SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 0-6233
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
1st SOURCE CORPORATION EMPLOYEES' PROFIT SHARING PLAN and TRUST
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
1st Source Corporation
100 N. Michigan Street
South Bend, Indiana 46601
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
1st SOURCE CORPORATION
EMPLOYEES' PROFIT SHARING AND TRUST
By the Plan Administrator
1st Source Corporation
/s/John B. Griffith
-------------------
John B. Griffith,
Senior Vice President
Date: June 28, 2006
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
1st Source Corporation Employees' Profit Sharing Plan and Trust
December 31, 2005 and 2004, and the Year Ended December 31, 2005
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Financial Statements and Supplemental Schedule
December 31, 2005 and 2004,
and the Year Ended December 31, 2005
Contents
Report of Independent Registered Public Accounting Firm........................1
Financial Statements
Statements of Net Assets Available for Benefits................................2
Statement of Changes in Net Assets Available for Benefits......................3
Notes to Financial Statements..................................................4
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)................10
Report of Independent Registered Public Accounting Firm
The Human Resources Committee of the Board of Directors
1st Source Corporation
We have audited the accompanying statements of net assets available for benefits
of the 1st Source Corporation Employees' Profit Sharing Plan and Trust as of
December 31, 2005 and 2004, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2005. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2005 and 2004, and the changes in net assets available for benefits
for the year ended December 31, 2005, in conformity with U.S. generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying schedule of assets (held at end of
year) as of December 31, 2005, is presented for the purpose of additional
analysis and is not a required part of the financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/Ernst & Young LLP
Chicago, Illinois
June 1, 2006
1
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Statements of Net Assets Available for Benefits
December 31
2005 2004
----------------------------------
Assets
Cash and cash equivalents $ 483,284 $ 971,090
Investments at fair value:
Mutual funds 52,317,771 47,179,412
1st Source Corporation common stock 32,624,710 34,319,512
1st Source Bank common trust fund 4,921,819 3,799,312
Participant notes receivable 700,986 835,884
----------------------------------
Total investments 90,565,286 86,134,120
Employer contributions receivable 3,146,464 2,969,537
Accrued investment income 9,086 676
----------------------------------
Net assets available for benefits $ 94,204,120 $ 90,075,423
==================================
See accompanying notes.
2
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2005
Additions
Investment income:
Interest $ 78,192
Dividends 1,824,553
-----------
1,902,745
Contributions:
Employer 3,162,434
Employees 3,984,534
-----------
7,146,968
Net realized and unrealized appreciation
in fair value of investments 183,418
-----------
Total additions 9,233,131
Deductions
Benefits paid to participants 5,104,434
-----------
Total deductions 5,104,434
-----------
Net increase in net assets available for benefits 4,128,697
Net assets available for benefits:
Beginning of year 90,075,423
-----------
End of year $94,204,120
===========
See accompanying notes.
3
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Notes to Financial Statements
December 31, 2005
1. DESCRIPTION OF THE PLAN
GENERAL
The 1st Source Corporation Employees' Profit Sharing Plan and Trust (the Plan)
is a defined-contribution plan covering substantially all employees of 1st
Source Corporation (1st Source) and its subsidiaries, with the exception of
Trustcorp Mortgage Company, who have completed one year of service in which the
employee has worked 1,000 hours. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
CONTRIBUTIONS AND VESTING
Effective July 1, 2002 participants are permitted to designate up to 25% of
their annual pre-tax compensation as a salary reduction contribution to the Plan
(prior to that date participants were permitted to designate up to 15%). In
addition, participants age 50 or older may elect to defer up to an additional
$4,000 (in 2005) and $3,000 (in 2004) (called "catch-up contributions") to the
Plan. Provided net profits or retained earnings are sufficient, 1st Source will
match employee salary reduction contributions 100% for the first 4% of
compensation that is deferred and 50% of any additional contributions up to 6%
of compensation that is deferred. Participants direct the investment of their
contributions into various investment options offered by the Plan. The Plan
currently offers nine different fund options, one of which is the 1st Source
Stock Fund, which primarily consists of 1st Source Corporation common stock. 1st
Source matching contributions are invested directly in the 1st Source Stock
Fund.
In addition, 1st Source makes an annual, mandatory contribution to the Plan
based on 2% of participants' eligible annual compensation. This contribution is
made to the Profit Sharing Mandatory Account of the Plan. The Profit Sharing
Mandatory Account is invested in a diversified portfolio of investments as
directed by 1st Source.
In addition, the Board of Directors of 1st Source may authorize a contribution
from consolidated net profits or retained earnings in excess of the minimum
401(k) matching contributions required by the Plan. This discretionary
profit-sharing contribution is made to the Profit Sharing Regular Account of the
Plan. The Profit Sharing Regular Account is invested in a diversified portfolio
of investments as directed by 1st Source. There was no discretionary match for
2005.
4
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
Vesting of participant contributions is immediate upon contribution to the Plan.
Vesting of 1st Source contributions, both the match of the employee salary
reduction contributions, the discretionary profit-sharing contribution, and the
mandatory 2% contribution, is based on years of credited service. A participant
is 100% vested after five years of credited service or upon reaching early
retirement age, normal retirement age, or disability.
Each participant's account is credited with the participant's contribution and
an allocation of (a) 1st Source's contribution, (b) Plan earnings, and (c)
forfeitures of terminated participants' nonvested accounts. Allocations are
based on participant compensation or account balances, as defined. The benefit
to which a participant is entitled is the benefit that can be provided from the
participant's vested account balance.
PARTICIPANT LOANS
Participants may borrow from the Plan amounts not to exceed the lesser of
one-half of the participant's vested account balance or $50,000. The loans are
collateralized by the participant's vested account balance and bear interest at
fixed rates of 1% above 1st Source Bank's (a wholly owned subsidiary of 1st
Source Corporation) prime rate. The loans are repayable over five years except
for loans used to acquire or construct a participant's principal residence, in
which case the repayment term may exceed five years.
PAYMENT OF BENEFITS
On termination of service, a participant may elect to receive either a lump-sum
amount equal to the value of his or her vested account balance or periodic
installments in accordance with Plan provisions. At December 31, 2005 and 2004,
$2,923,382 and $1,897,793, respectively, of the net assets available for
benefits at the end of the year have been allocated to participants who had
effectively withdrawn from the Plan and requested distribution as of the end of
those respective years, but had yet to receive their final distribution.
PLAN TERMINATION
Although it has not expressed any intention to do so, 1st Source has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become fully vested in their accounts.
5
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
The foregoing description of the Plan provides only general information.
Participants should refer to the Plan Agreement for a more complete description
of the Plan's provisions. Copies are available from the 1st Source Corporation
Human Resources Division.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at fair value. Securities traded on a national securities
exchange are valued at the average of the reported sales prices for the last
five business days of the Plan year; securities traded in the over-the-counter
market and listed securities for which no sale was reported on that date are
valued at the average of the last reported bid-and-ask prices. The fair value of
mutual funds and the Plan's participation in common/collective trust funds of
1st Source Bank are stated at the net asset value as reported by the funds on
the last business day of the Plan year. Loans to participants and short-term
temporary investments are stated at cost, which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
USE OF ESTIMATES
The financial statements of the Plan are presented on the accrual basis and are
prepared in conformity with accounting principles generally accepted in the
United States, which require management to make estimates and assumptions that
affect amounts in the financial statements and accompanying notes. Actual
results could differ from those estimates.
CASH EQUIVALENTS
All short-term investments with a maturity of less than 90 days are deemed to be
cash equivalents.
6
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
3. INVESTMENTS
During 2005, the Plan's investments (including investments purchased, sold, as
well as held during the year) appreciated in value by $183,418, including net
realized losses of $339,845, as follows:
2005 Net
Appreciation
(Depreciation)
in Fair Value During
the Year
----------------------
1st Source Corporation common stock $ (1,162,607)
Mutual funds 1,629,609
1st Source Bank common trust funds (283,584)
----------------------
$ 183,418
======================
The fair value of individual investments that represent 5% or more of the fair
value of the Plan's net assets are as follows:
2005 2004
-------------------------
1st Source Corporation common stock $32,624,710 $34,319,512
1st Source Monogram Income Fund 13,177,843 13,024,204
1st Source Monogram Diversified Equity Fund 9,501,622 8,399,933
1st Source Monogram Income Equity Fund 13,937,503 11,415,005
1st Source Monogram Special Equity Fund 5,304,207
Morgan Stanley Institutional International Equity Fund 8,161,243 6,817,552
1st Source Bank Employee Benefit Guaranteed
Income Fund 4,921,819 3,799,312
7
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investment is as follows:
December 31
2005 2004
--------------------------
NET ASSETS
Cash and cash equivalents $ 2,018,378 $ (25,405)
1st Source Corporation common stock 26,885,430 28,218,005
1st Source Corporation mutual funds 16,604,982 16,649,206
1st Source Bank Employee Benefit Guaranteed
Income Fund 2,441,202 2,017,759
--------------------------
TOTAL NET ASSETS $47,949,992 $46,859,565
==========================
Year Ended
December 31 2005
------------------
CHANGES IN NET ASSETS
Contributions $ 3,192,390
Investment income 1,123,022
Net realized/unrealized depreciation (1,079,173)
Benefits paid to participants (2,145,812)
------------------
TOTAL CHANGES IN NET ASSETS $ 1,090,427
==================
8
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
5. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan held the following party-in-interest investments at fair value at
December 31:
2005 2004
----------------------------
1st Source Corporation common stock $32,624,710 $34,319,512
1st Source Monogram Income Fund 13,177,843 13,024,204
1st Source Monogram Income Equity Fund 13,937,503 11,415,005
1st Source Monogram Diversified Equity Fund 9,501,622 8,399,933
1st Source Monogram Special Equity Fund 4,052,266 5,304,207
1st Source Bank Employee
Benefit Guaranteed Income Fund 4,921,819 6,817,552
1st Source Monogram Long/Short Fund 1,098,241 518,947
All expenses incurred in administration of the Plan are paid by 1st Source
Corporation.
6. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
(IRS) dated June 24, 2003, stating that the Plan is qualified under Section
401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust
is exempt from taxation. Subsequent to this determination by the IRS, the Plan
was amended. Once qualified, the Plan is required to operate in conformity with
the Code to maintain its qualification. The plan administrator believes the Plan
is being operated in compliance with the applicable requirements of the Code
and, therefore, believes that the Plan, as amended, is qualified and the related
trust is tax-exempt.
7. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market, and credit risks. Due to
the level of risks associated with certain investment securities, it is likely
that changes in the values of investment securities will occur in the near term
and that such changes could materially affect participants' account balances and
the amounts reported in the statements of assets available for benefits.
9
SUPPLEMENTAL SCHEDULE
1st Source Corporation
Employees' Profit Sharing Plan and Trust
Schedule H, Line 4i - Schedule of Assets
(Held at End of Year)
EIN: 35-1068133 Plan # 003
December 31, 2005
Identity of Issue
Borrower, Lessor, Description of
or Similar Party Investment Cost Fair Value
----------------------------------------------------------------------------------------------------------------------
Common stock:
1st Source Corporation* 1,277,897 shares $18,088,733 $ 32,624,710
-----------------------------------
18,088,733 32,624,710
Mutual funds:
American Century Short Term
Govt Fund #23 254,968 units 2,429,334 2,389,053
Morgan Stanley Institutional
International Equity Fund A 401,241 units 7,535,916 8,161,243
1st Source Monogram Long/Short
Fund* 101,220 units 1,082,649 1,098,241
1st Source Monogram Income Fund* 1,351,574 units 13,621,617 13,177,843
1st Source Monogram Income
Equity Fund* 1,067,190 units 12,444,177 13,937,503
1st Source Monogram Diversified
Equity Fund* 1,256,828 units 9,715,994 9,501,622
1st Source Monogram Special
Equity Fund* 477,862 units 4,512,551 4,052,266
-----------------------------------
51,342,238 52,317,771
Common trust funds:
1st Source Bank Employee Benefit
Guaranteed Income Fund* 191,653 units 4,193,957 4,921,819
-----------------------------------
4,193,957 4,921,819
Loans to participants $700,986 principal
amount, interest rates
ranging 6.25% - 11.75%,
maturities through 2020 700,986 700,986
-----------------------------------
$74,325,914 $ 90,565,286
===================================
*Indicates party-in-interest to the Plan.
10