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

Rhea-AI Summary

1st Source Corporation reports record quarterly net income of $32.94 million for Q3 2023

Positive

• Record quarterly net income of $32.94 million, up 0.62% from the same quarter last year
• Cash dividend of $0.34 per common share approved, up 6.25% from last year
• Average loans and leases grew $104.73 million in Q3 2023, up 1.71% from the previous quarter
• Gain on sale of renewable energy tax equity investments of $2.32 million recognized
• Included in Newsweek's 'America's Greatest Workplaces for Parents and Families 2023' ranking

Negative

• Net interest margin decreased by 2 basis points compared to the previous quarter
• Noninterest expense increased by $1.00 million, or 2.04%, from the prior quarter
• Net charge-offs of $0.33 million were recorded for Q3 2023

QUARTERLY HIGHLIGHTS

• Net income was a record $32.94 million for the quarter, up $0.20 million or 0.62% from the third quarter of 2022. Diluted net income per common share was $1.32, equal to the prior year's third quarter.
• Cash dividend of $0.34 per common share was approved, up 6.25% from the cash dividend declared a year ago.
• Average loans and leases grew $104.73 million in the third quarter, up 1.71% (6.84% annualized growth) from the previous quarter and $618.17 million, up 10.98% from the third quarter of 2022.
• Repurchased 260,887 shares for treasury at a total cost of $10.29 million in the quarter.
• During the quarter, a gain on sale of renewable energy tax equity investments of $2.32 million was recognized.

South Bend, Indiana--(Newsfile Corp. - October 19, 2023) - 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported record quarterly net income of $32.94 million for the third quarter of 2023, up 0.62% from the $32.74 million reported in the third quarter a year ago, bringing the 2023 year-to-date net income to $96.50 million compared to $89.44 million in 2022. Diluted net income per common share for the third quarter of 2023 was $1.32, equal to the third quarter of 2022. Diluted net income per common share for the first nine months of 2023 was $3.87 compared to $3.59 during the first nine months of 2022.

At its October 2023 meeting, the Board of Directors approved a cash dividend of $0.34 per common share, up 6.25% from the cash dividend declared a year ago. The cash dividend is payable to shareholders of record on November 6, 2023, and will be paid on November 15, 2023.

Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, "We are pleased that we achieved record quarterly net income during the third quarter. Average loans grew $104.73 million, up 1.71% while average deposits increased marginally from the previous quarter. Credit quality improved and remained strong and our trend of low nonperforming asset levels continued. Our liquidity and capital positions also remained strong during the quarter. While our tax-equivalent net interest margin continued to endure competitive deposit rate pressures, we limited overall margin compression to two basis points compared to the prior quarter."

"We were incredibly pleased to learn that 1st Source was included in the Newsweek 'America's Greatest Workplaces for Parents and Families 2023' ranking. According to Newsweek, over 224,000 completed company reviews by employees who work for companies employing at least 1,000 employees in the U.S. determined the results of the list. 1st Source is one of only 10 companies headquartered in Indiana to make the list and received a four-star rating (out of five stars). Newsweek conducted the survey in partnership with Plant-A Insights Group and shared that the '800 family-friendly companies' included in the list 'are lauded by their employees for being great places to work.' This honor speaks directly to our family values and client centric mission. We deliver a balance between work and family that is fulfilling for our colleagues. We're humbled by the response of our team members to name us to such lists, and we thank them for honoring us and our clients with the great work and passion they bring to this Company."

"Another exciting event in the third quarter was the launch of the Federal Reserve's new instant payment rail, the FedNow Service. 1st Source Bank was among the first depository institutions able to send and receive instant payments from other participating institutions. This was an important milestone for the banking industry, and it was very important that 1st Source be positioned as a leader in adopting this new instant payment method for the benefit of our business and personal clients. To participate in the FedNow Service, 1st Source completed a multi-step customer testing and certification program in the months leading up to launch. Early adopters of the service include a diverse range of financial institutions and service providers across the U.S., and we're very proud to be among its earliest users and advocates," Mr. Murphy concludes.

THIRD QUARTER 2023 FINANCIAL RESULTS

Loans

Third quarter average loans and leases increased $104.73 million to $6.25 billion, up 1.71% from the previous quarter and increased $618.17 million, up 10.98% from the third quarter a year ago. Year-to-date average loans and leases increased $667.45 million to $6.14 billion, up 12.19% from the first nine months of 2022. Growth during the quarter occurred primarily within the Commercial Real Estate, Construction Equipment, and Auto and Light Truck portfolios.

The Company has traditionally maintained a conservative approach to commercial real estate loans and non-owner occupied properties. At September 30, 2023, approximately 5% of the Company's total loans and leases are collateralized by non-owner occupied commercial real estate. The Company finances a minimal amount of commercial real estate secured by non-owner occupied office property where third-party tenant rents are the primary source of repayment. All non-owner occupied commercial real estate office projects are performing as agreed.

Deposits

Average deposits of $6.95 billion, grew $11.02 million, up 0.16% from the previous quarter and grew $276.87 million or 4.15% compared to the quarter ended September 30, 2022. Average deposits for the first nine months of 2023 were $6.92 billion, an increase of $224.19 million, up 3.35% from the same period a year ago. Average balances were relatively flat as the overall deposit mix changed due to expected seasonal public fund outflows and rate competition driving consumers to higher yielding time and money market deposit accounts.

End of period deposits were $6.97 billion at September 30, 2023, compared to $6.98 billion at June 30, 2023. Balances were steady, however the deposit mix changed as higher brokered, time, and money market deposit balances were offset by decreased noninterest-bearing and public fund deposit balances. Rate competition for deposits persisted during the quarter.

Net Interest Income and Net Interest Margin

Third quarter 2023 tax-equivalent net interest income increased $0.71 million to $69.41 million, up 1.04% from the previous quarter and was flat from the third quarter a year ago. For the first nine months of 2023, tax-equivalent net interest income increased $15.47 million to $207.89 million, up 8.04% from the same period in 2022.

Third quarter 2023 net interest margin was 3.45%, a decline of two basis points from the 3.47% in the previous quarter and a decrease of 14 basis points from the same period in 2022. On a fully tax-equivalent basis, third quarter 2023 net interest margin was 3.46%, down by two basis points compared to the 3.48% in the previous quarter and a decline of 14 basis points from the same period in 2022. The decrease from the prior quarter and prior year was primarily due to higher rates on interest-bearing deposits mainly from competitive market pressures and increased short-term borrowing rates.

Net interest margin for the first nine months of 2023 was 3.50%, an increase of 14 basis points compared to the first nine months of 2022. Similarly, net interest margin on a fully-tax-equivalent basis for the first nine months of 2023 was 3.51%, an increase of 14 basis points compared to the same period during the prior year. Higher market rates due to continuing Federal Reserve rate increases and loan repricing contributed to net interest margin expansion compared to the first nine months of 2022.

Noninterest Income

Third quarter 2023 noninterest income of $24.46 million increased $1.69 million, up 7.40% from the previous quarter and increased $2.45 million, up 11.12% compared to the third quarter a year ago. For the first nine months of 2023, noninterest income was $70.55 million, an increase of $2.57 million, up 3.77% from the same period a year ago.

The increase in noninterest income compared to the previous quarter and third quarter of 2022 was due to gains on the sale of renewable energy tax equity investments of $2.32 million, a rise in interest rate swap fees, and higher bank owned life insurance policy claims recognized. These were offset by lower debit card income from reduced transaction volumes, reduced equipment rental income as demand for leases declined and seasonal tax preparation fee income recognized in the second quarter of 2023 from our Trust and Wealth Advisory Services Group.

The increase in noninterest income compared to the first nine months of 2022 was due to gains on the sale of renewable energy equity investments of $3.43 million, a rise in interest rate swap fees, and higher bank owned life insurance policy claims, offset by reduced mortgage banking origination volumes resulting in lower income from loans sold in the secondary market and lower equipment rental income.

Noninterest Expense

Third quarter 2023 noninterest expense of $50.17 million increased $1.00 million, or 2.04% from the prior quarter and increased $4.84 million, or 10.67% from the third quarter a year ago. For the first nine months of 2023, noninterest expense was $148.75 million, an increase of $12.43 million, or 9.12% from the same period a year ago.

The increase in noninterest expense from the previous quarter was primarily due to increased group insurance claims and check fraud losses offset by lower marketing promotions.

The increase in noninterest expense compared to the third quarter and first nine months of 2022 was mainly the result of higher salaries and wages from normal merit increases, the impact of wage inflation and an increase in the number of employees filling prior open positions. A rise in group insurance claims, increased data processing and technology project costs, higher FDIC insurance premiums, and higher loan loss provision for unfunded loan commitments added to the increase. These were offset by a $1.08 million reversal of accrued legal fees during the first quarter of 2023 and lower leased equipment depreciation.

Credit

The allowance for loan and lease losses as of September 30, 2023, was 2.27% of total loans and leases compared to 2.31% at June 30, 2023, and 2.36% at September 30, 2022. Net charge-offs of $0.33 million were recorded for the third quarter of 2023 compared with $0.98 million of net recoveries in the prior quarter and net charge-offs of $0.30 million in the same quarter a year ago.

The provision for credit losses was $0.86 million for the third quarter of 2023, an increase of $0.81 million from the previous quarter and a decrease of $2.31 million compared with the same period in 2022. Net charge-offs during the quarter compared to net recoveries in the previous quarter was the primary reason for the increase in the provision for credit losses. The ratio of nonperforming assets to loans and leases was 0.27% as of September 30, 2023, compared to 0.33% on June 30, 2023, and 0.48% on September 30, 2022.

Capital

As of September 30, 2023, the common equity-to-assets ratio was 10.84%, compared to 10.95% at June 30, 2023, and 10.20% a year ago. The tangible common equity-to-tangible assets ratio was 9.96% at September 30, 2023, compared to 10.05% at June 30, 2023, and 9.26% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines was 13.31% at September 30, 2023 compared to 13.59% at June 30, 2023 and 13.50% a year ago. During the third quarter of 2023, 260,887 shares were repurchased for treasury reducing common shareholders' equity by $10.29 million.

The Company has a long history of maintaining conservative capital levels and the risk-based capital ratios remained strong during the third quarter, even when adjusting for unrealized losses on the available-for-sale securities portfolio.

Liquidity

The Company maintains prudent strategies to support a strong liquidity position. Sources of liquidity include unencumbered available-for-sale securities, Federal Home Loan Bank (FHLB) advances, the Federal Reserve Bank (FRB) discount window and Bank Term Funding Program, Federal Funds lines from correspondent banks and brokered and listing services deposits. Total net available liquidity was $3.04 billion at September 30, 2023, which accounted for approximately 48% of total deposits net of brokered and listing services certificates of deposit.

The investment portfolio is managed with a prioritized focus on liquidity. Investment securities accounted for 18.83% of total assets at September 30, 2023, with the entirety of the portfolio classified as available-for-sale. The Company had no held-to-maturity securities therefore all market value adjustments resulting in unrealized gains and losses were reflected on the Consolidated Statements of Financial Condition. The modified duration of the total investment portfolio was calculated at 3.1 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 its clients, individuals, businesses and the communities it serves. For more information, visit www.1stsource.com.

1st Source serves the northern half of Indiana and southwest Michigan and is the largest locally controlled financial institution headquartered in the area. While delivering a comprehensive range of consumer and commercial banking services through its community bank offices, 1st Source has distinguished itself with highly personalized services. 1st Source Bank also competes for business nationally by offering specialized financing services for new and used private and cargo aircraft, automobiles for leasing and rental agencies, medium and heavy-duty trucks, and construction equipment. The Corporation includes 79 banking centers, 18 1st Source Bank Specialty Finance Group locations nationwide, nine Wealth Advisory Services locations and 10 1st Source Insurance offices.

FORWARD-LOOKING STATEMENTS

Except for historical information contained herein, the matters discussed in this document express "forward-looking statements." Generally, the words "believe," "contemplate," "seek," "plan," "possible," "assume," "hope," "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.

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(charts attached)

Category: Earnings

1st SOURCE CORPORATION
3rd QUARTER 2023 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)

		Three Months Ended									Nine Months Ended
		September 30,			June 30,			September 30,			September 30,			September 30,
		2023			2023			2022			2023			2022
AVERAGE BALANCES
Assets	$	8,417,391		$	8,362,308		$	8,019,104		$	8,368,054		$	8,040,090
Earning assets		7,963,537			7,921,528			7,615,593			7,917,763			7,645,464
Investments		1,645,906			1,697,699			1,863,979			1,703,626			1,862,252
Loans and leases		6,245,883			6,141,157			5,627,718			6,141,849			5,474,401
Deposits		6,950,105			6,939,082			6,673,239			6,919,695			6,695,507
Interest bearing liabilities		5,566,874			5,496,112			4,958,209			5,470,305			4,973,767
Common shareholders' equity		940,544			926,157			873,209			919,182			881,574
Total equity		999,552			985,406			931,412			978,461			936,974
INCOME STATEMENT DATA
Net interest income	$	69,236		$	68,516		$	68,934		$	207,317		$	192,014
Net interest income - FTE(1)		69,406			68,695			69,116			207,892			192,427
Provision for credit losses		859			47			3,167			3,955			7,903
Noninterest income		24,455			22,769			22,007			70,547			67,982
Noninterest expense		50,166			49,165			45,331			148,752			136,322
Net income		32,939			32,447			32,745			96,517			89,476
Net income available to common shareholders		32,939			32,435			32,737			96,498			89,441
PER SHARE DATA
Basic net income per common share	$	1.32		$	1.30		$	1.32		$	3.87		$	3.59
Diluted net income per common share		1.32			1.30			1.32			3.87			3.59
Common cash dividends declared		0.32			0.32			0.32			0.96			0.94
Book value per common share(2)		37.83			37.31			33.50			37.83			33.50
Tangible book value per common share(1)		34.40			33.92			30.10			34.40			30.10
Market value - High		49.36			47.94			51.29			53.85			52.70
Market value - Low		40.96			38.77			42.38			38.77			42.29
Basic weighted average common shares outstanding		24,660,508			24,686,435			24,656,736			24,677,914			24,697,106
Diluted weighted average common shares outstanding		24,660,508			24,686,435			24,656,736			24,677,914			24,697,106
KEY RATIOS
Return on average assets		1.55 %			1.56 %			1.62 %			1.54 %			1.49 %
Return on average common shareholders' equity		13.89			14.05			14.87			14.04			13.56
Average common shareholders' equity to average assets		11.17			11.08			10.89			10.98			10.96
End of period tangible common equity to tangible assets(1)		9.96			10.05			9.26			9.96			9.26
Risk-based capital - Common Equity Tier 1(3)		13.31			13.59			13.50			13.31			13.50
Risk-based capital - Tier 1(3)		14.86			15.20			15.24			14.86			15.24
Risk-based capital - Total(3)		16.12			16.46			16.50			16.12			16.50
Net interest margin		3.45			3.47			3.59			3.50			3.36
Net interest margin - FTE(1)		3.46			3.48			3.60			3.51			3.37
Efficiency ratio: expense to revenue		53.54			53.86			49.85			53.53			52.43
Efficiency ratio: expense to revenue - adjusted(1)		54.24			53.23			48.71			53.46			51.16
Net charge-offs (recoveries) to average loans and leases		0.02			(0.06)			0.02			(0.02)			(0.01)
Loan and lease loss allowance to loans and leases		2.27			2.31			2.36			2.27			2.36
Nonperforming assets to loans and leases		0.27			0.33			0.48			0.27			0.48
		September 30,			June 30,			March 31,			December 31,			September 30,
		2023			2023			2023			2022			2022
END OF PERIOD BALANCES
Assets	$	8,525,058		$	8,414,818		$	8,329,803		$	8,339,416		$	8,097,486
Loans and leases		6,353,648			6,215,343			6,116,716			6,011,162			5,762,078
Deposits		6,967,492			6,976,518			6,801,464			6,928,265			6,621,231
Allowance for loan and lease losses		144,074			143,542			142,511			139,268			135,736
Goodwill and intangible assets		83,921			83,897			83,901			83,907			83,911
Common shareholders' equity		924,250			921,020			909,159			864,068			826,059
Total equity		982,997			980,087			968,444			923,766			886,360
ASSET QUALITY
Loans and leases past due 90 days or more	$	154		$	56		$	24		$	54		$	165
Nonaccrual loans and leases		16,617			20,481			18,062			26,420			27,813
Other real estate		117			193			117			104			-
Repossessions		233			47			445			327			26
Equipment owned under operating leases		-			-			-			22			1
Total nonperforming assets	$	17,121		$	20,777		$	18,648		$	26,927		$	28,005

(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)

		September 30,			June 30,			December 31,			September 30,
		2023			2023			2022			2022
ASSETS
Cash and due from banks	$	75,729		$	86,742		$	84,703		$	86,952
Federal funds sold and interest bearing deposits with other banks		35,406			25,933			38,094			30,652
Investment securities available-for-sale		1,605,242			1,661,405			1,775,128			1,801,194
Other investments		25,075			25,320			25,293			25,538
Mortgages held for sale		3,118			2,321			3,914			3,058
Loans and leases, net of unearned discount:
Commercial and agricultural		763,051			797,188			812,031			835,762
Solar		364,949			376,905			381,163			358,635
Auto and light truck		901,484			901,054			808,117			743,324
Medium and heavy duty truck		323,202			319,634			313,862			293,068
Aircraft		1,079,581			1,060,340			1,077,722			997,995
Construction equipment		1,062,097			1,012,969			938,503			878,692
Commercial real estate		1,088,199			985,323			943,745			937,423
Residential real estate and home equity		627,515			617,495			584,737			568,602
Consumer		143,570			144,435			151,282			148,577
Total loans and leases		6,353,648			6,215,343			6,011,162			5,762,078
Allowance for loan and lease losses		(144,074)			(143,542)			(139,268)			(135,736)
Net loans and leases		6,209,574			6,071,801			5,871,894			5,626,342
Equipment owned under operating leases, net		24,096			26,582			31,700			32,964
Net premises and equipment		43,951			44,089			44,773			44,837
Goodwill and intangible assets		83,921			83,897			83,907			83,911
Accrued income and other assets		418,946			386,728			380,010			362,038
Total assets	$	8,525,058		$	8,414,818		$	8,339,416		$	8,097,486
LIABILITIES
Deposits:
Noninterest-bearing demand	$	1,680,725		$	1,721,947		$	1,998,151		$	2,047,328
Interest-bearing deposits:
Interest-bearing demand		2,416,864			2,528,231			2,591,464			2,527,461
Savings		1,180,837			1,163,166			1,198,191			1,267,531
Time		1,689,066			1,563,174			1,140,459			778,911
Total interest-bearing deposits		5,286,767			5,254,571			4,930,114			4,573,903
Total deposits		6,967,492			6,976,518			6,928,265			6,621,231
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase		48,335			69,308			141,432			145,192
Other short-term borrowings		223,757			118,377			74,097			195,270
Total short-term borrowings		272,092			187,685			215,529			340,462
Long-term debt and mandatorily redeemable securities		46,533			46,649			46,555			47,587
Subordinated notes		58,764			58,764			58,764			58,764
Accrued expenses and other liabilities		197,180			165,115			166,537			143,082
Total liabilities		7,542,061			7,434,731			7,415,650			7,211,126
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 September 30, 2023, June 30, 2023, December 31, 2022, and September 30, 2022, respectively		436,538			436,538			436,538			436,538
Retained earnings		769,603			744,442			694,862			671,541
Cost of common stock in treasury (3,776,591, 3,523,113, 3,543,388, and 3,548,496 shares at September 30, 2023, June 30, 2023, December 31, 2022, and September 30, 2022, respectively)		(130,579)			(120,410)			(119,642)			(119,743)
Accumulated other comprehensive loss		(151,312)			(139,550)			(147,690)			(162,277)
Total shareholders' equity		924,250			921,020			864,068			826,059
Noncontrolling interests		58,747			59,067			59,698			60,301
Total equity		982,997			980,087			923,766			886,360
Total liabilities and equity	$	8,525,058		$	8,414,818		$	8,339,416		$	8,097,486

 

1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands, except per share amounts)

		Three Months Ended									Nine Months Ended
		September 30,			June 30,			September 30,			September 30,			September 30,
		2023			2023			2022			2023			2022
Interest income:
Loans and leases	$	100,206		$	93,300		$	69,027		$	280,195		$	184,650
Investment securities, taxable		5,918			5,946			6,691			18,512			19,324
Investment securities, tax-exempt		319			330			339			1,131			630
Other		883			978			421			2,498			1,952
Total interest income		107,326			100,554			76,478			302,336			206,556
Interest expense:
Deposits		34,405			28,870			6,556			84,538			12,485
Short-term borrowings		2,136			1,625			380			5,154			427
Subordinated notes		1,060			1,028			904			3,108			2,578
Long-term debt and mandatorily redeemable securities		489			515			(296)			2,219			(948)
Total interest expense		38,090			32,038			7,544			95,019			14,542
Net interest income		69,236			68,516			68,934			207,317			192,014
Provision for credit losses		859			47			3,167			3,955			7,903
Net interest income after provision for credit losses		68,377			68,469			65,767			203,362			184,111
Noninterest income:
Trust and wealth advisory		5,648			6,467			5,498			17,794			17,499
Service charges on deposit accounts		3,297			3,118			3,240			9,418			8,974
Debit card		4,377			4,701			4,628			13,585			13,383
Mortgage banking		971			926			864			2,699			3,303
Insurance commissions		1,714			1,641			1,695			5,384			5,168
Equipment rental		2,101			2,326			2,761			6,930			9,718
Losses on investment securities available-for-sale		-			-			-			(44)			-
Other		6,347			3,590			3,321			14,781			9,937
Total noninterest income		24,455			22,769			22,007			70,547			67,982
Noninterest expense:
Salaries and employee benefits		28,866			28,236			26,386			85,699			77,415
Net occupancy		2,867			2,676			2,582			8,165			7,917
Furniture and equipment		1,217			1,414			1,372			3,938			4,051
Data processing		6,289			6,268			5,802			18,714			16,412
Depreciation - leased equipment		1,672			1,876			2,233			5,570			7,912
Professional fees		1,763			1,704			1,539			4,149			5,241
FDIC and other insurance		1,598			1,344			939			4,302			2,682
Business development and marketing		1,201			1,649			1,415			4,822			4,352
Other		4,693			3,998			3,063			13,393			10,340
Total noninterest expense		50,166			49,165			45,331			148,752			136,322
Income before income taxes		42,666			42,073			42,443			125,157			115,771
Income tax expense		9,727			9,626			9,698			28,640			26,295
Net income		32,939			32,447			32,745			96,517			89,476
Net (income) loss attributable to noncontrolling interests		-			(12)			(8)			(19)			(35)
Net income available to common shareholders	$	32,939		$	32,435		$	32,737		$	96,498		$	89,441
Per common share:
Basic net income per common share	$	1.32		$	1.30		$	1.32		$	3.87		$	3.59
Diluted net income per common share	$	1.32		$	1.30		$	1.32		$	3.87		$	3.59
Cash dividends	$	0.32		$	0.32		$	0.32		$	0.96		$	0.94
Basic weighted average common shares outstanding		24,660,508			24,686,435			24,656,736			24,677,914			24,697,106
Diluted weighted average common shares outstanding		24,660,508			24,686,435			24,656,736			24,677,914			24,697,106

1st SOURCE CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited - Dollars in thousands)

										Three Months Ended
		September 30, 2023								June 30, 2023								September 30, 2022
		Average Balance			Interest Income/ Expense		Yield/ Rate			Average Balance			Interest Income/ Expense		Yield/ Rate			Average Balance			Interest Income/ Expense		Yield/ Rate
ASSETS
Investment securities available-for-sale:
Taxable	$	1,605,912		$	5,918		1.46 %		$	1,655,790		$	5,946		1.44 %		$	1,816,138		$	6,691		1.46 %
Tax exempt(1)		39,994			397		3.94 %			41,909			411		3.93 %			47,841			426		3.53 %
Mortgages held for sale		3,169			54		6.76 %			1,879			28		5.98 %			4,272			58		5.39 %
Loans and leases, net of unearned discount(1)		6,245,883			100,244		6.37 %			6,141,157			93,370		6.10 %			5,627,718			69,064		4.87 %
Other investments		68,579			883		5.11 %			80,793			978		4.86 %			119,624			421		1.40 %
Total earning assets(1)		7,963,537			107,496		5.36 %			7,921,528			100,733		5.10 %			7,615,593			76,660		3.99 %
Cash and due from banks		68,640								72,880								74,329
Allowance for loan and lease losses		(145,197)								(144,337)								(133,989)
Other assets		530,411								512,237								463,171
Total assets	$	8,417,391							$	8,362,308							$	8,019,104
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits	$	5,247,332		$	34,405		2.60 %		$	5,192,206		$	28,870		2.23 %		$	4,634,092		$	6,556		0.56 %
Short-term borrowings:
Securities sold under agreements to repurchase		60,736			35		0.23 %			69,301			32		0.19 %			159,345			21		0.05 %
Other short-term borrowings		153,523			2,101		5.43 %			129,230			1,593		4.94 %			57,609			359		2.47 %
Subordinated notes		58,764			1,060		7.16 %			58,764			1,028		7.02 %			58,764			904		6.10 %
Long-term debt and mandatorily redeemable securities		46,519			489		4.17 %			46,611			515		4.43 %			48,399			(296)		(2.43) %
Total interest-bearing liabilities		5,566,874			38,090		2.71 %			5,496,112			32,038		2.34 %			4,958,209			7,544		0.60 %
Noninterest-bearing deposits		1,702,773								1,746,876								2,039,147
Other liabilities		148,192								133,914								90,336
Shareholders' equity		940,544								926,157								873,209
Noncontrolling interests		59,008								59,249								58,203
Total liabilities and equity	$	8,417,391							$	8,362,308							$	8,019,104
Less: Fully tax-equivalent adjustments					(170)								(179)								(182)
Net interest income/margin (GAAP-derived)(1)				$	69,236		3.45 %					$	68,516		3.47 %					$	68,934		3.59 %
Fully tax-equivalent adjustments					170								179								182
Net interest income/margin - FTE(1)				$	69,406		3.46 %					$	68,695		3.48 %					$	69,116		3.60 %
(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)

		Nine Months Ended
		September 30, 2023									September 30, 2022
		Average Balance			Interest Income/Expense			Yield/ Rate			Average Balance			Interest Income/Expense			Yield/ Rate
ASSETS
Investment securities available-for-sale:
Taxable	$	1,657,241		$	18,512			1.49 %		$	1,826,095		$	19,324			1.41 %
Tax exempt(1)		46,385			1,413			4.07 %			36,157			786			2.91 %
Mortgages held for sale		2,489			114			6.12 %			5,967			177			3.97 %
Loans and leases, net of unearned discount(1)		6,141,849			280,374			6.10 %			5,474,401			184,730			4.51 %
Other investments		69,799			2,498			4.78 %			302,844			1,952			0.86 %
Total earning assets(1)		7,917,763			302,911			5.11 %			7,645,464			206,969			3.62 %
Cash and due from banks		70,288									75,497
Allowance for loan and lease losses		(143,545)									(131,572)
Other assets		523,548									450,701
Total assets	$	8,368,054								$	8,040,090
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits		5,143,493			84,538			2.20 %			4,658,394			12,485			0.36 %
Short-term borrowings:
Securities sold under agreements to repurchase		87,909			107			0.16 %			176,029			67			0.05 %
Other short-term borrowings		133,965			5,047			5.04 %			22,983			360			2.09 %
Subordinated notes		58,764			3,108			7.07 %			58,764			2,578			5.87 %
Long-term debt and mandatorily redeemable securities		46,174			2,219			6.43 %			57,597			(948	)		(2.20) %
Total interest-bearing liabilities		5,470,305			95,019			2.32 %			4,973,767			14,542			0.39 %
Noninterest-bearing deposits		1,776,202									2,037,113
Other liabilities		143,086									92,236
Shareholders' equity		919,182									881,574
Noncontrolling interests		59,279									55,400
Total liabilities and equity	$	8,368,054								$	8,040,090
Less: Fully tax-equivalent adjustments					(575	)								(413	)
Net interest income/margin (GAAP-derived)(1)				$	207,317			3.50 %					$	192,014			3.36 %
Fully tax-equivalent adjustments					575									413
Net interest income/margin - FTE(1)				$	207,892			3.51 %					$	192,427			3.37 %
(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									Nine Months Ended
			September 30,			June 30,			September 30,			September 30,			September 30,
			2023			2023			2022			2023			2022
Calculation of Net Interest Margin
(A)	Interest income (GAAP)	$	107,326		$	100,554		$	76,478		$	302,336		$	206,556
	Fully tax-equivalent adjustments:
(B)	- Loans and leases		92			98			95			293			257
(C)	- Tax exempt investment securities		78			81			87			282			156
(D)	Interest income - FTE (A+B+C)		107,496			100,733			76,660			302,911			206,969
(E)	Interest expense (GAAP)		38,090			32,038			7,544			95,019			14,542
(F)	Net interest income (GAAP) (A-E)		69,236			68,516			68,934			207,317			192,014
(G)	Net interest income - FTE (D-E)		69,406			68,695			69,116			207,892			192,427
(H)	Annualization factor		3.967			4.011			3.967			1.337			1.337
(I)	Total earning assets	$	7,963,537		$	7,921,528		$	7,615,593		$	7,917,763		$	7,645,464
	Net interest margin (GAAP-derived) (F*H)/I		3.45%			3.47 %			3.59 %			3.50 %			3.36 %
	Net interest margin - FTE (G*H)/I		3.46 %			3.48 %			3.60 %			3.51 %			3.37 %
Calculation of Efficiency Ratio
(F)	Net interest income (GAAP)	$	69,236		$	68,516		$	68,934		$	207,317		$	192,014
(G)	Net interest income - FTE		69,406			68,695			69,116			207,892			192,427
(J)	Plus: noninterest income (GAAP)		24,455			22,769			22,007			70,547			67,982
(K)	Less: gains/losses on investment securities and partnership investments		(2,779)			(748)			(418)			(5,049)			(1,498)
(L)	Less: depreciation - leased equipment		(1,672)			(1,876)			(2,233)			(5,570)			(7,912)
(M)	Total net revenue (GAAP) (F+J)		93,691			91,285			90,941			277,864			259,996
(N)	Total net revenue - adjusted (G+J-K-L)		89,410			88,840			88,472			267,820			250,999
(O)	Noninterest expense (GAAP)		50,166			49,165			45,331			148,752			136,322
(L)	Less:depreciation - leased equipment		(1,672)			(1,876)			(2,233)			(5,570)			(7,912)
(P)	Noninterest expense - adjusted (O-L)		48,494			47,289			43,098			143,182			128,410
	Efficiency ratio (GAAP-derived) (O/M)		53.54 %			53.86 %			49.85 %			53.53 %			52.43 %
	Efficiency ratio - adjusted (P/N)		54.24 %			53.23 %			48.71 %			53.46 %			51.16 %
			End of Period
			September 30,			June 30,			September 30,
			2023			2023			2022
Calculation of Tangible Common Equity-to-Tangible Assets Ratio
(Q)	Total common shareholders' equity (GAAP)	$	924,250		$	921,020		$	826,059
(R)	Less: goodwill and intangible assets		(83,921)			(83,897)			(83,911)
(S)	Total tangible common shareholders' equity (Q-R)	$	840,329		$	837,123		$	742,148
(T)	Total assets (GAAP)		8,525,058			8,414,818			8,097,486
(R)	Less: goodwill and intangible assets		(83,921)			(83,897)			(83,911)
(U)	Total tangible assets (T-R)	$	8,441,137		$	8,330,921		$	8,013,575
	Common equity-to-assets ratio (GAAP-derived) (Q/T)		10.84 %			10.95 %			10.20 %
	Tangible common equity-to-tangible assets ratio (S/U)		9.96 %			10.05 %			9.26 %
Calculation of Tangible Book Value per Common Share
(Q)	Total common shareholders' equity (GAAP)	$	924,250		$	921,020		$	826,059
(V)	Actual common shares outstanding		24,429,083			24,682,561			24,657,178
	Book value per common share (GAAP-derived) (Q/V)*1000	$	37.83		$	37.31		$	33.50
	Tangible common book value per share (S/V)*1000	$	34.40		$	33.92		$	30.10

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

Brett Bauer
574-235-2000

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/184412

FAQ

What was 1st Source Corporation's net income for Q3 2023?

$32.94 million

What was the cash dividend per common share approved by the Board of Directors?

$0.34

How much did average loans and leases grow in Q3 2023?

$104.73 million

What was the gain on sale of renewable energy tax equity investments recognized?

$2.32 million

What ranking did 1st Source Corporation receive in Newsweek's 'America's Greatest Workplaces for Parents and Families 2023'?

Included in the ranking

What was the decrease in net interest margin compared to the previous quarter?

2 basis points

How much did noninterest expense increase from the prior quarter?

$1.00 million, or 2.04%

What were the net charge-offs recorded for Q3 2023?

$0.33 million