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| INDIANA                                                             |   | 35-1068133                                |
|---------------------------------------------------------------------|--------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) |   | (I.R.S.      Employer Identification No.) |

| 100 North Michigan Street                               | South Bend, Indiana | 46601 |
|---------------------------------------------------------|---------------------|-------|
| (Address      of principal executive offices) (ZipCode) |

|   | Yes | X |   | No |   |   |
|--------|-----|---|--------|----|--------|--------|

|   | Yes |   |   | No | X |   |
|--------|-----|--------|--------|----|---|--------|

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Table of Contents

TABLE OF CONTENTS

| PART      I.  FINANCIAL INFORMATION |                                                                                                             |
|-----------------------------------------------|------------------------------------------------------------------------------------------------------------------|
|                                          |                                                                                                             | Page |
| Item      1.                                  | Financial      Statements (Unaudited)                                                                            |   |
|                                          | Consolidated statements of financial condition – June 30,      2008, and December 31, 2007                 | 3 |
|                                          | Consolidated statements of income -- three months and six      months ended June 30, 2008 and 2007               | 4 |
|                                          | Consolidated statements of changes in shareholders’ equity      -- six months ended June 30, 2008 and 2007 | 5 |
|                                          | Consolidated statements of cash flows -- six months ended      June 30, 2008 and 2007                            | 6 |
|                                          | Notes to the Consolidated Financial      Statements                                                              | 7 |
| Item      2.                                  | Management’s Discussion and Analysis of Financial      Condition and Results of Operations                 | 14 |
| Item      3.                                  | Quantitative and Qualitative Disclosures About Market      Risk                                                  | 23 |
| Item      4.                                  | Controls and Procedures                                                                                          | 23 |
|                                          |                                                                                                             |   |
| PART      II.  OTHER INFORMATION    |                                                                                                             |
|                                          |                                                                                                             |   |
| Item      1.                                  | Legal Proceedings                                                                                                | 24 |
| Item      1A.                                 | Risk Factors                                                                                                     | 24 |
| Item      2.                                  | Unregistered Sales of Equity Securities and Use of      Proceeds                                                 | 24 |
| Item      3.                                  | Defaults Upon Senior Securities                                                                                  | 24 |
| Item      4.                                  | Submission of Matters to a Vote of Security      Holders                                                         | 24 |
| Item      5.                                  | Other Information                                                                                                | 25 |
| Item      6.                                  | Exhibits                                                                                                         | 25 |
|                                          |                                                                                                             |   |
| SIGNATURES                                    | 26                                                                                                               |
|                                          |                                                                                                             |   |
| EXHIBITS                                      |                                                                                                                  |

|   |  Exhibit 31.1 |   |
|--------|--------------------|--------|
|   |  Exhibit 31.2 |   |
|   |  Exhibit 32.1 |   |
|   |  Exhibit 32.2 |   |
|   |               |   |
|   |               |   |

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Table of Contents

| 1st      SOURCE CORPORATION                                                           |   |          |      |   |              |   |
|---------------------------------------------------------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
| CONSOLIDATED STATEMENTS OF FINANCIAL      CONDITION                                   |   |          |      |   |              |   |
| (Unaudited      - Dollars in thousands)                                               |   |          |      |   |              |   |
|                                                                                  |   | June      30, |      |   | December      31, |   |
|                                                                                  |   | 2008          |      |   | 2007              |   |
| ASSETS                                                                                |   |          |      |   |              |   |
| Cash      and due from banks                                                          |   | $             | 126,208   |   |              | $      | 153,137 |   |
| Federal      funds sold and                                                           |   |          |      |   |              |   |   |   |
| interest      bearing deposits with other banks                                       |   |          | 29,116    |   |              |   | 25,817 |   |
| Investment      securities available-for-sale                                         |   |          |      |   |              |   |   |   |
| (amortized      cost of $710,264 and $775,922                                         |   |          |      |   |              |   |   |   |
| at      June 30, 2008 and December 31, 2007, respectively)                            |   |          | 712,436   |   |              |   | 779,981 |   |
| Other      investments                                                                |   |          | 18,612    |   |              |   | 14,937 |   |
| Trading      account securities                                                       |   |          | 150       |   |              |   | - |   |
| Mortgages      held for sale                                                          |   |          | 35,883    |   |              |   | 25,921 |   |
| Loans      and leases - net of unearned discount:                                     |   |          |      |   |              |   |   |   |
| Commercial      and agricultural loans                                                |   |          | 669,867   |   |              |   | 593,806 |   |
| Auto,      light truck and environmental equipment                                    |   |          | 349,182   |   |              |   | 305,238 |   |
| Medium      and heavy duty truck                                                      |   |          | 270,141   |   |              |   | 300,469 |   |
| Aircraft      financing                                                               |   |          | 579,131   |   |              |   | 587,022 |   |
| Construction      equipment financing                                                 |   |          | 398,888   |   |              |   | 377,785 |   |
| Loans      secured by real estate                                                     |   |          | 908,364   |   |              |   | 881,646 |   |
| Consumer      loans                                                                   |   |          | 138,069   |   |              |   | 145,475 |   |
| Total      loans and leases                                                           |   |          | 3,313,642 |   |              |   | 3,191,441 |   |
| Reserve      for loan and lease losses                                                |   |          | (71,698   | )      |              |   | (66,602 | ) |
| Net      loans and leases                                                             |   |          | 3,241,944 |   |              |   | 3,124,839 |   |
| Equipment      owned under operating leases, net of accumulated    depreciation       |   |          | 82,517    |   |              |   | 81,960 |   |
| Net      premises and equipment                                                       |   |          | 40,888    |   |              |   | 45,048 |   |
| Goodwill      and intangible assets                                                   |   |          | 92,535    |   |              |   | 93,567 |   |
| Accrued      income and other assets                                                  |   |          | 97,325    |   |              |   | 101,897 |   |
| Total      assets                                                                     |   | $             | 4,477,614 |   |              | $      | 4,447,104 |   |
|                                                                                  |   |          |      |   |              |   |   |   |
| LIABILITIES                                                                           |   |          |      |   |              |   |   |   |
| Deposits:                                                                             |   |          |      |   |              |   |   |   |
| Noninterest      bearing                                                              |   | $             | 385,967   |   |              | $      | 418,529 |   |
| Interest      bearing                                                                 |   |          | 2,979,099 |   |              |   | 3,051,134 |   |
| Total      deposits                                                                   |   |          | 3,365,066 |   |              |   | 3,469,663 |   |
|                                                                                  |   |          |      |   |              |   |   |   |
| Federal      funds purchased and securities                                           |   |          |      |   |              |   |   |   |
| sold      under agreements to repurchase                                              |   |          | 228,853   |   |              |   | 303,429 |   |
| Other      short-term borrowings                                                      |   |          | 257,141   |   |              |   | 34,403 |   |
| Long-term      debt and mandatorily redeemable securities                             |   |          | 34,825    |   |              |   | 34,702 |   |
| Subordinated      notes                                                               |   |          | 89,692    |   |              |   | 100,002 |   |
| Accrued      expenses and other liabilities                                           |   |          | 62,415    |   |              |   | 74,401 |   |
| Total      liabilities                                                                |   |          | 4,037,992 |   |              |   | 4,016,600 |   |
|                                                                                  |   |          |      |   |              |   |   |   |
| SHAREHOLDERS'      EQUITY                                                             |   |          |      |   |              |   |   |   |
| Preferred      stock; no par value                                                    |   |          |      |   |              |   |   |   |
| Authorized      10,000,000 shares; none issued or outstanding                         |   |          | -         |   |              |   | - |   |
| Common      stock; no par value                                                       |   |          |      |   |              |   |   |   |
| Authorized      40,000,000 shares; issued 25,911,397 at June 30, 2008                 |   |          |      |   |              |   |   |   |
| and      25,927,510 at December 31, 2007, less unearned shares                        |   |          |      |   |              |   |   |   |
| (267,891      at June 30, 2008 and 284,004 at December 31, 2007)                      |   |          | 342,976   |   |              |   | 342,840 |   |
| Retained      earnings                                                                |   |          | 127,328   |   |              |   | 117,373 |   |
| Cost      of common stock in treasury (1,533,638 shares at June 30, 2008,      and    |   |          |      |   |              |   |   |   |
| 1,551,396      shares at December 31, 2007)                                           |   |          | (32,031   | )      |              |   | (32,231 | ) |
| Accumulated      other comprehensive income                                           |   |          | 1,349     |   |              |   | 2,522 |   |
| Total      shareholders' equity                                                       |   |          | 439,622   |   |              |   | 430,504 |   |
| Total      liabilities and shareholders' equity                                       |   | $             | 4,477,614 |   |              | $      | 4,447,104 |   |
|                                                                                  |   |          |      |   |              |   |   |   |
|                                                                                  |   |          |      |   |              |   |   |   |
| The      accompanying notes are a part of the consolidated financial      statements. |   |          |      |   |              |   |   |   |

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Table of Contents

| 1st      SOURCE CORPORATION                                                           |   |                    |       |   |                  |   |       |   |   |   |       |   |
|---------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|-----------------------|--------|------------|--------|--------|--------|------------|--------|
| CONSOLIDATED      STATEMENTS OF INCOME                                                |   |                    |       |   |                  |   |       |   |   |   |       |   |
| (Unaudited      - Dollars in thousands, except per share amounts)                     |   |                    |       |   |                  |   |       |   |   |   |       |   |
|                                                                                  |   | Three      Months Ended |       |   | Six      Months Ended |   |
|                                                                                  |   | June      30,           |       |   | June      30,         |   |
|                                                                                  |   | 2008                    |       |   | 2007                  |   |       | 2008   |   |   | 2007       |   |
| Interest      income:                                                                 |   |                    |       |   |                  |   |       |   |   |   |       |   |
| Loans      and leases                                                                 |   | $                       | 50,348     |   |                  | $      | 53,078     |   |   | $      | 103,611    |   |   | $ | 101,352 |   |
| Investment      securities, taxable                                                   |   |                    | 5,945      |   |                  |   | 5,991      |   |   |   | 12,392     |   |   |   | 11,721 |   |
| Investment      securities, tax-exempt                                                |   |                    | 1,926      |   |                  |   | 1,721      |   |   |   | 4,031      |   |   |   | 3,138 |   |
| Other                                                                                 |   |                    | 360        |   |                  |   | 1,542      |   |   |   | 669        |   |   |   | 2,074 |   |
| Total      interest income                                                            |   |                    | 58,579     |   |                  |   | 62,332     |   |   |   | 120,703    |   |   |   | 118,285 |   |
| Interest      expense:                                                                |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |
| Deposits                                                                              |   |                    | 21,649     |   |                  |   | 28,795     |   |   |   | 46,769     |   |   |   | 54,065 |   |
| Short-term      borrowings                                                            |   |                    | 1,798      |   |                  |   | 2,572      |   |   |   | 4,179      |   |   |   | 5,262 |   |
| Subordinated      notes                                                               |   |                    | 1,647      |   |                  |   | 1,296      |   |   |   | 3,419      |   |   |   | 2,390 |   |
| Long-term      debt and mandatorily redeemable securities                             |   |                    | 361        |   |                  |   | 798        |   |   |   | 915        |   |   |   | 1,425 |   |
| Total      interest expense                                                           |   |                    | 25,455     |   |                  |   | 33,461     |   |   |   | 55,282     |   |   |   | 63,142 |   |
| Net      interest income                                                              |   |                    | 33,124     |   |                  |   | 28,871     |   |   |   | 65,421     |   |   |   | 55,143 |   |
| Provision      for loan and lease losses                                              |   |                    | 4,493      |   |                  |   | 1,247      |   |   |   | 6,032      |   |   |   | 624 |   |
| Net      interest income after                                                        |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |
| provision      for loan and lease losses                                              |   |                    | 28,631     |   |                  |   | 27,624     |   |   |   | 59,389     |   |   |   | 54,519 |   |
| Noninterest      income:                                                              |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |
| Trust      fees                                                                       |   |                    | 4,954      |   |                  |   | 3,871      |   |   |   | 9,216      |   |   |   | 7,514 |   |
| Service      charges on deposit accounts                                              |   |                    | 5,764      |   |                  |   | 5,226      |   |   |   | 10,872     |   |   |   | 9,796 |   |
| Mortgage      banking income                                                          |   |                    | 1,417      |   |                  |   | 1,059      |   |   |   | 2,534      |   |   |   | 1,630 |   |
| Insurance      commissions                                                            |   |                    | 1,092      |   |                  |   | 938        |   |   |   | 3,038      |   |   |   | 2,576 |   |
| Equipment      rental income                                                          |   |                    | 5,760      |   |                  |   | 5,287      |   |   |   | 11,509     |   |   |   | 10,385 |   |
| Other      income                                                                     |   |                    | 2,446      |   |                  |   | 2,482      |   |   |   | 4,668      |   |   |   | 4,201 |   |
| Investment      securities and other investment (losses) gains                        |   |                    | (1,066     | )      |                  |   | 207        |   |   |   | (443       | )      |   |   | 454 |   |
| Total      noninterest income                                                         |   |                    | 20,367     |   |                  |   | 19,070     |   |   |   | 41,394     |   |   |   | 36,556 |   |
| Noninterest      expense:                                                             |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |
| Salaries      and employee benefits                                                   |   |                    | 19,065     |   |                  |   | 18,153     |   |   |   | 39,699     |   |   |   | 35,719 |   |
| Net      occupancy expense                                                            |   |                    | 2,481      |   |                  |   | 2,149      |   |   |   | 4,957      |   |   |   | 4,085 |   |
| Furniture      and equipment expense                                                  |   |                    | 3,883      |   |                  |   | 3,748      |   |   |   | 7,861      |   |   |   | 6,842 |   |
| Depreciation      - leased equipment                                                  |   |                    | 4,609      |   |                  |   | 4,243      |   |   |   | 9,225      |   |   |   | 8,319 |   |
| Professional      fees                                                                |   |                    | 2,522      |   |                  |   | 1,267      |   |   |   | 3,680      |   |   |   | 2,168 |   |
| Supplies      and communication                                                       |   |                    | 1,682      |   |                  |   | 1,512      |   |   |   | 3,351      |   |   |   | 2,784 |   |
| Business      development and marketing expense                                       |   |                    | 1,000      |   |                  |   | 1,416      |   |   |   | 1,643      |   |   |   | 2,274 |   |
| Other  expense                                                              |   |                    | 3,153      |   |                  |   | 1,958      |   |   |   | 5,880      |   |   |   | 4,055 |   |
| Total      noninterest expense                                                        |   |                    | 38,395     |   |                  |   | 34,446     |   |   |   | 76,296     |   |   |   | 66,246 |   |
| Income      before income taxes                                                       |   |                    | 10,603     |   |                  |   | 12,248     |   |   |   | 24,487     |   |   |   | 24,829 |   |
| Income      tax expense                                                               |   |                    | 3,358      |   |                  |   | 4,188      |   |   |   | 7,888      |   |   |   | 8,246 |   |
|                                                                                  |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |
| Net      income                                                                       |   | $                       | 7,245      |   |                  | $      | 8,060      |   |   | $      | 16,599     |   |   | $ | 16,583 |   |
|                                                                                  |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |
| Per      common share:                                                                |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |
| Basic      net income per common share                                                |   | $                       | 0.30       |   |                  | $      | 0.35       |   |   | $      | 0.69       |   |   | $ | 0.73 |   |
| Diluted      net income per common share                                              |   | $                       | 0.30       |   |                  | $      | 0.34       |   |   | $      | 0.68       |   |   | $ | 0.72 |   |
| Dividends                                                                             |   | $                       | 0.14       |   |                  | $      | 0.14       |   |   | $      | 0.28       |   |   | $ | 0.28 |   |
| Basic      weighted average common shares outstanding                                 |   |                    | 24,105,746 |   |                  |   | 23,127,790 |   |   |   | 24,101,010 |   |   |   | 22,818,015 |   |
| Diluted      weighted average common shares outstanding                               |   |                    | 24,386,218 |   |                  |   | 23,423,121 |   |   |   | 24,384,170 |   |   |   | 23,113,159 |   |
|                                                                                  |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |
| The      accompanying notes are a part of the consolidated financial      statements. |   |                    |       |   |                  |   |       |   |   |   |       |   |   |   |   |   |

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Table of Contents

| 1st SOURCE CORPORATION                                                                |   |   |    |   |   |   |    |     |   |   |
|---------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|----------|--------|--------|
| CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY                             |   |   |    |   |   |   |    |     |   |   |
| (Unaudited      - Dollars in thousands, except per share amounts)                     |   |   |    |   |   |   |    |     |   |   |
|                                                                                  |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |
|                                                                                  |   |   |    |   |   |   |    |     |   |   |   |   |   | Net |   |
|                                                                                  |   |   |    |   |   |   |    |     |   |   |   |   |   | Unrealized |   |
|                                                                                  |   |   |    |   |   |   |    |     |   |   |   |   |   | Appreciation |   |
|                                                                                  |   |   |    |   |   |   |    |     |   |   | Cost      of |   |   | (Depreciation) |   |
|                                                                                  |   |   |    |   |   |   |    |     |   |   | Common |   |   | of      Securities |   |
|                                                                                  |   |   |    |   | Common |   |    | Retained |   |   | Stock |   |   | Available- |   |
|                                                                                  |   | Total  |    |   | Stock  |   |    | Earnings |   |   | in      Treasury |   |   | For-Sale |   |
| Balance      at January 1, 2007                                                       |   | $      | 368,904 |   |   | $      | 289,163 |     |   | $      | 99,572 |   |   | $ | (19,571 | ) |   | $ | (260 | ) |
| Comprehensive      Income, net of tax:                                                |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income                                                                       |   |   | 16,583  |   |   |   | -       |     |   |   | 16,583 |   |   |   | - |   |   |   | - |   |
| Change      in unrealized appreciation                                                |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| of      available-for-sale securities, net of tax                                     |   |   | (1,750  | )      |   |   | -       |     |   |   | - |   |   |   | - |   |   |   | (1,750 | ) |
| Total      Comprehensive Income                                                       |   |   | 14,833  |   |   |   | -       |     |   |   | - |   |   |   | - |   |   |   | - |   |
| Issuance      of 40,088 common shares                                                 |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| under      stock-based compensation awards,                                           |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| including      related tax effects                                                    |   |   | 538     |   |   |   | -       |     |   |   | 381 |   |   |   | 157 |   |   |   | - |   |
| Cost      of 233,806 shares of common                                                 |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      acquired for treasury                                                      |   |   | (6,110  | )      |   |   | -       |     |   |   | - |   |   |   | (6,110 | ) |   |   | - |   |
| Cash      dividend ($0.28 per share)                                                  |   |   | (6,316  | )      |   |   | -       |     |   |   | (6,316 | ) |   |   | - |   |   |   | - |   |
| Issuance      of 2,124,974 shares of common                                           |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      for FINA Bancorp purchase                                                  |   |   | 53,677  |   |   |   | 53,677  |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at June 30, 2007                                                         |   | $      | 425,526 |   |   | $      | 342,840 |     |   | $      | 110,220 |   |   | $ | (25,524 | ) |   | $ | (2,010 | ) |
|                                                                                  |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at January 1, 2008                                                       |   | $      | 430,504 |   |   | $      | 342,840 |     |   | $      | 117,373 |   |   | $ | (32,231 | ) |   | $ | 2,522 |   |
| Comprehensive      Income, net of tax:                                                |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Income                                                                       |   |   | 16,599  |   |   |   | -       |     |   |   | 16,599 |   |   |   | - |   |   |   | - |   |
| Change      in unrealized appreciation                                                |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| of      available-for-sale securities, net of tax                                     |   |   | (1,173  | )      |   |   | -       |     |   |   | - |   |   |   | - |   |   |   | (1,173 | ) |
| Total      Comprehensive Income                                                       |   |   | 15,426  |   |   |   | -       |     |   |   | - |   |   |   | - |   |   |   | - |   |
| Issuance      of 17,758 common shares                                                 |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| under      stock-based compensation awards,                                           |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| including      related tax effects                                                    |   |   | 319     |   |   |   | -       |     |   |   | 119 |   |   |   | 200 |   |   |   | - |   |
| Stock-based      compensation                                                         |   |   | 136     |   |   |   | 136     |     |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      dividend ($0.28 per share)                                                  |   |   | (6,763  | )      |   |   | -       |     |   |   | (6,763 | ) |   |   | - |   |   |   | - |   |
| Balance      at June 30, 2008                                                         |   | $      | 439,622 |   |   | $      | 342,976 |     |   | $      | 127,328 |   |   | $ | (32,031 | ) |   | $ | 1,349 |   |
|                                                                                  |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |
| The      accompanying notes are a part of the consolidated financial      statements. |   |   |    |   |   |   |    |     |   |   |   |   |   |   |   |   |   |

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Table of Contents

| 1st      SOURCE CORPORATION                                                           |   |                           |     |   |   |   |
|---------------------------------------------------------------------------------------|--------|--------------------------------|----------|--------|--------|--------|
| CONSOLIDATED      STATEMENTS OF CASH FLOWS                                            |   |                           |     |   |   |   |
| (Unaudited      - Dollars in thousands)                                               |   |                           |     |   |   |   |
|                                                                                  |   | Six      Months Ended June 30, |     |
|                                                                                  |   | 2008                           |     |   | 2007   |   |
| Operating      activities:                                                            |   |                           |     |   |   |   |
| Net      income                                                                       |   | $                              | 16,599   |   |   | $      | 16,583 |   |
| Adjustments      to reconcile net income to net cash                                  |   |                           |     |   |   |   |   |   |
| provided      by operating activities:                                                |   |                           |     |   |   |   |   |   |
| Provision      for loan and lease losses                                              |   |                           | 6,032    |   |   |   | 624 |   |
| Depreciation      of premises and equipment                                           |   |                           | 2,848    |   |   |   | 2,518 |   |
| Depreciation      of equipment owned and leased to others                             |   |                           | 9,225    |   |   |   | 8,319 |   |
| Amortization      of investment security premiums                                     |   |                           |     |   |   |   |   |   |
| and      accretion of discounts, net                                                  |   |                           | 654      |   |   |   | 71 |   |
| Amortization      of mortgage servicing rights                                        |   |                           | 1,552    |   |   |   | 638 |   |
| Mortgage      servicing asset impairment                                              |   |                           | 69       |   |   |   | - |   |
| Deferred      income taxes                                                            |   |                           | (5,405   | )      |   |   | (2,272 | ) |
| Realized      investment securities losses (gains)                                    |   |                           | 443      |   |   |   | (454 | ) |
| Change      in mortgages held for sale                                                |   |                           | (9,962   | )      |   |   | 24,561 |   |
| Change      in trading account securities                                             |   |                           | (150     | )      |   |   | - |   |
| Change      in interest receivable                                                    |   |                           | 1,528    |   |   |   | (1,853 | ) |
| Change      in interest payable                                                       |   |                           | (4,132   | )      |   |   | 3,901 |   |
| Change      in other assets                                                           |   |                           | 2,456    |   |   |   | 625 |   |
| Change      in other liabilities                                                      |   |                           | (1,733   | )      |   |   | 10,571 |   |
| Other                                                                                 |   |                           | 3,105    |   |   |   | 932 |   |
| Net      change in operating activities                                               |   |                           | 23,129   |   |   |   | 64,764 |   |
|                                                                                  |   |                           |     |   |   |   |   |   |
| Investing      activities:                                                            |   |                           |     |   |   |   |   |   |
| Cash      paid for acquisition, net                                                   |   |                           | -        |   |   |   | (56,370 | ) |
| Proceeds      from sales of investment securities                                     |   |                           | 5,579    |   |   |   | 1,070 |   |
| Proceeds      from maturities of investment securities                                |   |                           | 287,077  |   |   |   | 178,157 |   |
| Purchases      of investment securities                                               |   |                           | (228,095 | )      |   |   | (83,099 | ) |
| Net      change in short-term investments                                             |   |                           | (6,974   | )      |   |   | 24,923 |   |
| Net      change in loans and leases                                                   |   |                           | (123,137 | )      |   |   | (192,667 | ) |
| Net      change  in equipment owned under operatingleases                   |   |                           | (9,782   | )      |   |   | (11,091 | ) |
| Purchases      of premises and equipment                                              |   |                           | (1,073   | )      |   |   | (13,549 | ) |
| Net      change in investing activities                                               |   |                           | (76,405  | )      |   |   | (152,626 | ) |
|                                                                                  |   |                           |     |   |   |   |   |   |
| Financing      activities:                                                            |   |                           |     |   |   |   |   |   |
| Net      change in demand deposits, NOW                                               |   |                           |     |   |   |   |   |   |
| accounts      and savings accounts                                                    |   |                           | (73,017  | )      |   |   | (156,790 | ) |
| Net      change in certificates of deposit                                            |   |                           | (31,580  | )      |   |   | 171,807 |   |
| Net      change in short-term borrowings                                              |   |                           | 148,162  |   |   |   | 23,549 |   |
| Proceeds      from issuance of long-term debt                                         |   |                           | 10,022   |   |   |   | - |   |
| Proceeds      from issuance of trust preferred securities                             |   |                           | -        |   |   |   | 41,238 |   |
| Payments      on subordinated notes                                                   |   |                           | (10,310  | )      |   |   | - |   |
| Payments      on long-term debt                                                       |   |                           | (10,370  | )      |   |   | (385 | ) |
| Net      proceeds from issuance of treasury stock                                     |   |                           | 319      |   |   |   | 539 |   |
| Acquisition      of treasury stock                                                    |   |                           | -        |   |   |   | (6,110 | ) |
| Cash      dividends                                                                   |   |                           | (6,879   | )      |   |   | (6,426 | ) |
| Net      change in financing activities                                               |   |                           | 26,347   |   |   |   | 67,422 |   |
| Net      change in cash and cash equivalents                                          |   |                           | (26,929  | )      |   |   | (20,440 | ) |
| Cash      and cash equivalents, beginning of year                                     |   |                           | 153,137  |   |   |   | 118,131 |   |
| Cash      and cash equivalents, end of period                                         |   | $                              | 126,208  |   |   | $      | 97,691 |   |
|                                                                                  |   |                           |     |   |   |   |   |   |
| Supplemental      non-cash activity:                                                  |   |                           |     |   |   |   |   |   |
| Common      stock issued for purchase of FNBV                                         |   |                           | -        |   |   | $      | 53,677 |   |
|                                                                                  |   |                           |     |   |   |
| The      accompanying notes are a part of the consolidated financial      statements. |   |                           |     |   |   |

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|                                              |   |               |    |   |            |   |   |            |   |   |            |   |
|---------------------------------------------------|--------|--------------------|---------|--------|-----------------|--------|--------|-----------------|--------|--------|-----------------|--------|
|                                              |   | June      30, 2008 |    |   |            |   |   |            |   |
|                                              |   |               |    |   |            |   |   | Average         |   |   |            |   |
|                                              |   |               |    |   | Weighted        |   |   | Remaining       |   |   | Total           |   |
|                                              |   |               |    |   | Average         |   |   | Contractual     |   |   | Intrinsic       |   |
|                                              |   | Number      of     |    |   | Grant-date      |   |   | Term            |   |   | Value           |   |
|                                              |   | Shares             |    |   | Fair      Value |   |   | (in      years) |   |   | (in      000's) |   |
|                                              |   |               |    |   |            |   |   |            |   |   |            |   |
| Options      outstanding, beginning of year       |   |               | 471,517 |   |            | $      | 26.51  |            |   |   |            |   |   |   |
| Granted                                           |   |               | -       |   |            |   | -      |            |   |   |            |   |   |   |
| Exercised                                         |   |               | -       |   |            |   | -      |            |   |   |            |   |   |   |
| Forfeited                                         |   |               | (14,008 | )      |            |   | 26.76  |            |   |   |            |   |   |   |
| Options      outstanding, June 30, 2008           |   |               | 457,509 |   |            | $      | 26.51  |            |   |   | 0.65            |   |   | $ | 89 |   |
|                                              |   |               |    |   |            |   |   |            |   |   |            |   |   |   |   |   |
|                                              |   |               |    |   |            |   |   |            |   |   |            |   |   |   |   |   |
| Vested      and expected to vest at June 30, 2008 |   |               | 457,509 |   |            | $      | 26.51  |            |   |   | 0.65            |   |   | $ | 89 |   |
| Exercisable      at June 30, 2008                 |   |               | 449,259 |   |            | $      | 26.77  |            |   |   | 0.57            |   |   | $ | 56 |   |

|          |                 |   | Options      Outstanding |   |    | Options      Exercisable |   |
|---------------|----------------------|--------|--------------------------|--------|---------|--------------------------|--------|
|          |                 |   |                     |   |    | Weighted                 |   |   |   |   |   |   |   |   |   |   |
|          |                 |   |                     |   |    | Average                  |   |   | Weighted |   |   |   |   |   | Weighted |   |
| Range      of |                 |   | Number                   |   |    | Remaining                |   |   | Average |   |   | Number |   |   | Average |   |
| Exercise      |                 |   | of      shares           |   |    | Contractual              |   |   | Exercise |   |   | of      shares |   |   | Exercise |   |
| Prices        |                 |   | Outstanding              |   |    | Life                     |   |   | Price |   |   | Exercisable |   |   | Price |   |
| $             | 12.04      to $17.99 |   |                     |   | 29,508  |                     |   |   | 4.24 |   |   | $ | 13.38 |   |   |   | 21,258 |   |   | $ | 13.90 |   |
| $             | 18.00      to $26.99 |   |                     |   | 48,917  |                     |   |   | 2.68 |   |   |   | 20.46 |   |   |   | 48,917 |   |   |   | 20.46 |   |
| $             | 27.00      to $28.40 |   |                     |   | 379,084 |                     |   |   | 0.11 |   |   |   | 28.31 |   |   |   | 379,084 |   |   |   | 28.31 |   |

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| §   | Investment      securities available for sale are valued primarily by a third party      pricing agent and both the market and income valuation approaches are      implemented using the following types ofinputs: |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Mortgages      held for sale and the related loan commitments and forward contracts      (hedges) are valued using an income approach and utilizing an appropriate      current market yield and a loan commitment closing rate based on      historical analysis. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| §   | Interest      rate swap positions, both assets and liabilities, are valued by a      third-party pricing agent using an income approach and utilizing models      that use as their basis readily observable market      parameters.  This valuation process considers various factors      including interest rate yield curves, time value and volatility      factors. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Assets      and Liabilities Measured at Fair Value on a recurring    basis: |   |         |   |   |         |   |    |         |   |   |
|-----------------------------------------------------------------------------|--------|--------------|--------|--------|--------------|--------|---------|--------------|--------|--------|
|                                                                        |   |         |   |   |         |   |    |         |   |   | June      30, 2008 |   |
| (Dollars      in thousands)                                                 |   | Level      1 |   |   | Level      2 |   |    | Level      3 |   |   | Total |   |
| Assets:                                                                     |   |         |   |   |         |   |    |         |   |   |   |   |
| Investment      securities available for sale                               |   | $            | 52,539 |   |         | $      | 640,521 |         |   | $      | 19,376 |   |   | $ | 712,436 |   |
| Mortgages      held for sale                                                |   |         | -      |   |         |   | 35,883  |         |   |   | - |   |   |   | 35,883 |   |
| Accrued      income and other assets (Interest rate swap                    |   |         | -      |   |         |   |    |         |   |   | - |   |   |   | - |   |
|      agreements)                                   |   |         |   |   |         |   | 5,251   |         |   |   |   |   |   |   | 5,251 |   |
| Total                                                                       |   | $            | 52,539 |   |         | $      | 681,655 |         |   | $      | 19,376 |   |   | $ | 753,570 |   |
|                                                                        |   |         |   |   |         |   |    |         |   |   |   |   |   |   |   |   |
| Liabilities                                                                 |   |         |   |   |         |   |    |         |   |   |   |   |   |   | - |   |
| Accrued      expenses and other liabilities (Interest rate                  |   |         |   |   |         |   |    |         |   |   |   |   |   |   |   |   |
|      swap      agreements)                         |   | $            | -      |   |         | $      | 5,251   |         |   | $      | - |   |   | $ | 5,251 |   |
| Total                                                                       |   | $            | -      |   |         | $      | -       |         |   | $      | - |   |   | $ | - |   |

|                                                                                                    |   |                                          |   |
|---------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                                    |   |                                          |   |
|                                                                                                    |   |                                          |   |
|                                                                                                    |   |                                          |   |
| (Dollars      in thousands)                                                                             |   | Quarter      ended June 30, 2008              |   |
|                                                                                                    |   | Investment      securities available for sale |   |
| Beginning      balance April 1, 2008                                                                    |   | $                                             | 13,681 |   |
|   Total      gains or losses (realized/unrealized):                                           |   |                                          |   |   |
|           Included      in earnings                   |   |                                          | (47    | ) |
|           Included      in other comprehensive income |   |                                          | (215   | ) |
|   Purchases      and issuances                                                                |   |                                          | 11,822 |   |
|   Settlements                                                                                 |   |                                          | -      |   |
|   Maturities                                                                                  |   |                                          | (4,222 | ) |
|   Transfers      in and/or out of Level 3                                                     |   |                                          | (1,643 | ) |
| Ending      balance June 30, 2008                                                                       |   | $                                             | 19,376 |   |
|                                                                                                    |   |                                          |   |   |
| The      amount of total gains or (losses) for the period included in      earnings                     |   |                                          |   |   |
| attributable      to the change in unrealized gains or losses relating to                               |   |                                          |   |   |
| assets      and liabilities still held at June 30, 2008.                                                |   | $                                             | -      |   |

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|                                                                                |   |               |   |   |         |   |   |         |   |   |   |   |
|-------------------------------------------------------------------------------------|--------|--------------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------|--------|
|                                                                                |   |               |   |   |         |   |   |         |   |   |   |   |
| Assets      and Liabilities Measured at Fair Value on a non-recurring      basis:   |   |               |   |   |         |   |   |         |   |   |
|                                                                                |   |               |   |   |         |   |   |         |   |   |   |   |
|                                                                                |   |               |   |
|                                                                                |   | June      30, 2008 |   |
| (Dollars      in thousands)                                                         |   | Level      1       |   |   | Level      2 |   |   | Level      3 |   |   | Total  |   |
|                                                                                |   |               |   |   |         |   |   |         |   |   |   |   |
| Loans                                                                               |   | $                  | -      |   |         | $      | -      |         |   | $      | 17,021 |   |   | $ | 17,021 |   |
| Accrued      income and other assets (venture capital partnership      investments) |   |               | -      |   |         |   | -      |         |   |   | 2,766  |   |   |   | 2,766 |   |
| Accrued      income and other assets (mortgage servicing rights)                    |   |               |   |   |         |   |   |         |   |   | 11,275 |   |   |   | 11,275 |   |
|                                                                                |   | $                  | -      |   |         | $      | -      |         |   | $      | 19,787 |   |   | $ | 19,787 |   |

|                                                                                                                               |   |                            |   |   |                            |   |   |                                                                        |   |   |   |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|--------|--------|---------------------------------|--------|--------|-----------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                                                               |   |                            |   |   |                            |   |   |                                                                        |   |   |   |   |
|                                                                                                                               |   |                            |   |   |                            |   |   |                                                                        |   |   |   |   |
|                                                                                                                               |   |                            |   |   |                            |   |   |                                                                        |   |   |   |   |
| (Dollars      in thousands)                                                                                                        |   | Fair      value carrying amount |   |   | Aggregate      unpaid principal |   |   | Excess      of fair value carrrying amount over (under) unpaid    principal |   |   |   |   |
|                                                                                                                               |   |                            |   |   |                            |   |   |                                                                        |   |   |   |   |
| Mortgages      held for sale reported at fair value:                                                                               |   |                            |   |   |                            |   |   |                                                                        |   |   |   |   |
|   Total      loans                                                                                                       |   | $                               | 35,883 |   |                            | $      | 35,224 |                                                                        |   | $      | 659    |   |   |   | (1 | ) |
|   Nonaccrual      loans                                                                                                  |   |                            | -      |   |                            |   | -      |                                                                        |   |   | -      |   |   |   |   |   |
|   Loans      90 days or more past due and still accruing                                                                 |   |                            | -      |   |                            |   | -      |                                                                        |   |   | -      |   |   |   |   |   |
|                                                                                                                               |   |                            |   |   |                            |   |   |                                                                        |   |   |   |   |   |   |   |   |
| (1)      The excess of fair value carrying amount over unpaid principal includes      changes in fair value recorded at and        |   |
| subsequent      to funding, gains and losses on the related loan commitment prior to      funding, and premiums on acquired loans. |   |

MAN

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| (Dollars      in Thousands)                         |   |          |   |
|-----------------------------------------------------|--------|---------------|--------|
|                                                |   |          |   |
|                                                |   | June      30, |   |   | December      31, |   |
|                                                |   | 2008          |   |   | 2007 |   |
| Accrued      income and other assets:               |   |          |   |   |   |   |
| Bank      owned life insurance cash surrender value |   | $             | 38,064 |   |   | $ | 38,871 |   |
| Accrued      interest receivable                    |   |          | 17,764 |   |   |   | 19,293 |   |
| Mortgage      servicing assets                      |   |          | 6,590  |   |   |   | 7,279 |   |
| Other      real estate                              |   |          | 1,079  |   |   |   | 781 |   |
| Former      bank premises held for sale             |   |          | 4,181  |   |   |   | 4,040 |   |
| Repossessions                                       |   |          | 1,091  |   |   |   | 2,291 |   |
| All      other assets                               |   |          | 28,556 |   |   |   | 29,342 |   |
| Total      accrued income and other assets          |   | $             | 97,325 |   |   | $ | 101,897 |   |

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|                                           |   |   |    |   |     |   |   |                   |   |   |                   |   |   |                   |   |   |   |   |
|------------------------------------------------|--------|--------|---------|--------|----------|--------|--------|------------------------|--------|--------|------------------------|--------|--------|------------------------|--------|--------|--------|--------|
|                                           |   |   |    |   |     |   |   |                   |   |   |                   |   |   | To      Be Well        |   |
|                                           |   |   |    |   |     |   |   |                   |   |   |                   |   |   | Capitalized      Under |   |
|                                           |   |   |    |   |     |   |   | Minimum      Capital   |   |   | Prompt      Corrective |   |
|                                           |   | Actual |    |   | Adequacy |   |   | Action      Provisions |   |
| (Dollars      in thousands)                    |   | Amount |    |   | Ratio    |   |   | Amount                 |   |   | Ratio                  |   |   | Amount                 |   |   | Ratio  |   |
| Total      Capital (To Risk-Weighted Assets):  |   |   |    |   |     |   |   |                   |   |   |                   |   |   |                   |   |   |   |   |
| 1st      Source Corporation                    |   | $      | 480,676 |   |     |   | 12.77  | %                      |   | $      | 301,212                |   |   |                   | 8.00   | %      |   | $      | 376,514 |   |   |   | 10.00 | % |
| 1st      Source Bank                           |   |   | 475,337 |   |     |   | 12.68  |                   |   |   | 299,892                |   |   |                   | 8.00   |   |   |   | 374,865 |   |   |   | 10.00 |   |
| Tier      1 Capital (to Risk-Weighted Assets): |   |   |    |   |     |   |   |                   |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| 1st      Source Corporation                    |   |   | 432,556 |   |     |   | 11.49  |                   |   |   | 150,606                |   |   |                   | 4.00   |   |   |   | 225,909 |   |   |   | 6.00 |   |
| 1st      Source Bank                           |   |   | 428,049 |   |     |   | 11.42  |                   |   |   | 149,946                |   |   |                   | 4.00   |   |   |   | 224,919 |   |   |   | 6.00 |   |
| Tier      1 Capital (to Average Assets):       |   |   |    |   |     |   |   |                   |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| 1st      Source Corporation                    |   |   | 432,556 |   |     |   | 10.07  |                   |   |   | 171,896                |   |   |                   | 4.00   |   |   |   | 214,869 |   |   |   | 5.00 |   |
| 1st      Source Bank                           |   |   | 428,049 |   |     |   | 10.05  |                   |   |   | 170,407                |   |   |                   | 4.00   |   |   |   | 213,009 |   |   |   | 5.00 |   |

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| DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS'      EQUITY |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |
|-------------------------------------------------------------------|--------|-----------------------------|-----------|--------|-----------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|----------|-----------|--------|--------|--------|--------|---------|--------|--------|----------|--------|--------|
| INTEREST      RATES AND INTEREST DIFFERENTIAL                     |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |
| (Dollars      in thousands)                                       |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |
|                                                              |   | Three months ended June 30, |      |   | Six months ended June    30, |   |
|                                                              |   |                        |      |   | 2008                              |   |   |   |   |   |    |   |   | 2007     |      |   |   |   |   |    |   |   | 2008     |   |   |   |   |   |   |   |   | 2007 |   |   |   |   |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                        |      |   | Interest                          |   |   |   |   |   |    |   |   | Interest |      |   |   |   |   |    |   |   | Interest |   |   |   |   |   |   |   |   | Interest |   |   |   |   |
|                                                              |   | Average                     |      |   | Income/                           |   |   | Yield/ |   |   | Average |   |   | Income/  |      |   | Yield/ |   |   | Average |   |   | Income/  |   |   | Yield/ |   |   | Average |   |   | Income/ |   |   | Yield/ |   |
|                                                              |   | Balance                     |      |   | Expense                           |   |   | Rate   |   |   | Balance |   |   | Expense  |      |   | Rate   |   |   | Balance |   |   | Expense  |   |   | Rate |   |   | Balance |   |   | Expense |   |   | Rate |   |
| ASSETS:                                                           |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Investment      securities:                                       |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                           |   | $                           | 505,109   |   |                              | $      | 5,945  |   |   |   | 4.73    | %      |   | $        | 482,344   |   |   | $      | 5,821  |    |   |   | 4.84     | %      |   | $ | 516,576 |   |   | $ | 12,392 |   |   |   | 4.82 | % |   | $ | 478,333 |   |   | $ | 11,439 |   |   |   | 4.82 | % |
| Tax      exempt                                                   |   |                        | 225,172   |   |                              |   | 2,688  |   |   |   | 4.80    | %      |   |     | 210,090   |   |   |   | 2,364  |    |   |   | 4.51     | %      |   |   | 230,627 |   |   |   | 5,583 |   |   |   | 4.87 | % |   |   | 195,556 |   |   |   | 4,382 |   |   |   | 4.52 | % |
| Mortgages      - held for sale                                    |   |                        | 36,462    |   |                              |   | 537    |   |   |   | 5.92    | %      |   |     | 32,047    |   |   |   | 494    |    |   |   | 6.18     | %      |   |   | 34,412 |   |   |   | 1,021 |   |   |   | 5.97 | % |   |   | 35,489 |   |   |   | 1,132 |   |   |   | 6.43 | % |
| Net      loans and leases                                         |   |                        | 3,253,147 |   |                              |   | 49,959 |   |   |   | 6.18    | %      |   |     | 2,899,340 |   |   |   | 52,681 |    |   |   | 7.29     | %      |   |   | 3,215,371 |   |   |   | 102,867 |   |   |   | 6.43 | % |   |   | 2,803,434 |   |   |   | 100,409 |   |   |   | 7.22 | % |
| Other      investments                                            |   |                        | 35,476    |   |                              |   | 360    |   |   |   | 4.08    | %      |   |     | 129,040   |   |   |   | 1,712  |    |   |   | 5.32     | %      |   |   | 35,784 |   |   |   | 669 |   |   |   | 3.76 | % |   |   | 90,257 |   |   |   | 2,356 |   |   |   | 5.26 | % |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Earning Assets                                         |   |                        | 4,055,366 |   |                              |   | 59,489 |   |   |   | 5.90    | %      |   |     | 3,752,861 |   |   |   | 63,072 |    |   |   | 6.74     | %      |   |   | 4,032,770 |   |   |   | 122,532 |   |   |   | 6.11 | % |   |   | 3,603,069 |   |   |   | 119,718 |   |   |   | 6.70 | % |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash      and due from banks                                      |   |                        | 88,565    |   |                              |   |   |   |   |   |    |   |   |     | 79,994    |   |   |   |   |    |   |   |     |   |   |   | 92,071 |   |   |   |   |   |   |   |   |   |   |   | 75,107 |   |   |   |   |   |   |   |   |   |
| Reserve      for loan and lease losses                            |   |                        | (68,407   | )      |                              |   |   |   |   |   |    |   |   |     | (59,470   | )      |   |   |   |    |   |   |     |   |   |   | (67,621 | ) |   |   |   |   |   |   |   |   |   |   | (59,137 | ) |   |   |   |   |   |   |   |   |
| Other      assets                                                 |   |                        | 314,399   |   |                              |   |   |   |   |   |    |   |   |     | 251,525   |   |   |   |   |    |   |   |     |   |   |   | 318,610 |   |   |   |   |   |   |   |   |   |   |   | 235,262 |   |   |   |   |   |   |   |   |   |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                             |   | $                           | 4,389,923 |   |                              |   |   |   |   |   |    |   |   | $        | 4,024,910 |   |   |   |   |    |   |   |     |   |   | $ | 4,375,830 |   |   |   |   |   |   |   |   |   |   | $ | 3,854,301 |   |   |   |   |   |   |   |   |   |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES      AND SHAREHOLDERS' EQUITY:                        |   |                        |      |   |                              |   |   |   |   |   |    |   |   |
| Interest-bearing      deposits                                    |   | $                           | 3,006,221 |   |                              | $      | 21,649 |   |   |   | 2.90    | %      |   | $        | 2,840,382 |   |   | $      | 28,795 |    |   |   | 4.07     | %      |   | $ | 3,006,812 |   |   | $ | 46,769 |   |   |   | 3.13 | % |   | $ | 2,709,051 |   |   | $ | 54,065 |   |   |   | 4.02 | % |
| Short-term      borrowings                                        |   |                        | 354,971   |   |                              |   | 1,798  |   |   |   | 2.04    | %      |   |     | 241,297   |   |   |   | 2,572  |    |   |   | 4.28     | %      |   |   | 347,126 |   |   |   | 4,179 |   |   |   | 2.42 | % |   |   | 245,063 |   |   |   | 5,262 |   |   |   | 4.33 | % |
| Subordinated      notes                                           |   |                        | 89,692    |   |                              |   | 1,647  |   |   |   | 7.39    | %      |   |     | 69,898    |   |   |   | 1,296  |    |   |   | 7.44     | %      |   |   | 92,241 |   |   |   | 3,419 |   |   |   | 7.45 | % |   |   | 64,490 |   |   |   | 2,390 |   |   |   | 7.47 | % |
| Long-term      debt and                                           |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mandatorilyredeemable securities                             |   |                        | 34,993    |   |                              |   | 361    |   |   |   | 4.15    | %      |   |     | 43,545    |   |   |   | 798    |    |   |   | 7.35     | %      |   |   | 34,541 |   |   |   | 915 |   |   |   | 5.33 | % |   |   | 43,560 |   |   |   | 1,425 |   |   |   | 6.60 | % |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Interest-Bearing Liabilities                           |   |                        | 3,485,877 |   |                              |   | 25,455 |   |   |   | 2.94    | %      |   |     | 3,195,122 |   |   |   | 33,461 |    |   |   | 4.20     | %      |   |   | 3,480,720 |   |   |   | 55,282 |   |   |   | 3.19 | % |   |   | 3,062,164 |   |   |   | 63,142 |   |   |   | 4.16 | % |
| Noninterest-bearing       deposits                           |   |                        | 383,756   |   |                              |   |   |   |   |   |    |   |   |     | 351,865   |   |   |   |   |    |   |   |     |   |   |   | 377,038 |   |   |   |   |   |   |   |   |   |   |   | 333,099 |   |   |   |   |   |   |   |   |   |
| Other      liabilities                                            |   |                        | 74,781    |   |                              |   |   |   |   |   |    |   |   |     | 81,750    |   |   |   |   |    |   |   |     |   |   |   | 75,443 |   |   |   |   |   |   |   |   |   |   |   | 73,794 |   |   |   |   |   |   |   |   |   |
| Shareholders'      equity                                         |   |                        | 445,509   |   |                              |   |   |   |   |   |    |   |   |     | 396,173   |   |   |   |   |    |   |   |     |   |   |   | 442,629 |   |   |   |   |   |   |   |   |   |   |   | 385,244 |   |   |   |   |   |   |   |   |   |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                             |   | $                           | 4,389,923 |   |                              |   |   |   |   |   |    |   |   | $        | 4,024,910 |   |   |   |   |    |   |   |     |   |   | $ | 4,375,830 |   |   |   |   |   |   |   |   |   |   | $ | 3,854,301 |   |   |   |   |   |   |   |   |   |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Interest Income                                          |   |                        |      |   |                              | $      | 34,034 |   |   |   |    |   |   |     |      |   |   | $      | 29,611 |    |   |   |     |   |   |   |   |   |   | $ | 67,250 |   |   |   |   |   |   |   |   |   |   | $ | 56,576 |   |   |   |   |   |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      Yield on Earning Assets on a Taxable Equivalent          |   |                        |      |   |                              |   |   |   |   |   |    |   |   |     |      |   |   |   |   |    |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basis                                                             |   |                        |      |   |                              |   |   |   |   |   | 3.38    | %      |   |     |      |   |   |   |   |    |   |   | 3.16     | %      |   |   |   |   |   |   |   |   |   |   | 3.35 | % |   |   |   |   |   |   |   |   |   |   | 3.17 | % |

----

Table of Contents

|                                                        |   | Summary      of Reserve for Loan and Lease Losses |      |
|-------------------------------------------------------------|--------|---------------------------------------------------|-----------|
|                                                        |   | (Dollars      in Thousands)                       |      |
|                                                        |   | Three      Months Ended                           |      |   | Six      Months Ended |   |
|                                                        |   | June      30,                                     |      |   | June      30, |   |
|                                                        |   | 2008                                              |      |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                                        |   |                                              |      |   |   |   |   |   |   |   |   |   |
|                                                        |   |                                              |      |   |   |   |   |   |   |   |   |   |
|                                                        |   |                                              |      |   |   |   |   |   |   |   |   |   |
| Reserve      for loan and lease losses - beginning balance  |   | $                                                 | 67,428    |   |   | $ | 58,702 |   |   | $ | 66,602 |   |   | $ | 58,802 |   |
| Acquired      reserves from acquisitions                    |   |                                              | -         |   |   |   | 2,214 |   |   |   | - |   |   |   | 2,214 |   |
| Charge-offs                                                 |   |                                              | (1,333    | ) |   |   | (1,085 | ) |   |   | (2,915 | ) |   |   | (2,430 | ) |
| Recoveries                                                  |   |                                              | 1,110     |   |   |   | 1,604 |   |   |   | 1,979 |   |   |   | 3,472 |   |
| Net      (charge-offs)/recoveries                           |   |                                              | (223      | ) |   |   | 519 |   |   |   | (936 | ) |   |   | 1,042 |   |
|                                                        |   |                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for loan and lease losses                    |   |                                              | 4,493     |   |   |   | 1,247 |   |   |   | 6,032 |   |   |   | 624 |   |
|                                                        |   |                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserve      for loan and lease losses - ending balance     |   | $                                                 | 71,698    |   |   | $ | 62,682 |   |   | $ | 71,698 |   |   | $ | 62,682 |   |
|                                                        |   |                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans      and leases outstanding at end of period          |   | $                                                 | 3,313,642 |   |   | $ | 3,134,170 |   |   | $ | 3,313,642 |   |   | $ | 3,134,170 |   |
| Average      loans and leases outstanding during period     |   |                                              | 3,253,147 |   |   |   | 2,899,340 |   |   |   | 3,215,371 |   |   |   | 2,803,434 |   |
|                                                        |   |                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                        |   |                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserve      for loan and lease losses as a percentage of   |   |                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| loans      and leases outstanding at end of period          |   |                                              | 2.16      | % |   |   | 2.00 | % |   |   | 2.16 | % |   |   | 2.00 | % |
| Ratio      of net charge offs/(recoveries) during period to |   |                                              |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| average      loans and leases outstanding                   |   |                                              | 0.03      | % |   |   | (0.07 | )      % |   |   | 0.06 | % |   |   | (0.07 | )      % |

| (Dollars      in thousands)                       |   |          |   |   |              |   |   |          |   |
|---------------------------------------------------|--------|---------------|--------|--------|-------------------|--------|--------|---------------|--------|
|                                              |   | June      30, |   |   | December      31, |   |   | June      30, |   |
|                                              |   | 2008          |   |   | 2007              |   |   | 2007          |   |
|                                              |   |          |   |   |              |   |   |          |   |
|                                              |   |          |   |   |              |   |   |          |   |
| Loans      and leases past due 90 days or more    |   | $             | 929    |   |              | $      | 1,105  |          |   | $ | 205 |   |
| Nonaccrual      and restructured loans and leases |   |          | 20,807 |   |              |   | 10,136 |          |   |   | 10,274 |   |
| Other      real estate                            |   |          | 1,079  |   |              |   | 781    |          |   |   | 1,001 |   |
| Former      bank premises held for sale           |   |          | 4,181  |   |              |   | 4,040  |          |   |   | 1,855 |   |
| Repossessions                                     |   |          | 1,091  |   |              |   | 2,291  |          |   |   | 2,183 |   |
| Equipment      owned under operating leases       |   |          | 57     |   |              |   | 126    |          |   |   | 170 |   |
|                                              |   |          |   |   |              |   |   |          |   |   |   |   |
| Total      nonperforming assets                   |   | $             | 28,144 |   |              | $      | 18,479 |          |   | $ | 15,688 |   |

----

Table of Contents

| (Dollars      in thousands)                        |   |                  |      |   | Nonaccrual              |   |   | Other      real estate |   |   | Year-to-date            |   |
|----------------------------------------------------|--------|-----------------------|-----------|--------|-------------------------|--------|--------|------------------------|--------|--------|-------------------------|--------|
|                                               |   | Loans      and leases |      |   | and                     |   |   | owned      and         |   |   | net      credit losses/ |   |
|                                               |   | outstanding           |      |   | restructured      loans |   |   | repossessions          |   |   | (recoveries)            |   |
|                                               |   |                  |      |   |                    |   |   |                   |   |   |                    |   |
| Commercial      and agricultural loans             |   | $                     | 669,867   |   |                    | $      | 2,221  |                   |   | $      | 6                       |   |   | $ | 359 |   |
| Auto,      light truck and environmental equipment |   |                  | 349,182   |   |                    |   | 481    |                   |   |   | 82                      |   |   |   | (52 | ) |
| Medium      and heavy duty truck                   |   |                  | 270,141   |   |                    |   | 10,010 |                   |   |   | 563                     |   |   |   | 471 |   |
| Aircraft      financing                            |   |                  | 579,131   |   |                    |   | 909    |                   |   |   | 250                     |   |   |   | (743 | ) |
| Construction      equipment financing              |   |                  | 398,888   |   |                    |   | 654    |                   |   |   | 150                     |   |   |   | 205 |   |
| Loans      secured by real estate                  |   |                  | 908,364   |   |                    |   | 6,366  |                   |   |   | 1,079                   |   |   |   | 288 |   |
| Consumer      loans                                |   |                  | 138,069   |   |                    |   | 166    |                   |   |   | 40                      |   |   |   | 213 |   |
|                                               |   |                  |      |   |                    |   |   |                   |   |   |                    |   |   |   |   |   |
| Total                                              |   | $                     | 3,313,642 |   |                    | $      | 20,807 |                   |   | $      | 2,170                   |   |   | $ | 741 |   |

|                                                                       |   |                    |   |   |                  |   |   |   |   |   |   |   |
|----------------------------------------------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|--------|--------|--------|--------|--------|--------|
| (Dollars      in thousands)                                                |   | Three      Months Ended |   |   | Six      Months Ended |   |
|                                                                       |   | June      30,           |   |   | June      30,         |   |
|                                                                       |   | 2008                    |   |   | 2007                  |   |   | 2008   |   |   | 2007   |   |
| Noninterest      income:                                                   |   |                    |   |   |                  |   |   |   |   |   |   |   |
|   Trust      fees                                                |   | $                       | 4,954  |   |                  | $      | 3,871  |   |   | $      | 9,216  |   |   | $ | 7,514 |   |
|   Service      charges on deposit accounts                       |   |                    | 5,764  |   |                  |   | 5,226  |   |   |   | 10,872 |   |   |   | 9,796 |   |
|   Mortgage      banking income                                   |   |                    | 1,417  |   |                  |   | 1,059  |   |   |   | 2,534  |   |   |   | 1,630 |   |
|   Insurance      commissions                                     |   |                    | 1,092  |   |                  |   | 938    |   |   |   | 3,038  |   |   |   | 2,576 |   |
|   Equipment      rental income                                   |   |                    | 5,760  |   |                  |   | 5,287  |   |   |   | 11,509 |   |   |   | 10,385 |   |
|   Other      income                                              |   |                    | 2,446  |   |                  |   | 2,482  |   |   |   | 4,668  |   |   |   | 4,201 |   |
|   Investment      securities and other investment (losses) gains |   |                    | (1,066 | )      |                  |   | 207    |   |   |   | (443   | )      |   |   | 454 |   |
|                                                                       |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total      noninterest income                                              |   | $                       | 20,367 |   |                  | $      | 19,070 |   |   | $      | 41,394 |   |   | $ | 36,556 |   |

----

Table of Contents

| (Dollars      in thousands)                             |   | Three      Months Ended |   |   | Six      Months Ended |   |
|---------------------------------------------------------|--------|-------------------------|--------|--------|-----------------------|--------|
|                                                    |   | June      30,           |   |   | June      30,         |   |
|                                                    |   | 2008                    |   |   | 2007                  |   |   | 2008 |   |   | 2007 |   |
| Noninterest      expense:                               |   |                    |   |   |                  |   |   |   |   |   |   |   |
| Salaries      and employee benefits                     |   | $                       | 19,065 |   |                  | $      | 18,153 |   |   | $ | 39,699 |   |   | $ | 35,719 |   |
| Net      occupancy expense                              |   |                    | 2,481  |   |                  |   | 2,149 |   |   |   | 4,957 |   |   |   | 4,085 |   |
| Furniture      and equipment expense                    |   |                    | 3,883  |   |                  |   | 3,748 |   |   |   | 7,861 |   |   |   | 6,842 |   |
| Depreciation      - leased equipment                    |   |                    | 4,609  |   |                  |   | 4,243 |   |   |   | 9,225 |   |   |   | 8,319 |   |
| Professional      fees                                  |   |                    | 2,522  |   |                  |   | 1,267 |   |   |   | 3,680 |   |   |   | 2,168 |   |
| Supplies      and communication                         |   |                    | 1,682  |   |                  |   | 1,512 |   |   |   | 3,351 |   |   |   | 2,784 |   |
| Business      development and marketing expense         |   |                    | 1,000  |   |                  |   | 1,416 |   |   |   | 1,643 |   |   |   | 2,274 |   |
| Intangible      asset amortization                      |   |                    | 350    |   |                  |   | 132 |   |   |   | 701 |   |   |   | 237 |   |
| Loan      and lease collection and repossession expense |   |                    | 269    |   |                  |   | 160 |   |   |   | 802 |   |   |   | 325 |   |
| Other      expense                                      |   |                    | 2,534  |   |                  |   | 1,666 |   |   |   | 4,377 |   |   |   | 3,493 |   |
|                                                    |   |                    |   |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Total      noninterest expense                          |   | $                       | 38,395 |   |                  | $      | 34,446 |   |   | $ | 76,296 |   |   | $ | 66,246 |   |

----

Table of Contents

QUAN

CON

----

Table of Contents

| ITEM      1. | Legal Proceedings. |
|--------------|--------------------|

| ITEM      1A. | Risk Factors. |
|---------------|---------------|

| ITEM      2. | Unregistered Sales of Equity Securities and Use of      Proceeds. |
|--------------|-------------------------------------------------------------------|

|   | ISSUER PURCHASES OF      EQUITY SECURITIES |
|--------|--------------------------------------------|

|                                                                                                                         |   |              |   |   |                |   |   |                               |   |   |                                 |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|---------------------|--------|--------|------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                                                                         |   |              |   |   |                |   |   |                               |   |   |                                 |   |
|                                                                                                                         |   |              |   |   |                |   |   | Total      number of               |   |   | Maximum      number (or approximate  |   |
|                                                                                                                         |   | Total      number |   |   | Average             |   |   | shares      purchased              |   |   | dollar      value) of shares         |   |
|                                                                                                                         |   | of      shares    |   |   | price      paid per |   |   | as      part of publicly announced |   |   | that      may yet be purchased under |   |
| Period                                                                                                                       |   | purchased         |   |   | share               |   |   | plans      or programs (1)         |   |   | the      plans or programs           |   |
| April      01 - 30, 2008                                                                                                     |   |              | -      |   |                |   | -      |                               |   |   | -                                    |   |   |   | 1,447,448 |   |
| May      01 - 31, 2008                                                                                                       |   |              | -      |   |                |   | -      |                               |   |   | -                                    |   |   |   | 1,447,448 |   |
| June      01 - 30, 2008                                                                                                      |   |              | -      |   |                |   | -      |                               |   |   | -                                    |   |   |   | 1,447,448 |   |
|                                                                                                                         |   |              |   |   |                |   |   |                               |   |   |                                 |   |   |   |   |   |
|                                                                                                                         |   |              |   |   |                |   |   |                               |   |   |                                 |   |   |   |   |   |
| (1)1st      Source maintains a stock repurchase plan that was authorized by the Board      of Directors on April 26, 2007.   |   |
| Under      the terms of the plan, 1st Source may repurchase up to 2,000,000 shares of      its common stock when             |   |
| favorable      conditions exist on the open market or through private transactions at      various prices from time to time. |   |
| Since      the inception of the plan, 1st Source has repurchased a total of 552,552      shares.                             |   |

| ITEM      3. | Defaults Upon Senior  Securities. |
|--------------|-----------------------------------|

Sub

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| ITEM      5. | Other Information. |
|--------------|--------------------|

| ITEM      6. | Exhibits |
|--------------|----------|

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|                                |   | 1st Source Corporation                        |
|-------------------------------------|--------|-----------------------------------------------|
|                                |   |                                          |
|                                |   |                                          |
|                                |   |                                          |
| DATE   July 24, 2008 |   | /s/CHRISTOPHER J. MURPHY III                  |
|                                |   | Christopher      J. Murphy III                |
|                                |   | Chairman      of the Board, President and CEO |
|                                |   |                                          |
|                                |   |                                          |
| DATE   July 24, 2008 |   | /s/LARRY E.      LENTYCH                      |
|                                |   | Larry      E. Lentych                         |
|                                |   | Treasurer      and Chief Financial Officer    |
|                                |   | Principal      Accounting Officer             |

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