11-K 1 tmc11_k.txt TMC 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.
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