1st Source Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow

source-20200930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐ 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 or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 North Michigan Street

South Bend,

46601

(Address of principal executive offices)

(Zip Code)

(574) 235-2000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock - without par value

SRCE

The NASDAQ Stock Market LLC

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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No

Number of shares of common stock outstanding as of October 16, 2020 — 25,553,644 shares

Table of Contents

TABLE OF CONTENTS


		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition — September 30, 2020 and December 31, 2019	3
	Consolidated Statements of Income — three and nine months ended September 30, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income — three and nine months ended September 30, 2020 and 2019	5
	Consolidated Statements of Shareholders’ Equity — three and nine months ended September 30, 2020 and 2019	6
	Consolidated Statements of Cash Flows — nine months ended September 30, 2020 and 2019	7
	Notes to the Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 3.	Defaults Upon Senior Securities	47
Item 4.	Mine Safety Disclosures	47
Item 5.	Other Information	47
Item 6.	Exhibits	48

SIGNATURES			49

EXHIBITS
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32.1
	Exhibit 32.2

Table of Contents

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited - Dollars in thousands)


	September 30, 2020		December 31, 2019
ASSETS
Cash and due from banks	$	62,575	$	67,215
Federal funds sold and interest bearing deposits with other banks	91,641		16,150
Investment securities available-for-sale	1,083,427		1,040,583
Other investments	27,674		28,414

Mortgages held for sale	20,990		20,277
Loans and leases, net of unearned discount:
Commercial and agricultural	1,681,519		1,132,791
Auto and light truck	527,582		588,807
Medium and heavy duty truck	271,248		294,824
Aircraft	806,162		784,040
Construction equipment	723,596		705,451
Commercial real estate	961,550		908,177
Residential real estate and home equity	519,881		532,003
Consumer	135,498		139,434
Total loans and leases	5,627,036		5,085,527
Reserve for loan and lease losses	(136,817)		(111,254)
Net loans and leases	5,490,219		4,974,273
Equipment owned under operating leases, net	79,703		111,684
Net premises and equipment	49,933		52,219
Goodwill and intangible assets	83,953		83,971
Accrued income and other assets	300,834		227,990
Total assets	$	7,290,949	$	6,622,776

LIABILITIES
Deposits:
Noninterest-bearing demand	$	1,720,768	$	1,216,834
Interest-bearing deposits:
Interest-bearing demand	1,885,771		1,677,200
Savings	992,320		814,794
Time	1,297,996		1,648,498
Total interest-bearing deposits	4,176,087		4,140,492
Total deposits	5,896,855		5,357,326
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase	158,834		120,459
Other short-term borrowings	6,740		25,434
Total short-term borrowings	165,574		145,893
Long-term debt and mandatorily redeemable securities	81,659		71,639
Subordinated notes	58,764		58,764
Accrued expenses and other liabilities	173,082		140,518
Total liabilities	6,375,934		5,774,140

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 at September 30, 2020 and December 31, 2019	436,538		436,538
Retained earnings	497,419		463,269
Cost of common stock in treasury (2,652,030 shares at September 30, 2020 and 2,696,200 shares at December 31, 2019)	(75,861)		(76,702)
Accumulated other comprehensive income	19,658		5,172
Total shareholders’ equity	877,754		828,277
Noncontrolling interests	37,261		20,359
Total equity	915,015		848,636
Total liabilities and equity	$	7,290,949	$	6,622,776

The accompanying notes are a part of the unaudited consolidated financial statements.

Table of Contents

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited - Dollars in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Interest income:
Loans and leases	$	58,318	$	66,807	$	178,659	$	195,089
Investment securities, taxable	4,103		5,056		14,140		15,757
Investment securities, tax-exempt	207		316		703		1,054
Other	289		497		951		1,434
Total interest income	62,917		72,676		194,453		213,334
Interest expense:
Deposits	6,532		13,524		25,648		37,972
Short-term borrowings	83		293		427		1,764
Subordinated notes	824		914		2,543		2,770
Long-term debt and mandatorily redeemable securities	610		750		2,122		2,258
Total interest expense	8,049		15,481		30,740		44,764
Net interest income	54,868		57,195		163,713		168,570
Provision for loan and lease losses	9,303		3,717		31,031		12,882
Net interest income after provision for loan and lease losses	45,565		53,478		132,682		155,688
Noninterest income:
Trust and wealth advisory	5,153		4,982		15,590		15,423
Service charges on deposit accounts	2,336		2,892		6,851		8,175
Debit card	4,019		3,727		10,993		10,616
Mortgage banking	6,474		1,362		12,125		3,297
Insurance commissions	1,825		1,603		5,401		5,295
Equipment rental	5,593		7,578		18,213		23,369
Gains on investment securities available-for-sale	—		—		279		—
Other	2,641		3,621		8,452		9,378
Total noninterest income	28,041		25,765		77,904		75,553
Noninterest expense:
Salaries and employee benefits	25,609		24,434		74,009		71,716
Net occupancy	2,512		2,635		7,737		7,888
Furniture and equipment	6,247		6,027		18,912		18,340
Depreciation – leased equipment	4,694		6,198		15,263		19,122
Professional fees	2,041		1,603		4,741		4,907
Supplies and communication	1,305		1,643		4,329		4,744
FDIC and other insurance	868		260		1,755		1,513
Business development and marketing	923		1,844		3,403		4,471
Loan and lease collection and repossession	1,054		697		2,655		2,288
Other	1,790		1,765		5,599		4,674
Total noninterest expense	47,043		47,106		138,403		139,663
Income before income taxes	26,563		32,137		72,183		91,578
Income tax expense	6,509		7,689		17,185		21,517
Net income	20,054		24,448		54,998		70,061
Net loss (income) attributable to noncontrolling interests	4		(10)		(25)		(42)
Net income available to common shareholders	$	20,058	$	24,438	$	54,973	$	70,019
Per common share:
Basic net income per common share	$	0.78	$	0.95	$	2.14	$	2.72
Diluted net income per common share	$	0.78	$	0.95	$	2.14	$	2.72
Cash dividends	$	0.28	$	0.27	$	0.85	$	0.81
Basic weighted average common shares outstanding	25,552,374		25,520,035		25,538,910		25,630,771
Diluted weighted average common shares outstanding	25,552,374		25,520,035		25,538,910		25,630,771

The accompanying notes are a part of the unaudited consolidated financial statements.

Table of Contents

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited - Dollars in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Net income	$	20,054	$	24,448	$	54,998	$	70,061
Other comprehensive income:
Unrealized (depreciation) appreciation of available-for-sale securities	(303)		2,920		19,360		20,161
Reclassification adjustment for realized gains included in net income	—		—		(279)		—
Income tax effect	73		(703)		(4,595)		(4,855)
Other comprehensive (loss) income, net of tax	(230)		2,217		14,486		15,306
Comprehensive income	19,824		26,665		$	69,484	$	85,367
Comprehensive loss (income) attributable to noncontrolling interests	4		(10)		(25)		(42)
Comprehensive income available to common shareholders	$	19,828	$	26,655	$	69,459	$	85,325

The accompanying notes are a part of the unaudited consolidated financial statements.

Table of Contents

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - Dollars in thousands, except per share amounts)


	Three Months Ended
	Preferred Stock		Common Stock		Retained Earnings		Cost of Common Stock in Treasury		Accumulated Other Comprehensive Income (Loss), Net		Total Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance at July 1, 2019	$	—	$	436,538	$	431,091	$	(75,380)	$	2,413	$	794,662	$	10,024	$	804,686
Net income	—		—		24,438		—		—		24,438		10		24,448
Other comprehensive income	—		—		—		—		2,217		2,217		—		2,217
Issuance of 3,544 common shares under stock based compensation awards	—		—		91		70		—		161		—		161
Cost of 30,000 shares of common stock acquired for treasury	—		—		—		(1,406)		—		(1,406)		—		(1,406)
Common stock dividend ($0.27 per share)	—		—		(6,905)		—		—		(6,905)		—		(6,905)
Contributions from noncontrolling interests	—		—		—		—		—		—		9,879		9,879
Distributions to noncontrolling interests	—		—		—		—		—

Price	46.82	EPS	3
Shares	26	P/E	17
MCap	1,200	P/FCF	21
Net Debt	-127	EBIT	136
TEV	1,073	TEV/EBIT	8
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-10-22
10-Q	2020-06-30	Filed 2020-07-23
10-Q	2020-03-31	Filed 2020-04-23
10-K	2019-12-31	Filed 2020-02-20
10-Q	2019-09-30	Filed 2019-10-17
10-Q	2019-06-30	Filed 2019-07-18
10-Q	2019-03-31	Filed 2019-04-18
10-K	2018-12-31	Filed 2019-02-22
10-Q	2018-09-30	Filed 2018-10-18
10-Q	2018-06-30	Filed 2018-07-19
10-Q	2018-03-31	Filed 2018-04-19
10-K	2017-12-31	Filed 2018-02-16
10-Q	2017-09-30	Filed 2017-10-19
10-Q	2017-06-30	Filed 2017-07-20
10-Q	2017-03-31	Filed 2017-04-20
10-K	2016-12-31	Filed 2017-02-17
10-Q	2016-09-30	Filed 2016-10-20
10-Q	2016-06-30	Filed 2016-07-21
10-Q	2016-03-31	Filed 2016-04-21
10-K	2015-12-31	Filed 2016-02-19
10-Q	2015-09-30	Filed 2015-10-22
10-Q	2015-06-30	Filed 2015-07-23
10-Q	2015-03-31	Filed 2015-04-23
10-K	2014-12-31	Filed 2015-02-20
10-Q	2014-09-30	Filed 2014-10-23
10-Q	2014-06-30	Filed 2014-07-24
10-Q	2014-03-31	Filed 2014-04-24
10-K	2013-12-31	Filed 2014-02-21
10-Q	2013-09-30	Filed 2013-10-24
10-Q	2013-06-30	Filed 2013-07-25
10-Q	2013-03-31	Filed 2013-04-25
10-K	2012-12-31	Filed 2013-02-22
10-Q	2012-09-30	Filed 2012-10-25
10-Q	2012-06-30	Filed 2012-07-26
10-Q	2012-03-31	Filed 2012-04-26
10-K	2011-12-31	Filed 2012-02-17
10-Q	2011-09-30	Filed 2011-10-20
10-Q	2011-06-30	Filed 2011-07-21
10-Q	2011-03-31	Filed 2011-04-21
10-K	2010-12-31	Filed 2011-02-17
10-Q	2010-09-30	Filed 2010-10-21
10-Q	2010-06-30	Filed 2010-07-22
10-Q	2010-03-31	Filed 2010-04-22
10-K	2009-12-31	Filed 2010-02-19

8-K	2020-11-13
8-K	2020-10-22
8-K	2020-07-23
8-K	2020-07-23
8-K	2020-07-03
8-K	2020-06-05
8-K	2020-05-15
8-K	2020-04-23
8-K	2020-04-23
8-K	2020-04-16
8-K	2020-04-14
8-K	2020-03-20
8-K	2020-02-13
8-K	2020-01-23
8-K	2020-01-23
8-K	2019-11-05
8-K	2019-10-17
8-K	2019-08-09
8-K	2019-07-30
8-K	2019-07-18
8-K	2019-07-09
8-K	2019-05-31
8-K	2019-04-18
8-K	2019-04-18
8-K	2019-02-14
8-K	2019-01-24
8-K	2018-10-31
8-K	2018-08-16
8-K	2018-05-08
8-K	2018-04-19
8-K	2018-04-19
8-K	2018-04-03
8-K	2018-02-07
8-K	2018-01-29
8-K	2018-01-18

EX-31.1	ex31193020.htm
EX-31.2	ex31293020.htm
EX-32.1	ex32193020.htm
EX-32.2	ex32293020.htm

SRCE 10Q Quarterly Report

1st Source Earnings 2020-09-30