While the S&P 500 is up 13.9% since June 2025, 1st Source (currently trading at $65.84 per share) has lagged behind, posting a return of 6.2%. This might have investors contemplating their next move.

Does this present a buying opportunity for SRCE? Or does the price properly account for its business quality and fundamentals?

Why Does 1st Source Spark Debate?

Tracing its roots back to 1863 during the Civil War era, 1st Source Corporation (NASDAQ: SRCE) is a regional bank holding company that provides commercial, consumer, specialty finance, and wealth management services across Indiana, Michigan, and Florida.

Two Things to Like:

1. Increasing Net Interest Margin Juices Financials

Net interest margin (NIM) serves as a critical gauge of a bank's fundamental profitability by showing the spread between interest income and interest expenses. It's essential for understanding whether a firm can sustainably generate returns from its lending operations.

Over the past two years, 1st Source’s net interest margin averaged 3.8%, climbing by 48.7 basis points (100 basis points = 1 percentage point) over that period.

This expansion was a tailwind for its net interest income, and while prevailing interest rates matter the most for industry net interest margins, banks that consistently increase this figure generally boast higher-earning loan books (all else equal such as the risk of those loans) or provide differentiated services that give them the ability to charge higher rates (pricing power).

2. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

1st Source’s EPS grew at a spectacular 15.9% compounded annual growth rate over the last five years, higher than its 5.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

Net Interest Income Points to Soft Demand

Our experience and research show the market cares primarily about a bank’s net interest income growth as one-time fees are considered a lower-quality and non-recurring revenue source.

1st Source’s net interest income has grown at a 8.8% annualized rate over the last five years, slightly worse than the broader banking industry.

Final Judgment

1st Source has huge potential even though it has some open questions. With its shares underperforming the market lately, the stock trades at 1.3× forward P/B (or $65.84 per share). Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.

High-Quality Stocks for All Market Conditions

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