EX-99.1 2 prq2.txt PRESS RELEASE SECOND QTR 2004 Exhibit 99.1 For: Immediate Release Contact: Larry Lentych July 29, 2004 574 235 2702 Andrea Short 574 235 2348 1ST SOURCE CORPORATION UP 85.88 PERCENT IN 2ND QUARTER, INCREASED DIVIDEND ANNOUNCED South Bend, IN -- 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today reported net income of $8.72 million for the second quarter of 2004, up 85.88 percent over the $4.69 million reported in the second quarter of 2003. During the first six months of 2004, net income for 1st Source Corporation was $13.80 million, a 50.79 percent increase over the $9.15 million reported for the same period in 2003. Diluted net income per common share for the second quarter of 2004 amounted to $0.42, up 90.91 percent compared with $0.22 reported in the second quarter of 2003. Diluted net income per share for the first two quarters of 2004 was $0.66, an increase of 53.49 percent over the $0.43 reported in the same period a year ago. Earnings for the second quarter of 2004 represent a return on average common shareholders' equity of 11.03 percent, as compared to 5.95 percent for the second quarter of 2003. Return on average total assets for the second quarter of 2004 was 1.08 percent versus 0.57 percent reported in the second quarter of 2003. Christopher J. Murphy III, Chairman and Chief Executive Officer, reported that at the July meeting, the Board of Directors approved an increase in the cash dividend for the second quarter to $0.11 per share from $0.10 per share last quarter. This is a 10.00 percent increase from the previous quarter's dividend and a 22.22 percent increase over the second quarter dividend of 2003. The increased cash dividend is reflective of the improving performance of the company and will be payable on August 16, 2004, to shareholders of record August 9, 2004. - MORE - Page 2 1st Source Corporation July 29, 2004 Mr. Murphy commented, "1st Source's financial performance continues to improve. We have worked diligently to strengthen our credit quality which has shown steady progress over the past year. We are still affected by decreased interest margins and volatility in the valuation of our mortgage servicing rights portfolio, but this quarter that volatility had a positive effect." Murphy concluded, "We have also continued to look for opportunities to grow our customer base and opened a new banking center on South Bend's south side in April. We continue to review and upgrade our systems and processes to help us provide outstanding customer service and better manage our businesses." 1st Source's reserve for loan losses as of June 30, 2004 was 3.14 percent of total loans compared to 3.22 percent at the end of the first quarter of 2004 and 3.01 percent for the second quarter a year ago. 1st Source's provision for loan losses was $0.48 million this quarter compared to $4.90 million for the second quarter of 2003. Net charge-offs were $0.48 million for the second quarter 2004 compared to $6.48 million for the second quarter of 2003. The ratio of nonperforming assets to net loans and leases was 1.22 percent on June 30, 2004, compared to 2.65 percent on June 30, 2003. Tax-equivalent net interest income was $26.02 million for the second quarter of 2004, down 5.41 percent from 2003's second quarter. The net interest margin was 3.45 percent for the second quarter of 2004 versus 3.66 percent for the same period in 2003. For the first six months of 2004, tax-equivalent interest income was $52.49 million compared to $54.82 million for the first six months of 2003, a decrease of 4.24 percent. The net interest margin was 3.49 percent for the six months ending June 30, 2004, versus 3.69 percent for the same period in 2003. Noninterest income for the second quarter of 2004 was $20.22 million, down 7.74 percent from the second quarter of 2003. In the second quarter, equipment rental income decreased due to the shrinkage of the operating lease portfolio, while other income decreased with the elimination of securitization income, as 1st Source no longer securitizes any of its loan portfolio. Trading security income also declined in the second quarter. Mortgage banking income increased in the second quarter of 2004 compared to a year ago as mortgage servicing - MORE - Page 3 1st Source Corporation July 29, 2004 rights impairment recoveries of $3.78 million offset both a reduction in mortgage origination volume and reduced gains on the sale of mortgage loans into the secondary market. For the first six months of 2004, noninterest income was $34.24 million, down 18.39 percent from 2003. Significant items affecting comparability between six month periods included decreased income from mortgage banking, equipment rental, securitization and securities trading. Noninterest expense was $31.95 million for the second quarter of 2004, compared with $37.28 million for the second quarter of 2003. For the first six months, noninterest expense was $64.29 million, compared with $72.08 million for the same period in 2003. In general, noninterest expense improvements in 2004 reflect decreases in salaries and employee benefits expense, depreciation on leased equipment, and loan collection and repossession expenses partially offset by an increase in professional fees which are included in other expense. As of June 30, 2004, the 1st Source common equity-to-assets ratio was 9.50 percent compared to 9.63 percent a year ago. Common shareholders' equity was $314.94 million, down 0.70 percent from the $317.17 million a year ago, due to the repurchase of 103,733 shares of common stock and a decrease of $10.51 million in accumulated other comprehensive income. The decrease in accumulated other comprehensive income was a result of changes in unrealized gain or loss on securities in the available-for-sale portfolio. Total assets at the end of the second quarter of 2004 were $3.32 billion, up 0.63 percent from the same time last year. Total deposits were down 9.79 percent and total loans were up 6.27 percent over the comparable figures at the end of the second quarter of 2003. 1st Source is the largest locally controlled financial institution headquartered in the northern Indiana-southwestern Michigan area. While delivering a comprehensive range of consumer and commercial banking services, 1st Source Bank has distinguished itself with highly personalized services. 1st Source Bank also competes for business nationally by offering specialized financing services for private and cargo aircraft, automobiles for leasing and rental agencies, medium and heavy duty trucks, construction and environmental equipment. The - MORE - Page 4 1st Source Corporation July 29, 2004 Corporation includes 61 banking centers in 15 counties, 6 Trustcorp Mortgage offices in Indiana, Ohio and Michigan, and 22 locations nationwide for the 1st Source Bank Specialty Finance Group. With a history dating back to 1863, 1st Source Bank has a tradition of providing superior service to customers while playing a leadership role in the continued development of the communities in which it serves. 1st Source may be accessed on its home page at "www.1stsource.com." Its common stock is traded on the Nasdaq stock market under "SRCE" and appears in the National Market System tables in many daily newspapers under the code name "1st Src." Marketmakers in 1st Source common shares are Citigroup Global Markets, Inc.; FTN Midwest Research Securities; Goldman, Sachs & Company; Keefe, Bruyette & Woods, Inc.; NatCity Investments, Inc.; Prudential Equity Group, Inc.; RBC Capital Markets; Sandler O'Neill & Partners; Schwab Capital Markets; Stifel, Nicolaus & Company, Incorporated.; and William Blair & Company. A portion of 1st Source's fixed and floating rate cumulative trust preferred securities are traded on the Nasdaq stock market under the symbols "SRCEP" and "SRCEO," respectively. The rate on the fixed rate securities is 9.0 percent and the rate for the third quarter 2004 on the floating rate securities is 3.63 percent. Marketmakers in those securities are Howe, Barnes Investments, Inc.; Schwab Capital Markets; and Stifel, Nicolaus & Company, Incorporated. Except for historical information contained herein, the matters discussed in this document express "forward-looking statements." Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" 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 U. S. generally accepted accounting principles; 1st Source's competitive position - MORE - Page 5 1st Source Corporation July 29, 2004 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. # # 1ST SOURCE CORPORATION 2ND QUARTER 2004 FINANCIAL HIGHLIGHTS (Unaudited-Dollars in thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE JUNE 2004 2003 2004 2003 -------------------------------- ----------------------------- END OF PERIOD BALANCES Assets $ 3,315,249 $ 3,294,473 Loans 2,230,429 2,098,788 Deposits 2,384,863 2,643,744 Reserve for loan losses 70,045 63,194 Intangible assets 24,904 27,034 Common shareholders' equity 314,936 317,172 AVERAGE BALANCES Assets $ 3,257,795 $ 3,299,570 $ 3,254,177 $ 3,286,796 Earning assets 3,030,244 3,013,449 3,023,187 2,995,225 Investments 737,900 670,172 739,352 663,215 Loans 2,191,348 2,112,247 2,195,194 2,131,930 Deposits 2,432,125 2,625,320 2,422,959 2,604,273 Interest bearing liabilities 2,489,900 2,500,962 2,501,970 2,508,611 Common shareholders' equity 317,805 315,933 317,688 313,887 INCOME STATEMENT DATA Net interest income $ 25,334 $ 26,740 $ 51,096 $ 53,296 Net interest income - FTE 26,015 27,504 52,490 54,816 Provision for loan losses 482 4,901 583 10,451 Noninterest income 20,221 21,918 34,240 41,957 Noninterest expense 31,945 37,275 64,287 72,077 Net income 8,718 4,690 13,797 9,150 PER SHARE DATA Basic net income per common share $ 0.42 $ 0.22 $ 0.67 $ 0.43 Diluted net income per common share 0.42 0.22 0.66 0.43 Cash dividends per common share 0.100 0.090 0.200 0.180 Book value per common share 15.26 15.05 15.26 15.05 Market value - High 25.500 19.500 25.500 19.500 Market value - Low 20.350 12.570 20.350 12.570 Basic weighted average common shares outstanding 20,700,516 21,071,946 20,713,775 21,036,329 Diluted weighted average common shares outstanding 20,969,669 21,407,824 20,993,471 21,368,940 KEY RATIOS Return on average assets 1.08 % 0.57 % 0.85 % 0.56 % Return on average common shareholders' equity 11.03 5.95 8.73 5.88 Average common shareholders' equity to average assets 9.76 9.57 9.76 9.55 End of period tangible common equity to tangible assets 8.81 8.88 8.81 8.88 Net interest margin 3.45 3.66 3.49 3.69 Efficiency: expense to revenue 66.20 72.18 71.08 70.95 Net charge-offs to average loans 0.09 0.67 0.05 0.61 Loan loss reserve to loans 3.14 3.01 3.14 3.01 Nonperforming assets to loans and leases 1.22 2.65 1.22 2.65 ASSET QUALITY Loans past due 90 days or more $ 164 $ 289 Nonaccrual loans 22,210 41,930 Other real estate 2,184 3,213 Repossessions 3,222 12,583 Equipment owned under operating leases 118 168 Total nonperforming assets 27,898 58,183
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1ST SOURCE CORPORATION CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited-Dollars in thousands) June 30, 2004 June 30, 2003 --------------- --------------- ASSETS Cash and due from banks $ 82,131 $ 122,422 Federal funds sold and interest bearing deposits with other banks 1,169 61,351 Investment securities, available-for-sale (amortized cost of $791,019 and $676,431 at June 30, 2004 and 2003, respectively) 782,525 684,926 Trading account securities 4,516 13,303 Mortgages held for sale 66,296 125,724 Loans, net of unearned discount: Commercial and agricultural loans 426,933 427,760 Auto, light truck and environmental equipment 269,583 277,477 Medium and heavy duty truck 229,867 209,235 Aircraft financing 445,340 288,110 Construction equipment financing 213,609 270,582 Loans secured by real estate 551,058 527,047 Consumer loans 94,039 98,577 --------------- --------------- Total loans 2,230,429 2,098,788 Reserve for loan losses (70,045) (63,194) --------------- --------------- Net loans 2,160,384 2,035,594 Equipment owned under operating leases (net of accumulated depreciation) 56,186 80,135 Net premises and equipment 37,490 39,376 Accrued income and other assets 124,552 131,642 --------------- --------------- Total assets $ 3,315,249 $ 3,294,473 =============== =============== LIABILITIES Deposits: Noninterest bearing $ 384,302 $ 444,705 Interest bearing 2,000,561 2,199,039 --------------- --------------- Total deposits 2,384,863 2,643,744 Federal funds purchased and securities sold under agreements to repurchase 411,812 172,586 Other short-term borrowings 71,760 35,707 Long-term debt and mandatorily redeemable securities 22,901 17,253 Subordinated notes 56,444 54,750 Accrued expenses and other liabilities 52,533 53,261 --------------- --------------- Total liabilities 3,000,313 2,977,301 SHAREHOLDERS' EQUITY Preferred stock; no par value - - Common stock; no par value 7,578 7,578 Capital surplus 214,001 214,001 Retained earnings 110,199 95,855 Cost of common stock in treasury (11,603) (5,535) Accumulated other comprehensive (loss)/income (5,239) 5,273 --------------- --------------- Total shareholders' equity 314,936 317,172 --------------- --------------- Total liabilities and shareholders' equity $ 3,315,249 $ 3,294,473 =============== ===============
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1ST SOURCE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited - Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, 2004 2003 2004 2003 --------- ----------- --------- --------- Interest income: Loans $ 31,904 $ 36,103 $ 64,358 $ 72,713 Investment securities, taxable 4,106 4,710 8,395 9,244 Investment securities, tax-exempt 1,258 1,445 2,575 2,880 Other 46 295 111 445 --------- ------------ ---------- ---------- Total interest income 37,314 42,553 75,439 85,282 Interest expense: Deposits 9,597 13,187 19,420 26,958 Short-term borrowings 1,283 1,498 2,540 2,762 Subordinated notes 962 941 1,923 1,881 Long-term debt and mandatorily redeemable securities 138 187 460 385 --------- ------------ ---------- ---------- Total interest expense 11,980 15,813 24,343 31,986 --------- ------------ ---------- ---------- Net interest income 25,334 26,740 51,096 53,296 Provision for loan losses 482 4,901 583 10,451 --------- ------------ ---------- ---------- Net interest income after provision for loan losses 24,852 21,839 50,513 42,845 Noninterest income: Trust fees 3,140 2,736 6,230 5,376 Service charges on deposit accounts 4,115 3,922 7,821 7,646 Mortgage banking income 6,187 5,176 5,345 9,342 Equipment rental income 4,927 6,455 10,751 13,226 Other income 1,890 3,904 4,383 6,922 Investment securities and other investment losses (38) (275) (290) (555) --------- ------------ ---------- ---------- Total noninterest income 20,221 21,918 34,240 41,957 --------- ------------ ---------- ---------- Noninterest expense: Salaries and employee benefits 15,866 18,290 31,620 35,537 Net occupancy expense 1,725 1,785 3,558 3,649 Furniture and equipment expense 2,697 2,677 5,281 5,318 Depreciation - leased equipment 3,883 5,050 8,419 10,408 Supplies and communication 1,451 1,558 2,883 3,069 Loan collection and repossession expense 821 3,695 1,876 5,566 Other expense 5,502 4,220 10,650 8,530 --------- ------------ ---------- ---------- Total noninterest expense 31,945 37,275 64,287 72,077 --------- ------------ ---------- ---------- Income before income taxes 13,128 6,482 20,466 12,725 Income taxes 4,410 1,792 6,669 3,575 --------- ------------ ---------- ---------- Net Income $ 8,718 $ 4,690 $ 13,797 $ 9,150 ========= ============ ========== ==========
The Nasdaq Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3) Please contact us at shareholder@1stsource.com 8