Christopher J. Murphy III
About Christopher J. Murphy III
Christopher J. Murphy III is 78 and serves as Chairman of the Board and Chief Executive Officer of 1st Source Corporation (since 2024), and Chairman of the Board of 1st Source Bank (since 2022). He has over 52 years of banking and business experience, including prior roles as President and CEO of both the corporation and the bank; earlier in his career he worked at Citibank and the U.S. Comptroller of the Currency while in college. He holds a B.A. in Government from the University of Notre Dame, a J.D. from the University of Virginia School of Law, and an M.B.A. from Harvard Business School . Company performance in 2024 featured record net income of $132.6 million, EPS of $5.36, ROA of 1.52%, loans up 6.4% year-over-year, and the 37th consecutive year of dividend increases . The Compensation Committee assessed 2024 performance relative to peers, with ROA at the 91st percentile vs. $3–$10B peers, and maintained strong efficiency (51.9%) and credit quality (net charge-offs 0.09%) .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| 1st Source Corporation | Chairman & CEO (since 2024); prior Chairman, President & CEO | Over 52 years | Long-term perspective, deep market knowledge, extensive stakeholder relationships |
| 1st Source Bank | Chairman (since 2022); prior President & CEO | Over 52 years | Enterprise leadership across banking operations |
| Citibank | Banker | Not disclosed | Early foundational banking experience |
| Office of the Comptroller of the Currency (U.S. Treasury) | Banking regulatory work (during college) | Not disclosed | Exposure to regulation and supervision |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Aunalytics, Inc. | Director (represents 1st Source’s investment) | Not disclosed | Oversight of managed data center and analytics partner; supports bank’s digital/data infrastructure |
| Federal Reserve Bank of Chicago | Director (service noted) | Not disclosed | Macro/industry insight and policy engagement |
| Medical Education Foundation (Indiana University Medical School at Notre Dame) | Board/citizens advisory board member | Not disclosed | Community engagement and regional influence |
| Indiana State Chamber of Commerce | Board (emeritus) | Not disclosed | Statewide business advocacy and networks |
| Beacon Health System | Prior Board & Audit Committee service | Not disclosed | Governance and financial oversight experience |
| Indiana Academy; Indiana Commission for Higher Education | Prior board roles | Not disclosed | Education policy and leadership |
Fixed Compensation
Multi-year pay detail for Mr. Murphy:
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | $810,000 | $821,495 | $836,538 |
| Directors’ Fees ($) | $72,620 (included in All Other) | $72,620 (included in All Other) | $72,620 (included in All Other) |
| All Other Compensation ($) | $157,592 | $180,729 | $184,830 |
| Total Compensation ($) | $2,364,896 | $2,768,600 | $2,035,648 |
Director compensation structure (applies to all directors; Mr. Murphy and Ms. Short only receive the annual retainer):
- Annual retainer: $72,620; increased from $70,565 effective May 1, 2024
- Meeting fees: Board $3,000; Audit/Finance/Risk $3,000; Loan & Funds $2,500; other committees $2,500
- Committee chair retainers: Governance & Nominating $20,000; Audit/Finance/Risk $15,000; Executive Compensation & HR $15,000; Loan & Funds $10,000; Trust & Investment $10,000
- Executive Committee chair: $0 (Mr. Murphy is Chair)
Perquisites disclosed for Mr. Murphy include annual medical exam and personal aircraft use (incremental cost via SIFL), and reimbursements for miscellaneous personal benefits ($2,000 in 2024) .
Performance Compensation
Summary of 2024 incentive outcomes for Mr. Murphy:
- Executive Incentive Plan (EIP) cash award: $376,450
- Strategic Deployment Incentive Plan (SDIP) cash award: $311,400
- Stock awards (book value awards tied to prior-year performance; vesting over 5 years): $326,430 (granted 2024, for 2023 performance)
EIP architecture and hurdles:
- Partnership level: 15% of base salary for CEO
- Company Performance Factor linked to ROA percentile vs. $3–$10B peers; 2024 factor = 125% (91st percentile at Sept. 30, 2024)
- Book value stock match: equal to cash award; forfeiture lapses ratably over 5 years if the Company achieves 3% EPS growth or 1.20% ROA; holdings generally restricted until retirement with limited exceptions after 7 years post-lapse (8–12 years from grant)
Detailed 2024 performance metrics and weightings for Mr. Murphy under EIP:
| Metric | Weighting (Murphy) | Target | Actual | Payout | Vesting/Hurdle |
|---|---|---|---|---|---|
| Net income ($000s) | 14.25% | $129,185 | $135,406 (adjusted) | Included in overall EIP award; CEO cash = $376,450 | Book value stock matched; forfeiture lapses over 5 years if Company achieves 3% EPS growth or 1.20% ROA |
| Return on assets | 9.50% | 1.46% | 1.55% | See above | See above |
| ROA percentile vs. $3–$10B peers | 14.25% | 54th of 108 | 10th of 110 | See above | See above |
| Return on common equity | 9.50% | 11.33% (ex-AOCI) | 11.71% (ex-AOCI) | See above | See above |
| Expense-to-revenue ratio | 14.25% | 53.38% | 51.62% | See above | See above |
| Revenue growth | 4.75% | 6.33% | 7.01% | See above | See above |
| Nonperforming assets ratio | 9.50% | 0.75% | 0.46% | See above | See above |
| Net charge-offs ratio | 9.50% | 0.12% | 0.08% | See above | See above |
| Diverse exempt colleagues (%) | 5.00% | 14.00% | 14.65% (Company result) | See above | See above |
| Net new primary relationships | 9.50% | Target | 39% of Target | See above | See above |
SDIP (strategy-linked awards; paid entirely in cash for 2024):
- Award range basis: % of adjusted net income; CEO minimum 0%, target 0.21%, max 0.42%
- 2024 SDIP goals/weights: deposits (30%), $10B threshold planning (25%), digital transformation (25%), diversity (5%), colleague focus (10%), mastery (5%), qualitative adjustment (unused); CEO award was $311,400
Long-Term EIP (2023–2025 cycle):
- Corporate goals weighted across ROA (19%), expense/revenue (10%), average assets (14%), credit losses (9%), NPAs (9%), net new relationships (19%), mix of community bank loans (15%), diverse exempt colleagues (5%); awards formula-based, up to 200% of average annual EIP awards; CEO assigned 100% .
Equity Ownership & Alignment
| Category | Shares/Value | Notes |
|---|---|---|
| Total beneficial ownership | 4,353,315 shares | 17.22% of outstanding shares (out of 25,285,937) |
| Direct/trust (sole voting/dispositive) | 482,033 shares | Held directly or in a revocable trust |
| IRA | 6,352 shares | Individual retirement account |
| Corporate holding | 125,893 shares | Held via corporation where Mr. Murphy is president |
| 401(k) plan | 62,730 shares | Company’s 401(k) |
| Limited partnerships (general partner) | 496,889 shares | Two LPs where Mr. Murphy is general partner |
| Family foundation (shared voting/dispositive) | 64,806 shares | Shared with spouse via family foundation |
| Spouse holdings (disclaimed by Mr. Murphy) | 3,114,612 shares | Attributed to spouse’s sole voting/dispositive power; disclaimed by Mr. Murphy |
| Stock ownership guidelines | ≥5x base salary for CEO | All NEOs in compliance |
| Hedging/pledging policy | Prohibits pledging/margin, derivatives, short sales; limited collateral use above guideline holdings with prior approval | Governance & Nominating Committee oversight |
| Options | None | No option awards 2022–2024 |
Vesting and liquidity constraints:
- EIP book value stock awards are subject to five-year forfeiture and generally must be held until retirement; limited post-lapse exceptions (up to 50%) after seven years following lapse (8–12 years from grant) for specified needs, subject to ownership guidelines . This structure reduces open-market selling pressure and aligns incentives with book value accretion .
Employment Terms
| Component | Terms | Amount/Multiple |
|---|---|---|
| Employment Agreement (severance) | If terminated without cause or for good reason: continue base salary for 36 months; first six months in lump sum | $2.52 million as of 12/31/2024 |
| Change-in-Control (two-trigger) | If terminates for good reason within 1 year of a change in control: cash severance equal to 2.99x “Annualized Includable Compensation for the Base Period” (IRC definition); no tax gross-up | 2.99x; no gross-up |
| Clawback | Compensation recoupment for restatements, misstatements, fraud/malfeasance (with added recovery for those responsible) | Policy applies to incentive compensation |
Board Governance
- Board service: Director since 1972 (terms expiring April 2026); Chairman & CEO dual role; not independent .
- Committee roles: Chair of Executive Committee; member of Loan & Funds Management Committee .
- Board structure: Combined Chairman/CEO considered optimal; majority of Board is independent (9 of 12); Lead Director (Daniel B. Fitzpatrick) chairs Governance & Nominating and executive sessions; independent directors held executive sessions at each Board meeting in 2024 .
- Board activity: Six Board meetings in 2024; all directors met ≥75% attendance across Board and committees .
- Director compensation: See Fixed Compensation (retainers/fees). Mr. Murphy receives only the annual retainer .
Compensation Peer Group and Consultants
- Peer groups used for benchmarking and performance assessment include Midwest peers, National Commercial & Industrial concentration peers, and National $3–$10B asset peers (lists specified) .
- Company Performance Factor in EIP anchored to ROA percentile vs. $3–$10B peers (100% at median; up to 125% at ≥75th percentile; 2024 applied 125%) .
- Consultants: Blanchard Consulting Group engaged in 2021 (independent) for program validation and peer construction; McLagan/Aon survey used for specialty finance roles; committee determined independence .
Say-on-Pay & Shareholder Feedback
- 2023 say-on-pay support: 89% approval of votes cast; committee continued current practices .
- Say-on-frequency: 58% supported triennial; next say-on-pay in 2026; next frequency vote in 2029 .
Related Party Transactions
- Aunalytics services: 1st Source Bank paid $3,001,921 for services in 2024; Aunalytics consolidates prior Data Realty entities; primary operating system hardware located in Aunalytics data center; Mr. Murphy serves as a director representing 1st Source’s interests; other SRCE directors involved (Affleck-Graves, Graham—Aunalytics CEO/principal) .
Compensation Structure Analysis
- Cash vs. equity mix: Balanced EIP design with cash plus book value stock match; SDIP entirely cash in 2024; long-term EIP adds market-value stock with five-year forfeiture, increasing at-risk pay tied to multi-year goals .
- Options: None granted in 2022–2024 (no option repricing risk) .
- Performance metrics: Emphasis on ROA vs. peer percentile, net income, efficiency, credit quality, revenue/loan growth, diversity; clear hurdles for vesting (EPS growth or ROA) .
- Clawback and risk controls: Comprehensive clawback; multi-year forfeiture and book value focus discourage short-term risk-taking; committee oversight affirms incentives do not encourage excessive risk .
- Governance considerations: Dual Chairman/CEO offset by Lead Director and majority independent Board; executive sessions at every meeting .
Equity Ownership & Alignment (Director-Level)
- Ownership guidelines: CEO must own ≥5x base salary; all NEOs compliant .
- Pledging/hedging: Prohibited for directors and senior officers; limited collateralization permitted only for holdings above guideline requirements with prior committee approval .
Performance & Track Record Highlights
- Record net income and EPS in 2024; sustained ROA and efficiency in top tier vs. peers; credit quality maintained; dividend growth streak extended to 37 years; inclusion in KBW Bank Honor Roll (10 consecutive years of EPS increases) .
- Peer comparisons across ROA, ROE, EPS growth, NIM, credit ratios, allowance coverage, noninterest income/expense, efficiency indicated competitive standing (multiple top decile/quantile ranks) .
Investment Implications
- Alignment: Very high insider ownership (17.22%) combined with strict book value stock liquidity constraints reduces open-market selling pressure and tightly aligns incentives with book value accretion and long-term ROA/EPS performance .
- Incentive quality: EIP’s ROA-relative factor and hard vesting hurdles (EPS growth or ROA) plus SDIP linking awards to net income and strategic execution suggest strong pay-for-performance and discipline; clawback strengthens downside governance .
- Governance risk: Dual Chairman/CEO and related-party ties to Aunalytics create oversight sensitivity; mitigants include majority independent board, Lead Director, independent executive sessions, and formal committee oversight of related-party transactions and risk .
- Retention economics: Employment agreement provides 36 months salary severance; double-trigger 2.99x change-in-control without gross-ups—meaningful but standard for community bank CEOs; suggests moderate retention protection without shareholder-unfriendly tax gross-ups .
- Trading signals: With no options and book value stock largely illiquid before retirement, near-term insider selling pressure likely limited; monitor Form 4 filings for any cash-settlement of book value awards and any approved collateralization above guideline thresholds per policy .