1st Source Corporation Reports Strong Second Quarter Results, Cash Dividend Declared

Rhea-AI Summary

1st Source Corporation (NASDAQ: SRCE) reported a net income of $32.44 million for Q2 2023, up 10.65% from the previous year. The company also approved a cash dividend of $0.32 per common share. Average loans and leases grew by $104.95 million, and average deposits increased by $70.08 million. Tax-equivalent net interest income was $68.70 million, down 1.57% from Q1 2023, while net interest margin was 3.48%, down 12 basis points from the previous quarter.

Positive

• Net income increased by 10.65% from the previous year, demonstrating strong financial performance.
• The company's inclusion in the Forbes 'Best In State Banks' list and the KBW Bank Honor Roll reflects positive industry recognition and reputation.
• Strategic initiatives to grow the commercial banking footprint and leadership team changes indicate a focus on long-term growth and client satisfaction.

Negative

• The decrease in tax-equivalent net interest income by 1.57% from Q1 2023 could indicate potential challenges in maintaining interest income.
• The increase in noninterest expense by 7.69% from the second quarter a year ago may raise concerns about cost management and efficiency.

QUARTERLY HIGHLIGHTS

• Net income was $32.44 million for the quarter, up $3.12 million or 10.65% from the second quarter of 2022. Diluted net income per common share was $1.30, up $0.12 or 10.17% from the prior year's second quarter of $1.18.

• Cash dividend of $0.32 per common share was approved, equal to the cash dividend declared a year ago.

• Average loans and leases grew $104.95 million in the second quarter, up 1.74% (6.96% annualized growth) from the previous quarter and $673.35 million, up 12.31% from the second quarter of 2022.

• Average deposits grew $70.08 million in the second quarter, up 1.02% from the previous quarter and $143.29 million, up 2.11% from the second quarter of 2022.

• Tax-equivalent net interest income was $68.70 million, down $1.10 million or 1.57% from first quarter 2023 and up $5.11 million, or 8.04% from the second quarter a year ago. Tax-equivalent net interest margin was 3.48%, down 12 basis points from the previous quarter and up 16 basis points from the second quarter a year ago.

South Bend, Indiana--(Newsfile Corp. - July 20, 2023) - 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported quarterly net income of $32.44 million for the second quarter of 2023, up 10.65% from the $29.31 million reported in the second quarter a year ago, bringing the 2023 year-to-date net income to $63.56 million compared to $56.70 million in 2022. Diluted net income per common share for the second quarter of 2023 was $1.30, up 10.17% versus $1.18 in the second quarter of 2022. Diluted net income per common share for the first half of 2023 was $2.55 compared to $2.28 a year earlier.

At its July 2023 meeting, the Board of Directors approved a cash dividend of $0.32 per common share. The cash dividend is payable to shareholders of record on August 1, 2023, and will be paid on August 11, 2023.

Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, "We are pleased that the strong start in 2023 continued throughout the second quarter. In the second quarter of 2023, average loans grew $104.95 million, up 1.74% while average deposits grew $70.08 million, up 1.02% from the previous quarter. Credit quality during the quarter remained steady with low levels of nonperforming assets. Our liquidity position is solid, our strong capital position continued, and deposit balances increased modestly during the period from expected seasonal trends. The tax-equivalent net interest margin continues to be under pressure at 3.48%, down 12 basis points from the prior quarter, as rate competition on deposits remains elevated.

"We were incredibly pleased to learn during the second quarter that 1st Source was included on the Forbes 'Best In State Banks' list, ranking #1 in Indiana! The list was compiled in partnership with market research firm Statista, and the result of an independent survey conducted of bank customers across the state. Being named among the 'Best In State Banks' in Indiana by our clients for the second consecutive year, and #1 in the state for the first time, is an important and gratifying recognition for us. We strive every day to show our clients they have made the right choice for their financial future by entrusting us to be their partner. Being named the best bank in Indiana by our clients lets us know that we are living our mission to help people achieve security, build wealth and realize their dreams in all that we do.

"We were also happy to learn that 1st Source was named among the Keefe, Bruyette & Woods, Inc. (KBW) Bank Honor Roll for the fifth consecutive year. We are proud to be one of the 14 honorees, placing us among the top 4% of eligible banks in the country. To be considered for this recognition, banks must be publicly traded institutions with more than $500 million in total assets and must have had 10 consecutive years of increased earnings per share. We strive to strike the right balance in our performance over the longer term and the ways we deliver positive results for our clients, shareholders, colleagues and communities. Receiving this honor once again is welcome recognition that our efforts are successful.

"As part of a strategic initiative to grow our commercial banking footprint and refocus the efforts of some of our leadership team, two significant changes were made this quarter as well. The first being, we opened a loan production office in the Indianapolis area, currently open by appointment only, which serves the community with small business loans and other commercial credit needs. The team will grow over time, and we look forward to serving business clients in this market. It was also announced that Larry Mayers, who has long served as Fort Wayne Regional President and Business Banking Group Head, would step away from his regional duties to focus solely on his business banking responsibilities. Luke Squires was named as his successor, taking over the role of Regional President of the Fort Wayne region and Cecile Weir replaced Luke as head of Business Banking in Fort Wayne. These changes align with 1st Source Bank's community banking model. They continue our tradition of promoting from within and enhance our position as a community bank with a strong client focus and local leaders who strongly live the 1st Source values and who have the authority and responsibility to serve clients well and grow the Bank.

"We announced in April the re-election of three board members - Christopher J. Murphy III, Chairman, President and Chief Executive Officer of 1st Source Corporation and Chairman of 1st Source Bank; Timothy K. Ozark, Chairman, TKO Finance Corporation; and Todd F. Schurz, Former President and Chief Executive Officer, Schurz Communications, Inc. - and the election of Andrea G. Short, President and Chief Executive Officer of 1st Source Bank as a new addition to the 1st Source Corporation Board of Directors. They all bring unique and valuable perspective to the Board and are knowledgeable business leaders with passion for 1st Source's mission, making them ideal stewards for the future of the Company.

"Lastly, I must mention, after the quarter ended, just last week, we lost a friend, a partner, and a leader in the Bank and the community when Ernestine Raclin, our Chairman Emeritus died at the age of 95. The community joined us in celebrating her life and we acknowledge here the role she played in establishing the vision of who we are today - focusing on our Mission and living our values. Her legacy will live on in the way we serve our clients, and communities for generations to come. I thank you all for the outpouring of condolences and the messages celebrating her spirit. She loved this organization and the people here so dearly, and we'll all miss her and honor her well into the future," Mr. Murphy concluded.

SECOND QUARTER 2023 FINANCIAL RESULTS

Loans

Second quarter average loans and leases increased $104.95 million to $6.14 billion, up 1.74% from the previous quarter and increased $673.35 million, up 12.31% from the year ago second quarter. Year-to-date average loans and leases increased $692.50 million to $6.09 billion, up 12.83% from the first six months of 2022. Growth during the quarter occurred primarily within the Auto and Light Truck, Construction Equipment, and Commercial Real Estate portfolios.

The Company has traditionally maintained a conservative approach to commercial real estate loans and non-owner occupied properties. At June 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 $6.94 billion, grew $70.08 million, up 1.02% from the previous quarter and grew $143.29 million or 2.11% compared to the quarter ended June 30, 2022. Average deposits for the first six months of 2023 were $6.90 billion, an increase of $197.41 million, up 2.94% from the same period a year ago. Average balances were modestly higher primarily due to expected seasonal public fund deposit inflows during the quarter.

End of period deposits were $6.98 billion at June 30, 2023, compared to $6.80 billion at March 31, 2023. Balances were higher primarily due to higher public funds, time, and brokered deposits which were offset by a decrease in noninterest-bearing deposits and a slight decrease in savings account deposits. Rate competition for deposits persisted during the quarter from various areas including traditional bank and credit union competitors, money market funds, bond markets, and other non-bank alternatives.

Net Interest Income and Net Interest Margin

Second quarter 2023 tax-equivalent net interest income declined $1.10 million to $68.70 million, down 1.57% from the previous quarter and increased $5.11 million, up 8.04% from the second quarter a year ago. For the first six months of 2023, tax-equivalent net interest income increased $15.18 million to $138.49 million, up 12.31% from the first half of 2022.

Second quarter 2023 net interest margin was 3.47%, a decline of 12 basis points from the 3.59% in the previous quarter and an increase of 16 basis points from the same period in 2022. On a fully tax-equivalent basis, second quarter 2023 net interest margin was 3.48%, down by 12 basis points compared to the 3.60% in the previous quarter and an increase of 16 basis points from the same period in 2022. The 12-basis point decrease from the prior quarter was primarily due to higher rates on interest-bearing deposits mainly from competitive market pressures and increased borrowing rates. Higher market rates due to multiple Federal Reserve rate increases during 2022 and 2023 contributed to net interest margin expansion compared to the previous year's second quarter.

Net interest margin for the first six months of 2023 was 3.53%, an increase of 29 basis points compared to the first six months of 2022. Similarly, net interest margin on a fully-tax-equivalent basis for the first half of 2023 was 3.54%, an increase of 29 basis points compared to the first half of the prior year.

Noninterest Income

Second quarter 2023 noninterest income decreased $0.55 million to $22.77 million, down 2.38% from the previous quarter and was relatively flat compared to the second quarter a year ago. For the first six months of 2023, noninterest income held steady from the same period a year ago.

The decrease in noninterest income compared to the previous quarter was due to gains on the sale of renewable energy tax equity investments of $1.11 million during the previous quarter. These were offset by higher seasonal tax preparation fee income recognized in the second quarter of 2023 from our Trust and Wealth Advisory Services Group.

Noninterest Expense

Second quarter 2023 noninterest expense of $49.17 million was relatively flat from the prior quarter and increased $3.51 million, or 7.69% from the second quarter a year ago. For the first six months of 2023, noninterest expense was $98.59 million, an increase of $7.60 million, or 8.35% from the same period a year ago.

The increase in noninterest expense for the second quarter and first six months of 2023 was mainly the result of higher salaries from normal merit increases, the impact of wage inflation and an increase in the number of employees due to fewer open positions. A rise in group insurance claims, increased data processing and technology project costs, and higher FDIC insurance premiums also contributed to higher expenses. 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 June 30, 2023, was 2.31% of total loans and leases compared to 2.33% at March 31, 2023, and 2.39% at June 30, 2022. Net recoveries of $0.98 million were recorded for the second quarter of 2023 compared with $0.19 million of net recoveries in the prior quarter and net recoveries of $0.40 million in the same quarter a year ago.

The provision for credit losses was $0.05 million for the second quarter of 2023, a decrease of $3.00 million from the previous quarter and a decrease of $2.46 million compared with the same period in 2022. The decrease in provision for credit losses compared to the previous quarter was primarily due to increased net recoveries and a reduction in highly reserved special attention loan balances. The ratio of nonperforming assets to loans and leases was 0.33% as of June 30, 2023, compared to 0.30% on March 31, 2023, and 0.60% on June 30, 2022.

Capital

As of June 30, 2023, the common equity-to-assets ratio was 10.95%, compared to 10.91% at March 31, 2023, and 10.66% a year ago. The tangible common equity-to-tangible assets ratio was 10.05% at June 30, 2023, compared to 10.01% at March 31, 2023, and 9.72% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines was 13.59% at June 30, 2023 compared to 13.51% at March 31, 2023 and 13.79% a year ago. During the second quarter of 2023, 33,276 shares were repurchased for treasury reducing common shareholders' equity by $1.41 million.

The Company has a long history of maintaining conservative capital levels and the risk-based capital ratios remained strong during the second 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 $3.23 billion at June 30, 2023, which accounted for approximately 50% 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 19.74% of total assets at June 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 3.3 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
2nd QUARTER 2023 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)

				Three Months Ended									Six Months Ended
				June 30,			March 31,			June 30,			June 30,			June 30,
				2023			2023			2022			2023			2022
AVERAGE BALANCES
	Assets		$	8,362,308		$	8,323,431		$	8,092,316		$	8,342,977		$	8,050,758
	Earning assets			7,921,528			7,864,595			7,685,631			7,893,218			7,653,120
	Investments			1,697,699			1,768,621			1,835,974			1,732,964			1,861,374
	Loans and leases			6,141,157			6,036,203			5,467,808			6,088,970			5,396,472
	Deposits			6,939,082			6,869,006			6,795,793			6,904,237			6,706,826
	Interest bearing liabilities			5,496,112			5,345,498			5,049,145			5,421,221			4,981,675
	Common shareholders' equity			926,157			890,294			861,134			908,325			885,826
	Total equity			985,406			949,879			915,714			967,742			939,801
INCOME STATEMENT DATA
	Net interest income		$	68,516		$	69,565		$	63,462		$	138,081		$	123,080
	Net interest income - FTE(1)			68,695			69,791			63,585			138,486			123,311
	Provision for credit losses			47			3,049			2,503			3,096			4,736
	Noninterest income			22,769			23,323			22,830			46,092			45,975
	Noninterest expense			49,165			49,421			45,655			98,586			90,991
	Net income			32,447			31,131			29,330			63,578			56,731
	Net income available to common shareholders			32,435			31,124			29,314			63,559			56,704
PER SHARE DATA
	Basic net income per common share		$	1.30		$	1.25		$	1.18		$	2.55		$	2.28
	Diluted net income per common share			1.30			1.25			1.18			2.55			2.28
	Common cash dividends declared			0.32			0.32			0.31			0.64			0.62
	Book value per common share(2)			37.31			36.81			34.74			37.31			34.74
	Tangible book value per common share(1)			33.92			33.42			31.33			33.92			31.33
	Market value - High			47.94			53.85			48.42			53.85			52.70
	Market value - Low			38.77			42.50			42.29			38.77			42.29
	Basic weighted average common shares outstanding			24,686,435			24,687,087			24,691,747			24,686,760			24,717,625
	Diluted weighted average common shares outstanding			24,686,435			24,687,087			24,691,747			24,686,760			24,717,625
KEY RATIOS
	Return on average assets			1.56 %			1.52 %			1.45 %			1.54 %			1.42 %
	Return on average common shareholders' equity			14.05			14.18			13.65			14.11			12.91
	Average common shareholders' equity to average assets			11.08			10.70			10.64			10.89			11.00
	End of period tangible common equity to tangible assets(1)			10.05			10.01			9.72			10.05			9.72
	Risk-based capital - Common Equity Tier 1(4)			13.59			13.51			13.79			13.59			13.79
	Risk-based capital - Tier 1(4)			15.20			15.15			15.53			15.20			15.53
	Risk-based capital - Total(4)			16.46			16.41			16.79			16.46			16.79
	Net interest margin			3.47			3.59			3.31			3.53			3.24
	Net interest margin - FTE(1)			3.48			3.60			3.32			3.54			3.25
	Efficiency ratio: expense to revenue			53.86			53.20			52.91			53.53			53.82
	Efficiency ratio: expense to revenue - adjusted(1)			53.23			52.92			51.72			53.07			52.49
	Net recoveries to average loans and leases			(0.06	)		(0.01	)		(0.03	)		(0.04	)		(0.02	)
	Loan and lease loss allowance to loans and leases			2.31			2.33			2.39			2.31			2.39
	Nonperforming assets to loans and leases			0.33			0.30			0.60			0.33			0.60
				June 30,			March 31,			December 31,			September 30,			June 30,
				2023			2023			2022			2022			2022
END OF PERIOD BALANCES
	Assets		$	8,414,818		$	8,329,803		$	8,339,416		$	8,097,486		$	8,029,359
	Loans and leases			6,215,343			6,116,716			6,011,162			5,762,078			5,551,216
	Deposits			6,976,518			6,801,464			6,928,265			6,621,231			6,744,896
	Allowance for loan and lease losses			143,542			142,511			139,268			135,736			132,865
	Goodwill and intangible assets			83,897			83,901			83,907			83,911			83,916
	Common shareholders' equity			921,020			909,159			864,068			826,059			856,251
	Total equity			980,087			968,444			923,766			886,360			910,667
ASSET QUALITY
	Loans and leases past due 90 days or more		$	56		$	24		$	54		$	165		$	50
	Nonaccrual loans and leases			20,481			18,062			26,420			27,813			33,490
	Other real estate			193			117			104			-			-
	Repossessions			47			445			327			26			102
	Equipment owned under operating leases			-			-			22			1			43
	Total nonperforming assets		$	20,777		$	18,648		$	26,927		$	28,005		$	33,685

 

(1) See "Reconciliation of Non-GAAP Financial Measures" for more information on this performance measure/ratio.
(2) Calculated as common shareholders' equity divided by common shares outstanding at the end of the period.
(3) Calculated as the sum of available-for-sale securities and loan and leases that mature or reprice in over 5 years as a percent of total assets.
(4) Calculated under banking regulatory guidelines.

1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)

				June 30,			March 31,			December 31,			June 30,
				2023			2023			2022			2022
ASSETS
Cash and due from banks			$	86,742		$	66,866		$	84,703		$	116,915
Federal funds sold and interest bearing deposits with other banks				25,933			27,171			38,094			164,848
Investment securities available-for-sale				1,661,405			1,713,480			1,775,128			1,836,389
Other investments				25,320			25,293			25,293			25,538
	Mortgages held for sale			2,321			2,068			3,914			5,525
	Loans and leases, net of unearned discount:
	Commercial and agricultural			797,188			795,429			812,031			842,618
	Solar			376,905			375,330			381,163			350,472
	Auto and light truck			901,054			875,564			808,117			708,720
	Medium and heavy duty truck			319,634			326,588			313,862			278,334
	Aircraft			1,060,340			1,056,829			1,077,722			959,876
	Construction equipment			1,012,969			991,412			938,503			803,734
	Commercial real estate			985,323			954,221			943,745			931,058
	Residential real estate and home equity			617,495			594,618			584,737			535,589
	Consumer			144,435			146,725			151,282			140,815
Total loans and leases				6,215,343			6,116,716			6,011,162			5,551,216
	Allowance for loan and lease losses			(143,542	)		(142,511	)		(139,268	)		(132,865	)
Net loans and leases				6,071,801			5,974,205			5,871,894			5,418,351
Equipment owned under operating leases, net				26,582			30,083			31,700			36,579
Net premises and equipment				44,089			44,034			44,773			45,250
Goodwill and intangible assets				83,897			83,901			83,907			83,916
Accrued income and other assets				386,728			362,702			380,010			296,048
Total assets			$	8,414,818		$	8,329,803		$	8,339,416		$	8,029,359
LIABILITIES
Deposits:
	Noninterest-bearing demand		$	1,721,947		$	1,815,123		$	1,998,151		$	2,032,566
	Interest-bearing deposits:
	Interest-bearing demand			2,528,231			2,403,818			2,591,464			2,644,590
	Savings			1,163,166			1,171,418			1,198,191			1,282,791
	Time			1,563,174			1,411,105			1,140,459			784,949
	Total interest-bearing deposits			5,254,571			4,986,341			4,930,114			4,712,330
Total deposits				6,976,518			6,801,464			6,928,265			6,744,896
Short-term borrowings:
	Federal funds purchased and securities sold under agreements to repurchase			69,308			73,396			141,432			162,649
	Other short-term borrowings			118,377			229,640			74,097			5,190
Total short-term borrowings				187,685			303,036			215,529			167,839
Long-term debt and mandatorily redeemable securities				46,649			46,714			46,555			48,459
Subordinated notes				58,764			58,764			58,764			58,764
Accrued expenses and other liabilities				165,115			151,381			166,537			98,734
Total liabilities				7,434,731			7,361,359			7,415,650			7,118,692
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 June 30, 2023, March 31, 2023, December 31, 2022, and June 30, 2022, respectively			436,538			436,538			436,538			436,538
Retained earnings				744,442			719,495			694,862			646,600
	Cost of common stock in treasury (3,523,113, 3,510,122, 3,543,388, and 3,555,267 shares at June 30, 2023, March 31, 2023, December 31, 2022, and June 30, 2022, respectively)			(120,410	)		(119,409	)		(119,642	)		(119,876	)
Accumulated other comprehensive loss				(139,550	)		(127,465	)		(147,690	)		(107,011	)
Total shareholders' equity				921,020			909,159			864,068			856,251
Noncontrolling interests				59,067			59,285			59,698			54,416
Total equity				980,087			968,444			923,766			910,667
Total liabilities and equity			$	8,414,818		$	8,329,803		$	8,339,416		$	8,029,359

 

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

				Three Months Ended									Six Months Ended
				June 30,			March 31,			June 30,			June 30,			June 30,
				2023			2023			2022			2023			2022
Interest income:
	Loans and leases		$	93,300		$	86,689		$	60,415		$	179,989		$	115,623
	Investment securities, taxable			5,946			6,648			6,289			12,594			12,633
	Investment securities, tax-exempt			330			482			157			812			291
	Other			978			637			1,168			1,615			1,531
Total interest income				100,554			94,456			68,029			195,010			130,078
	Interest expense:
	Deposits			28,870			21,263			3,553			50,133			5,929
	Short-term borrowings			1,625			1,393			23			3,018			47
	Subordinated notes			1,028			1,020			851			2,048			1,674
	Long-term debt and mandatorily redeemable securities			515			1,215			140			1,730			(652	)
Total interest expense				32,038			24,891			4,567			56,929			6,998
Net interest income				68,516			69,565			63,462			138,081			123,080
Provision for credit losses				47			3,049			2,503			3,096			4,736
Net interest income after provision for credit losses				68,469			66,516			60,959			134,985			118,344
Noninterest income:
	Trust and wealth advisory			6,467			5,679			6,087			12,146			12,001
	Service charges on deposit accounts			3,118			3,003			2,942			6,121			5,734
	Debit card			4,701			4,507			4,561			9,208			8,755
	Mortgage banking			926			802			1,062			1,728			2,439
	Insurance commissions			1,641			2,029			1,568			3,670			3,473
	Equipment rental			2,326			2,503			3,295			4,829			6,957
	Losses on investment securities available-for-sale			-			(44	)		-			(44	)		-
	Other			3,590			4,844			3,315			8,434			6,616
Total noninterest income				22,769			23,323			22,830			46,092			45,975
Noninterest expense:
	Salaries and employee benefits			28,236			28,597			25,562			56,833			51,029
	Net occupancy			2,676			2,622			2,524			5,298			5,335
	Furniture and equipment			1,414			1,307			1,384			2,721			2,679
	Data processing			6,268			6,157			5,402			12,425			10,610
	Depreciation - leased equipment			1,876			2,022			2,664			3,898			5,679
	Professional fees			1,704			682			2,094			2,386			3,702
	FDIC and other insurance			1,344			1,360			893			2,704			1,743
	Business development and marketing			1,649			1,972			1,669			3,621			2,937
	Other			3,998			4,702			3,463			8,700			7,277
Total noninterest expense				49,165			49,421			45,655			98,586			90,991
Income before income taxes				42,073			40,418			38,134			82,491			73,328
Income tax expense				9,626			9,287			8,804			18,913			16,597
Net income				32,447			31,131			29,330			63,578			56,731
Net (income) loss attributable to noncontrolling interests				(12	)		(7	)		(16	)		(19	)		(27	)
Net income available to common shareholders			$	32,435		$	31,124		$	29,314		$	63,559		$	56,704
Per common share:
	Basic net income per common share		$	1.30		$	1.25		$	1.18		$	2.55		$	2.28
	Diluted net income per common share		$	1.30		$	1.25		$	1.18		$	2.55		$	2.28
	Cash dividends		$	0.32		$	0.32		$	0.31		$	0.64		$	0.62
Basic weighted average common shares outstanding				24,686,435			24,687,087			24,691,747			24,686,760			24,717,625
Diluted weighted average common shares outstanding				24,686,435			64,687,087			24,691,747			24,686,760			24,717,625

 

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

													Three Months Ended
				June 30, 2023									March 31, 2023									June 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		$	1,655,790		$	5,946			1.44 %		$	1,711,177		$	6,648			1.58 %		$	1,805,044		$	6,289			1.40%
	Tax exempt(1)			41,909			411			3.93 %			57,444			605			4.27 %			30,930			195			2.53%
	Mortgages held for sale			1,879			28			5.98 %			2,410			32			5.38 %			4,889			52			4.27%
	Loans and leases, net of unearned discount(1)			6,141,157			93,370			6.10 %			6,036,203			86,760			5.83 %			5,467,808			60,448			4.43%
	Other investments			80,793			978			4.86 %			57,361			637			4.50 %			376,960			1,168			1.24%
	Total earning assets(1)			7,921,528			100,733			5.10 %			7,864,595			94,682			4.88 %			7,685,631			68,152			3.56%
	Cash and due from banks			72,880									71,921									90,101
	Allowance for loan and lease losses			(144,337	)								(141,054	)								(132,020	)
	Other assets			512,237									527,969									448,604
	Total assets		$	8,362,308								$	8,323,431								$	8,092,316
	LIABILITIES AND SHAREHOLDERS' EQUITY
	Interest-bearing deposits		$	5,192,206		$	28,870			2.23 %		$	4,988,093		$	21,263			1.73 %		$	4,753,331		$	3,553			0.30%
	Short-term borrowings:
	Securities sold under agreements to repurchase			69,301			32			0.19 %			134,501			40			0.12 %			176,994			23			0.05%
	Other short-term borrowings			129,230			1,593			4.94 %			118,760			1,353			4.62 %			5,394			-			- %
	Subordinated notes			58,764			1,028			7.02 %			58,764			1,020			7.04 %			58,764			851			5.81%
	Long-term debt and mandatorily redeemable securities			46,611			515			4.43 %			45,380			1,215			10.86 %			54,662			140			1.03%
	Total interest-bearing liabilities			5,496,112			32,038			2.34 %			5,345,498			24,891			1.89 %			5,049,145			4,567			0.36%
	Non interest-bearing deposits			1,746,876									1,880,913									2,042,462
	Other liabilities			133,914									147,141									84,995
	Shareholders' equity			926,157									890,294									861,134
	Non controlling interests			59,249									59,585									54,580
	Total liabilities and equity		$	8,362,308								$	8,323,431								$	8,092,316
	Less: Fully tax-equivalent adjustments						(179	)								(226	)								(123	)
	Net interest income/margin (GAAP-derived)(1)					$	68,516			3.47 %					$	69,565			3.59 %					$	63,462			3.31%
	Fully tax-equivalent adjustments						179									226									123
	Net interest income/margin - FTE(1)					$	68,695			3.48 %					$	69,791			3.60 %					$	63,585			3.32%

 
(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)

			Six Months Ended
			June 30, 2023									June 30, 2022
			Average Balance			Interest Income/Expense			Yield/Rate			Average  Balance			Interest Income/Expense			Yield/ Rate
ASSETS
	Investment securities available-for-sale:
	Taxable		$ 1,683,330		$	12,594			1.51 %		$	1,831,156		$	12,633			1.39 %
	Tax exempt(1)		49,634			1,016			4.13 %			30,218			360			2.40 %
	Mortgages held for sale		2,143			60			5.65 %			6,829			119			3.51 %
	Loans and leases, net of unearned discount(1)		6,088,970			180,130			5.97 %			5,396,472			115,666			4.32 %
	Other investments		69,141			1,615			4.71 %			388,445			1,531			0.79 %
Total earning assets(1)			7,893,218			195,415			4.99 %			7,653,120			130,309			3.43 %
	Cash and due from banks		72,403									83,618
	Allowance for loan and lease losses		(142,705)									(130,343	)
	Other assets		520,061									444,363
Total assets			$ 8,342,977								$	8,050,758
LIABILITIES AND SHAREHOLDERS' EQUITY
	Interest-bearing deposits		5,090,713			50,133			1.99 %			4,670,746			5,929			0.26 %
	Short-term borrowings:
	Securities sold under agreements to repurchase		101,721			72			0.14 %			184,509			46			0.05 %
	Other short-term borrowings		124,024			2,946			4.79 %			5,383			1			0.04 %
	Subordinated notes		58,764			2,048			7.03 %			58,764			1,674			5.74 %
	Long-term debt and mandatorily redeemable securities		45,999			1,730			7.58 %			62,273			(652	)		(2.11) %
Total interest-bearing liabilities			5,421,221			56,929			2.12 %			4,981,675			6,998			0.28 %
	Noninterest-bearing deposits		1,813,524									2,036,080
	Other liabilities		140,490									93,202
	Shareholders' equity		908,325									885,826
	Noncontrolling interests		59,417									53,975
Total liabilities and equity			$ 8,342,977								$	8,050,758
Less: Fully tax-equivalent adjustments						(405	)								(231	)
Net interest income/margin (GAAP-derived)(1)					$	138,081			3.53 %					$	123,080			3.24 %
Fully tax-equivalent adjustments						405									231
Net interest income/margin - FTE(1)					$	138,486			3.54 %					$	123,311			3.25 %

 
(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									Six Months Ended
			June 30,			March 31,			June 30,			June 30,			June 30,
			2023			2023			2022			2023			2022
Calculation of Net Interest Margin
(A)	Interest income (GAAP)	$	100,554		$	94,456		$	68,029		$	195,010		$	130,078
	Fully tax-equivalent adjustments:
(B)	- Loans and leases		98			103			85			201			162
(C)	- Tax exempt investment securities		81			123			38			204			69
(D)	Interest income - FTE (A+B+C)		100,733			94,682			68,152			195,415			130,309
(E)	Interest expense (GAAP)		32,038			24,891			4,567			56,929			6,998
(F)	Net interest income (GAAP) (A-E)		68,516			69,565			63,462			138,081			123,080
(G)	Net interest income - FTE (D-E)		68,695			69,791			63,585			138,486			123,311
(H)	Annualization factor		4.011			4.056			4.011			2.017			2.017
(I)	Total earning assets	$	7,921,528		$	7,864,595		$	7,685,631		$	7,893,218		$	7,653,120
	Net interest margin (GAAP-derived) (F*H)/I		3.47 %			3.59 %			3.31 %			3.53 %			3.24 %
	Net interest margin - FTE (G*H)/I		3.48 %			3.60 %			3.32 %			3.54 %			3.25 %
Calculation of Efficiency Ratio
(F)	Net interest income (GAAP)	$	68,516		$	69,565		$	63,462		$	138,081		$	123,080
(G)	Net interest income - FTE		68,695			69,791			63,585			138,486			123,311
(J)	Plus: noninterest income (GAAP)		22,769			23,323			22,830			46,092			45,975
(K)	Less: gains/losses on investment securities and partnership investments		(748)			(1,522	)		(636	)		(2,270	)		(1,080	)
(L)	Less: depreciation - leased equipment		(1,876)			(2,022	)		(2,664	)		(3,898	)		(5,679	)
(M)	Total net revenue (GAAP) (F+J)		91,285			92,888			86,292			184,173			169,055
(N)	Total net revenue - adjusted (G+J-K-L)		88,840			89,570			83,115			178,410			162,527
(O)	Noninterest expense (GAAP)		49,165			49,421			45,655			98,586			90,991
(L)	Less:depreciation - leased equipment		(1,876)			(2,022	)		(2,664	)		(3,898	)		(5,679	)
(P)	Noninterest expense - adjusted (O-L)		47,289			47,399			42,991			94,688			85,312
	Efficiency ratio (GAAP-derived) (O/M)		53.86 %			53.20 %			52.91 %			53.53 %			53.82 %
	Efficiency ratio - adjusted (P/N)		53.23 %			52.92 %			51.72 %			53.07 %			52.49 %
			End of Period
			June 30,			March 31,			June 30,
			2023			2023			2022
Calculation of Tangible Common Equity-to-Tangible Assets Ratio
(Q)	Total common shareholders' equity (GAAP)	$	921,020		$	909,159		$	856,251
(R)	Less: goodwill and intangible assets	$	(83,897)			(83,901	)		(83,916	)
(S)	Total tangible common shareholders' equity (Q-R)	$	837,123		$	825,258		$	772,335
(T)	Total assets (GAAP)		8,414,818			8,329,803			8,029,359
(R)	Less: goodwill and intangible assets		(83,897)			(83,901	)		(83,916	)
(U)	Total tangible assets (T-R)	$	8,330,921		$	8,245,902		$	7,945,443
	Common equity-to-assets ratio (GAAP-derived) (Q/T)		10.95 %			10.91 %			10.66 %
	Tangible common equity-to-tangible assets ratio (S/U)		10.05 %			10.01 %			9.72 %
Calculation of Tangible Book Value per Common Share
(Q)	Total common shareholders' equity (GAAP)	$	921,020		$	909,159		$	856,251
(V)	Actual common shares outstanding		24,682,561			24,695,552			24,650,407
	Book value per common share (GAAP-derived) (Q/V)*1000	$	37.31		$	36.81		$	34.74
	Tangible common book value per share (S/V)*1000	$	33.92		$	33.42		$	31.33

 

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/174255

FAQ

What was 1st Source Corporation's net income for Q2 2023?

1st Source Corporation reported a net income of $32.44 million for the second quarter of 2023, up 10.65% from the previous year.

What is the cash dividend approved by 1st Source Corporation?

The company approved a cash dividend of $0.32 per common share.

How much did average loans and leases grow by in Q2 2023?

Average loans and leases grew by $104.95 million in the second quarter of 2023, up 1.74% from the previous quarter.

What was the tax-equivalent net interest income for Q2 2023?

The tax-equivalent net interest income was $68.70 million, down 1.57% from Q1 2023.