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1st Source: A Conservatively Managed Dividend Aristocrat That's Firing On All Cylinders

Published Wed, 09 Oct 2019 23:26:19 -0400 on Seeking Alpha

Investment Thesis
1st Source Corporation (SRCE) is a publicly traded regional bank as well as a Dividend Aristocrat, having raised its dividend for 31 consecutive years. It's a relatively small company at $1.15 billion in market cap, but it has demonstrated phenomenal resilience in this tough environment for community banks. Despite a relatively low starting yield of 2.4%, the bank only pays out a little less than a third of its profits (~31%), and the dividend is likely to continue growing for a long time to come. That makes the stock a reasonable buy at current levels, although I will give my target entry price below.
The Company
SRCE serves the Northern half of Indiana as well as Southwestern Michigan, offering both retail and commercial banking services. The company boasts over $6.5 billion in total assets, with nearly $5 billion of that as loans and leases as well as $4.3 billion in assets under management in the wealth management department. In addition, the lender also operates a specialty finance business for aircraft ($811 million loans and leases), construction machinery ($687 million), automobiles for commercial use ($635 million), and medium and heavy trucks ($300 million).
As of Q2, 2019, the specialty finance division (~$2.55 billion) had grown to nearly the same size as the community banking division (~$2.69 billion) in terms of assets.

Source: Q2 Company Presentation
The bank is headquartered in South Bend, Indiana (where one Pete... Read more