1st Source (SRCE) Q4 2011 earnings summary

Executive summary

• 2011 net income rose to $48.20 million from $41.24 million in 2010; lower loan-loss provisioning drove the improvement, partly offset by lower noninterest income and higher taxes.

• Year-end assets were $4.37 billion, loans and leases $3.09 billion, deposits $3.52 billion, and shareholders’ equity $523.92 million.

Financial highlights

• Net interest income was $148.40 million in 2011 versus $147.50 million in 2010; tax-equivalent net interest income was nearly flat at $150.91 million versus $150.87 million.

• Provision for loan and lease losses fell to $3.13 million from $19.21 million; net income increased to $48.20 million from $41.24 million.

• Noninterest income declined 6.71% to $80.87 million, while noninterest expense decreased 1.39% to $152.35 million.

• Q4 net income was $11.18 million versus $12.57 million a year earlier; diluted EPS was $0.45 versus $0.25, with a $0.40 million provision recovery in Q4 2011.

Outlook and guidance

• No formal earnings guidance was stated; year-end reserve ratios incorporated elevated economic and concentration risks and were calibrated with recent loss experience considered most relevant to 2012.

• Management cited Europe’s debt crisis as a significant risk to borrowers and the broader economy, while noting that the effect on loan portfolios could not be precisely determined.