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

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8-K - FORM 8K - 4TH QTR PRESS RELEASE - 1ST SOURCE CORP	form8_k.htm

			Exhibit 99.1

FOR:	Immediate Release	Contact:	Larry Lentych
	January 19, 2012		574 235 2000

			Andrea Short
			574 235 2000

1st Source Corporation Announces Record Earnings for Year,

History of Increased Dividends Continues

South Bend, IN - 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced net income of $48.20 million for the year of 2011, an increase of 16.85% over the $41.24 million reported in 2010. The annual net income sets a record as the highest in company history. Fourth quarter net income was $11.18 million, down 11.02% compared to $12.57 million in the fourth quarter of 2010, partially due to lower interest recoveries on nonperforming loans and lower mortgage banking income in the quarter.

Diluted net income per common share for the year was $1.96, an all-time record and an increase of 61.98% over the $1.21 per common share a year earlier. Diluted net income per common share for the fourth quarter was $0.45, up 80.00% compared to $0.25 per common share reported in the fourth quarter of the previous year. The December 2010 TARP repurchase led to significant improvement in diluted earnings per share, as diluted net income per common share for the fourth quarter and year of 2010 was negatively impacted by the preferred stock dividends and the accretion of discount on the preferred stock issued to the US Treasury under the TARP program in January 2009. Adjusting for these, the diluted net income would have been $1.70 per common share for the year of 2010 and $0.52 per common share for the fourth quarter of 2010.

At the January 2012 meeting, the Board of Directors approved a cash dividend of $0.16 per common share. The cash dividend is payable on February 15, 2012 to shareholders of record on February 6, 2012. Dividends for 2011 increased 4.92% over the previous year and achieved 24 years of consecutive dividend growth.

Christopher J. Murphy, III, Chairman of 1st Source, commented, "2011 was a good year for 1st Source Corporation. We set a record for annual net income and for earnings per share; and we continue a record of 24 years of consecutive dividend growth. 1st Source is strong and stable, and because of that, through good times and bad, we have been able to live up to our commitment of keeping our client’s best interests in mind while working to meet their unique individual needs."

“Our focus has been on three things – outstanding customer service, pristine credit quality, and superior financial returns. We concentrated on providing guidance to our clients, along with friendly, helpful service which assisted in expanding our relationships with them.

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We attracted new primary customers within our retail market area, and are pleased to have achieved our new client growth goals for the year. With all the financial uproar over the past year, from Occupy Wall Street to Bank Transfer Day, we remain a community bank committed to delivering highly personal service and distinctive convenience to our clients.”

“Credit continues to improve. Our 30 day delinquency rate ended 2011 at 0.30% of total loans and leases; our net charge-offs for 2011 were 0.27% to average net loans and leases; while our net charge-offs in dollars were $8.36 million compared to $20.57 million a year earlier.”

“At 1st Source, we’ve tightly managed our expenses, while spending money to grow when we needed to, whether by adding new staff members, or upgrading our facilities. I thank my colleagues and our loyal clients for a good year." Mr. Murphy concluded.

The net interest margin was 3.66% for the fourth quarter of 2011 versus 3.67% for the same period in 2010. The net interest margin was 3.69% for the year ending December 31, 2011, versus 3.59% for the same period in 2010. Tax-equivalent net interest income was $37.89 million for the fourth quarter of 2011, compared to $39.96 million for 2010’s fourth quarter. 2010’s fourth quarter included $0.95 million more in net interest recoveries than were experienced in 2011. For the twelve months of 2011, tax-equivalent net interest income was $150.91 million, compared to $150.87 million for the twelve months of 2010.

As of December 31, 2011, the 1st Source common equity-to-assets ratio was 11.98%, compared to 10.94% at December 31, 2010 and its tangible common equity-to-tangible assets ratio was 10.18% at December 31, 2011 compared to 9.12% at December 31, 2010. Common shareholders’ equity was $523.92 million, up from $486.38 million a year ago. Total assets at the end of 2011 were $4.37 billion, down slightly from the same period last year. Total loans and leases at December 31, 2011 were $3.09 billion, up slightly, and total deposits at December 31, 2011 were $3.52 billion, down 2.83% from the comparable figures at the end of 2010.

1st Source’s reserve for loan and lease losses as of December 31, 2011 was 2.64% of total loans and leases, compared to 2.83% as of December 31, 2010. Net charge-offs were $2.17 million for the fourth quarter 2011, compared to $6.08 million in the fourth quarter 2010. Net charge-offs for the full year were $8.36 million in 2011 compared to $20.57 million in 2010. The ratio of nonperforming assets to net loans and leases was 2.28% on December 31, 2011, compared to 2.81% on December 31, 2010.

Noninterest income for the fourth quarter of 2011 was $20.27 million, down 9.60% compared to $22.42 million for the fourth quarter of 2010. For the year, noninterest income was $80.87 million, down 6.71% from the $86.69 million in 2010. The predominate factors in the fourth quarter and year-to-date change were lower mortgage banking income, equipment rental income, and investment securities and other investment gains.

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Noninterest expense for the fourth quarter of 2011 was $40.79 million, up 2.13% compared to $39.94 million for the fourth quarter of 2010. The leading factors for the fourth quarter increase were higher loan and lease collection and repossession expense and salaries and employee benefits expense offset by lower expenses associated with the disposal of fixed assets. For the year ending December 31, 2011, noninterest expense was $152.35 million, down 1.39% from $154.51 million one year ago. The annual decrease was a result of lower depreciation on leased equipment, FDIC and other insurance expense, and lower expenses associated with the disposal of fixed assets offset by higher furniture and equipment expense and salaries and employee benefit expenses.

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. The Corporation includes 75 community banking centers in 17 counties, 23 specialty finance locations nationwide, 8 trust and wealth management locations, and 8 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.

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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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(charts attached)

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1st SOURCE CORPORATION
4th QUARTER 2011 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
	Three Months Ended						Twelve Months Ended
	December 31						December 31
	2011			2010			2011			2010
END OF PERIOD BALANCES
Assets							$	4,374,071		$	4,445,281
Loans and leases								3,090,543			3,070,623
Deposits								3,520,141			3,622,745
Reserve for loan and lease losses								81,644			86,874
Intangible assets								87,675			88,955
Common shareholders' equity								523,918			486,383
Total shareholders' equity								523,918			486,383

AVERAGE BALANCES
Assets	$	4,421,259		$	4,651,845		$	4,402,554		$	4,543,702
Earning assets		4,102,618			4,325,823			4,090,297			4,207,485
Investments		858,941			951,074			899,895			914,253
Loans and leases		3,063,248			3,087,494			3,078,581			3,109,508
Deposits		3,548,246			3,684,587			3,555,454			3,605,195
Interest bearing liabilities		3,247,367			3,454,799			3,286,246			3,402,199
Common shareholders' equity		522,267			495,808			506,939			485,793
Total shareholders' equity		522,267			598,383			506,939			590,464

INCOME STATEMENT DATA
Net interest income	$	37,330		$	39,162		$	148,400		$	147,497
Net interest income - FTE		37,893			39,963			150,907			150,872
(Recovery of) provision for loan and lease losses		(396	)		3,443			3,129			19,207
Noninterest income		20,265			22,416			80,872			86,691
Noninterest expense		40,787			39,936			152,354			154,505
Net income		11,182			12,567			48,195			41,244
Net income available to common shareholders		11,182			6,127			48,195			29,655

PER SHARE DATA
Basic net income per common share	$	0.45		$	0.25		$	1.96		$	1.21
Diluted net income per common share		0.45			0.25			1.96			1.21
Common cash dividends declared		0.16			0.16			0.64			0.61
Book value per common share		21.64			20.12			21.64			20.12
Tangible book value per common share		18.02			16.44			18.02			16.44
Market value - High		26.06			20.75			26.06			20.75
Market value - Low		19.91			17.01			17.86			14.25
Basic weighted average common shares outstanding		24,213,834			24,186,469			24,237,924			24,232,092
Diluted weighted average common shares outstanding		24,224,751			24,195,208			24,247,456			24,239,194

KEY RATIOS
Return on average assets		1.00	%		1.07	%		1.09	%		0.91	%
Return on average common shareholders' equity		8.49			4.90			9.51			6.10
Average common shareholders' equity to average assets		11.81			10.66			11.51			10.69
End of period tangible common equity to tangible assets		10.18			9.12			10.18			9.12
Risk-based capital - Tier 1		15.21			14.05			15.21			14.05
Risk-based capital - Total		16.51			15.34			16.51			15.34
Net interest margin		3.66			3.67			3.69			3.59
Efficiency: expense to revenue		68.60			62.10			64.35			63.26
Net charge-offs to average loans and leases		0.28			0.78			0.27			0.66
Loan and lease loss reserve to loans and leases		2.64			2.83			2.64			2.83
Nonperforming assets to loans and leases		2.28			2.81			2.28			2.81

ASSET QUALITY
Loans and leases past due 90 days or more							$	460		$	361
Nonaccrual loans and leases								56,440			74,853
Other real estate								7,621			6,392
Former bank premises held for sale								1,134			1,200
Repossessions								6,792			5,670
Equipment owned under operating leases								29			236
Total nonperforming assets								72,476			88,712

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
	December 31, 2011			December 31, 2010
ASSETS
Cash and due from banks	$	61,406		$	62,313
Federal funds sold and interest bearing deposits with other banks		52,921			34,559
Investment securities available-for-sale
(amortized cost of $853,204 and $952,101 at December 31, 2011 and 2010, respectively)		883,000			969,018
Other investments		18,974			21,343
Trading account securities		132			138
Mortgages held for sale		12,644			32,599

Loans and leases, net of unearned discount:
Commercial and agricultural loans		545,570			530,228
Auto, light truck and environmental equipment		435,965			396,500
Medium and heavy duty truck		159,796			162,824
Aircraft financing		620,782			614,357
Construction equipment financing		261,204			285,634
Commercial real estate		545,457			594,729
Residential real estate		423,606			390,951
Consumer loans		98,163			95,400
Total loans and leases		3,090,543			3,070,623
Reserve for loan and lease losses		(81,644	)		(86,874	)
Net loans and leases		3,008,899			2,983,749

Equipment owned under operating leases, net		69,551			78,138
Net premises and equipment		39,857			33,881
Goodwill and intangible assets		87,675			88,955
Accrued income and other assets		139,012			140,588

Total assets	$	4,374,071		$	4,445,281

LIABILITIES
Deposits:
Noninterest bearing	$	580,101		$	524,564
Interest bearing		2,940,040			3,098,181
Total deposits		3,520,141			3,622,745

Short-term borrowings:
Federal funds purchased and securities sold
under agreements to purchase		106,991			136,028
Other short-term borrowings		18,243			19,961
Total short-term borrowings		125,234			155,989
Long-term debt and mandatorily redeemable securities		37,156			24,816
Subordinated notes		89,692			89,692
Accrued expenses and other liabilities		77,930			65,656
Total liabilities		3,850,153			3,958,898

SHAREHOLDERS' EQUITY
Preferred stock; no par value		-			-
Common stock; no par value		346,535			350,282
Retained earnings		190,261			157,875
Cost of common stock in treasury		(31,389	)		(32,284	)
Accumulated other comprehensive income		18,511			10,510
Total shareholders' equity		523,918			486,383

Total liabilities and shareholders' equity	$	4,374,071		$	4,445,281

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2011			2010			2011		2010
Interest income:
Loans and leases	$	40,236		$	44,435		$	163,986	$	173,526
Investment securities, taxable		4,445			4,855			18,533		20,466
Investment securities, tax-exempt		889			1,315			4,013		5,573
Other		284			318			991		1,061
Total interest income		45,854			50,923			187,523		200,626

Interest expense:
Deposits		6,489			9,837			30,762		44,605
Short-term borrowings		60			187			300		800
Subordinated notes		1,647			1,647			6,589		6,589
Long-term debt and mandatorily redeemable securities		328			90			1,472		1,135
Total interest expense		8,524			11,761			39,123		53,129

Net interest income		37,330			39,162			148,400		147,497
(Recovery of) provision for loan and lease losses		(396	)		3,443			3,129		19,207
Net interest income after (recovery of)
provision for loan and lease losses		37,726			35,719			145,271		128,290

Noninterest income:
Trust fees		4,022			4,161			16,327		15,838
Service charges on deposit accounts		4,866			4,510			18,488		19,323
Mortgage banking income		1,504			2,467			3,839		6,218
Insurance commissions		1,377			1,368			4,793		5,074
Equipment rental income		5,500			6,124			23,361		26,036
Other income		3,283			3,552			12,665		11,909
Investment securities and other investment (losses) gains		(287	)		234			1,399		2,293
Total noninterest income		20,265			22,416			80,872		86,691

Noninterest expense:
Salaries and employee benefits		20,012			19,177			77,261		75,815
Net occupancy expense		2,106			2,162			8,714		8,788
Furniture and equipment expense		3,701			3,320			14,130		12,543
Depreciation - leased equipment		4,400			4,874			18,650		20,715
Professional fees		2,006			1,858			5,508		6,353
Supplies and communication		1,431			1,405			5,453		5,499
FDIC and other insurance		913			1,495			4,421		6,256
Business development and marketing expense		1,578			1,482			4,032		3,774
Loan and lease collection and repossession expense		2,513			405			6,724		6,227
Other expense		2,127			3,758			7,461		8,535
Total noninterest expense		40,787			39,936			152,354		154,505

Income before income taxes		17,204			18,199			73,789		60,476
Income tax expense		6,022			5,632			25,594		19,232

Net income		11,182			12,567			48,195		41,244
Preferred stock dividends and discount accretion		-			(6,440	)		-		(11,589	)
Net income available to common shareholders	$	11,182		$	6,127		$	48,195	$	29,655


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

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