1st Source Corporation Reports Record Annual Earnings, History of Increased Dividends Continues

  1st Source Corporation Reports Record Annual Earnings, History of Increased
  Dividends Continues

Business Wire

SOUTH BEND, Ind. -- January 22, 2013

1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today
announced record net income of $49.63 million for the year of 2012, an
increase of 2.98% over the $48.20 million in 2011. The annual net income sets
a record as the highest in company history. Fourth quarter net income was
$12.35 million, up 10.41% compared to $11.18 million in the fourth quarter of
2011, due to higher mortgage banking income along with reduced loan and lease
collection and repossession expenses.

Diluted net income per common share for the year was $2.02, an all-time record
and an increase of 3.06% over the $1.96 per common share a year earlier.
Diluted net income per common share for the fourth quarter was $0.50, up
11.11% compared to $0.45 per common share reported in the fourth quarter of
the previous year.

At the January 2013 meeting, the Board of Directors approved a cash dividend
of $0.17 per common share. The cash dividend is payable on February 15, 2013
to shareholders of record on February 4, 2013. Dividends for 2012 increased
3.13% over the previous year and achieved 25 years of consecutive dividend
growth.

Christopher J. Murphy, III, Chairman of 1st Source, commented, "In spite of
the rocky economy, 2012 was a good year for 1st Source Corporation. We set a
record for annual net income. We continue our record of 25 years of
consecutive dividend growth which puts us in a very select group nationally.”

“We also had a busy fourth quarter. New banking centers were opened in
Nappanee and Columbia City, Indiana; mobile banking and purchase rewards for
our checking account clients were rolled out; and 1st Source Mortgage Express
was introduced – a quick and easy online mortgage application that is
especially handy for our clients wishing to refinance.”

“Credit continues to improve. Our 30 day delinquency rate ended 2012 at 0.16%
of total loans and leases; our net charge-offs for 2012 were 0.13% to average
net loans and leases; while our net charge-offs in dollars were $4.09 million
compared to $8.36 million a year earlier. Credit performance is strong, but
our net interest margin is being squeezed. We continue to focus on controlling
expenses to compensate.”

“At 1st Source, we strive to be distinctively convenient, provide straight
talk and sound advice for our clients, and always keep their best interests in
mind – treating them in a very personal way. I am proud of what my colleagues
throughout the Bank have accomplished this year. It is their focus and
dedication to serving our clients well that has led to our success.” Mr.
Murphy concluded.

The net interest margin was 3.64% for the fourth quarter of 2012 versus 3.66%
for the same period in 2011. The net interest margin was 3.69% for the years
ending December 31, 2012 and 2011. Tax-equivalent net interest income was
$39.00 million for the fourth quarter of 2012, compared to $37.89 million for
2011’s fourth quarter. For the twelve months of 2012, tax-equivalent net
interest income was $153.84 million, compared to $150.91 million for the
twelve months of 2011.

As of December 31, 2012, the common equity-to-assets ratio was 12.28%,
compared to 11.98% at December 31, 2011 and its tangible common
equity-to-tangible assets ratio was 10.56% at December 31, 2012 compared to
10.18% at December 31, 2011. Common shareholders’ equity was $558.66 million,
up from $523.92 million a year ago. Total assets at the end of 2012 were $4.55
billion, up 4.04% from the same period last year. Total loans and leases at
December 31, 2012 were $3.33 billion, up 7.67%, and total deposits at December
31, 2012 were $3.62 billion, up 2.96% from the comparable figures at the end
of 2011.

Reserve for loan and lease losses as of December 31, 2012 was 2.50% of total
loans and leases, compared to 2.64% as of December 31, 2011. Net charge-offs
were $0.98 million for the fourth quarter 2012, compared to $2.17 million in
the fourth quarter 2011. Net charge-offs for the full year were $4.09 million
in 2012 compared to $8.36 million in 2011. The ratio of nonperforming assets
to net loans and leases was 1.25% on December 31, 2012, compared to 2.28% on
December 31, 2011.

Noninterest income for the fourth quarter of 2012 was $20.57 million, up 1.52%
compared to $20.27 million for the fourth quarter of 2011. The fourth quarter
increase was a result of higher mortgage banking income and investment
securities and other investment gains offset by lower equipment rental income.
For the year, noninterest income was $81.19 million, up slightly from the
$80.87 million in 2011. The year-to-date increase was due to higher mortgage
banking income and insurance commissions reduced by lower equipment rental
income and investment securities and other investment gains.

Noninterest expense for the fourth quarter of 2012 was $39.72 million, down
2.62% compared to $40.79 million for the fourth quarter of 2011. The leading
factors for the fourth quarter decrease were reduced depreciation on leased
equipment and lower loan and lease collection and repossession expenses offset
by higher salary and employee benefits expense. For the year ending December
31, 2012, noninterest expense was $151.54 million, down from $152.35 million
one year ago. The annual difference was a result of reduced depreciation on
leased equipment, reductions to provisions for unfunded loan commitments, loan
and lease collection and repossession expenses, and lower net occupancy
expenses. These decreases were  offset by increased salary and employee
benefit expenses and furniture and equipment 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 76 community banking centers in 17
counties, 9 trust and wealth management locations, 8 1st Source Insurance
offices, as well as 22 specialty finance locations nationwide. Celebrating 150
years, 1st Source has a history dating back to 1863. The 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.

                                                                                       
1st SOURCE CORPORATION
4th QUARTER 2012 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
                                                     
                  Three Months Ended                    Twelve Months Ended
                  December 31                           December 31
                  2012               2011               2012               2011
END OF PERIOD                                                           
BALANCES
Assets                                                $ 4,550,693        $ 4,374,071
Loans and                                               3,327,553          3,090,543
leases
Deposits                                                3,624,347          3,520,141
Reserve for
loan and                                                83,311             81,644
lease losses
Intangible                                              87,502             87,675
assets
Common
shareholders'                                           558,655            523,918
equity
                                                                                         
AVERAGE
BALANCES
Assets          $ 4,548,602        $ 4,421,259        $ 4,472,879        $ 4,402,554
Earning           4,260,643          4,102,618          4,174,443          4,090,297
assets
Investments       900,882            858,941            882,392            899,895
Loans and         3,268,948          3,063,248          3,209,490          3,078,581
leases
Deposits          3,635,800          3,548,246          3,574,211          3,555,454
Interest
bearing           3,265,521          3,247,367          3,239,530          3,286,246
liabilities
Common
shareholders'     559,307            522,267            545,631            506,939
equity
                                                                                         
INCOME
STATEMENT
DATA
Net interest    $ 38,509           $ 37,330           $ 151,776          $ 148,400
income
Net interest      39,004             37,893             153,844            150,907
income - FTE
Provision for
(recovery of)     793                (396)              5,752              3,129
loan and
lease losses
Noninterest       20,574             20,265             81,192             80,872
income
Noninterest       39,717             40,787             151,536            152,354
expense
Net income        12,346             11,182             49,633             48,195
                                                                                         
PER SHARE
DATA
Basic net
income per      $ 0.50             $ 0.45             $ 2.02             $ 1.96
common share
Diluted net
income per        0.50               0.45               2.02               1.96
common share
Common cash
dividends         0.17               0.16               0.66               0.64
declared
Book value
per common        23.04              21.64              23.04              21.64
share
Tangible book
value per         19.43              18.02              19.43              18.02
common share
Market value      23.15              26.06              26.79              26.06
- High
Market value      19.70              19.91              19.70              17.86
- Low
Basic
weighted
average           24,270,198         24,213,834         24,267,471         24,237,924
common shares
outstanding
Diluted
weighted
average           24,279,465         24,224,751         24,277,328         24,247,456
common shares
outstanding
                                                                                         
KEY RATIOS
Return on
average           1.08         %     1.00         %     1.11         %     1.09         %
assets
Return on
average
common            8.78               8.49               9.10               9.51
shareholders'
equity
Average
common
shareholders'     12.30              11.81              12.20              11.51
equity to
average
assets
End of period
tangible
common equity     10.56              10.18              10.56              10.18
to tangible
assets
Risk-based
capital -         14.26              15.21              14.26              15.21
Tier 1
Risk-based
capital -         15.57              16.51              15.57              16.51
Total
Net interest      3.64               3.66               3.69               3.69
margin
Efficiency:
expense to        65.95              68.60              63.33              64.35
revenue
Net
charge-offs
to average        0.12               0.28               0.13               0.27
loans and
leases
Loan and
lease loss
reserve to        2.50               2.64               2.50               2.64
loans and
leases
Nonperforming
assets to         1.25               2.28               1.25               2.28
loans and
leases
                                                                                         
ASSET QUALITY
Loans and
leases past                                           $ 442              $ 460
due 90 days
or more
Nonaccrual
loans and                                               36,417             56,440
leases
Other real                                              4,311              7,621
estate
Former bank
premises held                                           1,034              1,134
for sale
Repossessions                                           63                 6,792
Equipment
owned under                                             -                  29
operating
leases
Total
nonperforming                                           42,267             72,476
assets
                                                                                         

                                                           
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
                                      December 31, 2012      December 31, 2011
ASSETS
Cash and due from banks               $   83,232             $   61,406
Federal funds sold and interest
bearing deposits with other               702                    52,921
banks
Investment securities
available-for-sale
(amortized cost of $849,139 and
$853,204 at
December 31, 2012 and 2011,               880,764                883,000
respectively)
Other investments                         22,609                 18,974
Trading account securities                146                    132
Mortgages held for sale                   10,879                 12,644
                                                              
Loans and leases, net of
unearned discount:
Commercial and agricultural               639,069                545,570
loans
Auto, light truck and                     438,147                435,965
environmental equipment
Medium and heavy duty truck               172,002                159,796
Aircraft financing                        696,479                620,782
Construction equipment                    278,974                261,204
financing
Commercial real estate                    554,968                545,457
Residential real estate                   438,641                423,606
Consumer loans                            109,273                98,163      
Total loans and leases                    3,327,553              3,090,543
Reserve for loan and lease                (83,311    )           (81,644    )
losses
Net loans and leases                      3,244,242              3,008,899
                                                              
Equipment owned under operating           52,173                 69,551
leases, net
Net premises and equipment                45,016                 39,857
Goodwill and intangible assets            87,502                 87,675
Accrued income and other assets           123,428                139,012     
                                                              
Total assets                          $   4,550,693          $   4,374,071   
                                                              
LIABILITIES
Deposits:
Noninterest bearing                   $   646,380            $   580,101
Interest bearing                          2,977,967              2,940,040   
Total deposits                            3,624,347              3,520,141
                                                              
Short-term borrowings:
Federal funds purchased and
securities sold
under agreements to purchase              158,680                106,991
Other short-term borrowings               10,508                 18,243      
Total short-term borrowings               169,188                125,234
Long-term debt and mandatorily            71,021                 37,156
redeemable securities
Subordinated notes                        58,764                 89,692
Accrued expenses and other                68,718                 77,930      
liabilities
Total liabilities                         3,992,038              3,850,153
                                                              
SHAREHOLDERS' EQUITY
Preferred stock; no par value             -                      -
Common stock; no par value                346,535                346,535
Retained earnings                         223,715                190,261
Cost of common stock in                   (31,134    )           (31,389    )
treasury
Accumulated other comprehensive           19,539                 18,511      
income
Total shareholders' equity                558,655                523,918     
                                                              
Total liabilities and                 $   4,550,693          $   4,374,071   
shareholders' equity
                                                                             

                                                                  
1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited - Dollars in thousands)
                                                                      
                           Three Months Ended          Twelve Months Ended
                           December 31,                December 31,
                           2012         2011           2012          2011
Interest income:
Loans and leases           $ 40,552     $ 40,236       $ 161,376     $ 163,986
Investment securities,       3,852        4,445          16,426        18,533
taxable
Investment securities,       814          889            3,340         4,013
tax-exempt
Other                        255          284            943           991
Total interest income        45,473       45,854         182,085       187,523
                                                                      
Interest expense:
Deposits                     5,009        6,489          21,877        30,762
Short-term borrowings        33           60             169           300
Subordinated notes           1,542        1,647          6,484         6,589
Long-term debt and
mandatorily redeemable       380          328            1,779         1,472
securities
Total interest expense       6,964        8,524          30,309        39,123
                                                                      
Net interest income          38,509       37,330         151,776       148,400
Provision for (recovery
of) loan and lease           793          (396   )       5,752         3,129
losses
Net interest income
after provision for
(recovery of) loan and       37,716       37,726         146,024       145,271
lease losses
                                                                      
Noninterest income:
Trust fees                   4,091        4,022          16,498        16,327
Service charges on           4,779        4,866          18,807        18,488
deposit accounts
Mortgage banking income      2,893        1,504          8,357         3,839
Insurance commissions        1,443        1,377          5,494         4,793
Equipment rental income      4,176        5,500          18,796        23,361
Other income                 3,104        3,283          12,660        12,665
Investment securities
and other investment         88           (287   )       580           1,399
gains (losses)
Total noninterest income     20,574       20,265         81,192        80,872
                                                                      
Noninterest expense:
Salaries and employee        20,931       20,012         82,599        77,261
benefits
Net occupancy expense        2,159        2,106          7,819         8,714
Furniture and equipment      4,251        3,701          15,406        14,130
expense
Depreciation - leased        3,293        4,400          15,202        18,650
equipment
Professional fees            1,851        2,006          6,083         5,508
Supplies and                 1,536        1,431          5,701         5,453
communication
FDIC and other insurance     886          913            3,602         4,421
Business development and     1,307        1,578          4,232         4,032
marketing expense
Loan and lease
collection and               1,426        2,513          5,772         6,724
repossession expense
Other expense                2,077        2,127          5,120         7,461
Total noninterest            39,717       40,787         151,536       152,354
expense
                                                                      
Income before income         18,573       17,204         75,680        73,789
taxes
Income tax expense           6,227        6,022          26,047        25,594
                                                                      
Net income                 $ 12,346     $ 11,182       $ 49,633      $ 48,195

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

Contact:

1st Source Corporation
Andrea Short, 574-235-2000