1st Source Corporation (NASDAQ:SRCE), parent company of 1st Source Bank, today announced record net income of $58.07 million for the year of 2014, a 5.66% increase over the $54.96 million in 2013. The annual net income is the highest in company history. Fourth quarter net income was $15.00 million, up 9.33% compared to $13.72 million in the fourth quarter of 2013.

Diluted net income per common share for the year was $2.39, another all-time record and an increase of 7.17% over the $2.23 per common share a year earlier. Diluted net income per common share for the fourth quarter was $0.62, up 10.71% compared to $0.56 per common share reported in the fourth quarter of the previous year.

At its January 2015 meeting, the 1st Source Board of Directors approved a cash dividend of $0.18 per common share. The cash dividend is payable on February 13, 2015 to shareholders of record on February 3, 2015. Dividends for 2014 increased 4.41% over the previous year.

According to Christopher J. Murphy, III, Chairman, "I am pleased to report a steady fourth quarter and another solid year for 1st Source Corporation. We achieved record earnings yet again and continued our streak of 27 years of consecutive dividend growth. It was also a year of celebration, as we began our 151st year of helping clients achieve security, build wealth and realize their dreams. We increased our primary client relationships in all of our markets. We were also able to decrease our nonperforming assets and grow our loan and lease outstandings by almost $140 million during the year, while reducing our exposure to some more risk challenged markets."

"We ended the year having refurbished six banking centers and opening two new ones in Fort Wayne, Indiana. The grand openings marked the completion of an $8 million investment in that market, the second largest city in Indiana. This allows us to increase our market share in an attractive market and provide a level of convenience and service previously not available," Murphy concluded.

Total assets at the end of 2014 were $4.83 billion, up 2.27% from the same period last year. Total loans and leases at December 31, 2014 were $3.69 billion, up 3.92%, and total deposits at December 31, 2014 were $3.80 billion, up 4.08% from the same period last year. As of December 31, 2014, the common equity-to-assets ratio was 12.72%, compared to 12.39% at December 31, 2013 and the tangible common equity-to-tangible assets ratio was 11.15% at December 31, 2014 compared to 10.76% at December 31, 2013.

The net interest margin was 3.61% for the fourth quarter of 2014 versus 3.59% for the same period in 2013. The net interest margin was 3.59% for the year ending December 31, 2014 versus 3.67% for the year ending December 31, 2013. Tax-equivalent net interest income was $41.29 million for the fourth quarter of 2014, up 4.53% compared to $39.50 million for 2013’s fourth quarter. For the twelve months of 2014, tax-equivalent net interest income was $162.17 million, up 2.22% compared to $158.64 million for the twelve months of 2013.

Reserve for loan and lease losses as of December 31, 2014 was 2.31% of total loans and leases, compared to 2.35% as of December 31, 2013. Net charge-offs were $1.51 million for the fourth quarter 2014, compared to $0.14 million in the fourth quarter 2013. Net charge-offs for the full year were $2.17 million in 2014 compared to $0.58 million in 2013. There was a recovery of provision for loan and lease losses of $0.82 million in the fourth quarter of 2014, compared with $0.86 million for the same period in 2013. For the twelve months of 2014, the provision for loan and lease losses was $3.73 million compared with $0.77 million for the twelve months of 2013. The ratio of nonperforming assets to net loans and leases was 1.13% on December 31, 2014, compared to 1.29% on December 31, 2013.

Noninterest income for the fourth quarter of 2014 was $19.88 million, up 10.51% compared to $17.99 million for the fourth quarter of 2013. The fourth quarter increase was primarily a result of higher trust fees, increased equipment rental income and higher debit card income. For the year, noninterest income was $77.89 million, up slightly from $77.21 million in 2013.

Noninterest expense for the fourth quarter of 2014 was $41.99 million, up 8.81% compared to $38.59 million for the fourth quarter of 2013. The leading factors for the fourth quarter increase were higher salary and employee benefits expense, other expenses, depreciation on leased equipment, business development and marketing expenses, loan and lease collection and repossession expenses and professional fees. For the year ending December 31, 2014, noninterest expense was $150.04 million, up slightly from $149.31 million one year ago.

The provision for income taxes included a one-time benefit of $2.12 million and $3.30 million for the three and twelve months ended December 31, 2014, respectively, which resulted in a lower effective tax rate. These benefits were the result of a reduction in uncertain tax positions due to settlements with taxing authorities and the lapse of the applicable statute of limitations.

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 the communities it serves. For more information, visit www.1stsource.com.

1st Source serves the northern half of Indiana and southwest Michigan and is the largest locally controlled financial institution headquartered in the area. While delivering a comprehensive range of consumer and commercial banking services through its community bank offices, 1st Source has distinguished itself with highly personalized services. 1st Source Bank also competes for business nationally by offering specialized financing services for new and used private and cargo aircraft, automobiles for leasing and rental agencies, medium and heavy duty trucks, construction and environmental equipment. The Corporation includes 80 community banking centers in 17 counties, 9 trust and wealth management locations, 8 1st Source Insurance offices, as well as 21 specialty finance locations nationwide.

In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. 1st Source Corporation believes that providing non-GAAP financial measures provides investors with information useful to understanding our financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on “tangible equity” which is “common shareholders’ equity” excluding intangible assets.

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.

1st SOURCE CORPORATION
4th QUARTER 2014 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share amounts)
   
Three Months Ended
December 31,		 Twelve Months Ended
December 31,
2014   2013 2014   2013
END OF PERIOD BALANCES        
Assets $ 4,829,958 $ 4,722,826
Loans and leases 3,688,574 3,549,324
Deposits 3,802,860 3,653,650
Reserve for loan and lease losses 85,068 83,505
Intangible assets 85,371 86,343
Common shareholders' equity 614,473 585,378
 
AVERAGE BALANCES
Assets $ 4,839,479 $ 4,649,245 $ 4,806,805 $ 4,607,949
Earning assets 4,536,441 4,362,005 4,513,631 4,325,907
Investments 812,497 837,180 822,021 840,798
Loans and leases 3,651,994 3,487,900 3,639,985 3,433,938
Deposits 3,844,239 3,720,299 3,777,743 3,700,509
Interest bearing liabilities 3,361,111 3,281,486 3,395,591 3,286,558
Common shareholders' equity 611,960 587,442 601,892 575,662
 
INCOME STATEMENT DATA
Net interest income $ 40,839 $ 39,034 $ 160,329 $ 156,817
Net interest income - FTE 41,285 39,495 162,168 158,643
(Recovery of) provision for loan and lease losses (820 ) (859 ) 3,733 772
Noninterest income 19,876 17,985 77,887 77,212
Noninterest expense 41,991 38,590 150,040 149,314
Net income 14,996 13,716 58,069 54,958
 
PER SHARE DATA
Basic net income per common share $ 0.62 $ 0.56 $ 2.39 $ 2.23
Diluted net income per common share 0.62 0.56 2.39 2.23
Common cash dividends declared 0.18 0.17 0.71 0.68
Book value per common share 25.75 24.07 25.75 24.07
Tangible book value per common share 22.17 20.52 22.17 20.52
Market value - High 35.22 32.92 35.22 32.92
Market value - Low 28.00 25.64 27.56 21.88
Basic weighted average common shares outstanding 23,862,382 24,322,516 24,031,608 24,344,623
Diluted weighted average common shares outstanding 23,862,382 24,323,158 24,031,608 24,345,209
 
KEY RATIOS
Return on average assets 1.23 % 1.17 % 1.21 % 1.19 %
Return on average common shareholders' equity 9.72 9.26 9.65 9.55
Average common shareholders' equity to average assets 12.65 12.64 12.52 12.49
End of period tangible common equity to tangible assets 11.15 10.76 11.15 10.76
Risk-based capital - Tier 1 14.57 14.54 14.57 14.54
Risk-based capital - Total 15.89 15.86 15.89 15.86
Net interest margin 3.61 3.59 3.59 3.67
Efficiency: expense to revenue 67.56 66.25 60.62 62.44
Net charge offs to average loans and leases 0.16 0.02 0.06 0.02
Loan and lease loss reserve to loans and leases 2.31 2.35 2.31 2.35
Nonperforming assets to loans and leases 1.13 1.29 1.13 1.29
 
ASSET QUALITY
Loans and leases past due 90 days or more $ 981 $ 287
Nonaccrual loans and leases 34,602 36,707
Other real estate 1,109 4,539
Former bank premises held for sale 626 951
Repossessions 5,156 4,262
Equipment owned under operating leases 6   —    
Total nonperforming assets $ 42,480   $ 46,746    
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
   
December 31, 2014 December 31, 2013

ASSETS

Cash and due from banks $ 64,834 $ 77,568
Federal funds sold and interest bearing deposits with other banks 1,356 2,484

Investment securities available-for-sale (amortized cost of $776,057 and $822,163 at December 31, 2014 and 2013, respectively)

791,118 832,700
Other investments 20,801 22,400
Trading account securities 205 192
Mortgages held for sale 13,604 6,079
 
Loans and leases, net of unearned discount:
Commercial and agricultural loans 710,758 679,492
Auto and light truck 397,902 391,649
Medium and heavy duty truck 247,153 237,854
Aircraft financing 727,665 738,133
Construction equipment financing 399,940 333,088
Commercial real estate 616,587 583,997
Residential real estate 445,759 460,981
Consumer loans 142,810   124,130  
Total loans and leases 3,688,574 3,549,324
Reserve for loan and lease losses (85,068 ) (83,505 )
Net loans and leases 3,603,506 3,465,819
 
Equipment owned under operating leases, net 74,143 60,967
Net premises and equipment 50,328 46,630
Goodwill and intangible assets 85,371 86,343
Accrued income and other assets 124,692   121,644  
 
Total assets $ 4,829,958   $ 4,722,826  
 

LIABILITIES

Deposits:
Noninterest bearing $ 796,241 $ 735,212
Interest bearing 3,006,619   2,918,438  
Total deposits 3,802,860 3,653,650
 
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase 138,843 181,120
Other short-term borrowings 106,979   133,011  
Total short-term borrowings 245,822 314,131
Long-term debt and mandatorily redeemable securities 56,232 58,335
Subordinated notes 58,764 58,764
Accrued expenses and other liabilities 51,807   52,568  
Total liabilities 4,215,485   4,137,448  
 

SHAREHOLDERS' EQUITY

Preferred stock; no par value — —
Common stock; no par value 346,535 346,535
Retained earnings 302,242 261,626
Cost of common stock in treasury (43,711 ) (29,364 )
Accumulated other comprehensive income 9,407   6,581  
Total shareholders' equity 614,473   585,378  
 
Total liabilities and shareholders' equity $ 4,829,958   $ 4,722,826  
 
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
   
Three Months Ended
December 31,		 Twelve Months Ended
December 31,
2014   2013 2014   2013
Interest income:    
Loans and leases $ 40,781 $ 39,463 $ 161,215 $ 161,137
Investment securities, taxable 3,346 3,640 13,054 14,414
Investment securities, tax-exempt 803 799 3,269 3,094
Other 266     228   1,016     940  
Total interest income 45,196 44,130 178,554 179,585
 
Interest expense:
Deposits 2,626 3,561 11,356 16,604
Short-term borrowings 101 62 541 211
Subordinated notes 1,055 1,055 4,220 4,220
Long-term debt and mandatorily redeemable securities 575     418   2,108     1,733  
Total interest expense 4,357     5,096   18,225     22,768  
 
Net interest income 40,839 39,034 160,329 156,817
(Recovery of) provision for loan and lease losses (820 )   (859 ) 3,733     772  
Net interest income after provision for loan and lease losses 41,659 39,893 156,596 156,045
 
Noninterest income:
Trust fees 4,581 3,583 18,511 17,383
Service charges on deposit accounts 2,186 2,249 8,684 9,177
Debit card income 2,508 2,130 9,585 8,882
Mortgage banking income 1,420 1,277 5,381 5,944
Insurance commissions 1,388 1,361 5,556 5,492
Equipment rental income 4,615 4,131 17,156 16,229
Gains (losses) on investment securities available-for-sale — (140 ) 963 (168 )
Other income 3,178     3,394   12,051     14,273  
Total noninterest income 19,876     17,985   77,887     77,212  
 
Noninterest expense:
Salaries and employee benefits 21,389 20,230 80,488 79,783
Net occupancy expense 2,387 2,220 9,311 8,700
Furniture and equipment expense 4,592 4,610 17,657 16,895
Depreciation - leased equipment 3,783 3,310 13,893 13,055
Professional fees 1,698 1,478 5,046 5,321
Supplies and communication 1,436 1,325 5,589 5,690
FDIC and other insurance 814 783 3,384 3,462
Business development and marketing expense 2,248 1,927 6,049 4,938
Loan and lease collection and repossession expense 962 648 1,102 4,030
Other expense 2,682     2,059   7,521     7,440  
Total noninterest expense 41,991     38,590   150,040     149,314  
 
Income before income taxes 19,544 19,288 84,443 83,943
Income tax expense 4,548     5,572   26,374     28,985  
 
Net income $ 14,996     $ 13,716   $ 58,069     $ 54,958  
 

The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com