1st Source Corporation (NASDAQ:SRCE), a leading regional bank holding company, has reported its second-quarter 2024 financial results, showcasing resilience in the face of a challenging economic landscape. The company's net income for the quarter stood at $36.8 million, or $1.49 per diluted share, compared to $32.4 million, or $1.30 per diluted share, in the same period last year. For the first six months of 2024, the company's net income reached $66.3 million, or $2.68 per diluted share, up from $63.6 million, or $2.55 per diluted share, in the first half of 2023.

Financials

Revenue for the second quarter of 2024 came in at $97.3 million, a 6.6% increase from the $91.3 million reported in the second quarter of 2023. For the first six months of 2024, the company's revenue reached $197.3 million, up from $184.2 million in the same period last year. The increase in revenue was primarily driven by growth in net interest income, which rose to $145.9 million in the first half of 2024, compared to $138.1 million in the first half of 2023.

The company's net interest margin, on a fully taxable-equivalent basis, was 3.59% in the second quarter of 2024, up from 3.48% in the same period last year. For the first six months of 2024, the net interest margin stood at 3.57%, compared to 3.54% in the first half of 2023. This improvement was largely due to higher yields on loans and leases, as well as increased income from other investments, which include federal funds sold, time deposits with other banks, and Federal Reserve Bank excess balances.

1st Source's loan and lease portfolio grew to $6.65 billion as of June 30, 2024, up 2.1% from $6.52 billion at the end of 2023. The largest contributors to the loan and lease growth were the renewable energy, construction equipment, auto and light truck, and commercial real estate portfolios, which offset declines in the commercial and agricultural and aircraft portfolios.

Asset Quality

The company's asset quality remained stable, with nonperforming assets as a percentage of total loans and leases at 0.31% as of June 30, 2024, compared to 0.37% at the end of 2023 and 0.33% a year ago. The allowance for loan and lease losses as a percentage of total loans and leases stood at 2.26% at the end of the second quarter of 2024, compared to 2.31% at the end of 2023 and 2.31% a year ago.

The provision for credit losses for the second quarter of 2024 was $0.06 million, compared to $0.05 million in the same period last year. For the first six months of 2024, the provision for credit losses was $6.65 million, up from $3.10 million in the first half of 2023. The increase in the provision was primarily driven by modest loan growth, higher special attention outstandings, and an increase in specific impairments in the commercial and agricultural portfolio.

Deposits and Capital Position

1st Source's total deposits grew to $7.20 billion as of June 30, 2024, up 2.2% from $7.04 billion at the end of 2023. The increase was mainly due to a rise in public fund and time deposits, partially offset by a decrease in non-interest-bearing deposits. The company's loan-to-deposit ratio stood at 92.4% as of June 30, 2024, compared to 92.5% at the end of 2023.

The company's capital position remained strong, with a total risk-based capital ratio of 16.64% and a Tier 1 capital ratio of 15.38% as of June 30, 2024. These ratios were well above the regulatory minimums required to be considered "well-capitalized."

Liquidity

In terms of liquidity, 1st Source had $3.20 billion in available liquidity as of June 30, 2024, which represented approximately 49% of total deposits net of brokered and listing services certificates of deposit. The company's cash and cash equivalents totaled $269.2 million at the end of the second quarter of 2024, up from $129.7 million at the end of 2023.

Christopher J. Murphy III, Chairman and CEO of 1st Source, commented, "1st Source is pleased with the solid financial performance in the second quarter, which reflects the strength and resilience of the diversified business model. However, the company remains cautious about the economic outlook, as it navigates a challenging environment marked by elevated inflation, rising interest rates, and ongoing geopolitical uncertainties."

Outlook

Looking ahead, the company maintained a cautious outlook, citing concerns about the potential impact of tightened credit conditions, a softening labor market, and persistent inflationary pressures on its clients and the broader economy. 1st Source will continue to closely monitor these developments and adjust its strategies accordingly to ensure the long-term success of the organization.

Conclusion

Overall, 1st Source's second-quarter and first-half 2024 results demonstrate the company's ability to navigate the current economic landscape and deliver solid financial performance. The company's diversified business model, strong capital position, and prudent risk management practices position it well to weather the ongoing challenges and capitalize on future growth opportunities.