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:
TRUSTCORP MORTGAGE COMPANY EMPLOYEE RETIREMENT SAVINGS PLAN
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.
TRUSTCORP MORTGAGE COMPANY
EMPLOYEES RETIREMENT SAVINGS PLAN
By the Plan Administrator
TRUSTCORP MORTGAGE COMPANY
DIANA L. RINGER
---------------
Senior Vice President and
Chief Operating Officer
Date: June 29, 2006
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
Trustcorp Mortgage Company Employee Retirement Savings Plan
Years Ended December 31, 2005 and 2004
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Financial Statements and Supplemental Schedule
Years Ended December 31, 2005 and 2004
Contents
Report of Independent Registered Public Accounting Firm .......................1
Financial Statements
Statements of Net Assets Available for Benefits................................2
Statements 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).................9
Report of Independent Registered Public Accounting Firm
The Board of Directors
Trustcorp Mortgage Company
We have audited the accompanying statements of net assets available for benefits
of the Trustcorp Mortgage Company Employee Retirement Savings Plan as of
December 31, 2005 and 2004, and the related statements of changes in net assets
available for benefits for the years then ended. 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 auditing standards generally accepted
in the 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, as well as 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 its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
assets (held at end of year) as of December 31, 2005, is presented for purposes
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
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Statements of Net Assets Available for Benefits
December 31
2005 2004
-------------------------------
Assets
Cash and cash equivalents $ 61,692 $ 75,609
Investments at fair value
Common stock 900,579 848,443
Mutual funds 3,423,248 3,676,785
1st Source Bank common trust fund 324,849 377,301
Participant loans receivable 184,898 198,250
-------------------------------
Total investments 4,833,574 5,100,779
Contribution receivable
Employer 6,740 36,349
Employee 10,016 17,031
-------------------------------
16,756 53,380
Other assets
Other receivables 2,486 5,789
-------------------------------
Total assets 4,914,508 5,235,557
Liabilities
Accrued expenses payable 10,117 10,757
-------------------------------
Total liabilities 10,117 10,757
-------------------------------
Net assets available for benefits $ 4,904,391 $ 5,224,800
===============================
See accompanying notes.
2
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31
2005 2004
-----------------------------
Additions
Investment income:
Interest $ 12,354 $ 17,327
Dividends 61,484 58,661
-----------------------------
73,838 75,988
-----------------------------
Contributions:
Employer 109,020 157,885
Employee 263,577 330,607
-----------------------------
372,597 488,492
-----------------------------
Net realized and unrealized appreciation in fair
value of investments 111,820 427,212
Total additions 558,255 991,692
Deductions
Benefits paid to participants 851,852 432,316
Plan expenses 26,812 28,190
-----------------------------
Total deductions 878,664 460,506
-----------------------------
Net increase (decrease) (320,409) 531,186
Net assets available for benefits:
Beginning of year 5,224,800 4,693,614
-----------------------------
End of year $ 4,904,391 $ 5,224,800
=============================
See accompanying notes.
3
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Notes to Financial Statements
Years Ended December 31, 2005 and 2004
1. Description of the Plan
General
The Trustcorp Mortgage Company Employee Retirement Savings Plan (the Plan) is a
defined-contribution plan covering substantially all employees of Trustcorp
Mortgage Company (Trustcorp) 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). Trustcorp is a wholly
owned subsidiary of 1st Source Corporation.
The Board of Directors of Trustcorp may authorize a contribution from
consolidated net profits or retained earnings in excess of the 401(k) matching
contributions which are also approved by the Board. These discretionary
contributions are made in cash and are allocated to each participant based upon
provisions of the Plan Agreement.
Funding and Vesting
Participants are permitted to designate up to 25% of their annual compensation
as a salary reduction contribution to the Plan under Section 401(k) of the
Internal Revenue Code. In addition, participants age 50 or older may elect to
defer up to an additional amount per year ($4,000 in 2005 and $3,000 in 2004)
(called "catch-up contributions") to the Plan. When applying the discretionary
matching contributions, only salary reductions up to 6% of eligible employee
compensation is considered. For the years 2005 and 2004, the discretionary
matching contribution percentage was 50%. In addition, as part of the
profit-sharing component of the Plan, Trustcorp has the discretion to make an
additional contribution to the Plan, out of current or accumulated net profits.
There were no discretionary contributions to the Plan for 2005 or 2004.
Vesting of participant contributions and Trustcorp's 401(k) matching
contributions are immediate. Vesting of the Trustcorp contributions for the
profit-sharing component of the Plan is based on years of credited service, with
participants becoming 100% vested after seven years of credited service.
However, a participant becomes 100% vested upon satisfying the requirements for
early retirement under the terms of the Plan document.
4
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Each participant's account is credited with the participant's contribution and
an allocation of (a) Trustcorp's contribution, (b) Plan earnings net of Plan
expenses, 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 the national prime rate as posted in the Wall Street
Journal. 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 be up to ten 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. At December 31, 2005 and
2004, there have been no amounts 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, Trustcorp 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.
The foregoing description of the Plan provides only general information.
Participants should refer to the Plan Agreement, the Summary Plan Description,
or the Employee Handbook for a more complete description of the Plan's
provisions. Copies are available from the Trustcorp Human Resources Division.
5
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies
Investment Valuation and Income Recognition
Investments are stated at fair value. Securities traded on a national securities
exchange are valued at the last reported sales price on the last business day 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 aggregate current value as reported by the funds. Loans to
participants 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 preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect amounts in the financial statements and accompanying
notes. Actual results could differ from those estimates.
3. Investments
During 2005 and 2004, the Plan's investments (including investments purchased,
sold, as well as held during the year) appreciated in value by $111,820 and
$427,212, respectively, as follows:
Net Appreciation (Depreciation) in Fair
Value During
2005 2004
----------------------------------------
Common stock $ (7,402) $ 124,479
Mutual funds 109,863 290,895
1st Source Bank Common Trust Fund 9,359 11,838
----------------------------------------
$ 111,820 $ 427,212
========================================
6
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Notes to Financial Statements (continued)
3. Investments (continued)
The fair value of individual investments that represent 5% or more of the Plan's
net assets are as follows:
2005 2004
-------------------------
1st Source Corporation common stock $ 739,058 $ 682,163
Morgan Stanley Institutional International Equity 1,028,698 1,016,874
1st Source Monogram Income Equity Fund 658,756 738,785
1st Source Monogram Diversified Equity Fund 753,155 736,269
1st Source Monogram Special Equity Fund 252,422 397,025
1st Source Monogram Income Fund 392,932 412,769
1st Source Monogram Long/Short Fund 337,285 375,063
1st Source Bank Employee Benefit
Guaranteed Income Fund 324,849 377,301
4. Transactions With Parties-In-Interest
Parties-in-interest are defined under Department of Labor regulations as any
fiduciary of the Plan, any party rendering service to the Plan, the employer,
and certain others.
Plan assets are held in custody by the trust division of 1st Source Bank, a
wholly owned subsidiary of 1st Source Corporation, parent of Trustcorp.
Professional fees for the audit of the Plan for the year ended December 31,
2005, were paid by Trustcorp.
The Plan held the following party-in-interest investments at fair value at
December 31:
2005 2004
--------------------
1st Source Corporation common stock $739,058 $682,163
1st Source Monogram Income Equity Fund 658,756 738,785
1st Source Monogram Diversified Equity Fund 753,155 736,269
1st Source Monogram Special Equity Fund 252,422 397,025
1st Source Monogram Income Fund 392,932 412,769
1st Source Monogram Long/Short Fund 337,285 375,063
1st Source Bank Employee
Benefit Guaranteed Income Fund 324,849 377,301
7
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Notes to Financial Statements (continued)
4. Transactions With Parties-In-Interest (continued)
Plan transactions with parties-in-interest during the years ended December 31,
2005 and 2004, were as follows:
Identity Relationship 2005 2004
--------------------------------------------------------------------------------
RSM McGladrey, Inc. Recordkeeper and Tax Accountant $17,147 $18,839
1st Source Bank Trustee 9,665 9,351
---------------------
$26,812 $28,190
=====================
5. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
(IRS) dated September 30, 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.
6. 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.
8
Supplemental Schedule
Trustcorp Mortgage Company
Employee Retirement Savings Plan
Schedule H, Line 4i - Schedule of Assets
(Held at End of Year)
EIN #35-1933290 Plan #003
December 31, 2005
Identity of Issue, Borrower,
Lessor, or Similar Party Description of Investment Cost Fair Value
-------------------------------------------------------------------------------------------------------------------
Common stock:
1st Source Corporation* 29,386 shares ** $ 739,058
Key Corp 4,905 shares ** 161,521
--------------
900,579
Mutual funds:
Morgan Stanley Institutional International Equity Fund 50,951 units ** 1,028,698
1st Source Monogram Income Equity Fund* 50,441 units ** 658,756
1st Source Monogram Diversified Equity Fund* 99,624 units ** 753,155
1st Source Monogram Special Equity Fund* 29,767 units ** 252,422
1st Source Monogram Long/Short Fund* 31,086 units ** 337,285
1st Source Monogram Income Fund* 40,301 units ** 392,932
--------------
3,423,248
Common trust funds:
1st Source Bank Employee Benefits 12,649 units ** 324,849
Guaranteed Income Fund* --------------
324,849
Loans to participants: $184,898 principal amount,
interest rates ranging from
5.00% to 9.00%, maturities
through 2012 ** 184,898
--------------
184,898
Total assets held for investment purposes at end of year $ 4,833,574
==============
Indicates a party-in-interest to the Plan.
Historical cost information is not required for participant-directed
investments.
9