RankingBanking 25 - Flipbook - Page 13
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kept adding things over time to build a broader
that’s more focused on in-market [commercial
base of potential clients and markets, drive growth
and industrial] and commercial real estate.”
and minimize risks.”
The laws and terms of the competition have
The company’s 78-branch community banking
franchise, a powerhouse deposit gatherer, is the
changed a lot since then, but 1st Source’s special-
foundation of the formula. It’s primarily a business
ty finance group — and the mix of opportunism
bank — consumers, many of them small business
and conservatism underlying its strategy — con-
owners, account for 48% of its deposit base and
tinue to drive results. The company’s performance
only 2% of loans. The institution boasts No. 1 de-
was strong enough to rank No. 19 in Bank
posit market shares in 16 contiguous counties in its
Director’s RankingBanking analysis of the 300
northeastern Indiana and southwestern Michigan
largest publicly traded banks. In the ranking, its
footprint. In a fiercely competitive environment, it
core return on average asset was 1.55% while its
regularly beats out the likes of JPMorgan Chase &
tangible common equity to tangible assets totaled
Co., Fifth Third Bancorp and a bevy of local banks
11.61%. In 2024, the company reported record
and credit unions, growing core deposits at an aver-
net income of $132.6 million, up more than 6%
age annual compounded rate of 4.6% since 2021.
from a year earlier.
It also has a wealth management business with
Tom Brown, CEO of Second Curve Capital, says
$5.9 billion in assets under management — much
the blend of a strong core banking franchise with a
of it from its loan customers — that generated
handful of specialty niches helps 1st Source differ-
$26.7 million in noninterest income in 2024, and
entiate itself and maintain its independence, even
an insurance business that contributed another
as it continues to grow. “They do a really good job
$6.7 million in commissions. In total, 1st Source
of balancing focus with diversification, and they’ve
gets 23% of its revenue from noninterest sources.
been able to maintain a community feel that fuels
The banking team’s quest to gain more of exist-
deposit growth,” says Brown, who has met with
ing customers’ business is constant. The company
both management and the board this year. “They
was an early adopter of Salesforce’s customer
pick their spots, and they win in those spots. That’s
relationship management (CRM) platform and
what banks this size need to do to be successful.”
uses it aggressively. “If they don’t have a piece of a
customer’s business, they’ll make sure it’s recorded
A 50/50 Split
in the Salesforce CRM, and their bankers will go
1st Source is a commercial banking company
after that business,” Race says. “It’s a solid organ-
with a balance sheet that’s split roughly 50/50
ic growth story. They’re focused on full-client rela-
between community banking operations and its
tionship banking and maximizing wallet share.”
four established specialty finance verticals. It
also boasts a relatively new niche that provides
construction loans and other financing for solar
and other renewable energy projects.
“Clumping Risk”
1st Source can put those deposits to work in
ways that most smaller banks cannot. Fully 52%
“It’s a really solid story and one that I’ve
of its loans and leases lie in the specialty finance
recommended for years,” says Nathan Race, a
portfolio — national businesses that generate
managing director and senior research analyst for
higher yields and growth potential than standard
Piper Sandler & Co. “The diversity of loans means
commercial banking. The company won’t release
the headwinds aren’t as acute as they are for
exact yields on its specialty lending verticals, but
the prototypical Midwestern bank of similar size
Chief Financial Officer Brett Bauer says they’re
