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1st Source to buy back shares from Treasury

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SOUTH BEND, Ind. (AP) — Lender 1st Source Corp. said Thursday it will pay $111.7 million to buy back preferred shares it issued to the U.S. Treasury under the Capital Purchase Program, part of the government’s Troubled Asset Relief Program.

The company, which operates 1st Source Bank, issued the 111,000 Series A preferred shares to the Treasury in January 2009.

The amount it will pay to redeem the shares includes accrued and unpaid dividends. The lender expects to buy back the shares on Dec. 29.

1st Source also must choose whether to buy back warrants issued to the Treasury to buy up to $16.7 million of its common stock, representing about 3.3 percent of common shares outstanding at the time the warrants were issued.

Christopher J. Murphy III, 1st Source's chairman, said the company never needed to rely on the investment from the Treasury.

“The bank entered this last recession with strong capital and reserves and we continued to maintain them,” Murphy said. “Our participation in the Capital Purchase Program came out of an abundance of caution and a desire to support our government's efforts to deal with frozen capital markets.”

As a result of the share buyback, 1st Source said it will accelerate the benefit of a $4.86 million discount and record a reduction in retained earnings.

1st Source serves the northern half of Indiana and southwest Michigan.

The company's shares added 4 cents to $20.50 in afternoon trading.


Posted 12/27/2010




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