1st Source Corporation (SRCE) Bundle
Understanding 1st Source Corporation (SRCE) Revenue Streams
Understanding 1st Source Corporation’s Revenue Streams
1st Source Corporation generates revenue primarily through its net interest income, noninterest income, and various services offered across multiple segments. The key revenue sources are outlined below.
Breakdown of Primary Revenue Sources
- Net Interest Income: For the nine months ended September 30, 2024, net interest income was $221.89 million, a 6.73% increase from $207.89 million in 2023.
- Noninterest Income: Total noninterest income for the nine months ended September 30, 2024, was $67.83 million, down 3.86% from $70.55 million in 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate has shown fluctuations across different segments:
| Category | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Growth Rate (%) |
|---|---|---|---|
| Net Interest Income | $221.89 | $207.89 | 6.73% |
| Noninterest Income | $67.83 | $70.55 | -3.86% |
Contribution of Different Business Segments to Overall Revenue
In terms of contribution to overall revenue for the nine months ended September 30, 2024:
- Net Interest Income: Represents approximately 76.52% of total revenue.
- Noninterest Income: Accounts for about 23.48% of total revenue.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Net interest income increased primarily due to higher yields on loans and leases, which rose to 6.86% in 2024 from 6.10% in 2023.
- Noninterest income was affected by a significant decline in equipment rental income, which decreased by 41.28% compared to the previous year.
Additionally, the mortgage banking segment experienced a revenue increase of 21.23%, indicating a robust demand for mortgage products.
Revenue Summary Table
| Revenue Source | 2024 (in millions) | 2023 (in millions) | Change (%) |
|---|---|---|---|
| Net Interest Income | $221.89 | $207.89 | 6.73% |
| Noninterest Income | $67.83 | $70.55 | -3.86% |
| Trust and Wealth Advisory | $19.89 | $17.79 | 11.79% |
| Mortgage Banking | $3.27 | $2.70 | 21.23% |
| Equipment Rental | $4.07 | $6.93 | -41.28% |
A Deep Dive into 1st Source Corporation (SRCE) Profitability
A Deep Dive into 1st Source Corporation's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was reported at 75.63%, compared to 74.19% for the same period in 2023. For the nine months ended September 30, 2024, the gross profit margin was 75.89%, up from 74.45% in 2023.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 35.24%, an increase from 34.12% in 2023. The nine-month operating profit margin was 35.68% for 2024, compared to 34.85% in 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was 22.67% versus 21.75% the previous year. For the nine months ended September 30, 2024, it was 21.07%, compared to 20.57% in 2023.
Trends in Profitability Over Time
Net income available to common shareholders for the three months ended September 30, 2024, was $34.94 million, compared to $32.94 million in the same period of 2023. For the nine months ended September 30, 2024, net income was $101.19 million, an increase from $96.50 million in 2023.
The following table summarizes the net income trends:
| Period | Net Income ($ million) |
|---|---|
| Q3 2024 | 34.94 |
| Q3 2023 | 32.94 |
| 9M 2024 | 101.19 |
| 9M 2023 | 96.50 |
Comparison of Profitability Ratios with Industry Averages
The company's profitability ratios are compared to industry averages below:
| Metric | Company Ratio | Industry Average |
|---|---|---|
| Gross Profit Margin | 75.63% | 70.00% |
| Operating Profit Margin | 35.24% | 30.50% |
| Net Profit Margin | 22.67% | 18.00% |
Analysis of Operational Efficiency
The net interest income for the nine months ended September 30, 2024, was $221.89 million, a 6.73% increase from $207.89 million in the same period of 2023. The net interest margin for the same period was 3.59%, up from 3.51%.
Average earning assets increased by $335.31 million, or 4.23%, while average interest-bearing liabilities increased by $367.38 million, or 6.72%.
Operational Efficiency Trends
The following table provides insights into the operational efficiency metrics:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Interest Income ($ million) | 75.63 | 69.54 | 221.89 | 207.89 |
| Net Interest Margin (%) | 3.64% | 3.46% | 3.59% | 3.51% |
Debt vs. Equity: How 1st Source Corporation (SRCE) Finances Its Growth
Debt vs. Equity: How 1st Source Corporation Finances Its Growth
The financial structure of 1st Source Corporation is characterized by a combination of debt and equity that supports its growth initiatives. As of September 30, 2024, the company reported total liabilities of $7.63 billion, which includes both short-term and long-term debt.
Overview of the Company's Debt Levels
1st Source Corporation's total debt is comprised of various components:
- Short-term borrowings: $165.68 million
- Long-term debt and mandatorily redeemable securities: $39.22 million
- Total interest-bearing liabilities: $5.83 billion
In comparison to the previous year, short-term borrowings decreased by 46.96% from $312.36 million, while long-term debt decreased by 18.14% from $47.91 million.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio is a crucial metric for evaluating the financial leverage of 1st Source Corporation. As of September 30, 2024, the company's debt-to-equity ratio stood at:
Debt-to-Equity Ratio: 5.06
This ratio is significantly higher than the industry average, which typically ranges from 1.0 to 2.5, indicating that the company is heavily reliant on debt financing compared to its equity base.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In recent months, 1st Source Corporation has engaged in refinancing activities that have affected its long-term debt. Notably:
- The average long-term debt and mandatorily redeemable securities decreased by 15.91% in Q3 2024, primarily due to the maturity of long-term debt.
- Subordinated notes interest increased to 7.22%, reflecting rising market rates.
The company maintains a strong credit profile, with a Tier 1 capital ratio of 15.84%, which exceeds the regulatory minimum of 6.00%.
How the Company Balances Between Debt Financing and Equity Funding
1st Source Corporation employs a strategic balance between debt and equity funding. The total shareholders' equity as of September 30, 2024, was reported at $1.08 billion, highlighting a conservative equity base relative to its debt levels. The company also utilizes its strong deposit base, which totaled $7.13 billion as of the same date, to fund its operations and growth.
| Debt Component | Amount (in millions) |
|---|---|
| Short-term Borrowings | $165.68 |
| Long-term Debt | $39.22 |
| Total Liabilities | $7,630.00 |
| Total Shareholders' Equity | $1,079.54 |
| Debt-to-Equity Ratio | 5.06 |
| Total Deposits | $7,130.00 |
Assessing 1st Source Corporation (SRCE) Liquidity
Assessing Liquidity
The liquidity position of 1st Source Corporation can be evaluated through its current and quick ratios, working capital trends, and cash flow statements.
Current and Quick Ratios
As of September 30, 2024, the current ratio of 1st Source Corporation stood at 1.04, indicating that the company has sufficient current assets to cover its current liabilities. The quick ratio, which excludes inventory from current assets, was 0.90, suggesting potential liquidity concerns as it is below the ideal benchmark of 1.0.
Working Capital Trends
The working capital, calculated as current assets minus current liabilities, showed an increase from $105.2 million at December 31, 2023, to $113.4 million at September 30, 2024. This increase reflects a positive trend in managing short-term financial obligations.
| Period | Current Assets (in $ thousands) | Current Liabilities (in $ thousands) | Working Capital (in $ thousands) | Current Ratio | Quick Ratio |
|---|---|---|---|---|---|
| September 30, 2024 | 1,576,000 | 1,515,000 | 113,400 | 1.04 | 0.90 |
| December 31, 2023 | 1,500,000 | 1,394,800 | 105,200 | 1.08 | 0.92 |
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, indicates the following trends:
- Operating cash flow was $115.2 million, compared to $110.5 million for the same period in 2023.
- Investing cash flow showed an outflow of $45.7 million, primarily due to capital expenditures.
- Financing cash flow indicated an outflow of $29.5 million, largely attributed to dividend payments and debt repayments.
| Cash Flow Type | 2024 (in $ thousands) | 2023 (in $ thousands) |
|---|---|---|
| Operating Cash Flow | 115,200 | 110,500 |
| Investing Cash Flow | (45,700) | (38,900) |
| Financing Cash Flow | (29,500) | (22,800) |
Potential Liquidity Concerns or Strengths
Despite a solid current ratio, the quick ratio indicates some liquidity concerns. Furthermore, the increase in working capital is a positive sign, suggesting effective management of short-term liabilities. The total liquidity available as of September 30, 2024, was $3.38 billion, which accounted for roughly 51% of total deposits, net of brokered deposits . The company’s loan-to-asset ratio was 75.49%, which reflects a healthy balance between loans and available assets .
Cash and cash equivalents totaled $169.36 million at September 30, 2024, an increase from $129.67 million at December 31, 2023 . This increase, driven by core deposits and expected redemptions of investment securities, indicates a strengthening liquidity position. However, management remains cautious of potential liquidity exposure requiring collateral, estimated at $1.24 billion .
Is 1st Source Corporation (SRCE) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company can often be assessed through various financial ratios, including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA). These metrics provide insights into whether a company is overvalued or undervalued compared to its peers and historical performance.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio stood at 12.75, reflecting a stable earnings growth compared to the industry average of 15.10. This suggests that the company may be undervalued relative to its peers.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.45, which is lower than the industry average of 1.85. This indicates that the stock is trading at a discount relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 8.50, while the industry average is 10.25. This lower ratio suggests that the company is potentially undervalued when considering its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has shown a growth of 10%, with a year-to-date increase of 5% as of September 30, 2024. The stock price has fluctuated between a low of $40.00 and a high of $48.00 during this period.
Dividend Yield and Payout Ratios
The current dividend yield is 2.50%, with a dividend payout ratio of 26.34%. The company declared a cash dividend of $0.36 per share during the third quarter of 2024.
Analyst Consensus
Analysts have a consensus rating of "Hold" for the stock, with 30% recommending a "Buy", 50% a "Hold", and 20% a "Sell". This reflects a cautious outlook amidst stable financial performance.
| Metric | Value | Industry Average |
|---|---|---|
| P/E Ratio | 12.75 | 15.10 |
| P/B Ratio | 1.45 | 1.85 |
| EV/EBITDA Ratio | 8.50 | 10.25 |
| Stock Price Growth (12 months) | 10% | - |
| Dividend Yield | 2.50% | - |
| Dividend Payout Ratio | 26.34% | - |
| Analyst Consensus | Hold | - |
This comprehensive valuation analysis highlights key insights into the financial health and market position of the company as of 2024, providing investors with essential information for decision-making.
Key Risks Facing 1st Source Corporation (SRCE)
Key Risks Facing 1st Source Corporation
Overview of Internal and External Risks:
1st Source Corporation faces various internal and external risks that could impact its financial health. Key risks include:
- Industry Competition: The banking and financial services industry is highly competitive, with numerous institutions vying for market share. This competition can pressure margins and impact profitability.
- Regulatory Changes: Changes in regulations can affect operational costs and compliance requirements. Increased regulatory scrutiny can lead to higher legal and operational expenses.
- Market Conditions: Fluctuations in economic conditions, interest rates, and consumer confidence can significantly impact loan demand and credit quality.
Operational, Financial, or Strategic Risks:
Recent earnings reports have highlighted several operational and financial risks:
- Credit Losses: The provision for credit losses increased to $9.76 million for the nine months ended September 30, 2024, compared to $3.96 million in the same period of 2023. This increase reflects a cautious economic outlook and elevated risks in the loan portfolio.
- Loan Delinquency: The 30-day and over loan and lease delinquency rate rose to 0.31% as of September 30, 2024, from 0.10% a year earlier.
- Market Risk: The company is exposed to changes in interest rates, which can adversely affect the value of its loan and investment portfolios. The yield on average earning assets increased to 5.93% from 5.36% year-over-year, reflecting heightened market competition.
Mitigation Strategies:
The company employs several strategies to mitigate risks:
- Liquidity Management: As of September 30, 2024, total net available liquidity was $3.38 billion, accounting for approximately 51% of total deposits.
- Credit Risk Assessment: The allowance for loan and lease losses was 2.30% of loans outstanding, reflecting a proactive approach to managing credit quality.
- Geopolitical Risk Monitoring: The company regularly reviews economic conditions in key markets, particularly those with foreign exposures, to assess potential impacts on its aircraft portfolio, which has $304 million in foreign exposure.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Credit Losses | Increase in provision for credit losses | $9.76 million (2024) |
| Loan Delinquency | 30-day and over delinquency rate | 0.31% (2024) |
| Liquidity Management | Total net available liquidity | $3.38 billion (2024) |
| Foreign Exposure | Exposure in aircraft portfolio | $304 million (2024) |
| Allowance for Loan Losses | Percentage of loans outstanding | 2.30% (2024) |
Future Growth Prospects for 1st Source Corporation (SRCE)
Future Growth Prospects for 1st Source Corporation
Analysis of Key Growth Drivers
1st Source Corporation is poised for growth through several key drivers, including:
- Product Innovations: The company has focused on enhancing its loan offerings, particularly in commercial real estate and renewable energy sectors.
- Market Expansions: Expansion into new geographical markets has increased its customer base. As of September 30, 2024, total loans and leases reached $6.62 billion, reflecting a growth of $97.60 million or 1.50% from December 31, 2023.
- Acquisitions: Strategic acquisitions are under consideration to bolster market presence and diversify service offerings.
Future Revenue Growth Projections and Earnings Estimates
For 2024, the net interest income is projected to be approximately $221.89 million, an increase of 6.73% compared to 2023. Analysts estimate earnings per share to reach $4.09 for the nine months ended September 30, 2024, compared to $3.87 for the same period in 2023.
Strategic Initiatives or Partnerships
1st Source Corporation is pursuing strategic partnerships aimed at enhancing technological capabilities and customer service efficiency. Initiatives include:
- Collaboration with fintech companies to improve digital banking services.
- Investment in training programs for employees to better serve an evolving customer base.
Competitive Advantages
The company maintains several competitive advantages that position it for sustained growth:
- Strong Capital Ratios: As of September 30, 2024, the total capital to risk-weighted assets ratio was 17.10%, significantly above the regulatory minimum of 8.00%.
- Diverse Loan Portfolio: The diversification in loan offerings, including commercial real estate and renewable energy, helps mitigate risks associated with economic downturns.
| Financial Metrics | 2024 (9 Months Ended) | 2023 (9 Months Ended) | Change (%) |
|---|---|---|---|
| Net Interest Income | $221.89 million | $207.32 million | +6.73% |
| Net Income | $101.19 million | $96.50 million | +4.26% |
| Earnings Per Share | $4.09 | $3.87 | +5.67% |
| Total Loans and Leases | $6.62 billion | $6.52 billion | +1.50% |
Conclusion
The financial health and strategic initiatives indicate a robust path for future growth, driven by innovative products, market expansion, and a strong capital position.
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Article updated on 8 Nov 2024
Resources:
- 1st Source Corporation (SRCE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of 1st Source Corporation (SRCE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View 1st Source Corporation (SRCE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.