1st Source Corporation Announces Second Quarter Earnings, Cash Dividend Declared
- Net income of $14.48 million and diluted net income per common share of $0.56.
- Return on average assets of 1.09% and return on average common shareholders' equity of 8.84%.
- Net recoveries of $0.11 million and nonperforming assets to loans and leases of 0.49%.
- Average loans and leases grew $304.99 million or 8.03% from the second quarter of 2015.
- Average deposits grew $373.33 million or 9.51% from the second quarter of 2015.
- Net interest income on a tax-equivalent basis increased $0.68 million or 1.62% from the second quarter of 2015.
- Noninterest income increased $0.77 million or 3.56% from the second quarter of 2015 (decreased 2.53% excluding equipment rental income).
- Noninterest expenses increased $1.79 million or 4.69% from the second quarter of 2015 (increased 2.20% excluding leased equipment depreciation).
Diluted net income per common share for the second quarter of 2016 was $0.56, versus $0.59 in the second quarter of 2015. Diluted net income per common share for the first half of 2016 was $1.08, compared to the $1.10 earned a year earlier.
At its July 2016 meeting, the Board of Directors approved a cash dividend of $0.18 per common share. The cash dividend is payable to shareholders of record on August 2, 2016 and will be paid on August 12, 2016. This brings dividends this year to $0.540 per common share compared to $0.491 per common share at the same time last year.
According to Christopher J. Murphy III, Chairman, “We saw solid growth in loans and leases and deposits again this quarter as we continue to add new clients to the bank. Average loans and leases were up a healthy 8.03% from a year ago and average deposits were strong, up 9.51% from that same period. Given the challenging low interest rate environment, we had a steady performance overall. Just as importantly, credit quality remains positive with net recoveries for the quarter. Net interest margins continue to be negatively impacted by low interest rates and while flat compared to last quarter are down 19 basis points compared to a year ago.”
“We continue to reinvest in our facilities and this quarter completed renovations of our banking centers in Bluffton and Huntington, Indiana, making the Fort Wayne region our first to be fully renovated. We also started construction of a new larger office in the heart of downtown Warsaw, Indiana.” Mr. Murphy concluded.
SECOND QUARTER 2016 FINANCIAL RESULTS
LoansAverage loans and leases of $4.11 billion increased $304.99 million, or 8.03% in the second quarter of 2016 from the year ago quarter and have increased $96.68 million, or 2.41% from the first quarter. Year to date average loans and leases of $4.06 billion increased $319.32 million, or 8.54% from the first six months of 2015.
DepositsAverage deposits of $4.30 billion grew $373.33 million, or 9.51% for the quarter ended June 30, 2016 from the year ago quarter and have increased $147.13 million, or 3.54% compared to the first quarter. Average deposits for the first six months of 2016 were $4.23 billion an increase of $354.52 million or 9.16% from the same period a year ago.
Net Interest Income and Net Interest Margin
Second quarter 2016 tax-equivalent net interest income of $42.75 million increased $0.68 million, or 1.62% from the quarter a year ago and increased $1.00 million, or 2.40% from the first quarter. Second quarter 2016 net interest recoveries were down $1.35 million from the year ago quarter, resulting in an 11 basis point reduction to the net interest margin. Second quarter 2016 net interest recoveries were slightly higher relative to the first quarter.
For the first six months of 2016, tax-equivalent net interest income was $84.50 million, an increase of $2.58 million, or 3.15% compared to the same period a year ago. Net interest recoveries for the first half of 2016 were down $1.41 million from the first half of 2015, resulting in a 6 basis point reduction to the net interest margin.
Second quarter 2016 net interest margin was 3.45%, a decrease of 19 basis points from the 3.64% for the same period in 2015 and remained unchanged from the first quarter.
Net interest margin for the first six months of 2016 was 3.45%, a decrease of 16 basis points from the 3.61% for the same period in 2015.
Noninterest IncomeNoninterest income increased $0.77 million or 3.56% and $2.64 million or 6.40% in the three and six month periods ended June 30, 2016, respectively over the same periods a year ago. The increase in noninterest income was mainly due to higher equipment rental income related to an increase in the average equipment rental portfolio and gains on the liquidation of a partnership investment required by the Volcker Rule, which was offset by lower monogram fund income and an other than temporary impairment writedown on an available-for-sale equity security.
Noninterest ExpenseNoninterest expense increased $1.79 million or 4.69% and $4.44 million or 5.28% for the three and six months ended June 30, 2016, respectively over the comparable periods a year ago. The increase in noninterest expense was primarily due to higher depreciation on leased equipment and increased loan and lease collection and repossession expenses. Depreciation on leased equipment was higher as a result of an increase in the average equipment rental portfolio. Loan and lease collection and repossession expenses increased mainly due to lower recoveries on repurchased mortgage loans and fewer gains on the sale of other real estate owned.
The reserve for loan and lease losses as of June 30, 2016 was 2.20% of total loans and leases compared to 2.21% at March 31, 2016 and 2.25% at June 30, 2015. Net recoveries of $0.11 million were recorded for the second quarter of 2016 compared with net recoveries of $0.68 million in the same quarter a year ago. Year to date, net recoveries of $0.32 million have been recorded in 2016, compared to net recoveries of $0.35 million for the first half of 2015.
Due primarily to an increase in loan and lease outstandings and special attention reserves, the provision for loan and lease losses for the second quarter 2016 increased $1.24 million compared with the same period in 2015 and was up $1.07 million from the first quarter. The provision for loan and lease losses for the first six months of 2016 was $3.02 million up $1.86 million from the same period in 2015.
The ratio of nonperforming assets to net loans and leases was 0.49% as of June 30, 2016, down from 0.55% on June 30, 2015 and down from the 0.51% on March 31, 2016.
CapitalAs of June 30, 2016, the common equity-to-assets ratio was 12.30%, compared to 12.39% at March 31, 2016 and 12.60% a year ago. The tangible common equity-to-tangible assets ratio was 10.90% at June 30, 2016 and 10.96% at March 31, 2016 compared to 11.09% a year earlier. The Common Equity Tier 1 ratio was 12.20% at June 30, 2016 compared to 12.37% at March 31, 2016 and 12.72% a year ago. During 2016, the Company repurchased $8.01 million of common stock in several open market transactions.
ABOUT 1ST SOURCE CORPORATION
1st Source common stock is traded on the NASDAQ Global Select Market under “SRCE” and appears in the National Market System tables in many daily newspapers under the code name “1st Src.” Since 1863, 1st Source has been committed to the success of the communities it serves. For more information, visit www.1stsource.com.
1st Source serves the northern half of Indiana and southwest Michigan and is the largest locally controlled financial institution headquartered in the area. While delivering a comprehensive range of consumer and commercial banking services through its community bank offices, 1st Source has distinguished itself with highly personalized services. 1st Source Bank also competes for business nationally by offering specialized financing services for new and used private and cargo aircraft, automobiles for leasing and rental agencies, medium and heavy duty trucks, and construction equipment. The Corporation includes 80 community banking centers in 17 counties, 8 trust and wealth management locations, 10 1st Source Insurance offices, as well as 22 specialty finance locations nationwide.
FORWARD LOOKING STATEMENTS
Except for historical information contained herein, the matters discussed in this document express “forward-looking statements.” Generally, the words “believe,” “contemplate,” “seek,” “plan,” “possible,” “assume,” “expect,” “intend,” “targeted,” “continue,” “remain,” “estimate,” “anticipate,” “project,” “will,” “should,” “indicate,” “would,” “may” and similar expressions indicate forward-looking statements. Those statements, including statements, projections, estimates or assumptions concerning future events or performance, and other statements that are other than statements of historical fact, are subject to material risks and uncertainties. 1st Source cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made.
1st Source may make other written or oral forward-looking statements from time to time. Readers are advised that various important factors could cause 1st Source’s actual results or circumstances for future periods to differ materially from those anticipated or projected in such forward-looking statements. Such factors, among others, include changes in laws, regulations or accounting principles generally accepted in the United States; 1st Source’s competitive position within its markets served; increasing consolidation within the banking industry; unforeseen changes in interest rates; unforeseen downturns in the local, regional or national economies or in the industries in which 1st Source has credit concentrations; and other risks discussed in 1st Source’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, which filings are available from the SEC. 1st Source undertakes no obligation to publicly update or revise any forward-looking statements.
NON-GAAP FINANCIAL MEASURES
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.
Media contact: Andrea Short, (574) 235-2000