Keefe, Bruyette & Woods (KBW) raised its price target for 1st Source (NASDAQ: SRCE) to $72.00 from $69.00 on Monday and left its rating on the shares intact. The revision follows quarterly results that outperformed expectations on several fronts.
1st Source reported operating earnings of $1.86 per share for the period. KBW attributed the upside to stronger pre-provision net revenue (PPNR) combined with a lower provision. Data from InvestingPro indicates that three analysts have recently nudged up their earnings estimates for the upcoming period, and the company has delivered a robust diluted EPS of $6.41 over the trailing twelve months.
Net interest margin (NIM) improved during the quarter, widening by 20 basis points on a linked-quarter basis. That expansion, together with improved fee income, was central to the earnings beat. The benefit was not fully unambiguous, however, as the bank also reported higher expenses that partially offset the revenue gains.
On balance-sheet dynamics, loan balances rose at an annualized linked-quarter rate of 5%, with the increase coming primarily from the community bank portfolio. Conversely, deposits fell at an annualized linked-quarter rate of 10%, a drop driven mainly by declining time deposit balances.
KBW flagged an uptick in non-performing assets that it said stemmed from a single auto rental client. The bank is actively pursuing resolution in that situation, the firm noted.
Following the quarter, KBW adjusted its forward estimates upward, raising its 2026 and 2027 earnings projections by 6% and 5%, respectively. The firm cited the stronger net interest margin as the reason for the improved run-rate versus its prior model.
Separately, 1st Source Corporation reported record net income of $158.28 million for 2025, an increase of 19.34% compared with the prior year. The fourth-quarter net income was $41.14 million, up 30.87% year-over-year, though that amount represented a 2.73% decline versus the third quarter of 2025.
Management changes at the bank include the promotion of John Bedient to Chief Operating Officer and Executive Vice President. In his expanded role, Bedient will oversee Information Technology, Salesforce, and the Enterprise Project Management Office in addition to his existing Operations responsibilities. The bank also named a new Chief Administrative Officer as part of broader leadership adjustments undertaken after recent succession shifts.
What this means
- KBW's decision to raise the price target reflects confidence in the bank's improved revenue mix and margin profile, even as expenses and deposit pressure persist.
- Loan growth from the community bank segment is supporting top-line momentum, but the deposit decline highlights liquidity and funding mix pressures.
- Management changes indicate an effort to fortify operational leadership following succession moves.
Overall, the analyst update and the company's results present a mix of constructive operating trends and identifiable headwinds that investors and industry observers will likely monitor in coming quarters.