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1S

1ST SOURCE CORP (SRCE)·Q1 2025 Earnings Summary

Executive Summary

  • Record quarter: Net income $37.52M and diluted EPS $1.52; net interest margin expanded for the fifth consecutive quarter to 3.90% FTE, with average loans and deposits up 1.84% and 2.62% QoQ, respectively .
  • EPS materially beat S&P Global consensus by $0.15; revenue (company total net revenue) of $104.04M exceeded S&P consensus revenue ($100.97M) by ~$3.07M; consensus based on 3 estimates. Bold beat driven by NIM expansion, higher earning assets, reduced reliance on short‑term borrowings, and lower effective tax rate from a one‑time refund interest payment . EPS consensus: $1.37*, Revenue consensus: $100.97M*, Actual EPS: $1.52*, Actual Revenue: $100.78M* (S&P), Company total net revenue: $104.04M .
  • Credit remained strong with net charge‑offs 0.01% of average loans/leases; allowance increased to 2.29% while NPA/loans/leases rose to 0.63% amid a weakened forward economic outlook .
  • Board approved a quarterly dividend of $0.38, up 11.76% YoY; capital ratios strengthened (CET1 14.71%; TCE/TA 12.14%) and liquidity improved as short-term borrowings declined sharply QoQ .

What Went Well and What Went Wrong

  • What Went Well

    • Net interest margin expansion (+12 bps QoQ; +36 bps YoY on FTE) from higher rates on investment securities, increased average loan/lease balances, and less reliance on higher-cost short‑term borrowings; net interest recoveries added 7 bps in Q1 vs 3 bps in Q4 .
    • Noninterest income rebounded (+$4.62M QoQ) as Q4 AFS securities losses did not recur; gains included swap fees, partnership investment gains on renewable energy tax equity, brokerage/commissions, and trust/wealth income on better markets .
    • Effective tax rate declined to 21.34% (from 21.53% in Q4) owing to a one‑time after‑tax interest payment on federal tax refunds, modestly boosting after-tax earnings .
    • Quote: “We are pleased to have achieved record quarterly net income… Higher rates on investment securities, increased average loan and lease balances, and less reliance on higher costing short‑term borrowings lead to a 12-basis point improvement…” — Christopher J. Murphy III, CEO .

  • What Went Wrong

    • Nonperforming assets increased to 0.63% of loans/leases (from 0.46% in Q4; 0.34% YoY), reflecting rising special attention outstandings and macro uncertainty .
    • Noninterest expense rose $4.37M YoY on higher salaries (merit/incentives), group insurance claims, data processing and professional fees; QoQ expense fell but cost pressure remains .
    • Equipment rental income continues to decline as operating lease demand weakens; debit card and deposit account fees were lower QoQ .

Financial Results

Headline Metrics vs Prior Periods

MetricQ3 2024Q4 2024Q1 2025
Diluted EPS ($)$1.41 $1.27 $1.52
Net Income ($M)$34.914 $31.437 $37.523
Net Interest Income ($M)$75.486 $79.366 $80.938
Net Interest Margin - FTE (%)3.64 3.78 3.90
Noninterest Income ($M)$22.448 $18.482 $23.103
Noninterest Expense ($M)$49.443 $54.208 $53.076
Provision for Credit Losses ($M)$3.108 $3.580 $3.265
ROA (%)1.59 1.42 1.72
ROE (%)12.87 11.21 13.33
Efficiency Ratio (GAAP) (%)50.49 55.40 51.01

Q1 2025 vs Prior Quarter and Prior Year

MetricQ1 2024Q4 2024Q1 2025
Diluted EPS ($)$1.19 $1.27 $1.52
Net Income ($M)$29.462 $31.437 $37.523
Net Interest Margin - FTE (%)3.54 3.78 3.90
Noninterest Income ($M)$22.156 $18.482 $23.103
Noninterest Expense ($M)$48.704 $54.208 $53.076
Provision for Credit Losses ($M)$7.477 $3.580 $3.265
Net Charge-offs to Avg Loans (%)0.38 0.04 0.01
NPA / Loans & Leases (%)0.34 0.46 0.63

Revenue vs Estimates

MetricConsensus (S&P Global)Actual (S&P Global)Company Reported
EPS ($)$1.37*$1.52*$1.52
Revenue ($M)$100.97*$100.78*$104.04

Values retrieved from S&P Global.*

Bold beat: EPS +$0.15 vs consensus; Company total net revenue +$3.07M vs consensus .

Balance Growth and Funding

MetricQ3 2024Q4 2024Q1 2025
Avg Loans & Leases ($M)$6,605.677 $6,676.421 $6,798.952
Avg Deposits ($M)$7,134.426 $7,146.149 $7,333.542
End Deposits ($M)$7,125.944 $7,230.035 $7,417.765
Short-term Borrowings ($M, end)$165.677 $249.198 $61.177

Capital and Tax

MetricQ3 2024Q4 2024Q1 2025
CET1 Ratio (%)14.18 14.21 14.71
TCE / TA (%)11.76 11.61 12.14
Effective Tax Rate (%)N/A21.53 21.34

Segment Breakdown – End of Period Loans/Leases

Segment ($M)Mar 31, 2024Dec 31, 2024Mar 31, 2025
Commercial & Agricultural$731.527 $772.974 $775.118
Renewable Energy$413.662 $487.266 $505.413
Auto & Light Truck$997.465 $948.435 $955.945
Medium & Heavy Duty Truck$303.799 $289.623 $289.837
Aircraft$1,104.058 $1,123.797 $1,118.099
Construction Equipment$1,092.585 $1,203.912 $1,171.934
Commercial Real Estate$1,135.595 $1,215.265 $1,230.760
Residential RE & Home Equity$643.856 $680.071 $689.101
Consumer$140.225 $133.465 $127.186
Total Loans & Leases$6,562.772 $6,854.808 $6,863.393

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Dividend per ShareQ1 2025$0.36 (Q4’24 dividend) $0.38 Raised
Formal Financial Guidance (Revenue, Margins, OpEx, Tax)2025None disclosedNone disclosedMaintained (no formal guidance)

Earnings Call Themes & Trends

Note: A Q1 2025 earnings call was held on April 24, 2025, but a full transcript was not available in our document repository; company IR site lists the event, and third-party sites confirm timing .

TopicPrevious Mentions (Q3 2024 & Q4 2024)Current Period (Q1 2025)Trend
Net Interest Margin trajectory4th consecutive quarter of expansion; driven by pricing discipline and lower reliance on short-term borrowings 5th consecutive expansion (+12 bps QoQ, +36 bps YoY FTE); higher securities yields, larger average loans, lower short-term borrowings Improving
Deposit competition/mixPersistent competition; clients moved to higher-yield accounts; seasonal public fund outflows in Q3 Average deposits +2.62% QoQ, +4.60% YoY; higher brokered/savings QoQ; mix shifts continued Stabilizing with growth
Credit qualityQ3: higher NCOs (one account); allowance 2.30% NCOs 0.01%; allowance 2.29%; NPA ratio increased to 0.63%; weaker forward outlook Mixed: low losses, higher NPAs
Noninterest income driversQ3: lower equipment rental, fewer renewable tax equity gains ; Q4: AFS losses ($3.90M), writedown $0.86M Rebound QoQ (no AFS losses), gains in swap fees, renewable tax equity, contingent commissions, brokerage, trust/wealth; rental and mortgage banking lower YoY Recovering from Q4
Tech/process/customer experienceQ4: Joined U.S. Faster Payments Council; NPS 76.4% Rollout of side-by-side banking centers and new Carmel, IN location; awards for service and employers Continuing investments
Capital/liquidityCET1 ~14.2% in Q4; TCE/TA 11.61%; high short-term borrowings in Q4 CET1 14.71%; TCE/TA 12.14%; short-term borrowings down to $61.2M Strengthening

Management Commentary

  • “Record quarterly net income… net interest margin expansion compared to the previous quarter… higher rates on investment securities, increased average loan and lease balances, and less reliance on higher costing short-term borrowings…” — Christopher J. Murphy III, CEO .
  • Accolades and culture: Forbes America’s Best Banks (#26/100), America’s Best Midsize Employers (4th consecutive year), S&P Global Market Intelligence Top 50 Community Banks (#25), SBA Gold Level Award (12th year), and multiple regional awards — reinforcing strong operating model and client service .
  • Network and experience: Side‑by‑side banking model expansion, branch relocation/opening (Winamac, Carmel) to enhance transparency and client engagement .

Q&A Highlights

A full Q1 2025 earnings call transcript was not available in our repository; the company held its call on April 24, 2025. No verified Q&A content to report .

Estimates Context

  • EPS: Consensus $1.37* vs actual $1.52* — bold beat, supported by margin expansion (+12 bps QoQ), higher earning assets, lower short-term funding costs, and a one-time tax refund interest reducing effective tax rate . Values retrieved from S&P Global.*
  • Revenue: Consensus $100.97M*; company’s total net revenue of $104.04M implies a ~$3.07M beat vs consensus; S&P Global “actual revenue” appears to use a different definition ($100.78M*), which is below consensus — we anchor to company-reported total net revenue for comparability . Values retrieved from S&P Global.*
  • Estimate dispersion: 3 EPS and 3 revenue estimates in consensus for Q1 2025.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin momentum: Five straight quarters of NIM expansion with further benefit from securities yields and balance growth; watch path of rates and deposit pricing competition .
  • Quality with caution: Losses remain low, allowance robust (2.29%), but NPAs rose to 0.63%; monitor special attention trends and macro headwinds .
  • Noninterest normalization: Rebound from Q4’s AFS losses; sustainable drivers include trust/wealth, brokerage, swaps; operating lease/rental remains a headwind .
  • Capital optionality: CET1 14.71% and TCE/TA 12.14% support dividend increases and selective buybacks (7,554 shares repurchased in Q1) while funding growth .
  • Tax tailwind was one‑time: Effective tax rate benefited from refund interest; absent repeat, EPS comparisons should normalize .
  • Liquidity improved: Short-term borrowings reduced sharply QoQ; deposit growth healthy; funding mix improving .
  • Near-term trading: Positive EPS/revenue beat and NIM expansion could be catalysts; watch credit (NPAs) and fee trends; medium-term thesis supported by disciplined pricing, niche specialty finance, and conservative capital profile .

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