1ST SOURCE CORPSRCE
1ST SOURCE CORP Commitments Disclosure
Contingent Liabilities, Commitments, and Financial Instruments with Off-Balance-Sheet Risk
Contingent Liabilities —1st Source and its subsidiaries are defendants in various legal proceedings arising in the normal course of business. In the opinion of management, based upon present information including the advice of legal counsel, the ultimate resolution of these proceedings will not have a material effect on the Company’s consolidated financial position or results of operations.
1st Source Bank sells residential mortgage loans to Fannie Mae as well as FHA-insured, USDA-insured and VA-guaranteed loans in Ginnie Mae mortgage-backed securities. Additionally, the Bank has sold loans on a service released basis to various other financial institutions in the past. The agreements under which the Bank sells these mortgage loans contain various representations and warranties regarding the acceptability of loans for purchase. On occasion, the Bank may be required to indemnify the loan purchaser for credit losses on loans that were later deemed ineligible for purchase or may be required to repurchase a loan. Both circumstances are collectively referred to as “repurchases.”
The Company’s liability for repurchases, included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition, was $0.05 million and $0.12 million as of December 31, 2025 and 2024, respectively. The mortgage repurchase liability represents the Company’s best estimate of the loss that it may incur. The estimate is based on specific loan repurchase requests and a historical loss ratio with respect to origination dollar volume. Because the level of mortgage loan repurchase losses are dependent on economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment.
Lease Commitments — The Company and its subsidiaries are obligated under operating leases for certain office premises and equipment.
The following table shows operating lease right of use assets and operating lease liabilities as of December 31.
| (Dollars in thousands) | Statement of Financial Condition classification | 2025 | 2024 | |||||||||||
| Operating lease right of use assets | $ | 20,130 | $ | 21,076 | ||||||||||
| Operating lease liabilities | $ | 16,566 | $ | 18,150 | ||||||||||
The following table shows the components of operating leases expense for the year ended December 31.
| (Dollars in thousands) | Statement of Income classification | 2025 | 2024 | 2023 | ||||||||||||||||
| Operating lease cost | Net occupancy expense | $ | 3,804 | $ | 3,855 | $ | 3,721 | |||||||||||||
| Short-term lease cost | Net occupancy expense | 1 | — | 9 | ||||||||||||||||
| Variable lease cost | Net occupancy expense | 9 | 9 | 8 | ||||||||||||||||
| Total operating lease cost | $ | 3,814 | $ | 3,864 | $ | 3,738 | ||||||||||||||
The following table shows future minimum rental commitments for all noncancellable operating leases with an initial term longer than 12 months for the next five years and thereafter.
| (Dollars in thousands) | ||||||||
| 2026 | $ | 3,967 | ||||||
| 2027 | 3,270 | |||||||
| 2028 | 1,999 | |||||||
| 2029 | 1,887 | |||||||
| 2030 | 1,809 | |||||||
| Thereafter | 7,708 | |||||||
| Total lease payments | 20,640 | |||||||
| Less: imputed interest | (4,074) | |||||||
| Present value of operating lease liabilities | $ | 16,566 | ||||||
The following table shows the weighted average remaining operating lease term, the weighted average discount rate and supplemental Consolidated Statement of Cash Flows information for operating leases at December 31.
| (Dollars in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Weighted average remaining lease term | 9.39 years | 8.94 years | 9.31 years | ||||||||||||||
| Weighted average discount rate | 4.46 | % | 4.34 | % | 4.28 | % | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
| Operating cash flows from operating leases | $ | 4,403 | $ | 4,509 | $ | 4,508 | |||||||||||
There were no new significant leases that had not yet commenced as of December 31, 2025.
Financial Instruments with Off-Balance-Sheet Risk — To meet the financing needs of its clients, 1st Source and its subsidiaries are parties to financial instruments with off-balance-sheet risk in the normal course of business. These off-balance-sheet financial instruments include commitments to originate and sell loans and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition.
Financial instruments, whose contract amounts represent credit risk as of December 31, were as follows:
| (Dollars in thousands) | 2025 | 2024 | ||||||||||||
| Amounts of commitments: | ||||||||||||||
| Loan commitments to extend credit | $ | 1,438,112 | $ | 1,304,735 | ||||||||||
| Standby letters of credit | $ | 20,870 | $ | 21,828 | ||||||||||
| Commercial and similar letters of credit | $ | 1,435 | $ | 161 | ||||||||||
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for loan commitments and standby letters of credit is represented by the dollar amount of those instruments. The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance-sheet instruments.
Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company grants mortgage loan commitments to borrowers subject to normal loan underwriting standards. The interest rate risk associated with these loan commitments is managed by entering into contracts for future deliveries of loans.
Standby letters of credit are conditional commitments issued to guarantee the performance of a client to a third party. The credit risk involved in and collateral obtained when issuing standby letters of credit are essentially the same as those involved in extending loan commitments to clients. Standby letters of credit generally have terms ranging from two months to one year.
Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party. Commercial letters of credit generally have terms ranging from two months to six months.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 19, 2016 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.