1st Source Corporation Reports Second Quarter Earnings, Dividend Increased

South Bend, IN -- 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today reported net income of $12.57 million for the second quarter of 2012 and $24.28 million for the first six months of 2012. This compares to $14.87 million reported in the second quarter of 2011 and $25.47 million for the first six months of 2011. Last year’s second quarter benefited from higher investment security gains and lower loan and lease loss provisions. Diluted net income per common share for the second quarter amounted to $0.51 compared with $0.61 for the second quarter of 2011. Diluted net income per common share for the first half of 2012 was $0.99, compared to the $1.04 earned a year earlier.
At its July meeting, the Board of Directors approved a cash dividend of $0.17 per common share, an increase of 6.25% over the second quarter a year ago. The dividend is payable to shareholders of record on August 6, 2012 and will be paid on August 15, 2012.
Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, “This was a good quarter for 1st Source. Loans were up a strong 4.89% from a year ago; we grew our deposits and total assets; our net interest margin is holding steady; our total nonperforming assets have declined 27.1% from a year ago; and credit quality continues to improve. In comparing the quarters, last year benefited from one-time gains of $2.22 million from the sale of investment securities and the sale of a former corporate aircraft, as well as a $1.99 million lower provision to our loan and lease loss reserve. The present quarter is more normalized with an increase to the reserve driven by loan growth. Overall, our net income for the second quarter is up about 7% from the first quarter of this year.”
Mr. Murphy continued, “We continue to be cautious about the economy. It seems as soon as one sector improves, another faces challenges. Locally, the RV industry is improving, while agriculture is hit with a drought. Our national and international businesses are doing well – financing and leasing for aircraft, car rentals, medium and heavy duty trucks, and construction equipment are all performing as expected or better.”
“With the uncertainties in Washington, a stalled Congress, and a presidential election coming up, we look for little steam in the economy. During these unsettled times, we will continue to offer sound advice and counsel to our clients, provide excellent customer service, and keep our client’s bests interests in mind,” Mr. Murphy concluded.
As of June 30, 2012, the 1st Source common equity-to-assets ratio was 12.09% compared to 11.61% a year ago and its tangible common equity to tangible assets ratio is 10.32% compared to 9.78% a year earlier. Total assets at June 30, 2012 are $4.49 billion, up 3.02% from a year earlier. Total loans and leases were $3.27 billion, up 4.89% from June 30, 2011. Total deposits were $3.59 billion, up 1.78% from the comparable figures at June 30, 2011.
The 1st Source reserve for loan and lease losses as of June 30, 2012 was 2.55% of total loans and leases compared to 2.73% at June 30, 2011. Net charge-offs were $1.15 million in the second quarter 2012, compared with net charge-offs of $1.22 million in the same quarter a year ago. Year-to-date, net charge-offs of $2.65 million have been recorded in 2012, compared to net charge-offs of $4.13 million for the first half of 2011. The ratio of nonperforming assets to net loans and leases was 1.67% as of June 30, 2012, down from 2.39% on June 30, 2011.
The net interest margin was 3.70% for the second quarter of 2012 versus 3.72% for the same period in 2011. The net interest margin was 3.74% for the six months ending June 30, 2012, versus 3.72% for the same period in 2011. Tax-equivalent net interest income was $38.50 million for the second quarter of 2012, compared to $38.23 million for 2011’s second quarter. For the first six months of 2012, tax-equivalent net interest income was $76.42 million, compared to $75.80 million for the first six months of 2011.
Noninterest income for the second quarter of 2012 was $19.79 million, down 7.63% from the same period in 2011. For the first six months, noninterest income was $40.31 million, flat compared to 2011. Noninterest income decreased in the second quarter primarily as a result of lower equipment rental income and gains on sale of investment securities offset by increased mortgage banking income.
Noninterest expense was $36.58 million for the second quarter of 2012, up 1.77% from the second quarter of 2011. For the first six months, noninterest expense was $74.63 million, up slightly compared with $74.42 million for the same period in 2011. The leading factors in the increase were higher salary and employee benefit expenses and increased professional fees. These increases were offset by reductions to provisions for unfunded loan commitments, FDIC and other insurance expense and lower depreciation on leased equipment.
1st Source serves the northern half of Indiana and southwest Michigan with its community banking, insurance and wealth management services, and nationally and internationally with specialty financing and leasing services. 1st Source distinguishes itself with highly personalized service and a comprehensive range of consumer and commercial banking services delivered through its community bank offices. 1st Source Bank provides services for businesses nationally by offering specialized financing of  automobiles for leasing and rental agencies, medium and heavy duty trucks, construction and environmental equipment, and nationally and internationally, for new and used private and cargo aircraft. The Corporation includes 75 community banking centers, 9 trust and wealth management locations, and 8 1st Source Insurance offices located within 17 counties of northern Indiana and southwestern Michigan and 22 specialty finance locations nationwide. 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 assuring a strong social safety net and continued economic development in 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.
Media contacts: Larry Lentych or Andrea Short, (574) 235-2000
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