1st Source (SRCE) Q4 2009 earnings summary

Executive summary

• FY09 net income fell to $25.49M from $33.39M; diluted EPS was $0.79 vs. $1.37, reflecting higher credit costs and the absence of the prior-year asset-sale gain.

• Year-end assets were $4.54B, loans and leases $3.09B, deposits $3.65B, and shareholders’ equity $570.32M.

Financial highlights

• Net interest income was $128.21M vs. $132.16M; provision for loan and lease losses rose to $31.10M from $16.65M.

• Noninterest income was $85.53M vs. $84.00M; FY08 included an $11.49M pretax gain on Investment Advisors assets, while FY09 recorded $1.69M in investment gains.

• Noninterest expense declined 1.3% to $151.12M; lower salaries and professional fees were partly offset by higher FDIC insurance and collection costs.

• Q4 net income was $6.22M and diluted EPS $0.19 vs. $12.32M and $0.50 in Q4 2008, which included the $11.49M pretax asset-sale gain.

• FY09 income tax expense was $6.03M; a $2.60M one-time benefit followed resolution of tax audits and reduced the effective tax rate to 19.13% from 28.05%.

Outlook and guidance

• Plans called for repaying the $111.00M TARP investment once national conditions and local markets stabilize, with a sustainable recovery and low risk of renewed decline.

• TARP terms restricted common dividends above $0.16 per quarter through Jan. 23, 2012 without Treasury consent, while Treasury held the preferred shares.