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| 8-K - 8-K 4TH QUARTER EARNINGS RELEASE - 1ST SOURCE CORP | srce-20161231pr8k.htm |
Exhibit 99.1
For: | Immediate Release | Contact: | Andrea Short |
January 19, 2017 | 574-235-2000 | ||
1st Source Corporation Reports Earnings,
History of Increased Dividends Continues
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). |
South Bend, IN — 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 | ||||||||||||||||||||||||||||||
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 | $ | 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 | ||||||||||||||||||||
Average Balance | Interest Income/Expense | Yield/ Rate | Average Balance | Interest Income/Expense | Yield/ 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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