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

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8-K - 1ST SOURCE CORP PRESS RELEASE - 1ST SOURCE CORP	form8_k.htm

Exhibit 99.1

For:	Immediate Release	Contact:	Larry Lentych
	October 25, 2012		Andrea Short
			574-235-2000

1ST SOURCE INCREASES THIRD QUARTER INCOME

DIVIDEND ANNOUNCED

South Bend, IN – 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced third quarter net income of $13.01 million, an increase of 12.69% over the $11.54 million in the third quarter of 2011. For the first three quarters of the year, net income was $37.29 million versus $37.01 million a year earlier, a 0.74% increase. Diluted net income per common share for the third quarter of 2012 was $0.53 versus $0.47, up 12.77% over the same period in 2011. Diluted net income per common share for the first three quarters was $1.51 in 2012 and 2011.

At the October meeting, the Board of Directors approved a cash dividend of $0.17 per common share, an increase of 6.25% over the third quarter a year ago. The dividend is payable on November 15, 2012 to shareholders of record on November 5, 2012.

Christopher J. Murphy III, Chairman of 1st Source, commented, “It was another good quarter for 1st Source Corporation. From a year ago, our quarterly net income was up 12.7%, we had nice growth in loans and deposits, our nonperforming assets continued to decline, and our net charge-offs were down allowing for a lower provision for loan and lease losses. We are, however, seeing more margin pressure due to the Federal Reserve’s efforts to lower interest rates. The spread between the income on loans and the cost of deposits continues to narrow as deposit rates reach their floors. Also, the government has put enormous pressure on fees and costs.”

“This was also a quarter to grow our market. We broke ground on two new banking centers in Indiana – Nappanee and Columbia City. We enhanced our online banking product making it easier to navigate, adding great features such as purchase rewards and the ability to include outside accounts giving a clearer financial picture for our client. We are upgrading our ATM network with more features and branding elements; and we continue to hone our processes, making them quicker, smoother and more in touch with the client’s point of view. Our client focus is strong - providing distinctive convenience, straight talk and sound advice, always keeping our clients’ best interests in mind,” Mr. Murphy concluded.

As of September 30, 2012, the 1st Source common equity-to-assets ratio was 12.34% compared to 12.00% a year ago and the tangible common equity to tangible assets ratio was 10.59% compared to 10.17% a year earlier. Common shareholders' equity was $553.67 million, up 7.12% from the $516.88 million reported a year ago. Total assets at the end of the third quarter of 2012 were $4.49 billion, up 4.23% from a year ago. Total loans and leases were $3.27 billion, up 6.00% from September 30, 2011. Total deposits were $3.57 billion, up 3.51% from the comparable figures at September 30, 2011.

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The reserve for loan and lease losses as of September 30, 2012 was 2.55% of total loans and leases compared to 2.73% at September 30, 2011. Net charge-offs were $0.45 million in the third quarter 2012, compared with net charge-offs of $2.06 million in the same quarter a year ago. Year-to-date, net charge-offs of $3.10 million have been recorded in 2012, compared to net charge-offs of $6.19 million through September 30, 2011. The ratio of nonperforming assets to net loans and leases was 1.51% as of September 30, 2012, down from 2.43% on September 30, 2011.

Noninterest income for the third quarter was $20.31 million, compared to $20.23 million for the same period in 2011. For the nine months, noninterest income was $60.62 million, versus $60.61 million from 2011. Increased mortgage banking income for the third quarter and year-to-date was offset by decreased equipment rental income resulting in relatively flat noninterest income during 2012 as compared to 2011.

Noninterest expense for the third quarter was $37.19 million compared to $37.15 million reported in the third quarter a year earlier. Noninterest expense for the first nine months of 2012 was $111.82 million versus $111.57 million for the same period of 2011. Increased salary and employee benefit expenses were offset by decreased depreciation on leased equipment causing noninterest expense to remain relatively flat during 2012 as compared to 2011.

1st Source serves the northern half of Indiana and southwest Michigan with its community banking, insurance and wealth management services, and nationally and internationally with specialty financing and leasing services. 1st Source distinguishes itself with highly personalized service and a comprehensive range of consumer and commercial banking services delivered through its community bank offices. 1st Source Bank provides services for businesses nationally by offering specialized financing of automobiles for leasing and rental agencies, medium and heavy duty trucks, construction and environmental equipment, and nationally and internationally, for new and used private and cargo aircraft. The Corporation includes 75 community banking centers, 9 trust and wealth management locations, and 8 1st Source Insurance offices located within 17 counties of northern Indiana and southwestern Michigan and 22 specialty finance locations nationwide. 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 assuring a strong social safety net and continued economic development in 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.

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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
3rd QUARTER 2012 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
END OF PERIOD BALANCES
Assets							$	4,488,219		$	4,305,941
Loans and leases								3,268,413			3,083,294
Deposits								3,568,668			3,447,585
Reserve for loan and lease losses								83,499			84,210
Intangible assets								87,796			88,000
Common shareholders' equity								553,668			516,879

AVERAGE BALANCES
Assets	$	4,499,425		$	4,342,406		$	4,447,453		$	4,396,250
Earning assets		4,206,982			4,033,723			4,145,500			4,086,144
Investments		854,994			873,753			876,183			913,696
Loans and leases		3,268,304			3,096,168			3,189,526			3,083,747
Deposits		3,583,174			3,477,448			3,553,531			3,557,883
Interest bearing liabilities		3,243,445			3,211,939			3,230,802			3,299,348
Common shareholders' equity		549,963			513,556			541,040			501,774

INCOME STATEMENT DATA
Net interest income	$	37,907		$	36,626		$	113,267		$	111,070
Net interest income - FTE		38,420			37,216			114,840			113,014
Provision for loan and lease losses		650			1,260			4,959			3,525
Noninterest income		20,305			20,230			60,618			60,607
Noninterest expense		37,193			37,148			111,819			111,567
Net income		13,005			11,540			37,287			37,013

PER SHARE DATA
Basic net income per common share	$	0.53		$	0.47		$	1.52		$	1.51
Diluted net income per common share		0.53			0.47			1.51			1.51
Common cash dividends declared		0.17			0.16			0.49			0.48
Book value per common share		22.80			21.35			22.80			21.35
Tangible book value per common share		19.19			17.71			19.19			17.71
Market value - High		23.97			24.00			26.79			24.00
Market value - Low		21.40			19.36			20.51			17.86
Basic weighted average common shares outstanding		24,279,178			24,213,063			24,267,535			24,246,041
Diluted weighted average common shares outstanding		24,289,495			24,223,432			24,278,160			24,255,357

KEY RATIOS
Return on average assets		1.15	%		1.05	%		1.12	%		1.13	%
Return on average common shareholders' equity		9.41			8.92			9.21			9.86
Average common shareholders' equity to average assets		12.22			11.83			12.17			11.41
End of period tangible common equity to tangible assets		10.59			10.17			10.59			10.17
Risk-based capital - Tier 1		15.10			14.96			15.10			14.96
Risk-based capital - Total		16.42			16.26			16.42			16.26
Net interest margin		3.63			3.66			3.70			3.70
Efficiency: expense to revenue		61.98			63.25			62.43			62.89
Net charge offs to average loans		0.05			0.26			0.13			0.27
Loan and lease loss reserve to loans and leases		2.55			2.73			2.55			2.73
Nonperforming assets to loans and leases		1.51			2.43			1.51			2.43

ASSET QUALITY
Loans and leases past due 90 days or more							$	477		$	624
Nonaccrual loans and leases								42,756			61,549
Other real estate								4,842			8,032
Former bank premises held for sale								1,101			1,514
Repossessions								1,248			4,918
Equipment owned under operating leases								32			389
Total nonperforming assets								50,456			77,026

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
	September 30, 2012			September 30, 2011
ASSETS
Cash and due from banks	$	54,635		$	57,986
Federal funds sold and
interest bearing deposits with other banks		17,179			25,064
Investment securities available-for-sale
(amortized cost of $832,951 and $820,336 at
September 30, 2012 and 2011, respectively)		868,312			850,507
Other investments		22,364			18,974
Trading account securities		145			119
Mortgages held for sale		22,853			13,219

Loans and leases, net of unearned discount:
Commercial and agricultural loans		584,996			557,392
Auto, light truck and environmental equipment		456,665			442,127
Medium and heavy duty truck		167,709			152,703
Aircraft financing		685,800			613,706
Construction equipment financing		276,270			260,241
Commercial real estate		548,921			556,287
Residential real estate		436,909			404,063
Consumer loans		111,143			96,775
Total loans and leases		3,268,413			3,083,294
Reserve for loan and lease losses		(83,499	)		(84,210	)
Net loans and leases		3,184,914			2,999,084

Equipment owned under operating leases, net		58,496			75,096
Net premises and equipment		43,172			40,958
Goodwill and intangible assets		87,796			88,000
Accrued income and other assets		128,353			136,934

Total assets	$	4,488,219		$	4,305,941

LIABILITIES
Deposits:
Noninterest bearing	$	634,795		$	560,932
Interest bearing		2,933,873			2,886,653
Total deposits		3,568,668			3,447,585

Short-term borrowings:
Federal funds purchased and securities
sold under agreements to repurchase		119,749			124,779
Other short-term borrowings		16,886			16,159
Total short-term borrowings		136,635			140,938
Long-term debt and mandatorily redeemable securities		66,964			37,064
Subordinated notes		89,692			89,692
Accrued expenses and other liabilities		72,592			73,783
Total liabilities		3,934,551			3,789,062

SHAREHOLDERS' EQUITY
Preferred stock; no par value		-			-
Common stock; no par value		346,535			346,535
Retained earnings		215,647			183,007
Cost of common stock in treasury		(30,360	)		(31,408	)
Accumulated other comprehensive income		21,846			18,745
Total shareholders' equity		553,668			516,879

Total liabilities and shareholders' equity	$	4,488,219		$	4,305,941

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
	Three Months Ended				Nine Months Ended
	September 30				September 30
	2012		2011		2012		2011
Interest income:
Loans and leases	$	40,610	$	40,741	$	120,824	$	123,750
Investment securities, taxable		3,913		4,694		12,574		14,088
Investment securities, tax-exempt		826		934		2,526		3,124
Other		231		217		688		707
Total interest income		45,580		46,586		136,612		141,669

Interest expense:
Deposits		5,419		7,756		16,868		24,273
Short-term borrowings		36		77		136		240
Subordinated notes		1,647		1,647		4,942		4,942
Long-term debt and mandatorily redeemable securities		571		480		1,399		1,144
Total interest expense		7,673		9,960		23,345		30,599

Net interest income		37,907		36,626		113,267		111,070
Provision for loan and lease losses		650		1,260		4,959		3,525
Net interest income after provision for
loan and lease losses		37,257		35,366		108,308		107,545

Noninterest income:
Trust fees		4,055		3,902		12,407		12,305
Service charges on deposit accounts		4,708		4,748		14,028		13,622
Mortgage banking income		2,020		1,056		5,464		2,335
Insurance commissions		1,483		1,212		4,051		3,416
Equipment rental income		4,604		5,814		14,620		17,861
Other income		3,346		3,084		9,556		9,382
Investment securities and other investment gains		89		414		492		1,686
Total noninterest income		20,305		20,230		60,618		60,607

Noninterest expense:
Salaries and employee benefits		20,982		19,476		61,668		57,249
Net occupancy expense		1,652		2,237		5,660		6,608
Furniture and equipment expense		3,817		3,519		11,155		10,429
Depreciation - leased equipment		3,795		4,650		11,909		14,250
Professional fees		1,385		1,326		4,232		3,502
Supplies and communication		1,387		1,312		4,165		4,022
FDIC and other insurance		913		874		2,716		3,508
Business development and marketing expense		1,008		968		2,925		2,454
Loan and lease collection and repossession expense		1,866		1,387		4,346		4,211
Other expense		388		1,399		3,043		5,334
Total noninterest expense		37,193		37,148		111,819		111,567

Income before income taxes		20,369		18,448		57,107		56,585
Income tax expense		7,364		6,908		19,820		19,572

Net income	$	13,005	$	11,540	$	37,287	$	37,013


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

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