Safe and Sound

1st Source Bank

South Bend, IN
5
Star Rating
1st Source Bank is a South Bend, IN-based, FDIC-insured bank dating back to 1922. As of December 31, 2017, the bank held equity of $706.1 million on assets of $5.89 billion.

With 1,133 full-time employees in 82 offices in multiple states, the bank holds loans and leases worth $4.45 billion, including real estate loans of $1.44 billion. U.S. bank customers currently have $4.75 billion in deposits with the bank.

Overall, Bankrate believes that, as of December 31, 2017, 1st Source Bank exhibited a superior condition, earning a full 5 stars for safety and soundness. Here's an analysis of how the bank fared on the three major criteria Bankrate used to evaluate American banks on safety and soundness.

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THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and provides protection for depositors during periods of economic trouble for the bank. Therefore, a bank's level of capital is a useful measurement of an institution's financial fortitude. From a safety and soundness perspective, the higher the capital, the better.

On our test to measure the adequacy of a bank's capital, 1st Source Bank received a score of 12 out of a possible 30 points, lower than the national average of 13.13.

A bank's Tier 1 capital ratio is an important measure of this buffer. 1st Source Bank's Tier 1 capital ratio was 12.10 percent, higher than the 6 percent level regulators consider adequate, but under the national average of 25.65 percent. A higher capital ratio suggests the bank will be better able to stand up to financial downturns.

Overall, 1st Source Bank held equity amounting to 12.00 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test is intended to estimate how the bank's loan loss reserves and overall capitalization could be affected by troubled assets, such as unpaid loans.

A bank with a large number of these kinds of assets could eventually be forced to use capital to cover losses, cutting down on its equity cushion. Many of those assets are also likely to be in non-accrual status and thus aren't earning interest for the bank, resulting in lower earnings and potentially more risk of a failure in the future.

1st Source Bank beat out the national average of 37.49 on Bankrate's asset quality test, racking up 40 out of a possible 40 points .

A useful indicator of asset quality is the percentage of problem assets a bank holds compared to its total assets. As of December 31, 2017, 0.50 percent of 1st Source Bank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . How large that reserve is can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on 1st Source Bank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its safety and soundness. Earnings may be retained by the bank, expanding its capital cushion, or be used to address problematic loans, likely making the bank better prepared to withstand economic trouble. Banks that are losing money, however, have less ability to do those things.

1st Source Bank did above-average on Bankrate's test of earnings, achieving a score of 18 out of a possible 30.

Return on equity, calculated by dividing net income (essentially, profit) by the total amount of equity, is one important way to measure a bank's earnings. The most recent annualized quarterly return on equity for 1st Source Bank was 9.83 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $68.1 million on total equity of $706.1 million. The bank reported an annualized return on average assets, or ROA, of 1.20 percent, above the 1 percent deemed satisfactory in accordance with industry standards, and above the average for U.S. banks of 1.00 percent.

WHAT IS SAFE & SOUND?

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.