FULL YEAR AND QUARTERLY HIGHLIGHTS
•Net income was a record $120.51 million for the year of 2022, up 1.67% from 2021 and was $31.07 million for the fourth quarter of 2022, down 5.10% from the previous quarter and up 12.07% from the fourth quarter of 2021. Diluted net income per common share was a record $4.84 for the year of 2022, up 2.98% from 2021 and was $1.25 for the fourth quarter of 2022, down 5.30% from the previous quarter and up 12.61% from the prior year's fourth quarter.
•Cash dividend of $0.32 per common share was approved, up 3.23% from the cash dividend declared a year ago.
•Average loans and leases net of Paycheck Protection Program (PPP) loans grew $402.04 million in 2022, up 7.82% from 2021 and grew $215.70 million during the fourth quarter, up 3.84% (15.36% annualized growth) from the previous quarter.
•Tax-equivalent net interest income was $264.10 million for the year, up 11.39% from 2021 and was $71.67 million in the fourth quarter, up 3.70% from the previous quarter and up 19.10% from the fourth quarter of 2021. Tax-equivalent net interest margin was 3.45% for 2022, up 22 basis points from 2021 and was 3.69% for the fourth quarter of 2022, up nine basis points from the prior quarter and up 60 basis points from the fourth quarter of 2021.
•Due to strong loan growth, $13.25 million was provided and charged against earnings to the provision for credit losses for the full year of 2022 compared to the recognition of a $4.30 million recovery in the provision for credit losses during 2021. During the fourth quarter, $5.34 million was recognized in the provision for credit losses compared to a provision of $3.17 million in the previous quarter and a recovery in the provision of $1.12 million in the fourth quarter of 2021.
South Bend, IN - 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported record net income of $120.51 million for 2022, an increase of 1.67% compared to $118.53 million earned in 2021. Fourth quarter net income was $31.07 million, an increase of 12.07% compared to $27.72 million earned in the fourth quarter of 2021. Diluted net income per common share for the year was a record $4.84, up 2.98% from the $4.70 earned a year earlier. Diluted net income per common share for the fourth quarter was $1.25, up 12.61% from the $1.11 earned in the fourth quarter of the previous year.
At its January 2023 meeting, the Board of Directors approved a cash dividend of $0.32 per common share, up 3.23% from the $0.31 per common share declared a year ago. The cash dividend is payable to shareholders of record on February 6, 2023 and will be paid on February 16, 2023.
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Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, "We are pleased to announce record net income for the second year in a row and we reached our 35th consecutive year of dividend growth. We were able to grow average loans and leases by $402.04 million or 7.82% net of PPP from 2021. Given such strong loan and lease growth, we added $13.25 million to our provision for credit losses during the year compared to a $4.30 million recovery of provision for credit losses recorded during 2021. Our tax-equivalent net interest margin was 3.45% for the year compared to 3.23% in the prior year. As mentioned previously, the expansion in our net interest margin has largely been the result of seven Federal Reserve rate increases during 2022. We are hopeful that these rate increases will successfully stymie historically elevated levels of inflation but anticipate pressure on our net interest margin as we move forward into 2023. Our credit quality remained stable as we had net charge-offs to average loans and leases of only 0.03% in 2022 compared to 0.16% in 2021. I am extremely proud my colleagues were able to achieve such positive results during 2022.
"I am pleased also to report the U.S. Small Business Administration (SBA), Indiana District, recently recognized 1st Source Bank with a Gold Level Award in the Community Lender category for the tenth consecutive year. The award honors 1st Source Bank for delivering the greatest number of SBA loans in Indiana in 2022 among Community Banks with less than $10 billion in assets. Over the last decade our team members have proven their commitment to our values and mission in serving our business clients well. This award is a tremendous testament to them and the trust our clients have put in us, and we are proud to support our clients as they strive to start, grow and expand their community-based businesses.
"Lastly, as recently reported, our Board of Directors made two promotions with an eye on the future of our organization. Effective December 1, 2022, Andrea G. Short, President of 1st Source Bank also became the Bank's CEO. In her new role, Ms. Short has Personal Banking, Business Banking, Specialty Finance, Wealth Advisory Services, Credit, and the Operations functions of the Bank reporting up through her. She remains an Executive Vice President of 1st Source Corporation. Ms. Short is a CPA and joined 1st Source's Tax Department in 1998 and in 2001 was promoted to Assistant Vice President and Tax Director. She successfully moved up the ranks as Senior Vice President and Controller, then Executive Vice President and Chief Financial Officer, and finally as President of the Bank and Executive Vice President of the Corporation. In addition, Kevin C. Murphy has been named Chief Digital Officer and been promoted to Executive Vice President of the Bank and 1st Source Corporation. Other than interning with 1st Source as a CSR during his high school and college years, Mr. Murphy officially joined the Bank in 2006. His career has taken him through many different areas and management roles in the Bank: IT Web Development, Branch Systems, Treasury Products and Customer Support, Electronic Banking, Central Region President, Chief Information Officer and most recently as Group Head of IT, Marketing, and Digital Strategy. These two colleagues have demonstrated their belief in our values, selfless leadership, and their long-term commitment to the Mission and success of 1st Source. I continue as Chairman, President, and CEO of 1st Source Corporation and Chairman of 1st Source Bank, and look forward to continuing to work closely with Ms. Short and Mr. Murphy as well as the rest of our leadership team to build a strong and stable future for 1st Source, our clients, and shareholders," Mr. Murphy concluded.
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FULL YEAR AND FOURTH QUARTER 2022 FINANCIAL RESULTS
Loans
Annual average loans and leases of $5.57 billion increased $402.04 million, up 7.82% net of PPP loans from the full year 2021. Quarterly average loans and leases of $5.84 billion increased $631.29 million, up 12.13% net of PPP loans in the fourth quarter of 2022 from the year ago quarter and have increased $215.70 million net of PPP loans from the third quarter. PPP forgiveness and customer payments totaled $74.88 million for the full year of 2022 with less than $1 million remaining. Strong growth primarily within our specialty finance group portfolios drove total average loans and leases higher during the year.
Deposits
Annual average deposits for 2022 were $6.71 billion, an increase of $368.85 million, up 5.82% from 2021. Quarterly average deposits of $6.76 billion grew $57.89 million, up 0.86% for the quarter ended December 31, 2022 compared to the year ago quarter and have increased $85.23 million, up 1.28% compared to the third quarter. Deposit growth over the last year came from increased business, consumer and public funds. The deposit mix changed as the year progressed with clients moving their funds from non-maturity accounts to certificates of deposit due to the rate environment. Additionally, brokered deposits grew during the fourth quarter compared to the third quarter and the prior year's fourth quarter.
Net Interest Income and Net Interest Margin
For the twelve months of 2022, tax-equivalent net interest income was $264.10 million, an increase of $27.00 million, up 11.39% compared to the full year 2021. Fourth quarter 2022 tax-equivalent net interest income of $71.67 million increased $11.49 million, up 19.10% from the fourth quarter a year ago and increased $2.55 million, or 3.70% from the third quarter. We recognized $2.70 million in PPP loan fees during the full year of 2022 and $0.12 million during the fourth quarter compared to $16.84 million in 2021 and $3.58 million in the previous fourth quarter.
Net interest margin for the year ending December 31, 2022 was 3.44%, an increase of 22 basis points from the 3.22% for the year ending December 31, 2021. Net interest margin on a tax-equivalent basis for the year ending December 31, 2022 was 3.45%, an increase of 22 basis points from the 3.23% for the year ending December 31, 2021. Non-recurring items during the year including PPP loans fees and net interest recoveries contributed six-basis points to the 22-basis point increase.
Fourth quarter 2022 net interest margin was 3.68%, an increase of 59 basis points from the 3.09% for the same period in 2021 and an increase of nine basis points from the prior quarter. Fourth quarter 2022 net interest margin on a fully tax-equivalent basis was 3.69%, an increase of 60 basis points from the 3.09% for the same period in 2021 and an increase of nine basis points from the 3.60% in the prior quarter. PPP loan fees and net interest recoveries had a positive three-basis point impact on the fourth quarter net interest margin compared to a positive 17-basis point impact during the fourth quarter of 2021.
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Seven Federal Reserve rate increases totaling 425 basis points during 2022 contributed to net interest margin expansion as loans repriced faster than deposits during the year.
Noninterest Income
Noninterest income for the twelve months ended December 31, 2022 was $91.26 million, down $8.83 million or 8.82% compared to the twelve months ended December 31, 2021. Fourth quarter 2022 noninterest income of $23.28 million decreased $0.55 million, or 2.30% from the fourth quarter a year ago and increased $1.27 million or 5.78% from the third quarter.
Noninterest income during the twelve months ended December 31, 2022 was lower compared to a year ago mainly from a decline in mortgage banking origination volumes resulting in lower income from loans sold in the secondary market. Demand for mortgages has continued to decline with steep increases in interest rates that drove a precipitous decline in market activity. Noninterest income in 2022 was also impacted by lower equipment rental income due to a decrease in the size of the average equipment rental portfolio as demand for operating leases continues to decline, reduced trust and wealth advisory income based on lower market valuations of assets under management, fewer insurance commissions and a one-time write down of $0.37 million on small business capital investments. These decreases were offset by partnership investment gains on sale of renewable energy tax equity investments of $2.24 million, and increased deposit fee income.
The increase in noninterest income from the third quarter was mainly due to the aforementioned higher partnership investment gains on sale of renewable energy tax equity investments of $2.24 million offset by the aforementioned one-time $0.37 million write-down on small business capital investments and losses on the sale of available-for-sale securities.
Noninterest Expense
Noninterest expense for the twelve months ended December 31, 2022 was $184.70 million, a decrease of $1.45 million, or 0.78% compared to the same period a year ago. Fourth quarter 2022 noninterest expense of $48.38 million declined $0.37 million, or 0.76% from the fourth quarter a year ago and increased $3.05 million or 6.72% from the prior quarter.
The decrease in noninterest expense for 2022 from 2021 was primarily due to lower leased equipment depreciation resulting from a reduction in the average equipment rental portfolio, a $3.00 million charitable contribution made in 2021 not present in 2022, reduced legal fees, less incentive compensation awards and fewer group insurance claims. Those decreases were offset mainly by higher base salaries due to normal merit increases, an increase in the provision for unfunded loan commitments, a rise in software maintenance costs related to technology projects, and a higher valuation provision for interest rate swaps with customers.
The increase in noninterest expense from the third quarter was mainly due to a seasonal increase in group insurance claims, a rise in the provision for unfunded loan commitments, higher legal fees, and increased snow removal costs due to seasonal weather conditions offset by a lower valuation provision for interest rate swaps with customers.
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Additionally, we had a one-time federal income tax adjustment during the fourth quarter 2022 related to disallowed compensation of $0.44 million which increased our fourth quarter effective tax rate.
Credit
The allowance for loan and lease losses as of December 31, 2022 was 2.32% of total loans and leases compared to 2.36% at September 30, 2022 and 2.38% at December 31, 2021. The allowance calculation includes PPP loans which are guaranteed by the SBA. Excluding those loans from the calculation results in an allowance which was unchanged at December 31, 2022 and September 30, 2022 and 2.42% at December 31, 2021.
Net charge-offs that have been recorded for the full year of 2022 were $1.47 million compared to net charge-offs of $8.86 million in 2021. This resulted in a charge-off ratio of 0.03% for 2022 compared to 0.16% for 2021. Net charge-offs of $1.81 million were recorded for the fourth quarter of 2022 compared with net charge-offs of $5.15 million in the same quarter a year ago and $0.30 million of net charge-offs in the previous quarter. Overall, construction equipment accounted for 75% of the net charge-offs for the year.
The provision for credit losses was $13.25 million for the twelve months ended December 31, 2022 and $5.34 million for the fourth quarter of 2022, an increase of $17.55 million and $6.46 million, respectively, compared with the same periods in 2021. The ratio of nonperforming assets to loans and leases was 0.45% as of December 31, 2022, compared to 0.48% on September 30, 2022 and 0.77% on December 31, 2021.
Capital
As of December 31, 2022, the common equity-to-assets ratio was 10.36%, compared to 10.20% at September 30, 2022 and 11.32% a year ago. The tangible common equity-to-tangible assets ratio was 9.45% at December 31, 2022 compared to 9.26% at September 30, 2022 and 10.39% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines, was 13.19% at December 31, 2022 compared to 13.50% at September 30, 2022 and 13.72% a year ago.
Book value per share declined to $35.04 primarily due to non-credit-related, negative market value adjustments to our investment securities available-for-sale portfolio during the year. Market value adjustments of $137.83 million reduced common shareholders' equity and were the result of interest rate increases, market spreads and market conditions subsequent to purchase.
During 2022, 149,819 shares were repurchased for treasury reducing common shareholders' equity by $6.84 million. No shares were repurchased during the fourth quarter 2022.
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.
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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 79 banking centers, 19 1st Source Bank Specialty Finance Group locations nationwide, nine Wealth Advisory Services locations and 10 1st Source Insurance 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.
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.
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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 2022 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,
2022 2022 2021 2022 2021
AVERAGE BALANCES
Assets $ 8,171,095 $ 8,019,104 $ 8,111,055 $ 8,073,111 $ 7,731,147
Earning assets 7,707,769 7,615,593 7,715,838 7,661,168 7,338,639
Investments 1,795,200 1,863,979 1,715,227 1,845,351 1,443,380
Loans and leases 5,840,593 5,627,718 5,311,964 5,566,701 5,437,817
Deposits 6,758,465 6,673,239 6,700,575 6,711,376 6,342,527
Interest bearing liabilities 5,086,446 4,958,209 4,959,322 5,002,168 4,784,697
Common shareholders' equity 846,449 873,209 918,950 872,721 906,951
Total equity 906,613 931,412 966,063 929,321 951,991
INCOME STATEMENT DATA
Net interest income $ 71,455 $ 68,934 $ 60,067 $ 263,469 $ 236,638
Net interest income - FTE(1)
71,670 69,116 60,176 264,097 237,097
Provision (recovery of provision) for credit losses 5,342 3,167 (1,117) 13,245 (4,303)
Noninterest income 23,280 22,007 23,828 91,262 100,092
Noninterest expense 48,377 45,331 48,746 184,699 186,148
Net income 31,056 32,745 27,735 120,532 118,557
Net income available to common shareholders 31,068 32,737 27,723 120,509 118,534
PER SHARE DATA
Basic net income per common share $ 1.25 $ 1.32 $ 1.11 $ 4.84 $ 4.70
Diluted net income per common share 1.25 1.32 1.11 4.84 4.70
Common cash dividends declared 0.32 0.32 0.31 1.26 1.21
Book value per common share(2)
35.04 33.50 37.04 35.04 37.04
Tangible book value per common share(1)
31.63 30.10 33.64 31.63 33.64
Market value - High 59.94 51.29 51.20 59.94 51.20
Market value - Low 46.40 42.38 45.91 42.29 38.73
Basic weighted average common shares outstanding 24,658,294 24,656,736 24,775,288 24,687,324 25,038,127
Diluted weighted average common shares outstanding 24,658,294 24,656,736 24,775,288 24,687,324 25,038,127
KEY RATIOS
Return on average assets 1.51 % 1.62 % 1.36 % 1.49 % 1.53 %
Return on average common shareholders' equity 14.56 14.87 11.97 13.81 13.07
Average common shareholders' equity to average assets 10.36 10.89 11.33 10.81 11.73
End of period tangible common equity to tangible assets(1)
9.45 9.26 10.39 9.45 10.39
Risk-based capital - Common Equity Tier 1(3)
13.19 13.50 13.72 13.19 13.72
Risk-based capital - Tier 1(3)
14.84 15.24 15.50 14.84 15.50
Risk-based capital - Total(3)
16.10 16.50 16.76 16.10 16.76
Net interest margin 3.68 3.59 3.09 3.44 3.22
Net interest margin - FTE(1)
3.69 3.60 3.09 3.45 3.23
Efficiency ratio: expense to revenue 51.07 49.85 58.10 52.07 55.28
Efficiency ratio: expense to revenue - adjusted(1)
51.05 48.71 56.60 51.13 53.48
Net charge offs to average loans and leases 0.12 0.02 0.38 0.03 0.16
Loan and lease loss allowance to loans and leases 2.32 2.36 2.38 2.32 2.38
Nonperforming assets to loans and leases 0.45 0.48 0.77 0.45 0.77
December 31, September 30, June 30, March 31, December 31,
2022 2022 2022 2022 2021
END OF PERIOD BALANCES
Assets $ 8,339,416 $ 8,097,486 $ 8,029,359 $ 8,012,463 $ 8,096,289
Loans and leases 6,011,162 5,762,078 5,551,216 5,394,003 5,346,214
Deposits 6,928,265 6,621,231 6,744,896 6,673,092 6,679,065
Allowance for loan and lease losses 139,268 135,736 132,865 129,959 127,492
Goodwill and intangible assets 83,907 83,911 83,916 83,921 83,926
Common shareholders' equity 864,068 826,059 856,251 864,850 916,255
Total equity 923,766 886,360 910,667 919,470 969,464
ASSET QUALITY
Loans and leases past due 90 days or more $ 54 $ 165 $ 50 $ 274 $ 249
Nonaccrual loans and leases 26,420 27,813 33,490 35,435 38,706
Other real estate 104 - - - -
Repossessions 327 26 102 73 861
Equipment owned under operating leases 22 1 43 343 1,518
Total nonperforming assets $ 26,927 $ 28,005 $ 33,685 $ 36,125 $ 41,334
(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 under banking regulatory guidelines.
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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
December 31, September 30, June 30, December 31,
2022 2022 2022 2021
ASSETS
Cash and due from banks $ 84,703 $ 86,952 $ 116,915 $ 54,420
Federal funds sold and interest bearing deposits with other banks 38,094 30,652 164,848 470,767
Investment securities available-for-sale
1,775,128 1,801,194 1,836,389 1,863,041
Other investments 25,293 25,538 25,538 27,189
Mortgages held for sale 3,914 3,058 5,525 13,284
Loans and leases, net of unearned discount:
Commercial and agricultural 812,031 835,762 842,618 918,712
Solar 381,163 358,635 350,472 348,302
Auto and light truck 808,117 743,324 708,720 603,775
Medium and heavy duty truck 313,862 293,068 278,334 259,740
Aircraft 1,077,722 997,995 959,876 898,401
Construction equipment 938,503 878,692 803,734 754,273
Commercial real estate 943,745 937,423 931,058 929,341
Residential real estate and home equity 584,737 568,602 535,589 500,590
Consumer 151,282 148,577 140,815 133,080
Total loans and leases 6,011,162 5,762,078 5,551,216 5,346,214
Allowance for loan and lease losses (139,268) (135,736) (132,865) (127,492)
Net loans and leases 5,871,894 5,626,342 5,418,351 5,218,722
Equipment owned under operating leases, net 31,700 32,964 36,579 48,433
Net premises and equipment 44,773 44,837 45,250 47,038
Goodwill and intangible assets 83,907 83,911 83,916 83,926
Accrued income and other assets 380,010 362,038 296,048 269,469
Total assets $ 8,339,416 $ 8,097,486 $ 8,029,359 $ 8,096,289
LIABILITIES
Deposits:
Noninterest bearing demand $ 1,998,151 $ 2,047,328 $ 2,032,566 $ 2,052,981
Interest-bearing deposits:
Interest-bearing demand 2,591,464 2,527,461 2,644,590 2,455,580
Savings 1,198,191 1,267,531 1,282,791 1,286,367
Time 1,140,459 778,911 784,949 884,137
Total interest-bearing deposits 4,930,114 4,573,903 4,712,330 4,626,084
Total deposits 6,928,265 6,621,231 6,744,896 6,679,065
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase 141,432 145,192 162,649 194,727
Other short-term borrowings 74,097 195,270 5,190 5,300
Total short-term borrowings 215,529 340,462 167,839 200,027
Long-term debt and mandatorily redeemable securities 46,555 47,587 48,459 71,251
Subordinated notes 58,764 58,764 58,764 58,764
Accrued expenses and other liabilities 166,537 143,082 98,734 117,718
Total liabilities 7,415,650 7,211,126 7,118,692 7,126,825
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,
2022, September 30, 2022, June 30, 2022, and December 31, 2021,
respectively 		436,538 436,538 436,538 436,538
Retained earnings 694,862 671,541 646,600 603,787
Cost of common stock in treasury (3,543,388, 3,548,496, 3,555,267, and
3,466,162 shares at December 31, 2022, September 30, 2022, June 30, 2022,
and December 31, 2021, respectively) 		(119,642) (119,743) (119,876) (114,209)
Accumulated other comprehensive loss (147,690) (162,277) (107,011) (9,861)
Total shareholders' equity 864,068 826,059 856,251 916,255
Noncontrolling interests 59,698 60,301 54,416 53,209
Total equity 923,766 886,360 910,667 969,464
Total liabilities and equity $ 8,339,416 $ 8,097,486 $ 8,029,359 $ 8,096,289
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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,
2022 2022 2021 2022 2021
Interest income:
Loans and leases $ 79,244 $ 69,027 $ 58,327 $ 263,894 $ 235,031
Investment securities, taxable 6,970 6,691 5,091 26,294 17,767
Investment securities, tax-exempt 419 339 133 1,049 601
Other 627 421 430 2,579 1,373
Total interest income 87,260 76,478 63,981 293,816 254,772
Interest expense:
Deposits 12,746 6,556 2,624 25,231 12,276
Short-term borrowings 1,070 380 25 1,497 115
Subordinated notes 972 904 819 3,550 3,267
Long-term debt and mandatorily redeemable securities 1,017 (296) 446 69 2,476
Total interest expense 15,805 7,544 3,914 30,347 18,134
Net interest income 71,455 68,934 60,067 263,469 236,638
Provision (recovery of provision) for credit losses 5,342 3,167 (1,117) 13,245 (4,303)
Net interest income after provision for credit losses 66,113 65,767 61,184 250,224 240,941
Noninterest income:
Trust and wealth advisory 5,608 5,498 5,949 23,107 23,782
Service charges on deposit accounts 3,172 3,240 2,867 12,146 10,589
Debit card 4,669 4,628 4,619 18,052 18,125
Mortgage banking 819 864 1,913 4,122 11,822
Insurance commissions 1,535 1,695 1,549 6,703 7,247
Equipment rental 2,556 2,761 3,817 12,274 16,647
Losses on investment securities available-for-sale (184) - - (184) (680)
Other 5,105 3,321 3,114 15,042 12,560
Total noninterest income 23,280 22,007 23,828 91,262 100,092
Noninterest expense:
Salaries and employee benefits 27,695 26,386 28,128 105,110 105,808
Net occupancy 2,811 2,582 2,624 10,728 10,524
Furniture and equipment 1,397 1,372 1,589 5,448 5,977
Data processing 5,963 5,802 5,026 22,375 19,877
Depreciation - leased equipment 2,111 2,233 3,132 10,023 13,694
Professional fees 2,039 1,539 3,102 7,280 8,676
FDIC and other insurance 943 939 844 3,625 2,677
Business development and marketing 1,471 1,415 1,200 5,823 8,013
Other 3,947 3,063 3,101 14,287 10,902
Total noninterest expense 48,377 45,331 48,746 184,699 186,148
Income before income taxes 41,016 42,443 36,266 156,787 154,885
Income tax expense 9,960 9,698 8,531 36,255 36,328
Net income 31,056 32,745 27,735 120,532 118,557
Net loss (income) attributable to noncontrolling interests 12 (8) (12) (23) (23)
Net income available to common shareholders $ 31,068 $ 32,737 $ 27,723 $ 120,509 $ 118,534
Per common share:
Basic net income per common share $ 1.25 $ 1.32 $ 1.11 $ 4.84 $ 4.70
Diluted net income per common share $ 1.25 $ 1.32 $ 1.11 $ 4.84 $ 4.70
Cash dividends $ 0.32 $ 0.32 $ 0.31 $ 1.26 $ 1.21
Basic weighted average common shares outstanding 24,658,294 24,656,736 24,775,288 24,687,324 25,038,127
Diluted weighted average common shares outstanding 24,658,294 24,656,736 24,775,288 24,687,324 25,038,127

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1st SOURCE CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited - Dollars in thousands)
Three Months Ended
December 31, 2022 September 30, 2022 December 31, 2021
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 $ 1,742,567 $ 6,970 1.59 % $ 1,816,138 $ 6,691 1.46 % $ 1,686,231 $ 5,091 1.20 %
Tax-exempt(1)
52,633 525 3.96 % 47,841 426 3.53 % 28,996 163 2.23 %
Mortgages held for sale 2,834 40 5.60 % 4,272 58 5.39 % 28,693 188 2.60 %
Loans and leases, net of unearned discount(1)
5,840,593 79,313 5.39 % 5,627,718 69,064 4.87 % 5,311,964 58,218 4.35 %
Other investments 69,142 627 3.60 % 119,624 421 1.40 % 659,954 430 0.26 %
Total earning assets(1)
7,707,769 87,475 4.50 % 7,615,593 76,660 3.99 % 7,715,838 64,090 3.30 %
Cash and due from banks 76,843 74,329 80,754
Allowance for loan and lease losses (137,350) (133,989) (134,217)
Other assets 523,833 463,171 448,680
Total assets $ 8,171,095 $ 8,019,104 $ 8,111,055
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits $ 4,718,303 $ 12,746 1.07 % $ 4,634,092 $ 6,556 0.56 % $ 4,628,802 $ 2,624 0.22 %
Short-term borrowings:
Securties sold under agreements to repurchase 137,248 18 0.05 % 159,345 21 0.05 % 194,678 24 0.05 %
Other short-term borrowings 125,078 1,052 3.34 % 57,609 359 2.47 % 5,474 1 0.07 %
Subordinated notes 58,764 972 6.56 % 58,764 904 6.10 % 58,764 819 5.53 %
Long-term debt and mandatorily redeemable securities
47,053 1,017 8.58 % 48,399 (296) (2.43) % 71,604 446 2.47 %
Total interest-bearing liabilities
5,086,446 15,805 1.23 % 4,958,209 7,544 0.60 % 4,959,322 3,914 0.31 %
Noninterest-bearing deposits
2,040,162 2,039,147 2,071,773
Other liabilities 137,874 90,336 113,897
Shareholders' equity 846,449 873,209 918,950
Noncontrolling interests 60,164 58,203 47,113
Total liabilities and equity
$ 8,171,095 $ 8,019,104 $ 8,111,055
Less: Fully tax-equivalent adjustments (215) (182) (109)
Net interest income/margin (GAAP-derived)(1)
$ 71,455 3.68 % $ 68,934 3.59 % $ 60,067 3.09 %
Fully tax-equivalent adjustments
215 182 109
Net interest income/margin - FTE(1)
$ 71,670 3.69 % $ 69,116 3.60 % $ 60,176 3.09 %
(1) See "Reconciliation of Non-GAAP Financial Measures" for more information on this performance measure/ratio.
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1st SOURCE CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited - Dollars in thousands)
Twelve Months Ended
December 31, 2022 December 31, 2021
Average
Balance 		Interest Income/Expense Yield/
Rate 		Average
Balance 		Interest Income/Expense Yield/
Rate
ASSETS
Investment securities available-for-sale:
Taxable $ 1,805,041 $ 26,294 1.46 % $ 1,410,797 $ 17,767 1.26 %
Tax-exempt(1)
40,310 1,311 3.25 % 32,583 741 2.27 %
Mortgages held for sale 5,178 217 4.19 % 17,026 448 2.63 %
Loans and leases, net of unearned discount(1)
5,566,701 264,043 4.74 % 5,437,817 234,902 4.32 %
Other investments 243,938 2,579 1.06 % 440,416 1,373 0.31 %
Total earning assets(1)
7,661,168 294,444 3.84 % 7,338,639 255,231 3.48 %
Cash and due from banks 75,836 77,275
Allowance for loan and lease losses (133,028) (139,141)
Other assets 469,135 454,374
Total assets $ 8,073,111 $ 7,731,147
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits $ 4,673,494 $ 25,231 0.54 % $ 4,460,359 $ 12,276 0.28 %
Short-term borrowings:
Securities sold under agreements to repurchase 166,254 85 0.05 % 180,610 112 0.06 %
Other short-term borrowings 48,716 1,412 2.90 % 6,119 3 0.05 %
Subordinated notes 58,764 3,550 6.04 % 58,764 3,267 5.56 %
Long-term debt and mandatorily redeemable securities
54,940 69 0.13 % 78,845 2,476 3.14 %
Total interest-bearing liabilities
5,002,168 30,347 0.61 % 4,784,697 18,134 0.38 %
Noninterest-bearing deposits
2,037,882 1,882,168
Other liabilities 103,740 112,291
Shareholders' equity 872,721 906,951
Noncontrolling interests 56,600 45,040
Total liabilities and equity
$ 8,073,111 $ 7,731,147
Less: Fully tax-equivalent adjustments (628) (459)
Net interest income/margin (GAAP-derived)(1)
$ 263,469 3.44 % $ 236,638 3.22 %
Fully tax-equivalent adjustments
628 459
Net interest income/margin - FTE(1)
$ 264,097 3.45 % $ 237,097 3.23 %
(1) See "Reconciliation of Non-GAAP Financial Measures" for more information on this performance measure/ratio.
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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,
2022 2022 2021 2022 2021
Calculation of Net Interest Margin
(A) Interest income (GAAP) $ 87,260 $ 76,478 $ 63,981 $ 293,816 $ 254,772
Fully tax-equivalent adjustments:
(B) - Loans and leases 109 95 79 366 319
(C) - Tax-exempt investment securities 106 87 30 262 140
(D) Interest income - FTE (A+B+C) 87,475 76,660 64,090 294,444 255,231
(E) Interest expense (GAAP) 15,805 7,544 3,914 30,347 18,134
(F)
Net interest income (GAAP) (A-E)
71,455 68,934 60,067 263,469 236,638
(G)
Net interest income - FTE (D-E)
71,670 69,116 60,176 264,097 237,097
(H) Annualization factor 3.967 3.967 3.967 1.000 1.000
(I) Total earning assets $ 7,707,769 $ 7,615,593 $ 7,715,838 $ 7,661,168 $ 7,338,639
Net interest margin (GAAP-derived) (F*H)/I 3.68 % 3.59 % 3.09 % 3.44 % 3.22 %
Net interest margin - FTE (G*H)/I 3.69 % 3.60 % 3.09 % 3.45 % 3.23 %
Calculation of Efficiency Ratio
(F) Net interest income (GAAP) $ 71,455 $ 68,934 $ 60,067 $ 263,469 $ 236,638
(G) Net interest income - FTE 71,670 69,116 60,176 264,097 237,097
(J) Plus: noninterest income (GAAP) 23,280 22,007 23,828 91,262 100,092
(K)
Less: gains/losses on investment securities and partnership investments
(2,216) (418) (285) (3,714) (1,020)
(L) Less: depreciation - leased equipment (2,111) (2,233) (3,132) (10,023) (13,694)
(M) Total net revenue (GAAP) (F+J) 94,735 90,941 83,895 354,731 336,730
(N)
Total net revenue - adjusted (G+J-K-L)
90,623 88,472 80,587 341,622 322,475
(O) Noninterest expense (GAAP) 48,377 45,331 48,746 184,699 186,148
(L) Less: depreciation - leased equipment (2,111) (2,233) (3,132) (10,023) (13,694)
(P)
Noninterest expense - adjusted (O-L)
46,266 43,098 45,614 174,676 172,454
Efficiency ratio (GAAP-derived) (O/M) 51.07 % 49.85 % 58.10 % 52.07 % 55.28 %
Efficiency ratio - adjusted (P/N) 51.05 % 48.71 % 56.60 % 51.13 % 53.48 %
End of Period
December 31, September 30, December 31,
2022 2022 2021
Calculation of Tangible Common Equity-to-Tangible Assets Ratio
(Q) Total common shareholders' equity (GAAP) $ 864,068 $ 826,059 $ 916,255
(R) Less: goodwill and intangible assets (83,907) (83,911) (83,926)
(S)
Total tangible common shareholders' equity (Q-R)
$ 780,161 $ 742,148 $ 832,329
(T) Total assets (GAAP) 8,339,416 8,097,486 8,096,289
(R) Less: goodwill and intangible assets (83,907) (83,911) (83,926)
(U)
Total tangible assets (T-R)
$ 8,255,509 $ 8,013,575 $ 8,012,363
Common equity-to-assets ratio (GAAP-derived) (Q/T) 10.36 % 10.20 % 11.32 %
Tangible common equity-to-tangible assets ratio (S/U) 9.45 % 9.26 % 10.39 %
Calculation of Tangible Book Value per Common Share
(Q) Total common shareholders' equity (GAAP) $ 864,068 $ 826,059 $ 916,255
(V) Actual common shares outstanding 24,662,286 24,657,178 24,739,512
Book value per common share (GAAP-derived) (Q/V)*1000 $ 35.04 $ 33.50 $ 37.04
Tangible common book value per share (S/V)*1000 $ 31.63 $ 30.10 $ 33.64
The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com
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1st Source Corporation published this content on 19 January 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 January 2023 21:20:11 UTC.