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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) |   | (Zip      Code)   |

| Title of      Class                         | Name of Each Exchange      on Which Registered                                                                                                                                                           |
|---------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Common      Stock — without par value |                             The      NASDAQ Stock Market LLC |

No

No

     No 

| Large      accelerated filer |        o | Accelerated      filer |  x | Non-accelerated      filer |        o |                  Smaller Reporting Company |        o |
|------------------------------|---------------|------------------------|---------|----------------------------|---------------|---------------------------------------------------------------------------------------------------|---------------|

  o   No

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TA

| Part      I   |                                                                                                                          |           |
|---------------|-------------------------------------------------------------------------------------------------------------------------------|----------------|
|          |                                                                                                                          |           |
| Item      1.  | Business                                                                                                                      |        3  |
| Item      1A. | Risk Factors                                                                                                                  |        7  |
| Item      1B. | Unresolved Staff Comments                                                                                                     |        9  |
| Item      2.  | Properties                                                                                                                    |        9  |
| Item      3.  | Legal Proceedings                                                                                                             |        9  |
| Item      4.  | Submission of Matters to a Vote of Security      Holders                                                                      |        9  |
|          |                                                                                                                          |           |
|          |                                                                                                                          |           |
| Part      II  |                                                                                                                          |           |
| Item      5.  | Market for Registrant’s Common Equity, Related Stockholder      Matters and Issuer Purchases of Equity Securities  |        9  |
| Item      6.  | Selected Financial Data                                                                                                       |        10 |
| Item      7.  | Management’s Discussion and Analysis of Financial Condition      and Results of Operations                              |        10 |
| Item      7A. | Quantitative and Qualitative Disclosures About Market      Risk                                                               |        23 |
| Item      8   | Financial Statements and SupplementaryData                                                                                    |        24 |
|          | Reports of Independent Registered Public Accounting      Firm                                                                 |        24 |
|          | Consolidated Statements of Financial    Condition                                                                             |        26 |
|          | Consolidated Statements of Income                                                                                             |        27 |
|          | Consolidated Statements of Shareholders’      Equity                                                                    |        28 |
|          | Consolidated Statements of Cash Flow                                                                                          |        29 |
|          | Notes to Consolidated Financial Statements                                                                                    |        30 |
| Item      9   | Changes in and Disagreements with Accountants on Accounting      and Financial Disclosure                                     |        47 |
| Item      9A. | Controls and Procedures                                                                                                       |        48 |
| Item      9B. | Other Information                                                                                                             |        48 |
|          |                                                                                                                          |           |
|          |                                                                                                                          |           |
| Part      III |                                                                                                                          |           |
| Item      10. | Directors and Executive Officers of the      Registrant                                                                       |        48 |
| Item      11. | Executive Compensation                                                                                                        |        48 |
| Item      12. | Security Ownership of Certain Beneﬁcial Owners and Management      and Related Stockholder Matters                     |        49 |
| Item      13. | Certain Relationships and Related    Transactions                                                                             |        49 |
| Item      14. | Principal Accounting Fees and Services                                                                                        |        49 |
|          |                                                                                                                          |           |
|          |                                                                                                                          |           |
| Part      IV  |                                                                                                                          |           |
| Item      15. | Exhibits and Financial Statement Schedules                                                                                    |        50 |
| Signatures    |        52                                                                                                                |

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We haveother subsidiaries that are not significant to the consolidatedentity.

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IT

| ·   | We      may incur substantial costs identifying and evaluating potential      acquisitions and merger partners, or in evaluating new markets, hiring      experienced local managers, and opening new  offices; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Our      estimates and judgments used to evaluate credit, operations, management,      and market risks relating to target institutions may not be      accurate; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | There      may be substantial lag-time between completing an acquisition or opening a      new office and generating sufficient assets and deposits to support costs      of the expansion; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      may not be able to finance an acquisition, or the financing we obtain may      have an adverse effect on our operating results or dilution of our      existing shareholders; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      attention of our management in negotiating a transaction and integrating      the operations and personnel of the combining businesses may be diverted      from our existing business; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Acquisitions      typically involve the payment of a premium over book and market values      and; therefore, some dilution of our tangible book value and net income      per common share may occur in connection with any future      transaction; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      may enter new markets where we lack local  experience; |
|--------------------|----------------------------------------------------------------|

| ·   | We      may incur goodwill in connection with an acquisition, or the goodwill we      incur may become impaired, which results in adverse short-term effects on      our operating results; or |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We      may lose key employees and clients. |
|--------------------|---------------------------------------------|

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ITEM 

ITE

ITE

ITE

ITE

|                                                                                             |   | 2007      Sales Price |   | Cash      Dividends |   | 2006      Sales Price |   | Cash      Dividends |
|--------------------------------------------------------------------------------------------------|--------|-----------------------|--------|---------------------|--------|-----------------------|--------|---------------------|
| Common      Stock Prices  (quarter      ended)                                         |   | High                  |   | Low                 |   | Paid                  |   | High                |   | Low |   | Paid |
| March      31                                                                                    | $      | 32.62                 | $      | 24.27               | $      | .140                  | $      | 27.26               | $ | 22.64 | $ | .127 |
| June      30                                                                                     |   | 27.92                 |   | 23.32               |   | .140                  |   | 30.81               |   | 24.68 |   | .127 |
| September      30                                                                                |   | 27.00                 |   | 18.41               |   | .140                  |   | 31.33               |   | 28.46 |   | .140 |
| December      31                                                                                 |   | 24.47                 |   | 16.28               |   | .140                  |   | 33.46               |   | 29.08 |   | .140 |
| As      of December 31, 2007, there were 1,048 holders of record of 1st Source      common stock |   |                  |   |                |   |                  |   |                |

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|                                                                                                                                                                                            |                  |    |                | Total      Number of            | Maximum      Number (or Approximate   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|---------|---------------------|---------------------------------|---------------------------------------|
|                                                                                                                                                                                            |                  |    |                | Shares      Purchased as        | Dollar      Value) of Shares that     |
|                                                                                                                                                                                            | Total      Number of  |    | Average      Price  | Part      of Publicly Announced |  may      yet be Purchased Under |
| Period                                                                                                                                                                                          | Shares      Purchased |    | Paid      Per Share | Plans      or Programs*         | the      Plans or Programs            |
| October      01 - 31, 2007                                                                                                                                                                      | 4,225                 |  $ | 18.55               | 4,225                           | 1,524,096                             |
| November      01 - 30, 2007                                                                                                                                                                     | 76,648                |    | 18.73               | 76,648                          | 1,447,448                             |
| December      01 - 31, 2007                                                                                                                                                                     | -                     |    | -                   | -                               | 1,447,448                             |
| *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.                                                                                                                    |                  |

ITE

| Item 6                                                                                                                                                                              |   |                                               |      |   |   |   |      |   |   |   |      |   |   |   |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|
| (Dollars      in thousands, except per share amounts)                                                                                                                               |   |             2007 (2) |      |   | 2006   |   |      | 2005   |   |   | 2004      |   |   | 2003   |      |
| Interest income                                                                                                                                                                     |   | $                                                  | 253,587   |   |   | $      | 208,994   |   |   | $      | 168,532   |   |   | $      | 151,437   |   |   | $ | 162,322 |   |
| Interest      expense                                                                                                                                                               |   |                                               | 134,677   |   |   |   | 102,561   |   |   |   | 70,104    |   |   |   | 52,749    |   |   |   | 59,070 |   |
| Net      interest income                                                                                                                                                            |   |                                               | 118,910   |   |   |   | 106,433   |   |   |   | 98,428    |   |   |   | 98,688    |   |   |   | 103,252 |   |
| Provision      for (recovery of) loan and lease losses                                                                                                                              |   |                                               | 7,534     |   |   |   | (2,736    | )      |   |   | (5,855    | )      |   |   | 229       |   |   |   | 17,361 |   |
| Net      interest income after provision for (recovery of)                                                                                                                          |   |                                               |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |   |   |
| loan      and lease losses                                                                                                                                                          |   |                                               | 111,376   |   |   |   | 109,169   |   |   |   | 104,283   |   |   |   | 98,459    |   |   |   | 85,891 |   |
| Noninterest      income                                                                                                                                                             |   |                                               | 70,619    |   |   |   | 76,585    |   |   |   | 68,533    |   |   |   | 62,733    |   |   |   | 80,196 |   |
| Noninterest      expense                                                                                                                                                            |   |                                               | 140,312   |   |   |   | 126,211   |   |   |   | 123,439   |   |   |   | 127,091   |   |   |   | 138,904 |   |
| Income      before income taxes                                                                                                                                                     |   |                                               | 41,683    |   |   |   | 59,543    |   |   |   | 49,377    |   |   |   | 34,101    |   |   |   | 27,183 |   |
| Income      taxes                                                                                                                                                                   |   |                                               | 11,144    |   |   |   | 20,246    |   |   |   | 15,626    |   |   |   | 9,136     |   |   |   | 8,029 |   |
| Net      income                                                                                                                                                                     |   | $                                                  | 30,539    |   |   | $      | 39,297    |   |   | $      | 33,751    |   |   | $      | 24,965    |   |   | $ | 19,154 |   |
| Assets      at year-end                                                                                                                                                             |   | $                                                  | 4,447,104 |   |   | $      | 3,807,315 |   |   | $      | 3,511,277 |   |   | $      | 3,563,715 |   |   | $ | 3,330,153 |   |
| Long-term      debt and mandatorily redeemable                                                                                                                                      |   |                                               |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |   |   |
| securities      at year-end                                                                                                                                                         |   |                                               | 34,702    |   |   |   | 43,761    |   |   |   | 23,237    |   |   |   | 17,964    |   |   |   | 22,802 |   |
| Shareholders’      equity at year-end                                                                                                                                         |   |                                               | 430,504   |   |   |   | 368,904   |   |   |   | 345,576   |   |   |   | 326,600   |   |   |   | 314,691 |   |
| Basic      net income per common share (1)                                                                                                                                          |   |                                               | 1.30      |   |   |   | 1.74      |   |   |   | 1.48      |   |   |   | 1.10      |   |   |   | 0.83 |   |
| Diluted      net income per common share (1)                                                                                                                                        |   |                                               | 1.28      |   |   |   | 1.72      |   |   |   | 1.46      |   |   |   | 1.08      |   |   |   | 0.82 |   |
| Cash      dividends per common share (1)                                                                                                                                            |   |                                               | .560      |   |   |   | .534      |   |   |   | .445      |   |   |   | .382      |   |   |   | .336 |   |
| Dividend      payout ratio                                                                                                                                                          |   |                                               | 43.75     | %      |   |   | 31.05     | %      |   |   | 30.48     | %      |   |   | 35.37     | % |   |   | 40.98 | % |
| Return      on average assets                                                                                                                                                       |   |                                               | 0.74      | %      |   |   | 1.11      | %      |   |   | 1.00      | %      |   |   | 0.75      | % |   |   | 0.59 | % |
| Return      on average common equity                                                                                                                                                |   |                                               | 7.47      | %      |   |   | 10.98     | %      |   |   | 10.12     | %      |   |   | 7.81      | % |   |   | 6.12 | % |
| Average      common equity to average assets                                                                                                                                        |   |                                               | 9.85      | %      |   |   | 10.07     | %      |   |   | 9.89      | %      |   |   | 9.55      | % |   |   | 9.60 | % |
|                                                                                                                                                                                |   |                                               |      |   |   |   |      |   |   |   |      |   |   |   |      |   |   |   |   |   |
| (1)      The computation of per common share data gives retroactive recognition to      a 10% stock dividend declared July 27, 2006.                                                |   |                                               |      |   |   |   |      |   |   |
| (2)      Results for 2007 include the acquisition of FINA Bancorp, Inc. Refer      to Note C of the Notes to Consolidated Financial Statements for further      details.  |   |                                               |      |   |   |   |      |

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| ·   | Local,      regional, national, and international economic conditions and the impact      they may have on us and our clients and our assessment of that      impact. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Changes      in the level of nonperforming assets and  charge-offs. |
|--------------------|---------------------------------------------------------------------|

| ·   | Changes      in estimates of future cash reserve requirements based upon the periodic      review thereof under relevant regulatory and accounting      requirements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      effects of and changes in trade and monetary and fiscal policies and laws,      including the interest rate policies of the Federal Reserve      Board. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Inflation,      interest rate, securities market, and monetary    fluctuations. |
|--------------------|---------------------------------------------------------------------------------|

| ·   | Political      instability. |
|--------------------|-----------------------------|

| ·   | Acts      of war or terrorism. |
|--------------------|--------------------------------|

| ·   | Substantial      increases in the cost of fuel. |
|--------------------|-------------------------------------------------|

| ·   | The      timely development and acceptance of new products and services and      perceived overall value of these products and services by      others. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Changes      in consumer spending, borrowings, and savings  habits. |
|--------------------|---------------------------------------------------------------------|

| ·   | Changes      in the financial performance and/or condition of our      borrowers. |
|--------------------|-----------------------------------------------------------------------------------|

| ·   | Technological      changes. |
|--------------------|-----------------------------|

| ·   | Acquisitions      and integration of acquiredbusinesses. |
|--------------------|----------------------------------------------------------|

| ·   | The      ability to increase market share and control  expenses. |
|--------------------|------------------------------------------------------------------|

| ·   | Changes      in the competitive environment among bank holding    companies. |
|--------------------|------------------------------------------------------------------------------|

| ·   | The      effect of changes in laws and regulations (including laws and regulations      concerning taxes, banking, securities, and insurance) with which we and      our subsidiaries must comply. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      effect of changes in accounting policies and practices and auditing      requirements, as may be adopted by the regulatory agencies, as well as the      Public Company Accounting Oversight Board, the Financial Accounting      Standards Board, and other accounting standard  setters. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Changes      in our organization, compensation, and benefit  plans. |
|--------------------|---------------------------------------------------------------------|

| ·   | The      costs and effects of legal and regulatory developments including the      resolution of legal proceedings or regulatory or other governmental      inquires and the results of regulatory examinations or      reviews. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Greater      than expected costs or difficulties related to the integration of new      products and lines of business. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

| ·   | Our      success at managing the risks described in Item 1A. Risk      Factors. |
|--------------------|---------------------------------------------------------------------------------|

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|                                    |   |    |      |   | 2007     |   |    |   |   |   |    |   |   | 2006     |      |   |   |   |    |    |   |   | 2005     |   |   |   |      |
|-----------------------------------------|--------|---------|-----------|--------|----------|--------|---------|--------|--------|--------|---------|--------|--------|----------|-----------|--------|--------|--------|---------|---------|--------|--------|----------|--------|--------|--------|-----------|
|                                    |   |    |      |   | Interest |   |    |   |   |   |    |   |   | Interest |      |   |   |   |    |    |   |   | Interest |   |   |   |      |
|                                    |   | Average |      |   | Income/  |   |    | Yield/ |   |   | Average |   |   | Income/  |      |   | Yield/ |   |    | Average |   |   | Income/  |   |   | Yield/ |      |
| (Dollars      in thousands)             |   | Balance |      |   | Expense  |   |    | Rate   |   |   | Balance |   |   | Expense  |      |   | Rate   |   |    | Balance |   |   | Expense  |   |   | Rate   |      |
| ASSETS                                  |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |
| Investment      securities:             |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |
| Taxable                                 |   | $       | 523,931   |   |     | $      | 25,770  |   |   |   | 4.92    | %      |   | $        | 470,447   |   |   | $      | 19,816  |    |   |   | 4.21     | %      |   | $      | 515,992   |   |   | $ | 14,777 |   |   |   | 2.86 | % |
| Tax-exempt                              |   |    | 225,849   |   |     |   | 10,800  |   |   |   | 4.78    |   |   |     | 173,652   |   |   |   | 7,416   |    |   |   | 4.27     |   |   |   | 186,614   |   |   |   | 7,682 |   |   |   | 4.12 |   |
| Mortgages      held for sale            |   |    | 28,913    |   |     |   | 1,892   |   |   |   | 6.54    |   |   |     | 53,034    |   |   |   | 3,549   |    |   |   | 6.69     |   |   |   | 82,174    |   |   |   | 4,779 |   |   |   | 5.82 |   |
| Net      loans and leases               |   |    | 2,992,540 |   |     |   | 214,725 |   |   |   | 7.18    |   |   |     | 2,566,217 |   |   |   | 178,125 |    |   |   | 6.94     |   |   |   | 2,348,690 |   |   |   | 143,295 |   |   |   | 6.10 |   |
| Other      investments                  |   |    | 81,496    |   |     |   | 4,023   |   |   |   | 4.94    |   |   |     | 51,754    |   |   |   | 2632    |    |   |   | 5.09     |   |   |   | 18,765    |   |   |   | 666 |   |   |   | 3.55 |   |
| Total      earning assets               |   |    | 3,852,729 |   |     |   | 257,210 |   |   |   | 6.68    |   |   |     | 3,315,104 |   |   |   | 211,538 |    |   |   | 6.38     |   |   |   | 3,152,235 |   |   |   | 171,199 |   |   |   | 5.43 |   |
| Cash      and due from banks            |   |    | 82,451    |   |     |   |    |   |   |   |    |   |   |     | 78,365    |   |   |   |    |    |   |   |     |   |   |   | 84,517    |   |   |   |   |   |   |   |   |   |
| Reserve      for loan and               |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |
| lease      losses                       |   |    | (61,555   | )      |     |   |    |   |   |   |    |   |   |     | (59,082   | )      |   |   |    |    |   |   |     |   |   |   | (61,072   | ) |   |   |   |   |   |   |   |   |
| Other      assets                       |   |    | 277,684   |   |     |   |    |   |   |   |    |   |   |     | 217,914   |   |   |   |    |    |   |   |     |   |   |   | 197,457   |   |   |   |   |   |   |   |   |   |
| Total      assets                       |   | $       | 4,151,309 |   |     |   |    |   |   |   |    |   |   | $        | 3,552,301 |   |   |   |    |    |   |   |     |   |   | $      | 3,373,137 |   |   |   |   |   |   |   |   |   |
| LIABILITIES      AND                    |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |
| SHAREHOLDERS’      EQUITY         |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |
| Interest      bearing deposits          |   | $       | 2,918,756 |   |     | $      | 115,113 |   |   |   | 3.94    | %      |   | $        | 2,418,344 |   |   | $      | 85,067  |    |   |   | 3.52     | %      |   | $      | 2,217,923 |   |   | $ | 56,341 |   |   |   | 2.54 | % |
| Short-term      borrowings              |   |    | 271,377   |   |     |   | 10,935  |   |   |   | 4.03    |   |   |     | 265,824   |   |   |   | 11,011  |    |   |   | 4.14     |   |   |   | 295,271   |   |   |   | 8,628 |   |   |   | 2.92 |   |
| Subordinated      notes                 |   |    | 82,414    |   |     |   | 6,051   |   |   |   | 7.34    |   |   |     | 59,022    |   |   |   | 4,320   |    |   |   | 7.32     |   |   |   | 59,022    |   |   |   | 4,008 |   |   |   | 6.79 |   |
| Long-term      debt and                 |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |
| mandatorily      redeemable             |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |
| securities                              |   |    | 42,265    |   |     |   | 2,578   |   |   |   | 6.10    |   |   |     | 36,952    |   |   |   | 2,163   |    |   |   | 5.85     |   |   |   | 18,270    |   |   |   | 1,127 |   |   |   | 6.17 |   |
| Total      interest bearing liabilities |   |    | 3,314,812 |   |     |   | 134,677 |   |   |   | 4.06    |   |   |     | 2,780,142 |   |   |   | 102,561 |    |   |   | 3.69     |   |   |   | 2,590,486 |   |   |   | 70,104 |   |   |   | 2.71 |   |
| Noninterest      bearing deposits       |   |    | 351,050   |   |     |   |    |   |   |   |    |   |   |     | 352,204   |   |   |   |    |    |   |   |     |   |   |   | 392,475   |   |   |   |   |   |   |   |   |   |
| Other      liabilities                  |   |    | 76,472    |   |     |   |    |   |   |   |    |   |   |     | 62,196    |   |   |   |    |    |   |   |     |   |   |   | 56,553    |   |   |   |   |   |   |   |   |   |
| Shareholders'      equity               |   |    | 408,975   |   |     |   |    |   |   |   |    |   |   |     | 357,759   |   |   |   |    |    |   |   |     |   |   |   | 333,623   |   |   |   |   |   |   |   |   |   |
| Total      liabilities and              |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |
| shareholders’      equity         |   | $       | 4,151,309 |   |     |   |    |   |   |   |    |   |   | $        | 3,552,301 |   |   |   |    |    |   |   |     |   |   | $      | 3,373,137 |   |   |   |   |   |   |   |   |   |
| Net      interest income                |   |    |      |   |     | $      | 122,533 |   |   |   |    |   |   |     |      |   |   | $      | 108,977 |    |   |   |     |   |   |   |      |   |   | $ | 101,095 |   |   |   |   |   |
| Net      interest margin on a tax       |   |    |      |   |     |   |    |   |   |   |    |   |   |     |      |   |   |   |    |    |   |   |     |   |   |   |      |   |   |   |   |   |   |   |   |   |
| equivalent      basis                   |   |    |      |   |     |   |    |   |   |   | 3.18    | %      |   |     |      |   |   |   |    |    |   |   | 3.29     | %      |   |   |      |   |   |   |   |   |   |   | 3.21 | % |

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Table of Contents

|                                                      |   | Increase      (Decrease) due to |   |   |   |   |
|-----------------------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|
| (Dollars      in thousands)                               |   | Volume                          |   |   | Rate   |   |   | Net |   |
| 2007      compared to 2006                                |   |                            |   |   |   |   |   |   |   |
| Interest      earned on:                                  |   |                            |   |   |   |   |   |   |   |
| Investment      securities:                               |   |                            |   |   |   |   |   |   |   |
| Taxable                                                   |   | $                               | 2,386  |   |   | $      | 3,568 |   |   | $ | 5,954 |   |
| Tax-exempt                                                |   |                            | 2,422  |   |   |   | 962 |   |   |   | 3,384 |   |
| Mortgages      held for sale                              |   |                            | (1,579 | )      |   |   | (78 | ) |   |   | (1,657 | ) |
| Net      loans and leases                                 |   |                            | 30,264 |   |   |   | 6,336 |   |   |   | 36,600 |   |
| Other      investments                                    |   |                            | 1,467  |   |   |   | (76 | ) |   |   | 1,391 |   |
| Total      earning assets                                 |   | $                               | 34,960 |   |   | $      | 10,712 |   |   | $ | 45,672 |   |
| Interest      paid on:                                    |   |                            |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing deposits                            |   | $                               | 19,125 |   |   | $      | 10,921 |   |   | $ | 30,046 |   |
| Short-term      borrowings                                |   |                            | 241    |   |   |   | (317 | ) |   |   | (76 | ) |
| Subordinated      notes                                   |   |                            | 1,719  |   |   |   | 12 |   |   |   | 1,731 |   |
| Long-term      debt and mandatorily redeemable securities |   |                            | 320    |   |   |   | 95 |   |   |   | 415 |   |
| Total      interest bearing liabilities                   |   | $                               | 21,405 |   |   | $      | 10,711 |   |   | $ | 32,116 |   |
| Net      interest income                                  |   | $                               | 13,555 |   |   | $      | 1 |   |   | $ | 13,556 |   |
| 2006      compared to 2005                                |   |                            |   |   |   |   |   |   |   |   |   |   |
| Interest      earned on:                                  |   |                            |   |   |   |   |   |   |   |   |   |   |
| Investment      securities:                               |   |                            |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                   |   | $                               | (1,169 | )      |   | $      | 6,208 |   |   | $ | 5,039 |   |
| Tax-exempt                                                |   |                            | (568   | )      |   |   | 302 |   |   |   | (266 | ) |
| Mortgages      held for sale                              |   |                            | (2,143 | )      |   |   | 913 |   |   |   | (1,230 | ) |
| Net      loans and leases                                 |   |                            | 14,009 |   |   |   | 20,821 |   |   |   | 34,830 |   |
| Other      investments                                    |   |                            | 1,576  |   |   |   | 390 |   |   |   | 1,966 |   |
| Total      earning assets                                 |   | $                               | 11,705 |   |   | $      | 28,634 |   |   | $ | 40,339 |   |
| Interest      paid on:                                    |   |                            |   |   |   |   |   |   |   |   |   |   |
| Interest      bearing deposits                            |   | $                               | 5,395  |   |   | $      | 23,331 |   |   | $ | 28,726 |   |
| Short-term      borrowings                                |   |                            | (747   | )      |   |   | 3,130 |   |   |   | 2,383 |   |
| Subordinated      notes                                   |   |                            | -      |   |   |   | 312 |   |   |   | 312 |   |
| Long-term      debt and mandatorily redeemable securities |   |                            | 1,091  |   |   |   | (55 | ) |   |   | 1,036 |   |
| Total      interest bearing liabilities                   |   | $                               | 5,739  |   |   | $      | 26,718 |   |   | $ | 32,457 |   |
| Net      interest income                                  |   | $                               | 5,966  |   |   | $      | 1,916 |   |   | $ | 7,882 |   |

| (Dollars      in thousands)                                    |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Noninterest      income:                                       |   |   |   |   |   |   |   |   |   |
| Trust      fees                                                |   | $      | 15,567 |   |   | $      | 13,806 |   |   | $ | 12,877 |   |
| Service      charges on deposit accounts                       |   |   | 20,470 |   |   |   | 19,040 |   |   |   | 17,775 |   |
| Mortgage      banking income                                   |   |   | 2,868  |   |   |   | 11,637 |   |   |   | 10,868 |   |
| Insurance      commissions                                     |   |   | 4,666  |   |   |   | 4,574  |   |   |   | 4,133 |   |
| Equipment      rental income                                   |   |   | 21,312 |   |   |   | 18,972 |   |   |   | 16,067 |   |
| Other      income                                              |   |   | 8,864  |   |   |   | 6,554  |   |   |   | 6,463 |   |
| Investment      securities and other investment (losses) gains |   |   | (3,128 | )      |   |   | 2,002  |   |   |   | 350 |   |
| Total      noninterest income                                  |   | $      | 70,619 |   |   | $      | 76,585 |   |   | $ | 68,533 |   |

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Table of Contents

| (Dollars      in thousands)                                      |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| Noninterest      expense:                                        |   |   |    |   |   |   |    |   |   |
| Salaries      and employee benefits                              |   | $      | 73,944  |   |   | $      | 66,605  |   |   | $ | 69,767 |   |
| Net      occupancy expense                                       |   |   | 9,030   |   |   |   | 7,492   |   |   |   | 7,749 |   |
| Furniture      and equipment expense                             |   |   | 15,145  |   |   |   | 12,316  |   |   |   | 11,418 |   |
| Depreciation      — leased equipment                       |   |   | 17,085  |   |   |   | 14,958  |   |   |   | 12,895 |   |
| Professional      fees                                           |   |   | 4,575   |   |   |   | 3,998   |   |   |   | 3,362 |   |
| Supplies      and communications                                 |   |   | 5,987   |   |   |   | 5,496   |   |   |   | 5,462 |   |
| Business      development and marketing expense                  |   |   | 4,788   |   |   |   | 4,008   |   |   |   | 3,630 |   |
| Intangible      asset amortization                               |   |   | 874     |   |   |   | 1,910   |   |   |   | 2,663 |   |
| Loan      and lease collection and repossession expense (income) |   |   | 1,123   |   |   |   | 704     |   |   |   | (1,094 | ) |
| Other      expense                                               |   |   | 7,761   |   |   |   | 8,724   |   |   |   | 7,587 |   |
| Total      noninterest expense                                   |   | $      | 140,312 |   |   | $      | 126,211 |   |   | $ | 123,439 |   |

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Table of Contents

| (Dollars      in thousands)                        |   | 2007   |      |   | 2006   |   |      | 2005   |   |   | 2004      |   |   | 2003   |      |
|----------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|--------|-----------|
| Commercial      and agricultural loans             |   | $      | 593,806   |   |   | $      | 478,310   |   |   | $      | 453,197   |   |   | $      | 425,018   |   |   | $ | 402,905 |   |
| Auto,      light truck and environmental equipment |   |   | 305,238   |   |   |   | 317,604   |   |   |   | 310,786   |   |   |   | 263,637   |   |   |   | 269,490 |   |
| Medium      and heavy duty truck                   |   |   | 300,469   |   |   |   | 341,744   |   |   |   | 302,137   |   |   |   | 267,834   |   |   |   | 221,562 |   |
| Aircraft      financing                            |   |   | 587,022   |   |   |   | 498,914   |   |   |   | 459,645   |   |   |   | 444,481   |   |   |   | 489,155 |   |
| Construction      equipment financing              |   |   | 377,785   |   |   |   | 305,976   |   |   |   | 224,230   |   |   |   | 196,516   |   |   |   | 219,562 |   |
| Loans      secured by real estate                  |   |   | 881,646   |   |   |   | 632,283   |   |   |   | 601,077   |   |   |   | 583,437   |   |   |   | 533,749 |   |
| Consumer      loans                                |   |   | 145,475   |   |   |   | 127,706   |   |   |   | 112,359   |   |   |   | 99,245    |   |   |   | 94,577 |   |
| Total      loans and leases                        |   | $      | 3,191,441 |   |   | $      | 2,702,537 |   |   | $      | 2,463,431 |   |   | $      | 2,280,168 |   |   | $ | 2,231,000 |   |

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Table of Contents

| (Dollars      in thousands)                        |   | 0-1      Year |    |   | 1-5      Years |   |      | Over      5 Years |   |   | Total   |   |
|----------------------------------------------------|--------|---------------|---------|--------|----------------|--------|-----------|-------------------|--------|--------|---------|--------|
| Commercial      and agricultural loans             |   | $             | 277,126 |   |           | $      | 249,128   |              |   | $      | 67,552  |   |   | $ | 593,806 |   |
| Auto,      light truck and environmental equipment |   |          | 129,508 |   |           |   | 168,693   |              |   |   | 7,037   |   |   |   | 305,238 |   |
| Medium      and heavy duty truck                   |   |          | 93,083  |   |           |   | 201,915   |              |   |   | 5,471   |   |   |   | 300,469 |   |
| Aircraft      financing                            |   |          | 180,267 |   |           |   | 376,374   |              |   |   | 30,381  |   |   |   | 587,022 |   |
| Construction      equipment financing              |   |          | 106,818 |   |           |   | 266,966   |              |   |   | 4,001   |   |   |   | 377,785 |   |
| Total                                              |   | $             | 786,802 |   |           | $      | 1,263,076 |              |   | $      | 114,442 |   |   | $ | 2,164,320 |   |

| Rate      Sensitivity  (Dollars in      thousands) |   | Fixed      Rate |    |   | Variable      Rate |   |    | Total  |   |
|--------------------------------------------------------------|--------|-----------------|---------|--------|--------------------|--------|---------|--------|--------|
| 1 –      5 Years                                       |   | $               | 888,902 |   |               | $      | 374,174 |   |   | $ | 1,263,076 |   |
| Over      5 Years                                            |   |            | 23,593  |   |               |   | 90,849  |   |   |   | 114,442 |   |
| Total                                                        |   | $               | 912,495 |   |               | $      | 465,023 |   |   | $ | 1,377,518 |   |

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Table of Contents

| (Dollars      in thousands)                               |   | 2007   |      |   | 2006   |   |      | 2005     |   |   | 2004      |     |   | 2003   |      |
|-----------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|----------|--------|--------|-----------|----------|--------|--------|-----------|
| Amounts of loans and leases      outstanding    |   |   |      |   |   |   |      |     |   |   |      |     |   |   |      |
| at      end of period                                     |   | $      | 3,191,441 |   |   | $      | 2,702,537 |     |   | $      | 2,463,431 |     |   | $      | 2,280,168 |   |   | $ | 2,231,000 |   |
| Average      amount of net loans and leases outstanding   |   |   |      |   |   |   |      |     |   |   |      |     |   |   |      |   |   |   |   |   |
| during      period                                        |   | $      | 2,992,540 |   |   | $      | 2,566,217 |     |   | $      | 2,348,690 |     |   | $      | 2,240,055 |   |   | $ | 2,091,004 |   |
| Balance      of reserve for loan and lease losses         |   |   |      |   |   |   |      |     |   |   |      |     |   |   |      |   |   |   |   |   |
| at      beginning of period                               |   | $      | 58,802    |   |   | $      | 58,697    |     |   | $      | 63,672    |     |   | $      | 70,045    |   |   | $ | 59,218 |   |
| Charge-offs:                                              |   |   |      |   |   |   |      |     |   |   |      |     |   |   |      |   |   |   |   |   |
| Commercial      and agricultural loans                    |   |   | 1,841     |   |   |   | 1,038     |     |   |   | 1,478     |     |   |   | 6,104     |   |   |   | 1,187 |   |
| Auto,      light truck and environmental equipment        |   |   | 1,770     |   |   |   | 340       |     |   |   | 630       |     |   |   | 2,408     |   |   |   | 2,789 |   |
| Medium      and heavy duty truck                          |   |   | 569       |   |   |   | -         |     |   |   | 15        |     |   |   | 352       |   |   |   | 69 |   |
| Aircraft      financing                                   |   |   | 378       |   |   |   | 1,126     |     |   |   | 2,424     |     |   |   | 3,585     |   |   |   | 6,877 |   |
| Construction      equipment financing                     |   |   | 799       |   |   |   | 118       |     |   |   | -         |     |   |   | 686       |   |   |   | 4,712 |   |
| Loans      secured by real estate                         |   |   | 356       |   |   |   | 129       |     |   |   | 167       |     |   |   | 456       |   |   |   | 344 |   |
| Consumer      loans                                       |   |   | 1,654     |   |   |   | 1,203     |     |   |   | 858       |     |   |   | 1,090     |   |   |   | 1,560 |   |
| Total      charge-offs                                    |   |   | 7,367     |   |   |   | 3,954     |     |   |   | 5,572     |     |   |   | 14,681    |   |   |   | 17,538 |   |
| Recoveries:                                               |   |   |      |   |   |   |      |     |   |   |      |     |   |   |      |   |   |   |   |   |
| Commercial      and agricultural loans                    |   |   | 2,356     |   |   |   | 1,594     |     |   |   | 1,308     |     |   |   | 1,312     |   |   |   | 519 |   |
| Auto,      light truck and environmental equipment        |   |   | 446       |   |   |   | 430       |     |   |   | 1,140     |     |   |   | 1,277     |   |   |   | 1,182 |   |
| Medium      and heavy duty truck                          |   |   | 64        |   |   |   | 59        |     |   |   | 174       |     |   |   | 14        |   |   |   | - |   |
| Aircraft      financing                                   |   |   | 1,779     |   |   |   | 3,612     |     |   |   | 2,255     |     |   |   | 4,460     |   |   |   | 1,698 |   |
| Construction      equipment financing                     |   |   | 19        |   |   |   | 753       |     |   |   | 1,065     |     |   |   | 547       |   |   |   | 248 |   |
| Loans      secured by real estate                         |   |   | 169       |   |   |   | 31        |     |   |   | 89        |     |   |   | 107       |   |   |   | 11 |   |
| Consumer      loans                                       |   |   | 421       |   |   |   | 316       |     |   |   | 421       |     |   |   | 362       |   |   |   | 523 |   |
| Total      recoveries                                     |   |   | 5,254     |   |   |   | 6,795     |     |   |   | 6,452     |     |   |   | 8,079     |   |   |   | 4,181 |   |
| Net      (recoveries) charge-offs                         |   |   | 2,113     |   |   |   | (2,841    | )        |   |   | (880      | )        |   |   | 6,602     |   |   |   | 13,357 |   |
| (Recoveries)      provisions charged to operating expense |   |   | 7,534     |   |   |   | (2,736    | )        |   |   | (5,855    | )        |   |   | 229       |   |   |   | 17,361 |   |
| Reserves      acquired in acquisitions                    |   |   | 2,379     |   |   |   | -         |     |   |   | -         |     |   |   | -         |   |   |   | 6,823 |   |
| Balance      at end of period                             |   | $      | 66,602    |   |   | $      | 58,802    |     |   | $      | 58,697    |     |   | $      | 63,672    |   |   | $ | 70,045 |   |
| Ratio      of net charge-offs (recoveries) to average net |   |   |      |   |   |   |      |     |   |   |      |     |   |   |      |   |   |   |   |   |
| loans      and leases outstanding                         |   |   | 0.07      | %      |   |   | (0.11     | )      % |   |   | (0.04     | )      % |   |   | 0.29      | % |   |   | 0.64 | % |

|                                                                               |   | 2007   |   |     | 2006   |   |   | 2005     |   |   | 2004  |     |   | 2003   |   |
|------------------------------------------------------------------------------------|--------|--------|--------|----------|--------|--------|--------|----------|--------|--------|-------|----------|--------|--------|--------|
| Commercial      and agricultural loans                                             |   |   | (0.09  | )      % |   |   | (0.12  | )      % |   |   | 0.04  | %        |   |   | 1.14   | % |   |   | 0.16 | % |
| Auto,      light truck and environmental equipment                                 |   |   | 0.40   |     |   |   | (0.03  | )        |   |   | (0.17 | )        |   |   | 0.43   |   |   |   | 0.62 |   |
| Medium      and heavy duty truck                                                   |   |   | 0.16   |     |   |   | (0.02  | )        |   |   | (0.06 | )        |   |   | 0.14   |   |   |   | 0.03 |   |
| Aircraft      financing                                                            |   |   | (0.26  | )        |   |   | (0.54  | )        |   |   | 0.04  |     |   |   | (0.19  | ) |   |   | 1.73 |   |
| Construction      equipment financing                                              |   |   | 0.22   |     |   |   | (0.24  | )        |   |   | (0.51 | )        |   |   | 0.07   |   |   |   | 1.67 |   |
| Loans      secured by real estate                                                  |   |   | 0.02   |     |   |   | 0.02   |     |   |   | 0.01  |     |   |   | 0.06   |   |   |   | 0.06 |   |
| Consumer      loans                                                                |   |   | 0.88   |     |   |   | 0.74   |     |   |   | 0.41  |     |   |   | 0.77   |   |   |   | 1.04 |   |
| Total      net charge-offs (recoveries) to average portfolio loans and      leases |   |   | 0.07   | %        |   |   | (0.11  | )      % |   |   | (0.04 | )      % |   |   | 0.29   | % |   |   | 0.64 | % |

----

Table of Contents

|                                   |   | 2007    |   |   | 2006            |   |   | 2005    |   |   | 2004            |   |   | 2003    |   |
|----------------------------------------|--------|---------|--------|--------|-----------------|--------|--------|---------|--------|--------|-----------------|--------|--------|---------|--------|
|                                   |   |    |   |   | Percent      of |   |   |    |   |   | Percent      of |   |   |    |   |   | Percent      of |   |   |   |   |   | Percent      of |   |   |   |   |   | Percent      of |   |
|                                   |   |    |   |   | Loans      and  |   |   |    |   |   | Loans      and  |   |   |    |   |   | Loans      and |   |   |   |   |   | Loans      and |   |   |   |   |   | Loans      and |   |
|                                   |   |    |   |   | Leases          |   |   |    |   |   | Leases          |   |   |    |   |   | Leases |   |   |   |   |   | Leases |   |   |   |   |   | Leases |   |
|                                   |   |    |   |   | in      Each    |   |   |    |   |   | in      Each    |   |   |    |   |   | in      Each |   |   |   |   |   | in      Each |   |   |   |   |   | in      Each |   |
|                                   |   |    |   |   | Category        |   |   |    |   |   | Category        |   |   |    |   |   | Category |   |   |   |   |   | Category |   |   |   |   |   | Category |   |
|                                   |   |    |   |   | to      Total   |   |   |    |   |   | to      Total   |   |   |    |   |   | to      Total |   |   |   |   |   | to      Total |   |   |   |   |   | to      Total |   |
|                                   |   | Reserve |   |   | Loans      and  |   |   | Reserve |   |   | Loans      and  |   |   | Reserve |   |   | Loan      and |   |   | Reserve |   |   | Loans      and |   |   | Reserve |   |   | Loans      and |   |
| (Dollars      in thousands)            |   | Amount  |   |   | Leases          |   |   | Amount  |   |   | Leases          |   |   | Amount  |   |   | Leases |   |   | Amount |   |   | Leases |   |   | Amount |   |   | Leases |   |
| Commercial      and agricultural loans |   | $       | 17,393 |   |            |   | 18.61  | %       |   | $      | 14,547          |   |   |    | 17.70  | % |   | $ | 15,472 |   |   |   | 18.40 | % |   | $ | 13,612 |   |   |   | 18.64 | % |   | $ | 9,589 |   |   |   | 18.06 | % |
| Truck      and automobile financing    |   |    | 16,017 |   |            |   | 18.98  |    |   |   | 13,359          |   |   |    | 24.40  |   |   |   | 13,008 |   |   |   | 24.88 |   |   |   | 12,633 |   |   |   | 23.31 |   |   |   | 13,966 |   |   |   | 22.01 |   |
| Aircraft      financing                |   |    | 17,761 |   |            |   | 18.39  |    |   |   | 18,621          |   |   |    | 18.46  |   |   |   | 19,583 |   |   |   | 18.66 |   |   |   | 26,475 |   |   |   | 19.49 |   |   |   | 31,733 |   |   |   | 21.93 |   |
| Construction      equipment financing  |   |    | 6,171  |   |            |   | 11.84  |    |   |   | 5,030           |   |   |    | 11.32  |   |   |   | 4,235 |   |   |   | 9.10 |   |   |   | 4,502 |   |   |   | 8.62 |   |   |   | 9,061 |   |   |   | 9.84 |   |
| Loans      secured by real estate      |   |    | 6,320  |   |            |   | 27.62  |    |   |   | 4,672           |   |   |    | 23.40  |   |   |   | 4,058 |   |   |   | 24.40 |   |   |   | 4,187 |   |   |   | 25.59 |   |   |   | 3,798 |   |   |   | 23.92 |   |
| Consumer      loans                    |   |    | 2,940  |   |            |   | 4.56   |    |   |   | 2,573           |   |   |    | 4.72   |   |   |   | 2,341 |   |   |   | 4.56 |   |   |   | 2,263 |   |   |   | 4.35 |   |   |   | 1,898 |   |   |   | 4.24 |   |
| Total                                  |   | $       | 66,602 |   |            |   | 100.00 | %       |   | $      | 58,802          |   |   |    | 100.00 | % |   | $ | 58,697 |   |   |   | 100.00 | % |   | $ | 63,672 |   |   |   | 100.00 | % |   | $ | 70,045 |   |   |   | 100.00 | % |

| Nonperforming      assets at December 31 (Dollars in      thousands) |   | 2007   |   |   | 2006   |   |   | 2005   |   |   | 2004   |   |   | 2003   |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Loans      past due over 90 days                                     |   | $      | 1,105  |   |   | $      | 116    |   |   | $      | 245    |   |   | $      | 481    |   |   | $ | 212 |   |
| Nonaccrual      loans and leases and restructured loans:             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and agricultural loans                               |   |   | 1,597  |   |   |   | 1,768  |   |   |   | 3,701  |   |   |   | 6,928  |   |   |   | 2,795 |   |
| Auto,      light truck and environmental equipment                   |   |   | 507    |   |   |   | 481    |   |   |   | 812    |   |   |   | 2,336  |   |   |   | 2,419 |   |
| Medium      and heavy duty truck                                     |   |   | 277    |   |   |   | 1,755  |   |   |   | 17     |   |   |   | 179    |   |   |   | 1,823 |   |
| Aircraft      financing                                              |   |   | 1,846  |   |   |   | 8,219  |   |   |   | 7,641  |   |   |   | 10,132 |   |   |   | 12,900 |   |
| Construction      equipment financing                                |   |   | 1,196  |   |   |   | 853    |   |   |   | 2,513  |   |   |   | 4,097  |   |   |   | 4,663 |   |
| Loans      secured by real estate                                    |   |   | 3,581  |   |   |   | 2,214  |   |   |   | 1,475  |   |   |   | 1,141  |   |   |   | 1,786 |   |
| Consumer      loans                                                  |   |   | 1,132  |   |   |   | 285    |   |   |   | 393    |   |   |   | 440    |   |   |   | 699 |   |
| Total      nonaccrual loans and leases and restructured loans        |   |   | 10,136 |   |   |   | 15,575 |   |   |   | 16,552 |   |   |   | 25,253 |   |   |   | 27,085 |   |
| Total      nonperforming loans and leases                            |   |   | 11,241 |   |   |   | 15,691 |   |   |   | 16,797 |   |   |   | 25,734 |   |   |   | 27,297 |   |
| Other      real estate                                               |   |   | 4,821  |   |   |   | 800    |   |   |   | 960    |   |   |   | 1,307  |   |   |   | 3,010 |   |
| Repossessions:                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commercial      and agricultural loans                               |   |   | 45     |   |   |   | 2      |   |   |   | -      |   |   |   | -      |   |   |   | 34 |   |
| Auto,      light truck and environmental equipment                   |   |   | 183    |   |   |   | 178    |   |   |   | 128    |   |   |   | 1,112  |   |   |   | 847 |   |
| Medium      and heavy duty truck                                     |   |   | 54     |   |   |   | -      |   |   |   | -      |   |   |   | -      |   |   |   | - |   |
| Aircraft      financing                                              |   |   | 1,850  |   |   |   | 300    |   |   |   | 4,073  |   |   |   | 3,037  |   |   |   | 4,551 |   |
| Construction      equipment financing                                |   |   | 92     |   |   |   | 400    |   |   |   | -      |   |   |   | 183    |   |   |   | 753 |   |
| Consumer      loans                                                  |   |   | 67     |   |   |   | 95     |   |   |   | 83     |   |   |   | 50     |   |   |   | 78 |   |
| Total      repossessions                                             |   |   | 2,291  |   |   |   | 975    |   |   |   | 4,284  |   |   |   | 4,382  |   |   |   | 6,263 |   |
| Operating      leases                                                |   |   | 126    |   |   |   | 201    |   |   |   | -      |   |   |   | 1,785  |   |   |   | 257 |   |
| Total      nonperforming assets                                      |   | $      | 18,479 |   |   | $      | 17,667 |   |   | $      | 22,041 |   |   | $      | 33,208 |   |   | $ | 36,827 |   |
| Nonperforming      loans and leases to loans and leases,             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net      of unearned discount                                        |   |   | 0.35   | %      |   |   | 0.58   | %      |   |   | 0.68   | %      |   |   | 1.13   | % |   |   | 1.22 | % |
| Nonperforming      assets to loans and leases and operating leases,  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net      of unearned discount                                        |   |   | 0.56   | %      |   |   | 0.64   | %      |   |   | 0.87   | %      |   |   | 1.42   | % |   |   | 1.59 | % |

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| (Dollars      in thousands)                                                                  |   | 2007   |    |   | 2006   |   |    | 2005   |   |
|----------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| U.S.      Treasury and government agencies, including agency mortgage-backed      securities |   | $      | 483,596 |   |   | $      | 466,326 |   |   | $ | 415,793 |   |
| States      and political subdivisions                                                       |   |   | 258,260 |   |   |   | 182,356 |   |   |   | 179,797 |   |
| Other      securities                                                                        |   |   | 49,003  |   |   |   | 60,409  |   |   |   | 42,288 |   |
| Total      investment securities available-for-sale                                          |   | $      | 790,859 |   |   | $      | 709,091 |   |   | $ | 637,878 |   |

| (Dollars      in thousands)                                                                        |   | Amount |    |   | Yield  |   |
|----------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| U.S.      Treasury and government agencies, including agency mortgage-backed      securities       |   |   |    |   |   |   |
| Under      1 year                                                                                  |   | $      | 286,760 |   |   |   | 4.87 | % |
| 1 –      5 years                                                                             |   |   | 40,558  |   |   |   | 5.20 |   |
| 5 –      10 years                                                                            |   |   | 22,315  |   |   |   | 4.77 |   |
| Over      10 years                                                                                 |   |   | 133,963 |   |   |   | 5.56 |   |
| Total      U.S. Treasury and government agencies, including agency mortgage-backed      securities |   |   | 483,596 |   |   |   | 5.08 |   |
| States      and political subdivisions                                                             |   |   |    |   |   |   |   |   |
| Under      1 year                                                                                  |   |   | 105,219 |   |   |   | 6.85 |   |
| 1 –      5 years                                                                             |   |   | 102,124 |   |   |   | 6.76 |   |
| 5 –      10 years                                                                            |   |   | 50,917  |   |   |   | 7.25 |   |
| Over      10 years                                                                                 |   |   | -       |   |   |   | - |   |
| Total      states and political subdivisions                                                       |   |   | 258,260 |   |   |   | 6.90 |   |
| Other      securities                                                                              |   |   |    |   |   |   |   |   |
| Under      1 year                                                                                  |   |   | 9,282   |   |   |   | 3.09 |   |
| 1 –      5 years                                                                             |   |   | 3,010   |   |   |   | 5.27 |   |
| 5 –      10 years                                                                            |   |   | -       |   |   |   | - |   |
| Over      10 years                                                                                 |   |   | -       |   |   |   | - |   |
| Marketable      equity securities                                                                  |   |   | 36,711  |   |   |   | 6.69 |   |
| Total      other securities                                                                        |   |   | 49,003  |   |   |   | 5.92 |   |
| Total      investment securities available-for-sale                                                |   | $      | 790,859 |   |   |   | 5.73 | % |

|                                     |   | 2007   |      |   | 2006   |   |    | 2005   |   |   |
|------------------------------------------|--------|--------|-----------|--------|--------|--------|---------|--------|--------|--------|
| (Dollars      in thousands)              |   | Amount |      |   | Rate   |   |    | Amount |   |   | Rate |   |   | Amount |   |   | Rate |   |   |
| Noninterest      bearing demand deposits |   | $      | 351,050   |   |   |   | -       | %      |   | $      | 352,204 |   |   |   | - | % |   | $ | 392,475 |   |   |   | - |  % |   |
| Interest      bearing demand deposits    |   |   | 988,308   |   |   |   | 3.10    |   |   |   | 715,242 |   |   |   | 2.51 |   |   |   | 784,366 |   |   |   | 1.78 |   |   |
| Savings      deposits                    |   |   | 250,927   |   |   |   | 1.21    |   |   |   | 190,347 |   |   |   | 0.44 |   |   |   | 210,151 |   |   |   | 0.30 |   |   |
| Other      time deposits                 |   |   | 1,679,521 |   |   |   | 4.85    |   |   |   | 1,512,755 |   |   |   | 4.38 |   |   |   | 1,223,406 |   |   |   | 3.41 |   |   |
| Total      deposits                      |   | $      | 3,269,806 |   |   |   | -  |   |   | $      | 2,770,548 |   |   |   | -  |   |   | $ | 2,610,398 |   |   |   | -  |   |   |

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| (Dollars      in thousands) |   |   |    |
|-----------------------------|--------|--------|---------|
| Under      3 months         |   | $      | 146,879 |   |
| 4 –      6 months     |   |   | 94,276  |   |
| 7 –      12 months    |   |   | 139,995 |   |
| Over      12 months         |   |   | 151,504 |   |
| Total                       |   | $      | 532,654 |   |

| (Dollars      in thousands) |   |
|-----------------------------|--------|
| 2008                        |   | $ | 1,226,775 |   |
| 2009                        |   |   | 220,217 |   |
| 2010                        |   |   | 49,598 |   |
| 2011                        |   |   | 18,725 |   |
| 2012                        |   |   | 17,025 |   |
| Thereafter                  |   |   | 16,012 |   |
| Total                       |   | $ | 1,548,352 |   |

|                                                           |   | Federal      Funds |    |   |       |   |   |       |   |   |       |   |
|----------------------------------------------------------------|--------|--------------------|---------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
|                                                           |   | Purchased      and |    |   |       |   |   |       |   |   |       |   |
|                                                           |   | Security           |    |   |       |   |   | Other      |   |   |       |   |
|                                                           |   | Repurchase         |    |   | Commercial |   |   | Short-Term |   |   | Total      |   |
| (Dollars      in thousands)                                    |   | Agreements         |    |   | Paper      |   |   | Borrowings |   |   | Borrowings |   |
| 2007                                                           |   |               |    |   |       |   |   |       |   |   |       |   |
| Balance      at December 31, 2007                              |   | $                  | 303,429 |   |       | $      | 10,783 |       |   | $      | 23,620     |   |   | $ | 337,832 |   |
| Maximum      amount outstanding at any month-end               |   |               | 327,623 |   |       |   | 15,478 |       |   |   | 42,784     |   |   |   | 385,885 |   |
| Average      amount outstanding                                |   |               | 246,792 |   |       |   | 12,598 |       |   |   | 11,987     |   |   |   | 271,377 |   |
| Weighted      average interest rate during the year            |   |               | 3.92    | %      |       |   | 4.84   | %          |   |   | 5.49       | %      |   |   | 4.03 | % |
| Weighted      average interest rate for outstanding amounts at |   |               |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| December      31, 2007                                         |   |               | 2.98    | %      |       |   | 4.04   | %          |   |   | 2.60       | %      |   |   | 2.99 | % |
| 2006                                                           |   |               |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Balance      at December 31, 2006                              |   | $                  | 195,262 |   |       | $      | 10,907 |       |   | $      | 16,549     |   |   | $ | 222,718 |   |
| Maximum      amount outstanding at any month-end               |   |               | 265,362 |   |       |   | 12,922 |       |   |   | 90,689     |   |   |   | 368,973 |   |
| Average      amount outstanding                                |   |               | 211,973 |   |       |   | 7,997  |       |   |   | 45,854     |   |   |   | 265,824 |   |
| Weighted      average interest rate during the year            |   |               | 3.95    | %      |       |   | 4.99   | %          |   |   | 4.87       | %      |   |   | 4.14 | % |
| Weighted      average interest rate for outstanding amounts at |   |               |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| December      31, 2006                                         |   |               | 3.41    | %      |       |   | 5.08   | %          |   |   | 4.89       | %      |   |   | 3.60 | % |
| 2005                                                           |   |               |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| Balance      at December 31, 2005                              |   | $                  | 230,756 |   |       | $      | 4,600  |       |   | $      | 42,113     |   |   | $ | 277,469 |   |
| Maximum      amount outstanding at any month-end               |   |               | 273,428 |   |       |   | 5,552  |       |   |   | 122,038    |   |   |   | 401,018 |   |
| Average      amount outstanding                                |   |               | 214,199 |   |       |   | 2,054  |       |   |   | 79,018     |   |   |   | 295,271 |   |
| Weighted      average interest rate during the year            |   |               | 2.55    | %      |       |   | 3.36   | %          |   |   | 3.91       | %      |   |   | 2.92 | % |
| Weighted      average interest rate for outstanding amounts at |   |               |    |   |       |   |   |       |   |   |       |   |   |   |   |   |
| December      31, 2005                                         |   |               | 3.86    | %      |       |   | 3.88   | %          |   |   | 2.76       | %      |   |   | 3.70 | % |

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|                                  |   |   |   |      |                  |   |      |                   |   |   |                   |   |   |              |   |    | Indeterminate |   |    |   |   |
|---------------------------------------|--------|--------|--------|-----------|-----------------------|--------|-----------|------------------------|--------|--------|------------------------|--------|--------|-------------------|--------|---------|---------------|--------|---------|--------|--------|
| (Dollars      in thousands)           |   | Note   |   |      | 0 –      1 Year |   |      | 1 –      3 Years |   |   | 3 –      5 Years |   |   | Over      5 Years |   |    | maturity      |   |    | Total  |   |
| Deposits      without stated maturity |   |   | -      |      |                  | $      | 1,921,311 |                   |   | $      | -                      |   |   | $                 | -      |    |          | $      | -       |   |   | $ | - |   |   | $ | 1,921,311 |   |
| Certificates      of deposit          |   |   | -      |      |                  |   | 1,226,775 |                   |   |   | 269,815                |   |   |              | 35,750 |    |          |   | 16,012  |   |   |   | - |   |   |   | 1,548,352 |   |
| Long-term      debt                   |   |   | K      |      |                  |   | 15,394    |                   |   |   | 11,016                 |   |   |              | 235    |    |          |   | 869     |   |   |   | 7,188 |   |   |   | 34,702 |   |
| Subordinated      notes               |   |   | M      |      |                  |   | -         |                   |   |   | -                      |   |   |              | -      |    |          |   | 100,002 |   |   |   | - |   |   |   | 100,002 |   |
| Operating      leases                 |   |   | P      |      |                  |   | 2,749     |                   |   |   | 4,470                  |   |   |              | 2,610  |    |          |   | 1,069   |   |   |   | - |   |   |   | 10,898 |   |
| Purchase      obligations             |   |   | -      |      |                  |   | 15,910    |                   |   |   | 5,640                  |   |   |              | 5,529  |    |          |   | -       |   |   |   | - |   |   |   | 27,079 |   |
| Total      contractual obligations    |   |   | $      | 3,182,139 |                  |   | $         | 290,941                |   |   | $                      | 44,124 |   |              | $      | 117,952 |          |   | $       | 7,188  |   |   | $ | 3,642,344 |   |

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| Three      Months Ended (Dollars in      thousands, except per share amounts) |   | March      31 |   |   | June      30 |   |   | September      30 |   |   | December      31 |   |
|-------------------------------------------------------------------------------|--------|---------------|--------|--------|--------------|--------|--------|-------------------|--------|--------|------------------|--------|
| 2007                                                                          |   |          |   |   |         |   |   |              |   |   |             |   |
| Interest      income                                                          |   | $             | 55,953 |   |         | $      | 62,332 |              |   | $      | 68,330           |   |   | $ | 66,972 |   |
| Interest      expense                                                         |   |          | 29,681 |   |         |   | 33,461 |              |   |   | 36,632           |   |   |   | 34,903 |   |
| Net      interest income                                                      |   |          | 26,272 |   |         |   | 28,871 |              |   |   | 31,698           |   |   |   | 32,069 |   |
| (Recovery      of) provision for loan and lease losses                        |   |          | (623   | )      |         |   | 1,247  |              |   |   | 3,660            |   |   |   | 3,250 |   |
| Investment      securities and other investment gains (losses)                |   |          | 247    |   |         |   | 207    |              |   |   | (154             | )      |   |   | (3,428 | ) |
| Income      before income taxes                                               |   |          | 12,581 |   |         |   | 12,248 |              |   |   | 8,495            |   |   |   | 8,359 |   |
| Net      income                                                               |   |          | 8,523  |   |         |   | 8,060  |              |   |   | 6,130            |   |   |   | 7,826 |   |
| Diluted      net income per common share                                      |   |          | 0.37   |   |         |   | 0.34   |              |   |   | 0.25             |   |   |   | 0.32 |   |
| 2006                                                                          |   |          |   |   |         |   |   |              |   |   |             |   |   |   |   |   |
| Interest      income                                                          |   | $             | 46,396 |   |         | $      | 50,781 |              |   | $      | 54,379           |   |   | $ | 57,438 |   |
| Interest      expense                                                         |   |          | 21,297 |   |         |   | 23,636 |              |   |   | 26,928           |   |   |   | 30,700 |   |
| Net      interest income                                                      |   |          | 25,099 |   |         |   | 27,145 |              |   |   | 27,451           |   |   |   | 26,738 |   |
| (Recovery      of) provision for loan and lease losses                        |   |          | (300   | )      |         |   | (1,671 | )                 |   |   | (667             | )      |   |   | (98 | ) |
| Investment      securities and other investment gains (losses)                |   |          | 2,083  |   |         |   | 150    |              |   |   | (223             | )      |   |   | (8 | ) |
| Income      before income taxes                                               |   |          | 14,998 |   |         |   | 15,497 |              |   |   | 17,117           |   |   |   | 11,931 |   |
| Net      income                                                               |   |          | 9,933  |   |         |   | 10,277 |              |   |   | 10,964           |   |   |   | 8,123 |   |
| Diluted      net income per common share                                      |   |          | 0.43   |   |         |   | 0.45   |              |   |   | 0.48             |   |   |   | 0.36 |   |

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| CONSOLIDATED STATEMENTS OF FINANCIAL      CONDITION                                                          |   |   |      |   |   |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                                                                         |   |   |      |   |   |   |
| December      31 (Dollars in      thousands)                                                            |   | 2007   |      |   | 2006   |   |
|                                                                                                         |   |   |      |   |   |   |
| ASSETS                                                                                                       |   |   |      |   |   |   |
| Cash      and due from banks                                                                                 |   | $      | 153,137   |   |   | $      | 118,131 |   |
| Federal      funds sold and interest bearing deposits with other banks                                       |   |   | 25,817    |   |   |   | 64,979 |   |
| Investment      securities available-for-sale                                                                |   |   |      |   |   |   |   |   |
| (amortized      cost of $790,859 and $709,091 at December 31, 2007 and December 31, 2006,      respectively) |   |   | 794,918   |   |   |   | 708,672 |   |
| Mortgages      held for sale                                                                                 |   |   | 25,921    |   |   |   | 50,159 |   |
| Loans      and leases, net of unearned discount:                                                             |   |   |      |   |   |   |   |   |
| Commercial      and agricultural loans                                                                       |   |   | 593,806   |   |   |   | 478,310 |   |
| Auto,      light truck and environmental equipment                                                           |   |   | 305,238   |   |   |   | 317,604 |   |
| Medium      and heavy duty truck                                                                             |   |   | 300,469   |   |   |   | 341,744 |   |
| Aircraft      financing                                                                                      |   |   | 587,022   |   |   |   | 498,914 |   |
| Construction      equipment financing                                                                        |   |   | 377,785   |   |   |   | 305,976 |   |
| Loans      secured by real estate                                                                            |   |   | 881,646   |   |   |   | 632,283 |   |
| Consumer      loans                                                                                          |   |   | 145,475   |   |   |   | 127,706 |   |
| Total      loans and leases                                                                                  |   |   | 3,191,441 |   |   |   | 2,702,537 |   |
| Reserve      for loan and lease losses                                                                       |   |   | (66,602   | )      |   |   | (58,802 | ) |
| Net      loans and leases                                                                                    |   |   | 3,124,839 |   |   |   | 2,643,735 |   |
| Equipment      owned under operating leases, net                                                             |   |   | 81,960    |   |   |   | 76,310 |   |
| Net      premises and equipment                                                                              |   |   | 45,048    |   |   |   | 37,326 |   |
| Goodwill      and intangible assets                                                                          |   |   | 93,567    |   |   |   | 19,418 |   |
| Accrued      income and other assets                                                                         |   |   | 101,897   |   |   |   | 88,585 |   |
| Total      assets                                                                                            |   | $      | 4,447,104 |   |   | $      | 3,807,315 |   |
| LIABILITIES                                                                                                  |   |   |      |   |   |   |   |   |
| Deposits:                                                                                                    |   |   |      |   |   |   |   |   |
| Noninterest      bearing                                                                                     |   | $      | 418,529   |   |   | $      | 339,866 |   |
| Interest      bearing                                                                                        |   |   | 3,051,134 |   |   |   | 2,708,418 |   |
| Total      deposits                                                                                          |   |   | 3,469,663 |   |   |   | 3,048,284 |   |
| Short-term      borrowings:                                                                                  |   |   |      |   |   |   |   |   |
| Federal      funds purchased and securities sold under agreements to      repurchase                         |   |   | 303,429   |   |   |   | 195,262 |   |
| Other      short-term borrowings                                                                             |   |   | 34,403    |   |   |   | 27,456 |   |
| Total      short-term borrowings                                                                             |   |   | 337,832   |   |   |   | 222,718 |   |
| Long-term      debt and mandatorily redeemable securities                                                    |   |   | 34,702    |   |   |   | 43,761 |   |
| Subordinated      notes                                                                                      |   |   | 100,002   |   |   |   | 59,022 |   |
| Accrued      expenses and other liabilities                                                                  |   |   | 74,401    |   |   |   | 64,626 |   |
| Total      liabilities                                                                                       |   |   | 4,016,600 |   |   |   | 3,438,411 |   |
| 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 25,927,510 shares in 2007 and 23,781,518 shares      in 2006       |   |   |      |   |   |   |   |   |
| less      unearned shares (284,004 in 2007 and 262,986 in      2006)                               |   |   | 342,840   |   |   |   | 289,163 |   |
| Retained      earnings                                                                                       |   |   | 117,373   |   |   |   | 99,572 |   |
| Cost      of common stock in treasury (1,551,396 shares in 2007 and 1,022,435      shares in 2006) |   |   | (32,231   | )      |   |   | (19,571 | ) |
| Accumulated      other comprehensive income (loss)                                                           |   |   | 2,522     |   |   |   | (260 | ) |
| Total      shareholders' equity                                                                              |   |   | 430,504   |   |   |   | 368,904 |   |
| Total      liabilities and shareholders' equity                                                              |   | $      | 4,447,104 |   |   | $      | 3,807,315 |   |
|                                                                                                         |   |   |      |   |   |   |   |   |
| The      accompanying notes are a part of the consolidated financial      statements.                        |   |   |      |   |   |   |   |   |

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Table of Contents

| CONSOLIDATED STATEMENTS OF INCOME                                                                   |   |   |    |   |   |   |    |   |   |
|-----------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
|                                                                                                |   |   |    |   |   |   |    |   |   |
| Year      Ended December 31 (Dollars in      thousands, except per share data)                 |   | 2007   |    |   | 2006   |   |    | 2005   |   |
| Interest      income:                                                                               |   |   |    |   |   |   |    |   |   |
| Loans      and leases                                                                               |   | $      | 216,186 |   |   | $      | 181,363 |   |   | $ | 147,814 |   |
| Investment      securities, taxable                                                                 |   |   | 25,770  |   |   |   | 19,816  |   |   |   | 14,777 |   |
| Investment      securities, tax-exempt                                                              |   |   | 7,608   |   |   |   | 5,183   |   |   |   | 5,275 |   |
| Other                                                                                               |   |   | 4,023   |   |   |   | 2,632   |   |   |   | 666 |   |
| Total      interest income                                                                          |   |   | 253,587 |   |   |   | 208,994 |   |   |   | 168,532 |   |
| Interest      expense:                                                                              |   |   |    |   |   |   |    |   |   |   |   |   |
| Deposits                                                                                            |   |   | 115,113 |   |   |   | 85,067  |   |   |   | 56,341 |   |
| Short-term      borrowings                                                                          |   |   | 10,935  |   |   |   | 11,011  |   |   |   | 8,628 |   |
| Subordinated      notes                                                                             |   |   | 6,051   |   |   |   | 4,320   |   |   |   | 4,008 |   |
| Long-term      debt and mandatorily redeemable securities                                           |   |   | 2,578   |   |   |   | 2,163   |   |   |   | 1,127 |   |
| Total      interest expense                                                                         |   |   | 134,677 |   |   |   | 102,561 |   |   |   | 70,104 |   |
| Net      interest income                                                                            |   |   | 118,910 |   |   |   | 106,433 |   |   |   | 98,428 |   |
| Provision      for (recovery of provision for) loan and lease losses                                |   |   | 7,534   |   |   |   | (2,736  | )      |   |   | (5,855 | ) |
| Net      interest income after provision for (recovery of provision for) loan and      lease losses |   |   | 111,376 |   |   |   | 109,169 |   |   |   | 104,283 |   |
| Noninterest      income:                                                                            |   |   |    |   |   |   |    |   |   |   |   |   |
| Trust      fees                                                                                     |   |   | 15,567  |   |   |   | 13,806  |   |   |   | 12,877 |   |
| Service      charges on deposit accounts                                                            |   |   | 20,470  |   |   |   | 19,040  |   |   |   | 17,775 |   |
| Mortgage      banking income                                                                        |   |   | 2,868   |   |   |   | 11,637  |   |   |   | 10,868 |   |
| Insurance      commissions                                                                          |   |   | 4,666   |   |   |   | 4,574   |   |   |   | 4,133 |   |
| Equipment      rental income                                                                        |   |   | 21,312  |   |   |   | 18,972  |   |   |   | 16,067 |   |
| Other      income                                                                                   |   |   | 8,864   |   |   |   | 6,554   |   |   |   | 6,463 |   |
| Investment      securities and other investment (losses) gains                                      |   |   | (3,128  | )      |   |   | 2,002   |   |   |   | 350 |   |
| Total      noninterest income                                                                       |   |   | 70,619  |   |   |   | 76,585  |   |   |   | 68,533 |   |
| Noninterest      expense:                                                                           |   |   |    |   |   |   |    |   |   |   |   |   |
| Salaries      and employee benefits                                                                 |   |   | 73,944  |   |   |   | 66,605  |   |   |   | 69,767 |   |
| Net      occupancy expense                                                                          |   |   | 9,030   |   |   |   | 7,492   |   |   |   | 7,749 |   |
| Furniture      and equipment expense                                                                |   |   | 15,145  |   |   |   | 12,316  |   |   |   | 11,418 |   |
| Depreciation      - leased equipment                                                                |   |   | 17,085  |   |   |   | 14,958  |   |   |   | 12,895 |   |
| Professional      fees                                                                              |   |   | 4,575   |   |   |   | 3,998   |   |   |   | 3,362 |   |
| Supplies      and communications                                                                    |   |   | 5,987   |   |   |   | 5,496   |   |   |   | 5,462 |   |
| Business      development and marketing expense                                                     |   |   | 4,788   |   |   |   | 4,008   |   |   |   | 3,630 |   |
| Loan      and lease collection and repossession expense                                             |   |   | 1,123   |   |   |   | 704     |   |   |   | (1,094 | ) |
| Other  expense                                                                            |   |   | 8,635   |   |   |   | 10,634  |   |   |   | 10,250 |   |
| Total      noninterest expense                                                                      |   |   | 140,312 |   |   |   | 126,211 |   |   |   | 123,439 |   |
| Income      before income taxes                                                                     |   |   | 41,683  |   |   |   | 59,543  |   |   |   | 49,377 |   |
| Income      taxes                                                                                   |   |   | 11,144  |   |   |   | 20,246  |   |   |   | 15,626 |   |
| Net      income                                                                                     |   | $      | 30,539  |   |   | $      | 39,297  |   |   | $ | 33,751 |   |
| Basic      net income per common share                                                              |   | $      | 1.30    |   |   | $      | 1.74    |   |   | $ | 1.48 |   |
| Diluted      net income per common share                                                            |   | $      | 1.28    |   |   | $      | 1.72    |   |   | $ | 1.46 |   |
|                                                                                                |   |   |    |   |   |   |    |   |   |   |   |   |
| The      accompanying notes are a part of the consolidated financial      statements.               |   |   |    |   |   |   |    |   |   |   |   |   |

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Table of Contents

| CONSOLIDATED STATEMENTS OF SHAREHOLDERS'      EQUITY                                  |   |
|---------------------------------------------------------------------------------------|--------|
|                                                                                  |   |   |   |   |   |   |   |   |   |   | Cost      of |   |   | Accumulated |   |
|                                                                                  |   |   |   |   |   |   |   |   |   |   | Common |   |   | Other |   |
|                                                                                  |   |   |   |   | Common |   |   | Retained |   |   | Stock |   |   | Comprehensive |   |
| (Dollars      in thousands, except per share data)                                    |   | Total |   |   | Stock |   |   | Earnings |   |   | in      Treasury |   |   | Income      (Loss), Net |   |
| Balance      at January 1, 2005                                                       |   | $ | 326,600 |   |   | $ | 221,579 |   |   | $ | 115,830 |   |   | $ | (10,512 | ) |   | $ | (297 | ) |
| Comprehensive      income, net of tax:                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                       |   |   | 33,751 |   |   |   | - |   |   |   | 33,751 |   |   |   | - |   |   |   | - |   |
| Change      in unrealized losses of                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale      securities, net of tax                                        |   |   | (2,943 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (2,943 | ) |
| Total      comprehensive income                                                       |   |   | 30,808 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Issuance      of 51,433 common shares per                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  stock      based compensation awards, including                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  related      tax effects                                                        |   |   | 528 |   |   |   | - |   |   |   | 159 |   |   |   | 369 |   |   |   | - |   |
| Cost      of 111,475 shares of common                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      acquired for treasury                                                      |   |   | (2,221 | ) |   |   | - |   |   |   | - |   |   |   | (2,221 | ) |   |   | - |   |
| Cash      dividend ($.445 per share)                                                  |   |   | (10,139 | ) |   |   | - |   |   |   | (10,139 | ) |   |   | - |   |   |   | - |   |
| Balance      at December 31, 2005                                                     |   | $ | 345,576 |   |   | $ | 221,579 |   |   | $ | 139,601 |   |   | $ | (12,364 | ) |   | $ | (3,240 | ) |
| Comprehensive      income, net of tax:                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                       |   |   | 39,297 |   |   |   | - |   |   |   | 39,297 |   |   |   | - |   |   |   | - |   |
| Change      in unrealized losses of                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale      securities, net of tax                                        |   |   | 2,980 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,980 |   |
| Total      comprehensive income                                                       |   |   | 42,277 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Issuance      of 95,032 common shares per                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      based compensation awards, including                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  related      tax effects                                                        |   |   | 814 |   |   |   | - |   |   |   | 364 |   |   |   | 450 |   |   |   | - |   |
| Cost      of 335,038 shares of common                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      acquired for treasury                                                      |   |   | (7,657 | ) |   |   | - |   |   |   | - |   |   |   | (7,657 | ) |   |   | - |   |
| Cash      dividend ($.534 per share)                                                  |   |   | (12,094 | ) |   |   | - |   |   |   | (12,094 | ) |   |   | - |   |   |   | - |   |
| 10%      common stock dividend                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ($12      cash paid in lieu of fractional shares)                                     |   |   | (12 | ) |   |   | 67,584 |   |   |   | (67,596 | ) |   |   | - |   |   |   | - |   |
| Balance      at December 31, 2006                                                     |   | $ | 368,904 |   |   | $ | 289,163 |   |   | $ | 99,572 |   |   | $ | (19,571 | ) |   | $ | (260 | ) |
| Comprehensive      income, net of tax:                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                       |   |   | 30,539 |   |   |   |   |   |   |   | 30,539 |   |   |   |   |   |   |   |   |   |
| Change      in unrealized losses of                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| available-for-sale      securities, net of tax                                        |   |   | 2,782 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 2,782 |   |
| Total      comprehensive income                                                       |   |   | 33,321 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of 40,349 common shares per                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      based compensation awards, including                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  related      tax effects                                                        |   |   | 545 |   |   |   |   |   |   |   | 384 |   |   |   | 161 |   |   |   |   |   |
| Cost      of 569,310 shares of common                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| stock      acquired for treasury                                                      |   |   | (12,821 | ) |   |   |   |   |   |   |   |   |   |   | (12,821 | ) |   |   |   |   |
| Cash      dividend ($.560 per share)                                                  |   |   | (13,122 | ) |   |   |   |   |   |   | (13,122 | ) |   |   |   |   |   |   |   |   |
| Issuance      of 2,124,974 shares of common                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  stock      for FINA Bancorp purchase                                            |   |   | 53,677 |   |   |   | 53,677 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                                                     |   | $ | 430,504 |   |   | $ | 342,840 |   |   | $ | 117,373 |   |   | $ | (32,231 | ) |   | $ | 2,522 |   |
|                                                                                  |   |
| The      accompanying notes are a part of the consolidated financial      statements. |   |

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| CONSOLIDATED STATEMENTS OF CASH FLOW                                                        |   |   |     |   |   |   |     |   |   |
|---------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|----------|--------|--------|
|                                                                                        |   |   |     |   |   |   |     |   |   |
| Year      Ended December 31 (Dollars in      thousands)                                     |   | 2007   |     |   | 2006   |   |     | 2005   |   |
| Operating      activities:                                                                  |   |   |     |   |   |   |     |   |   |
| Net      income                                                                             |   | $      | 30,539   |   |   | $      | 39,297   |   |   | $ | 33,751 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities: |   |   |     |   |   |   |     |   |   |   |   |   |
| Provision      for (recovery of provision for) loan and lease losses                        |   |   | 7,534    |   |   |   | (2,736   | )      |   |   | (5,855 | ) |
| Depreciation      of premises and equipment                                                 |   |   | 5,364    |   |   |   | 4,797    |   |   |   | 5,002 |   |
| Depreciation      of equipment owned and leased to others                                   |   |   | 17,085   |   |   |   | 14,958   |   |   |   | 12,895 |   |
| Amortization      of investment security premiums and accretion of discounts,      net      |   |   | (356     | )      |   |   | (259     | )      |   |   | 4,471 |   |
| Amortization      of mortgage servicing rights                                              |   |   | 2,403    |   |   |   | 4,587    |   |   |   | 6,782 |   |
| Mortgage      servicing asset impairment/(recoveries)                                       |   |   | 143      |   |   |   | (12      | )      |   |   | (2,271 | ) |
| Deferred      income taxes                                                                  |   |   | (3,239   | )      |   |   | (3,921   | )      |   |   | (2,908 | ) |
| Realized      investment securities losses (gains)                                          |   |   | 3,128    |   |   |   | (2,002   | )      |   |   | (350 | ) |
| Change      in mortgages held for sale                                                      |   |   | 24,238   |   |   |   | 17,065   |   |   |   | (11,513 | ) |
| Change      in interest receivable                                                          |   |   | (1,296   | )      |   |   | (3,616   | )      |   |   | (1,876 | ) |
| Change      in interest payable                                                             |   |   | (380     | )      |   |   | 10,577   |   |   |   | 3,265 |   |
| Change      in other assets                                                                 |   |   | (8,587   | )      |   |   | 8,378    |   |   |   | (1,347 | ) |
| Change      in other liabilities                                                            |   |   | 2,684    |   |   |   | (4,270   | )      |   |   | 8,391 |   |
| Other                                                                                       |   |   | 5,101    |   |   |   | 1,253    |   |   |   | 827 |   |
| Net      change in operating activities                                                     |   |   | 84,361   |   |   |   | 84,096   |   |   |   | 49,264 |   |
| Investing      activities:                                                                  |   |   |     |   |   |   |     |   |   |   |   |   |
| Cash      paid for acquisition, net                                                         |   |   | (55,977  | )      |   |   | -        |   |   |   | - |   |
| Proceeds      from sales of investment securities                                           |   |   | 121,671  |   |   |   | 65,682   |   |   |   | 28,806 |   |
| Proceeds      from maturities of investment securities                                      |   |   | 496,324  |   |   |   | 322,073  |   |   |   | 315,660 |   |
| Purchases      of investment securities                                                     |   |   | (518,041 | )      |   |   | (456,706 | )      |   |   | (196,061 | ) |
| Net      change in short-term investments                                                   |   |   | 195,337  |   |   |   | 3,599    |   |   |   | 151,552 |   |
| Net      change in loans and leases                                                         |   |   | (252,929 | )      |   |   | (236,266 | )      |   |   | (182,382 | ) |
| Net      change  in equipment owned under operatingleases                         |   |   | (22,734  | )      |   |   | (33,015  | )      |   |   | (23,887 | ) |
| Purchases      of premises and equipment                                                    |   |   | (14,467  | )      |   |   | (5,553   | )      |   |   | (5,858 | ) |
| Net      change in investing activities                                                     |   |   | (50,816  | )      |   |   | (340,186 | )      |   |   | 87,830 |   |
| Financing      activities:                                                                  |   |   |     |   |   |   |     |   |   |   |   |   |
| Net      change in demand deposits, NOW accounts and savings    accounts                    |   |   | (14,260  | )      |   |   | (101,390 | )      |   |   | (132,699 | ) |
| Net      change in certificates of deposit                                                  |   |   | (86,502  | )      |   |   | 404,087  |   |   |   | 71,284 |   |
| Net      change in short-term borrowings                                                    |   |   | 96,930   |   |   |   | (54,751  | )      |   |   | (22,193 | ) |
| Proceeds      from issuance of long-term debt                                               |   |   | 1,159    |   |   |   | 21,922   |   |   |   | 5,368 |   |
| Proceeds      from issuance of subordinated notes                                           |   |   | 58,764   |   |   |   | -        |   |   |   | - |   |
| Payments      on subordinated notes                                                         |   |   | (17,784  | )      |   |   | -        |   |   |   | - |   |
| Payments      on long-term debt                                                             |   |   | (11,225  | )      |   |   | (1,306   | )      |   |   | (274 | ) |
| Net      proceeds from issuance of treasury stock                                           |   |   | 545      |   |   |   | 814      |   |   |   | 528 |   |
| Acquisition      of treasury stock                                                          |   |   | (12,821  | )      |   |   | (7,657   | )      |   |   | (2,221 | ) |
| Cash      dividends                                                                         |   |   | (13,345  | )      |   |   | (12,315  | )      |   |   | (10,325 | ) |
| Net      change in financing activities                                                     |   |   | 1,461    |   |   |   | 249,404  |   |   |   | (90,532 | ) |
| Net      change in cash and cash equivalents                                                |   |   | 35,006   |   |   |   | (6,686   | )      |   |   | 46,562 |   |
| Cash      and cash equivalents, beginning of year                                           |   |   | 118,131  |   |   |   | 124,817  |   |   |   | 78,255 |   |
| Cash      and cash equivalents, end of year                                                 |   | $      | 153,137  |   |   | $      | 118,131  |   |   | $ | 124,817 |   |
| Supplemental      Information:                                                              |   |   |     |   |   |   |     |   |   |   |   |   |
| Cash      paid for:                                                                         |   |   |     |   |   |   |     |   |   |   |   |   |
| Interest                                                                                    |   | $      | 137,397  |   |   | $      | 91,985   |   |   | $ | 66,839 |   |
| Income      taxes                                                                           |   |   | 13,314   |   |   |   | 29,364   |   |   |   | 12,002 |   |
| The      accompanying notes are a part of the consolidated financial      statements.       |   |   |     |   |   |   |     |   |   |   |   |   |

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| (Dollars      in thousands)                                                 |   |   |    |
|-----------------------------------------------------------------------------|--------|--------|---------|
| Purchase      price                                                         |   | $      | 134,193 |   |
| Carrying      value of net assets acquired                                  |   |   | 68,676  |   |
| Excess      of purchase price over carrying value of net assets    acquired |   |   | 65,517  |   |
| Purchase      accounting adjustments                                        |   |   |    |   |
| Securities                                                                  |   |   | (44     | ) |
| Loans                                                                       |   |   | 1,707   |   |
| Premises      and equipment                                                 |   |   | 1,765   |   |
| Mortgage      servicing rights                                              |   |   | (511    | ) |
| Other      assets                                                           |   |   | 337     |   |
| Deposits                                                                    |   |   | (1,489  | ) |
| Severance      and exit costs                                               |   |   | 3,098   |   |
| Other      liabilities                                                      |   |   | 503     |   |
| Deferred      taxes                                                         |   |   | 1,944   |   |
| Subtotal                                                                    |   |   | 72,827  |   |
| Core      deposit intangibles                                               |   |   | (8,689  | ) |
| Other      identifiable intangible assets                                   |   |   | (254    | ) |
| Goodwill                                                                    |   | $      | 63,884  |   |

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| (Dollars      in thousands)                |   |   |     |
|--------------------------------------------|--------|--------|----------|
| Assets:                                    |   |   |     |
| Cash      and cash equivalents             |   | $      | 171,308  |   |
| Securities                                 |   |   | 184,494  |   |
| Loans,      net of reserve for loan losses |   |   | 235,709  |   |
| Premises      and equipment                |   |   | 14,277   |   |
| Mortgage      servicing rights             |   |   | 1,086    |   |
| Goodwill      and other intangibles        |   |   | 72,827   |   |
| Other      assets                          |   |   | 8,623    |   |
| Total      assets                          |   |   | 688,324  |   |
| Liabilities:                               |   |   |     |   |
| Deposits                                   |   |   | (521,630 | ) |
| Borrowings                                 |   |   | (18,184  | ) |
| Other      liabilities                     |   |   | (14,317  | ) |
| Total      liabilities                     |   |   | (554,131 | ) |
| Fair      value of net assets acquired     |   | $      | 134,193  |   |

|                                                  |   | Amortized |    |   | Gross                 |   |   | Gross                  |   |   |            |   |
|-------------------------------------------------------|--------|-----------|---------|--------|-----------------------|--------|--------|------------------------|--------|--------|-----------------|--------|
| (Dollars      in thousands)                           |   | Cost      |    |   | Unrealized      Gains |   |   | Unrealized      Losses |   |   | Fair      Value |   |
| December      31, 2007                                |   |      |    |   |                  |   |   |                   |   |   |            |   |
| U.S.      Treasury and government agencies securities |   | $         | 284,214 |   |                  | $      | 1,556  |                   |   | $      | (134            | )      |   | $ | 285,636 |   |
| States      and political subdivisions                |   |      | 258,260 |   |                  |   | 1,162  |                   |   |   | (544            | )      |   |   | 258,878 |   |
| Mortgage-backed      securities                       |   |      | 199,382 |   |                  |   | 988    |                   |   |   | (1,274          | )      |   |   | 199,096 |   |
| Other      securities                                 |   |      | 49,003  |   |                  |   | 2,832  |                   |   |   | (527            | )      |   |   | 51,308 |   |
| Total      investment securities available-for-sale   |   | $         | 790,859 |   |                  | $      | 6,538  |                   |   | $      | (2,479          | )      |   | $ | 794,918 |   |
| December      31, 2006                                |   |      |    |   |                  |   |   |                   |   |   |            |   |   |   |   |   |
| U.S.      Treasury and government agencies securities |   | $         | 386,678 |   |                  | $      | 67     |                   |   | $      | (2,442          | )      |   | $ | 384,303 |   |
| States      and political subdivisions                |   |      | 182,356 |   |                  |   | 266    |                   |   |   | (1,882          | )      |   |   | 180,740 |   |
| Mortgage-backed      securities                       |   |      | 79,648  |   |                  |   | 490    |                   |   |   | (960            | )      |   |   | 79,178 |   |
| Other      securities                                 |   |      | 60,409  |   |                  |   | 4,328  |                   |   |   | (286            | )      |   |   | 64,451 |   |
| Total      investment securities available-for-sale   |   | $         | 709,091 |   |                  | $      | 5,151  |                   |   | $      | (5,570          | )      |   | $ | 708,672 |   |

|                                                |   | Amortized |    |   |            |   |
|-----------------------------------------------------|--------|-----------|---------|--------|-----------------|--------|
| (Dollars      in thousands)                         |   | Cost      |    |   | Fair      Value |   |
| Due      in one year or less                        |   | $         | 358,627 |   |            | $      | 359,279 |   |
| Due      after one year through five years          |   |      | 145,222 |   |            |   | 146,157 |   |
| Due      after five years through ten years         |   |      | 50,917  |   |            |   | 51,344 |   |
| Due      after ten years                            |   |      | -       |   |            |   | - |   |
| Mortgage-backed      securities                     |   |      | 199,382 |   |            |   | 199,096 |   |
| Equity      securities                              |   |      | 36,711  |   |            |   | 39,042 |   |
| Total      investment securities available-for-sale |   | $         | 790,859 |   |            | $      | 794,918 |   |

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Table of Contents

|                                                  |   | Less      than 12 Months |    |   | 12      months or Longer |   |   | Total  |   |
|-------------------------------------------------------|--------|--------------------------|---------|--------|--------------------------|--------|--------|--------|--------|
|                                                  |   | Fair                     |    |   | Unrealized               |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| (Dollars      in thousands)                           |   | Value                    |    |   | Losses                   |   |   | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| December      31, 2007                                |   |                     |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.      Treasury and government agencies securities |   | $                        | 5,058   |   |                     | $      | (5     | )      |   | $ | 47,856 |   |   | $ | (129 | ) |   | $ | 52,914 |   |   | $ | (134 | ) |
| States      and political subdivisions                |   |                     | 30,209  |   |                     |   | (137   | )      |   |   | 70,039 |   |   |   | (407 | ) |   |   | 100,248 |   |   |   | (544 | ) |
| Mortgage-backed      securities                       |   |                     | 64,965  |   |                     |   | (627   | )      |   |   | 27,680 |   |   |   | (647 | ) |   |   | 92,645 |   |   |   | (1,274 | ) |
| Other      securities                                 |   |                     | 921     |   |                     |   | (229   | )      |   |   | 6,715 |   |   |   | (298 | ) |   |   | 7,636 |   |   |   | (527 | ) |
| Total      temporarily impaired securities            |   | $                        | 101,153 |   |                     | $      | (998   | )      |   | $ | 152,290 |   |   | $ | (1,481 | ) |   | $ | 253,443 |   |   | $ | (2,479 | ) |
|                                                  |   |                     |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December      31, 2006                                |   |                     |    |   |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S.      Treasury and government agencies securities |   | $                        | 139,532 |   |                     | $      | (58    | )      |   | $ | 137,416 |   |   | $ | (2,384 | ) |   | $ | 276,948 |   |   | $ | (2,442 | ) |
| States      and political subdivisions                |   |                     | 21,702  |   |                     |   | (65    | )      |   |   | 112,493 |   |   |   | (1,817 | ) |   |   | 134,195 |   |   |   | (1,882 | ) |
| Mortgage-backed      securities                       |   |                     | 17,585  |   |                     |   | (105   | )      |   |   | 27,013 |   |   |   | (855 | ) |   |   | 44,598 |   |   |   | (960 | ) |
| Other      securities                                 |   |                     | 2,236   |   |                     |   | (56    | )      |   |   | 6,302 |   |   |   | (230 | ) |   |   | 8,538 |   |   |   | (286 | ) |
| Total      temporarily impaired securities            |   | $                        | 181,055 |   |                     | $      | (284   | )      |   | $ | 283,224 |   |   | $ | (5,286 | ) |   | $ | 464,279 |   |   | $ | (5,570 | ) |

| (Dollars      in thousands)                    |   | 2007   |    |   | 2006   |   |
|------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Direct      finance leases:                    |   |   |    |   |   |   |
| Rentals      receivable                        |   | $      | 157,658 |   |   | $      | 153,058 |   |
| Estimated      residual value of leased assets |   |   | 44,775  |   |   |   | 54,060 |   |
| Gross      investment in lease financing       |   |   | 202,433 |   |   |   | 207,118 |   |
| Unearned      income                           |   |   | (29,402 | )      |   |   | (31,773 | ) |
| Net      investment in lease financing         |   | $      | 173,031 |   |   | $      | 175,345 |   |

| (Dollars      in thousands)                                          |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Balance,      beginning of year                                      |   | $      | 58,802 |   |   | $      | 58,697 |   |   | $ | 63,672 |   |
| Provision      for (recovery of provision for) loan and lease losses |   |   | 7,534  |   |   |   | (2,736 | )      |   |   | (5,855 | ) |
| Charge-offs                                                          |   |   | (7,367 | )      |   |   | (3,954 | )      |   |   | (5,572 | ) |
| Recoveries                                                           |   |   | 5,254  |   |   |   | 6,795  |   |   |   | 6,452 |   |
| Reserves      acquired in acquisitions                               |   |   | 2,379  |   |   |   | -      |   |   |   | - |   |
| Balance,      end of year                                            |   | $      | 66,602 |   |   | $      | 58,802 |   |   | $ | 58,697 |   |

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Table of Contents

| (Dollars      in thousands)                    |   | 2007   |    |   | 2006   |   |
|------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Land                                           |   | $      | 6,981   |   |   | $      | 7,063 |   |
| Buildings      and improvements                |   |   | 52,443  |   |   |   | 43,111 |   |
| Furniture      and equipment                   |   |   | 35,397  |   |   |   | 32,948 |   |
| Total      premises and equipment              |   |   | 94,821  |   |   |   | 83,122 |   |
| Accumulated      depreciation and amortization |   |   | (49,773 | )      |   |   | (45,796 | ) |
| Net      premises and equipment                |   | $      | 45,048  |   |   | $      | 37,326 |   |

| (Dollars      in thousands)                                              |   | 2007   |   |   | 2006   |   |
|--------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Mortgage      servicing assets:                                          |   |   |   |   |   |   |
| Balance      at beginning of period                                      |   | $      | 7,590  |   |   | $      | 19,393 |   |
| Additions                                                                |   |   | 4,987  |   |   |   | 8,023 |   |
| Acquisition      of First National Bank, Valparaiso                      |   |   | 1,086  |   |   |   | - |   |
| Amortization                                                             |   |   | (2,403 | )      |   |   | (4,411 | ) |
| Sales                                                                    |   |   | (3,820 | )      |   |   | (15,415 | ) |
| Carrying      value before valuation allowance at end of period          |   |   | 7,440  |   |   |   | 7,590 |   |
| Valuation      allowance:                                                |   |   |   |   |   |   |   |   |
| Balance      at beginning of period                                      |   |   | (18    | )      |   |   | (30 | ) |
| Impairment      (charges) recoveries                                     |   |   | (143   | )      |   |   | 12 |   |
| Balance      at end of period                                            |   | $      | (161   | )      |   | $      | (18 | ) |
| Net      carrying value of mortgage servicing assets at end of    period |   | $      | 7,279  |   |   | $      | 7,572 |   |
| Fair      value of mortgage servicing assets at end of period            |   | $      | 9,010  |   |   | $      | 10,624 |   |

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Table of Contents

|                                                 |   | 2007   |   |   | 2006   |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Expected      weighted-average life (in years)       |   |   | 3.19   |   |   |   | 3.06 |   |
| Weighted-average      constant prepayment rate (CPR) |   |   | 17.28  | %      |   |   | 12.24 | % |
| Weighted-average      discount rate                  |   |   | 8.57   | %      |   |   | 8.37 | % |

| (Dollars      in thousands)         |   | 2007   |   |   | 2006   |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|
| Core      deposit intangibles:      |   |   |   |   |   |   |
| Gross      carrying amount          |   | $      | 15,655 |   |   | $      | 5,710 |   |
| Less:      accumulated amortization |   |   | (5,999 | )      |   |   | (5,143 | ) |
| Net      carrying amount            |   | $      | 9,656  |   |   | $      | 567 |   |
| Other      intangibles:             |   |   |   |   |   |   |   |   |
| Gross      carrying amount          |   | $      | 7,454  |   |   | $      | 7,201 |   |
| Less:      accumulated amortization |   |   | (7,219 | )      |   |   | (7,201 | ) |
| Net      carrying amount            |   | $      | 235    |   |   | $      | - |   |

| (Dollars      in thousands)                                     |   | 2007   |   |   | 2006   |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Term      loan                                                  |   | $      | -      |   |   | $      | 10,000 |   |
| Federal      Home Loan Bank borrowings (4.73%–6.54%)      |   |   | 26,005 |   |   |   | 26,028 |   |
| Mandatorily      redeemable securities                          |   |   | 7,188  |   |   |   | 6,181 |   |
| Other      long-term debt                                       |   |   | 1,509  |   |   |   | 1,552 |   |
| Total      long-term debt and mandatorily redeemable securities |   | $      | 34,702 |   |   | $      | 43,761 |   |

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Table of Contents

|                              |   |           |      |   | Non-Vested      Stock   |   |         Stock Options |            |
|-----------------------------------|--------|----------------|-----------|--------|-------------------------|--------|---------------------------------|-----------------|
|                              |   |           |      |   | Awards      Outstanding |   |  Outstanding               |            |
|                              |   |           |      |   |                    |   |                            | Weighted-       |   |   |   |   |   | Weighted- |   |
|                              |   | Shares         |      |   | Number      of          |   |                            | Average         |   |   |   |   |   | Average |   |
|                              |   | Available      |      |   | Shares                  |   |                            | Grant-Date      |   |   | Number      of |   |   | Exercise |   |
|                              |   | for      Grant |      |   |                    |   |                            | Fair      Value |   |   | Shares |   |   | Price |   |
| Balance,      January 1, 2005     |   |           | 2,413,399 |   |                    |   | 328,620                         |            |   | $ | 12.88 |   |   |   | 617,698 |   |   | $ | 23.61 |   |
| Shares      authorized --2005 EIP |   |           | 71,963    |   |                    |   | -                               |            |   |   | - |   |   |   | - |   |   |   | - |   |
| Granted                           |   |           | (83,974   | )      |                    |   | 83,974                          |            |   |   | 15.16 |   |   |   | - |   |   |   | - |   |
| Stock      options exercised      |   |           | -         |   |                    |   | -                               |            |   |   | - |   |   |   | (29,721 | ) |   |   | 11.31 |   |
| Stock      awards vested          |   |           | -         |   |                    |   | (14,892                         | )               |   |   | 15.39 |   |   |   | - |   |   |   | - |   |
| Forfeited                         |   |           | 9,570     |   |                    |   | (24,653                         | )               |   |   | 12.08 |   |   |   | (7,129 | ) |   |   | 27.21 |   |
| Canceled                          |   |           | -         |   |                    |   | -                               |            |   |   | - |   |   |   | - |   |   |   | - |   |
| Balance,      December 31, 2005   |   |           | 2,410,958 |   |                    |   | 373,049                         |            |   |   | 13.35 |   |   |   | 580,848 |   |   |   | 24.19 |   |
| Shares      authorized --2006 EIP |   |           | 76,442    |   |                    |   | -                               |            |   |   | - |   |   |   | - |   |   |   | - |   |
| Granted                           |   |           | (97,123   | )      |                    |   | 94,264                          |            |   |   | 16.65 |   |   |   | 2,859 |   |   |   | 29.46 |   |
| Stock      options exercised      |   |           | -         |   |                    |   | -                               |            |   |   | - |   |   |   | (71,062 | ) |   |   | 12.78 |   |
| Stock      awards vested          |   |           | -         |   |                    |   | (37,269                         | )               |   |   | 15.57 |   |   |   | - |   |   |   | - |   |
| Forfeited                         |   |           | 17,382    |   |                    |   | (19,896                         | )               |   |   | 13.46 |   |   |   | (23,170 | ) |   |   | 20.74 |   |
| Canceled                          |   |           | -         |   |                    |   | -                               |            |   |   | - |   |   |   | - |   |   |   | - |   |
| Balance,      December 31, 2006   |   |           | 2,407,659 |   |                    |   | 410,148                         |            |   |   | 13.90 |   |   |   | 489,475 |   |   |   | 26.04 |   |
| Shares      authorized --2007 EIP |   |           | 97,250    |   |                    |   | -                               |            |   |   | - |   |   |   | - |   |   |   | - |   |
| Granted                           |   |           | (131,796  | )      |                    |   | 129,100                         |            |   |   | 18.90 |   |   |   | 2,696 |   |   |   | 28.40 |   |
| Stock      options exercised      |   |           | -         |   |                    |   | -                               |            |   |   | - |   |   |   | (20,654 | ) |   |   | 15.63 |   |
| Stock      awards vested          |   |           | -         |   |                    |   | (48,530                         | )               |   |   | 15.43 |   |   |   | - |   |   |   | - |   |
| Forfeited                         |   |           | 555       |   |                    |   | (20,516                         | )               |   |   | 12.33 |   |   |   | - |   |   |   | - |   |
| Canceled                          |   |           | -         |   |                    |   | -                               |            |   |   | - |   |   |   | - |   |   |   | - |   |
| Balance,      December 31, 2007   |   |           | 2,373,668 |   |                    |   | 470,202                         |            |   | $ | 15.18 |   |   |   | 471,517 |   |   | $ | 26.51 |   |

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Table of Contents

|                          | Options      Outstanding |                       | Options      Exercisable |
|-------------------------------|--------------------------|----------------------------|--------------------------|
|                          |                     | Weighted-Average           |                     |   |   |   |
|                          | Number      of           | Remaining      Contractual | Weighted-Average         |   | Number      of | Weighted-Average |
| Range      of Exercise Prices | Shares                   | Life      (Years)          | Exercise      Price      |   | Shares | Exercise      Price |
| $12.04      to $17.99         | 29,508                   | 4.74                       | $13.38                   |   | 18,508 | $14.18 |
| $18.00      to $26.99         | 55,587                   | 2.83                       | 21.06                    |   | 55,587 | 21.06 |
| $27.00      to $29.46         | 386,422                  | 0.60                       | 28.30                    |   | 383,726 | 28.30 |

| Year      Ended December 31 (Dollars in      thousands, except per share data)        |   | 2005   |   |
|---------------------------------------------------------------------------------------|--------|--------|--------|
| Net      income, as reported                                                          |   | $      | 33,751 |   |
| Add:                                                                                  |   |   |   |   |
| Stock-based      employee compensation expense included in reported net    income,    |   |   |   |   |
| net      of related tax effects                                                       |   |   | 2,875  |   |
| Deduct:                                                                               |   |   |   |   |
| Stock-based      employee compensation expense determined under fair value      based |   |   |   |   |
| method      for all awards, net of related tax effects                                |   |   | (2,998 | ) |
| Pro      forma net income                                                             |   | $      | 33,628 |   |
| Earnings      per share:                                                              |   |   |   |   |
| Basic      — as reported                                                        |   | $      | 1.48   |   |
| Basic      — pro forma                                                          |   | $      | 1.48   |   |
| Diluted      — as reported                                                      |   | $      | 1.46   |   |
| Diluted      — pro forma                                                        |   | $      | 1.46   |   |

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Table of Contents

|                                      |   | Amount      of |    |   |     |   |     |
|-------------------------------------------|--------|----------------|---------|--------|----------|--------|----------|
|                                      |   | Subordinated   |    |   | Interest |   | Maturity |
| (Dollars      in thousands)               |   | Notes          |    |   | Rate     |   | Date     |
| November      2002 issuance-floating rate |   | $              | 10,310  |   |     |   | 8.22     | % | 11/15/32 |
| September      2004 issuance-fixed rate   |   |           | 30,928  |   |     |   | 7.66     | % | 12/15/34 |
| June      2007 issuance-fixed rate        |   |           | 41,238  |   |     |   | 7.22     | % | 06/15/37 |
| August      2007 issuance-fixed rate      |   |           | 17,526  |   |     |   | 7.10     | % | 09/15/37 |
| Total                                     |   | $              | 100,002 |   |     |   |     |   |   |

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Table of Contents

| Year      Ended December 31  (Dollars in      thousands) |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Current:                                                           |   |   |   |   |   |   |   |   |   |
| Federal                                                            |   | $      | 14,630 |   |   | $      | 22,350 |   |   | $ | 16,625 |   |
| State                                                              |   |   | 1,072  |   |   |   | 1,781  |   |   |   | 1,909 |   |
| Total      current                                                 |   |   | 15,702 |   |   |   | 24,131 |   |   |   | 18,534 |   |
| Deferred:                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                                            |   |   | (4,191 | )      |   |   | (3,434 | )      |   |   | (2,644 | ) |
| State                                                              |   |   | (367   | )      |   |   | (451   | )      |   |   | (264 | ) |
| Total      deferred                                                |   |   | (4,558 | )      |   |   | (3,885 | )      |   |   | (2,908 | ) |
| Total      provision                                               |   | $      | 11,144 |   |   | $      | 20,246 |   |   | $ | 15,626 |   |

|                                                                                                                                                                        |   | 2007   |   |   | 2006            |   |   | 2005   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-----------------|--------|--------|--------|--------|
|                                                                                                                                                                        |   |   |   |   | Percent      of |   |   |   |   |   | Percent      of |   |   |   |   |   | Percent      of |   |
|                                                                                                                                                                        |   |   |   |   | Pretax          |   |   |   |   |   | Pretax |   |   |   |   |   | Pretax |   |
| Year      Ended December 31  (Dollars in      thousands)                                                                                                          |   | Amount |   |   | Income          |   |   | Amount |   |   | Income |   |   | Amount |   |   | Income |   |
| Statutory      federal income tax                                                                                                                                           |   | $      | 14,589 |   |            |   | 35.0   | %      |   | $ | 20,840 |   |   |   | 35.0 | % |   | $ | 17,282 |   |   |   | 35.0 | % |
| (Decrease)      increase in income taxes resulting from:                                                                                                                    |   |   |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax-exempt      interest income                                                                                                                                             |   |   | (2,380 | )      |            |   | (5.7   | )      |   |   | (1,669 | ) |   |   | (2.8 | ) |   |   | (1,749 | ) |   |   | (3.5 | ) |
| State      taxes, net of federal income tax benefit                                                                                                                         |   |   | 458    |   |            |   | 1.1    |   |   |   | 865 |   |   |   | 1.5 |   |   |   | 1,069 |   |   |   | 2.2 |   |
| Dividends      received deduction                                                                                                                                           |   |   | (343   | )      |            |   | (0.8   | )      |   |   | (270 | ) |   |   | (0.5 | ) |   |   | (188 | ) |   |   | (0.4 | ) |
| Other                                                                                                                                                                       |   |   | (1,180 | )      |            |   | (2.9   | )      |   |   | 480 |   |   |   | 0.8 |   |   |   | (788 | ) |   |   | (1.6 | ) |
| Total                                                                                                                                                                       |   | $      | 11,144 |   |            |   | 26.7   | %      |   | $ | 20,246 |   |   |   | 34.0 | % |   | $ | 15,626 |   |   |   | 31.7 | % |
| The      tax (benefit) expense applicable to securities (losses) gains for the      years 2007, 2006, and 2005 was $(1,185,000), $758,000, and $134,000,      respectively. |   |

| Deferred      tax assets and liabilities as of December 31, 2007 and 2006 consisted of      the following: |   |
|------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                       |   |   |   |   |   |   |
|                                                                                                       |   |   |   |   |   |   |
| (Dollars      in thousands)                                                                                |   | 2007 |   |   | 2006 |   |
| Deferred      tax assets:                                                                                  |   |   |   |   |   |   |
| Reserve      for loan and lease losses                                                                     |   | $ | 25,649 |   |   | $ | 22,551 |   |
| Accruals      for employee benefits                                                                        |   |   | 3,693 |   |   |   | 3,827 |   |
| Securities      valuation reserve                                                                          |   |   | 2,762 |   |   |   | 1,319 |   |
| Net      unrealized losses on securities available-for-sale                                                |   |   | - |   |   |   | 159 |   |
| Other                                                                                                      |   |   | 586 |   |   |   | 1,403 |   |
| Total      deferred tax assets                                                                             |   |   | 32,690 |   |   |   | 29,259 |   |
| Deferred      tax liabilities:                                                                             |   |   |   |   |   |   |   |   |
| Differing      depreciable bases in premises and leased equipment                                          |   |   | 30,558 |   |   |   | 32,108 |   |
| Capitalized      loan costs                                                                                |   |   | 2,833 |   |   |   | 2,307 |   |
| Mortgage      servicing                                                                                    |   |   | 2,174 |   |   |   | 3,394 |   |
| Differing      bases in assets related to acquisitions                                                     |   |   | 2,095 |   |   |   | 433 |   |
| Net      unrealized gains on securities available-for-sale                                                 |   |   | 1,537 |   |   |   | - |   |
| Other                                                                                                      |   |   | 1,674 |   |   |   | 2,060 |   |
| Total      deferred tax liabilities                                                                        |   |   | 40,871 |   |   |   | 40,302 |   |
| Net      deferred tax liability                                                                            |   | $ | 8,181 |   |   | $ | 11,043 |   |

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| (Dollars      in thousands)                                       |   | 2007   |   |
|-------------------------------------------------------------------|--------|--------|--------|
| Balance,      beginning of year                                   |   | $      | 5,795  |   |
| Additions      based on tax positions related to the current year |   |   | 1,268  |   |
| Additions      for tax positions of prior years                   |   |   | -      |   |
| Reductions      for tax positions of prior years                  |   |   | -      |   |
| Settlements                                                       |   |   | -      |   |
| Balance,      end of year                                         |   | $      | 7,063  |   |

| Year      Ended December 31  (Dollars in      thousands) |   | 2007   |   |   | 2006   |   |   | 2005   |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Gross      rental expense                                          |   | $      | 3,255  |   |   | $      | 3,250  |   |   | $ | 3,574 |   |
| Sublease      rental income                                        |   |   | (1,640 | )      |   |   | (1,626 | )      |   |   | (1,809 | ) |
| Net      rental expense                                            |   | $      | 1,615  |   |   | $      | 1,624  |   |   | $ | 1,765 |   |

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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                    |   | $      | 478,433 |   |     |   | 13.04  | %                      |   | $      | 293,407                |   |   |                   | 8.00   | % |   | $ | 366,759 |   |   |   | 10.00 | % |
| 1st      Source Bank                           |   |   | 404,607 |   |     |   | 11.82  | %                      |   |   | 273,837                |   |   |                   | 8.00   | % |   |   | 342,296 |   |   |   | 10.00 | % |
| First      National Bank, Valparaiso           |   |   | 63,970  |   |     |   | 24.12  | %                      |   |   | 21,218                 |   |   |                   | 8.00   | % |   |   | 26,522 |   |   |   | 10.00 | % |
| Tier      I Capital (to Risk-Weighted Assets): |   |   |    |   |     |   |   |                   |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| 1st      Source Corporation                    |   |   | 431,283 |   |     |   | 11.76  | %                      |   |   | 146,704                |   |   |                   | 4.00   | % |   |   | 220,056 |   |   |   | 6.00 | % |
| 1st      Source Bank                           |   |   | 361,486 |   |     |   | 10.56  | %                      |   |   | 136,918                |   |   |                   | 4.00   | % |   |   | 205,377 |   |   |   | 6.00 | % |
| First      National Bank, Valparaiso           |   |   | 61,156  |   |     |   | 23.06  | %                      |   |   | 10,609                 |   |   |                   | 4.00   | % |   |   | 15,913 |   |   |   | 6.00 | % |
| Tier      I Capital (to Average Assets):       |   |   |    |   |     |   |   |                   |   |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |
| 1st      Source Corporation                    |   |   | 431,283 |   |     |   | 9.92   | %                      |   |   | 173,859                |   |   |                   | 4.00   | % |   |   | 217,324 |   |   |   | 5.00 | % |
| 1st      Source Bank                           |   |   | 361,486 |   |     |   | 9.16   | %                      |   |   | 157,906                |   |   |                   | 4.00   | % |   |   | 197,382 |   |   |   | 5.00 | % |
| First      National Bank, Valparaiso           |   |   | 61,156  |   |     |   | 10.20  | %                      |   |   | 23,972                 |   |   |                   | 4.00   | % |   |   | 29,965 |   |   |   | 5.00 | % |

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|                                                                                                                 |   | 2007                |      |   | 2006            |   |
|----------------------------------------------------------------------------------------------------------------------|--------|---------------------|-----------|--------|-----------------|--------|
|                                                                                                                 |   | Carrying      or    |      |   |            |   |   | Carrying      or |   |   |   |   |
| (Dollars      in thousands)                                                                                          |   | Contract      Value |      |   | Fair      Value |   |   | Contract      Value |   |   | Fair      Value |   |
| Assets:                                                                                                              |   |                |      |   |            |   |   |   |   |   |   |   |
| Cash      and due from banks                                                                                         |   | $                   | 153,137   |   |            | $      | 153,137 |   |   | $ | 118,131 |   |   | $ | 118,131 |   |
| Federal      funds sold and interest bearing deposits with other banks                                               |   |                | 25,817    |   |            |   | 25,817 |   |   |   | 64,979 |   |   |   | 64,979 |   |
| Investment      securities, available-for-sale                                                                       |   |                | 794,918   |   |            |   | 794,918 |   |   |   | 708,672 |   |   |   | 708,672 |   |
| Mortgages      held for sale                                                                                         |   |                | 25,921    |   |            |   | 25,921 |   |   |   | 50,159 |   |   |   | 50,159 |   |
| Loans      and leases, net of reserve for loan and lease losses                                                      |   |                | 3,124,839 |   |            |   | 3,144,394 |   |   |   | 2,643,735 |   |   |   | 2,608,909 |   |
| Interest      rate swaps                                                                                             |   |                | 4,573     |   |            |   | 4,573 |   |   |   | 122 |   |   |   | 122 |   |
| Liabilities:                                                                                                         |   |                |      |   |            |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                                                                                             |   | $                   | 3,469,663 |   |            | $      | 3,468,360 |   |   | $ | 3,048,284 |   |   | $ | 3,048,971 |   |
| Short-term      borrowings                                                                                           |   |                | 337,832   |   |            |   | 337,832 |   |   |   | 222,718 |   |   |   | 222,718 |   |
| Long-term      debt and mandatorily redeemable securities                                                            |   |                | 34,702    |   |            |   | 34,900 |   |   |   | 43,761 |   |   |   | 43,502 |   |
| Subordinated      notes                                                                                              |   |                | 100,002   |   |            |   | 89,959 |   |   |   | 59,022 |   |   |   | 60,768 |   |
| Interest      rate swaps                                                                                             |   |                | 4,573     |   |            |   | 4,573 |   |   |   | 122 |   |   |   | 122 |   |
| Off-balance-sheet      instruments *                                                                                 |   |                | -         |   |            |   | 406 |   |   |   | - |   |   |   | 346 |   |
| *      Represents estimated cash outflows required to currently settle the      obligations at current market rates. |   |                |      |   |            |

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| STATEMENTS      OF FINANCIAL CONDITION                                                       |   |   |    |   |   |   |
|----------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                                                                         |   |   |    |   |   |   |
| December      31 (Dollars in      thousands)                                                 |   | 2007   |    |   | 2006   |   |
| ASSETS                                                                                       |   |   |    |   |   |   |
| Cash                                                                                         |   | $      | 32      |   |   | $      | 1 |   |
| Short-term      investments with bank subsidiary                                             |   |   | 11,220  |   |   |   | 14,442 |   |
| Investment      securities, available-for-sale                                               |   |   |    |   |   |   |   |   |
| (amortized      cost of $8,907 and $17,112 at December 31, 2007 and 2006,      respectively) |   |   | 11,075  |   |   |   | 19,697 |   |
| Investments      in:                                                                         |   |   |    |   |   |   |   |   |
| Bank      subsidiaries                                                                       |   |   | 514,988 |   |   |   | 402,805 |   |
| Non-bank      subsidiaries                                                                   |   |   | 4,127   |   |   |   | 10,202 |   |
| Loan      receivables:                                                                       |   |   |    |   |   |   |   |   |
| Non-bank      subsidiaries                                                                   |   |   | -       |   |   |   | 3,030 |   |
| Premises      and equipment, net                                                             |   |   | 2,237   |   |   |   | 2,143 |   |
| Other      assets                                                                            |   |   | 9,509   |   |   |   | 7,660 |   |
| Total      assets                                                                            |   | $      | 553,188 |   |   | $      | 459,980 |   |
| LIABILITIES AND      SHAREHOLDERS’ EQUITY                                              |   |   |    |   |   |   |   |   |
| Commercial      paper borrowings                                                             |   | $      | 11,475  |   |   | $      | 11,472 |   |
| Other      liabilities                                                                       |   |   | 3,086   |   |   |   | 3,209 |   |
| Long-term      debt and mandatorily redeemable securities                                    |   |   | 108,123 |   |   |   | 76,395 |   |
| Total      liabilities                                                                       |   |   | 122,684 |   |   |   | 91,076 |   |
| Shareholders’      equity                                                              |   |   | 430,504 |   |   |   | 368,904 |   |
| Total      liabilities and shareholders’ equity                                        |   | $      | 553,188 |   |   | $      | 459,980 |   |

| STATEMENTS      OF INCOME                                                                                                |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |   |
| Year      Ended December 31 (Dollars in      thousands)                                                                  |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Income:                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Dividends      from bank and non-bank subsidiaries                                                                       |   | $ | 58,051 |   |   | $ | 15,045 |   |   | $ | 11,552 |   |
| Rental      income from subsidiaries                                                                                     |   |   | 2,442 |   |   |   | 2,542 |   |   |   | 2,472 |   |
| Other                                                                                                                    |   |   | 2,080 |   |   |   | 4,134 |   |   |   | 3,286 |   |
| Total      income                                                                                                        |   |   | 62,573 |   |   |   | 21,721 |   |   |   | 17,310 |   |
| Expenses:                                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      on long-term debt and mandatorily redeemable securities                                                    |   |   | 7,294 |   |   |   | 5,495 |   |   |   | 5,040 |   |
| Interest      on commercial paper and other short-term borrowings                                                        |   |   | 639 |   |   |   | 418 |   |   |   | 73 |   |
| Rent      expense                                                                                                        |   |   | 1,057 |   |   |   | 1,059 |   |   |   | 1,059 |   |
| Other                                                                                                                    |   |   | 1,572 |   |   |   | 1,148 |   |   |   | 2,352 |   |
| Total      expenses                                                                                                      |   |   | 10,562 |   |   |   | 8,120 |   |   |   | 8,524 |   |
| Income      before income tax benefit and equity in undistributed (distributed in      excess of) income of subsidiaries |   |   | 52,011 |   |   |   | 13,601 |   |   |   | 8,786 |   |
| Income      tax benefit                                                                                                  |   |   | 2,380 |   |   |   | 220 |   |   |   | 897 |   |
| Income      before equity in undistributed (distributed in excess of) income of      subsidiaries                        |   |   | 54,391 |   |   |   | 13,821 |   |   |   | 9,683 |   |
| Equity      in undistributed (distributed in excess of) income of      subsidiaries:                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Bank      subsidiaries                                                                                                   |   |   | (23,028 | ) |   |   | 23,448 |   |   |   | 24,057 |   |
| Non-bank      subsidiaries                                                                                               |   |   | (824 | ) |   |   | 2,028 |   |   |   | 11 |   |
| Net      income                                                                                                          |   | $ | 30,539 |   |   | $ | 39,297 |   |   | $ | 33,751 |   |

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| STATEMENTS      OF CASH FLOW                                                                |   |   |        |   |   |   |    |   |   |
|---------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|---------|--------|--------|
|                                                                                        |   |   |        |   |   |   |    |   |   |
| Year      Ended December 31  (Dollars in      thousands)                          |   | 2007   |        |   | 2006   |   |    | 2005   |   |
| Operating      activities:                                                                  |   |   |        |   |   |   |    |   |   |
| Net      income                                                                             |   | $      | 30,539      |   |   | $      | 39,297  |   |   | $ | 33,751 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities: |   |   |        |   |   |   |    |   |   |   |   |   |
| Equity      distributed in excess of (undistrbuted) income of    subsidiaries               |   |   | 23,852      |   |   |   | (25,476 | )      |   |   | (24,068 | ) |
| Depreciation      of premises and equipment                                                 |   |   | 316         |   |   |   | 289     |   |   |   | 305 |   |
| Realized      and unrealized investment securities (gains) losses                           |   |   | (53         | )      |   |   | (517    | )      |   |   | (72 | ) |
| Other                                                                                       |   |   | (579        | )      |   |   | (1,124  | )      |   |   | (218 | ) |
| Net      change in operating activities                                                     |   |   | 54,075      |   |   |   | 12,469  |   |   |   | 9,698 |   |
| Investing      activities:                                                                  |   |   |        |   |   |   |    |   |   |   |   |   |
| Proceeds      from sales and maturities of investment securities                            |   |   | 18,752      |   |   |   | 1,817   |   |   |   | 15,356 |   |
| Purchases      of investment securities                                                     |   |   | (10,499     | )      |   |   | (3,754  | )      |   |   | (10,361 | ) |
| Net      change in premises and equipment                                                   |   |   | (410        | )      |   |   | (288    | )      |   |   | (118 | ) |
| Change      in short-term investments with bank subsidiary                                  |   |   | 3,222       |   |   |   | (2,880  | )      |   |   | (6,329 | ) |
| Change      in loans made to subsidiaries, net                                              |   |   | 3,030       |   |   |   | 2,970   |   |   |   | 1,000 |   |
| Capital      contributions to subsidiaries                                                  |   |   | -           |   |   |   | 1,400   |   |   |   | (1,460 | ) |
| Return      of capital from subsidiaries                                                    |   |   | 5,106  |   |   |   | -       |   |   |   |  - |   |
| Cash      paid for acquisition, net                                                         |   |   | (78,348)    |   |   |   | -       |   |   |   | - |   |
| Net      change in investing activities                                                     |   |   | (59,147     | )      |   |   | (735    | )      |   |   | (1,912 | ) |
| Financing      activities:                                                                  |   |   |        |   |   |   |    |   |   |   |   |   |
| Net      change in commercial paper and other short-term borrowings                         |   |   | 3           |   |   |   | 6,673   |   |   |   | 3,964 |   |
| Proceeds      from issuance of subordinated notes                                           |   |   | 58,764      |   |   |   | -       |   |   |   | - |   |
| Payments      on subordinated notes                                                         |   |   | (17,784     | )      |   |   | -       |   |   |   | - |   |
| Proceeds      from issuance of long-term debt                                               |   |   | -           |   |   |   | 874     |   |   |   | 311 |   |
| Payments      on long-term debt                                                             |   |   | (10,259     | )      |   |   | (123    | )      |   |   | (44 | ) |
| Net      proceeds from issuance of treasury stock                                           |   |   | 545         |   |   |   | 814     |   |   |   | 528 |   |
| Acquisition      of treasury stock                                                          |   |   | (12,821     | )      |   |   | (7,657  | )      |   |   | (2,221 | ) |
| Cash      dividends                                                                         |   |   | (13,345     | )      |   |   | (12,315 | )      |   |   | (10,325 | ) |
| Net      change in financing activities                                                     |   |   | 5,103       |   |   |   | (11,734 | )      |   |   | (7,787 | ) |
| Net      change in cash and cash equivalents                                                |   |   | 31          |   |   |   | -       |   |   |   | (1 | ) |
| Cash      and cash equivalents, beginning of year                                           |   |   | 1           |   |   |   | 1       |   |   |   | 2 |   |
| Cash      and cash equivalents, end of year                                                 |   | $      | 32          |   |   | $      | 1       |   |   | $ | 1 |   |

ITEM

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IT

| /s/CHRISTOPHER      J. MURPHY III |  /s/LARRY      E. LENTYCH |
|-----------------------------------|--------------------------------|

| CHRISTOPHER      J. MURPHY III | LARRY      E. LENTYCH              |
|--------------------------------|------------------------------------|
| Chairman,      President and   | Treasurer      and Chief Financial |
| Chief      Executive Officer   | Officer                            |
|                           |                               |
| South      Bend, Indiana       |                               |

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|                                                                                                                                      |                            |                      | Number      of Securities                                                                               |
|-------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|---------------------------|---------------------------------------------------------------------------------------------------------|
|                                                                                                                                      |                            |                      | Remaining      Available                                                                                |
|                                                                                                                                      |                            |                      | for      Future Issuance                                                                                |
|                                                                                                                                      | Number      of Securities to be | Weighted-average          | Under      Equity                                                                                       |
|                                                                                                                                      | Issued      upon Exercise of    | Exercise      Price of    | Compensation      Plans                                                                                 |
|                                                                                                                                      | Outstanding      Options,       | Outstanding      Options, | [excluding      securities                                                                              |
|                                                                                                                                      | Warrants      and Rights        | Warrants      and Rights  | reflected      in column (a)]                                                                           |
| Equity      compensation plans                                                                                                            |                            |                      |                                                                                                    |
| approved      by shareholders                                                                                                             |                            |                      |                                                                                                    |
| 1992      stock option plan                                                                                                               | 407,262                         | $27.81                    | -                                                                                                       |
| 2001      stock option plan                                                                                                               | 64,255                          | 18.29                     | 2,119,922                                                                                               |
| 1997      employee stock purchase plan                                                                                                    | 16,133                          | 25.63                     |         169,915                                                                               |
| 1982      executive incentive plan                                                                                                        | -                               | -                         |                    95,332 (1)      (2) |
| 1982      restricted stock award plan                                                                                                     | -                               | -                         |             158,414 (1)                                                   |
| Total      plans approved by shareholders                                                                                                 | 487,650                         | $26.48                    | 2,543,583                                                                                               |
| Equity      compensation plans                                                                                                            |
| not      approved by shareholders                                                                                                         | -                               | -                         | -                                                                                                       |
| Total      equity compensation plans                                                                                                      | 487,650                         | $26.48                    | 2,543,583                                                                                               |
| (1)Amount is to be awarded by grants      administered by the Executive Compensation Committee of the 1st Source      Board of Directors. |
| (2)Amount includes market value      stock only. Book value shares used for annual awards may only be sold to      1st Source             |

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| 3(a)     | Articles      of Incorporation of Registrant, as amended April 30, 1996, and filed as      exhibit to Form 10-K, dated December 31, 1996, and incorporated herein by      reference.                                                            |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(b)     | By-Laws      of Registrant, as amended January 29, 2004, filed as exhibit to Form 10-K,      dated December 31, 2003, and incorporated herein by    reference.                                                                                  |
| 4(a)     | Form      of Common Stock Certificates of Registrant filed as exhibit to      Registration Statement 2-40481 and incorporated herein by      reference.                                                                                    |
| 4(b)     | 1st      Source agrees to furnish to the Commission, upon request, a copy of each      instrument defining the rights of holders of Senior and Subordinated debt      of 1st Source.                                                            |
| 10(a)(1) | Employment      Agreement of Christopher J. Murphy III, dated April 16, 1998, filed as      exhibit to Form 10-K, dated December 31, 1998, and incorporated herein by      reference.                                                      |
| 10(a)(2) | Employment      Agreement of Wellington D. Jones III, dated April 16, 1998, filed as      exhibit to Form 10-K, dated December 31, 1998, and incorporated      herein by reference.                                                        |
| 10(a)(4) | Employment      Agreement of Larry E. Lentych, dated April 16, 1998, filed as exhibit to      Form 10-K, dated December 31, 1998, and incorporated herein by      reference.                                                                    |
| 10(a)(5) | Employment      Agreement of Richard Q. Stifel, dated April 16, 1998, filed as exhibit to      Form 10-K, dated December 31, 1998, and incorporated herein by      reference.                                                              |
| 10(a)(6) | Employment      Agreement of John B. Griffith, dated March 31, 2001, filed as exhibit to      Form 10-K, dated December 31, 2002, and incorporated herein by      reference.                                                               |
| 10(b)    | 1st      Source Corporation Employee Stock Purchase Plan dated April 17, 1997,      filed as exhibit to Form 10-K, dated December 31, 1997, and incorporated      herein by reference.                                                          |
| 10(c)    | 1st      Source Corporation 1982 Executive Incentive Plan, amended January 17,      2003, and filed as exhibit to Form 10-K, dated December 31, 2003, and      incorporated herein by reference.                                      |
| 10(d)    | 1st      Source Corporation 1982 Restricted Stock Award Plan, amended January      17, 2003, and filed as exhibit to Form 10-K, dated December 31, 2003, and      incorporated herein by reference.                                        |
| 10(e)    | 1st      Source Corporation 2001 Stock Option Plan, amended July 27, 2006, and      filed as an exhibit to 1st Source Corporation Proxy Statement dated March      7, 2001, and incorporated herein by reference.                               |
| 10(g)(1) | 1st      Source Corporation 1992 Stock Option Plan, amended July 27, 2006, and      dated April 23, 1992, as amended December 11, 1997, filed as exhibit to      Form 10-K, dated December 31, 1997, and incorporated herein by      reference. |

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| 10(g)(2) | An      amendment to 1st Source Corporation 1992 Stock Option Plan, dated July 18,      2000, and filed as exhibit to Form 10-K, dated December 31, 2000, and      incorporated herein by reference. |
|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10(h)    | 1st      Source Corporation 1998 Performance Compensation Plan, dated February 19,      1998, filed as exhibit to Form 10-K, dated December 31, 1998, and      incorporated herein by reference.     |
| 10(i)    | Consulting      Agreement of Ernestine M. Raclin, dated April 14, 1998, filed as exhibit      to Form 10-K, dated December 31, 1998, and incorporated herein by      reference.                      |
| 10(j)    | Contract      with Fiserv Solutions, Inc. dated November 23, 2005, filed as exhibit to      Form 10-K, dated, December 31, 2005, and incorporated herein by      reference.                          |
| 21       | Subsidiaries      of Registrant (unless otherwise indicated, each subsidiary does business      under its own name):                                                                                 |
|     | Name                                                                                                                                                                                                 | Jurisdiction |
|     | 1st      Source Bank                                                                                                                                                                                 | Indiana |
|     | First      National Bank, Valparaiso                                                                                                                                                                 | Indiana |
|     | SFG      Equipment Leasing, Inc. *                                                                                                                                                                   | Indiana |
|     | 1st      Source Insurance, Inc. *                                                                                                                                                                    | Indiana |
|     | 1st      Source Specialty Finance, Inc. *                                                                                                                                                            | Indiana |
|     | FBT      Capital Corporation (Inactive)                                                                                                                                                              | Indiana |
|     | 1st      Source Leasing, Inc.                                                                                                                                                                        | Indiana |
|     | 1st      Source Capital Corporation *                                                                                                                                                                | Indiana |
|     | Trustcorp      Mortgage Company                                                                                                                                                                      | Indiana |
|     | 1st      Source Capital Trust II                                                                                                                                                                     | Delaware |
|     | 1st      Source Capital Trust III                                                                                                                                                                    | Delaware |
|     | 1st      Source Capital Trust IV                                                                                                                                                                     | Delaware |
|     | 1st      Source Master Trust                                                                                                                                                                         | Delaware |
|     | Michigan      Transportation Finance Corporation *                                                                                                                                                   | Michigan |
|     | 1st      Source Intermediate Holding, LLC                                                                                                                                                            | Delaware |
|     | 1st      Source Funding, LLC                                                                                                                                                                         | Delaware |
|     | 1st      Source Corporation Investment Advisors, Inc. *                                                                                                                                         | Indiana |
|     | SFG      Commercial Aircraft Leasing, Inc. *                                                                                                                                                         | Indiana |
|     | SFG      Equipment Leasing Corporation I*                                                                                                                                                            | Indiana |
|     | *Wholly-owned      subsidiaries of 1st Source Bank                                                                                                                                                   |   |
| 23       | Consent of Ernst & Young LLP, Independent Registered      Public Accounting Firm.                                                                                                                |
| 31.1     | Certification of Christopher J. Murphy III, Chief      Executive Officer (Rule 13a-14(a)).                                                                                                           |
| 31.2     | Certification of Larry E. Lentych, Chief Financial      Officer (Rule 13a-14(a)).                                                                                                                    |
| 32.1     | Certification of Christopher J. Murphy III, Chief      Executive Officer.                                                                                                                            |
| 32.2     | Certification of Larry E. Lentych, Chief Financial      Officer.                                                                                                                                     |

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Table of Contents

SIGNATURES

| Signature                          | Title                                      | Date                   |
|------------------------------------|--------------------------------------------|------------------------|
| /s/      CHRISTOPHER J. MURPHY III | Chairman      of the Board,                | February      22, 2008 |
| Christopher      J. Murphy III     | President      and Chief Executive Officer |                   |
|                               |                                       |                   |
| /s/      WELLINGTON D. JONES III   | Executive      Vice President              | February      22, 2008 |
| Wellington      D. Jones III       | and      Director                          |                   |
|                               |                                       |                   |
| /s/      LARRY E. LENTYCH          | Treasurer,      Chief Financial Officer    | February      22, 2008 |
| Larry      E. Lentych              | and      Principal Accounting Officer      |                   |
|                               |                                       |                   |
| /s/      JOHN B. GRIFFITH          | Secretary                                  | February      22, 2008 |
| John      B. Griffith              | and      General Counsel                   |                   |
|                               |                                       |                   |
| /s/      DANIEL B. FITZPATRICK     | Director                                   | February      22, 2008 |
| Daniel      B. Fitzpatrick         |                                       |                   |
|                               |                                       |                   |
| /s/      TERRY L. GERBER           | Director                                   | February      22, 2008 |
| Terry      L. Gerber               |                                       |                   |
|                               |                                       |                   |
| /s/      LAWRENCE E. HILER         | Director                                   | February      22, 2008 |
| Lawrence      E. Hiler             |                                       |                   |
|                               |                                       |                   |
| /s/      WILLIAM P. JOHNSON        | Director                                   | February      22, 2008 |
| William      P. Johnson            |                                       |                   |
|                               |                                       |                   |
| /s/      CRAIG A. KAPSON           | Director                                   | February      22, 2008 |
| Craig      A. Kapson               |                                       |                   |
|                               |                                       |                   |
| /s/      REX MARTIN                | Director                                   | February      22, 2008 |
| Rex      Martin                    |                                       |                   |
|                               |                                       |                   |
| /s/      DANE A. MILLER            | Director                                   | February      22, 2008 |
| Dane      A. Miller                |                                       |                   |
|                               |                                       |                   |
| /s/      TIMOTHY K. OZARK          | Director                                   | February      22, 2008 |
| Timothy      K. Ozark              |                                       |                   |
|                               |                                       |                   |
| /s/      JOHN T. PHAIR             | Director                                   | February      22, 2008 |
| John      T. Phair                 |                                       |                   |
|                               |                                       |                   |
| /s/      MARK D. SCHWABERO         | Director                                   | February      22, 2008 |
| Mark      D. Schwabero             |                                       |                   |
|                               |                                       |                   |
| /s/      TOBY S. WILT              | Director                                   | February      22, 2008 |
| Toby      S. Wilt                  |                                       |                   |

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