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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-6233
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1st SOURCE CORPORATION
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(Exact name of registrant as specified in its charter)
Indiana 35-1068133
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 N. Michigan Street, South Bend, Indiana 46601
- ------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 219/235-2000
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
9% Cumulative Trust Preferred Securities and related guarantee - $25 par value
- -------------------------------------------------------------------------------
(Title of Class)
Floating Rate Cumulative Trust Preferred Securities and related guarantee -
$25 par value
- --------------------------------------------------------------------------------
(Title of Class)
Common Stock - without par value
--------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 14, 2000. Common Stock, without par value -
$197,728,604.
- --------------------------------------------------------------------------------
The number of shares outstanding of each of the registrant's classes of stock as
of February 14, 2000. Common Stock, without par value - 19,043,741 shares.
- --------------------------------------------------------------------------------
9% Cumulative Trust Preferred Securities and related guarantee, $25 par value -
1,100,000 shares.
- --------------------------------------------------------------------------------
Floating Rate Cumulative Trust Preferred Securities and related guarantee, $25
par value - 690,000 shares.
- --------------------------------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December 31, 1999,
are incorporated by reference into Part II. Portions of the annual proxy
statement for the 2000 annual meeting of shareholders are incorporated by
reference into Parts II and III.
1ST SOURCE CORPORATION AND SUBSIDIARIES
FORM 10-K
Index
Part I Page
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Item 1. Business .................................................... 3
Item 2. Properties .................................................. 21
Item 3. Legal Proceedings ........................................... 21
Item 4. Submission of Matters to a Vote of Security Holders ......... 21
Part II
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Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters ......................................... 21
Item 6. Selected Financial Data ..................................... 21
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 21
Item 7A. Quantitative and Qualitative Disclosures about Market Risk .. 22
Item 8. Financial Statements and Supplementary Data ................. 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure .................................... 22
Part III
--------
Item 10. Directors and Executive Officers of the Registrant .......... 22
Item 11. Executive Compensation ...................................... 22
Item 12. Security Ownership of Certain Beneficial
Owners and Management ....................................... 22
Item 13. Certain Relationships and Related Transactions .............. 22
Part IV
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Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K ................................................. 23
Signatures ............................................................. 24
2
PART I
ITEM 1. BUSINESS
GENERAL
1st Source Corporation is an Indiana corporation and registered bank
holding company headquartered in South Bend, Indiana which commenced operations
as a bank holding company in 1971. As used herein, unless the context otherwise
requires, the term "1st Source" refers to 1st Source Corporation and its
subsidiaries. At December 31, 1999, 1st Source had assets of $2.87 billion,
deposits of $2.13 billion and total shareholders' equity of $238.8 million.
Pages 20 through 41 of 1st Source's Annual Report to Shareholders for the year
ended December 31, 1999 are incorporated herein by reference.
1st Source, through its principal subsidiary 1st Source Bank (the
"Bank"), delivers a comprehensive range of consumer and commercial banking
services to individual and business customers through 50 banking locations in
the northern Indiana/southwestern Michigan market area. The Bank also competes
for business nationwide by offering specialized financing services for used
private aircraft, automobiles for leasing and rental agencies, heavy duty trucks
and construction equipment. The Bank, which was chartered as an Indiana state
bank in 1922, is a member of the Federal Reserve System and its deposits are
insured by the Federal Deposit Insurance Corporation (the "FDIC") to the extent
provided by law. The Bank is headquartered in South Bend, Indiana, which is in
northern Indiana, approximately 95 miles east of Chicago and 140 miles north of
Indianapolis. Its principal market area consists of nine counties in northern
Indiana and three counties in southwestern lower Michigan. South Bend, in St.
Joseph County, is the largest city in its market area, and is a regional center
for educational institutions, health care, financial, accounting and legal
services and retailing.
1st Source's other subsidiaries include 1st Source Leasing, Inc., an
originator and servicer of personal property leases to businesses nationwide,
1st Source Insurance, Inc., a general property and casualty insurance agency in
South Bend, 1st Source Capital Corporation, a licensed small business investment
company, 1st Source Capital Trust I and II, subsidiaries created to issue $44.75
million of Trust Preferred Securities, Michigan Transportation Finance
Corporation, a company which manages the non-Indiana assets of our national
niche lending businesses, 1st Source Funding Corporation, a qualified special
purpose entity established for purposes of administering securitization
activity, and Trustcorp Mortgage Company, a mortgage banking company with eight
offices in Indiana, Ohio and Kentucky. 1st Source's inactive subsidiaries
include 1st Source Travel, Inc., 1st Source Auto Leasing, Inc., and FBT Capital
Corporation.
The principal executive office of 1st Source is located at 100 North
Michigan Street, South Bend, Indiana 46601 and its telephone number is (219)
235-2000.
BUSINESS STRATEGY AND OBJECTIVES
1st Source, as part of its "Vision 2000" strategic planning process
commenced in 1995, has identified several business objectives and strategies
which focus on growth and customer service. The principal objectives of 1st
Source under Vision 2000 have been to (i) increase financial performance and
market share, (ii) provide exceptional customer service, (iii) enhance credit
quality, and (iv) maintain cost controls.
1st Source has employed the following strategies to further its Vision
2000 objectives:
1. Increase market share in each market served and as a percentage of
each customer's relationship. 1st Source has opened 17 new banking locations
from 1995 through 1999 as part of its banking center expansion program designed
to maintain its position as one of the dominant financial institutions in its
market area -- which
3
includes nine counties in northern Indiana and three counties in southwestern
lower Michigan. Management believes that such a strategy allows the most
effective and efficient use of 1st Source's marketing resources and assures that
1st Source's banking offices are accessible to a majority of the people residing
in the markets served. 1st Source's goal is to deliver highly personal and
superior customer services through each of its banking facilities and to meet a
higher percentage of each customer's financial needs through personal
relationship management.
2. Expand fee-based businesses. 1st Source currently provides a number
of fee-based services to its clients, the major services being trust, mortgage
banking, and insurance. 1st Source believes that additional sources of fee
income are available from existing relationships and that existing fee-based
product lines can be used effectively in developing new relationships with
customers. 1st Source also believes that customers are more loyal and responsive
to its products and services when a large percentage of a customer's financial
services are provided directly by 1st Source. 1st Source's fee-based businesses
are designed to strengthen the relationship between 1st Source and its
customers.
3. Expand the national niche businesses across the United States taking
advantage of specialized opportunities. 1st Source caters to specialized
national market niches that management believes are not being well served by
either the credit subsidiaries of manufacturers or by other financial
institutions. Asset-based lending and personal relationship management of the
customer base, together with an efficient method of operation, is the focus of
the Bank's Specialty Finance Group, which provides such services. Additional
experienced sales people have been and will be added to ensure better geographic
coverage in areas of opportunity. 1st Source has also pursued a strategy of
securitizing loan receivables so that this Group's business growth is not
totally dependent on deposit funding.
4. Actively managing credit quality. 1st Source has adopted a proactive
credit management process with loan officers maintaining responsibility for the
quality of the credits they originate and manage. The credit management process
is supported by a collective and collaborative review and approval process and
is balanced by a review, evaluation and grading process undertaken by an
objective third party. Senior management is actively involved in the management
of the process and incentive compensation is based on 1st Source's overall
credit experience.
BANKING AND FINANCIAL SERVICES
The organization offers a broad range of consumer and commercial
banking services through its lending operations, retail branches and
fee based businesses.
Loans and Leases
- 1st Source's commercial and agriculture loans at December 31,
1999, were approximately $441 million and were 21.4% of total
loans outstanding. The primary focus of this lending area is
with privately-held or closely-controlled firms in 1st
Source's regional market area of Northern Indiana and
Southwest Michigan.
- Commercial loans secured by transportation and construction
equipment totaled $897 million, or 43.5% of total loans
outstanding, at December 31, 1999. This loan area concentrates
on specialty finance lending for automobile leasing and rental
companies, truck leasing companies, privately- owned aircraft
for businesses and individuals and heavy duty trucks and other
equipment used in the construction business. Currently, 1st
Source has 15 locations nationwide supporting these lending
activities. Loan sale and servicing income resulting from loan
securitizations from these specialty finance lending
activities totaled $12.07 million in 1999. 1st Source also
generates equipment rental
4
income through the leasing of various automobiles,
construction equipment and other equipment to customers
through operating leases, where 1st Source retains ownership
of the property being leased. Total equipment rental income
for 1999 totaled $17.4 million with depreciation on this
equipment amounting to $13.0 million.
- Loans secured by real estate amounted to $591 million, which
was approximately 28.6% of total loans outstanding, at
December 31, 1999. The primary focus of this lending area is
commercial real estate and residential mortgage lending in the
regional market area of Northern Indiana and Southwest
Michigan. Most of the residential mortgages are sold into the
secondary market and serviced by 1st Source's mortgage
subsidiary, Trustcorp Mortgage Company.
- 1st Source's consumer loans at December 31, 1999, amounted to
$134 million and 6.5% of total loans outstanding. Consumer
loans are primarily all other non-real estate loans to
individuals in 1st Source's regional market area.
Deposits
Through its network of 50 branches in 12 counties in Indiana and
Michigan, 1st Source generates deposits to fund its lending activities.
Total deposits at December 31, 1999 were $2.13 billion. Enhancing
customer service, 1st Source offers banking services, in addition to
its traditional branches, through its network of 52 automatic teller
machines, bank by phone services and through the internet. Service
charges on deposit accounts totaled $6.90 million for 1999.
Fee Based Businesses
1st Source maintains various fee based businesses to complement net
interest income.
- Trust fees are generated from employee benefit services,
personal and agency trusts and estate planning. In 1999, trust
fees were approximately $8.95 million.
- Mortgage loan sale and servicing income for 1999 amounted to
$7.42 million. Income from loan sale and servicing is
generated from the mortgage banking operations of Trustcorp
Mortgage Company. Trustcorp serviced approximately $2.21
billion of mortgage loans at December 31, 1999.
- Insurance commissions from 1st Source's property and casualty
insurance agency totaled $1.51 million for 1999.
COMPETITION
The activities in which 1st Source and the Bank engage are highly
competitive. Those activities and the geographic markets served involve
primarily competition with other banks, some of which are affiliated with large
bank holding companies headquartered outside of 1st Source's principal market.
Larger financial institutions competing within 1st Source's principal market,
but headquartered elsewhere, include Key Bank, Wells Fargo Bank, Banc One, Fifth
Third Bank, Standard Federal Bank, Old Kent Bank and National City Corporation.
Competition among financial institutions is based upon interest rates offered on
deposit accounts, interest rates charged on loans and other credit and service
charges, the quality of services rendered, the convenience of banking facilities
and, in the case of loans to large commercial borrowers, relative lending
limits.
In addition to competing with other banks within its primary service
areas, the Bank also competes with
5
other financial intermediaries, such as credit unions, industrial loan
associations, securities firms, insurance companies, small loan companies,
finance companies, mortgage companies, real estate investment trusts, certain
governmental agencies, credit organizations and other enterprises. Additional
competition for depositors' funds comes from United States Government
securities, private issuers of debt obligations and suppliers of other
investment alternatives for depositors. Many of 1st Source's non-bank
competitors are not subject to the same extensive federal regulations that
govern bank holding companies and banks. Such non-bank competitors may, as a
result, have certain advantages over 1st Source in providing some services.
1st Source competes against these financial institutions by offering
innovative products and highly personalized services. 1st Source also relies on
a history in the market dating back to 1863, relationships that long- term
employees have with their customers, and the capacity for quick local
decision-making.
EMPLOYEES
1st Source employs approximately 1,083 persons on a full-time
equivalent basis. 1st Source provides a wide range of employee benefits and
considers employee relations to be good.
REGULATION AND SUPERVISION
GENERAL. 1st Source and the Bank are extensively regulated under
federal and state law. These laws and regulations are intended to protect
depositors, not shareholders. To the extent that the following information
describes statutory or regulatory provisions, it is qualified in its entirety by
reference to the particular statutory and regulatory provisions. Any change in
applicable laws or regulations may have a material effect on the business and
prospects of 1st Source. The operations of 1st Source may be affected by
legislative changes and by the policies of various regulatory authorities. 1st
Source is unable to predict the nature or the extent of the effects on its
business and earnings that fiscal or monetary policies, economic controls or new
federal or state legislation may have in the future.
1st Source is a registered bank holding company under the Bank Holding
Company Act of 1956 (the "BHCA") and, as such, is subject to regulation,
supervision and examination by the Board of Governors of the Federal Reserve
System (the "Federal Reserve"). 1st Source is required to file annual reports
with the Federal Reserve and to provide the Federal Reserve such additional
information as it may require.
The Bank, as an Indiana state bank, is supervised by the Indiana
Department of Financial Institutions (the "DFI") and the Federal Reserve. As
such, the Bank is regularly examined by and subject to regulations promulgated
by the DFI and the Federal Reserve. Because the FDIC provides deposit insurance
to the Bank, the Bank is also subject to supervision and regulation by the FDIC
(even though the FDIC is not its primary federal regulator).
BANK AND BANK HOLDING COMPANY REGULATION. As noted above, both 1st
Source and the Bank are subject to extensive regulation and supervision.
Bank Holding Company Act. Under the BHCA, as amended, the activities of
a bank holding company, such as 1st Source, are limited to business so closely
related to banking, managing or controlling banks as to be a proper incident
thereto. 1st Source is also subject to capital requirements applied on a
consolidated basis in a form substantially similar to those required of the
Bank. The BHCA also requires a bank holding company to obtain approval from the
Federal Reserve before (i) acquiring, or holding more than 5% voting interest in
any bank or bank holding company, (ii) acquiring all or substantially all of the
assets of another bank or bank holding company, or (iii) merging or
consolidating with another bank holding company.
6
The BHCA also restricts non-bank activities to those which, by statute
or by Federal Reserve regulation or order, have been identified as activities
closely related to the business of banking or of managing or controlling banks.
Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") reorganized and reformed the regulatory structure applicable to
financial institutions generally.
The Federal Deposit Insurance Corporation Improvement Act of 1991. The
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") was
adopted to supervise and regulate a wide variety of banking issues. In general,
FDICIA provides for the recapitalization of the Bank Insurance Fund ("BIF"),
deposit insurance reform, including the implementation of risk-based deposit
insurance premiums, the establishment of five capital levels for financial
institutions ("well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized") that would
impose more scrutiny and restrictions on less capitalized institutions, along
with a number of other supervisory and regulatory issues.
Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994.
Congress enacted the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Interstate Act") in September 1994. Beginning in September 1995,
bank holding companies have the right to expand, by acquiring existing banks,
into all states, even those which had theretofore restricted entry. The
legislation also provides that, subject to future action by individual states, a
holding company has the right to convert the banks which its owns in different
states to branches of a single bank. The states of Indiana and Michigan have
adopted the interstate branching provisions of the Interstate Act.
Economic Growth and Regulatory Paperwork Reduction Act of 1996. The
Economic Growth and Regulatory Paperwork Reduction Act of 1996 (the "EGRPRA")
was signed into law on September 30, 1996. EGRPRA streamlined the non-banking
activities application process for well-capitalized and well-managed bank
holding companies.
Gramm-Leach-Bliley Act of 1999. The Act is intended to modernize the
banking industry by removing barriers to affiliation among banks, insurance
companies, the securities industry and other financial service providers. It
permits financial organizations flexibility in structuring such affiliations
through a holding company structure or a financial subsidiary, with certain
limitations on activities and appropriate safeguards. The Act sets forth a
system of functional regulation that makes the Board of Governors of the Federal
Reserve System (the "Board) the "umbrella supervisor" for holding companies
while providing for supervision by other federal and state agencies. The Board
and the Secretary of the treasury must coordinate their supervision regarding
approval of new financial activities. Banks may not participate in new financial
affiliations unless they are well-capitalized and well- managed. Further a bank
must have received at least a satisfactory Community Reinvestment Act ("CRA")
rating. The Act addresses state regulation of insurance, generally prohibits
unitary thrifts from participating in new financial activities, provides privacy
protection for nonpublic customer information of financial institutions,
modernizes the Federal Home Loan Bank system and makes miscellaneous regulatory
improvements. While much of the Act is directed to national banks, state banks
will generally be able to undertake the activities permitted by the Act. In
addition, the provisions for securities transactions, CRA, and privacy apply
whether or not a national or state bank elects to become a financial holding
company or form or acquire a financial subsidiary. The Act becomes effective
March 11, 2000 for the affiliation provisions and provides for various
subsequent effective dates for other sections. Regulations will be issued by the
regulatory authorities pursuant to a schedule of effective dates under the Act.
Regulations Governing Capital Adequacy. The federal bank regulatory
agencies use capital adequacy guidelines in their examination and regulation of
bank holding companies and banks. If the capital falls below the minimum levels
established by these guidelines, the bank holding company or bank may be denied
approval to acquire or establish additional banks or nonbank businesses or to
open facilities. The various regulatory capital requirements that 1st Source is
subject to are disclosed on page 38 in Footnote "O" of the annual shareholders
report for year ended December 31, 1999, and is incorporated herein by
reference. Management of 1st Source believes that the risk-weighting of assets
and the risk-based capital guidelines do not have a material adverse impact on
1st Source's operations or on the operations of the Bank.
7
Community Reinvestment Act. The Community Reinvestment Act of 1977
requires that, in connection with examinations of financial institutions within
their jurisdiction, the federal banking regulators must evaluate the record of
the financial institutions in meeting the credit needs of their local
communities, including low and moderate income neighborhoods, consistent with
the safe and sound operation of those banks. These factors are also considered
in evaluating mergers, acquisitions and applications to open a branch or
facility.
Regulations Governing Extensions of Credit. The Bank is subject to certain
restrictions imposed by the Federal Reserve Act on extensions of credit to the
bank holding company or its subsidiaries, or investments in their securities and
on the use of their securities as collateral for loans to any borrowers. These
regulations and restrictions may limit the ability of 1st Source to obtain funds
from the Bank for its cash needs, including funds for acquisitions and for
payment of dividends, interest and operating expenses. Further, under the BHCA
and certain regulations of the Federal Reserve, a bank holding company and its
subsidiaries are prohibited from engaging in certain tying arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.
The Bank is also subject to certain restrictions imposed by the Federal
Reserve Act on extensions of credit to executive officers, directors, principal
shareholders or any related interest of such persons. Extensions of credit (i)
must be made on substantially the same terms, including interest-rates and
collateral, and following credit underwriting procedures that are not less
stringent than, as those prevailing at the time for comparable transactions with
persons not covered above and who are not employees, and (ii) must not involve
more than the normal risk of repayment or present other unfavorable features.
The Bank is also subject to certain lending limits and restrictions on
overdrafts to such persons.
Reserve Requirements. The Federal Reserve requires all depository
institutions to maintain reserves against their transaction accounts and
non-personal time deposits. Reserves of 3% must be maintained against total
transaction accounts of $46.5 million or less (subject to adjustment by the
Federal Reserve) and 10% must be maintained against that portion of total
transaction accounts in excess of such amount.
Dividends. The ability of the Bank to pay dividends and management fees
is limited by various state and federal laws, by the regulations promulgated by
its primary regulators and by the principles of prudent bank management.
Monetary Policy and Economic Control. The commercial banking business
in which 1st Source engages is affected not only by general economic conditions,
but also by the monetary policies of the Federal Reserve. Changes in the
discount rate on member bank borrowing, availability of borrowing at the
"discount window," open market operations, the imposition of changes in reserve
requirements against member banks deposits and assets of foreign branches, and
the imposition of and changes in reserve requirements against certain borrowings
by banks and their affiliates are some of the instruments of monetary policy
available to the Federal Reserve. These monetary policies are used in varying
combinations to influence overall growth and distributions of bank loans,
investments and deposits, and such use may affect interest rates charged on
loans or paid on deposits. The monetary policies of the Federal Reserve have had
a significant effect on the operating results of commercial banks and are
expected to do so in the future. The monetary policies of the Federal Reserve
are influenced by various factors, including inflation, unemployment, short-term
and long-term changes in the international trade balance and in the fiscal
policies of the U.S. Government. Future monetary policies and the effect of such
policies on the future business and earnings of 1st Source and the Bank cannot
be predicted.
Pending Legislation. Because of concerns relating to competitiveness
and the safety and soundness of the banking industry, Congress often considers a
number of wide-ranging proposals for altering the structure, regulation and
competitive relationships of the nation's financial institutions. It cannot be
predicted whether or in what form any proposals will be adopted or the extent to
which the business of 1st Source may be affected thereby.
FORWARD LOOKING STATEMENTS
The information regarding "forward-looking statements" on page 7 of the
annual shareholders report for the year ended December 31, 1999, is incorporated
herein by reference.
8
ITEM 1. BUSINESS (Continued)
SELECTED STATISTICAL INFORMATION
Distribution of Assets, Liabilities and Shareholders' Equity
Interest Rates and Interest Differential
(Dollars in Thousands)
Year ended December 31, 1999 1998 1997
---------------------------------- -------------------------------- ------------------------------
Interest Interest Interest
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
---------------------------------- -------------------------------- -------------------------------
ASSETS:
Investment securities:
Taxable $ 348,944 $ 20,049 5.75% $ 294,632 $ 17,419 5.91% $ 272,400 $ 16,638 6.11%
Tax-exempt (1) 161,712 11,336 7.01% 150,678 11,327 7.52% 151,686 11,723 7.73%
Net loans (2 & 3) 1,949,172 171,770 8.81% 1,853,537 168,664 9.10% 1,610,889 148,061 9.19%
Other investments 18,354 911 4.96% 45,708 2,348 5.14% 11,662 592 5.09%
--------- ------- ----- --------- ------- ----- --------- ------- -----
Total Earning Assets 2,478,182 204,066 8.23% 2,344,555 199,758 8.52% 2,046,637 177,014 8.65%
Cash and due from banks 113,099 86,452 73,246
Reserve for loan losses (39,105) (38,050) (31,966)
Other assets 187,868 157,968 110,383
---------- ---------- ----------
Total $2,740,044 $2,550,925 $2,198,300
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest bearing deposits $1,843,692 $ 84,839 4.60% $1,748,759 $ 86,264 4.93% $1,488,287 $ 73,150 4.92%
Short-term borrowings 283,035 14,995 5.30% 243,431 15,034 6.18% 227,757 13,014 5.71%
Long-term debt 12,492 892 7.14% 13,036 929 7.13% 16,527 1,160 7.02%
--------- ------- ----- --------- ------- ----- --------- ------- -----
Total Interest Bearing
Liabilities 2,139,219 100,726 4.71% 2,005,226 102,227 5.10% 1,732,571 87,324 5.04%
Noninterest bearing deposits 283,479 250,755 210,686
Other liabilities 90,152 89,343 72,500
Shareholders' equity 227,194 205,601 182,543
---------- ---------- ----------
Total $2,740,044 $2,550,925 $2,198,300
========== ========== ==========
Net Interest Income $103,340 $97,531 $89,690
======== ======= =======
Net Yield on Earning Assets on
a Taxable Equivalent Basis 4.17% 4.16% 4.38%
===== ===== =====
(1) Interest income including the effects of taxable equivalent adjustments,
using a 40.525% rate. Tax equivalent adjustments were $3,441 in 1999,
$3,408 in 1998 and $3,536 in 1997.
(2) Loan income includes fees on loans of $5,745 in 1999, $4,889 in 1998 and
$4,097 in 1997. Loan income also includes the effects of taxable
equivalent adjustments, using a 40.525% rate. Tax equivalent adjustments
were $196 in 1999, $202 in 1998 and $162 in 1997.
(3) For purposes of this computation, nonaccruing loans are included in the
daily average loan amounts outstanding.
9
ITEM 1. BUSINESS (Continued)
The following table sets forth for the periods indicated a summary of the
changes in interest earned and interest paid, resulting from changes in volume
and changes in rates:
Increase (Decrease) Due to (1)
Volume Rate Net
-------- -------- --------
(In Thousands)
1999 compared to 1998
Interest earned on:
Loans ................................... $ 8,041 $ (4,935) $ 3,106
Investment securities:
Taxable ............................... 3,086 (456) 2,630
Tax-exempt ............................ 126 (116) 10
Interest-bearing deposits with
other banks .......................... -- (18) (18)
Federal funds sold and other
money market investments ............. (1,416) (4) (1,420)
-------- -------- --------
Total Earning Assets ............. $ 9,837 $ (5,529) $ 4,308
Interest paid on:
Savings deposits ........................ 4,829 2,073 6,902
Other time deposits ..................... (3,580) (4,747) (8,327)
Short-term borrowings ................... (308) 269 (39)
Long-term debt .......................... (38) 1 (37)
-------- -------- --------
Total Interest-Bearing Liabilities 903 (2,404) (1,501)
-------- -------- --------
Net Interest Income ....................... $ 8,934 $ (3,125) $ 5,809
======== ======== ========
1998 compared to 1997
Interest earned on:
Loans ................................... $ 22,038 $ (1,435) $ 20,603
Investment securities:
Taxable ............................... 1,297 (516) 781
Tax-exempt ............................ (80) (317) (397)
Interest-bearing deposits with
other banks ........................... (1) 27 26
Federal funds sold and other
money market investments .............. 1,764 (33) 1,731
-------- -------- --------
Total Earning Assets ............. 25,018 (2,274) 22,744
Interest paid on:
Savings deposits ........................ 2,084 1,113 3,197
Other time deposits ..................... 10,463 (546) 9,917
Short-term borrowings ................... 909 1,111 2,020
Long-term debt .......................... (249) 18 (231)
-------- -------- --------
Total Interest-Bearing Liabilities 13,207 1,696 14,903
-------- -------- --------
Net Interest Income ....................... $ 11,811 $ (3,970) $ 7,841
======== ======== ========
(1) The change in interest due to both rate and volume has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
10
ITEM 1. BUSINESS (Continued)
INVESTMENT PORTFOLIO
The carrying amounts of investment securities at the dates indicated are
summarized as follows:
December 31
--------------------------------------
1999 1998 1997
-------- -------- --------
(In Thousands)
U.S. Treasury and government agencies and corporations $282,313 $284,327 $228,884
States and political subdivisions 161,125 154,473 148,228
Other 103,792 100,899 37,796
-------- -------- --------
Total $547,230 $539,699 $414,908
The following table shows the maturities of investment securities at December
31, 1999, at the carrying amounts and the weighted average yields (for
tax-exempt obligations on a fully taxable basis assuming a 40.525% tax rate) of
such securities.
Maturing
-------------------------------------------------------------------------------------------------
After One After Five
Within But Within But Within After
One Year Five Years Ten Years Ten Years
----------------- ---------------- ---------------- ----------------
Amount Yield Amount Yield Amount Yield Amount Yield
-------- ----- -------- ----- ------- ----- ------- -----
(Dollars in Thousands)
U.S. Treasury and
government agencies
and corporations $ 89,949 5.33% $162,112 5.62% $12,474 6.08% $17,778 6.39%
States and political
subdivisions 12,177 6.30% 110,530 6.56% 30,303 7.77% 8,115 6.63%
Other 30,445 6.29% 22,277 5.86% 223 5.41% 50,847 6.37%
---------- ----- ---------- ----- ------- ----- ------- -----
Total $132,571 5.64% $294,919 5.99% $43,000 7.28% $76,740 6.40%
Weighted average yields on tax-exempt obligations have been computed by
adjusting tax-exempt income to a fully taxable equivalent basis, excluding the
effect of the tax preference interest expense adjustments.
11
ITEM 1. BUSINESS (Continued)
LOAN PORTFOLIO
The following table shows 1st Source's loan distribution at the end of each of
the last five years for December 31:
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
(Dollars in Thousands)
Loans:
Commercial and agricultural $ 440,909 $ 399,013 $ 364,391 $ 335,192 $ 314,421
Commercial loans secured
by transportation and
construction equipment 896,848 732,488 752,677 561,042 457,930
Loans secured by real estate 591,401 630,915 568,136 468,109 408,028
Consumer loans 134,031 119,280 111,577 91,220 79,036
---------- ---------- ---------- ---------- ----------
Total Loans $2,063,189 $1,881,696 $1,796,781 $1,455,563 $1,259,415
========== ========== ========== ========== ==========
12
ITEM 1. BUSINESS (Continued)
LOAN PORTFOLIO (Continued)
The following table shows the rate sensitivity of loans (excluding residential
mortgages for 1-4 family residences, consumer loans and lease financing)
outstanding as of December 31, 1999. The amounts due after one year are also
classified according to the sensitivity to changes in interest rates.
Rate Sensitivity
----------------------------------------------------------------
Within After One But After
One Year Within Five Years Five Years Total
-------- ----------------- ---------- ---------
(In Thousands)
Commercial loans secured
by transportation and
construction equipment $454,355 $398,127 $25,943 $ 878,425
Commercial and agricultural 306,824 69,540 11,916 388,280
Loans secured by real estate 219,540 67,533 9,722 296,795
-------- -------- ------- ----------
Total $980,719 $535,200 $47,581 $1,563,500
======== ======== ======= ==========
Rate Sensitivity
----------------
Fixed Variable
Rate Rate
-------- -------
Due after one year but within five years $517,510 $17,690
Due after five years 44,892 2,689
-------- -------
Total $562,402 $20,379
======== =======
The following table summarizes the nonaccrual, past due and restructured loans:
December 31
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(Dollars in Thousands)
Nonaccrual Loans $11,967 $9,266 $10,030 $6,678 $4,893
Accruing loans past
due 90 days or more 254 275 730 557 274
Restructured loans -- -- -- -- --
------- ------ ------- ------ ------
Total Nonperforming Loans $12,221 $9,541 $10,760 $7,235 $5,167
======= ====== ======= ====== ======
13
ITEM 1. BUSINESS (Continued)
LOAN PORTFOLIO (Concluded)
Information with respect to nonaccrual and restructured loans at December 31,
1999 and 1998 is as follows:
December 31
1999 1998
-------- --------
(In Thousands)
Nonaccrual loans $11,967 $9,266
Interest income which would have been
recorded under original terms 1,237 1,129
Interest income recorded during the period 371 410
At December 31, 1999, $11,179,000 of the nonaccrual loans are collateralized.
Potential Problem Loans
At December 31, 1999, management was monitoring two large potential problem
loans, both of which are secured by capital equipment. In February 2000, these
loans, with total outstanding balances of approximately $18 million, were placed
into nonaccrual status. The collateral on these loans, if sold in liquidation,
is estimated to cover 75% of outstandings. Loans are subject to constant review
and are given management's attention whenever a problem situation appears to be
developing.
Loan Concentrations
At December 31, 1999, 15.7% of total business loans were concentrated with
borrowers in air transportation and aircraft dealers. Loans to truck and
automobile leasing companies accounted for 14.2% of all business loans at
December 31, 1999.
14
ITEM 1. BUSINESS (Continued)
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the Company's loan loss experience for each of
the last five years:
December 31
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(In Thousands)
Amount of loans outstanding
at end of period ............... $ 2,063,189 $ 1,881,696 $ 1,796,781 $ 1,455,563 $ 1,259,415
=========== =========== =========== =========== ===========
Average amount of net loans
outstanding during period ...... $ 1,949,172 $ 1,853,537 $ 1,610,889 $ 1,348,489 $ 1,172,438
=========== =========== =========== =========== ===========
Balance of reserve for loan
losses at beginning of period .. $ 38,629 $ 35,424 $ 29,516 $ 27,470 $ 23,868
Charge-offs:
Commercial and agricultural .... 879 1,295 293 2,385 985
Commercial loans secured
by transportation and
construction equipment ..... 519 1,671 317 347 36
Loans secured by real estate ... 148 323 157 230 597
Consumer loans ................. 1,481 1,510 643 324 372
----------- ----------- ----------- ----------- -----------
Total charge-offs .......... 3,027 4,799 1,410 3,286 1,990
----------- ----------- ----------- ----------- -----------
Recoveries:
Commercial and agricultural .... 84 255 101 383 287
Commercial loans secured
by transportation and
construction equipment ..... 87 419 917 593 2,224
Loans secured by real estate ... 50 47 87 359 122
Consumer loans ................. 418 427 161 172 202
----------- ----------- ----------- ----------- -----------
Total recoveries ........... 639 1,148 1,266 1,507 2,835
----------- ----------- ----------- ----------- -----------
Net charge-offs (recoveries) ........ 2,388 3,651 144 1,779 (845)
Additions charged to
operating expense .............. 7,442 9,156 6,052 4,649 2,757
Recaptured reserve due
to loan securitizations ........ (3,473) (2,300) -- (824) --
----------- ----------- ----------- ----------- -----------
Balance at end of period ............ $ 40,210 $ 38,629 $ 35,424 $ 29,516 $ 27,470
=========== =========== =========== =========== ===========
Ratio of net charge-offs (recoveries)
to average net loans outstanding 0.12% 0.20% 0.01% 0.13% (0.07%)
15
1st Source's reserve for loan losses is provided for by direct charges to
operations. Losses on loans are charged against the reserve and likewise,
recoveries during the period for prior losses are credited to the reserve. The
loss reserve is maintained at a level considered by management to be adequate to
absorb anticipated losses from loans presently outstanding. The provision made
to this reserve is determined by management based on the risk factors and
general economic conditions affecting the loan portfolio, including changes in
the portfolio mix and past loan loss experience. Management of 1st Source is
constantly reviewing the status of the loan portfolio to identify borrowers that
might develop financial problems, in order to aid borrowers in the handling of
their accounts and to prevent sizable unexpected losses.
In 1999, after management's assessment of loan quality, 1st Source made a charge
of $7.44 million to operations as a provision for loan losses. At December 31,
1999, the reserve for loan losses was $40.21 million, or 1.95% of loans
outstanding, net of unearned discount.
16
ITEM 1. BUSINESS (Continued)
SUMMARY OF LOAN LOSS EXPERIENCE (Concluded)
The reserve for loan losses has been allocated according to the amount deemed
necessary to provide for the possibility of losses being incurred within the
categories of loans set forth in the table below. The amount of such components
of the reserve at December 31, and the ratio of such loan categories to total
outstanding loan balances, are as follows:
(Dollars in Thousands)
1999 1998 1997 1996 1995
-------------------- ----------------- ----------------- ----------------- -----------------
Percent Percent Percent Percent Percent
Of Loans Of Loans Of Loans Of Loans Of Loans
In Each In Each In Each In Each In Each
Category Category Category Category Category
Reserve to Total Reserve to Total Reserve to Total Reserve to Total Reserve to Total
Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
Commercial and
agricultural $ 7,698 21.4% $ 7,566 21.2% $ 6,325 20.3% $ 8,011 19.5% $ 8,250 25.0%
Commercial loans secured
by transportation
and construction
equipment 25,473 43.5% 21,822 38.9% 18,188 41.9% 12,867 38.0% 10,258 36.4%
Loans secured
by real estate 4,659 28.6% 6,460 33.5% 7,177 31.6% 5,535 28.5% 6,185 32.4%
Consumer loans 2,380 6.5% 2,781 6.4% 3,734 6.2% 3,103 14.0% 2,777 6.2%
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total $40,210 100.0% $38,629 100.0% $35,424 100.0% $29,516 100.0% $27,470 100.0%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
Allowance for potential losses not specifically identified is allocated on a pro
rata basis to all loan categories.
17
ITEM 1. BUSINESS (Continued)
DEPOSITS
The average daily amounts of deposits and rates paid on such deposits are
summarized as follows:
Year Ended December 31
------------------------------------------------------------------------------------
1999 1998 1997
------------------------ ------------------------ -----------------------
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
Noninterest bearing
demand deposits $ 283,479 -- % $ 250,755 -- % $ 210,685 -- %
Interest bearing
demand deposits 218,631 4.19% 123,571 3.27% 75,765 2.30%
Savings deposits 440,047 2.57% 373,495 2.55% 341,777 2.52%
Other time deposits 1,185,014 5.43% 1,251,693 5.81% 1,070,746 5.86%
---------- ---------- ----------
Total $2,127,171 $1,999,514 $1,698,973
========== ========== ==========
The amount of time certificates of deposit of $100,000 or more and other time
deposits of $100,000 or more outstanding at December 31, 1999, by time remaining
until maturity is as follows (in thousands):
Under 3 months $206,277
4 - 6 months 37,495
7 - 12 months 62,078
Over 12 months 61,673
----------
Total $367,523
========
18
ITEM 1. BUSINESS (Continued)
RETURN ON EQUITY AND ASSETS
The ratio of net income to average shareholders' equity and average total
assets, and certain other ratios, are presented below:
Year Ended December 31
1999 1998 1997
------ ------ ------
Percentage of net income to:
Average shareholders' equity 15.74% 15.30% 14.51%
Average total assets 1.31% 1.23% 1.21%
Percentage of dividends declared
per common share to diluted net income
per common share 16.83% 17.16% 18.38%
Percentage of average shareholders'
equity to average total assets 8.29% 8.06% 8.30%
19
ITEM 1. BUSINESS (Concluded)
SHORT-TERM BORROWINGS
The following table shows the distribution of 1st Source's short-term borrowings
and the weighted average interest rates thereon at the end of each of the last
three years. Also provided are the maximum amount of borrowings and the average
amount of borrowings in thousands, as well as weighted average interest rates
for the last three years.
Federal Funds
Purchased and
Security Other
Repurchase Commercial Short-Term Total
1999 Agreements Paper Borrowings Borrowings
- -------------------------------- -------------- ---------- ------------ -----------
Balance at December 31, 1999 $263,253 $8,635 $137,854 $409,742
Maximum amount outstanding
at any month-end 263,253 10,325 142,143 415,721
Average amount outstanding 191,265 7,846 83,924 283,035
Weighted average interest
rate during the year 4.51% 4.95% 7.13% 5.30%
Weighted average interest rate
for outstanding amounts at
December 31, 1999 5.20% 5.35% 5.87% 5.43%
1998
- --------------------------------
Balance at December 31, 1998 $159,478 $5,856 $76,825 $242,159
Maximum amount outstanding
at any month-end 181,364 6,556 141,030 328,950
Average amount outstanding 149,794 4,646 88,991 243,431
Weighted average interest
rate during the year 4.84% 5.29% 8.48% 6.18%
Weighted average interest rate
for outstanding amounts at
December 31, 1998 4.34% 4.63% 5.33% 4.66%
1997
- --------------------------------
Balance at December 31, 1997 $117,987 $3,892 $113,127 $235,006
Maximum amount outstanding
at any month-end 217,039 6,641 113,127 336,807
Average amount outstanding 136,208 5,321 86,228 227,757
Weighted average interest
rate during the year 5.12% 5.46% 6.66% 5.71%
Weighted average interest rate
for outstanding amounts at
December 31, 1997 5.00% 5.39% 6.08% 5.53%
Federal funds purchased and securities sold under agreements to repurchase
generally mature within 1 to 30 days of the transaction date. Commercial paper
and other short-term borrowings generally mature within 30 to 180 days.
20
ITEM 2. PROPERTIES
1st Source's headquarters building is located in downtown South Bend. In 1982,
the land was leased from the City of South Bend on a 49-year lease, with a
50-year renewal option. The building is part of a larger complex, including a
300-room hotel and a 500-car parking garage. 1st Source sold the building and
entered into a leaseback agreement with the purchaser for a term of 30 years.
The bank building is a structure of approximately 160,000 square feet, with 1st
Source and its subsidiaries occupying approximately 70% of the available office
space, and approximately 30% presently subleased to unrelated tenants.
1st Source also owns property and/or buildings on which 29 of the bank
subsidiary's 50 banking offices are located, including the facilities in
Elkhart, LaPorte, Marshall, Porter, St. Joseph and Starke Counties in the state
of Indiana, as well as a parking facility, two buildings housing drive-in
banking plazas, a records retention facility, and a computer operations center.
In 1995, 1st Source reacquired its former headquarters building through
foreclosure. It is being refurbished for additional tenants and 1st Source use.
The remaining properties utilized by the subsidiary are leased from unrelated
parties.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information regarding common stock prices and dividends on page 18 of the
annual shareholders report for the year ended December 31, 1999, is incorporated
herein by reference. There were 1,146 shareholders of 1st Source Common Stock as
of December 31, 1999.
ITEM 6. SELECTED FINANCIAL DATA
The information under the caption "Selected Consolidated Financial Data" on page
8 of the annual shareholders report for the year ended December 31, 1999, is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 7 through 19 of the
annual shareholders report for the year ended December 31, 1999, is incorporated
herein by reference.
1st Source cautions that any forward looking statements contained in this
report, in a report incorporated by reference into this report or made by
management of 1st Source involve risks and uncertainties and are subject to
change based on various factors. Actual results could differ materially from
those expressed or implied.
21
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information under the caption "Quantitative and Qualitative Disclosures
about Market Risk" on pages 11 and 12 of the annual shareholders report for the
year ended December 31, 1999, is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of independent accountants and the consolidated financial statements
of 1st Source and its subsidiaries are included on pages 20 through 41 in the
annual shareholders report for the year ended December 31, 1999, and are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the caption "Directors and Executive Officers" on pages 3
through 6 and under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" on page 15 of the proxy statement dated March 15, 2000, is
incorporated herein by reference with respect to Directors.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Renumeration of Executive Officers" on pages
7 through 14 of the proxy statement dated March 15, 2000, is incorporated herein
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Voting Securities and Principal Holders
Thereof" on page 2 and under the caption "Directors and Executive Officers" on
pages 3 through 6 of the proxy statement dated March 15, 2000, is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information on page 6 of the proxy statement dated March 15, 2000, is
incorporated herein by reference.
22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) -- The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) -- The response to this portion of Item 14 is submitted as a
separate section of this report.
(b) Reports on Form 8-K -- None filed during the fourth quarter of 1999.
(c) Exhibits -- The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedules -- None.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
1st SOURCE CORPORATION
Registrant
By: /s/ CHRISTOPHER J. MURPHY III
--------------------------------
Christopher J. Murphy III
Chairman of the Board, President and Chief Executive Officer
Date: February 17, 2000
------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ CHRISTOPHER J. MURPHY III
- ------------------------------------
Christopher J. Murphy III, Chairman of the Board, President and
Chief Executive Officer
Date: February 17, 2000
---------------------
/s/ WELLINGTON D. JONES III
- ------------------------------------
Wellington D. Jones III, Executive Vice President and a Director
Date: February 17, 2000
---------------------
/s/ VINCENT A. TAMBURO
- ------------------------------------
Vincent A. Tamburo, Secretary and General Counsel
Date: March 7, 2000
---------------------
/s/ LARRY E. LENTYCH
- ------------------------------------
Larry E. Lentych, Treasurer and Chief Financial Officer
Date: February 17, 2000
---------------------
/s/ E. WILLIAM BEAUCHAMP, C.S.C.
- ------------------------------------
Reverend E. William Beauchamp, Director
Date: February 17, 2000
---------------------
24
/s/ PAUL R. BOWLES
- ------------------------------------
Paul R. Bowles, Director
Date: February 17, 2000
---------------------
/s/ PHILIP J. FACCENDA
- ------------------------------------
Philip J. Faccenda, Director
Date: February 18, 2000
---------------------
/s/ DANIEL B. FITZPATRICK
- ------------------------------------
Daniel B. Fitzpatrick, Director
Date: February 18, 2000
---------------------
/s/ LAWRENCE E. HILER
- ------------------------------------
Lawrence E. Hiler, Director
Date: February 17, 2000
---------------------
/s/ WILLIAM P. JOHNSON
- ------------------------------------
William P. Johnson, Director
Date: February 17, 2000
---------------------
/s/ REX MARTIN
- ------------------------------------
Rex Martin, Director
Date: February 17, 2000
---------------------
/s/ DANE A. MILLER
- ------------------------------------
Dane A. Miller, Director
Date: February 17, 2000
---------------------
/s/ RICHARD J. PFEIL
- ------------------------------------
Richard J. Pfeil, Director
Date: February 17, 2000
---------------------
/s/ TIMOTHY K. OZARK
- ------------------------------------
Timothy K. Ozark, Director
Date: February 17, 2000
---------------------
25
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) and (2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1999
1st SOURCE CORPORATION
SOUTH BEND, INDIANA
F-1
FORM 10-K -- ITEM 14(a) (1) and (2)
1ST SOURCE CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following report of independent accountants and consolidated financial
statements of 1st Source Corporation and subsidiaries, included in the annual
report of the registrant to its shareholders for the year ended December 31,
1999, are incorporated by reference in Item 8:
Report of independent accountants
Consolidated statements of financial condition --
December 31, 1999 and 1998
Consolidated statements of income --
Years ended December 31, 1999, 1998 and 1997
Consolidated statements of shareholders' equity -- Years ended
December 31, 1999, 1998 and 1997
Consolidated statements of cash flows -- Years ended December
31, 1999, 1998 and 1997
Notes to consolidated financial statements --
December 31, 1999, 1998 and 1997
Financial statement schedules required by Article 9 of Regulation S-X are not
required under the related instructions, or are inapplicable and, therefore,
have been omitted.
F-2
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (3) and 14(c)
LIST OF EXHIBITS
YEAR ENDED DECEMBER 31, 1999
1st SOURCE CORPORATION
SOUTH BEND, INDIANA
E-1
FORM 10-K -- Item 14(a) (3) and 14(c)
1ST SOURCE CORPORATION AND SUBSIDIARIES
LIST OF EXHIBITS *
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 April 16, 1998, filed as exhibit
to Form 10-K, dated December 31, 1998, 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.
Note: No long-term debt of the Registrant exceeds 10% of the
consolidated total assets of the Registrant and its subsidiaries. In
accordance with paragraph (4)(iii) of Item 601(b) of Regulation S-K,
the Registrant will furnish the Commission upon request copies of
long-term debt instruments and related agreements.
4(b)(1) -- Form of 9% Cumulative Trust Preferred Securities Indenture, dated
March 21, 1997, filed as exhibit to Form 10-K, dated December 31, 1997,
and incorporated herein by reference.
4(b)(2) -- Form of 9% Cumulative Trust Preferred Securities Trust Agreement,
dated March 21, 1997, filed as exhibit to Form 10-K, dated December 31,
1997, and incorporated herein by reference.
4(b)(3) -- Form of 9% Cumulative Trust Preferred Securities Guarantee
Agreement, dated March 21, 1997, filed as exhibit to Form 10-K, dated
December 31, 1997, and incorporated herein by reference.
4(c)(1) -- Form of Floating Rate Cumulative Trust Preferred Securities
Indenture, dated March 21, 1997, filed as exhibit to Form 10-K, dated
December 31, 1997, and incorporated herein by reference.
4(c)(2) -- Form of Floating Rate Cumulative Trust Preferred Securities Trust
Agreement, dated March 21, 1997, filed as exhibit to Form 10-K, dated
December 31, 1997, and incorporated herein by reference.
4(c)(3) -- Form of Floating Rate Cumulative Trust Preferred Securities
Guarantee Agreement, dated March 21, 1997, filed as exhibit to Form
10-K, dated December 31, 1997, and incorporated herein by reference.
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.
E-2
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)(3) -- Employment Agreement of Allen R. Qualey, 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(b)(1) -- Form of Company's Employees' Money Purchase Pension Plan and Trust
Agreement dated January 1, 1989, and amendment to the Company's
Employees' Money Purchase Pension Plan and Trust dated April 1, 1994,
filed as exhibit to Form 10-K dated December 31, 1994, and incorporated
herein by reference.
10(b)(2) -- An amendment to Company's Employees' Money Purchase Pension Plan and
Trust Agreement dated July 20, 1999, and filed as exhibit to Form 10-K
dated December 31, 1999, and attached hereto.
10(c)(1) -- Form of Company's Employees' Profit Sharing Plan and Trust Agreement
dated January 1, 1989, amendment to the Company's Profit Sharing Plan
and Trust Agreement dated April 1, 1994, filed as exhibit to Form 10-K
dated December 31, 1994, and incorporated herein by reference.
10(c)(2) -- An amendment to 1st Source Corporation Employees' Profit Sharing
Plan and Trust Agreement dated September 30, 1996, and filed as exhibit
to Form 10-K, dated December 31, 1996, and incorporated herein by
reference.
10(c)(3) -- An amendment to 1st Source Corporation Employees' Profit Sharing
Plan and Trust Agreement dated July 20, 1999, and filed as exhibit to
Form 10-K dated December 31, 1999, and attached hereto.
10(d) -- 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(e) -- 1st Source Corporation 1982 Executive Incentive Plan, amended April
19, 1988, and filed as exhibit to Form 10-K, dated December 31, 1988,
and incorporated herein by reference.
10(f) -- 1st Source Corporation 1982 Restricted Stock Award Plan, as amended
February 19, 1997, filed as exhibit to Form 10-K, dated December 31,
1997, and incorporated herein by reference.
E-3
10(h) -- 1st Source Corporation Non-Qualified Stock Option Agreement with
Christopher J. Murphy III, dated January 1, 1992, as amended December
11, 1997, filed as exhibit to Form 10-K, dated December 31, 1997, and
incorporated herein by reference.
10(i) -- 1st Source Corporation 1992 Stock Option Plan, 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.
10(j) -- 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(k) -- 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.
13 -- Portions of Annual Report to Security Holders for the year ended
December 31, 1999, attached hereto.
21 -- Subsidiaries of Registrant, attached hereto.
23 -- Consent of Independent Accountants, attached hereto.
27 -- Financial Data Schedule, attached hereto.
* The exhibits included under exhibit 10 constitute all management
contracts, compensatory plans and arrangements required to be
filed as an exhibit to this form pursuant to Item 14(c) of this
report.
E-4