MSR Recovery Helps 1st Source Bank Boost Dividend
1st Source Corp. here, parent of 1st Source Bank, earned $24.6 million for the first nine months of this year, up 44% over the same period in 2004, as stronger mortgage banking results helped strengthen the company's results.
1st Source noted that the year-earlier results were hampered by the larger provision for loan and lease losses and by impairment charges on mortgage servicing rights and preferred stock from the government-sponsored enterprises.
Christopher Murphy, chairman and CEO, also noted in the company's release that 1st Source's board of directors has approved an increase in the cash dividend to $0.13 per share, up 18% from the dividend paid a year ago. The dividend is payable Nov. 15.
Mr. Murphy said the third quarter was clearly an improvement over the previous year.
"We benefited from recoveries in our loan portfolio and in our provision for loan and lease losses, and a recapturing of value in our mortgage servicing rights due to the rise in interest rates. Net interest margins are relatively flat but we are pleased with the continuing improvement in our credit quality," he said.
1st Source noted that a substantial increase in non-interest income during the third quarter largely reflected an increase in mortgage banking income, which was the result of a recovery in value from the bank's mortgage servicing rights.
During the third quarter, 1st Source recovered $1.5 million in MSR value vs. $2.5 million of negative impairment a year earlier. That was a swing of $4.1 million in the company's MSR performance. For the first nine months of this year, 1st Source recovered $2.2 million in MSR value.
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