1ST SOURCE CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - FORM 8K PRESS RELEASE 7/21/11 - 1ST SOURCE CORP	form8_k.htm

Exhibit 99.1

For:	Immediate Release	Contact:	Larry Lentych
	July 21, 2011		Andrea Short
			574 235 2000

1ST SOURCE CORPORATION REPORTS STRONG SECOND QUARTER,

DIVIDEND DECLARED

South Bend, IN -- 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today reports net income of $14.87 million for the second quarter of 2011, an increase of 90.70% over the $7.80 million reported in the second quarter of 2010. For the first six months of 2011, net income for 1st Source Corporation is $25.47 million, up 45.78% compared to $17.47 million reported for the same period in 2010. Diluted net income per common share for the second quarter amounts to $0.61 compared with $0.25, an increase of 144.00% over the second quarter of 2010. Diluted net income per common share for the first half of 2011 is $1.04, up 82.46% over the $0.57 earned a year earlier.

At its July meeting, the Board of Directors approved a cash dividend of $0.16 per common share, an increase of 6.67% over the third quarter a year ago. The dividend is payable to shareholders of record on August 5, 2011 and will be paid on August 15, 2011.

Christopher J. Murphy III, Chairman and Chief Executive Officer, commented, “I am quite pleased with our performance this quarter. Our colleagues’ focus on working to ensure the success of our clients and providing distinctive convenience in our market has led to our strong performance. We are also benefiting from a focus on attracting new clients to the Bank by understanding their needs, offering sound advice during these unsettling times, ensuring our products and services are up-to-date and competitive, and always keeping our clients’ best interests in mind. We know our success is a mirror of our clients’ success so we continue to work hard to help make them successful.”

Mr. Murphy continued, “During the quarter, credit has continued to show improvement. Our non-performing assets decreased $11.22 million or 12.79% from the same period a year ago. We charged-off $1.22 million during the quarter which is down from second quarter last year. The net provision for loan and lease losses for the second quarter totaled $67,000 versus $5.80 million a year ago and the quarter end reserve for loan and lease losses is $85.01 million compared to a year end 2010 reserve of $86.87 million. Additionally, our net interest margin increased from 2010 levels to 3.72% for the quarter, while expenses have been held in check. The margin was positively impacted by interest recoveries on non-accrual loans and lower funding costs. Even with these good results, we still see choppy times ahead from the global economy and little to no growth in the national economy overall.

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As a result, we continue to keep a close watch on our loan portfolios and on our expenses. Moreover, the regulatory burden continues to grow and recent enactments will have a long range impact on the profitability of certain lines of business throughout the banking industry. As always, we will adjust accordingly,” Mr. Murphy concluded.

As of June 30, 2011, the 1st Source common equity-to-assets ratio is 11.61% compared to 10.68% a year ago and its tangible equity to assets ratio is 9.78% compared to 8.88% a year earlier. Total assets at June 30, 2011 are $4.35 billion, down 3.89% from a year earlier. Total loans and leases are $3.12 billion, down slightly from June 30, 2010. Total deposits are $3.52 billion, down 2.39% from the comparable figures at June 30, 2010.

The 1st Source reserve for loan and lease losses as of June 30, 2011 is 2.73% of total loans and leases compared to 2.81% at June 30, 2010. Net charge-offs are $1.22 million in the second quarter 2011, compared with net charge-offs of $5.61 million in the same quarter a year ago. Year-to-date, net charge-offs of $4.13 million have been recorded in 2011, compared to net charge-offs of $10.41 million for the first half of 2010. The ratio of nonperforming assets to net loans and leases is 2.39% as of June 30, 2011, down from 2.71% on June 30, 2010.

The net interest margin is 3.72% for the second quarter of 2011 versus 3.57% for the same period in 2010. The net interest margin is 3.72% for the six months ending June 30, 2011, versus 3.53% for the same period in 2010. Tax-equivalent net interest income is $38.23 million for the second quarter of 2011, compared to $37.11 million for 2010’s second quarter. For the first six months of 2011, tax-equivalent net interest income is $75.80 million, compared to $72.89 million for the first six months of 2010.

Noninterest income for the second quarter of 2011 is $21.42 million, up 3.99% from the same period in 2010. For the first six months, noninterest income is $40.38 million, down 2.76% from 2010. Noninterest income increased in the second quarter primarily as a result of gains on sale of investment securities offset by lower service charges on deposit accounts and lower equipment rental income. Noninterest income decreased for the first six months of 2011 due to declines in service charges on deposit accounts and lower equipment rental income.

Noninterest expense is $35.94 million for the second quarter of 2011, down 9.35% from the second quarter of 2010. For the first six months, noninterest expense is $74.42 million, down 3.05% compared with $76.76 million for the same period in 2010. The leading factors in the decrease are reduced loan and lease collection and repossession expense, depreciation expense on leased equipment, and FDIC and other insurance expense.

1st Source serves the northern half of Indiana and southwest Michigan and is the largest locally controlled financial institution headquartered in the area. While delivering a comprehensive range of consumer and commercial banking services through its community bank offices, 1st Source has distinguished itself with highly personalized services. 1st Source Bank also competes for business nationally by offering specialized financing services for new and used private and cargo aircraft, automobiles for leasing and rental agencies, medium and heavy duty trucks, construction and environmental equipment.

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The Corporation includes 75 community banking centers in 17 counties, 22 specialty finance locations nationwide, 8 trust and wealth management locations, and 7 1st Source Insurance offices. With a history dating back to 1863, 1st Source Bank has a tradition of providing superior service to clients while playing a leadership role in the continued development of the communities it serves.

In addition to the results presented in accordance with generally accepted accounting principles in the United States of America, this press release contains certain non-GAAP financial measures. 1st Source Corporation believes that providing non-GAAP financial measures provides investors with information useful to understanding our financial performance. Additionally, these non-GAAP measures are used by management for planning and forecasting purposes, including measures based on “tangible equity” which is “common shareholders’ equity” excluding intangible assets.

1st Source may be accessed on its home page at “www.1stsource.com.” Its common stock is traded on the Nasdaq Global Select Market under "SRCE" and appears in the National Market System tables in many daily newspapers under the code name "1st Src". Except for historical information contained herein, the matters discussed in this document express “forward-looking statements.” Generally, the words “believe,” “contemplate,” “seek,” “plan,” “possible,” “assume,” “expect,” “intend,” “targeted,” “continue,” “remain,” “estimate,” “anticipate,” “project,” “will,” “should,” “indicate,” “would,” “may” and similar expressions indicate forward-looking statements. Those statements, including statements, projections, estimates or assumptions concerning future events or performance, and other statements that are other than statements of historical fact, are subject to material risks and uncertainties. 1st Source cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made.

1st Source may make other written or oral forward-looking statements from time to time. Readers are advised that various important factors could cause 1st Source’s actual results or circumstances for future periods to differ materially from those anticipated or projected in such forward-looking statements. Such factors, among others, include changes in laws, regulations or accounting principles generally accepted in the United States; 1st Source’s competitive position within its markets served; increasing consolidation within the banking industry; unforeseen changes in interest rates; unforeseen downturns in the local, regional or national economies or in the industries in which 1st Source has credit concentrations; and other risks discussed in 1st Source’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K, which filings are available from the SEC. 1st Source undertakes no obligation to publicly update or revise any forward-looking statements.

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1st SOURCE CORPORATION
2nd QUARTER 2011 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except for per share data)
	Three Months Ended June 30,						Six Months Ended June 30,
	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
END OF PERIOD BALANCES
Assets							$	4,354,951		$	4,531,313
Loans and leases								3,118,157			3,131,749
Deposits								3,523,316			3,609,586
Reserve for loan and lease losses								85,010			88,014
Intangible assets								88,325			89,618
Common shareholders' equity								505,594			483,919
Total shareholders' equity								505,594			589,502

AVERAGE BALANCES
Assets	$	4,427,034		$	4,517,624		$	4,423,618		$	4,501,598
Earning assets		4,116,791			4,174,376			4,112,789			4,160,120
Investments		911,678			917,151			933,999			904,946
Loans and leases		3,100,598			3,120,871			3,077,434			3,110,565
Deposits		3,597,533			3,592,827			3,598,767			3,583,529
Interest bearing liabilities		3,338,983			3,399,245			3,343,777			3,397,971
Common shareholders' equity		498,863			481,462			495,785			477,534
Total shareholders' equity		498,863			586,835			495,785			582,746

INCOME STATEMENT DATA
Net interest income	$	37,584		$	36,249		$	74,444		$	71,151
Net interest income - FTE		38,232			37,113			75,798			72,890
Provision for loan and lease losses		67			5,798			2,265			10,186
Noninterest income		21,424			20,602			40,377			41,524
Noninterest expense		35,943			39,649			74,419			76,759
Net income		14,865			7,795			25,473			17,474
Net income available to common shareholders		14,865			6,078			25,473			14,046

PER SHARE DATA
Basic net income per common share	$	0.61		$	0.25		$	1.04		$	0.57
Diluted net income per common share		0.61			0.25			1.04			0.57
Common cash dividends declared		0.16			0.15			0.32			0.30
Book value per common share		20.88			19.93			20.88			19.93
Tangible book value per common share		17.23			16.24			17.23			16.24
Market value - High		21.33			20.36			21.33			20.36
Market value - Low		19.10			16.58			17.86			14.25
Basic weighted average common shares outstanding		24,254,334			24,284,519			24,262,803			24,247,586
Diluted weighted average common shares outstanding		24,263,596			24,292,491			24,271,527			24,254,098

KEY RATIOS
Return on average assets		1.35	%		0.69	%		1.16	%		0.78	%
Return on average common shareholders' equity		11.95			5.06			10.36			5.93
Average common shareholders' equity to average assets		11.27			10.66			11.21			10.61
End of period tangible common equity to tangible assets		9.78			8.88			9.78			8.88
Risk-based capital - Tier 1		14.52			16.58			14.52			16.58
Risk-based capital - Total		15.82			17.87			15.82			17.87
Net interest margin		3.72			3.57			3.72			3.53
Efficiency: expense to revenue		59.10			66.70			62.70			65.27
Net charge-offs to average loans and leases		0.16			0.72			0.27			0.67
Loan and lease loss reserve to loans and leases		2.73			2.81			2.73			2.81
Nonperforming assets to loans and leases		2.39			2.71			2.39			2.71

ASSET QUALITY
Loans and leases past due 90 days or more							$	337		$	1,230
Nonaccrual loans and leases								64,920			68,433
Other real estate								7,878			6,673
Former bank premises held for sale								1,580			2,363
Repossessions								1,302			8,670
Equipment owned under operating leases								474			337
Total nonperforming assets								76,491			87,706

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
	June 30, 2011			June 30, 2010
ASSETS
Cash and due from banks	$	59,249		$	65,337
Federal funds sold and
interest bearing deposits with other banks		100			41,099
Investment securities available-for-sale
(amortized cost of $878,401 and $909,516 at
June 30, 2011 and 2010, respectively)		902,742			932,583
Other investments		18,974			22,892
Trading account securities		143			113
Mortgages held for sale		7,805			59,084

Loans and leases, net of unearned discount:
Commercial and agricultural loans		551,820			539,003
Auto, light truck and environmental equipment		473,925			416,152
Medium and heavy duty truck		155,423			185,954
Aircraft financing		607,567			596,138
Construction equipment financing		274,968			308,602
Commercial real estate		568,226			581,392
Residential real estate		390,389			401,662
Consumer loans		95,839			102,846
Total loans and leases		3,118,157			3,131,749
Reserve for loan and lease losses		(85,010	)		(88,014	)
Net loans and leases		3,033,147			3,043,735

Equipment owned under operating leases, net		77,102			91,288
Net premises and equipment		36,885			36,573
Goodwill and intangible assets		88,325			89,618
Accrued income and other assets		130,479			148,991

Total assets	$	4,354,951		$	4,531,313

LIABILITIES
Deposits:
Noninterest bearing	$	516,189		$	487,719
Interest bearing		3,007,127			3,121,867
Total deposits		3,523,316			3,609,586

Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase		108,799			113,638
Other short-term borrowings		21,324			28,136
Total short-term borrowings		130,123			141,774
Long-term debt and mandatorily redeemable securities		36,785			29,854
Subordinated notes		89,692			89,692
Accrued expenses and other liabilities		69,441			70,905
Total liabilities		3,849,357			3,941,811

SHAREHOLDERS' EQUITY
Preferred stock; no par value		-			105,583
Common stock; no par value		346,535			350,275
Retained earnings		175,374			149,799
Cost of common stock in treasury		(31,437	)		(30,486	)
Accumulated other comprehensive income		15,122			14,331
Total shareholders' equity		505,594			589,502

Total liabilities and shareholders' equity	$	4,354,951		$	4,531,313

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Interest income:
Loans and leases	$	41,710	$	43,099		$	83,009	$	85,369
Investment securities, taxable		4,912		5,279			9,394		10,680
Investment securities, tax-exempt		1,004		1,422			2,190		2,889
Other		247		250			490		524
Total interest income		47,873		50,050			95,083		99,462

Interest expense:
Deposits		8,162		11,573			16,517		23,978
Short-term borrowings		74		206			163		394
Subordinated notes		1,648		1,647			3,295		3,294
Long-term debt and mandatorily redeemable securities		405		375			664		645
Total interest expense		10,289		13,801			20,639		28,311

Net interest income		37,584		36,249			74,444		71,151
Provision for loan and lease losses		67		5,798			2,265		10,186
Net interest income after provision for loan and lease losses		37,517		30,451			72,179		60,965

Noninterest income:
Trust fees		4,411		4,062			8,403		7,807
Service charges on deposit accounts		4,638		5,275			8,874		9,895
Mortgage banking income		835		425			1,279		1,202
Insurance commissions		1,062		1,061			2,204		2,526
Equipment rental income		6,009		6,672			12,047		13,417
Other income		3,327		3,012			6,298		5,701
Investment securities and other investment gains		1,142		95			1,272		976
Total noninterest income		21,424		20,602			40,377		41,524

Noninterest expense:
Salaries and employee benefits		19,135		18,848			37,773		37,658
Net occupancy expense		2,051		1,939			4,371		4,426
Furniture and equipment expense		3,561		3,196			6,910		5,996
Depreciation - leased equipment		4,795		5,304			9,600		10,668
Professional fees		1,080		1,418			2,176		2,932
Supplies and communication		1,316		1,338			2,710		2,707
FDIC and other insurance		958		1,667			2,634		3,341
Business development and marketing expense		864		880			1,486		1,447
Loan and lease collection and respossession expense		1,500		3,267			2,824		4,373
Other expense		683		1,792			3,935		3,211
Total noninterest expense		35,943		39,649			74,419		76,759

Income before income taxes		22,998		11,404			38,137		25,730
Income tax expense		8,133		3,609			12,664		8,256

Net income		14,865		7,795			25,473		17,474
Preferred stock dividends and discount accretion		-		(1,717	)		-		(3,428	)
Net income available to common shareholders	$	14,865	$	6,078		$	25,473	$	14,046

The Nasdaq Global Select Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com

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