RankingBanking 25 - Flipbook - Page 15
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“Bankers tend to be like lemmings that jump on the beach and
die together. You’ve got to watch the fads and not do what
everyone else is doing.”
Christopher Murphy III, 1st Source Corp.
entry that keeps competitors largely at bay and
Getting Burned
provides pricing power. “Financing equipment is
The company compensates for the risks with
in our DNA. Our strength is that we know how to
a combination of experience, connections and
work through the downsides in these businesses,”
conservative capital management. 1st Source’s
Murphy says. “How? You develop experience. You
top six executives boast an average of 36 years
get hurt, you get burned. And then you learn from
in banking, while its 25 specialty finance officers
those experiences and codify that learning.”
average 24 years of lending experience.
The company spends years researching before
Capital Defense
it enters a new vertical and emphasizes continued
That learning is supplemented by one of the
learning as things evolve. Specialized businesses
higher capital levels in the industry. In 2024, 1st
require specialized knowledge, such as understand-
Source boasted total risk-based capital of 17.1%
ing how to maintain a complex piece of machinery
and a common equity tier 1 ratio of 14.2%. The
or where exactly to sell that repossessed helicopter.
company’s loan loss reserves were 2.27% of the
The company has a strong network of dealers and
loan book, even though net charge-offs were just
understands the nuances of its lending niches and
0.09% of loans and leases.
the resale markets should it need to seize collateral.
“Could we bring the reserve down a little bit
“You have to know your collateral,” says Short,
and move earnings up a little bit for the quarter?”
62, an accountant by training who has steadily
asks Bauer, the CFO. “We could but managing
climbed the executive ranks and is expected to
for the long term is so embedded in our culture,
become CEO when Murphy steps aside. “When
we aren’t apt to do that. The reason we have the
you’re financing a private or corporate aircraft,
reserve is so we can be there for customers in bad
you want to make sure it’s being flown, because
times. It’s all about the long term.”
it’s not good for the aircraft not to be flown. So,
1st Source manages its balance sheet “from a
we monitor the [Federal Aviation Administration]
liquidity perspective first and foremost,” Bauer
register to make sure our planes are flying and the
adds, always targeting about 15% or 16% of the
engines are being maintained.”
investment portfolio to total assets. That’s higher
The knowledge requirements form a barrier to
than other banks, “but since we have the risk of
