% 63.28 % 63.69 % Efficiency ratio - adjusted (Q/N) 59.87 % 60.10 %
61.98 % 60.24 % 60.93 %
End of Period December
31, September 30, December 31,
2016 2016 2015
Calculation of
Tangible Common Equity-to-Tangible Assets Ratio
(R) Total common shareholders’ equity (GAAP) $ 672,650 $ 670,259 $
644,053 (S) Less: goodwill and intangible assets
(84,102 ) (84,244 ) (84,676 ) (T) Total
tangible common shareholders’ equity (R–S) $ 588,548
$ 586,015 $ 559,377 (U) Total assets
(GAAP) 5,486,268 5,447,911 5,187,916 (S) Less: goodwill and
intangible assets (84,102 ) (84,244 ) (84,676
) (V) Total tangible assets (U–S) $ 5,402,166
$ 5,363,667 $ 5,103,240 Common
equity-to-assets ratio (GAAP-derived) (R/U) 12.26 % 12.30 % 12.41 %
Tangible common equity-to-tangible assets ratio (T/V) 10.89 % 10.93
% 10.96 %
Calculation of
Tangible Book Value per Common Share
(R) Total common shareholders’ equity (GAAP) $ 672,650 $ 670,259 $
644,053 (W) Actual common shares outstanding
25,875,765 25,867,093 26,027,584
Book value per common share (GAAP-derived) (R/W)*1000 $ 26.00 $
25.91 $ 24.75 Tangible common book value per share (T/W)*1000 $
22.75 $ 22.65 $ 21.49
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