| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 45.01 | -33 |
| Intrinsic value (DCF) | 53.02 | -21 |
| Graham-Dodd Method | 47.33 | -30 |
| Graham Formula | 108.23 | 61 |
1st Source Corporation (NASDAQ: SRCE) is a regional bank holding company operating through its subsidiary, 1st Source Bank, providing a comprehensive suite of financial services. Founded in 1863 and headquartered in South Bend, Indiana, the company serves individual and business clients across Indiana, Michigan, and Florida with 79 banking centers. Its offerings include commercial and consumer banking, trust and wealth advisory services, insurance products, and specialized equipment financing for sectors like aviation, construction, and transportation. With a diversified revenue model, 1st Source generates income through interest on loans, leasing, fee-based services, and insurance. The bank maintains a strong regional presence, emphasizing personalized customer relationships and community-focused banking. As a mid-cap financial institution, it competes in the highly regulated and competitive regional banking sector, where scale and local expertise are critical differentiators. Investors value its steady dividend history, conservative risk management, and niche financing capabilities in equipment leasing.
1st Source Corporation presents a stable investment opportunity within the regional banking sector, supported by its long operating history, diversified revenue streams, and conservative balance sheet. The company’s low beta (0.669) suggests lower volatility relative to the broader market, appealing to risk-averse investors. Key strengths include its specialized equipment financing segments (e.g., aircraft and truck leasing), which provide higher-margin revenue diversification beyond traditional lending. However, its regional concentration in the Midwest exposes it to localized economic risks, and its modest market cap (~$1.48B) limits scale advantages against larger peers. Net income of $132.6M (2023) and a diluted EPS of $5.46 reflect efficient operations, while a dividend yield of ~2.7% (based on a $1.46 annual payout) adds income appeal. Challenges include interest rate sensitivity and competition from both regional and national banks. Investors should weigh its niche expertise against growth constraints in a consolidating industry.
1st Source Corporation’s competitive advantage lies in its hyper-localized service model and niche financing expertise, particularly in equipment leasing for aviation and commercial vehicles. Unlike larger national banks, 1st Source leverages deep community relationships to cross-sell banking, trust, and insurance products—a strategy that fosters customer loyalty but limits geographic scalability. Its equipment financing division differentiates it from generic regional peers, offering specialized underwriting and leasing solutions for high-value assets. However, the company lacks the digital banking sophistication and cost efficiencies of megabanks like JPMorgan Chase, which could pressure its ability to retain tech-savvy customers. Capital ratios and loan/deposit metrics are solid but unexceptional compared to top-tier regionals. The bank’s Midwest focus provides stability but also caps growth potential, as it has not aggressively expanded into higher-growth Sun Belt markets. Its trust and wealth management services are a relative strength, though they face competition from both local fiduciaries and national players like Raymond James. In summary, 1st Source is a well-run but geographically constrained player whose outperformance hinges on execution in niche lending and maintaining premium customer service.