Investors in 1st Source Corporation (SRCE) need to pay close attention to the stock based on moves in the options market lately. That is because the Sep 19, 2025 $40 Call had some of the highest implied volatility of all equity options today.What is Implied Volatility?Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could a ...

Core Insights - 1st Source reported Q2 2025 earnings per share (GAAP) of $1.51, exceeding analyst expectations of $1.47, while provisions for credit losses increased due to higher net charge-offs in auto and truck portfolios [1][2][7] Financial Performance - Q2 2025 revenue (GAAP) reached $108.25 million, an 11.3% increase from $97.27 million in Q2 2024 [2] - Net interest income (GAAP) rose to $85.19 million, a 15.0% increase year-over-year, driven by higher loan balances and improved net interest margin of 4.01% [2][5] - Average loans and leases grew to $6.97 billion, up 5.48% year-over-year, with significant growth in Commercial and Agricultural, Renewable Energy, and Construction Equipment portfolios [5] - Noninterest income (GAAP) was relatively flat at $23.06 million compared to Q2 2024, impacted by lower insurance commissions and equipment rental income [6] Asset Quality and Risk Management - Provisions for credit losses (GAAP) more than doubled to $7.69 million from $3.27 million in Q1 2025, with net charge-offs rising to $1.87 million [7] - Nonperforming assets as a share of loans and leases increased to 1.06%, primarily due to issues in the auto and light truck segment [7] - The allowance for loan and lease losses rose to $163.48 million, representing 2.30% of total loans and leases [7] Capital and Deposits - Average deposits increased by 2.3% to $7.35 billion, although noninterest-bearing deposits declined [8] - The bank's Common Equity Tier 1 ratio stood at 14.60%, indicating a strong capital base [8] - Tangible book value per share increased to $45.44 from $39.16 in Q2 2024 [8] Dividend and Outlook - The quarterly dividend was raised by 5.6% to $0.38 per share [10] - Management expressed confidence in the bank's balance sheet and liquidity, while acknowledging ongoing economic uncertainty and the need to monitor asset quality [10][11]

Company Performance - 1st Source reported quarterly earnings of $1.51 per share, exceeding the Zacks Consensus Estimate of $1.49 per share, and showing an increase from $1.49 per share a year ago, resulting in an earnings surprise of +1.34% [1] - The company achieved revenues of $108.25 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.12% and up from $97.27 million year-over-year [2] - Over the last four quarters, 1st Source has consistently surpassed consensus EPS and revenue estimates [2] Stock Outlook - The stock has gained approximately 8.2% since the beginning of the year, slightly outperforming the S&P 500's gain of 8.1% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is $1.45 on revenues of $105.7 million, and for the current fiscal year, it is $5.97 on revenues of $421.8 million [7] Industry Context - The Zacks Industry Rank for Banks - Midwest, to which 1st Source belongs, is currently in the top 29% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - The favorable estimate revisions trend prior to the earnings release has resulted in a Zacks Rank 2 (Buy) for 1st Source, suggesting expected outperformance in the near future [6]

Core Viewpoint - 1st Source Corporation announces a leadership transition, with Christopher J. Murphy III stepping down as CEO to become Executive Chairman, while Andrea Short is promoted to CEO and President, and Kevin Murphy becomes President of 1st Source Bank. This transition is part of a long-term succession strategy aimed at ensuring the company's future success and stability [1][2][4][15]. Leadership Changes - Christopher J. Murphy III will transition from CEO to Executive Chairman effective October 1, 2025, after 50 years in leadership roles [1]. - Andrea Short, previously President of 1st Source Corp and CEO of 1st Source Bank, will take over as CEO and President of 1st Source Corp while retaining her role as CEO of 1st Source Bank [2]. - Kevin Murphy, the current Chief Digital Officer, will become President of 1st Source Bank, marking the fourth generation of Morris family leadership since 1931 [2][12]. Leadership Qualifications - Andrea Short has a strong track record in managing day-to-day operations and is recognized for her commitment to the company's values and long-term performance [5][6][8]. - Kevin Murphy has extensive experience in IT and community banking, having held various roles within the organization since 2004, which positions him well for his new role [10][11][12]. Succession Strategy - The leadership transition is part of a multi-year succession strategy designed to prepare the company for a strong future, with each officer having gained relevant experience for their new roles [4][15]. - Chris Murphy emphasized the importance of this succession plan for the future of 1st Source Corporation, aiming to build value for shareholders while maintaining independence and strong capital reserves [15]. Company Overview - 1st Source Corporation, the parent company of 1st Source Bank, has assets totaling $9.1 billion and operates 78 banking centers, 18 specialty finance locations, nine trust and wealth advisory services locations, 10 insurance offices, and three loan production offices [18].

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for 1st Source Corporation as of June 30, 2025, and for the three and six-month periods then ended, including detailed notes on accounting policies and financial data [Consolidated Statements of Financial Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) As of June 30, 2025, total assets grew to **$9.09 billion** from **$8.93 billion** at year-end 2024, driven by a **$235.22 million** increase in net loans and leases, while total liabilities increased to **$7.83 billion** and total equity rose to **$1.26 billion** Consolidated Statements of Financial Condition (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$9,087,162** | **$8,931,938** | | Net loans and leases | $6,934,485 | $6,699,268 | | Investment securities available-for-sale | $1,456,157 | $1,536,299 | | **Total Liabilities** | **$7,829,738** | **$7,750,432** | | Total deposits | $7,442,669 | $7,230,035 | | Short-term borrowings | $110,058 | $249,198 | | **Total Equity** | **$1,257,424** | **$1,181,506** | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) For the six months ended June 30, 2025, net income available to common shareholders was **$74.84 million**, an increase from **$66.25 million** in the prior year period, resulting in a diluted EPS of **$3.02** driven by a significant increase in net interest income Key Income Statement Data (in thousands, except per share amounts) | | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net interest income | $166,130 | $145,965 | | Provision for credit losses | $10,955 | $7,163 | | Noninterest income | $46,160 | $45,377 | | Noninterest expense | $105,506 | $98,565 | | **Net income available to common shareholders** | **$74,839** | **$66,248** | | **Diluted net income per common share** | **$3.02** | **$2.68** | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income available to common shareholders for the six months ended June 30, 2025, was **$105.31 million**, a significant increase from **$67.01 million** in the same period of 2024, primarily due to a **$30.47 million** positive change in other comprehensive income Comprehensive Income (Loss) Summary (in thousands) | | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income | $74,849 | $66,267 | | Other comprehensive income (loss), net of tax | $30,471 | $758 | | **Comprehensive income (loss) available to common shareholders** | **$105,310** | **$67,006** | [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Total shareholders' equity increased from **$1.18 billion** at the start of 2025 to **$1.26 billion** at June 30, 2025, driven by **$74.84 million** in net income and a **$30.47 million** positive change in accumulated other comprehensive income, partially offset by **$18.22 million** in common stock dividends - Key drivers for the change in shareholders' equity during the first six months of 2025 were net income of **$74.8 million** and other comprehensive income of **$30.5 million**, offset by common stock dividends of **$18.2 million** and treasury stock acquisitions of **$3.3 million**[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was **$116.6 million**, net cash used in investing activities was **$140.3 million**, and net cash provided by financing activities was **$47.9 million**, resulting in a net increase in cash and cash equivalents of **$24.3 million** Net Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $116,645 | $91,946 | | Net cash used in investing activities | ($140,269) | ($55,541) | | Net cash provided by financing activities | $47,906 | $103,170 | | **Net change in cash and cash equivalents** | **$24,282** | **$139,575** | [Notes to the Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed disclosures supporting the consolidated financial statements, covering accounting policies, investment securities, loan and lease portfolio composition and credit quality, allowance for credit losses, derivative instruments, fair value measurements, and segment information - The company's loan and lease portfolio is diverse, with significant segments in Commercial Real Estate (**$1.25 billion**), Construction Equipment (**$1.21 billion**), and Aircraft (**$1.13 billion**) as of June 30, 2025[9](index=9&type=chunk) - The allowance for loan and lease losses increased to **$163.5 million** at June 30, 2025, from **$155.5 million** at year-end 2024, reflecting loan growth and increased historical loss rates in the auto and light truck portfolio[70](index=70&type=chunk) - The company has one reportable operating segment: commercial banking, which provides a broad array of financial products and services, with performance evaluated on a company-wide basis[158](index=158&type=chunk)[159](index=159&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and results of operations, comparing Q2 2025 to previous periods, highlighting asset and loan growth, increased net income driven by an expanded net interest margin, and a rise in nonperforming assets primarily from the auto and light truck segment - Total assets increased by **$155.22 million** (**1.74%**) to **$9.09 billion** since year-end 2024, primarily due to a **$243.16 million** (**3.55%**) growth in total loans and leases[167](index=167&type=chunk)[168](index=168&type=chunk) - Net income available to common shareholders for the six months ended June 30, 2025, was **$74.84 million** (**$3.02** per diluted share), up from **$66.25 million** (**$2.68** per diluted share) in the prior-year period[188](index=188&type=chunk) - The net interest margin on a fully taxable-equivalent basis expanded to **4.01%** for Q2 2025, up from **3.59%** in Q2 2024, driven by higher asset yields and lower costs on interest-bearing liabilities[194](index=194&type=chunk) - Nonperforming assets increased significantly to **$75.54 million** (**1.06%** of loans) at June 30, 2025, up from **$31.33 million** at year-end 2024, mainly due to higher nonaccrual loans in the auto and light truck portfolio[218](index=218&type=chunk)[219](index=219&type=chunk) [Financial Condition](index=34&type=section&id=Financial%20Condition) As of June 30, 2025, total assets reached **$9.09 billion**, a **1.74%** increase from year-end 2024, primarily fueled by a **$243.16 million** rise in loans and leases, while total deposits grew by **$212.63 million** and short-term borrowings decreased by **$139.14 million** Balance Sheet Changes (vs. Dec 31, 2024) | Account | Change (in millions) | % Change | | :--- | :--- | :--- | | Total Assets | $155.22 | 1.74% | | Total Loans and Leases | $243.16 | 3.55% | | Investment Securities | ($80.14) | -5.22% | | Total Deposits | $212.63 | 2.94% | | Short-term Borrowings | ($139.14) | -55.84% | - The loan portfolio growth was led by the renewable energy, commercial and agricultural, and commercial real estate segments[168](index=168&type=chunk) [Capital](index=35&type=section&id=Capital) The company's capital position remains strong, with all regulatory capital ratios significantly exceeding the 'well-capitalized' thresholds, and total shareholders' equity rising to **$1.26 billion** at June 30, 2025, driven by net income and a decrease in accumulated other comprehensive loss Capital Ratios as of June 30, 2025 | Ratio | 1st Source Corporation | To Be Well Capitalized | | :--- | :--- | :--- | | Total Capital Ratio | 17.30% | 10.00% | | Tier 1 Capital Ratio | 16.04% | 8.00% | | Common Equity Tier 1 Ratio | 14.60% | 6.50% | | Tier 1 Leverage Ratio | 14.39% | 5.00% | - Book value per common share increased to **$48.86** from **$45.31** at December 31, 2024[175](index=175&type=chunk) - A cash dividend of **$0.38** per common share was declared and paid during Q2 2025[176](index=176&type=chunk) [Liquidity and Interest Rate Sensitivity](index=35&type=section&id=Liquidity%20and%20Interest%20Rate%20Sensitivity) The company maintains a strong liquidity position with total available liquidity of **$3.44 billion** as of June 30, 2025, representing approximately **50%** of total deposits (net of brokered and listing services CDs), with key sources including unencumbered securities and external borrowing capacity Sources of Liquidity as of June 30, 2025 (in thousands) | Source | Available | | :--- | :--- | | Unencumbered securities | $1,221,043 | | FHLB advances | $561,709 | | FRB borrowings | $424,728 | | Fed funds purchased | $410,000 | | Brokered & Listing services deposits | $818,219 | | **Total liquidity** | **$3,435,699** | [Results of Operations](index=36&type=section&id=Results%20of%20Operations) For the six months ended June 30, 2025, net income rose to **$74.84 million** from **$66.25 million** year-over-year, driven by a **13.8%** rise in taxable-equivalent net interest income to **$166.43 million** as the net interest margin expanded by **38 basis points** to **3.95%**, partially offset by a higher provision for credit losses and increased noninterest expense - Taxable-equivalent net interest income for H1 2025 increased **13.79%** YoY to **$166.43 million**[201](index=201&type=chunk) - The provision for credit losses for H1 2025 was **$10.96 million**, compared to **$7.16 million** in H1 2024, driven by loan growth and increased risk in the auto and light truck portfolio[210](index=210&type=chunk) - Total noninterest income for H1 2025 increased slightly by **1.73%** to **$46.16 million**, while total noninterest expense grew **7.04%** to **$105.51 million**[225](index=225&type=chunk)[236](index=236&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes in the market risks it faces since December 31, 2024, referring to its 2024 Annual Report on Form 10-K for detailed information - There have been no material changes in market risks faced by 1st Source since December 31, 2024[246](index=246&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the second quarter - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[248](index=248&type=chunk) - No material changes to internal control over financial reporting were identified during the second fiscal quarter of 2025[249](index=249&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company and its subsidiaries are involved in various legal proceedings incidental to their business, none of which are expected by management to have a material adverse effect on the company's financial position or results of operations - Management does not expect the outcome of any current legal proceedings to have a material adverse effect on the company's consolidated financial position or results of operations[251](index=251&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes in the risk factors faced by the company since December 31, 2024, with a full discussion available in its 2024 Annual Report on Form 10-K - No material changes in risk factors have occurred since the 2024 year-end report[252](index=252&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchases of its own equity securities during the quarter, with **47,428** shares repurchased in Q2 2025 under a plan authorized in October 2023, leaving **942,021** shares available Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 32,528 | $59.85 | | May 2025 | — | — | | June 2025 | 14,900 | $59.97 | - The stock repurchase plan, authorized on October 19, 2023, allows for the repurchase of up to **1,000,000** shares, and as of June 30, 2025, **942,021** shares may still be purchased under this plan[255](index=255&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) On July 23, 2025, the Executive Compensation and Human Resources Committee amended two executive compensation plans, updating the 1982 Restricted Stock Award Plan with clawback language and book value stock issuance, and changing the 1982 Executive Incentive Plan's Corporate Performance Factor calculation to be based on return on assets relative to a peer group - The 1982 Restricted Stock Award Plan was amended to include clawback provisions and allow for book value stock issuance[258](index=258&type=chunk) - The 1982 Executive Incentive Plan was amended to change the calculation of the Corporate Performance Factor for annual awards, now based on ROA performance against a peer group[259](index=259&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q report, including amended executive compensation plans, CEO and CFO certifications as required by SEC rules, and XBRL data files - Exhibits filed include amended versions of the 1982 Executive Incentive Plan and the 1982 Restricted Stock Award Plan[260](index=260&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer are included as exhibits 31.1, 31.2, 32.1, and 32.2[260](index=260&type=chunk)

Quarterly Highlights and Management Commentary The company reported Q2 2025 financial results, showcasing net income, loan growth, and margin expansion, alongside management's insights on credit quality and corporate achievements [Second Quarter 2025 Performance Overview](index=1&type=section&id=QUARTERLY%20HIGHLIGHTS) 1st Source Corporation reported Q2 2025 net income of $37.32 million, a slight decrease of 0.54% from the previous quarter but a 1.43% increase year-over-year. The solid growth in net interest income was partially offset by a higher provision for credit losses and realized losses from strategic investment portfolio trades. The Board approved a cash dividend of $0.38 per share, a 5.56% increase from the prior year Q2 2025 Key Financial Results | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $37.32 million | $37.52 million | $36.79 million | +1.43% | | Diluted EPS | $1.51 | $1.52 | $1.49 | +1.34% | | Cash Dividend per Share | $0.38 | $0.36 | $0.34 | +5.56% | - Performance was driven by **strong net interest income**, which was offset by a **$7.69 million provision for credit losses** and **$1.00 million in pre-tax losses** from the sale of available-for-sale securities[2](index=2&type=chunk)[5](index=5&type=chunk) - Average loans and leases grew by **$169.51 million (2.49%)** from the previous quarter and **$362.25 million (5.48%)** from the second quarter of 2024[5](index=5&type=chunk) - Tax-equivalent net interest margin expanded to **4.01%**, an increase of **11 basis points** from the previous quarter and **42 basis points** from the prior year's second quarter[5](index=5&type=chunk) [Management Commentary and Corporate Achievements](index=1&type=section&id=Management%20Commentary%20and%20Corporate%20Achievements) The CEO highlighted the sixth consecutive quarter of margin expansion, driven by higher rates and loan growth, despite economic uncertainty. Credit quality faced challenges with elevated net charge-offs from a single large account. The company was recognized for its long-term performance and community service, and expanded its physical presence by opening a new banking center in Carmel, Indiana - The CEO noted a **sixth consecutive quarter of margin expansion**, attributing it to higher rates on investments, increased loan balances, and lower deposit costs[4](index=4&type=chunk) - Credit quality was challenged by **elevated net charge-offs**, primarily from one Auto and Light Truck account, leading to an increase in nonperforming assets to **1.06% of loans and leases**[6](index=6&type=chunk) - For the **seventh consecutive year**, 1st Source was named to the Bank Honor Roll by Keefe, Bruyette & Woods, Inc., placing it among the **top 5% of eligible U.S. banks** for long-term performance[8](index=8&type=chunk) - The company received the Indiana Banker's Association's (IBA) Commitment to Community award, recognizing over **14,500 volunteer hours** and more than **200 financial education classes** in 2024[9](index=9&type=chunk) - A new banking center was opened in Carmel, Indiana, featuring a "side-by-side" banking model to enhance client interaction and transparency[10](index=10&type=chunk) Detailed Financial Results (Q2 2025) This section provides an in-depth analysis of the company's Q2 2025 financial performance, covering loans, deposits, net interest income, expenses, credit quality, and capital [Loans and Leases](index=2&type=section&id=Loans%20and%20Leases) Average loans and leases reached $6.97 billion in Q2 2025, showing a 2.49% increase from the previous quarter and a 5.48% rise year-over-year. Growth was primarily concentrated in the Commercial and Agricultural, Renewable Energy, and Construction Equipment portfolios Average Loans and Leases Growth | Period | Average Balance | Change (QoQ) | Change (YoY) | | :--- | :--- | :--- | :--- | | Q2 2025 | $6.97 billion | +2.49% | +5.48% | | Q1 2025 | $6.80 billion | - | - | | Q2 2024 | $6.61 billion | - | - | - Portfolio growth was led by the Commercial and Agricultural, Renewable Energy, and Construction Equipment sectors[12](index=12&type=chunk) [Deposits](index=2&type=section&id=Deposits) Average deposits for Q2 2025 were $7.35 billion, marking a slight increase of 0.21% quarter-over-quarter and 2.30% year-over-year. The growth was driven by increases in interest-bearing demand, savings, and non-brokered time deposits, which offset declines in brokered and noninterest-bearing demand deposits Average Deposit Growth | Period | Average Balance | Change (QoQ) | Change (YoY) | | :--- | :--- | :--- | :--- | | Q2 2025 | $7.35 billion | +0.21% | +2.30% | | Q1 2025 | $7.33 billion | - | - | | Q2 2024 | $7.18 billion | - | - | - The composition of deposit growth shifted towards interest-bearing demand, savings, and non-brokered time deposits, while brokered and noninterest-bearing demand deposits decreased[13](index=13&type=chunk) [Net Interest Income and Net Interest Margin](index=2&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Tax-equivalent net interest income for Q2 2025 rose to $85.35 million, a 15.03% increase from the prior year. The tax-equivalent net interest margin expanded to 4.01%, up 11 basis points from Q1 2025 and 42 basis points from Q2 2024, primarily due to higher rates on securities, loan growth, and lower deposit costs Net Interest Income and Margin Performance | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Tax-Equivalent NII | $85.35 million | $81.09 million | $74.19 million | +15.03% | | Tax-Equivalent NIM | 4.01% | 3.90% | 3.59% | +42 bps | - The increase in net interest margin was primarily driven by **higher rates on investment securities**, **increased average loan and lease balances**, and **lower deposit costs**[15](index=15&type=chunk) [Noninterest Income](index=3&type=section&id=Noninterest%20Income) Q2 2025 noninterest income remained flat at $23.06 million compared to the previous quarter and the prior year. A notable event was a $1.00 million realized loss from repositioning available-for-sale securities, which was offset by higher trust fees, debit card income, and partnership investment gains - The company realized a **$1.00 million loss** from the strategic sale of available-for-sale securities. The securities sold had a **1.04% yield** and were replaced with securities yielding **4.18%**[18](index=18&type=chunk) - The loss was offset by **higher trust and wealth advisory income** (from seasonal tax fees), **increased debit card income**, and **gains from a small business capital investment**[18](index=18&type=chunk) [Noninterest Expense](index=3&type=section&id=Noninterest%20Expense) Noninterest expense in Q2 2025 was $52.43 million, a decrease of 1.22% from Q1 2025 but an increase of 5.15% from Q2 2024. The quarterly decrease was due to lower insurance claims, while the annual increase was driven by higher salaries, incentive compensation, and technology-related costs Noninterest Expense Comparison | Period | Amount | Change (QoQ) | Change (YoY) | | :--- | :--- | :--- | :--- | | Q2 2025 | $52.43 million | -1.22% | +5.15% | | Q1 2025 | $53.08 million | - | - | | Q2 2024 | $49.86 million | - | - | - The QoQ decrease was mainly due to **reduced group insurance claims** and **lower leased equipment depreciation**[21](index=21&type=chunk) - The YoY increase was primarily caused by **higher salaries** from merit increases, **increased incentive compensation**, and **higher data processing costs** from technology projects[22](index=22&type=chunk) [Credit Quality](index=3&type=section&id=Credit) Credit conditions were challenging in Q2 2025. The provision for credit losses increased to $7.69 million, and net charge-offs were $1.87 million. Nonperforming assets rose significantly to 1.06% of loans, up from 0.63% in the prior quarter, primarily due to a single relationship in the Auto and Light Truck portfolio. The allowance for loan and lease losses was increased to 2.30% of total loans Credit Quality Indicators | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Provision for Credit Losses | $7.69 million | $3.27 million | ($0.31 million) | | Net Charge-offs | $1.87 million | $0.18 million | ($1.99 million) | | Nonperforming Assets to Loans | 1.06% | 0.63% | 0.31% | | Allowance to Total Loans | 2.30% | 2.29% | 2.26% | - The increase in nonperforming assets during the quarter was primarily attributed to **one relationship in the Auto and Light Truck portfolio**[24](index=24&type=chunk) [Capital](index=4&type=section&id=Capital) Capital levels remained robust as of June 30, 2025. The Common Equity Tier 1 (CET1) ratio was 14.60%, and the tangible common equity-to-tangible assets ratio improved to 12.38% from 12.14% in the previous quarter. Capital growth was driven by retained earnings. The company also repurchased 47,428 shares for $2.84 million during the quarter Key Capital Ratios | Ratio | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 14.60% | 14.71% | 13.74% | | Tangible Common Equity / Tangible Assets | 12.38% | 12.14% | 10.91% | | Common Equity / Assets | 13.19% | 12.96% | 11.75% | - During Q2 2025, the company repurchased **47,428 shares** for **$2.84 million**[26](index=26&type=chunk) Company Overview and Disclosures This section provides an overview of 1st Source Corporation's business, along with important disclosures regarding forward-looking statements and the use of non-GAAP financial measures [About 1st Source Corporation](index=4&type=section&id=About%201st%20Source%20Corporation) 1st Source Corporation (NASDAQ: SRCE), founded in 1863, is the largest locally controlled financial institution in its primary market of northern Indiana and southwest Michigan. It operates 78 banking centers and provides a range of consumer and commercial banking services. The company also has a national presence through specialized financing services for aircraft, trucks, and construction equipment - 1st Source is traded on the NASDAQ under the symbol "**SRCE**"[28](index=28&type=chunk) - The corporation includes **78 banking centers**, **18 Specialty Finance Group locations**, **nine Wealth Advisory Services locations**, and **10 insurance offices**[29](index=29&type=chunk) - The bank competes nationally by offering specialized financing for private and cargo aircraft, auto leasing fleets, medium/heavy-duty trucks, and construction equipment[29](index=29&type=chunk) [Forward-Looking Statements](index=4&type=section&id=FORWARD%20LOOKING%20STATEMENTS) This section provides a standard safe harbor disclaimer, warning that the report contains forward-looking statements subject to material risks and uncertainties. It advises readers not to place undue reliance on these statements and notes that the company has no obligation to update them. Key risk factors include regulatory changes, competition, interest rate shifts, and economic downturns - The document contains forward-looking statements identified by words like "believe," "expect," "will," etc., which are subject to **material risks and uncertainties**[31](index=31&type=chunk) - The company cautions readers that actual results could differ materially from projections and undertakes no obligation to publicly update any forward-looking statements[31](index=31&type=chunk)[32](index=32&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) The company utilizes several non-GAAP financial measures, such as taxable-equivalent net interest income, net interest margin, the efficiency ratio, and tangible common equity ratios, which management believes offer a more meaningful view of performance. These measures should not be considered in isolation and are reconciled to the most comparable GAAP measures in the report's tables - Management uses non-GAAP measures to evaluate performance, including **taxable-equivalent (FTE) net interest income**, **net interest margin**, the **efficiency ratio**, and **tangible equity ratios**[34](index=34&type=chunk) - The company provides a reconciliation of these non-GAAP measures to their most closely related GAAP measures in a subsequent table[36](index=36&type=chunk) Financial Statements and Reconciliations This section presents the company's detailed financial statements for Q2 2025, including highlights, balance sheet, income statement, and reconciliations of non-GAAP financial measures [Financial Highlights](index=6&type=section&id=2nd%20QUARTER%202025%20FINANCIAL%20HIGHLIGHTS) The financial highlights table presents a consolidated view of the company's performance, comparing Q2 2025 against Q1 2025 and Q2 2024. Key metrics for Q2 2025 include a Return on Average Assets of 1.67%, a Return on Average Common Shareholders' Equity of 12.61%, and a tax-equivalent Net Interest Margin of 4.01% Q2 2025 Key Performance Ratios | Ratio | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Return on average assets | 1.67% | 1.72% | 1.69% | | Return on average common shareholders' equity | 12.61% | 13.33% | 14.41% | | Net interest margin - FTE | 4.01% | 3.90% | 3.59% | | Efficiency ratio - adjusted | 48.40% | 51.31% | 51.17% | [Consolidated Statements of Financial Condition (Balance Sheet)](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION) As of June 30, 2025, 1st Source Corporation's total assets stood at $9.09 billion, an increase from $8.96 billion at the end of Q1 2025. Total loans and leases grew to $7.10 billion, while total deposits increased to $7.44 billion. Total shareholders' equity strengthened to $1.20 billion Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total Assets | $9,087,162 | $8,963,114 | $8,878,003 | | Net Loans and Leases | $6,934,485 | $6,705,923 | $6,502,932 | | Total Deposits | $7,442,669 | $7,417,765 | $7,195,924 | | Total Shareholders' Equity | $1,198,589 | $1,161,459 | $1,043,515 | [Consolidated Statements of Income](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20INCOME) For the second quarter of 2025, the company generated total interest income of $127.22 million and net interest income of $85.19 million. After accounting for a $7.69 million provision for credit losses and other income/expenses, net income available to common shareholders was $37.32 million, or $1.51 per diluted share Income Statement Summary (in thousands) | Account | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Interest Income | $85,192 | $80,938 | $74,050 | | Provision for Credit Losses | $7,690 | $3,265 | ($314) | | Noninterest Income | $23,057 | $23,103 | $23,221 | | Noninterest Expense | $52,430 | $53,076 | $49,861 | | Net Income | $37,326 | $37,523 | $36,805 | [Interest Rates and Interest Differential](index=9&type=section&id=DISTRIBUTION%20OF%20ASSETS%2C%20LIABILITIES%20AND%20SHAREHOLDERS%27%20EQUITY) This analysis details the components of net interest margin. For Q2 2025, the tax-equivalent yield on total earning assets was 5.98%, while the rate on total interest-bearing liabilities was 2.81%. This resulted in a tax-equivalent net interest margin of 4.01%, an improvement from 3.59% in the same quarter of the previous year Interest Rate Spread (FTE) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Yield on Earning Assets | 5.98% | 5.88% | | Cost of Interest-Bearing Liabilities | 2.81% | 3.20% | | Net Interest Margin | 4.01% | 3.59% | [Reconciliation of Non-GAAP Financial Measures](index=11&type=section&id=RECONCILIATION%20OF%20NON-GAAP%20FINANCIAL%20MEASURES) This section provides the necessary calculations to bridge GAAP figures to the non-GAAP measures used by management. It details the adjustments for tax-equivalent net interest income, the adjusted efficiency ratio, and the calculation of tangible common equity and tangible book value per share by removing goodwill and intangible assets - The tables reconcile GAAP net interest income to fully tax-equivalent (FTE) net interest income, which was **$85.35 million** in Q2 2025[45](index=45&type=chunk) - It demonstrates the calculation of the tangible common equity-to-tangible assets ratio (**12.38%** at June 30, 2025) by subtracting goodwill and intangible assets from both equity and total assets[45](index=45&type=chunk) - The tangible book value per common share is calculated as **$45.44** at June 30, 2025, compared to the GAAP book value per share of **$48.86**[46](index=46&type=chunk)

Core Viewpoint 1st Source Corporation reported its second quarter results for 2025, showing a slight decline in net income compared to the previous quarter but an increase year-over-year. The company declared a cash dividend, reflecting its commitment to returning value to shareholders despite economic uncertainties. Financial Performance - The net income for the second quarter of 2025 was $37.32 million, down 0.54% from $37.52 million in the previous quarter, but up 1.43% from $36.79 million a year ago [2][4] - Diluted net income per common share was $1.51, a decrease of 0.66% from $1.52 in the previous quarter, and an increase of 1.34% from $1.49 in the second quarter of 2024 [2][4] - Year-to-date net income for 2025 reached $74.84 million, up 12.97% compared to $66.25 million during the first six months of 2024 [2] Dividend Declaration - The Board of Directors approved a cash dividend of $0.38 per common share, representing a 5.56% increase from the cash dividend declared a year ago [3] Interest Income and Margin - Tax-equivalent net interest income for the second quarter was $85.35 million, up 5.25% from the previous quarter and up 15.03% from the same quarter a year ago [13][14] - The net interest margin was 4.01%, an increase of 11 basis points from the previous quarter and 42 basis points from the same period in 2024 [14][15] Loan and Lease Growth - Average loans and leases increased by $169.51 million, or 2.49%, from the previous quarter, and by $362.25 million, or 5.48%, from the second quarter of 2024 [11] - The allowance for loan and lease losses was 2.30% of total loans and leases, consistent with historical levels [22] Noninterest Income and Expense - Noninterest income for the second quarter was $23.06 million, relatively flat compared to the previous quarter and the same quarter a year ago [16] - Noninterest expense decreased by 1.22% from the prior quarter to $52.43 million, but increased by 5.15% from the second quarter of 2024 [19][21] Credit Quality - The provision for credit losses was $7.69 million, an increase from $3.27 million in the previous quarter and a recovery of $0.31 million in the same quarter last year [23] - Nonperforming assets to loans and leases ratio was 1.06%, up from 0.63% in the previous quarter [6][23] Capital Position - The common equity-to-assets ratio was 13.19%, compared to 12.96% at the end of the previous quarter [24] - The company repurchased 47,428 shares during the second quarter, reducing common shareholders' equity by $2.84 million [25]

Company Overview - 1st Source (SRCE) is expected to report flat earnings of $1.49 per share for the quarter ended June 2025, with revenues projected at $106 million, reflecting a 9% increase year-over-year [3]. Earnings Expectations - Wall Street anticipates that the stock may rise if the actual earnings exceed expectations in the upcoming report, scheduled for July 24 [2]. - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [4]. Earnings Surprise Prediction - The Most Accurate Estimate for 1st Source is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +0.34%, suggesting a likelihood of beating the consensus EPS estimate [12]. - A positive Earnings ESP is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 2 (Buy) [10]. Historical Performance - In the last reported quarter, 1st Source exceeded the expected earnings of $1.36 per share by delivering $1.52, resulting in a surprise of +11.76% [13]. - The company has successfully beaten consensus EPS estimates in each of the last four quarters [14]. Industry Comparison - First Busey (BUSE), another player in the Zacks Banks - Midwest industry, is expected to report earnings of $0.61 per share, marking a year-over-year increase of +22%, with revenues projected at $192.1 million, up 65.3% from the previous year [18]. - However, First Busey's consensus EPS estimate has been revised 2.1% lower over the last 30 days, resulting in a negative Earnings ESP of -4.49% and a Zacks Rank of 4 (Sell), making it difficult to predict an earnings beat [19].

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: 1st Source (SRCE) - 1st Source currently holds a Momentum Style Score of B, indicating potential as a solid momentum pick [3][12] - The company has a Zacks Rank of 2 (Buy), suggesting it is positioned for outperformance in the market [4][12] Price Performance - Over the past week, SRCE shares increased by 3.93%, while the Zacks Banks - Midwest industry rose by 5.08% [6] - In a longer timeframe, SRCE shares have gained 22.35% over the past quarter and 24.06% over the last year, outperforming the S&P 500, which increased by 16.66% and 14.76% respectively [7] Trading Volume - SRCE's average 20-day trading volume is 124,741 shares, which serves as a baseline for price-to-volume analysis [8] Earnings Outlook - In the last two months, one earnings estimate for SRCE has increased, while none have decreased, raising the consensus estimate from $5.93 to $5.97 [10] - For the next fiscal year, one estimate has also moved upwards with no downward revisions [10]

Core Viewpoint - 1st Source Corporation (SRCE) has reached a significant support level, indicating a potential bullish breakout due to a "golden cross" formation in its moving averages [1] Technical Analysis - SRCE's 50-day simple moving average has recently crossed above its 200-day moving average, a pattern known as a "golden cross," which is typically seen as a bullish signal [1] - The golden cross pattern consists of three stages: a downtrend that bottoms out, a crossover of the shorter moving average over the longer one, and an upward price movement [2] Performance Metrics - Over the past four weeks, SRCE shares have increased by 9.6%, suggesting positive momentum [3] - The company currently holds a 2 (Buy) rating on the Zacks Rank, indicating strong potential for further gains [3] Earnings Expectations - Recent earnings expectations for SRCE show one upward revision with no downward changes in the last 60 days, contributing to a more bullish outlook [3] - The Zacks Consensus Estimate for SRCE has also increased, reinforcing the positive sentiment around the stock [3] Investment Consideration - Given the technical indicators and positive earnings revisions, SRCE may present a compelling opportunity for investors looking for potential gains in the near future [5]