1st Source (SRCE) Stock Forecast & Price Target

1st Source Corp demonstrated strong financial momentum, evidenced by a 4% increase in core fee income and a notable $235 million growth in end-of-period loan balances, particularly in commercial, agricultural, and equipment financing segments. The bank's ability to maintain a healthy loan-to-deposit ratio (net L/D) of 93%, reflecting efficient use of its deposits to fund lending activities, further supports its stability and growth prospects. Additionally, a slight rise in the allowance for credit losses signals prudent management practices and a commitment to mitigating potential risks.

1st Source Corp is experiencing declines in interest-bearing time deposits and savings deposits, with decreases of 5% and 9% LQA, which indicates a contraction in customer deposits and potential liquidity challenges. The company’s revenue is projected to normalize lower in the third quarter, reflecting concerns over ongoing operational performance coupled with lower insurance revenue of $1.7 million compared to $5.1 million in the prior period. Additionally, risks related to increased credit costs, reduced loan demand, and margin pressure are anticipated to have a more pronounced impact on earnings in the near term due to the prevailing interest rate environment.