1st Source Increases Income, Dividend Announced.

SOUTH BEND, Ind. -- 1st Source Corporation (Nasdaq:SRCE), parent company of 1st Source Bank, today reported net income of $10.96 million for the third quarter of 2006, an increase of 15.64 percent over the $9.48 million in the third quarter of 2005. For the first nine months of 2006, net income for 1st Source Corporation was $31.17 million, an increase of 26.46 percent over the $24.65 million reported for the same period in 2005.

Diluted net income per share for the third quarter of 2006 amounted to $0.48 up 17.07 percent over the $0.41 for the same period last year. Diluted net income per common share for the first three quarters of 2006 was $1.36, up 27.10 percent over the $1.07 for the same period of 2005. (All share and per share information has been adjusted for a 10% stock dividend declared on July 27, 2006.)

Christopher J. Murphy III, Chairman and Chief Executive Officer, reported that at its October meeting, the Board of Directors approved a cash dividend of $0.14 per share, up 18.64 percent from the dividend announced a year ago. The cash dividend will be payable on November 15, 2006, to shareholders of record on November 6, 2006.

Mr. Murphy commented, "The Corporation continues to perform well. We were aided in the third quarter by a $3.20 million, pre-tax, gain on the sale of mortgage servicing rights by Trustcorp, our mortgage subsidiary. We continue to show improvement in the credit area with our nonperforming assets down 33.34 percent since year-end 2005, and net recoveries of $2.94 million year-to-date."

Mr. Murphy continued, "With our credit quality much improved, we can now refocus on margins and operational improvements. Much of this year has been focused on preparing for the conversion of our core systems in 2007. We look forward to the improved effectiveness and efficiencies the new systems will provide us in meeting the needs of our clients. It will also give us a platform for growth for years to come."

Noninterest income for the three month periods ended September 30, 2006 and 2005, was $20.82 million and $17.87 million, respectively, and $58.90 million and $50.96 million for the nine month periods ended September 30, 2006 and 2005, respectively. During the third quarter of 2006, mortgage banking income increased primarily due to the $3.20 million, pre-tax, gain on the bulk sale of mortgage servicing rights related to both government and conventional loans. Equipment rental income, service charges on deposit accounts, and trust fees increased in both the three and nine month periods ended September 30, 2006. Insurance commissions decreased slightly during the third quarter of 2006 as compared to the same quarter of 2005; however, insurance commissions increased on a year-over-year basis.

Noninterest expense for the three month periods ended September 30, 2006 and 2005, was $31.82 million and $30.28 million, respectively, and $93.62 million and $92.58 million for the nine month periods ended September 30, 2006 and 2005, respectively. Leased equipment depreciation, business development and marketing expense, and other expense increased on a year-over-year and quarter-over-quarter basis. Professional fees and furniture and equipment expense increased on a year-over-year basis and decreased on a quarter-over-quarter basis.

Salaries and employee benefits decreased on a year-over-year basis primarily due to the first quarter 2006 reversal of previously recognized stock-based compensation expense under historical accounting methods related to the estimated forfeiture of stock awards. Intangible asset amortization decreased during the third quarter of 2006, while supplies and communication and net occupancy expense remained comparable to 2005 levels.

1st Source's reserve for loan and lease losses as of September 30, 2006, was 2.25 percent of total loans and leases compared to 2.46 percent at September 30, 2005. 1st Source's recovery of provision for loan and lease losses was $0.67 million this quarter compared to $1.30 million for the third quarter of 2005. Net recoveries were $0.47 million for the third quarter 2006 compared to $0.30 million for the same quarter last year. The ratio of nonperforming assets to net loans and leases was 0.54 percent on September 30, 2006, compared to 0.89 percent on September 30, 2005.

As of September 30, 2006, the 1st Source common equity-to-assets ratio was 10.04 percent compared to 10.08 percent a year ago. Common shareholders' equity was $363.45 million, up 7.03 percent from the $339.57 million reported a year ago. Total assets at the end of the third quarter of 2006 were $3.62 billion up 7.45 percent from a year ago. Total loans and leases were up 10.39 percent and total deposits were up 11.19 percent over the comparable figures at the end of the third quarter of 2005.

1st Source is the largest locally controlled financial institution headquartered and serving the northern Indiana-southwestern Michigan area. While delivering a comprehensive range of consumer and commercial banking services, 1st Source Bank 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 65 banking centers in 15 counties, 3 Trustcorp Mortgage offices in Indiana and Ohio, and 24 locations nationwide for the 1st Source Bank Specialty Finance Group. 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 stock market under "SRCE" and appears in the National Market System tables in many daily newspapers under the code name "1st Src." Marketmakers in 1st Source common shares are Crowell, Weedon & Company; FTN Midwest Securities Corp.; Goldman, Sachs & Company; Keefe, Bruyette & Woods, Incorporated; Lehman Brothers, Incorporated; Morgan Stanley & Company, Incorporated; Sandler O'Neill & Partners; Stifel, Nicolaus & Company; Susquehanna Capital Group; and UBS Securities LLC.

1st Source's floating rate cumulative trust preferred security is traded on the Nasdaq stock market under the symbol "SRCEO." The rate for the fourth quarter 2006 is 7.12 percent. Marketmakers in those securities are Howe Barnes Investments, Inc.; Stifel, Nicolaus & Company; and UBS Securities LLC.

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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