-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uwefjo4NhsS+GYKJe/ivkkt86p12LR2o/FjffTSc4bCslR9H3n7HG1vkMeNHnzBB j+rd9f1u1Dl36N8fnLVrqQ== /in/edgar/work/0000034782-00-000045/0000034782-00-000045.txt : 20001114 0000034782-00-000045.hdr.sgml : 20001114 ACCESSION NUMBER: 0000034782-00-000045 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 1ST SOURCE CORP CENTRAL INDEX KEY: 0000034782 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 351068133 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06233 FILM NUMBER: 760158 BUSINESS ADDRESS: STREET 1: 100 N MICHIGAN ST CITY: SOUTH BEND STATE: IN ZIP: 46601 BUSINESS PHONE: 2192352702 MAIL ADDRESS: STREET 1: P O BOX 1602 STREET 2: P O BOX 1602 CITY: SOUTH BEND STATE: IN ZIP: 46634 FORMER COMPANY: FORMER CONFORMED NAME: FBT BANCORP INC DATE OF NAME CHANGE: 19820818 10-Q 1 form_10q-0900.txt FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 2000 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ------------------ OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-6233 -------- 1st SOURCE CORPORATION ---------------------- (Exact name of registrant as specified in its charter) INDIANA 35-1068133 ------- ---------- (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 North Michigan Street South Bend, Indiana 46601 - ------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (219) 235-2702 -------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares of common stock outstanding as of September 30, 2000 - 19,724,582 shares. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Page Consolidated statements of financial condition -- 3 September 30, 2000, and December 31, 1999 Consolidated statements of income -- 4 three months and nine months ended September 30, 2000 and 1999 Consolidated statements of cash flows -- 5 nine months ended September 30, 2000 and 1999 Notes to the Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 13 PART II.OTHER INFORMATION 14 SIGNATURES 15 - 2 - CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 1st Source Corporation and Subsidiaries (Unaudited - Dollars in thousands) September 30, December 31, 2000 1999 ------------ ------------ ASSETS Cash and due from banks .......................... $ 125,547 $ 101,911 Federal funds sold and interest bearing deposits with other banks ..... 7,239 1,399 Investment securities: Securities available-for-sale, at fair value (amortized cost of $487,398 and $475,390 at September 30, 2000 and December 31, 1999).. 484,351 470,040 Securities held-to-maturity, at amortized cost (fair value of $63,714 and $78,462 at September 30, 2000 and December 31, 1999) .... 62,748 77,190 ----------- ----------- Total Investment Securities ...................... 547,099 547,230 Loans - net of unearned discount ................. 2,272,574 2,063,189 Reserve for loan losses ........................ (42,544) (40,210) ----------- ----------- Net Loans ........................................ 2,230,030 2,022,979 Equipment owned under operating leases, net of accumulated depreciation 82,150 65,956 Premises and equipment, net of accumulated depreciation ............... 33,324 33,745 Other assets ..................................... 108,491 99,725 ----------- ----------- Total Assets ..................................... $ 3,133,880 $ 2,872,945 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest bearing ............................ $ 307,388 $ 268,825 Interest bearing ............................... 2,139,352 1,858,627 ----------- ----------- Total Deposits ................................... 2,446,740 2,127,452 Federal funds purchased and securities sold under agreements to repurchase ............ 177,916 263,253 Other short-term borrowings ...................... 139,759 146,489 Other liabilities ................................ 51,754 40,007 Long-term debt ................................... 12,123 12,174 ----------- ----------- Total Liabilities ................................ 2,828,292 2,589,375 Guaranteed preferred beneficial interests in 1st Source's subordinated debentures ........ 44,750 44,750 Shareholders' equity: Common stock-no par value ...................... 7,227 6,883 Capital surplus ................................ 195,197 179,905 Retained earnings .............................. 72,515 68,309 Less cost of common stock in treasury .......... (15,059) (14,382) Net unrealized appreciation (depreciation) of securities available-for-sale ................ 958 (1,895) ----------- ----------- Total Shareholders' Equity ....................... 260,838 238,820 ----------- ----------- Total Liabilities and Shareholders' Equity ....... $ 3,133,880 $ 2,872,945 =========== =========== The accompanying notes are a part of the consolidated financial statements. - 3 -
CONSOLIDATED STATEMENTS OF INCOME 1st Source Corporation and Subsidiaries (Unaudited - Dollars in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30 September 30 ------------------ ---------------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Interest Income: Loans, including fees ...................................... $ 53,133 $ 43,813 $ 149,558 $ 127,393 Investment securities: Taxable ................................................ 5,696 4,763 16,149 14,713 Tax-exempt ............................................. 2,020 1,993 6,014 5,888 Other .................................................. 281 29 523 374 ------------ ------------ ------------ ------------ Total Interest Income ....................................... 61,130 50,598 172,244 148,368 Interest Expense: Deposits ................................................. 29,243 20,483 78,928 62,954 Short-term borrowings .................................... 5,362 4,273 14,659 10,756 Long-term debt ........................................... 225 216 670 670 ------------ ------------ ------------ ------------ Total Interest Expense ...................................... 34,830 24,972 94,257 74,380 ------------ ------------ ------------ ------------ Net Interest Income ......................................... 26,300 25,626 77,987 73,988 Provision for loan losses ................................... 1,292 2,232 9,888 4,968 ------------ ------------ ------------ ------------ Net Interest Income After Provision for Loan Losses ................................ 25,008 23,394 68,099 69,020 Noninterest Income: Trust fees ............................................... 2,315 2,158 7,145 6,726 Service charges on deposit accounts ...................... 1,984 1,818 5,708 5,054 Loan servicing and sale income ........................... 3,632 4,932 15,459 14,410 Equipment rental income .................................. 5,810 4,846 14,913 12,349 Other income ............................................. 2,759 2,702 7,950 7,749 Investment securities and other investment gains (losses), net .................. -- -- 497 (476) ------------ ------------ ------------ ------------ Total Noninterest Income .................................... 16,500 16,456 51,672 45,812 ------------ ------------ ------------ ------------ Noninterest Expense: Salaries and employee benefits ........................... 14,076 13,770 41,378 39,824 Net occupancy expense .................................... 1,433 1,332 4,140 3,900 Furniture and equipment expense .......................... 2,123 1,895 6,378 5,866 Depreciation - leased equipment .......................... 4,389 3,359 12,213 9,436 Supplies and communications .............................. 1,298 1,273 3,809 3,881 Business development and marketing expense ............... 885 1,329 2,714 3,113 Other expense ............................................ 2,511 2,835 6,512 8,074 ------------ ------------ ------------ ------------ Total Noninterest Expense ................................... 26,715 25,793 77,144 74,094 ------------ ------------ ------------ ------------ Income Before Income Taxes and Subsidiary Trust Distributions 14,793 14,057 42,627 40,738 Income taxes ................................................ 4,967 4,883 14,024 14,057 Distribution on preferred securities of subsidiary trusts, net of income tax benefit .............. 600 561 1,786 1,666 ------------ ------------ ------------ ------------ Net Income .................................................. $ 9,226 $ 8,613 $ 26,817 $ 25,015 ============ ============ ============ ============ Other Comprehensive Income, Net of Tax: Change in unrealized appreciation (depreciation) of available-for-sale securities ........................... 1,998 (320) 2,853 (3,457) ------------ ------------ ------------ ------------ Total Comprehensive Income .................................. $ 11,224 $ 8,293 $ 29,670 $ 21,558 ============ ============ ============ ============ Per Common Share: (1) Basic Net Income Per Common Share ......................... $ 0.46 $ 0.44 $ 1.35 $ 1.26 ============ ============ ============ ============ Diluted Net Income Per Common Share ....................... $ 0.46 $ 0.43 $ 1.34 $ 1.24 ============ ============ ============ ============ Dividends ................................................. $ 0.090 $ 0.076 $ 0.261 $ 0.221 ============ ============ ============ ============ Basic Weighted Average Common Shares Outstanding ............ 19,748,539 19,870,325 19,801,965 19,896,349 ============ ============ ============ ============ Diluted Weighted Average Common Shares Outstanding .......... 19,949,587 20,183,451 20,021,683 20,225,420 ============ ============ ============ ============ (1) The computation of per share data gives retroactive recognition to a 5% stock dividend declared on July 18, 2000. The accompanying notes are a part of the consolidated financial statements.
- 4 - CONSOLIDATED STATEMENTS OF CASH FLOWS 1st Source Corporation and Subsidiaries (Unaudited - Dollars in thousands) Nine Months Ended September 30 2000 1999 --------- --------- Operating Activities: Net income .................................... $ 26,817 $ 25,015 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses ..................... 9,888 4,968 Depreciation of premises and equipment ........ 15,411 12,361 Amortization of investment security premiums and accretion of discounts, net ............. 759 1,224 Amortization of mortgage servicing rights ..... 4,199 4,305 Deferred income taxes ......................... 2,042 193 Realized investment securities (gains) losses . (497) 476 Realized gains on securitized loans ........... (6,916) (4,117) Increase in interest receivable ............... (4,628) (727) Increase in interest payable .................. 12,255 1,057 Other ......................................... (7,876) 2,959 --------- --------- Net Cash Provided by Operating Activities ....... 51,454 47,714 Investing Activities: Proceeds from sales and maturities of investment securities .................... 148,225 212,503 Purchases of investment securities ............ (132,056) (192,752) Net (increase)decrease in short-term investments (19,837) 38,290 Loans sold or participated to others .......... 225,749 267,421 Increase in loans net of principal collections. (448,077) (346,356) Net increase in equipment owned under operating leases ...................... (14,448) (9,970) Purchases of premises and equipment ........... (2,324) (3,163) Increase in other assets ...................... (1,784) (6,109) Other ......................................... (646) (1,124) --------- --------- Net Cash Used in Investing Activities ........... (245,198) (41,260) Financing Activities: Net increase (decrease) in demand deposits, NOW accounts and savings accounts ............... 40,423 (74,127) Net increase in certificates of deposit ....... 278,866 9,290 Net (decrease) increase in short-term borrowings (92,067) 56,560 Proceeds from issuance of long-term debt ...... 255 862 Payments of long-term debt .................... (307) (2,237) Acquisition of treasury stock ................. (4,601) (6,614) Cash dividends ................................ (5,189) (4,427) --------- --------- Net Cash Provided by (Used in) Financing Activities 217,380 (20,693) Increase (Decrease) in Cash and Cash Equivalents 23,636 (14,239) Cash and Cash Equivalents, Beginning of Period .. 101,911 132,514 --------- --------- Cash and Cash Equivalents, End of Period ........ $ 125,547 $ 118,275 ========= ========= The accompanying notes are a part of the consolidated financial statements. - 5 - Notes to the Consolidated Financial Statements 1. The unaudited consolidated condensed financial statements have been prepared in accordance with the instructions for Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The information furnished herein reflects all adjustments (all of which are normal and recurring in nature) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods for which this report is submitted. The 1999 1st Source Corporation Annual Report on Form 10-K and quarterly reports on Form 10-Q for the quarters ended March 31, 2000, and June 30, 2000 should be read in conjunction with these statements. 2. In June 1998, the Financial Accounting Standards Board (the "FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and for hedging activities. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on the intended use of the derivative and its resulting designation. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," which amends SFAS No. 133, deferring its effective date to fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of FASB Statement No. 133," which amends certain provisions of SFAS No. 133. 1st Source currently uses certain derivative contracts (interest rate swaps and forward contracts) which will be subject to SFAS No. 133. Management is currently in the process of assessing the impact that the adoption of SFAS No. 133 will have on 1st Source's results of operations and its financial position. Based on current information, it is not expected to have a material impact on its financial statements. 1st Source will adopt SFAS 133, concurrently with SFAS 137 and 138, on January 1, 2001. 3. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", which replaces SFAS No. 125. This statement revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but carries over most of the provisions of SFAS No. 125 without reconsideration. SFAS No. 140 is effective for transfers occurring after March 31, 2001 and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. This statement is not expected to have a material effect on 1st Source's financial position or results of operations. - 6 - PART I. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following management's discussion and analysis is presented to provide information concerning the financial condition of 1st Source as of September 30, 2000, as compared to September 30, 1999 and December 31, 1999, and the results of operations for the three and nine months ended September 30, 2000 and 1999. This discussion and analysis should be read in conjunction with 1st Source's consolidated condensed financial statements and the financial and statistical data appearing elsewhere in this report and the 1999 1st Source Corporation Annual Report on Form 10-K and the quarterly reports on Form 10-Q for the quarters ended March 31, and June 30, 2000. Except for historical information contained herein, the matters discussed in this document, and other information contained in 1st Source's SEC filings, may express "forward-looking statements." Those "forward-looking statements" may involve risk and uncertainties, including statements concerning future events, performance and assumptions and other statements that are other than statements of historical facts. 1st Source wishes to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Readers are advised that various factors--including, but not limited to, changes in laws, regulations or generally accepted accounting principles; 1st Source's competitive position within the markets served; increasing consolidation within the banking industry; unforeseen changes in interest rates; any unforeseen downturns in the local, regional or national economies--could cause 1st Source's actual results or circumstances for future periods to differ materially from those anticipated or projected. 1st Source does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date of such statements. - 7 - FINANCIAL CONDITION ------------------- 1st Source's assets at September 30, 2000 were $3.13 billion, up 14.2% from the same time last year. Total loans were up 16.1% and total deposits increased 15.8% over the comparable figures at the end of the third quarter of 1999. Shareholders' equity was $260.8 million, up 12.7% from the $231.5 million one year ago. As of September 30, 2000, the 1st Source equity-to-assets ratio was 8.3%, compared to 8.4% a year ago. Non-performing assets at September 30, 2000, were $21,570,000 compared to $15,355,000 at December 31, 1999, an increase of 40.48%. At September 30, 2000, non-performing assets were 0.95% of net loans compared to 0.74% at December 31, 1999. Loans are reported at the principal amount outstanding, net of unearned income. Loans identified as held-for- sale are carried at the lower of cost or market determined on an aggregate basis. Loans held-for-sale were $66.8 million and $73.6 million at September 30, 2000 and 1999, respectively. Included in Other Assets are capitalized mortagage servicing rights. The costs of purchasing the rights to service mortgage loans originated by others are deferred and amortized as reductions of mortgage servicing fee income over the estimated servicing period in proportion to the estimated servicing income to be received. SFAS No. 125 allows companies that intend to sell originated or purchased loans and retain the related servicing rights, to allocate a portion of the total costs of the loans to servicing rights, based on estimated fair value. Fair value is estimated based on market prices, when available, or the present value of future net servicing income, adjusted for such factors as discount and prepayment rates. As of September 30, 2000 and 1999, the balance of mortgage servicing rights was $20.4 million and $19.8 million, respectively. CAPITAL RESOURCES The banking regulators have established guidelines for leverage capital requirements, expressed in terms of Tier 1 or core capital as a percentage of average assets, to measure the soundness of a financial institution. These guidelines require all banks to maintain a minimum leverage capital ratio of 4.00% for adequately capitalized banks and 5.00% for well-capitalized banks. 1st Source's leverage capital ratio was 9.76% at September 30, 2000. The Federal Reserve Board has established risk-based capital guidelines for U.S. banking organizations. The guidelines established a conceptual framework calling for risk weights to be assigned to on and off-balance sheet items in arriving at risk-adjusted total assets, with the resulting ratio compared to a minimum standard to determine whether a bank has adequate capital. The minimum standard risk-based capital ratios effective in 2000 are 4.00% for adequately capitalized banks and 6.00% for well-capitalized banks for Tier 1 risk-based capital and 8.00% and 10.00%, respectively, for total risk-based capital. 1st Source's Tier 1 risk-based capital ratio on September 30, 2000 was 11.70% and the total risk-based capital ratio was 12.96%. - 8 - LIQUIDITY AND INTEREST RATE SENSITIVITY Asset and liability management includes the management of interest rate sensitivity and the maintenance of an adequate liquidity position. The purpose of liquidity management is to match the sources and uses of funds to anticipated customers' deposits and withdrawals, to anticipate borrowing requirements and to provide for the cash flow needs of 1st Source. The purpose of interest rate sensitivity management is to stabilize net interest income during periods of changing interest rates. Close attention is given to various interest rate sensitivity gaps and interest rate spreads. Maturities of rate sensitive assets are carefully maintained relative to the maturities of rate sensitive liabilities and interest rate forecasts. At September 30, 2000, the consolidated statement of financial condition was rate sensitive by $20,920,000 more liabilities than assets scheduled to reprice within one year or 98.72%. Management adjusts the composition of its assets and liabilities to manage the interest rate sensitivity gap based upon its expectations of interest rate fluctuations. - 9 - RESULTS OF OPERATIONS --------------------- NET INCOME Net income for the three-month and nine-month periods ended September 30, 2000, was $9,226,000 and $26,817,000 respectively, compared to $8,613,000 and $25,015,000 for the equivalent periods in 1999. The primary reasons for the increase were an increase in net interest income and noninterest income. This was offset by increases in the provision for loan losses and noninterest expense. Diluted net income per common share increased to $0.46 and $1.34, respectively, for the three-month and nine- month periods ended September 30, 2000, from $0.43 and $1.24 in 1999. Return on average common shareholders' equity was 14.41% for the nine months ended September 30, 2000, compared to 14.87% in 1999. The return on total average assets was 1.20% for the nine months ended September 30, 2000, compared to 1.23% in 1999. NET INTEREST INCOME The taxable equivalent net interest income for the three-month period ended September 30, 2000, was $27,087,000, an increase of 2.01% over the same period in 1999, resulting in a net yield of 3.81% compared to 4.24% in 1999. The fully taxable equivalent net interest income for the nine-month period ended September 30, 2000, was $80,404,000, an increase of 4.80% over 1999, resulting in a net yield of 3.94% compared to 4.18% in 1999. The net yield on earning assets has declined in 2000 due to more rapid increases in funding costs over increases in earning asset yields. Total average earning assets increased 13.87% and 11.01%, respectively, for the three-month and nine-month periods ended September 30, 2000, over the comparative periods in 1999. Total average investment securities increased 6.52% and 5.38%, respectively for the three-month and nine-month periods over one year ago primarily due to an increase of investments in U.S. Government Securities. Average loans increased by 14.99% and 12.50% for the three-month and nine-month periods, compared to the same periods in 1999, due to growth in loan volume in commercial, consumer and commercial loans secured by transportation and construction equipment. The taxable equivalent yields on total average earning assets were 8.71% and 8.23% for the three-month periods ended September 30, 2000, and 1999, and 8.57% and 8.24% for the nine-month periods ended September 30, 2000, and 1999, respectively. Average deposits increased 14.66% and 9.30%, respectively, for the three-month and nine-month periods over the same periods from 1999. The cost rate on average interest-bearing funds was 5.63% and 4.63% for the three- months ended September 30, 2000, and 1999, and 5.31% and 4.70% for the nine-month periods ended September 30, 2000 and 1999. The majority of the growth in deposits from last year has occurred in NOW accounts. The following table sets forth consolidated information regarding average balances and rates. - 10 -
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY INTEREST RATES AND INTEREST DIFFERENTIAL (Dollars in thousands) Three Months Ended September 30 ------------------------------------ 2000 1999 -------------------------------------------------------- Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ------- ------- ---- ------- ------- ---- ASSETS: Investment securities: Taxable ................. $ 363,281 $ 5,696 6.24% $ 337,702 $ 4,763 5.60% Tax exempt (1)........... 170,147 2,752 6.44% 163,064 2,864 6.97% Net loans (2)(3)........... 2,275,988 53,187 9.30% 1,979,307 43,867 8.79% Other investments ......... 17,797 281 6.28% 2,666 29 4.32% ---------- -------- ----- ---------- -------- ----- Total Earning Assets 2,827,213 61,916 8.71% 2,482,739 51,523 8.23% Cash and due from banks ... 95,995 112,985 Reserve for loan losses ... (42,210) (38,951) Other assets .............. 219,669 191,124 ---------- ---------- Total ..................... $3,100,667 $2,747,897 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY: Interest bearing deposits $2,111,164 $29,243 5.51% $1,804,569 $20,483 4.50% Short-term borrowings ... 339,863 5,361 6.28% 324,757 4,273 5.22% Long-term debt .......... 12,167 225 7.35% 11,835 215 7.22% ---------- ------- ----- ---------- ------- ----- Total Interest Bearing Liabilities ............. 2,463,194 34,829 5.63% 2,141,161 24,971 4.63% Noninterest bearing deposits 287,252 287,210 Other liabilities ....... 94,328 90,858 Shareholders' equity .... 255,893 228,668 ---------- ---------- Total ..................... $3,100,667 $2,747,897 ========== ========== ------- ------- Net Interest Income ....... $27,087 $26,552 ======= ======= Net Yield on Earning Assets on a Taxable ----- ----- Equivalent Basis ........ 3.81% 4.24% ===== ===== Nine Months Ended September 30 ------------------------------------- 2000 1999 -------------------------------------------------------- Interest Interest Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate ------- ------- ---- ------- ------- ---- ASSETS: Investment securities: Taxable ................. $ 362,253 $16,149 5.95% $ 343,140 $14,713 5.73% Tax exempt (1)........... 168,569 8,328 6.60% 160,583 8,474 7.06% Net loans (2)(3)........... 2,180,714 149,662 9.17% 1,938,355 127,540 8.80% Other investments ......... 11,823 522 5.90% 11,097 374 4.51% ---------- ------- ----- ---------- ------- ----- Total Earning Assets ...... 2,723,359 174,661 8.57% 2,453,175 151,101 8.24% Cash and due from banks ... 97,861 110,980 Reserve for loan losses ... (40,855) (38,759) Other assets .............. 213,468 184,826 ---------- ---------- Total ..................... $2,993,833 $2,710,222 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY: Interest bearing deposits $2,026,156 $78,928 5.20% $1,833,007 $62,954 4.59% Short-term borrowings ... 330,879 14,659 5.92% 270,800 10,756 5.31% Long-term debt .......... 12,224 670 7.32% 12,637 670 7.09% ---------- ------- ----- ---------- ------- ----- Total Interest Bearing Liabilities ............. 2,369,259 94,257 5.31% 2,116,444 74,380 4.70% Noninterest bearing deposits 283,536 280,125 Other liabilities ....... 92,528 88,778 Shareholders' equity .... 248,510 224,875 ---------- ---------- Total ..................... $2,993,833 $2,710,222 ========== ========== ------- ------- Net Interest Income ....... $80,404 $76,721 ======= ======= Net Yield on Earning Assets on a Taxable ----- ----- Equivalent Basis ........ 3.94% 4.18% ===== ===== (1) Interest income includes the effects of taxable equivalent adjustments, using a 40.525% rate for 2000 and 1999. Tax equivalent adjustments for the three-month periods were $733 in 2000 and $871 in 1999 and for the nine-month periods were $2,314 in 2000 and $2,586 in 1999. (2) Loan income includes fees on loans for the three-month periods of $1,299 in 2000 and $1,502 in 1999 and for the nine-month periods of $4,504 in 2000 and $4,302 in 1999. Loan income also includes the effects of taxable equivalent adjustments, using a 40.525% rate for 2000 and 1999. The tax equivalent adjustments for the three-month periods were $54 in 2000 and $55 in 1999 and for the nine-month periods were $104 in 1999 and $148 in 1999. (3) For purposes of this computation, non-accruing loans are included in the daily average loan amounts outstanding.
- 11 - PROVISION FOR LOAN LOSSES The provision for loan losses for the three-month period ended September 30, 2000, and 1999, was $1,292,000 and $2,232,000, respectively, and was $9,888,000 and $4,968,000 for the nine-month periods ended September 30, 2000 and 1999. Net Charge-offs of $247,000 have been recorded for the three-month period ended September 30, 2000, compared to $629,000 of Net Charge-offs for the same period in 1999. Year-to-date Net Charge-offs of $5,198,000 have been recorded in 2000, compared to Net Charge-offs of $994,000 through September 1999. A summary of loan loss experience during the three and nine months ended September 30, 2000 and 1999 is provided below.
Summary of Allowance for Loan Losses ------------------------------------ Three Months Ended Nine Months Ended September 30 September 30 2000 1999 2000 1999 --------- --------- --------- --------- Allowance for loan losses - beginning balance $ 42,205 $ 39,403 $ 40,210 $ 38,629 Charge-offs 731 762 5,994 1,457 Recoveries 484 133 796 463 --------- --------- --------- --------- Net charge-offs 247 629 5,198 994 Provision for loan losses 1,292 2,232 9,888 4,968 Recaptured reserve due to loan securitizations (706) (1,192) (2,356) (2,789) --------- --------- --------- --------- Allowance for loan losses - ending balance $ 42,544 $ 39,814 $ 42,544 $ 39,814 ========= ========= ========= ========= Loans outstanding at end of period 2,272,574 1,956,696 2,272,574 1,956,696 Average loans outstanding during period 2,275,988 1,979,307 2,180,714 1,938,355 Allowance for loan losses as a percentage of loans outstanding at end of period 1.87% 2.03% 1.87% 2.03% Ratio of net charge-offs during period to average loans outstanding 0.04% 0.13% 0.32% 0.07%
The reserve for loan losses was $42,544,000 or 1.87% of net loans at September 30, 2000, compared to $40,210,000 or 1.95% of net loans at December 31, 1999. It is management's opinion that the reserve for loan losses is adequate to absorb losses inherent in the loan portfolio as of September 30, 2000. NONINTEREST INCOME Noninterest income for the three-month periods ended September 30, 2000, and 1999 was $16,500,000 and $16,456,000, respectively, and for the nine-month periods was $51,672,000 in 2000 and $45,812,000 in 1999. For the nine-month period, trust fees increased 6.23%, service charges on deposit accounts increased 12.94%, loan servicing and sale income increased 7.28%, equipment rental income increased 20.76% and other income increased 2.59%. Servicing and sale income has increased for the nine-month period due to increased loan securitization activity and an increase in the sale and servicing of mortgage loans during the first six months of 2000. The increase in equipment rental income was primarily due to growth in operating leases. Investment Security and other net gains for the nine-month period ended September 30, 2000, were $497,000 compared to net losses of $476,000 in 1999. The net gains and losses for both years were primarily attributed to certain partnership and venture capital investments. - 12 - NONINTEREST EXPENSE Noninterest expense for the three-month period ended September 30, 2000, was $26,715,000, an increase of 3.57% over the same period in 1999 and was $77,144,000 for the nine-month period ended September 30, 2000, an increase of 4.12% over 1999. For the nine-month period ended September 30, 2000, salaries and employee benefits increased 3.90%, net occupancy expense increased 6.15%, furniture and equipment expense increased 8.73%, depreciation on leased equipment increased 29.43%, supplies and communications expense decreased 1.86%, business development and marketing expense decreased 12.82%, and miscellaneous other expenses decreased 19.35% over the same period in 1999. The increase in depreciation of leased equipment is due to a significant volume increase from the prior year. The miscellaneous other expense decrease from one year ago is attributed primarily to Year 2000 consulting expenses incurred in 1999. INCOME TAXES The provision for income taxes for the three-month and nine-month periods ended September 30, 2000, was $4,967,000 and $14,024,000, respectively, compared to $4,883,000 and $14,057,000 for the comparable periods in 1999. The provision for income taxes for the nine months ended September 30, 2000, and 1999, is at a rate which management believes approximates the effective rate for the year. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in market risk exposures that affect the "Quantitative and Qualitative Disclosures" presented in 1st Source's annual report on Form 10-K for the year ended December 31, 1999. See the discussion of interest rate sensitivity beginning on page 9. - 13 - PART II. OTHER INFORMATION ITEM 1. Legal Proceedings. None ITEM 2. Changes in Securities. None ITEM 3. Defaults Upon Senior Securities. None ITEM 4. Submission of Matters to a Vote of Security Holders None ITEM 5. Other Information. None ITEM 6. Exhibits and Reports on Form 8-K. (a) Exhibit 27 - Financial Data Schedule - 14 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 1st Source Corporation ------------------- DATE 11/13/00 /s/ Christopher J. Murphy III ---------- ---------------------------------------- (Signature) Christopher J. Murphy III Chairman of the Board, President and CEO DATE 11/13/00 /s/ Larry E. Lentych ---------- ---------------------------------------- (Signature) Larry E. Lentych Treasurer and Chief Financial Officer - 15 - EX-27 2 0002.txt
9 1,000 9-MOS DEC-31-2000 SEP-30-2000 125,547 1,239 6,000 0 484,351 62,748 63,714 2,272,574 42,544 3,133,880 2,446,740 317,675 51,754 56,873 0 0 7,227 253,611 3,133,880 149,558 22,163 523 172,244 78,928 94,257 77,987 9,888 497 77,144 42,627 26,817 0 0 26,817 1.35 1.34 3.94 18,157 728 0 0 40,210 5,994 (796) 42,544 31,655 0 10,889
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