# 1ST Source Corp: Form 10-Q for the period ended Sep 30, 2025

- Company: [1ST Source Corp](/companies/srce.md) (CIK 34782)
- Form: 10-Q
- Filed: 2025-10-23
- Accepted by EDGAR: Oct 23, 2025, 16:09 ET
- Period: 2025-09-30
- Accession: 0000034782-25-000109
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/34782/000003478225000109/source-20250930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/34782/000003478225000109/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2025-07-01 to 2025-09-30 | $12.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2025-01-01 to 2025-09-30 | $33.7m | us-gaap:IncomeTaxExpenseBenefit |
| Diluted EPS | 3 months, 2025-07-01 to 2025-09-30 | $1.71 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2025-01-01 to 2025-09-30 | $4.74 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-07-01 to 2025-09-30 | $1.71 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2025-01-01 to 2025-09-30 | $4.74 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-07-01 to 2025-09-30 | 24,472,035 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2025-01-01 to 2025-09-30 | 24,519,828 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2025-01-01 to 2025-09-30 | $167.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2025-01-01 to 2025-09-30 | $8.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2025-01-01 to 2025-09-30 | $28.3m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2025-01-01 to 2025-09-30 | $9.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Total assets | at 2025-09-30 | $9.06bn | us-gaap:Assets |
| Total liabilities | at 2025-09-30 | $7.77bn | us-gaap:Liabilities |
| Short-term borrowings | at 2025-09-30 | $73.6m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2025-09-30 | $1.24bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 48,070 characters.

### MANAGEMENT’S DISCUSSION AND ANALYSIS OF

### FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis is presented to provide information concerning 1st Source Corporation and its subsidiaries’ (collectively referred to as “the Company”, “we”, and “our”) financial condition as of September 30, 2025, as compared to December 31, 2024, and the results of operations for the three and nine months ended September 30, 2025, and 2024. This discussion and analysis should be read in conjunction with our consolidated financial statements and the financial and statistical data appearing elsewhere in this report and our 2024 Annual Report.

Except for historical information contained herein, the matters discussed in this document express “forward-looking statements.” Generally, the words “believe,” “contemplate,” “seek,” “plan,” “possible,” “assume,” “hope,” “expect,” “intend,” “targeted,” “continue,” “remain,” “estimate,” “anticipate,” “project,” “will,” “should,” “indicate,” “would,” “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Those statements, including statements, projections, estimates or assumptions concerning future events or performance, and other statements that are other than statements of historical fact, are subject to material risks and uncertainties. We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. We may make other written or oral forward-looking statements from time to time. Readers are advised that various important factors could cause our actual results or circumstances for future periods to differ materially from those anticipated or projected in such forward-looking statements. Such factors include, but are not limited to, changes in law, regulations or GAAP; our competitive position within the markets we serve; increasing consolidation within the banking industry; unforeseen changes in interest rates; unforeseen changes in loan prepayment assumptions; unforeseen downturns in or major events affecting the local, regional or national economies or the industries in which we have credit concentrations; potential impacts of epidemics, pandemics or other infectious disease outbreaks; and other matters discussed in our filings with the SEC, including our Annual Report on Form 10-K for 2024, which filings are available from the SEC. We undertake no obligation to publicly update or revise any forward-looking statements.

### FINANCIAL CONDITION

Our total assets at September 30, 2025, were $9.06 billion, an increase of $124.75 million or 1.40% from December 31, 2024. Total investment securities available-for-sale were $1.50 billion, a decrease of $41.18 million or 2.68% from December 31, 2024. The largest contributor to the decrease in investment securities available-for-sale was expected redemptions. Federal funds sold and interest bearing deposits with other banks were $138.94 million, an increase of $90.95 million or 189.53% from December 31, 2024. The increase in federal funds sold and interest bearing deposits with other banks was due to higher interest bearing deposits at other banks as a result of growth in deposit balances and the expected maturities of investment securities.

Total loans and leases were $6.96 billion, an increase of $109.65 million or 1.60% from December 31, 2024. The largest contributors to the increase in loans and leases was growth in the renewable energy, residential real estate and home equity and commercial real estate portfolios, offset by decreases in the aircraft, auto and light truck and commercial and agricultural portfolios. Our foreign loan and lease balances, all denominated in U.S. dollars, were $321.78 million and $301.18 million as of September 30, 2025, and December 31, 2024, respectively. Foreign loans and leases are in aircraft financing. Loan and lease balances to borrowers in Brazil and Mexico were $135.87 million and $164.50 million as of September 30, 2025, respectively, compared to $129.12 million and $145.85 million as of December 31, 2024, respectively. As of September 30, 2025, and December 31, 2024, there was not a significant concentration in any other country.

Equipment owned under operating leases was $7.65 million, a decrease of $3.83 million, or 33.39% compared to December 31, 2024. The largest contributors to the decrease in equipment owned under operating leases was reduced leasing volume primarily due to a change in customer preferences and continued competitive pricing pressure for new business.

Total deposits were $7.41 billion, an increase of $179.78 million or 2.49% from the end of 2024. The largest contributors to the increase in total deposits were higher savings and time deposits offset by a decrease in demand deposits. Rate competition for deposits persisted during the third quarter across our footprint from various sources, including traditional bank and credit union competitors, money market funds, bond markets, and other non-bank alternatives.

Short-term borrowings were $73.57 million, a decrease of $175.62 million or 70.48% from December 31, 2024, due primarily to the maturity and pay off of $100 million in borrowings from the Federal Reserve’s Bank Term Funding Program and pay downs of short-term FHLB borrowings. Long-term debt and mandatorily redeemable securities were $42.23 million, an increase of $3.08 million or 7.86% from December 31, 2024, due primarily to an increase in mandatorily redeemable securities. Accrued expenses and other liabilities were $180.87 million, an increase of $7.59 million or 4.38% from December 31, 2024, mainly due to increased unfunded partnership commitments offset by decreases in accrued interest payable and accounts payable.

The following table shows accrued income and other assets.

*(Dollars in thousands)*

| Accrued income and other assets: | September 30, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Bank owned life insurance cash surrender value | $87,922 | $86,396 |
| Operating lease right of use assets | 20,915 | 21,076 |
| Accrued interest receivable | 32,138 | 32,790 |
| Mortgage servicing rights | 3,263 | 3,436 |
| Other real estate | 120 | 460 |
| Repossessions | 435 | 155 |
| Partnership investments carrying amount | 131,712 | 140,244 |
| Deferred tax assets | 50,843 | 55,543 |
| All other assets | 38,298 | 56,185 |
| Total accrued income and other assets | $365,646 | $396,285 |

The largest contributors to the decrease in accrued income and other assets from December 31, 2024, were decreases in accounts receivable (included in All Other Assets in the table above) and partnership investments.

### CAPITAL

As of September 30, 2025, total shareholders’ equity was $1.24 billion, up $125.40 million, or 11.29% from the $1.11 billion at December 31, 2024. In addition to net income of $117.14 million, other significant changes in shareholders’ equity during the first nine months of 2025 included $27.54 million of dividends paid. The accumulated other comprehensive loss component of shareholders’ equity decreased to $45.86 million at September 30, 2025, compared to $87.23 million at December 31, 2024, due to changes in market conditions on our available-for-sale investment portfolio. Our shareholders’ equity-to-assets ratio was 13.65% as of September 30, 2025, compared to 12.44% at December 31, 2024. Book value per common share increased to $50.60 at September 30, 2025, from $45.31 at December 31, 2024, primarily due to increased retained earnings and decreased accumulated other comprehensive losses.

We declared and paid cash dividends per common share of $0.38 during the third quarter of 2025. The trailing four quarters dividend payout ratio, representing cash dividends per common share divided by diluted earnings per common share, was 24.63%. The dividend payout is continually reviewed by management and the Board of Directors subject to the Company’s capital and dividend policy.

The banking regulators have established guidelines for leverage capital requirements, expressed in terms of Tier 1 or core capital as a percentage of average assets, to measure the soundness of a financial institution. In addition, banking regulators have established risk-based capital guidelines for U.S. banking organizations.

The actual capital amounts and ratios of 1st Source Corporation and 1st Source Bank as of September 30, 2025, remained at their historically strong and conservative levels and are presented in the table below.

*(Dollars in thousands)*

| Total Capital (to Risk-Weighted Assets): | Actual Amount | Ratio | Minimum Capital Adequacy Amount | Ratio | Minimum Capital Adequacy with Capital Buffer Amount | Ratio | To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | Ratio |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| 1st Source Corporation | $1,414,793 | 17.85% | $634,114 | 8.00% | $832,275 | 10.50% | $792,643 | 10.00% |
| 1st Source Bank | 1,307,520 | 16.49 | 634,159 | 8.00 | 832,333 | 10.50 | 792,698 | 10.00 |
| Tier 1 Capital (to Risk-Weighted Assets): |  |  |  |  |  |  |  |  |
| 1st Source Corporation | 1,314,832 | 16.59 | 475,586 | 6.00 | 673,746 | 8.50 | 634,114 | 8.00 |
| 1st Source Bank | 1,207,552 | 15.23 | 475,619 | 6.00 | 673,793 | 8.50 | 634,159 | 8.00 |
| Common Equity Tier 1 Capital (to Risk-Weighted Assets): |  |  |  |  |  |  |  |  |
| 1st Source Corporation | 1,202,873 | 15.18 | 356,689 | 4.50 | 554,850 | 7.00 | 515,218 | 6.50 |
| 1st Source Bank | 1,152,593 | 14.54 | 356,714 | 4.50 | 554,889 | 7.00 | 515,254 | 6.50 |
| Tier 1 Capital (to Average Assets): |  |  |  |  |  |  |  |  |
| 1st Source Corporation | 1,314,832 | 14.55 | 361,482 | 4.00 | N/A | N/A | 451,853 | 5.00 |
| 1st Source Bank | 1,207,552 | 13.37 | 361,383 | 4.00 | N/A | N/A | 451,728 | 5.00 |

### LIQUIDITY AND INTEREST RATE SENSITIVITY

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as our operating cash needs are met. Funds are available from a number of sources, including the securities portfolio, the core deposit base, access to the national brokered certificates of deposit market, national listing service certificates of deposit, Federal Home Loan Bank (FHLB) borrowings, Federal Reserve Bank (FRB) borrowings, and the capability to package loans for sale.

We maintain prudent strategies to support a strong liquidity position. The following table represents our sources of liquidity as of September 30, 2025.

*(Dollars in thousands)*

| Internal Sources | Available |
| --- | ---: |
| Unencumbered securities | $1,248,934 |
| **External Sources** |  |
| FHLB advances(1) | 607,950 |
| FRB borrowings | 368,207 |
| Fed funds purchased(2) | 410,000 |
| Brokered deposits(3) | 396,410 |
| Listing services deposits(3) | 451,400 |
| Total liquidity | $3,482,901 |
| % of Total deposits net brokered and listing services certificates of deposit | 50.48% |
| (1) Availability is shown net of required stock purchases under the FHLB activity-based stock ownership requirement, which is currently 4.50%, and may vary |  |
| (2) Availability contingent on correspondent bank approvals at time of borrowing |  |
| (3) Availability contingent on internal borrowing guidelines |  |

External sources as listed in the table above are managed to approved guidelines by our Board of Directors. Total net available liquidity was $3.48 billion at September 30, 2025, which accounted for approximately 50% of total deposits net of brokered and listing services certificates of deposit.

Our loan to asset ratio was 76.90% at September 30, 2025, compared to 76.74% at December 31, 2024 and 75.49% at September 30, 2024. Cash and cash equivalents totaled $214.26 million at September 30, 2025, compared to $124.83 million at December 31, 2024 and $169.36 million at September 30, 2024. The increase in cash and cash equivalents was primarily due to an increase in deposits and the expected redemptions of investment securities available-for-sale. At September 30, 2025, the Consolidated Statements of Financial Condition was rate sensitive by $459.66 million more liabilities than assets scheduled to reprice within one year, or approximately 0.90%. Management believes that the present funding sources provide adequate liquidity to meet our cash flow needs.

Under Indiana law governing the collateralization of public fund deposits, the Indiana Board of Depositories determines which financial institutions are required to pledge collateral based on the strength of their financial ratings. We have been informed that no collateral is required for our public fund deposits. However, the Board of Depositories could alter this requirement in the future and adversely impact our liquidity. Our potential liquidity exposure if we must pledge collateral is approximately $1.38 billion.

### RESULTS OF OPERATIONS

Net income available to common shareholders for the three and nine month periods ended September 30, 2025, was $42.30 million and $117.14 million, compared to $34.94 million and $101.19 million for the same periods in 2024. Diluted net income per common share was $1.71 and $4.74 for the three and nine month periods ended September 30, 2025, compared to $1.41 and $4.09 earned for the same periods in 2024. Return on average common shareholders’ equity was 13.24% for the nine months ended September 30, 2025, compared to 13.02% in 2024. The return on total average assets was 1.75% for the nine months ended September 30, 2025, compared to 1.55% in 2024.

Net income increased for the nine months ended September 30, 2025, compared to the first nine months of 2024. Net interest income and noninterest income increased offset partially by an increase in the provision for credit losses and noninterest expense. Details of the changes in the various components of net income are discussed further below.

### NET INTEREST INCOME

The following tables provide an analysis of net interest income and illustrates the interest income earned and interest expense charged for each major component of interest earning assets and interest bearing liabilities. Yields/rates are computed on a tax-equivalent basis, using a 21% rate. Nonaccrual loans and leases are included in the average loan and lease balance outstanding.

### DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY

### INTEREST RATES AND INTEREST DIFFERENTIAL

*(Dollars in thousands)*

| ASSETS Investment securities available-for-sale: | September 30, 2025 Average Balance | Interest Income/Expense | Yield/ Rate | Three Months Ended June 30, 2025 Average Balance | Interest Income/Expense | Yield/ Rate | September 30, 2024 Average Balance | Interest Income/Expense | Yield/ Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Taxable | $1,439,793 | $8,803 | 2.43% | $1,444,203 | $8,602 | 2.39% | $1,510,162 | $6,120 | 1.61% |
| Tax exempt(1) | 32,727 | 379 | 4.59% | 32,418 | 375 | 4.64% | 29,057 | 316 | 4.33% |
| Mortgages held for sale | 4,516 | 73 | 6.41% | 3,385 | 55 | 6.52% | 3,758 | 63 | 6.67% |
| Loans and leases, net of unearned discount(1) | 7,015,389 | 120,245 | 6.80% | 6,968,463 | 117,250 | 6.75% | 6,605,677 | 115,216 | 6.94% |
| Other investments | 133,400 | 1,542 | 4.59% | 95,469 | 1,087 | 4.57% | 124,647 | 1,659 | 5.29% |
| Total earning assets(1) | 8,625,825 | 131,042 | 6.03% | 8,543,938 | 127,369 | 5.98% | 8,273,301 | 123,374 | 5.93% |
| Cash and due from banks | 59,957 |  |  | 67,535 |  |  | 64,014 |  |  |
| Allowance for loan and lease losses | (164,984) |  |  | (159,418) |  |  | (151,693) |  |  |
| Other assets | 512,741 |  |  | 510,079 |  |  | 534,202 |  |  |
| Total assets | $9,033,539 |  |  | $8,962,134 |  |  | $8,719,824 |  |  |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY** |  |  |  |  |  |  |  |  |  |
| Interest-bearing deposits | $5,817,284 | $39,654 | 2.70% | $5,774,752 | $39,106 | 2.72% | $5,534,358 | $43,782 | 3.15% |
| Short-term borrowings: |  |  |  |  |  |  |  |  |  |
| Securities sold under agreements to repurchase | 59,297 | 148 | 0.99% | 60,863 | 121 | 0.80% | 64,032 | 173 | 1.07% |
| Other short-term borrowings | 15,556 | 159 | 4.06% | 61,917 | 688 | 4.46% | 110,710 | 1,336 | 4.80% |
| Subordinated notes | 58,764 | 1,010 | 6.82% | 58,764 | 1,007 | 6.87% | 58,764 | 1,054 | 7.14% |
| Long-term debt and mandatorily redeemable securities | 41,646 | 1,167 | 11.12% | 41,328 | 1,102 | 10.70% | 39,119 | 1,399 | 14.23% |
| Total interest-bearing liabilities | 5,992,547 | 42,138 | 2.79% | 5,997,624 | 42,024 | 2.81% | 5,806,983 | 47,744 | 3.27% |
| Noninterest-bearing deposits | 1,606,828 |  |  | 1,574,332 |  |  | 1,600,068 |  |  |
| Other liabilities | 157,241 |  |  | 144,057 |  |  | 161,978 |  |  |
| Shareholders’ equity | 1,219,234 |  |  | 1,187,076 |  |  | 1,079,543 |  |  |
| Noncontrolling interests | 57,689 |  |  | 59,045 |  |  | 71,252 |  |  |
| Total liabilities and equity | $9,033,539 |  |  | $8,962,134 |  |  | $8,719,824 |  |  |
| Less: Fully tax-equivalent adjustments |  | (154) |  |  | (153) |  |  | (144) |  |
| Net interest income/margin (GAAP-derived)(1) |  | $88,750 | 4.08% |  | $85,192 | 4.00% |  | $75,486 | 3.63% |
| Fully tax-equivalent adjustments |  | 154 |  |  | 153 |  |  | 144 |  |
| Net interest income/margin - FTE(1) |  | $88,904 | 4.09% |  | $85,345 | 4.01% |  | $75,630 | 3.64% |
| (1) See “Reconciliation of Non-GAAP Financial Measures” at the end of this section for additional information on this performance measure/ratio. |  |  |  |  |  |  |  |  |  |

### Quarter Ended September 30, 2025, compared to the Quarter Ended September 30, 2024

The taxable-equivalent net interest income for the three months ended September 30, 2025, was $88.90 million, an increase of 17.55% over the same period in 2024. The net interest margin on a fully taxable-equivalent basis was 4.09% for the three months ended September 30, 2025, compared to 3.64% for the three months ended September 30, 2024.

During the three month period ended September 30, 2025, average earning assets increased $352.52 million, up 4.26% over the comparable period in 2024. Average interest-bearing liabilities increased $185.56 million or 3.20%. The yield on average earning assets increased 10 basis points to 6.03% from 5.93% at September 30, 2024, primarily due to higher loan and lease average balances and higher rates on investment securities. Total cost of average interest-bearing liabilities decreased 48 basis points to 2.79% from 3.27%, primarily as a result of lower rates on interest-bearing deposits and other short-term borrowings. The result to the tax-equivalent net interest margin, or the ratio of tax-equivalent net interest income to average earning assets, was an increase of 45 basis points.

The largest contributors to the improved yield on average earning assets for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, was an increase in average loan and lease balances and higher rates on investments securities offset by lower rates on other investments, which include federal funds sold, time deposits with other banks, Federal Reserve Bank excess balances, Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock and commercial paper. The yield on loans and leases decreased 14 basis points, mainly from lower rates on loans during the quarter compared to the prior year third quarter. Average loans and leases increased $409.71 million or 6.20%, primarily in the renewable energy, commercial real estate, construction equipment, commercial and agricultural, and residential real estate and home equity portfolios. Net interest recoveries positively contributed four basis points to the yield on average loans and leases during the quarter and four basis points to the average loans and leases yield during the prior year third quarter. Average investment securities decreased $66.70 million or 4.33%, due to the expected redemption of securities used to fund loan growth and pay down short-term borrowings. Average other investments, primarily held at the Federal Reserve Bank, increased $8.75 million or 7.02%.

Average interest-bearing deposits increased $282.93 million or 5.11% for the third quarter of 2025 over the same period in 2024 primarily in savings, interest-bearing demand and non-brokered time deposits. The effective rate on average interest-bearing deposits decreased 45 basis points to 2.70% from 3.15%, primarily as a result of Fed rate cuts during the second half of 2024 and third quarter of 2025. Average noninterest-bearing deposits increased $6.76 million or 0.42% for the third quarter of 2025 over the same period in 2024.

Average short-term borrowings decreased $99.89 million or 57.16% for the third quarter of 2025, compared to the same period in 2024. Interest on short-term borrowings decreased 181 basis points primarily due to the maturity and pay off of $100 million in borrowings from the Federal Reserve’s Bank Term Funding Program during the first quarter of this year along with lower rates on short-term FHLB borrowings. Interest on subordinated notes decreased 32 basis points during the third quarter of 2025 from the same period a year ago due to a variable rate decrease on one tranche. Average long-term debt and mandatorily redeemable securities balances increased $2.53 million or 6.46%. Interest on long-term debt and mandatorily redeemable securities decreased 311 basis points during the third quarter of 2025 from the same period in 2024, primarily due to lower imputed interest on mandatorily redeemable securities from a smaller increase in book value per share during the quarter compared to the previous year’s third quarter. Mandatorily redeemable securities are issued under the terms of one of our executive incentive compensation plans and are settled based on book value per share with changes from the previous reporting date recorded as interest expense.

*(Dollars in thousands)*

| ASSETS Investment securities available-for-sale: | Nine Months Ended September 30, 2025 Average Balance | Interest Income/Expense | Yield/ Rate | September 30, 2024 Average Balance | Interest Income/Expense | Yield/ Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Taxable | $1,457,157 | $25,558 | 2.35% | $1,537,066 | $18,099 | 1.57% |
| Tax exempt(1) | 32,112 | 1,103 | 4.59% | 30,057 | 962 | 4.28% |
| Mortgages held for sale | 3,444 | 167 | 6.48% | 3,257 | 162 | 6.64% |
| Loans and leases, net of unearned discount(1) | 6,928,394 | 351,091 | 6.78% | 6,572,108 | 337,580 | 6.86% |
| Other investments | 114,444 | 3,943 | 4.61% | 110,580 | 4,500 | 5.44% |
| Total earning assets(1) | 8,535,551 | 381,862 | 5.98% | 8,253,068 | 361,303 | 5.85% |
| Cash and due from banks | 63,819 |  |  | 62,277 |  |  |
| Allowance for loan and lease losses | (160,601) |  |  | (150,127) |  |  |
| Other assets | 512,531 |  |  | 545,805 |  |  |
| Total assets | $8,951,300 |  |  | $8,711,023 |  |  |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY** |  |  |  |  |  |  |
| Interest-bearing deposits | $5,779,321 | $118,606 | 2.74% | $5,511,116 | $126,621 | 3.07% |
| Short-term borrowings: |  |  |  |  |  |  |
| Securities sold under agreements to repurchase | 59,468 | 373 | 0.84% | 57,934 | 366 | 0.84% |
| Other short-term borrowings | 31,964 | 975 | 4.08% | 168,234 | 6,403 | 5.08% |
| Subordinated notes | 58,764 | 3,031 | 6.90% | 58,764 | 3,176 | 7.22% |
| Long-term debt and mandatorily redeemable securities | 40,891 | 3,543 | 11.58% | 41,633 | 2,850 | 9.14% |
| Total interest-bearing liabilities | 5,970,408 | 126,528 | 2.83% | 5,837,681 | 139,416 | 3.19% |
| Noninterest-bearing deposits | 1,589,924 |  |  | 1,598,711 |  |  |
| Other liabilities | 146,957 |  |  | 163,091 |  |  |
| Shareholders’ equity | 1,183,027 |  |  | 1,037,809 |  |  |
| Noncontrolling interests | 60,984 |  |  | 73,731 |  |  |
| Total liabilities and equity | $8,951,300 |  |  | $8,711,023 |  |  |
| Less: Fully tax-equivalent adjustments |  | (454) |  |  | (436) |  |
| Net interest income/margin (GAAP-derived)(1) |  | $254,880 | 3.99% |  | $221,451 | 3.58% |
| Fully tax-equivalent adjustments |  | 454 |  |  | 436 |  |
| Net interest income/margin - FTE(1) |  | $255,334 | 4.00% |  | $221,887 | 3.59% |
| (1) See “Reconciliation of Non-GAAP Financial Measures” at the end of this section for additional information on this performance measure/ratio. |  |  |  |  |  |  |

### Nine Months Ended September 30, 2025, compared to the Nine Months Ended September 30, 2024

The taxable-equivalent net interest income for the nine months ended September 30, 2025, was $255.33 million, an increase of 15.07% over the same period in 2024. The net interest margin on a fully taxable-equivalent basis was 4.00% for the nine months ended September 30, 2025, compared to 3.59% for the same period in 2024.

During the nine month period ended September 30, 2025, average earning assets increased $282.48 million, up 3.42% over the comparable period in 2024. Average interest-bearing liabilities increased $132.73 million or 2.27%. The yield on average earning assets increased 13 basis points to 5.98% from 5.85% primarily due to higher loan and lease average balances and higher rates on investment securities offset by lower rates on other investments, which include federal funds sold, time deposits with other banks, Federal Reserve Bank excess balances, Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock and commercial paper. Total cost of average interest-bearing liabilities decreased 36 basis points to 2.83% from 3.19% as a result of repricing of interest-bearing deposits and lower interest expense on other short-term borrowings which is predominately short-term FHLB borrowings offset by higher rates on mandatorily redeemable securities. The result to the net interest margin, or the ratio of net interest income to average earning assets, was a net 41 basis point improvement.

The largest contributors to the improved yield on average earning assets for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was an increase in average loan and lease balances and higher rates on investment securities. Average loans and leases increased $356.29 million, up 5.42%. Average investment securities decreased $77.85 million or 4.97% which represents the expected maturity of securities used to support liquidity and fund loan growth.

Average interest-bearing deposits increased $268.21 million or 4.87% for the first nine months of 2025 over the same period in 2024, primarily due to increased interest-bearing demand, savings, and non-brokered time deposit balances. The effective rate paid on average interest-bearing deposits decreased 33 basis points to 2.74% from 3.07% mainly from Fed rate cuts during the second half of 2024. Average noninterest-bearing deposits declined $8.79 million or 0.55% for the first nine months of 2025 over the same period in 2024, primarily due to persistent rate competition for deposits and greater utilization of excess funds by our business customers.

Average short-term borrowings decreased $134.74 million or 59.57% for the first nine months of 2025, compared to the same period in 2024. Interest paid on short-term borrowings decreased 203 basis points primarily due to the maturity and pay off of $100 million in borrowings from the Federal Reserve’s Bank Term Funding Program and lower short-term FHLB borrowings. Interest paid on subordinated notes decreased 32 basis points during the first nine months due to a variable rate decrease on one tranche. Average long-term debt and mandatorily redeemable securities balances decreased $0.74 million or 1.78%, primarily from maturity of long term debt. Interest paid on long-term debt and mandatorily redeemable securities increased 244 basis points due to higher imputed interest on mandatorily redeemable securities from a larger increase in book value per share during 2025. Mandatorily redeemable securities are issued under the terms of one of our executive incentive compensation plans and are settled based on book value per share with changes from the previous reporting date recorded as interest expense.

### Reconciliation of Non-GAAP Financial Measures

The accounting and reporting policies of 1st Source conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components) and net interest margin (including its individual components). Management believes that these measures provide users of the Company’s financial information a more meaningful view of the performance of the interest-earning assets and interest-bearing liabilities.

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources.

*(Dollars in thousands)*

| Calculation of Net Interest Margin |  | Three Months Ended September 30, 2025 | June 30, 2025 | September 30, 2024 | Nine Months Ended September 30, 2025 | September 30, 2024 |
| --- | --- | ---: | ---: | ---: | ---: | ---: |
| (A) | Interest income (GAAP) | $130,888 | $127,216 | $123,230 | $381,408 | $360,867 |
|  | Fully tax-equivalent adjustments: |  |  |  |  |  |
| (B) | - Loans and leases | 76 | 75 | 79 | 226 | 239 |
| (C) | - Tax-exempt investment securities | 78 | 78 | 65 | 228 | 197 |
| (D) | Interest income - FTE (A+B+C) | 131,042 | 127,369 | 123,374 | 381,862 | 361,303 |
| (E) | Interest expense (GAAP) | 42,138 | 42,024 | 47,744 | 126,528 | 139,416 |
| (F) | Net interest income (GAAP) (A–E) | 88,750 | 85,192 | 75,486 | 254,880 | 221,451 |
| (G) | Net interest income - FTE (D–E) | 88,904 | 85,345 | 75,630 | 255,334 | 221,887 |
| (H) | Annualization factor | 3.967 | 4.011 | 3.978 | 1.337 | 1.336 |
| (I) | Total earning assets | $8,625,825 | $8,543,938 | $8,273,301 | $8,535,551 | $8,253,068 |
|  | Net interest margin (GAAP-derived) (F\*H)/I | 4.08% | 4.00% | 3.63% | 3.99% | 3.58% |
|  | Net interest margin - FTE (G\*H)/I | 4.09% | 4.01% | 3.64% | 4.00% | 3.59% |

### PROVISION AND ALLOWANCE FOR CREDIT LOSSES

The provision for credit losses for the three and nine months ended September 30, 2025, was $0.90 million and $11.85 million, compared to $1.72 million and $8.89 million during the three and nine months ended September 30, 2024. Net charge-offs of $1.88 million or 0.11% of average loans and leases were recorded for the third quarter of 2025, compared to $0.85 million or 0.05% of average loans and leases for the same quarter a year ago. Year-to-date net charge-offs of $3.93 million or 0.08% of average loans and leases have been recorded in 2025, compared to net charge-offs of $4.99 million or 0.10% of average loans and leases through September 30, 2024. Net charge-offs recognized in 2025 are principally concentrated in the commercial and agricultural, construction equipment, auto and light truck, and consumer portfolios.

The provision for credit losses for the three months ended September 30, 2025, was principally driven by a decline in loan balances along with a slight decrease in special attention balances which are reserved at higher rates. The forecast adjustment was unchanged as the previous assumptions continue to be applicable to economic conditions expected during the forecast period. Risks include an unpredictable trade environment, an uncertain domestic GDP outlook, heightened geopolitical instability, a weakening labor market, and continued elevated levels of inflation and interest rates. We remain concerned about the potential risks in the small business portion of the commercial and agricultural portfolio, as domestic trade proposals increase the potential for pricing instability and shifting demand dynamics which may impact our customers. The agricultural portion of this portfolio remains under stress as financial performance has been adversely impacted by lower commodity prices. Clients in our auto and light truck portfolio are experiencing lower rental rates, higher fleet carrying costs, and overcapacity. Modest qualitative adjustments were made in the current quarter to account for higher special attention balances along with continued elevated delinquency rates in the auto rental portion of the portfolio. The medium and heavy duty truck portfolio is managing through a prolonged industry downturn. Consumers remain under stress, economic imbalances are prevalent, and confidence is waning. We modestly increased a qualitative factor related to consumer delinquency trends this quarter to account for higher delinquency rates in the portfolio. Reserves for assets individually evaluated total $1.16 million this quarter, consisting largely of accounts in our auto and light truck and medium and heavy duty truck portfolios.

We continually evaluate risks which may impact our loan portfolios. Such risks include an uncertain economic outlook fueled by significant changes in domestic trade policy, ongoing conflicts around the world with the potential to impact commodity prices and shipping routes, and the Federal Reserve’s challenge of maintaining full employment, while balancing inflation and interest rate concerns in an effort to maintain overall economic stability. The possibility for a downside economic scenario is heightened as disruptive trade policy, geopolitical uncertainty, and fragile growth prospects raise the potential for adverse impacts in the domestic and global economies. The potential for trade disruption increases asset price volatility and higher interest rates apply downward pressure to asset values which collateralize our loans. Credit market conditions remain tightened, and uncertainty is pervasive. The growth outlook in the U.S. is uncertain and susceptible to disruption caused by global conflicts and an environment of heightened instability. Our domestic political environment is fraught with uncompromising partisanship. Political discord and corruption scandals are also an ever-present threat in our Latin American markets. Globally, there is an ongoing threat of terrorism.

Our aircraft portfolio exhibits collateral concentration and contains $321.78 million of foreign exposure at September 30, 2025, the majority of which is in Mexico and Brazil. We review political and economic data for these countries on a regular basis to assess the impact the environment may have on our customers. We have recognized minimal credit losses in recent years in the aircraft portfolio and credit quality remains stable. However, historically, we have experienced brief periods of volatile and unanticipated losses in both foreign and domestic aircraft. Losses have been primarily attributable to unexpected declines in the value of specific aircraft collateral at a time when the borrower is experiencing financial difficulties. We review and assess aircraft values on an ongoing basis and use a tiered approach to establish advance rates and amortization schedules to limit collateral exposure. We continually monitor individual customer performance and assess risks in the overall portfolio.

On September 30, 2025, 30 day and over loan and lease delinquency as a percentage of loan and lease balances was 0.76%, compared to 0.31% on September 30, 2024. The allowance for loan and lease losses as a percentage of loans and leases outstanding at the end of the period was 2.32%, compared to 2.30% one year ago. A summary of loan and lease loss experience during the three and nine months ended September 30, 2025, and 2024 is located in Note 5 of the Consolidated Financial Statements.

### NONPERFORMING ASSETS

The following table shows nonperforming assets.

*(Dollars in thousands)*

|  | September 30, 2025 | December 31, 2024 | September 30, 2024 |
| --- | ---: | ---: | ---: |
| Loans and leases past due 90 days or more and accruing | $317 | $106 | $100 |
| Nonaccrual loans and leases | 62,264 | 30,613 | 30,678 |
| Other real estate | 120 | 460 | — |
| Repossessions | 435 | 155 | 109 |
| Equipment owned under operating leases | 56 | — | — |
| Total nonperforming assets | $63,192 | $31,334 | $30,887 |
| Nonperforming assets to loans and leases, net of unearned discount | 0.91% | 0.46% | 0.47% |

Nonperforming assets totaled $63.19 million at September 30, 2025, an increase of 101.67% from the $31.33 million reported at December 31, 2024, and a 104.59% increase from the $30.89 million reported at September 30, 2024. The increase in nonperforming assets during the first nine months of 2025 was primarily related to higher nonaccrual loans and leases. The increase in nonperforming assets as of September 30, 2025, from September 30, 2024, was also related to an increase in nonaccrual loans and leases. There is currently one property held in other real estate related to our residential real estate and home equity portfolio as of September 30, 2025.

The increase in nonaccrual loans and leases at September 30, 2025, from December 31, 2024, was predominantly in our auto and light truck portfolio as several large accounts were transferred to nonaccrual status during the year. A summary of nonaccrual loans and leases and past due aging for the periods ended September 30, 2025, and December 31, 2024, is located in Note 4 of the Consolidated Financial Statements.

Repossessions consisted primarily of two loan relationships in the construction equipment portfolio, coupled with minimal amounts in our auto and light truck, and consumer portfolios at September 30, 2025. At the time of repossession, the recorded amount of the loan or lease is written down to the fair value of the equipment or vehicle by a charge to the allowance for loan and lease losses or other income, if a positive adjustment, unless the equipment is in the process of immediate sale. Any subsequent fair value write-downs or write-ups, to the extent of previous write-downs, are included in noninterest expense.

The following table shows a summary of repossessions and other real estate.

*(Dollars in thousands)*

|  | September 30, 2025 | December 31, 2024 | September 30, 2024 |
| --- | ---: | ---: | ---: |
| Commercial and agricultural | $— | $— | $— |
| Renewable energy | — | — | — |
| Auto and light truck | 50 | — | — |
| Medium and heavy duty truck | — | — | — |
| Aircraft | — | — | — |
| Construction equipment | 307 | 594 | 66 |
| Commercial real estate | — | — | — |
| Residential real estate and home equity | 120 | — | — |
| Consumer | 78 | 21 | 43 |
| Total | $555 | $615 | $109 |

For financial statement purposes, nonaccrual loans and leases are included in loan and lease outstandings, whereas repossessions and other real estate are included in other assets.

### NONINTEREST INCOME

The following table shows the details of noninterest income.

*(Dollars in thousands)*

| Noninterest income: | Three Months Ended September 30, 2025 | 2024 | $ Change | % Change | Nine Months Ended September 30, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Trust and wealth advisory | $6,825 | $6,524 | $301 | 4.61% | $20,757 | $19,892 | $865 | 4.35% |
| Service charges on deposit accounts | 3,437 | 3,279 | 158 | 4.82% | 9,697 | 9,552 | 145 | 1.52% |
| Debit card | 4,530 | 4,598 | (68) | (1.48)% | 13,246 | 13,361 | (115) | (0.86)% |
| Mortgage banking | 1,031 | 1,042 | (11) | (1.06)% | 3,000 | 3,272 | (272) | (8.31)% |
| Insurance commissions | 1,845 | 1,641 | 204 | 12.43% | 5,970 | 5,028 | 942 | 18.74% |
| Equipment rental | 693 | 1,141 | (448) | (39.26)% | 2,371 | 4,069 | (1,698) | (41.73)% |
| Losses on investment securities available-for-sale | (1,877) | — | (1,877) | NM | (2,874) | — | (2,874) | NM |
| Other | 5,422 | 4,223 | 1,199 | 28.39% | 15,899 | 12,651 | 3,248 | 25.67% |
| Total noninterest income | $21,906 | $22,448 | $(542) | (2.41)% | $68,066 | $67,825 | $241 | 0.36% |

NM = Not Meaningful

Trust and wealth advisory fees (which include investment management fees, estate administration fees, mutual fund fees, annuity fees, and fiduciary fees) increased during the three and nine months ended September 30, 2025, compared with the same periods a year ago. Trust and wealth advisory fees are largely based on the number and size of client relationships and the market value of assets under management. The market value of trust assets under management at September 30, 2025, December 31, 2024, and September 30, 2024, was $6.07 billion, $5.97 billion, and $6.03 billion, respectively. Positive equity market returns during the first nine months of 2025 resulted in an increase in assets under management.

Service charges on deposit accounts increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024. The increase in service charges on deposit accounts was the result of higher consumer nonsufficient fund and overdraft transactions.

Debit card income decreased during the three and nine months ended September 30, 2025, compared to the same periods a year ago. The decrease during these periods was due to shifts in both client transaction behavior and the networks over which those merchants are routing transactions.

Mortgage banking income decreased during the three and nine months ended September 30, 2025, compared to the same periods in 2024. The decrease was primarily due to lower margins on loans originated for the secondary market and a reduction in servicing fees resulting from fewer loans being serviced for others.

Insurance commissions increased during the three and nine months ended September 30, 2025, compared to the same periods a year ago. The increase was mainly due to higher contingent commissions received and an increased book of business.

Equipment rental income decreased for the three and nine months ended September 30, 2025, over the comparable periods in 2024. The decline was the result of a reduction in the average equipment rental portfolio by 43.07% over the same period a year ago, due to changing customer preferences and competitive pricing pressures for new business.

Losses on investment securities available-for-sale during 2025 were exclusively the result of repositioning the portfolio during the second and third quarters. In the repositioning, approximately $26 million of securities with a weighted average yield of 1.04% were sold and used to purchase approximately $26 million of securities with a weighted average yield of 4.18% in the second quarter and approximately $73 million of securities with a weighted average yield of 0.85% were sold and used to purchase approximately $73 million of securities with a weighted average yield of 3.52% in the third quarter.

Other income increased for the three and nine months ended September 30, 2025, compared to the same periods in 2024. The increase was primarily the result of increased partnership investment gains, higher brokerage and commission fees and increased customer interest rate swap fees.

### NONINTEREST EXPENSE

The following table shows the details of noninterest expense.

*(Dollars in thousands)*

| Noninterest expense: | Three Months Ended September 30, 2025 | 2024 | $ Change | % Change | Nine Months Ended September 30, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Salaries and employee benefits | $32,217 | $31,274 | $943 | 3.02% | $96,132 | $90,084 | $6,048 | 6.71% |
| Net occupancy | 3,085 | 3,011 | 74 | 2.46% | 9,344 | 8,915 | 429 | 4.81% |
| Furniture and equipment | 1,566 | 1,496 | 70 | 4.68% | 4,597 | 3,910 | 687 | 17.57% |
| Data processing | 7,578 | 7,002 | 576 | 8.23% | 22,279 | 20,214 | 2,065 | 10.22% |
| Depreciation – leased equipment | 557 | 907 | (350) | (38.59)% | 1,894 | 3,194 | (1,300) | (40.70)% |
| Professional fees | 1,765 | 1,928 | (163) | (8.45)% | 4,932 | 4,986 | (54) | (1.08)% |
| FDIC and other insurance | 1,454 | 1,423 | 31 | 2.18% | 4,332 | 4,707 | (375) | (7.97)% |
| Business development and marketing | 2,846 | 1,671 | 1,175 | 70.32% | 6,655 | 5,441 | 1,214 | 22.31% |
| Other | 3,708 | 2,116 | 1,592 | 75.24% | 10,117 | 7,942 | 2,175 | 27.39% |
| Total noninterest expense | $54,776 | $50,828 | $3,948 | 7.77% | $160,282 | $149,393 | $10,889 | 7.29% |

Salaries and employee benefits increased during the three and nine months ended September 30, 2025, compared to the same periods in 2024. Higher salaries and employee benefits were mainly a result of normal merit increases, increased incentive compensation as well as higher group insurance costs as a result of overall higher health insurance claims experienced during the first half of 2025.

Net occupancy expense increased during the three and nine months ended September 30, 2025, compared to the same periods in 2024. The increase was primarily due to higher building depreciation and increased premises expenses.

Furniture and equipment expenses, including depreciation, increased during the three and nine months of 2025, compared to the same periods a year ago. The increase was mainly due to an increase in equipment repairs and maintenance and higher equipment depreciation.

Data processing expense grew during the three and nine months ended September 30, 2025, compared to the same periods a year ago due primarily to higher computer processing charges and software maintenance expense on technology projects.

Depreciation on leased equipment decreased for the three and nine months ended September 30, 2025, compared to the same periods in 2024. Depreciation on leased equipment correlates with the decrease in equipment rental income.

Professional fees were lower during the three and nine months ended September 30, 2025, compared to the same periods a year ago due primarily to lower professional consulting fees offset by an increase in legal and audit fees.

FDIC and other insurance remained flat during the three months ended September 30, 2025, and decreased during the nine months ended September 30, 2025, compared to the same periods in 2024. The decrease was the result of lower blanket bond insurance premiums due to a more cost effective policy renewal.

Business development and marketing expense increased during the three and nine months ended September 30, 2025, compared with the same periods in 2024. The increase was primarily due to a $1.00 million dollar charitable contribution, increased business development expenses, and marketing promotions.

Other expenses were higher during the three and nine months of 2025, compared to the same periods a year ago. The increase was primarily the result of fewer gains related to the sale of fixed assets and off-lease equipment, increased fraud losses due to a recovery of check fraud losses during the first quarter last year, higher printing expenses, an increase in credit report and appraisal fees, and higher collection and repossession expenses.

### INCOME TAXES

The provision for income taxes for the three and nine month periods ended September 30, 2025, was $12.71 million and $33.69 million, compared to $10.47 million and $29.82 million for the same periods in 2024. The effective tax rate was 23.11% and 23.07% for the quarters ended September 30, 2025, and 2024, respectively, and 22.34% and 22.76% for the nine months ended September 30, 2025, and 2024, respectively. The decrease in the year-to-date effective tax rate was due to a one-time $0.74 million after-tax interest payment on federal tax refunds from tax credit carrybacks recorded in the first quarter of 2025.

## Market risk

As filed, 288 characters.

### QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risks faced by 1st Source since December 31, 2024. For information regarding our market risk, refer to 1st Source’s Annual Report on Form 10-K for the year ended December 31, 2024.

## Controls and procedures

As filed, 1,390 characters.

### CONTROLS AND PROCEDURES

As of the end of the period covered by this report an evaluation was carried out, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, at September 30, 2025, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by 1st Source in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

In addition, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the third fiscal quarter of 2025 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 220 characters.

There have been no material changes in risks faced by 1st Source since December 31, 2024. For information regarding our risk factors, refer to 1st Source’s Annual Report on Form 10-K for the year ended December 31, 2024.

Filed Oct 23, 2025.
Source: SEC EDGAR, the filing index for accession 0000034782-25-000109. Last ingested by Listed: Nov 4, 2026, 16:07 ET. No prices; not investment advice.