SRCE

1st Source is a small ($9.06B-asset) state commercial bank that has done the boring things well: net income has marched up every year — $119M → $121M → $125M → $133M → $158M — and FY2025's +19.3% jump to $158M (diluted EPS $6.41, +19.6%) is the steepest of the run. Operating cash flow rose 15.1% to $223M against just $10.1M of capex, and the bank is returning that cash both ways — dividends paid up 8.6% to $38.4M and buybacks ramped sharply to $13.9M. Stockholders' equity grew 14.8% to $1.27B (retained earnings +13.9%), so the balance sheet is getting stronger even as capital is returned. The 6.07x liabilities/equity is unremarkable for a bank and, importantly, the franchise is well-capitalized and self-funding rather than levering up to chase the earnings.

Valuation is the crux of the buy case. At $81.95 the stock trades at 12.8x trailing diluted EPS while that EPS just grew ~20% — a growth-adjusted multiple well under 1x. Against ~$52 of book value per share (equity $1.27B / 24.3M shares) that's ~1.6x book, a fair-to-full price justified by a 12.4% ROE. You are not overpaying for the quality here; if anything the market is treating consistent, profitable community-bank earnings with the skepticism it usually reserves for cyclical banks.