1st Source Corporation (SRCE): BCG Matrix [Dec-2025 Updated]

You're looking at 1st Source Corporation's portfolio right now, and honestly, the picture is a classic regional bank balancing act: a powerhouse niche driving growth against stable cash engines. We've mapped their key areas using the BCG Matrix, revealing that while the core Community Banking keeps the lights on, generating $88.90$ million in Q3 Net Interest Income, the real excitement is in the Stars like their $2$ Billion-plus Aircraft Financing segment. Still, you've got legacy Dogs dragging down efficiency and exciting Question Marks, like their $5.9$ billion Wealth Management unit and new Renewable Energy push, that need clear investment decisions. Let's dive into where 1st Source Corporation is winning, where it's coasting, and where it needs to place its next big bet.

Background of 1st Source Corporation (SRCE)

You're looking at 1st Source Corporation (SRCE), which you should know is the bank holding company for 1st Source Bank. This institution traces its roots way back to 1863, right during the Civil War era, so it's definitely got staying power. It serves individual and business clients across Indiana, Michigan, and Florida, offering a mix of commercial and consumer banking, specialty finance, trust, wealth advisory services, and insurance products. The company employs about 1,205 people, and its core business is built on lending.

Honestly, the 2025 performance has been strong, showing solid growth momentum as of the third quarter. For the quarter ending September 30, 2025, 1st Source Corporation reported record net income of $42.30 million. That's a jump of 13.34% over the previous quarter and a healthy 21.06% increase compared to the third quarter of 2024. Year-to-date for the first nine months of 2025, net income hit $117.14 million, marking a 15.76% year-over-year improvement. Diluted net income per common share for that nine-month period stood at $4.74.

When we look at revenue, the picture remains positive, reflecting the strength in its lending operations-net interest income has historically made up about 74.2% of total revenue over the last five years. For the quarter ending September 30, 2025, revenue was reported at $109.76 million, which is a 14.08% increase year-over-year. The board is clearly confident, too; they approved a cash dividend of $0.40 per common share for the quarter, which is an 11.11% increase from the dividend declared a year prior. On the credit side, things look resilient: nonperforming assets as a percentage of loans and leases decreased to 0.91% as of September 30, 2025, while the allowance for credit losses remained strong at 2.32% of total loans and leases.

1st Source Corporation (SRCE) - BCG Matrix: Stars

You're analyzing 1st Source Corporation (SRCE)'s portfolio, and the 'Stars' quadrant is where the action is-high market share in a market that's still expanding rapidly. These units are leaders, but they definitely eat up cash to maintain that top spot.

For 1st Source Corporation (SRCE), the primary candidate for a Star centers on its specialized lending niche, specifically Aircraft Financing. This unit operates in the business aviation market, which is characterized by high growth, even if other parts of the loan book see shifts. The sheer volume of capital deployed here suggests market leadership.

The numbers back up the high-share, high-growth narrative for this segment. You'll see that 1st Source Corporation (SRCE) has financed over $2 Billion dollars of aircraft over the past four years. This activity spans a national/international niche, covering the USA, Canada, Brazil, and Mexico for aircraft financing. If this segment maintains its success as the high-growth aviation market matures, it's set to become a Cash Cow for 1st Source Corporation (SRCE).

The overall health of the lending engine, which supports these Stars, is strong. The High-Yield Loan Portfolio shows solid momentum. Overall loan and lease balances grew 6.20% year-over-year in Q3 2025, increasing by $409.71 million over the third quarter of 2024. This growth rate outpaced many regional peers, showing 1st Source Corporation (SRCE) is capturing market share in its lending activities. As of September 30, 2025, the total loans and leases portfolio stood at $6.96 billion.

Here's a quick look at how the overall loan book is structured, showing the relative weight of the specialty segments:

The Strategic Niche Expertise in fixed-wing and rotor-wing aircraft is what allows 1st Source Corporation (SRCE) to command this high relative share in its specific, growing market. This deep, specialized knowledge translates directly into competitive advantage, helping them structure deals ranging from $500,000 to beyond $15,000,000.

To maintain this Star status, 1st Source Corporation (SRCE) must continue to invest heavily. The strategy here is clear: fund the growth now to secure future, more stable cash flows. You see this commitment in their operational focus:

• Fund turbine powered aircraft and helicopters.
• Offer financing terms from 1 to 10 Years.
• Maintain expertise in Part 135 and Part 91 operations.
• Target credit quality from Near Investment Grade to B Quality.

The investment required to keep the Aircraft Financing segment ahead of competitors in a dynamic aviation market is substantial, but the potential payoff-a future Cash Cow-justifies the current cash burn. Finance: draft 13-week cash view by Friday.

1st Source Corporation (SRCE) - BCG Matrix: Cash Cows

Cash Cows are the business units that dominate a mature market, generating more cash than they consume, which is vital for funding other areas of 1st Source Corporation. You want to maintain these positions with minimal investment, milking the gains passively.

Community Banking Core: The stable, leading position in the 16-county northern Indiana and southwestern Michigan market.

This core operation is the bedrock of 1st Source Corporation's stability. As of early 2025, 1st Source Corporation has total assets of $8.9 billion and is recognized as the largest locally controlled financial institution headquartered in the northern Indiana-southwestern Michigan area. You operate 77 banking centers across this region, solidifying a high market share in a mature local market.

Net Interest Income (NII): The primary cash engine, generating $88.90 million in Q3 2025 with a strong 4.09% net interest margin.

The interest-earning assets are clearly the primary source of cash flow. For the third quarter of 2025, tax-equivalent net interest income reached $88.90 million, representing a year-over-year increase of 17.55% from the third quarter of 2024. The tax-equivalent net interest margin was a strong 4.09% for the quarter. This margin improvement was driven by higher rates on increased average loan and lease balances, alongside lower short-term borrowing costs.

Truck and Construction Equipment Financing: A large, established segment, providing substantial cash flow despite a poor near-term growth outlook.

The Specialty Finance Group, which includes financing for construction equipment, trucks, and aircraft, represents a significant portion of the earning assets. While the exact combined percentage requested is not explicitly reported for 2025, the components of this group show substantial scale. As of Q2 2025, the Construction Equipment portfolio accounted for 17% of the total loan portfolio, and the Auto and Light Truck segment was 14% of the total. [cite: 6 (from 1st search)] As of September 30, 2025, total loans and leases stood at $6.96 billion. [cite: 11 (from 2nd search)] This segment provides cash flow through established, long-term financing relationships, even as asset valuations for these collateral types soften. [cite: 7 (from 2nd search), 9 (from 2nd search)]

You can see the breakdown of the loan portfolio segments as of Q2 2025 below:

Strong Capital Base: A Tier 1 leverage ratio of 14.39% (Q2 2025) provides the capital buffer to fund growth in other segments.

Maintaining a robust capital position is key to supporting the entire enterprise. 1st Source Corporation reported a Tier 1 leverage ratio of 14.39% as of the second quarter of 2025, which is well above regulatory minimums and provides the necessary buffer. [cite: 6 (from 1st search)] This strong base allows 1st Source Corporation to passively 'milk' the gains from its Cash Cows while strategically allocating capital to higher-growth areas, like Question Marks.

You should review the current efficiency ratio of 49.5% from Q3 2025 against historical targets to ensure support investments are not eroding the cash generation of these core units. [cite: 2 (from 1st search)]

1st Source Corporation (SRCE) - BCG Matrix: Dogs

Dogs, in the Boston Consulting Group framework, represent business units or products operating in low-growth markets with a low relative market share. For 1st Source Corporation, these are the areas that tie up capital without generating significant returns, making them prime candidates for divestiture or aggressive minimization.

The identification of these Dog segments relies on analyzing specific asset classes and operational footprints that show low relative performance or high maintenance costs against low growth prospects. You need to be clear-eyed about these drags on overall efficiency.

Non-Performing Assets (NPA)

Though improving, the Non-Performing Assets (NPA) to loans ratio of 0.91% as of September 30, 2025, represents a low-return asset class that still consumes valuable management time and resources for resolution. This ratio decreased from 1.06% at June 30, 2025, showing moderate improvement in credit quality, but any NPA is a drag. The allowance for loans and lease losses remained strong at 2.32% at that same date. Management time spent managing these assets could be better allocated to higher-growth, higher-share areas of the business.

Legacy Branch Network

The physical footprint, while historically a strength, contains elements that fit the Dog profile. 1st Source Corporation maintains a network of 77 banking centers across its operating regions. Certain locations within this network, particularly those in mature markets with declining foot traffic, function as Dogs. These underperforming physical assets contribute to the overall Efficiency Ratio, which for Q3 2025 stood at 49.5%. While this ratio is respectable, minimizing the operational cost associated with low-traffic branches is key to improving this metric further. The industry trend shows a rapid migration toward digital platforms, making legacy, low-utilization physical locations increasingly costly relative to the business they generate.

Here's a quick look at the operational context:

Low-Yield Investment Securities

The strategic repositioning within the investment portfolio has highlighted specific securities that act as cash traps. In Q3 2025, 1st Source Corporation executed a sale of approximately $73 million in available-for-sale securities. This action resulted in a realized pre-tax loss of $1.88 million. These sales are indicative of shedding low-yield assets that are not contributing sufficiently to the net interest margin, which was 4.1% in Q3 2025. These realized losses, though one-time events, confirm the drag these specific securities represented.

The impact of these repositioning trades can be summarized:

• Securities Sold: Approximately $73 million
• Pre-Tax Loss on Sale: $1.88 million
• Net Interest Margin (Q3 2025): 4.1%
• Net Income Impact (Q3 2025): Offset by realized losses

Expensive turn-around plans for these types of assets-like holding low-yield securities hoping for a market recovery-rarely work; divestiture is often the cleaner path for 1st Source Corporation.

1st Source Corporation (SRCE) - BCG Matrix: Question Marks

The Question Marks quadrant for 1st Source Corporation represents business units operating in markets with high growth prospects but where the company currently holds a low relative market share. These areas consume significant cash to fuel expansion but have yet to deliver substantial, reliable returns. The strategic imperative here is clear: invest heavily to capture share and move them toward the Stars quadrant, or divest before they become Dogs.

You're looking at areas where 1st Source Corporation is placing bets on future growth, which inherently means high near-term cash burn. The decision to fund these ventures is implicitly supported by the strong performance of the Cash Cows, which, based on Q2 2025 results, showed tax-equivalent net interest income of $85.35 million.

Here are the specific business units categorized as Question Marks:

• Wealth Management: AUM of approximately $5.9 billion (Q2 2025) in a high-growth industry (US Private Banking CAGR projected at 8.0%).
• Renewable Energy Financing: An explicit, high-growth national initiative in a market with a projected 10.3% CAGR, but currently a small, unproven relative market share for 1st Source Corporation.
• Digital Transformation Investment: The push to increase mobile adoption (69% in Q2 2025) requires significant, unproven investment to compete with larger, tech-forward banks.

The required investment in these areas is substantial, as they are in high-demand, growing segments. For instance, the need to compete digitally is underscored by the current mobile adoption rate of 69% in Q2 2025, which demands capital expenditure to close the gap with larger competitors.

The strategic dilemma is best illustrated by comparing the market opportunity against the current standing:

These units are cash consumers; they need capital to build the market share necessary to eventually generate the high returns seen in Stars. If the Renewable Energy Financing segment, for example, fails to gain traction against established players in its 10.3% CAGR market, the capital deployed could quickly become stranded, risking a slide into the Dogs quadrant when market growth inevitably slows.

The path forward involves focused resource allocation. You must decide which of these high-potential areas warrants the heavy investment needed to achieve market leadership. Consider the following strategic actions:

• Invest heavily in Renewable Energy Financing to rapidly scale market share.
• Allocate capital to technology infrastructure to lift mobile adoption above 69%.
• Review the cost structure of Wealth Management to ensure the $5.9 billion AUM is efficiently managed.

Finance: draft 13-week cash view by Friday.