1st Source (SRCE) Q4 2012 earnings summary

Executive summary

• FY12 net income rose to $49.63M from $48.20M; diluted EPS was $2.02 vs. $1.96, with stronger net interest income offset partly by higher credit-loss provision.

• Year-end assets were $4.55B, loans and leases $3.33B, deposits $3.62B and shareholders’ equity $558.66M.

Financial highlights

• FY12 net interest income was $151.78M, up from $148.40M; provision for loan and lease losses increased to $5.75M from $3.13M.

• Noninterest income rose to $81.19M from $80.87M; noninterest expense fell to $151.54M from $152.35M.

• Q4 net income was $12.35M and diluted EPS $0.50, vs. $11.18M and $0.45 in Q4 2011; Q4 tax-equivalent net interest income increased 2.93% YoY.

• Mortgage banking income increased 117.69% to $8.36M, supported by higher production and loan-sale margins; equipment rental income declined 19.54% to $18.80M.

Outlook and guidance

• Business banking outlook remained mixed amid a weak economy and small-business uncertainty; agriculture outlook was strong on high crop prices and land values.

• Trucking and construction fundamentals improved, while aircraft collateral values remained depressed without a sustained recovery; risks included fuel costs, regulation and driver shortages.

• FY12 net interest margin was 3.69%, unchanged YoY; lower funding costs offset lower earning-asset yields.