Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 19, 2023

1st Source Corporation

(Exact name of registrant as specified in its charter)


Indiana	0-6233	35-1068133
(State or other jurisdiction of incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

100 North Michigan Street, South Bend, Indiana 46601

(Address of principal executive offices) (Zip Code)

574-235-2000

(Registrant's telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 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 Section 13(a) of the Exchange Act. o

ITEM 2.02 Results of Operations and Financial Condition.

On October 19, 2023, 1st Source Corporation issued a press release that announced its third quarter earnings for 2023. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

ITEM 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

The Board of Directors amended the Company’s bylaws effective October 19, 2023 to establish procedures to be followed by a shareholder seeking to nominate a director for election, in conformity with Securities and Exchange Commission Rule 14a-19 promulgated under the Securities and Exchange Act of 1934, also known as the “Universal Proxy Rule”, and procedures to be followed by a shareholder seeking to propose action for a vote at a meeting of shareholders.

ITEM 9.01 Financial Statements and Exhibits.

Exhibit 99.1: Press release dated October 19, 2023, with respect to 1st Source Corporation’s financial results for the third quarter ended September 30, 2023.

101 Pursuant to Rule 406 of Regulation S-T, the cover page is formatted in Inline XBRL (Inline eXtensible Business reporting Language).

104 Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


						1st SOURCE CORPORATION
						(Registrant)


Date: October 19, 2023						/s/ BRETT A. BAUER
						Brett A. Bauer
						Treasurer and Chief Financial Officer
						Principal Accounting Officer

Exhibit 99.1



For:	Immediate Release	Contact:	Brett Bauer
	October 19, 2023		574-235-2000

1st Source Corporation Reports Record Third Quarter Results,

Cash Dividend Increased

QUARTERLY HIGHLIGHTS

•Net income was a record $32.94 million for the quarter, up $0.20 million or 0.62% from the third quarter of 2022. Diluted net income per common share was $1.32, equal to the prior year’s third quarter.

•Cash dividend of $0.34 per common share was approved, up 6.25% from the cash dividend declared a year ago.

•Average loans and leases grew $104.73 million in the third quarter, up 1.71% (6.84% annualized growth) from the previous quarter and $618.17 million, up 10.98% from the third quarter of 2022.

•Repurchased 260,887 shares for treasury at a total cost of $10.29 million in the quarter.

•During the quarter, a gain on sale of renewable energy tax equity investments of $2.32 million was recognized.

South Bend, IN - 1st Source Corporation (NASDAQ: SRCE), parent company of 1st Source Bank, today reported record quarterly net income of $32.94 million for the third quarter of 2023, up 0.62% from the $32.74 million reported in the third quarter a year ago, bringing the 2023 year-to-date net income to $96.50 million compared to $89.44 million in 2022. Diluted net income per common share for the third quarter of 2023 was $1.32, equal to the third quarter of 2022. Diluted net income per common share for the first nine months of 2023 was $3.87 compared to $3.59 during the first nine months of 2022.

At its October 2023 meeting, the Board of Directors approved a cash dividend of $0.34 per common share, up 6.25% from the cash dividend declared a year ago. The cash dividend is payable to shareholders of record on November 6, 2023, and will be paid on November 15, 2023.

Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, “We are pleased that we achieved record quarterly net income during the third quarter. Average loans grew $104.73 million, up 1.71% while average deposits increased marginally from the previous quarter. Credit quality improved and remained strong and our trend of low nonperforming asset levels continued. Our liquidity and capital positions also remained strong during the quarter. While our tax-equivalent net interest margin continued to endure competitive deposit rate pressures, we limited overall margin compression to two basis points compared to the prior quarter.

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“We were incredibly pleased to learn that 1st Source was included in the Newsweek ‘America’s Greatest Workplaces for Parents and Families 2023’ ranking. According to Newsweek, over 224,000 completed company reviews by employees who work for companies employing at least 1,000 employees in the U.S. determined the results of the list. 1st Source is one of only 10 companies headquartered in Indiana to make the list and received a four-star rating (out of five stars). Newsweek conducted the survey in partnership with Plant-A Insights Group and shared that the ‘800 family-friendly companies’ included in the list ‘are lauded by their employees for being great places to work.’ This honor speaks directly to our family values and client centric mission. We deliver a balance between work and family that is fulfilling for our colleagues. We’re humbled by the response of our team members to name us to such lists, and we thank them for honoring us and our clients with the great work and passion they bring to this Company.

“Another exciting event in the third quarter was the launch of the Federal Reserve’s new instant payment rail, the FedNow Service. 1st Source Bank was among the first depository institutions able to send and receive instant payments from other participating institutions. This was an important milestone for the banking industry, and it was very important that 1st Source be positioned as a leader in adopting this new instant payment method for the benefit of our business and personal clients. To participate in the FedNow Service, 1st Source completed a multi-step customer testing and certification program in the months leading up to launch. Early adopters of the service include a diverse range of financial institutions and service providers across the U.S., and we're very proud to be among its earliest users and advocates,” Mr. Murphy concludes.

THIRD QUARTER 2023 FINANCIAL RESULTS

Loans

Third quarter average loans and leases increased $104.73 million to $6.25 billion, up 1.71% from the previous quarter and increased $618.17 million, up 10.98% from the third quarter a year ago. Year-to-date average loans and leases increased $667.45 million to $6.14 billion, up 12.19% from the first nine months of 2022. Growth during the quarter occurred primarily within the Commercial Real Estate, Construction Equipment, and Auto and Light Truck portfolios.

The Company has traditionally maintained a conservative approach to commercial real estate loans and non-owner occupied properties. At September 30, 2023, approximately 5% of the Company’s total loans and leases are collateralized by non-owner occupied commercial real estate. The Company finances a minimal amount of commercial real estate secured by non-owner occupied office property where third-party tenant rents are the primary source of repayment. All non-owner occupied commercial real estate office projects are performing as agreed.

Deposits

Average deposits of $6.95 billion, grew $11.02 million, up 0.16% from the previous quarter and grew $276.87 million or 4.15% compared to the quarter ended September 30, 2022. Average deposits for the first nine months of 2023 were $6.92 billion, an increase of $224.19 million, up 3.35% from the same period a year ago. Average balances were relatively flat as the overall deposit mix changed due to expected seasonal public fund outflows and rate competition driving consumers to higher yielding time and money market deposit accounts.

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End of period deposits were $6.97 billion at September 30, 2023, compared to $6.98 billion at June 30, 2023. Balances were steady, however the deposit mix changed as higher brokered, time, and money market deposit balances were offset by decreased noninterest-bearing and public fund deposit balances. Rate competition for deposits persisted during the quarter.

Net Interest Income and Net Interest Margin

Third quarter 2023 tax-equivalent net interest income increased $0.71 million to $69.41 million, up 1.04% from the previous quarter and was flat from the third quarter a year ago. For the first nine months of 2023, tax-equivalent net interest income increased $15.47 million to $207.89 million, up 8.04% from the same period in 2022.

Third quarter 2023 net interest margin was 3.45%, a decline of two basis points from the 3.47% in the previous quarter and a decrease of 14 basis points from the same period in 2022. On a fully tax-equivalent basis, third quarter 2023 net interest margin was 3.46%, down by two basis points compared to the 3.48% in the previous quarter and a decline of 14 basis points from the same period in 2022. The decrease from the prior quarter and prior year was primarily due to higher rates on interest-bearing deposits mainly from competitive market pressures and increased short-term borrowing rates.

Net interest margin for the first nine months of 2023 was 3.50%, an increase of 14 basis points compared to the first nine months of 2022. Similarly, net interest margin on a fully-tax-equivalent basis for the first nine months of 2023 was 3.51%, an increase of 14 basis points compared to the same period during the prior year. Higher market rates due to continuing Federal Reserve rate increases and loan repricing contributed to net interest margin expansion compared to the first nine months of 2022.

Noninterest Income

Third quarter 2023 noninterest income of $24.46 million increased $1.69 million, up 7.40% from the previous quarter and increased $2.45 million, up 11.12% compared to the third quarter a year ago. For the first nine months of 2023, noninterest income was $70.55 million, an increase of $2.57 million, up 3.77% from the same period a year ago.

The increase in noninterest income compared to the previous quarter and third quarter of 2022 was due to gains on the sale of renewable energy tax equity investments of $2.32 million, a rise in interest rate swap fees, and higher bank owned life insurance policy claims recognized. These were offset by lower debit card income from reduced transaction volumes, reduced equipment rental income as demand for leases declined and seasonal tax preparation fee income recognized in the second quarter of 2023 from our Trust and Wealth Advisory Services Group.

The increase in noninterest income compared to the first nine months of 2022 was due to gains on the sale of renewable energy equity investments of $3.43 million, a rise in interest rate swap fees, and higher bank owned life insurance policy claims, offset by reduced mortgage banking origination volumes resulting in lower income from loans sold in the secondary market and lower equipment rental income.

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Noninterest Expense

Third quarter 2023 noninterest expense of $50.17 million increased $1.00 million, or 2.04% from the prior quarter and increased $4.84 million, or 10.67% from the third quarter a year ago. For the first nine months of 2023, noninterest expense was $148.75 million, an increase of $12.43 million, or 9.12% from the same period a year ago.

The increase in noninterest expense from the previous quarter was primarily due to increased group insurance claims and check fraud losses offset by lower marketing promotions.

The increase in noninterest expense compared to the third quarter and first nine months of 2022 was mainly the result of higher salaries and wages from normal merit increases, the impact of wage inflation and an increase in the number of employees filling prior open positions. A rise in group insurance claims, increased data processing and technology project costs, higher FDIC insurance premiums, and higher loan loss provision for unfunded loan commitments added to the increase. These were offset by a $1.08 million reversal of accrued legal fees during the first quarter of 2023 and lower leased equipment depreciation.

Credit

The allowance for loan and lease losses as of September 30, 2023, was 2.27% of total loans and leases compared to 2.31% at June 30, 2023, and 2.36% at September 30, 2022. Net charge-offs of $0.33 million were recorded for the third quarter of 2023 compared with $0.98 million of net recoveries in the prior quarter and net charge-offs of $0.30 million in the same quarter a year ago.

The provision for credit losses was $0.86 million for the third quarter of 2023, an increase of $0.81 million from the previous quarter and a decrease of $2.31 million compared with the same period in 2022. Net charge-offs during the quarter compared to net recoveries in the previous quarter was the primary reason for the increase in the provision for credit losses. The ratio of nonperforming assets to loans and leases was 0.27% as of September 30, 2023, compared to 0.33% on June 30, 2023, and 0.48% on September 30, 2022.

Capital

As of September 30, 2023, the common equity-to-assets ratio was 10.84%, compared to 10.95% at June 30, 2023, and 10.20% a year ago. The tangible common equity-to-tangible assets ratio was 9.96% at September 30, 2023, compared to 10.05% at June 30, 2023, and 9.26% a year earlier. The Common Equity Tier 1 ratio, calculated under banking regulatory guidelines was 13.31% at September 30, 2023 compared to 13.59% at June 30, 2023 and 13.50% a year ago. During the third quarter of 2023, 260,887 shares were repurchased for treasury reducing common shareholders’ equity by $10.29 million.

The Company has a long history of maintaining conservative capital levels and the risk-based capital ratios remained strong during the third quarter, even when adjusting for unrealized losses on the available-for-sale securities portfolio.

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Liquidity

The Company maintains prudent strategies to support a strong liquidity position. Sources of liquidity include unencumbered available-for-sale securities, Federal Home Loan Bank (FHLB) advances, the Federal Reserve Bank (FRB) discount window and Bank Term Funding Program, Federal Funds lines from correspondent banks and brokered and listing services deposits. Total net available liquidity was $3.04 billion at September 30, 2023, which accounted for approximately 48% of total deposits net of brokered and listing services certificates of deposit.

The investment portfolio is managed with a prioritized focus on liquidity. Investment securities accounted for 18.83% of total assets at September 30, 2023, with the entirety of the portfolio classified as available-for-sale. The Company had no held-to-maturity securities therefore all market value adjustments resulting in unrealized gains and losses were reflected on the Consolidated Statements of Financial Condition. The modified duration of the total investment portfolio was calculated at 3.1 years.

ABOUT 1ST SOURCE CORPORATION

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 its clients, individuals, businesses and 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, and construction equipment. The Corporation includes 79 banking centers, 18 1st Source Bank Specialty Finance Group locations nationwide, nine Wealth Advisory Services locations and 10 1st Source Insurance offices.

FORWARD LOOKING STATEMENTS

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,” “hope,” “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.

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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.

NON-GAAP FINANCIAL MEASURES

The accounting and reporting policies of 1st Source conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures are used by management to evaluate and measure the Company’s performance. Although these non-GAAP financial measures are frequently used by investors to evaluate a financial institution, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP. These include taxable-equivalent net interest income (including its individual components), net interest margin (including its individual components), the efficiency ratio, tangible common equity-to-tangible assets ratio and tangible book value per common share. Management believes that these measures provide users of the Company’s financial information a more meaningful view of the performance of the interest-earning assets and interest-bearing liabilities and of the Company’s operating efficiency. Other financial holding companies may define or calculate these measures differently.

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources. Net interest income on a FTE basis is also used in the calculation of the Company’s efficiency ratio. The efficiency ratio, which is calculated by dividing non-interest expense by total taxable-equivalent net revenue (less securities gains or losses and lease depreciation), measures how much it costs to produce one dollar of revenue. Securities gains or losses and lease depreciation are excluded from this calculation to better match revenue from daily operations to operational expenses. Management considers the tangible common equity-to-tangible assets ratio and tangible book value per common share as useful measurements of the Company’s equity.

See the table marked “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of certain non-GAAP financial measures used by the Company with their most closely related GAAP measures.

# # #

(charts attached)

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1st SOURCE CORPORATION
3rd QUARTER 2023 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
	Three Months Ended									Nine Months Ended
	September 30,			June 30,			September 30,			September 30,			September 30,
	2023			2023			2022			2023			2022
AVERAGE BALANCES
Assets	$	8,417,391		$	8,362,308		$	8,019,104		$	8,368,054		$	8,040,090
Earning assets	7,963,537			7,921,528			7,615,593			7,917,763			7,645,464
Investments	1,645,906			1,697,699			1,863,979			1,703,626			1,862,252
Loans and leases	6,245,883			6,141,157			5,627,718			6,141,849			5,474,401
Deposits	6,950,105			6,939,082			6,673,239			6,919,695			6,695,507
Interest bearing liabilities	5,566,874			5,496,112			4,958,209			5,470,305			4,973,767
Common shareholders’ equity	940,544			926,157			873,209			919,182			881,574
Total equity	999,552			985,406			931,412			978,461			936,974
INCOME STATEMENT DATA
Net interest income	$	69,236		$	68,516		$	68,934		$	207,317		$	192,014
Net interest income - FTE(1)	69,406			68,695			69,116			207,892			192,427
Provision for credit losses	859			47			3,167			3,955			7,903
Noninterest income	24,455			22,769			22,007			70,547			67,982
Noninterest expense	50,166			49,165			45,331			148,752			136,322
Net income	32,939			32,447			32,745			96,517			89,476
Net income available to common shareholders	32,939			32,435			32,737			96,498			89,441
PER SHARE DATA
Basic net income per common share	$	1.32		$	1.30		$	1.32		$	3.87		$	3.59
Diluted net income per common share	1.32			1.30			1.32			3.87			3.59
Common cash dividends declared	0.32			0.32			0.32			0.96			0.94
Book value per common share(2)	37.83			37.31			33.50			37.83			33.50
Tangible book value per common share(1)	34.40			33.92			30.10			34.40			30.10
Market value - High	49.36			47.94			51.29			53.85			52.70
Market value - Low	40.96			38.77			42.38			38.77			42.29
Basic weighted average common shares outstanding	24,660,508			24,686,435			24,656,736			24,677,914			24,697,106
Diluted weighted average common shares outstanding	24,660,508			24,686,435			24,656,736			24,677,914			24,697,106
KEY RATIOS
Return on average assets	1.55		%	1.56		%	1.62		%	1.54		%	1.49		%
Return on average common shareholders’ equity	13.89			14.05			14.87			14.04			13.56



Average common shareholders’ equity to average assets	11.17			11.08			10.89			10.98			10.96
End of period tangible common equity to tangible assets(1)	9.96			10.05			9.26			9.96			9.26




Risk-based capital - Common Equity Tier 1(3)	13.31			13.59			13.50			13.31			13.50
Risk-based capital - Tier 1(3)	14.86			15.20			15.24			14.86			15.24
Risk-based capital - Total(3)	16.12			16.46			16.50			16.12			16.50
Net interest margin	3.45			3.47			3.59			3.50			3.36
Net interest margin - FTE(1)	3.46			3.48			3.60			3.51			3.37
Efficiency ratio: expense to revenue	53.54			53.86			49.85			53.53			52.43
Efficiency ratio: expense to revenue - adjusted(1)	54.24			53.23			48.71			53.46			51.16
Net charge-offs (recoveries) to average loans and leases	0.02			(0.06)			0.02			(0.02)			(0.01)
Loan and lease loss allowance to loans and leases	2.27			2.31			2.36			2.27			2.36
Nonperforming assets to loans and leases	0.27			0.33			0.48			0.27			0.48



	September 30,			June 30,			March 31,			December 31,			September 30,
	2023			2023			2023			2022			2022
END OF PERIOD BALANCES
Assets	$	8,525,058		$	8,414,818		$	8,329,803		$	8,339,416		$	8,097,486
Loans and leases	6,353,648			6,215,343			6,116,716			6,011,162			5,762,078
Deposits	6,967,492			6,976,518			6,801,464			6,928,265			6,621,231
Allowance for loan and lease losses	144,074			143,542			142,511			139,268			135,736
Goodwill and intangible assets	83,921			83,897			83,901			83,907			83,911
Common shareholders’ equity	924,250			921,020			909,159			864,068			826,059
Total equity	982,997			980,087			968,444			923,766			886,360
ASSET QUALITY
Loans and leases past due 90 days or more	$	154		$	56		$	24		$	54		$	165
Nonaccrual loans and leases	16,617			20,481			18,062			26,420			27,813
Other real estate	117			193			117			104			—
Repossessions	233			47			445			327			26
Equipment owned under operating leases	—			—			—			22			1
Total nonperforming assets	$	17,121		$	20,777		$	18,648		$	26,927		$	28,005

(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.

(2) Calculated as common shareholders’ equity divided by common shares outstanding at the end of the period.

(3) Calculated under banking regulatory guidelines.

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
	September 30,		June 30,		December 31,		September 30,
	2023		2023		2022		2022
ASSETS
Cash and due from banks	$	75,729	$	86,742	$	84,703	$	86,952
Federal funds sold and interest bearing deposits with other banks	35,406		25,933		38,094		30,652
Investment securities available-for-sale	1,605,242		1,661,405		1,775,128		1,801,194
Other investments	25,075		25,320		25,293		25,538
Mortgages held for sale	3,118		2,321		3,914		3,058
Loans and leases, net of unearned discount:
Commercial and agricultural	763,051		797,188		812,031		835,762
Solar	364,949		376,905		381,163		358,635
Auto and light truck	901,484		901,054		808,117		743,324
Medium and heavy duty truck	323,202		319,634		313,862		293,068
Aircraft	1,079,581		1,060,340		1,077,722		997,995
Construction equipment	1,062,097		1,012,969		938,503		878,692
Commercial real estate	1,088,199		985,323		943,745		937,423
Residential real estate and home equity	627,515		617,495		584,737		568,602
Consumer	143,570		144,435		151,282		148,577
Total loans and leases	6,353,648		6,215,343		6,011,162		5,762,078
Allowance for loan and lease losses	(144,074)		(143,542)		(139,268)		(135,736)
Net loans and leases	6,209,574		6,071,801		5,871,894		5,626,342
Equipment owned under operating leases, net	24,096		26,582		31,700		32,964
Net premises and equipment	43,951		44,089		44,773		44,837
Goodwill and intangible assets	83,921		83,897		83,907		83,911
Accrued income and other assets	418,946		386,728		380,010		362,038
Total assets	$	8,525,058	$	8,414,818	$	8,339,416	$	8,097,486
LIABILITIES
Deposits:
Noninterest-bearing demand	$	1,680,725	$	1,721,947	$	1,998,151	$	2,047,328
Interest-bearing deposits:
Interest-bearing demand	2,416,864		2,528,231		2,591,464		2,527,461
Savings	1,180,837		1,163,166		1,198,191		1,267,531
Time	1,689,066		1,563,174		1,140,459		778,911
Total interest-bearing deposits	5,286,767		5,254,571		4,930,114		4,573,903
Total deposits	6,967,492		6,976,518		6,928,265		6,621,231
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase	48,335		69,308		141,432		145,192
Other short-term borrowings	223,757		118,377		74,097		195,270
Total short-term borrowings	272,092		187,685		215,529		340,462
Long-term debt and mandatorily redeemable securities	46,533		46,649		46,555		47,587
Subordinated notes	58,764		58,764		58,764		58,764
Accrued expenses and other liabilities	197,180		165,115		166,537		143,082
Total liabilities	7,542,061		7,434,731		7,415,650		7,211,126
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 shares at September 30, 2023, June 30, 2023, December 31, 2022, and September 30, 2022, respectively	436,538		436,538		436,538		436,538
Retained earnings	769,603		744,442		694,862		671,541
Cost of common stock in treasury (3,776,591, 3,523,113, 3,543,388, and 3,548,496 shares at September 30, 2023, June 30, 2023, December 31, 2022, and September 30, 2022, respectively)	(130,579)		(120,410)		(119,642)		(119,743)
Accumulated other comprehensive loss	(151,312)		(139,550)		(147,690)		(162,277)
Total shareholders’ equity	924,250		921,020		864,068		826,059
Noncontrolling interests	58,747		59,067		59,698		60,301
Total equity	982,997		980,087		923,766		886,360
Total liabilities and equity	$	8,525,058	$	8,414,818	$	8,339,416	$	8,097,486

- 8 -


1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands, except per share amounts)
	Three Months Ended						Nine Months Ended
	September 30,		June 30,		September 30,		September 30,		September 30,
	2023		2023		2022		2023		2022
Interest income:
Loans and leases	$	100,206	$	93,300	$	69,027	$	280,195	$	184,650
Investment securities, taxable	5,918		5,946		6,691		18,512		19,324
Investment securities, tax-exempt	319		330		339		1,131		630
Other	883		978		421		2,498		1,952
Total interest income	107,326		100,554		76,478		302,336		206,556
Interest expense:
Deposits	34,405		28,870		6,556		84,538		12,485
Short-term borrowings	2,136		1,625		380		5,154		427
Subordinated notes	1,060		1,028		904		3,108		2,578
Long-term debt and mandatorily redeemable securities	489		515		(296)		2,219		(948)
Total interest expense	38,090		32,038		7,544		95,019		14,542
Net interest income	69,236		68,516		68,934		207,317		192,014
Provision for credit losses	859		47		3,167		3,955		7,903
Net interest income after provision for credit losses	68,377		68,469		65,767		203,362		184,111
Noninterest income:
Trust and wealth advisory	5,648		6,467		5,498		17,794		17,499
Service charges on deposit accounts	3,297		3,118		3,240		9,418		8,974
Debit card	4,377		4,701		4,628		13,585		13,383
Mortgage banking	971		926		864		2,699		3,303
Insurance commissions	1,714		1,641		1,695		5,384		5,168
Equipment rental	2,101		2,326		2,761		6,930		9,718
Losses on investment securities available-for-sale	—		—		—		(44)		—
Other	6,347		3,590		3,321		14,781		9,937
Total noninterest income	24,455		22,769		22,007		70,547		67,982
Noninterest expense:
Salaries and employee benefits	28,866		28,236		26,386		85,699		77,415
Net occupancy	2,867		2,676		2,582		8,165		7,917
Furniture and equipment	1,217		1,414		1,372		3,938		4,051
Data processing	6,289		6,268		5,802		18,714		16,412
Depreciation – leased equipment	1,672		1,876		2,233		5,570		7,912
Professional fees	1,763		1,704		1,539		4,149		5,241
FDIC and other insurance	1,598		1,344		939		4,302		2,682
Business development and marketing	1,201		1,649		1,415		4,822		4,352

Other	4,693		3,998		3,063		13,393		10,340
Total noninterest expense	50,166		49,165		45,331		148,752		136,322
Income before income taxes	42,666		42,073		42,443		125,157		115,771
Income tax expense	9,727		9,626		9,698		28,640		26,295
Net income	32,939		32,447		32,745		96,517		89,476
Net (income) loss attributable to noncontrolling interests	—		(12)		(8)		(19)		(35)
Net income available to common shareholders	$	32,939	$	32,435	$	32,737	$	96,498	$	89,441
Per common share:
Basic net income per common share	$	1.32	$	1.30	$	1.32	$	3.87	$	3.59
Diluted net income per common share	$	1.32	$	1.30	$	1.32	$	3.87	$	3.59
Cash dividends	$	0.32	$	0.32	$	0.32	$	0.96	$	0.94
Basic weighted average common shares outstanding	24,660,508		24,686,435		24,656,736		24,677,914		24,697,106
Diluted weighted average common shares outstanding	24,660,508		24,686,435		24,656,736		24,677,914		24,697,106

- 9 -


1st SOURCE CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited - Dollars in thousands)
							Three Months Ended
	September 30, 2023						June 30, 2023						September 30, 2022
	Average Balance		Interest Income/Expense		Yield/ Rate		Average Balance		Interest Income/Expense		Yield/ Rate		Average Balance		Interest Income/Expense		Yield/ Rate
ASSETS
Investment securities available-for-sale:
Taxable	$	1,605,912	$	5,918	1.46	%	$	1,655,790	$	5,946	1.44	%	$	1,816,138	$	6,691	1.46	%
Tax exempt(1)	39,994		397		3.94	%	41,909		411		3.93	%	47,841		426		3.53	%
Mortgages held for sale	3,169		54		6.76	%	1,879		28		5.98	%	4,272		58		5.39	%
Loans and leases, net of unearned discount(1)	6,245,883		100,244		6.37	%	6,141,157		93,370		6.10	%	5,627,718		69,064		4.87	%
Other investments	68,579		883		5.11	%	80,793		978		4.86	%	119,624		421		1.40	%
Total earning assets(1)	7,963,537		107,496		5.36	%	7,921,528		100,733		5.10	%	7,615,593		76,660		3.99	%
Cash and due from banks	68,640						72,880						74,329
Allowance for loan and lease losses	(145,197)						(144,337)						(133,989)
Other assets	530,411						512,237						463,171
Total assets	$	8,417,391					$	8,362,308					$	8,019,104

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits	$	5,247,332	$	34,405	2.60	%	$	5,192,206	$	28,870	2.23	%	$	4,634,092	$	6,556	0.56	%
Short-term borrowings:
Securities sold under agreements to repurchase	60,736		35		0.23	%	69,301		32		0.19	%	159,345		21		0.05	%
Other short-term borrowings	153,523		2,101		5.43	%	129,230		1,593		4.94	%	57,609		359		2.47	%
Subordinated notes	58,764		1,060		7.16	%	58,764		1,028		7.02	%	58,764		904		6.10	%
Long-term debt and mandatorily redeemable securities	46,519		489		4.17	%	46,611		515		4.43	%	48,399		(296)		(2.43)	%
Total interest-bearing liabilities	5,566,874		38,090		2.71	%	5,496,112		32,038		2.34	%	4,958,209		7,544		0.60	%
Noninterest-bearing deposits	1,702,773						1,746,876						2,039,147
Other liabilities	148,192						133,914						90,336
Shareholders’ equity	940,544						926,157						873,209
Noncontrolling interests	59,008						59,249						58,203
Total liabilities and equity	$	8,417,391					$	8,362,308					$	8,019,104
Less: Fully tax-equivalent adjustments			(170)						(179)						(182)
Net interest income/margin (GAAP-derived)(1)			$	69,236	3.45	%			$	68,516	3.47	%			$	68,934	3.59	%
Fully tax-equivalent adjustments			170						179						182
Net interest income/margin - FTE(1)			$	69,406	3.46	%			$	68,695	3.48	%			$	69,116	3.60	%
(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.

- 10 -



1st SOURCE CORPORATION
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY
INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited - Dollars in thousands)
	Nine Months Ended
	September 30, 2023						September 30, 2022
	Average Balance		Interest Income/Expense		Yield/ Rate		Average Balance		Interest Income/Expense		Yield/ Rate
ASSETS
Investment securities available-for-sale:
Taxable	$	1,657,241	$	18,512	1.49	%	$	1,826,095	$	19,324	1.41	%
Tax exempt(1)	46,385		1,413		4.07	%	36,157		786		2.91	%
Mortgages held for sale	2,489		114		6.12	%	5,967		177		3.97	%
Loans and leases, net of unearned discount(1)	6,141,849		280,374		6.10	%	5,474,401		184,730		4.51	%
Other investments	69,799		2,498		4.78	%	302,844		1,952		0.86	%
Total earning assets(1)	7,917,763		302,911		5.11	%	7,645,464		206,969		3.62	%
Cash and due from banks	70,288						75,497
Allowance for loan and lease losses	(143,545)						(131,572)
Other assets	523,548						450,701
Total assets	$	8,368,054					$	8,040,090

LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits	5,143,493		84,538		2.20	%	4,658,394		12,485		0.36	%
Short-term borrowings:
Securities sold under agreements to repurchase	87,909		107		0.16	%	176,029		67		0.05	%
Other short-term borrowings	133,965		5,047		5.04	%	22,983		360		2.09	%
Subordinated notes	58,764		3,108		7.07	%	58,764		2,578		5.87	%
Long-term debt and mandatorily redeemable securities	46,174		2,219		6.43	%	57,597		(948)		(2.20)	%
Total interest-bearing liabilities	5,470,305		95,019		2.32	%	4,973,767		14,542		0.39	%
Noninterest-bearing deposits	1,776,202						2,037,113
Other liabilities	143,086						92,236
Shareholders’ equity	919,182						881,574
Noncontrolling interests	59,279						55,400
Total liabilities and equity	$	8,368,054					$	8,040,090
Less: Fully tax-equivalent adjustments			(575)						(413)
Net interest income/margin (GAAP-derived)(1)			$	207,317	3.50	%			$	192,014	3.36	%
Fully tax-equivalent adjustments			575						413
Net interest income/margin - FTE(1)			$	207,892	3.51	%			$	192,427	3.37	%
(1) See “Reconciliation of Non-GAAP Financial Measures” for more information on this performance measure/ratio.

- 11 -


1st SOURCE CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited - Dollars in thousands, except per share data)

		Three Months Ended									Nine Months Ended
		September 30,			June 30,			September 30,			September 30,			September 30,
		2023			2023			2022			2023			2022
Calculation of Net Interest Margin
(A)	Interest income (GAAP)	$	107,326		$	100,554		$	76,478		$	302,336		$	206,556
	Fully tax-equivalent adjustments:
(B)	– Loans and leases	92			98			95			293			257
(C)	– Tax exempt investment securities	78			81			87			282			156
(D)	Interest income – FTE (A+B+C)	107,496			100,733			76,660			302,911			206,969
(E)	Interest expense (GAAP)	38,090			32,038			7,544			95,019			14,542
(F)	Net interest income (GAAP) (A-E)	69,236			68,516			68,934			207,317			192,014
(G)	Net interest income - FTE (D-E)	69,406			68,695			69,116			207,892			192,427
(H)	Annualization factor	3.967			4.011			3.967			1.337			1.337
(I)	Total earning assets	$	7,963,537		$	7,921,528		$	7,615,593		$	7,917,763		$	7,645,464
	Net interest margin (GAAP-derived) (F*H)/I	3.45		%	3.47		%	3.59		%	3.50		%	3.36		%
	Net interest margin – FTE (G*H)/I	3.46		%	3.48		%	3.60		%	3.51		%	3.37		%

Calculation of Efficiency Ratio
(F)	Net interest income (GAAP)	$	69,236		$	68,516		$	68,934		$	207,317		$	192,014
(G)	Net interest income – FTE	69,406			68,695			69,116			207,892			192,427
(J)	Plus: noninterest income (GAAP)	24,455			22,769			22,007			70,547			67,982
(K)	Less: gains/losses on investment securities and partnership investments	(2,779)			(748)			(418)			(5,049)			(1,498)
(L)	Less: depreciation – leased equipment	(1,672)			(1,876)			(2,233)			(5,570)			(7,912)
(M)	Total net revenue (GAAP) (F+J)	93,691			91,285			90,941			277,864			259,996
(N)	Total net revenue – adjusted (G+J–K–L)	89,410			88,840			88,472			267,820			250,999
(O)	Noninterest expense (GAAP)	50,166			49,165			45,331			148,752			136,322
(L)	Less:depreciation – leased equipment	(1,672)			(1,876)			(2,233)			(5,570)			(7,912)

(P)	Noninterest expense – adjusted (O–L)	48,494			47,289			43,098			143,182			128,410
	Efficiency ratio (GAAP-derived) (O/M)	53.54		%	53.86		%	49.85		%	53.53		%	52.43		%
	Efficiency ratio – adjusted (P/N)	54.24		%	53.23		%	48.71		%	53.46		%	51.16		%




		End of Period
		September 30,			June 30,			September 30,
		2023			2023			2022
Calculation of Tangible Common Equity-to-Tangible Assets Ratio
(Q)	Total common shareholders’ equity (GAAP)	$	924,250		$	921,020		$	826,059
(R)	Less: goodwill and intangible assets	(83,921)			(83,897)			(83,911)
(S)	Total tangible common shareholders’ equity (Q–R)	$	840,329		$	837,123		$	742,148
(T)	Total assets (GAAP)	8,525,058			8,414,818			8,097,486
(R)	Less: goodwill and intangible assets	(83,921)			(83,897)			(83,911)
(U)	Total tangible assets (T–R)	$	8,441,137		$	8,330,921		$	8,013,575
	Common equity-to-assets ratio (GAAP-derived) (Q/T)	10.84		%	10.95		%	10.20		%
	Tangible common equity-to-tangible assets ratio (S/U)	9.96		%	10.05		%	9.26		%












Calculation of Tangible Book Value per Common Share
(Q)	Total common shareholders’ equity (GAAP)	$	924,250		$	921,020		$	826,059
(V)	Actual common shares outstanding	24,429,083			24,682,561			24,657,178
	Book value per common share (GAAP-derived) (Q/V)*1000	$	37.83		$	37.31		$	33.50
	Tangible common book value per share (S/V)*1000	$	34.40		$	33.92		$	30.10

The NASDAQ Stock Market National Market Symbol: “SRCE” (CUSIP #336901 10 3)

Please contact us at shareholder@1stsource.com

- 12 -

Document and Entity Information	Oct. 19, 2023
Document and Entity Information
Document Type	8-K
Document Period End Date	Oct. 19, 2023
Entity Registrant Name	1st Source Corp
Entity Incorporation, State or Country Code	IN
Entity File Number	0-6233
Entity Tax Identification Number	35-1068133
Entity Address, Address Line One	100 North Michigan Street
Entity Address, City or Town	South Bend
Entity Address, State or Province	IN
Entity Address, Postal Zip Code	46601
City Area Code	574
Local Phone Number	235-2000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock - without par value
Trading Symbol	SRCE
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Amendment Flag	false
Entity Central Index Key	0000034782
Current Fiscal Year End Date	--12-31