1st Source Corporation (Nasdaq: SRCE), parent company of 1st Source Bank, today announced fourth quarter net income of $12.57 million, up 101.94% compared to $6.22 million in the fourth quarter of 2009. For the year of 2010, net income was $41.24 million, an increase of 61.80% over the $25.49 million reported in 2009. The annual net income sets a record as the highest in corporate history.
Diluted net income per common share for the fourth quarter was $0.25, up 31.58% compared to $0.19 per common share reported in the fourth quarter of the previous year. Diluted net income per common share for the year was $1.21, an increase of 53.16% over the $0.79 per common share a year earlier. Diluted net income per common share for the fourth quarter and for the year was negatively impacted by the preferred stock dividends and the accretion of discount on the preferred stock issued to the US Treasury under the TARP program in January 2009 and repurchased in December 2010. Adjusting for these, the diluted net income would have been $0.52 per common share for the fourth quarter of 2010, and $1.70 per common share for the year.
At the January 2011 meeting, the Board of Directors approved a cash dividend of $0.16 per common share, up 6.67% over the dividend declared in the same period a year earlier. The cash dividend is payable on February 15, 2011 to shareholders of record on February 4, 2011.
Christopher J. Murphy, III, Chairman of 1st Source, commented, "I could not be more pleased with our $12.6 million net income for the quarter and $41.2 million for the year, an annual net income record for 1st Source Corporation."
"The quarter was exceptionally busy. We repaid the $111 million Capital Purchase Program investment to the US Treasury with no conditions attached. Many others who paid back TARP funds were required to raise additional capital in the market which in most cases was dilutive to their present shareholders. We did not have to do that, attesting to the strength of the company and the Bank. We are pleased the economy has improved to the point where this extra insurance is no longer needed, and we continue to maintain strong capital and reserve ratios as always. The TARP repayment will save the company $5.55 million annually in after tax dollars, previously paid out in preferred dividends.”
“Also in the quarter, we closed on a new 10-year lease on our downtown South Bend main office that allows us to reduce our space in the building and lower our financial commitment for the term of the contract."
"Credit has improved but is still problematic going forward. We have seen slight improvement in the past year but the economy still has challenges for our personal and business banking clients, as well as some of our specialty finance markets. With that said, business seems to be slowly improving. In the coming year, we will continue to focus on providing advice and counsel to help our clients navigate this complicated financial world we live in, and will provide outstanding customer service. We pride ourselves on being a community bank and have always focused on the basics of providing deposit, investment, insurance and lending services to our neighbors, individuals, businesses, community organizations and local governments. I thank my colleagues and our loyal clients for a good year." Mr. Murphy concluded.
1st Source’s reserve for loan and lease losses as of December 31, 2010 was 2.83% of total loans and leases, compared to 2.85% as of December 31, 2009. Net charge-offs were $6.08 million for the fourth quarter 2010, compared to $5.63 million in the fourth quarter 2009. Net charge-offs for the full year were $20.57 million in 2010 compared to $22.64 million in 2009. The ratio of nonperforming assets to net loans and leases was 2.81% on December 31, 2010, compared to 3.15% on December 31, 2009.
The net interest margin was 3.67% for the fourth quarter of 2010 versus 3.27% for the same period in 2009. The net interest margin was 3.59% for the year ending December 31, 2010, versus 3.14% for the same period in 2009. Tax-equivalent net interest income was $39.96 million for the fourth quarter of 2010, compared to $34.49 million for 2009’s fourth quarter. For the twelve months of 2010, tax-equivalent net interest income was $150.87 million, compared to $132.00 million for the twelve months of 2009.
As of December 31, 2010, the 1st Source common equity-to-assets ratio was 10.94%, compared to 10.25% at December 31, 2009 and its tangible common equity-to-tangible assets ratio was 9.12% at December 31, 2010 compared to 8.43% at December 31, 2009. Common shareholders’ equity was $486.38 million, up from $465.39 million a year ago. Total assets at the end of 2010 were $4.45 billion, down 2.13% compared to the same period last year. Total loans and leases at December 31, 2010 were $3.07 billion, down 0.73% and total deposits at December 31, 2010 were $3.62 billion, down 0.81% from the comparable figures at the end of 2009.
Noninterest income for the fourth quarter of 2010 was $22.42 million, up 1.80% compared to $22.02 million for the fourth quarter of 2009. The predominate factors in the fourth quarter change were higher mortgage banking income and other income offset by lower service charges on deposit accounts, equipment rental income and investment securities and other investment gains. For the year, noninterest income was $86.69 million, up 1.36% from the $85.53 million in 2009. The annual increase was primarily due to higher trust fees and other income offset by lower service charges on deposit accounts and mortgage banking income.
Noninterest expense for the fourth quarter of 2010 was $39.94 million, up 3.56% compared to $38.56 million for the fourth quarter of 2009. The leading factors for the fourth quarter increase were higher salaries and employee benefits expense offset by lower loan and lease collection and repossession expense. For the year ending December 31, 2010, noninterest expense was $154.51 million, up 2.24% from $151.12 million one year ago. The annual increase was a result of higher employee salaries and benefits, professional fees, and loan and lease collection and repossession expense offset by reduced FDIC and other insurance (one time FDIC special assessment in 2009) and furniture and equipment expense.
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, construction and environmental equipment. The Corporation includes 76 community banking centers in 17 counties, 22 specialty finance locations nationwide, 7 trust and wealth management locations, and 7 1st Source Insurance offices. With a history dating back to 1863, 1st Source Bank has a tradition of providing superior service to clients while playing a leadership role in the continued development of the communities it serves.
In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. 1st Source Corporation believes that providing non-GAAP financial measures provides investors with information useful to understanding our financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on “tangible equity” which is “common shareholders’ equity” excluding intangible assets.
1st Source may be accessed on its home page at “www.1stsource.com.” Its 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". 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.