1st Source lends customers' deposits to businesses and households and keeps the interest gap. Cheaper deposits did much of the work in its third-quarter 2026 earnings rise, but with loans nearly matching deposits, cheap funding is the test.
Money left in a checking account doesn't sit idle. A bank lends it out again, perhaps to a firm buying construction equipment or building a solar farm. 1st Source is such a bank. It takes in customers' deposits and lends the money out as loans and leases, with specialties in markets such as renewable energy and construction equipment. It also earns fees from services such as trust and wealth advice, but lending is by far the bigger business.
Borrowers pay interest on their loans. The bank pays interest to depositors and to anyone else it borrows from, and keeps the difference. That gap pays for staff and running costs, and covers an estimated cost for loans that may not be repaid. What is left depends on three things: how far loan rates sit above the cost of the bank's money, how tightly costs are run and how few borrowers default. Fees have slipped over five years, so results hang ever more on lending. The bank also holds securities, investments it can sell. Their market value moves with interest rates. Paper losses on them reduce the owners' stake in the bank, its book value, without passing through earnings. So book value is a better gauge of progress than one quarter's profit.
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