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 22, 2009
1st Source Corporation
(Exact name of registrant as specified in its charter)
Indiana	0-6233	35-1068133
(State or other jurisdiction of incorporation)	(Commission File No.)	(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 22, 2009, 1st Source Corporation issued a press release that announced its third quarter earnings for 2009.  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 22, 2009, with respect to 1st Source Corporation’s financial results for the third quarter ended September 30, 2009.

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 22, 2009	/s/CHRISTOPHER J. MURPHY III
	Christopher J. Murphy III
	Chairman of the Board, President and CEO
Date:  October 22, 2009	/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 22, 2009		Andrea Short
				574 235 2000

1ST SOURCE ANNOUNCES THIRD QUARTER PROFITS

DIVIDEND ANNOUNCED

           South Bend, IN – South Bend, IN - 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today announced third quarter net income of $6.73 million compared to $4.47 million in the third quarter 2008. For the first three quarters of the year, net income was $19.27 million versus $21.07 million a year earlier. Diluted net income per common share for the third quarter of 2009 was $0.21 versus $0.18 a year earlier while diluted net income per common share for the first three quarters was $0.60 compared to $0.86 in 2008. Diluted net income per common share was reduced by $0.07 for the third quarter of 2009 and $0.20 for the nine months ending September 30, 2009, due to the preferred stock dividends and the accretion of the discount on the preferred stock issued to the U.S. Government under the TARP Program.  The preferred stock was issued in January 2009 and therefore did not impact the three or nine month periods ending September 30, 2008.

 At the October meeting, the Board of Directors approved a cash dividend of $0.16 per common share, equal to the dividend a year earlier. The cash dividend will be payable on November 16, 2009, to shareholders of record on November 6, 2009.

 Christopher J. Murphy III, Chairman of 1st Source, commented, “As the recession continues to buffet our markets, we continue to experience larger nonperforming asset ratios and larger charge-offs. Fortunately, we have maintained and continue to support strong reserves. Our local markets have been hit hard by layoffs and rising unemployment and there is also some stress among our specialty finance clients. While the Bank steered clear of sub-prime and construction or real estate development loans, our clients have been affected by the overall downturn in the economy, which then affects us. Although this year’s third quarter compares favorably to a year ago, the net income in the third quarter of 2008 was impacted by losses on investments in Fannie Mae and Freddie Mac preferred stock. ”

 Mr. Murphy continued, “During the quarter, we provided $6.47 million to our loan and lease loss reserve, while net-charge-offs were $4.09 million. Our reserve for loan and lease losses is 2.76 percent of loans and leases compared to 2.28 percent a year earlier. We will expense approximately $7.75 million in FDIC insurance fees this year compared to $1.60 million in 2008. With all of that said, our capital ratios

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remain very strong, our overall expenses are down, and we are a profitable organization that continues to provide our clients with expert service, straight talk and sound advice every day. Many in the financial world would like to be in our position,” concluded Mr. Murphy.

 As of September 30, 2009, the 1st Source common equity-to-assets ratio was 10.64 percent compared to 10.00 percent a year ago and its tangible equity-to-assets ratio was 8.77 percent compared to 8.08 percent a year earlier. Common shareholders' equity was $469.72 million, up 6.51 percent from the $441.01 million reported a year ago. Total assets at the end of the third quarter of 2009 were $4.41 billion, up slightly from a year ago. Total loans and leases were $3.09 billion, down 6.66 percent and total deposits were $3.49 billion, up 4.07 percent over the comparable figures at the end of the third quarter of 2008.

 Noninterest income for the third quarter was $20.26 million, up 63.62 percent from the same period in 2008. For the nine months, noninterest income was $63.51 million, up 18.11 percent from 2008. The increase in noninterest income was a result of significant improvements in investment securities and other investment gains (losses) due to a reduction in other than temporary impairment and partnership gains.

 Noninterest expense for the third quarter was $36.57 million, a decrease from the $38.32 million reported in the third quarter a year earlier. Noninterest expense for the first nine months of 2009 was $112.56 million versus $114.61 million for the same period of 2008. The leading factors in the year-to-date change were reduced salaries and benefits and professional fees partially offset by higher FDIC insurance costs. The FDIC has announced that it will require the industry to prepay its next three years of estimated FDIC insurance in December of this year. Using the currently applicable rates for FDIC insurance, we will likely remit $21.57 million to the FDIC this December. This prepayment will not affect earnings in 2009, rather it will be ratably expensed in fiscal years 2010, 2011, and 2012.

 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, 23 specialty finance locations nationwide, 7 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

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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.

# # #

(charts attached)

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1st SOURCE CORPORATION
3rd QUARTER 2009 FINANCIAL HIGHLIGHTS
(Unaudited - Dollars in thousands, except per share data)
	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2009			2008				2009			2008
END OF PERIOD BALANCES
Assets								$	4,413,160		$	4,409,619
Loans and leases									3,094,030			3,314,863
Deposits									3,486,714			3,350,412
Reserve for loan and lease losses									85,504			75,606
Intangible assets									90,669			92,185
Common shareholders' equity									469,718			441,010
Total shareholders' equity									574,330			441,010
AVERAGE BALANCES
Assets	$	4,463,324		$	4,400,009			$	4,508,202		$	4,383,948
Earning assets		4,159,318			4,075,541				4,206,498			4,047,131
Investments		826,468			681,972				818,498			725,301
Loans and leases		3,130,362			3,322,970				3,184,394			3,251,499
Deposits		3,536,013			3,341,035				3,571,280			3,369,474
Interest bearing liabilities		3,390,440			3,517,330				3,453,618			3,493,013
Common shareholders' equity		469,409			444,219				467,351			443,162
Total shareholders' equity		573,819			444,219				563,163			443,162
INCOME STATEMENT DATA
Net interest income	$	32,046		$	33,397			$	94,681		$	98,818
Net interest income - FTE		33,029			34,258				97,512			101,508
Provision for loan and lease losses		6,469			3,571				22,741			9,603
Noninterest income		20,256			12,380				63,510			53,774
Noninterest xxpense		36,570			38,317				112,559			114,613
Net income		6,733			4,472				19,267			21,071
Net income available to common shareholders		5,032			4,472				14,557			21,071
PER SHARE DATA
Basic net income per common share	$	0.21		$	0.19			$	0.60		$	0.87
Diluted net income per common share		0.21			0.18				0.60			0.86
Common cash dividends declared		0.15			0.14				0.43			0.42
Book value per common share		19.46			18.29				19.46			18.29
Tangible book value per common share		15.70			14.47				15.70			14.47
Market value - High		17.94			30.00				23.92			30.00
Market value - Low		14.52			14.54				14.16			14.54
Basic weighted average common shares outstanding		24,164,884			24,109,960				24,166,887			24,104,015
Diluted weighted average common shares outstanding		24,212,042			24,381,657				24,215,542			24,374,811
KEY RATIOS
Return on average assets		0.60	%		0.40		%		0.57	%		0.64	%
Return on average common shareholders' equity		4.25			4.00				4.16			6.35
Average common shareholders' equity to average assets		10.52			10.10				10.37			10.11
End of period tangible common equity to tangible assets		8.77			8.08				8.77			8.08
Risk-based capital - Tier 1		16.14			11.70				16.14			11.70
Risk-based capital - Total		17.43			12.98				17.43			12.98
Net interest margin		3.15			3.34				3.10			3.35
Efficiency:  expense to revenue		66.90			66.01				67.59			66.78
Net charge offs to average loans		0.52			(0.04	)			0.71			0.02
Loan and lease loss reserve to loans and leases		2.76			2.28				2.76			2.28
Nonperforming assets to loans and leases		2.95			0.88				2.95			0.88
ASSET QUALITY
Loans and leases past due 90 days or more								$	1,125		$	1,476
Nonaccrual and restructured loans and leases									80,361			22,812
Other real estate									4,074			1,615
Former bank premises held for sale									3,095			3,821
Repossessions									5,672			234
Equipment owned under operating leases									74			40
Total nonperforming assets									94,401			29,998

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1st SOURCE CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited - Dollars in thousands)
	September 30,			September 30,
	2009			2008
ASSETS
Cash and due from banks	$	56,408		$	75,704
Federal funds sold and
interest bearing deposits with other banks		65,307			59,090
Investment securities available-for-sale
(amortized cost of $871,266 and $656,294
at September 30, 2009 and 2008, respectively)		886,777			658,905
Other investments		21,012			18,612
Trading account securities		117			-
Mortgages held for sale		39,364			38,700
Loans and leases - net of unearned discount:
Commercial and agricultural loans		567,476			671,019
Auto, light truck and environmental equipment		313,808			337,248
Medium and heavy duty truck		219,762			253,682
Aircraft financing		633,552			608,881
Construction equipment financing		326,858			383,446
Loans secured by real estate		917,754			924,313
Consumer loans		114,820			136,274
Total loans and leases		3,094,030			3,314,863
Reserve for loan and lease losses		(85,504	)		(75,606	)
Net loans and leases		3,008,526			3,239,257
Equipment owned under operating leases, net		91,538			87,407
Net premises and equipment		38,552			41,194
Goodwill and intangible assets		90,669			92,185
Accrued income and other assets		114,890			98,565
Total assets	$	4,413,160		$	4,409,619
LIABILITIES
Deposits:
Noninterest bearing	$	425,742		$	374,290
Interest bearing		3,060,972			2,976,122
Total deposits		3,486,714			3,350,412
Federal funds purchased and securities
sold under agreements to repurchase		129,707			244,491
Other short-term borrowings		25,272			190,173
Long-term debt and mandatorily redeemable securities		20,046			34,861
Subordinated notes		89,692			89,692
Accrued expenses and other liabilities		87,399			58,980
Total liabilities		3,838,830			3,968,609
SHAREHOLDERS' EQUITY
Preferred stock; no par value		104,612			-
Common stock; no par value		350,266			342,979
Retained earnings		141,758			128,428
Cost of common stock in treasury		(31,943	)		(32,019	)
Accumulated other comprehensive income		9,637			1,622
Total shareholders' equity		574,330			441,010
Total liabilities and shareholders' equity	$	4,413,160		$	4,409,619

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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
	2009			2008			2009			2008
Interest income:
Loans and leases	$	43,436		$	50,979		$	132,507		$	154,590
Investment securities, taxable		4,357			4,896			12,600			17,288
Investment securities, tax-exempt		1,651			1,873			5,046			5,904
Other		297			317			894			986
Total interest income		49,741			58,065			151,047			178,768
Interest expense:
Deposits		15,460			20,347			49,662			67,116
Short-term borrowings		265			2,255			909			6,434
Subordinated notes		1,648			1,648			4,942			5,067
Long-term debt and mandatorily redeemable securities		322			418			853			1,333
Total interest expense		17,695			24,668			56,366			79,950
Net interest income		32,046			33,397			94,681			98,818
Provision for loan and lease losses		6,469			3,571			22,741			9,603
Net interest income after provision for
loan and lease losses		25,577			29,826			71,940			89,215
Noninterest income:
Trust fees		3,782			4,939			11,473			14,155
Service charges on deposit accounts		5,402			5,761			15,367			16,633
Mortgage banking income		965			959			6,874			3,493
Insurance commissions		1,022			1,084			3,614			4,122
Equipment rental income		6,347			6,285			18,896			17,794
Other income		2,022			2,168			6,613			6,836
Investment securities and other investment gains (losses)		716			(8,816	)		673			(9,259	)
Total noninterest income		20,256			12,380			63,510			53,774
Noninterest expense:
Salaries and employee benefits		18,425			19,297			55,340			58,996
Net occupancy expense		2,221			2,332			7,095			7,289
Furniture and equipment expense		3,241			3,694			10,487			11,555
Depreciation - leased equipment		5,021			5,041			15,065			14,266
Professional fees		1,020			2,773			2,897			6,453
Supplies and communication		1,473			1,812			4,468			5,163
FDIC and other insurance		1,582			713			6,851			1,396
Other  expense		3,587			2,655			10,356			9,495
Total noninterest expense		36,570			38,317			112,559			114,613
Income before income taxes		9,263			3,889			22,891			28,376
Income tax expense (benefit)		2,530			(583	)		3,624			7,305
Net income		6,733			4,472			19,267			21,071
Preferred stock dividends and discount accretion		(1,701	)		-			(4,710	)		-
Net income available to common shareholders	$	5,032		$	4,472		$	14,557		$	21,071
The NASDAQ Stock Market National Market Symbol: "SRCE" (CUSIP #336901 10 3)
Please contact us at shareholder@1stsource.com

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