8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 23, 2008
	0-6233 (Commission File No.)
1st Source Corporation
(Exact name of registrant as specified in its charter)
Indiana		35-1068133
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)
100 North Michigan Street, South Bend, Indiana  46601
(Address of principal executive offices)     (Zip Code)
574-235-2000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02                                Results of Operations and Financial Condition

On October 23, 2008, 1st Source Corporation issued a press release that announced its second quarter earnings for 2008.  A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

ITEM 9.01                                Financial Statements and Exhibits

Exhibit 99.1:  Press release dated October 23, 2008, with respect to 1st Source Corporation’s financial results for the third quarter ended September 30, 2008.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	1st SOURCE CORPORATION
	(Registrant)
Date:  October 23, 2008	/s/CHRISTOPHER J. MURPHY III
	Christopher J. Murphy III
	Chairman of the Board, President and CEO
Date:  October 23, 2008	/s/LARRY E. LENTYCH
	Larry E. Lentych
	Treasurer and Chief Financial Officer
	Principal Accounting Officer

EX-99.1

For:	Immediate Release	Contact:	Larry Lentych
	October 23, 2008		574 235 2000
			Andrea Short
			574 235 2000

1ST SOURCE ANNOUNCES DIVIDEND INCREASE, THIRD QUARTER PROFITS

·   Profitable quarter, good revenue growth

·   Solid credit quality

o   Reserve for loan and lease losses to 2.28%

o   Year-to-date net charge-offs of 0.02%

o   Nonperforming assets of 0.88%

·   Dividend increase of 14.3%

·   Impairment charge for investments in Fannie Mae, Freddie Mac of $8.07 million

·   11.70% and 12.98 % period end Tier 1 and total risk based capital ratios in the “well capitalized level”, the highest regulatory designation.

  South Bend, IN – South Bend, IN - - 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced third quarter earnings results as well as an increase in the quarterly cash dividend. Christopher J. Murphy III, Chairman of 1st Source, commented "With severe turbulence in so many financial institutions, I'm extremely pleased with our operating income growth and that 1st Source is able to increase its dividend this quarter, maintaining our streak of over 19 years of consecutive dividend growth. I am also pleased with the strong performance of our loan portfolios and the level of our reserves."

 1st Source Corporation reported operating income of $10.06 million for the third quarter of 2008 compared to $6.13 million for same period a year earlier. For the first three quarters of the year, operating income was $27.44 million versus the $22.71 million a year earlier. Net income, which was adversely impacted by impairment charges of $5.59 million, net of tax, primarily from investments in Fannie Mae and Freddie Mac preferred stock, was $4.47 million for the quarter and $21.07 million year-to-date versus $6.13 million and $22.71 million in net income for the same periods a year earlier. Operating income per share for the third quarter of 2008 was $0.41 per share versus $0.25 a year earlier while net income per share was $0.18 versus $0.25 a year ago.  For the first three quarters of the year, operating income per share was $1.12 compared to $0.96 per share in 2007, and net income per share was $0.86 for 2008 versus $0.96 per share for 2007.

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 At the October meeting, the Board of Directors approved an increase in the cash dividend to $0.16 per share, a 14.3 percent increase over the dividend a year earlier. The cash dividend will be payable on November 14, 2008, to shareholders of record on November 4, 2008.

 According to Mr. Murphy, “While this has been a tough quarter for business, we are pleased that we have been able to help our customers continue to grow with loan and deposit products designed to meet their needs. We are well positioned for the long term, are well-capitalized, have a strong balance sheet, a solid credit portfolio and our net interest margin is holding steady.  We actually had net loan and lease loss recoveries of $337 thousand for the quarter. Our mortgage and lending businesses have always been conventional and conservative. We have no sub-prime loans. We have no Alt-A loans. And, we have no overly valued residential or commercial real estate development loans.”

 “During the quarter, we completed blending First National Bank, Valparaiso into 1st Source and welcomed a wonderful new set of clients to the Bank. We are already seeing the benefits of the consolidation as our costs are dropping, while we continue to grow the market by offering highly personalized service, convenience, and a wider product and service selection. My colleagues also spent the quarter counseling our clients on positioning for turbulent times, the value of FDIC insurance, and navigating through uncertainty,” concluded Mr. Murphy.

 Before the impairment charge, noninterest income for the three month period ended September 30, 2008 was $21.38 million compared to $17.90 million reported in the same period of 2007. For the first three quarters of 2008, noninterest income before the impairment charge was $63.03 million versus $54.45 million for the first three quarters a year earlier. As discussed above, during the third quarter of 2008, 1st Source wrote down Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae) preferred stocks in the investment portfolio by $8.07 million ($5.01 million net of tax). Excluding this write-down, noninterest income increased in all categories. Noninterest income including the impairment charge was $12.38 million for the third quarter of 2008 and $53.77 million year-to-date.

 Noninterest expense for the third quarter was $38.32 million, an increase from the $37.44 million reported in the third quarter a year earlier. Noninterest expense for the first nine months was $114.61 million versus $103.69 million for the same period of 2007. The leading factor in the year-to-date change was increased expenses due to the May 31, 2007 acquisition of First National Bank, Valparaiso.

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 Net loans and leases at the close of the third quarter were $3.31 billion, up 3.54 percent from a year earlier. 1st Source’s reserve for loan and lease losses as of September 30, 2008, was 2.28 percent of total loans and leases compared to 2.02 percent at September 30, 2007. 1st Source’s provision for loan and lease losses was $3.57 million this quarter compared to $3.66 million for the third quarter 2007.  Net recoveries were $0.34 million this quarter compared to net charge-offs of $1.84 million in the quarter a year ago. The ratio of nonperforming assets to net loans and leases was 0.88 percent on September 30, 2008, compared to 0.52 percent on September 30, 2007.

     As of September 30, 2008, the 1st Source common equity-to-assets ratio was 10.00 percent compared to 9.68 percent a year ago. Common shareholders' equity was $441.01 million, up 3.23 percent from the $427.20 million reported a year ago. Total assets at the end of the third quarter of 2008 were $4.41 billion, down slightly from a year ago. Total loans and leases were up 3.54 percent and total deposits were down 1.90 percent over the comparable figures at the end of the third quarter of 2007.

 In light of the national financial crisis and the enactment of the Emergency Economic Stabilization Act of 2008, U.S. government agencies are taking various actions in an attempt to enhance financial stability. These include the U.S. Treasury Department's Troubled Asset Relief Program Capital Purchase Program, which offers to all U.S. banking organizations the opportunity to issue and sell preferred stock, along with warrants to purchase common stock, to the U.S. Treasury on what may be considered attractive terms. In addition, the FDIC has initiated the Temporary Liquidity Guarantee Program that will provide a 100 percent guarantee for a limited period of time to newly issued senior unsecured debt and non-interest bearing transaction deposits. Coverage under the Temporary Liquidity Guarantee Program is available for 30 days without charge and thereafter at a cost of 75 basis points per annum for senior unsecured debt and 10 basis points per annum for non-interest bearing transaction deposits. 1st Source’s capital ratios remain well above the minimum levels required for well capitalized status and have not been adversely affected in any significant respect by the national financial crisis. However, 1st Source is assessing its participation in both programs to determine what may be in its best interest long-term and has not yet made a definitive decision as to whether it will participate.

  In addition to the results presented in accordance with U.S. generally accepted accounting principles (GAAP), this press release contains certain non-GAAP financial measures.  1st Source believes that providing a non-GAAP financial measure to illustrate our earnings excluding extraordinary impairments of its Freddie Mac and Fannie Mae securities is useful in understanding 1st Source’s financial performance because the severe deterioration of those issues is unrelated to 1st Source’s operations. Additionally, these non-GAAP measures are used by management in its analysis of 1st Source’s performance.  These non-GAAP measures, referred to above as “operating income”, exclude other-than-temporary impairment on investment securities.  The following table reconciles net income presented in accordance with U.S. generally accepted accounting principles to operating earnings, a non-GAAP measure.

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Net income (dollars in thousands):	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2008			2007		2008			2007
Operating income	$	10,063		$	6,130	$	27,444		$	22,713
Other-than-temporary impairment, net of tax
FHLMC and FNMA preferred equities		(5,012	)		-		(5,593	)		-
Other preferred equities		(579	)		-		(780	)		-
Total other-than-temporary impairment, net of tax		(5,591	)		-		(6,373	)		-
Net income	$	4,472		$	6,130	$	21,071		$	22,713
Earnings per share	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2008			2007		2008			2007
Operating income per share	$	0.41		$	0.25	$	1.12		$	0.96
Other-than-temporary impairment, net of tax
FHLMC and FNMA preferred equities		(0.21	)		-		(0.23	)		-
Other preferred equities		(0.02	)		-		(0.03	)		-
Total other-than-temporary impairment, net of tax		(0.23	)		-		(0.26	)		-
Earnings per share	$	0.18		$	0.25	$	0.86		$	0.96

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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, 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 79 banking centers in 17 counties, 24 locations nationwide for the 1st Source Bank Specialty Finance Group, 7 Trust and Wealth management locations plus 6 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 in which it serves.

 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,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” “should,” 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 2008 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except for per share data)
	Three Months Ended							Nine Months Ended
	September 30							September 30
	2008				2007			2008			2007
END OF PERIOD BALANCES
Assets								$	4,409,619		$	4,412,651
Loans and leases									3,314,863			3,201,595
Deposits									3,350,412			3,415,169
Reserve for loan and lease losses									75,606			64,664
Intangible assets									92,185			91,546
Common shareholders' equity									441,010			427,195
AVERAGE BALANCES
Assets	$	4,400,009			$	4,446,719		$	4,383,948		$	4,053,944
Earning assets		4,075,541				4,103,807			4,047,131			3,771,816
Investments		681,972				826,374			725,301			725,275
Loans and leases		3,322,970				3,179,234			3,251,499			2,930,077
Deposits		3,341,035				3,490,193			3,369,474			3,193,139
Interest bearing liabilities		3,517,330				3,576,200			3,493,013			3,235,392
Common shareholders' equity		444,219				430,710			443,162			400,566
INCOME STATEMENT DATA
Net interest income	$	33,397			$	31,698		$	98,818		$	86,841
Net interest income - FTE		34,258				32,735			101,508			89,398
Provision for loan and lease losses		3,571				3,660			9,603			4,284
Noninterest income		12,380				17,897			53,774			54,453
Noninterest expense		38,317				37,440			114,613			103,686
Net income		4,472				6,130			21,071			22,713
PER SHARE DATA
Basic net income per common share	$	0.19			$	0.25		$	0.87		$	0.97
Diluted net income per common share		0.18				0.25			0.86			0.96
Cash dividends paid per common share		0.14				0.14			0.42			0.42
Book value per common share		18.29				17.67			18.29			17.67
Tangible book value per common share		14.47				13.89			14.47			13.89
Market value - High		30.00				26.53			30.00			32.62
Market value - Low		14.54				18.41			14.54			18.41
Basic weighted average common shares outstanding		24,109,960				24,275,794			24,104,015			23,309,281
Diluted weighted average common shares outstanding		24,393,603				24,567,404			24,386,756			23,603,676
KEY RATIOS
Return on average assets		0.40		%		0.55	%		0.64	%		0.75	%
Return on average common shareholders' equity		4.00				5.65			6.35			7.58
Average common shareholders' equity to average assets		10.10				9.69			10.11			9.88
End of period tangible common equity to tangible assets		8.08				7.77			8.08			7.77
Net interest margin		3.34				3.16			3.35			3.17
Efficiency: expense to revenue		66.01				71.30			66.78			69.56
Net charge-offs to average loans and leases		(0.04	)			0.23			0.02			0.04
Loan and lease loss reserve to loans and leases		2.28				2.02			2.28			2.02
Nonperforming assets to loans and leases		0.88				0.52			0.88			0.52
ASSET QUALITY
Loans and leases past due 90 days or more								$	1,476		$	693
Nonaccrual and restructured loans and leases									22,812			10,211
Other real estate									1,615			824
Former bank premises held for sale									3,821			1,855
Repossessions									234			3,430
Equipment owned under operating leases									40			114
Total nonperforming assets									29,998			17,127

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
	September 30, 2008			September 30, 2007
ASSETS
Cash and due from banks	$	75,704		$	117,564
Federal funds sold and
interest bearing deposits with other banks		59,090			3,754
Investment securities available-for-sale
(amortized cost of $656,294 and $792,504
at September 30, 2008 and 2007, respectively)		658,905			795,865
Other investments		18,612			14,937
Mortgages held for sale		38,700			25,074
Loans and leases, net of unearned discount:
Commercial and agricultural loans		671,019			585,842
Auto, light truck and environmental equipment		337,248			330,967
Medium and heavy duty truck		253,682			315,116
Aircraft financing		608,881			583,533
Construction equipment financing		383,446			377,069
Loans secured by real estate		924,313			858,818
Consumer loans		136,274			150,250
Total loans and leases		3,314,863			3,201,595
Reserve for loan and lease losses		(75,606	)		(64,664	)
Net loans and leases		3,239,257			3,136,931
Equipment owned under operating leases, net		87,407			78,041
Net premises and equipment		41,194			49,272
Goodwill and intangible assets		92,185			91,546
Accrued income and other assets		98,565			99,667
Total assets	$	4,409,619		$	4,412,651
LIABILITIES
Deposits:
Noninterest bearing	$	374,290		$	389,099
Interest bearing		2,976,122			3,026,070
Total deposits		3,350,412			3,415,169
Federal funds purchased and securities
sold under agreements to repurchase		244,491			327,623
Other short-term borrowings		190,173			24,611
Long-term debt and mandatorily redeemable securities		34,861			44,303
Subordinated notes		89,692			100,002
Accrued expenses and other liabilities		58,980			73,748
Total liabilities		3,968,609			3,985,456
SHAREHOLDERS' EQUITY
Preferred stock; no par value		-			-
Common stock; no par value		342,979			342,840
Retained earnings		128,428			112,938
Cost of common stock in treasury		(32,019	)		(30,717	)
Accumulated other comprehensive income		1,622			2,134
Total shareholders' equity		441,010			427,195
Total liabilities and shareholders' equity	$	4,409,619		$	4,412,651

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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
	2008			2007			2008			2007
Interest income:
Loans and leases	$	50,979		$	57,970		$	154,590		$	159,322
Investment securities, taxable		4,896			7,221			17,288			18,660
Investment securities, tax-exempt		1,873			2,213			5,904			5,351
Other		317			926			986			3,282
Total interest income		58,065			68,330			178,768			186,615
Interest expense:
Deposits		20,347			31,184			67,116			85,249
Short-term borrowings		2,255			2,978			6,434			8,240
Subordinated notes		1,648			1,846			5,067			4,236
Long-term debt and mandatorily redeemable securities		418			624			1,333			2,049
Total interest expense		24,668			36,632			79,950			99,774
Net interest income		33,397			31,698			98,818			86,841
Provision for loan and lease losses		3,571			3,660			9,603			4,284
Net interest income after provision for
loan and lease losses		29,826			28,038			89,215			82,557
Noninterest income:
Trust fees		4,939			3,853			14,155			11,367
Service charges on deposit accounts		5,761			5,278			16,633			15,074
Mortgage banking income		959			770			3,493			2,400
Insurance commissions		1,084			964			4,122			3,540
Equipment rental income		6,285			5,345			17,794			15,730
Other income		2,168			1,841			6,836			6,042
Investment securities and other investment (losses) gains		(8,816	)		(154	)		(9,259	)		300
Total noninterest income		12,380			17,897			53,774			54,453
Noninterest expense:
Salaries and employee benefits		19,297			20,035			58,996			55,754
Net occupancy expense		2,332			2,467			7,289			6,552
Furniture and equipment expense		3,694			3,996			11,555			10,838
Depreciation - leased equipment		5,041			4,284			14,266			12,603
Professional fees		2,773			922			6,453			3,089
Supplies and communication		1,812			1,666			5,163			4,450
Business development and marketing expense		881			1,027			2,524			3,302
Other expense		2,487			3,043			8,367			7,098
Total noninterest expense		38,317			37,440			114,613			103,686
Income before income taxes		3,889			8,495			28,376			33,324
Income tax (benefit) expense		(583	)		2,365			7,305			10,611
Net income	$	4,472		$	6,130		$	21,071		$	22,713
The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com

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