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, 2002
[ ] 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 PLAN AND TRUST
By the Plan Administrator:
1ST SOURCE CORPORATION
Date: June 27, 2003 /s/ Dan L. Craft
----------------------------------------
Dan L. Craft, Senior Vice President
Financial Statements and Schedules
1st Source Corporation Employees' Profit Sharing Plan and Trust
December 31, 2002 and 2001, and year ended December 31, 2002
1st Source Corporation
Employees' Profit Sharing Plan and Trust
As of December 31, 2002 and 2001,
and for the year ended December 31, 2002
CONTENTS
Report of Independent Accountants .............................................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
Schedule of Assets Held for Investment Purposes at End of Year................10
Exhibits
Consent of Independent Auditors.....................................Exhibit 23.1
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002..........................................Exhibit 99.1
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002..........................................Exhibit 99.2
Report of Independent Accountants
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, 2002 and 2001, and the related statement of changes in net assets
available for benefits for the year ended December 31, 2002. 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. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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, 2002 and 2001, and the changes in its net assets available for
benefits for the year ended December 31, 2002, 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 for investment purposes at end of year as of December
31, 2002, is presented for purposes of additional analysis and is not a required
part of the basic 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 basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
s/ Ernst & Young LLP
--------------------
Columbus, Ohio
June 23, 2003
1
1st Source Corporation Employees' Profit Sharing Plan and Trust
Statements of Net Assets Available for Benefits
December 31,
2002 2001
---------------------------
Assets
Cash and cash equivalents $ 174,671 $ 160,558
Investments at fair value:
Mutual funds 27,138,293 27,283,341
1st Source Corporation common stock 21,043,291 25,879,509
1st Source Bank common trust fund 1,724,916 1,287,908
Participant notes receivable 718,204 589,019
----------- -----------
Total investments 50,624,704 55,039,777
Employer contributions receivable 1,697,799 1,875,611
Accrued investment income 18,895 49,506
----------- -----------
Net assets available for benefits $52,516,069 $57,125,452
=========== ===========
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, 2002
Additions
Investment income:
Interest $ 65,416
Dividends 1,563,892
------------
1,629,308
Contributions:
Employer 1,698,825
Employees 3,219,137
------------
4,917,962
------------
Total additions 6,547,270
Deductions
Benefits paid to participants 2,704,087
Net realized and unrealized depreciation
in fair value of investments: 8,452,566
-------------
Total deductions 11,156,653
------------
Net decrease (4,609,383)
Net assets available for benefits:
Beginning of year 57,125,452
------------
End of year $ 52,516,069
============
See accompanying notes.
3
1st Source Corporation Employees' Profit Sharing Plan and Trust
Notes to Financial Statements
December 31, 2002
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 and its subsidiaries, with the exception of Trustcorp
Mortgage Company, ("1st Source") 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%).
Provided net profits or retained earnings are sufficient, 1st Source will match
employee salary reduction contributions one hundred percent (100%) for the first
four percent (4%) of compensation that is deferred and fifty percent (50%) of
any additional contributions up to six percent (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, the Board of Directors of 1st Source Corporation 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 2002.
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 and the discretionary profit sharing contribution is
based on years of credited service. A participant is one hundred percent (100%)
vested after five years of credited service or upon reaching early retirement
age, normal retirement age, or disability.
4
1st Source Corporation Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
CONTRIBUTIONS AND VESTING (CONTINUED)
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, 2002 and 2001,
$985,882 and $2,478,874, respectively, of the net assets available for benefits
at the end of the year has been allocated to participants who had effectively
withdrawn from the Plan 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 Corporation 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 for a more complete description
of the Plan's provisions. Copies are available from the 1st Source Corporation
Human Resources Division.
5
1st Source Corporation Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
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 closing bid prices for the five
consecutive trading days (on which such stock was traded) immediately preceding
and including the relevant valuation date; 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.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statements
to conform with the current year presentation.
6
1st Source Corporation Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
3. INVESTMENTS
During 2002, the Plan's investments (including investments purchased, sold, as
well as held during the year) depreciated in value by $8,452,566, including net
realized losses of $271,394 as follows:
2002
-------------------------
NET APPRECIATION
(DEPRECIATION) IN FAIR
VALUE DURING THE YEAR
-------------------------
1st Source Corporation common stock $ (5,556,647)
Mutual funds (2,969,642)
1st Source Bank common trust funds 73,723
-------------------------
$(8,452,566)
=========================
The fair value of individual investments that represent 5% or more of the fair
value of the Plan's net assets are as follows:
DECEMBER 31,
2002 2001
---------------- ---------------
1st Source Corporation common stock $21,043,291 $25,879,509
1st Source Monogram Income Fund 8,180,916 8,313,740
1st Source Monogram Diversified Equity Fund 4,775,285 5,228,956
1st Source Monogram Income Equity Fund 5,110,932 5,584,954
1st Source Monogram Special Equity Fund 4,399,277 3,951,509
Morgan Stanley Institutional International Equity Fund 3,177,015 3,211,515
7
1st Source Corporation Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
4. NON-PARTICIPANT DIRECTED INVESTMENTS
Information about the net assets and the significant components of the changes
in net assets relating to the non-participant directed investment is as follows:
DECEMBER 31,
2002 2001
---------------- ---------------
NET ASSETS
Cash & Cash Equivalents $ 85,303 $ 152,835
1st Source Corporation Common Stock 17,512,296 21,047,718
1st Source Corporation Mutual Funds 7,920,207 7,875,913
1st Source Bank Employee Benefit Guaranteed Income Fund 518,822 494,830
----------- -----------
TOTAL NET ASSETS $26,036,628 $29,571,296
=========== ===========
YEAR ENDED
DECEMBER 31, 2002
---------------------------
CHANGES IN NET ASSETS
Contributions $ 2,083,824
Investment income 754,120
Net realized/unrealized depreciation (4,894,846)
Benefits paid to participants (1,477,766)
---------------------------
Total changes in net assets: $ (3,534,668)
===========================
5. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan held the following party-in-interest investments at fair value at
December 31:
2002 2001
---------------- ---------------
1st Source Corporation Common Stock $21,043,291 $25,879,509
1st Source Monogram Income Fund 8,180,916 8,313,740
1st Source Monogram Income Equity Fund 5,110,932 5,584,954
1st Source Monogram Diversified Equity Fund 4,775,285 5,228,956
1st Source Monogram Special Equity Fund 4,399,277 3,951,509
1st Source Bank Employee Benefit Guaranteed Income Fund 1,724,916 1,287,908
8
1st Source Corporation Employees' Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
5. TRANSACTIONS WITH PARTIES-IN-INTEREST (CONTINUED)
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
dated April 23, 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. 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 is qualified and
the related trust is tax exempt.
7. PLAN MERGER
As of December 31, 2002 the 1st Source Corporation Money Purchase Pension Plan
was merged into the Plan. The resulting plan, titled 1st Source Employees'
Profit Sharing Plan and Trust, is covered by the determination letter dated
April 23, 2003.
9
1st Source Corporation Employees' Profit Sharing Plan and Trust
Schedule H, Line 4i - Schedule of Assets
Held for Investment Purposes at End of Year
December 31, 2002
EIN: 35-1068133
Plan Number: 003
Identity of Issue,
Borrower, Lessor
or Similar Party Description of Investment Cost Fair Value
----------------------------------------------------------------------------------------------------------
Common Stock:
* 1st Source Corporation 1,230,314 shares $ 14,501,176 $ 21,043,291
---------------------------
14,501,176 21,043,291
Mutual Funds:
American Century Benham Equity Fund 117,133 units 1,112,498 1,137,366
Federated Money Market Fund 357,502 units 357,502 357,502
Morgan Stanley Institutional International
Equity Fund 218,502 units 3,879,745 3,177,015
* 1st Source Monogram Income Fund 785,116 units 7,886,773 8,180,916
* 1st Source Monogram Income Equity Fund 537,427 units 5,697,688 5,110,932
* 1st Source Monogram Diversified Equity Fund 845,183 units 7,304,628 4,775,285
* 1st Source Monogram Special Equity Fund 537,809 units 5,327,494 4,399,277
---------------------------
31,566,328 27,138,293
Common Trust Funds:
* 1st Source Bank Employee Benefit Guaranteed
Income Fund 73,813 units 1,352,000 1,724,916
---------------------------
1,352,000 1,724,916
Loans to Participants $718,204 principal amount,
interest rates ranging
6.25% - 11.75%,
maturities through 2017 - 718,204
---------------------------
- 718,204
$ 47,419,504 $ 50,624,704
===========================
* Indicates party-in-interest to the Plan.
10