1st Source Corporation Reports Record Annual Earnings,
Cash Dividend Declared, History of Increased Dividends Continues
FULL YEAR AND QUARTERLY HIGHLIGHTS
•Net income was a record $124.93 million for the year of 2023, up 3.67% from 2022 and was $28.43 million for the fourth quarter of 2023, down 13.69% from the previous quarter and down 8.49% from the fourth quarter of 2022. Diluted net income per common share was a record $5.03 for the year of 2023, up 3.93% from 2022 and was $1.15 for the fourth quarter of 2023, down 12.88% from the previous quarter and down 8.00% from the prior year’s fourth quarter due primarily to repositioning of the investment securities portfolio and a contribution to the 1st Source Foundation as described below.
•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 $637.16 million in 2023, up 11.45% from 2022 and grew $141.98 million during the fourth quarter, up 2.27% (9.08% annualized growth) from the previous quarter.
•Tax-equivalent net interest margin was 3.51% for 2023, up six basis points from 2022 and was 3.51% for the fourth quarter of 2023, up five basis points from the prior quarter and down 18 basis points from the fourth quarter of 2022.
•During the fourth quarter, repositioning of the investment securities portfolio resulted in losses of $2.88 million on the sale of available-for-sale securities. Approximately $40 million of securities with an average yield of 1.10% were sold and used to purchase approximately $40 million of securities with an average yield of 4.80%.
•Charitable contribution of $1 million was made to the 1st Source Foundation during the fourth quarter.
•During 2023, gains on the sale of renewable energy tax equity investments of $3.43 million were recognized - $1.11 million during the first quarter and $2.32 million during the third quarter.
South Bend, IN — 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported record net income of $124.93 million for 2023, an increase of 3.67% compared to $120.51 million earned in 2022. Fourth quarter net income was $28.43 million, a decrease of 8.49% compared to $31.07 million earned in the fourth quarter of 2022 after losses due to repositioning the Company’s investment securities portfolio and a contribution to the 1st Source Foundation. Diluted net income per common share for the year was a record $5.03, up 3.93% from the $4.84 earned a year earlier. Diluted net income per common share for the fourth quarter was $1.15, down 8.00% from the $1.25 earned in the fourth quarter of the previous year.
At its January 2024 meeting, the Board of Directors approved a cash dividend of $0.34 per common share, up 6.25% from the $0.32 per common share declared a year ago. The cash dividend is payable to shareholders of record on February 5, 2024 and will be paid on February 15, 2024.
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Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, “We are pleased to announce record net income for the third year in a row and we reached our 36th consecutive year of dividend growth. We were able to grow average loans and leases by $637.16 million or 11.45% from 2022. Our tax-equivalent net interest margin expanded during 2023 to 3.51% from 3.45% in 2022. During the fourth quarter, we also experienced margin expansion of six basis points after experiencing slight compression during the third quarter. New loans at higher rates, variable rate loan repricing and management of deposit rates contributed to the improvement. Our credit quality remained very strong as we had net recoveries to average loans and leases of 0.04% in 2023 compared to net charge-offs to average loans and leases of only 0.03% in 2022. I am extremely proud my colleagues were able to achieve such positive results during the unique challenges of 2023.
“In addition, we were most pleased to learn that 1st Source Bank received the Gold Level Award in the Community Lender category from the U.S. Small Business Administration (SBA) for the 11th consecutive year. The award, which focused on community banks headquartered in Indiana with less than $10 billion in assets, recognizes 1st Source Bank for delivering the greatest number of SBA loans in the State of Indiana in 2023. Since the inception of the award, it has been an honor to see the great work done by our SBA team and it is a testament to 1st Source Bank’s commitment to serving local small businesses in all our markets.
“In alignment with that commitment and our strategic initiative to grow 1st Source’s commercial banking footprint, we opened a loan production office in Lake County, Indiana in early January 2024. It is currently open by appointment only and serves the community with small business loans and other commercial credit needs. We are thrilled to expand into Lake County to help businesses in the area grow. Also, in line with our growth initiative, we have been moving forward with our efforts in Indianapolis. We opened a loan production office in the second quarter of 2023, and we have been continuing to build our presence in this market.
“Finally, in an ongoing effort to help our clients and to continue investment in our traditional markets, we are happy to announce that our new Niles Banking Center located at 1401 S. 11th St. in Niles, Michigan is now open to serve our clients. Recognizing the need for a new space as well as a drive-thru in Niles, the location opened successfully on December 21, 2023, and we are welcoming clients to come and experience enhanced levels of convenience and service,” Mr. Murphy concluded.
FULL YEAR AND FOURTH QUARTER 2023 FINANCIAL RESULTS
Loans
Annual average loans and leases of $6.20 billion increased $637.16 million, up 11.45% loans from the full year 2022. Quarterly average loans and leases of $6.39 billion increased $547.27 million, up 9.37% loans in the fourth quarter of 2023 from the year ago quarter and have increased $141.98 million, up 2.27% from the third quarter. Strong growth primarily within our Auto and Light Truck and Construction Equipment portfolios and selective growth in our Commercial Real Estate portfolio drove total average loans and leases higher during the year.
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Deposits
Annual average deposits for 2023 were $6.96 billion, an increase of $245.87 million, up 3.66% from 2022. Quarterly average deposits of $7.07 billion grew $310.20 million, up 4.59% for the quarter ended December 31, 2023 compared to the year ago quarter and have increased $118.56 million, up 1.71% compared to the third quarter. Deposit growth over the last year came from increased time deposits, public funds, and brokered deposits. The deposit mix change from 2022 continued through 2023 with clients moving their funds from non-maturity accounts to higher yielding certificates of deposit and money market accounts due to the interest rate environment.
Net Interest Income and Net Interest Margin
For the twelve months of 2023, tax-equivalent net interest income was $279.39 million, an increase of $15.29 million, up 5.79% compared to the full year 2022. Fourth quarter 2023 tax-equivalent net interest income of $71.50 million decreased $0.17 million, down 0.24% from the fourth quarter a year ago and increased $2.09 million, or 3.01% from the third quarter.
Net interest margin for the year ending December 31, 2023 was 3.50%, an increase of six basis points from the 3.44% for the year ending December 31, 2022. Net interest margin on a tax-equivalent basis for the year ending December 31, 2023 was 3.51%, an increase of six basis points from the 3.45% for the year ending December 31, 2022. Net interest recoveries positively contributed two basis points to the tax-equivalent net interest margin compared to a positive three basis point impact during 2022.
Fourth quarter 2023 net interest margin was 3.51%, a decrease of 17 basis points from the 3.68% for the same period in 2022 and an increase of six basis points from the prior quarter. Fourth quarter 2023 net interest margin on a fully tax-equivalent basis was 3.51%, a decrease of 18 basis points from the 3.69% for the same period in 2022 and an increase of five basis points from the 3.46% in the prior quarter. Net interest recoveries had a positive four basis point impact on the fourth quarter net interest margin compared to a one basis point impact during the fourth quarter of 2022.
Noninterest Income
Noninterest income for the twelve months ended December 31, 2023 was $90.62 million, down $0.64 million or 0.70% compared to the twelve months ended December 31, 2022. Fourth quarter 2023 noninterest income of $20.08 million decreased $3.20 million, or 13.76% from the fourth quarter a year ago and decreased $4.38 million or 17.91% from the third quarter.
Noninterest income during the twelve months ended December 31, 2023 was lower compared to a year ago mainly from lower equipment rental income due to a decrease in the size of the equipment rental portfolio as demand for operating leases continues to decline. Also contributing to lower income was realized losses of $2.88 million from repositioning the available-for-sale investment securities portfolio during the fourth quarter. Noninterest income in 2023 was also impacted by reduced mortgage banking origination volumes resulting in lower income from loans sold into the secondary market. These decreases were offset by partnership investment gains on sale of renewable energy tax equity investments of $3.43 million, a rise in interest rate swap fees, and higher deposit account fees.
– 3 –
The decrease in noninterest income from the third quarter was mainly due to the losses on the sale of available-for-sale securities of $2.88 million as explained above and lower partnership investment gains mainly from the sale of renewable energy tax equity investments of $2.32 million during the third quarter. These were offset by increased trust and wealth advisory income primarily from the positive market performance during the quarter.
Noninterest Expense
Noninterest expense for the twelve months ended December 31, 2023 was $201.72 million, an increase of $17.03 million, or 9.22% compared to the same period a year ago. Fourth quarter 2023 noninterest expense of $52.97 million rose $4.60 million, or 9.50% from the fourth quarter a year ago and increased $2.81 million or 5.59% from the prior quarter.
The increase in noninterest expense for 2023 from 2022 was primarily due to higher base salaries as a result of normal merit increases, the impact of wage inflation and an increase in the number of employees filling prior open positions, lower turn-over and a rise in group insurance claims. There was also increased software maintenance costs related to technology projects, higher FDIC insurance premiums due to a two basis point increase in assessment rates during the first quarter of 2023, an increase in the provision for unfunded loan commitments and a $1 million charitable contribution. These increases were offset by lower leased equipment depreciation and a decrease in professional consulting fees.
The increase in noninterest expense from the third quarter was mainly due to the earlier mentioned $1 million charitable contribution, higher legal fees and increased computer equipment replacement expense. These increases were offset by a lower provision for unfunded loan commitments and reduced leased equipment depreciation.
Credit
The allowance for loan and lease losses as of December 31, 2023 was 2.26% of total loans and leases compared to 2.27% at September 30, 2023 and 2.32% at December 31, 2022.
Net recoveries that have been recorded for the full year of 2023 were $2.42 million compared to net charge-offs of $1.47 million in 2022. This resulted in net recoveries to average loans and leases of 0.04% for 2023 compared to a net charge off ratio of 0.03% for 2022. Net recoveries in the fourth quarter of 2023 were $1.57 million compared with net charge-offs of $1.81 million in the same quarter a year ago and $0.33 million of net charge-offs in the previous quarter.
The provision for credit losses was $5.87 million for the twelve months ended December 31, 2023 and included $1.91 million for the fourth quarter of 2023, a decrease of $7.38 million and $3.43 million, respectively, compared with the same periods in 2022. The decrease in the provision expense was mainly due to net recoveries. The ratio of nonperforming assets to loans and leases was 0.37% as of December 31, 2023, compared to 0.27% on September 30, 2023 and 0.45% on December 31, 2022.
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Capital
As of December 31, 2023, the common equity-to-assets ratio was 11.34%, compared to 10.84% at September 30, 2023 and 10.36% a year ago. The tangible common equity-to-tangible assets ratio was 10.48% at December 31, 2023 compared to 9.96% at September 30, 2023 and 9.45% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 13.22% at December 31, 2023 compared to 13.31% at September 30, 2023 and 13.19% a year ago.
During 2023, 310,522 shares were repurchased for treasury reducing common shareholders’ equity by $12.47 million. No shares were repurchased during the fourth quarter 2023.
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 78 banking centers, 18 1st Source Bank Specialty Finance Group locations nationwide, nine Wealth Advisory Services locations, 10 1st Source Insurance offices, and three loan production 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,” “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.
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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.
# # #
(charts attached)
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1st SOURCE CORPORATION
4th QUARTER 2023 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2023
2023
2022
2023
2022
AVERAGE BALANCES
Assets
$
8,553,500
$
8,417,391
$
8,171,095
$
8,414,797
$
8,073,111
Earning assets
8,071,861
7,963,537
7,707,769
7,956,604
7,661,168
Investments
1,596,602
1,645,906
1,795,200
1,676,650
1,845,351
Loans and leases
6,387,858
6,245,883
5,840,593
6,203,857
5,566,701
Deposits
7,068,668
6,950,105
6,758,465
6,957,244
6,711,376
Interest bearing liabilities
5,678,546
5,566,874
5,086,446
5,522,793
5,002,168
Common shareholders’ equity
949,939
940,544
846,449
926,935
872,721
Total equity
1,013,114
999,552
906,613
987,196
929,321
INCOME STATEMENT DATA
Net interest income
$
71,330
$
69,236
$
71,455
$
278,647
$
263,469
Net interest income - FTE(1)
71,496
69,406
71,670
279,388
264,097
Provision for credit losses
1,911
859
5,342
5,866
13,245
Noninterest income
20,076
24,455
23,280
90,623
91,262
Noninterest expense
52,972
50,166
48,377
201,724
184,699
Net income
28,417
32,939
31,056
124,934
120,532
Net income available to common shareholders
28,429
32,939
31,068
124,927
120,509
PER SHARE DATA
Basic net income per common share
$
1.15
$
1.32
$
1.25
$
5.03
$
4.84
Diluted net income per common share
1.15
1.32
1.25
5.03
4.84
Common cash dividends declared
0.34
0.32
0.32
1.30
1.26
Book value per common share(2)
40.50
37.83
35.04
40.50
35.04
Tangible book value per common share(1)
37.06
34.40
31.63
37.06
31.63
Market value - High
56.59
49.36
59.94
56.59
59.94
Market value - Low
41.30
40.96
46.40
38.77
42.29
Basic weighted average common shares outstanding
24,430,477
24,660,508
24,658,294
24,615,546
24,687,324
Diluted weighted average common shares outstanding
24,430,477
24,660,508
24,658,294
24,615,546
24,687,324
KEY RATIOS
Return on average assets
1.32
%
1.55
%
1.51
%
1.48
%
1.49
%
Return on average common shareholders’ equity
11.87
13.89
14.56
13.48
13.81
Average common shareholders’ equity to average assets
11.11
11.17
10.36
11.02
10.81
End of period tangible common equity to tangible assets(1)
10.48
9.96
9.45
10.48
9.45
Risk-based capital - Common Equity Tier 1(3)
13.22
13.31
13.19
13.22
13.19
Risk-based capital - Tier 1(3)
14.99
14.86
14.84
14.99
14.84
Risk-based capital - Total(3)
16.25
16.12
16.10
16.25
16.10
Net interest margin
3.51
3.45
3.68
3.50
3.44
Net interest margin - FTE(1)
3.51
3.46
3.69
3.51
3.45
Efficiency ratio: expense to revenue
57.95
53.54
51.07
54.63
52.07
Efficiency ratio: expense to revenue - adjusted(1)
56.40
54.24
51.05
54.21
51.13
Net (recoveries) charge offs to average loans and leases
(0.10)
0.02
0.12
(0.04)
0.03
Loan and lease loss allowance to loans and leases
2.26
2.27
2.32
2.26
2.32
Nonperforming assets to loans and leases
0.37
0.27
0.45
0.37
0.45
December 31,
September 30,
June 30,
March 31,
December 31,
2023
2023
2023
2023
2022
END OF PERIOD BALANCES
Assets
$
8,727,958
$
8,525,058
$
8,414,818
$
8,329,803
$
8,339,416
Loans and leases
6,518,505
6,353,648
6,215,343
6,116,716
6,011,162
Deposits
7,038,581
6,967,492
6,976,518
6,801,464
6,928,265
Allowance for loan and lease losses
147,552
144,074
143,542
142,511
139,268
Goodwill and intangible assets
83,916
83,921
83,897
83,901
83,907
Common shareholders’ equity
989,568
924,250
921,020
909,159
864,068
Total equity
1,068,263
982,997
980,087
968,444
923,766
ASSET QUALITY
Loans and leases past due 90 days or more
$
149
$
154
$
56
$
24
$
54
Nonaccrual loans and leases
23,381
16,617
20,481
18,062
26,420
Other real estate
—
117
193
117
104
Repossessions
705
233
47
445
327
Equipment owned under operating leases
—
—
—
—
22
Total nonperforming assets
$
24,235
$
17,121
$
20,777
$
18,648
$
26,927
(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 in over 5 years as a percent of total assets.
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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
December 31,
September 30,
June 30,
December 31,
2023
2023
2023
2022
ASSETS
Cash and due from banks
$
77,474
$
75,729
$
86,742
$
84,703
Federal funds sold and interest bearing deposits with other banks
52,194
35,406
25,933
38,094
Investment securities available-for-sale
1,622,600
1,605,242
1,661,405
1,775,128
Other investments
25,075
25,075
25,320
25,293
Mortgages held for sale
1,442
3,118
2,321
3,914
Loans and leases, net of unearned discount:
Commercial and agricultural
766,223
763,051
797,188
812,031
Renewable energy
399,708
364,949
376,905
381,163
Auto and light truck
966,912
901,484
901,054
808,117
Medium and heavy duty truck
311,947
323,202
319,634
313,862
Aircraft
1,078,172
1,079,581
1,060,340
1,077,722
Construction equipment
1,084,752
1,062,097
1,012,969
938,503
Commercial real estate
1,129,861
1,088,199
985,323
943,745
Residential real estate and home equity
637,973
627,515
617,495
584,737
Consumer
142,957
143,570
144,435
151,282
Total loans and leases
6,518,505
6,353,648
6,215,343
6,011,162
Allowance for loan and lease losses
(147,552)
(144,074)
(143,542)
(139,268)
Net loans and leases
6,370,953
6,209,574
6,071,801
5,871,894
Equipment owned under operating leases, net
20,366
24,096
26,582
31,700
Net premises and equipment
46,159
43,951
44,089
44,773
Goodwill and intangible assets
83,916
83,921
83,897
83,907
Accrued income and other assets
427,779
418,946
386,728
380,010
Total assets
$
8,727,958
$
8,525,058
$
8,414,818
$
8,339,416
LIABILITIES
Deposits:
Noninterest bearing demand
$
1,655,728
$
1,680,725
$
1,721,947
$
1,998,151
Interest-bearing deposits:
Interest-bearing demand
2,430,833
2,416,864
2,528,231
2,591,464
Savings
1,213,334
1,180,837
1,163,166
1,198,191
Time
1,738,686
1,689,066
1,563,174
1,140,459
Total interest-bearing deposits
5,382,853
5,286,767
5,254,571
4,930,114
Total deposits
7,038,581
6,967,492
6,976,518
6,928,265
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase
55,809
48,335
69,308
141,432
Other short-term borrowings
256,550
223,757
118,377
74,097
Total short-term borrowings
312,359
272,092
187,685
215,529
Long-term debt and mandatorily redeemable securities
47,911
46,533
46,649
46,555
Subordinated notes
58,764
58,764
58,764
58,764
Accrued expenses and other liabilities
202,080
197,180
165,115
166,537
Total liabilities
7,659,695
7,542,061
7,434,731
7,415,650
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 December 31, 2023, September 30, 2023, June 30, 2023, and December 31, 2022, respectively
436,538
436,538
436,538
436,538
Retained earnings
789,842
769,603
744,442
694,862
Cost of common stock in treasury (3,771,070, 3,776,591, 3,523,113, and 3,543,388 shares at December 31, 2023, September 30, 2023, June 30, 2023, and December 31, 2022, respectively)
(130,489)
(130,579)
(120,410)
(119,642)
Accumulated other comprehensive loss
(106,323)
(151,312)
(139,550)
(147,690)
Total shareholders’ equity
989,568
924,250
921,020
864,068
Noncontrolling interests
78,695
58,747
59,067
59,698
Total equity
1,068,263
982,997
980,087
923,766
Total liabilities and equity
$
8,727,958
$
8,525,058
$
8,414,818
$
8,339,416
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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands, except per share amounts)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2023
2023
2022
2023
2022
Interest income:
Loans and leases
$
107,103
$
100,206
$
79,244
$
387,298
$
263,894
Investment securities, taxable
5,989
5,918
6,970
24,501
26,294
Investment securities, tax-exempt
314
319
419
1,445
1,049
Other
1,165
883
627
3,663
2,579
Total interest income
114,571
107,326
87,260
416,907
293,816
Interest expense:
Deposits
38,624
34,405
12,746
123,162
25,231
Short-term borrowings
1,878
2,136
1,070
7,032
1,497
Subordinated notes
1,066
1,060
972
4,174
3,550
Long-term debt and mandatorily redeemable securities
1,673
489
1,017
3,892
69
Total interest expense
43,241
38,090
15,805
138,260
30,347
Net interest income
71,330
69,236
71,455
278,647
263,469
Provision for credit losses
1,911
859
5,342
5,866
13,245
Net interest income after provision for credit losses
69,419
68,377
66,113
272,781
250,224
Noninterest income:
Trust and wealth advisory
5,912
5,648
5,608
23,706
23,107
Service charges on deposit accounts
3,331
3,297
3,172
12,749
12,146
Debit card
4,395
4,377
4,669
17,980
18,052
Mortgage banking
772
971
819
3,471
4,122
Insurance commissions
1,527
1,714
1,535
6,911
6,703
Equipment rental
1,907
2,101
2,556
8,837
12,274
Losses on investment securities available-for-sale
(2,882)
—
(184)
(2,926)
(184)
Other
5,114
6,347
5,105
19,895
15,042
Total noninterest income
20,076
24,455
23,280
90,623
91,262
Noninterest expense:
Salaries and employee benefits
29,913
28,866
27,695
115,612
105,110
Net occupancy
2,925
2,867
2,811
11,090
10,728
Furniture and equipment
1,715
1,217
1,397
5,653
5,448
Data processing
6,341
6,289
5,963
25,055
22,375
Depreciation — leased equipment
1,523
1,672
2,111
7,093
10,023
Professional fees
2,556
1,763
2,039
6,705
7,280
FDIC and other insurance
1,624
1,598
943
5,926
3,625
Business development and marketing
2,335
1,201
1,471
7,157
5,823
Other
4,040
4,693
3,947
17,433
14,287
Total noninterest expense
52,972
50,166
48,377
201,724
184,699
Income before income taxes
36,523
42,666
41,016
161,680
156,787
Income tax expense
8,106
9,727
9,960
36,746
36,255
Net income
28,417
32,939
31,056
124,934
120,532
Net loss (income) attributable to noncontrolling interests
12
—
12
(7)
(23)
Net income available to common shareholders
$
28,429
$
32,939
$
31,068
$
124,927
$
120,509
Per common share:
Basic net income per common share
$
1.15
$
1.32
$
1.25
$
5.03
$
4.84
Diluted net income per common share
$
1.15
$
1.32
$
1.25
$
5.03
$
4.84
Cash dividends
$
0.34
$
0.32
$
0.32
$
1.30
$
1.26
Basic weighted average common shares outstanding
24,430,477
24,660,508
24,658,294
24,615,546
24,687,324
Diluted weighted average common shares outstanding
24,430,477
24,660,508
24,658,294
24,615,546
24,687,324
– 9 –
1st SOURCE CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited - Dollars in thousands)
Three Months Ended
December 31, 2023
September 30, 2023
December 31, 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
$
1,559,351
$
5,989
1.52
%
$
1,605,912
$
5,918
1.46
%
$
1,742,567
$
6,970
1.59
%
Tax-exempt(1)
37,251
392
4.17
%
39,994
397
3.94
%
52,633
525
3.96
%
Mortgages held for sale
2,010
41
8.09
%
3,169
54
6.76
%
2,834
40
5.60
%
Loans and leases, net of unearned discount(1)
6,387,858
107,150
6.65
%
6,245,883
100,244
6.37
%
5,840,593
79,313
5.39
%
Other investments
85,391
1,165
5.41
%
68,579
883
5.11
%
69,142
627
3.60
%
Total earning assets(1)
8,071,861
114,737
5.64
%
7,963,537
107,496
5.36
%
7,707,769
87,475
4.50
%
Cash and due from banks
70,352
68,640
76,843
Allowance for loan and lease losses
(146,076)
(145,197)
(137,350)
Other assets
557,363
530,411
523,833
Total assets
$
8,553,500
$
8,417,391
$
8,171,095
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
$
5,383,925
$
38,624
2.85
%
$
5,247,332
$
34,405
2.60
%
$
4,718,303
$
12,746
1.07
%
Short-term borrowings:
Securties sold under agreements to repurchase
52,278
29
0.22
%
60,736
35
0.23
%
137,248
18
0.05
%
Other short-term borrowings
136,814
1,849
5.36
%
153,523
2,101
5.43
%
125,078
1,052
3.34
%
Subordinated notes
58,764
1,066
7.20
%
58,764
1,060
7.16
%
58,764
972
6.56
%
Long-term debt and mandatorily redeemable securities
46,765
1,673
14.19
%
46,519
489
4.17
%
47,053
1,017
8.58
%
Total interest-bearing liabilities
5,678,546
43,241
3.02
%
5,566,874
38,090
2.71
%
5,086,446
15,805
1.23
%
Noninterest-bearing deposits
1,684,743
1,702,773
2,040,162
Other liabilities
177,097
148,192
137,874
Shareholders’ equity
949,939
940,544
846,449
Noncontrolling interests
63,175
59,008
60,164
Total liabilities and equity
$
8,553,500
$
8,417,391
$
8,171,095
Less: Fully tax-equivalent adjustments
(166)
(170)
(215)
Net interest income/margin (GAAP-derived)(1)
$
71,330
3.51
%
$
69,236
3.45
%
$
71,455
3.68
%
Fully tax-equivalent adjustments
166
170
215
Net interest income/margin - FTE(1)
$
71,496
3.51
%
$
69,406
3.46
%
$
71,670
3.69
%
(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.
– 10 –
1st SOURCE CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited - Dollars in thousands)
Twelve Months Ended
December 31, 2023
December 31, 2022
Average Balance
Interest Income/Expense
Yield/ Rate
Average Balance
Interest Income/Expense
Yield/ Rate
ASSETS
Investment securities available-for-sale:
Taxable
$
1,632,567
$
24,501
1.50
%
$
1,805,041
$
26,294
1.46
%
Tax-exempt(1)
44,083
1,805
4.09
%
40,310
1,311
3.25
%
Mortgages held for sale
2,368
155
6.55
%
5,178
217
4.19
%
Loans and leases, net of unearned discount(1)
6,203,857
387,524
6.25
%
5,566,701
264,043
4.74
%
Other investments
73,729
3,663
4.97
%
243,938
2,579
1.06
%
Total earning assets(1)
7,956,604
417,648
5.25
%
7,661,168
294,444
3.84
%
Cash and due from banks
70,304
75,836
Allowance for loan and lease losses
(144,183)
(133,028)
Other assets
532,072
469,135
Total assets
$
8,414,797
$
8,073,111
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits
$
5,204,095
$
123,162
2.37
%
$
4,673,494
$
25,231
0.54
%
Short-term borrowings:
Securities sold under agreements to repurchase
78,928
136
0.17
%
166,254
85
0.05
%
Other short-term borrowings
134,683
6,896
5.12
%
48,716
1,412
2.90
%
Subordinated notes
58,764
4,174
7.10
%
58,764
3,550
6.04
%
Long-term debt and mandatorily redeemable securities
46,323
3,892
8.40
%
54,940
69
0.13
%
Total interest-bearing liabilities
5,522,793
138,260
2.50
%
5,002,168
30,347
0.61
%
Noninterest-bearing deposits
1,753,149
2,037,882
Other liabilities
151,659
103,740
Shareholders’ equity
926,935
872,721
Noncontrolling interests
60,261
56,600
Total liabilities and equity
$
8,414,797
$
8,073,111
Less: Fully tax-equivalent adjustments
(741)
(628)
Net interest income/margin (GAAP-derived)(1)
$
278,647
3.50
%
$
263,469
3.44
%
Fully tax-equivalent adjustments
741
628
Net interest income/margin - FTE(1)
$
279,388
3.51
%
$
264,097
3.45
%
(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.
– 11 –
1st SOURCE CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited - Dollars in thousands, except per share data)
Three Months Ended
Twelve Months Ended
December 31,
September 30,
December 31,
December 31,
December 31,
2023
2023
2022
2023
2022
Calculation of Net Interest Margin
(A)
Interest income (GAAP)
$
114,571
$
107,326
$
87,260
$
416,907
$
293,816
Fully tax-equivalent adjustments:
(B)
- Loans and leases
88
92
109
381
366
(C)
- Tax-exempt investment securities
78
78
106
360
262
(D)
Interest income - FTE (A+B+C)
114,737
107,496
87,475
417,648
294,444
(E)
Interest expense (GAAP)
43,241
38,090
15,805
138,260
30,347
(F)
Net interest income (GAAP) (A–E)
71,330
69,236
71,455
278,647
263,469
(G)
Net interest income - FTE (D–E)
71,496
69,406
71,670
279,388
264,097
(H)
Annualization factor
3.967
3.967
3.967
1.000
1.000
(I)
Total earning assets
$
8,071,861
$
7,963,637
$
7,707,769
$
7,956,604
$
7,661,168
Net interest margin (GAAP-derived) (F*H)/I
3.51
%
3.45
%
3.68
%
3.50
%
3.44
%
Net interest margin - FTE (G*H)/I
3.51
%
3.46
%
3.69
%
3.51
%
3.45
%
Calculation of Efficiency Ratio
(F)
Net interest income (GAAP)
$
71,330
$
69,236
$
71,455
$
278,647
$
263,469
(G)
Net interest income - FTE
71,496
69,406
71,670
279,388
264,097
(J)
Plus: noninterest income (GAAP)
20,076
24,455
23,280
90,623
91,262
(K)
Less: gains/losses on investment securities and partnership investments
1,173
(2,779)
(2,216)
(3,875)
(3,714)
(L)
Less: depreciation - leased equipment
(1,523)
(1,672)
(2,111)
(7,093)
(10,023)
(M)
Total net revenue (GAAP) (F+J)
91,406
93,691
94,735
369,270
354,731
(N)
Total net revenue - adjusted (G+J–K–L)
91,222
89,410
90,623
359,043
341,622
(O)
Noninterest expense (GAAP)
52,972
50,166
48,377
201,724
184,699
(L)
Less: depreciation - leased equipment
(1,523)
(1,672)
(2,111)
(7,093)
(10,023)
(P)
Noninterest expense - adjusted (O–L)
51,449
48,494
46,266
194,631
174,676
Efficiency ratio (GAAP-derived) (O/M)
57.95
%
53.54
%
51.07
%
54.63
%
52.07
%
Efficiency ratio - adjusted (P/N)
56.40
%
54.24
%
51.05
%
54.21
%
51.13
%
End of Period
December 31,
September 30,
December 31,
2023
2023
2022
Calculation of Tangible Common Equity-to-Tangible Assets Ratio
(Q)
Total common shareholders’ equity (GAAP)
$
989,568
$
924,250
$
864,068
(R)
Less: goodwill and intangible assets
(83,916)
(83,921)
(83,907)
(S)
Total tangible common shareholders’ equity (Q–R)
$
905,652
$
840,329
$
780,161
(T)
Total assets (GAAP)
8,727,958
8,525,058
8,339,416
(R)
Less: goodwill and intangible assets
(83,916)
(83,921)
(83,907)
(U)
Total tangible assets (T–R)
$
8,644,042
$
8,441,137
$
8,255,509
Common equity-to-assets ratio (GAAP-derived) (Q/T)
11.34
%
10.84
%
10.36
%
Tangible common equity-to-tangible assets ratio (S/U)
10.48
%
9.96
%
9.45
%
Calculation of Tangible Book Value per Common Share
(Q)
Total common shareholders’ equity (GAAP)
$
989,568
$
924,250
$
864,068
(V)
Actual common shares outstanding
24,434,604
24,429,083
24,662,286
Book value per common share (GAAP-derived) (Q/V)*1000
$
40.50
$
37.83
$
35.04
Tangible common book value per share (S/V)*1000
$
37.06
$
34.40
$
31.63
The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP #336901 10 3)