Does 1st Source (SRCE) Using Higher Payouts Signal Evolving Capital Allocation Priorities?

• In January 2026, 1st Source Corporation reported that for 2025 its net interest income rose to US$348.18 million and net income to US$158.28 million, while also approving a higher quarterly dividend of US$0.40 per share and completing a US$13.99 million share repurchase program.
• Alongside this, the bank’s net charge-offs in the fourth quarter of 2025 fell to US$0.28 million from US$0.69 million a year earlier, highlighting improving credit costs even as it returned more capital to shareholders through dividend growth and buybacks.
• Next, we’ll examine how the dividend increase and capital return program shape 1st Source’s investment narrative for different types of investors.

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What Is 1st Source's Investment Narrative?

To own 1st Source, you need to be comfortable backing a regional bank story that leans on steady profitability, disciplined credit, and measured capital returns. The 2025 results, with higher net interest income and net income, and a lift in the quarterly dividend to US$0.40 per share, reinforce that narrative rather than change it. The completed US$13.99 million buyback and modest net charge-offs of US$0.28 million in the fourth quarter suggest that, for now, credit costs are not the main swing factor. Short term, the key catalysts remain how the bank manages its net interest margin and loan growth, while the biggest risks sit around any sudden deterioration in asset quality or a reversal in funding conditions. This latest update does not appear to materially shift those balances.

However, one risk around credit quality trends could catch income-focused investors off guard. 1st Source's shares have been on the rise but are still potentially undervalued by 48%. Find out what it's worth.

Exploring Other Perspectives

The three fair value views from the Simply Wall St Community span from about US$76 to a very large upper estimate, showing just how far apart individual expectations can be. Set that against the recent dividend increase and improving charge-offs, and you can see why some readers may want to compare these contrasting views before deciding how 1st Source fits into their own portfolio thinking.

Explore 3 other fair value estimates on 1st Source - why the stock might be worth just $76.33!

Build Your Own 1st Source Narrative

Disagree with this assessment? Create your own narrative in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your 1st Source research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.
• Our free 1st Source research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate 1st Source's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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