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Introduction & Market Context
1st Source Corporation (NASDAQ:SRCE) presented its Q2 2025 investor slides, highlighting the company’s financial performance, strategic initiatives, and market position. The $9.1 billion community bank, founded in 1863 and headquartered in South Bend, Indiana, continues to demonstrate consistent growth across its three main business lines: Community Banking, Renewable Energy Financing, and Specialty Finance.
The presentation comes as regional banks navigate a complex interest rate environment, with SRCE’s stock closing at $61.57 on August 14, 2025, down 0.95% for the day, but trading well above its 52-week low of $52.14.
Executive Summary
1st Source maintains a leading position in its primary 16-county market area spanning northern Indiana and southwestern Michigan, while expanding its national footprint through specialty finance and renewable energy initiatives. The company reported year-to-date net income of $74.8 million with diluted earnings per share of $3.02, supported by a strong net interest margin of 3.95%.
The bank continues to emphasize its digital transformation, with mobile adoption increasing to 69% in Q2 2025 from 62% in Q2 2022. Meanwhile, its capital position remains robust with a Tier 1 leverage ratio of 14.39%, well above regulatory requirements.
Business Model & Strategic Positioning
1st Source operates through three distinct business segments. Its Community Banking division encompasses 78 banking centers and 98 ATMs across northern Indiana and southwestern Michigan, offering traditional banking services alongside wealth management, with approximately $5.9 billion in assets under management.
The company’s Renewable Energy Financing division has established a significant environmental impact through its project financing. As shown in the following chart of environmental benefits from renewable energy projects:
The Specialty Finance Group provides nationwide financing for auto and light truck fleets, medium and heavy-duty trucks, construction equipment, and aircraft. This diversification has helped the bank maintain stable performance through various economic cycles.
1st Source has achieved market leadership in its core regions, securing the top deposit share position in its 16-county contiguous market. The following chart illustrates this competitive advantage:
Financial Performance Highlights
The company has demonstrated consistent growth in its loan portfolio, which has expanded at a compound annual growth rate of 6.97% since 2021. Total average loans and leases reached $6.88 billion in 2025 YTD, with yields increasing to 6.76%, as shown in the following chart:
Net interest margin has shown steady improvement, reaching 3.95% in 2025 YTD compared to 3.23% in 2021. This expansion has supported growth in net interest income despite recent interest rate volatility, as illustrated below:
Credit quality remains strong, with net charge-offs at just 0.06% of net loans and leases in 2025 YTD. The loan portfolio is well-diversified across commercial (19%), commercial real estate (18%), construction equipment (17%), aircraft (16%), and auto and light truck (14%) segments, among others.
Digital Transformation
1st Source has made significant progress in its digital banking initiatives. The company’s mobile app maintains a 4.8-star rating with 11,000 ratings, and mobile users have increased by 14.2% since Q2 2022. Particularly notable is the 82% growth in Zelle transactions during the same period. The following chart details this digital adoption:
The bank has also embraced instant payment technologies, launching Real Time Payments (RTP) in May 2023 and FedNow in July 2023. Since implementation, these platforms have processed over $345 million in transactions, with volumes steadily increasing each quarter.
Capital Position & Shareholder Returns
1st Source maintains a strong capital position, with all key regulatory ratios well above required minimums. The following chart illustrates the company’s capital strength:
This robust capital foundation has supported consistent growth in tangible book value per share, which has increased at a compound annual rate of 8.78% since 2018, reaching $45.44 in 2025 YTD.
The company has maintained an impressive 37-year streak of consecutive dividend increases, with dividends per share growing at a compound annual rate of 8.60% since 2015. This commitment to shareholder returns has translated into superior long-term performance compared to major market indices, as shown in the following chart:
When compared specifically to banking indices since the 2007-2008 financial crisis, 1st Source has significantly outperformed its peers:
Forward-Looking Statements
Looking ahead, 1st Source is positioned to continue its growth trajectory through its diversified business model and strong market presence. The company highlighted several investment considerations, including its consistent financial performance, experienced management team, diversified product mix and geography, leading market share, stable credit quality, and strong capital position.
The bank’s continued investment in digital banking capabilities and expansion of its renewable energy financing portfolio suggest a strategic focus on both technological advancement and sustainable growth opportunities. With its conservative capital management approach and history of dividend growth, 1st Source appears well-positioned to navigate the evolving banking landscape while delivering value to shareholders.
Full presentation:
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