1ST SOURCE CORP — Regulatory Filings 2007

Jun 29, 2007

11-K 1 form11-k.htm FORM 11-K TMC form11-k.htm Licensed to: 1st Source Document Created using EDGARizer 4.0.1.0 Copyright 2007 EDGARfilings, Ltd., an IEC company. All rights reserved EDGARfilings.com

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fis cal year ended December 31, 2006

o 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 belo w:

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.

EMPLOYEES
RETIREMENT SAVINGS PLAN
By
the Plan Administrator
TRUSTCORP
MORTGAGE COMPANY
/s/DEBRA
BASS
Debra Bass, Senior Vice
President
Date
: June 29, 2007

Financial Statements and Supplemental Schedule

Trustcorp Mortgage Company Employee Retirement Savings Plan

Years Ended December 31, 2006 and 2005

With Report of Independent Registered Public Accounting Firm

Trustcorp Mortgage Company

Employee Retirement Savings Plan

Financial Statements and Supplemental Schedule

Years Ended December 31, 2006 and 2005

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) 11

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 Trustcorp Mortgage Company Employee Retirement Savings Plan as of December 31, 2006 and 2005, and the related statement 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2006 and 2005, and the changes in its net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2006, is presented for purposes of additional analysis and is not a required part of the financial statements but are 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 25, 2007

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| Trustcorp
Mortgage Company | | |
| --- | --- | --- |
| Employee
Retirement Savings Plan | | |
| Statements
of Net Assets Available for Benefits | | |
| | December
31 | |
| | 2006 | 2005 |
| Assets | | |
| Cash | $ 35,705 | $ 61,692 |
| Investments
at fair value: | | |
| Common
stock | 956,083 | 900,579 |
| Mutual
funds | 3,540,217 | 3,423,248 |
| 1st
Source Bank common trust fund | 279,485 | 322,413 |
| Participant
loans receivable | 168,575 | 184,898 |
| Total
investments | 4,944,360 | 4,831,138 |
| Contribution
receivable: | | |
| Employer | 3,846 | 6,740 |
| Employee | 10,372 | 10,016 |
| | 14,218 | 16,756 |
| Other
assets: | | |
| Other
receivables | 446 | 2,486 |
| Total
assets | 4,994,729 | 4,912,072 |
| Liabilities | | |
| Accrued
expenses payable | 9,105 | 10,117 |
| Total
liabilities | 9,105 | 10,117 |
| Net
assets available for benefits, at fair value | 4,985,624 | 4,901,955 |
| Adjustment
from fair value to contract value | | |
| for
benefit responsive investments contracts | 1,207 | 2,436 |
| Net
assets available for benefits | $ 4,986,831 | $ 4,904,391 |
| See
accompanying notes. | | |

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| Trustcorp
Mortgage Company | | | |
| --- | --- | --- | --- |
| Employee
Retirement Savings Plan | | | |
| Statements
of Changes in Net Assets Available for Benefits | | | |
| | Year
Ended December 31 | | |
| | 2006 | 2005 | |
| Additions | | | |
| Investment
income: | | | |
| Interest | $ 14,702 | $ 12,354 | |
| Dividends | 85,722 | 61,484 | |
| | 100,424 | 73,838 | |
| Contributions: | | | |
| Employer | 92,505 | 109,020 | |
| Employee | 238,484 | 263,577 | |
| | 330,989 | 372,597 | |
| Net
realized and unrealized appreciation in fair | | | |
| value
of investments | 739,245 | 111,820 | |
| Total
additions | 1,170,658 | 558,255 | |
| Deductions | | | |
| Benefits
paid to participants | 1,057,935 | 851,852 | |
| Plan
expenses | 30,283 | 26,812 | |
| Total
deductions | 1,088,218 | 878,664 | |
| Net
increase (decrease) | 82,440 | (320,409 | ) |
| Net
assets available for benefits: | | | |
| Beginning
of year | 4,904,391 | 5,224,800 | |
| End
of year | $ 4,986,831 | $ 4,904,391 | |
| See
accompanying notes. | | | |

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Trustcorp Mortgage Company

Employee Retirement Savings Plan

Notes to Financial Statements

Years Ended December 31, 2006 and 2005

1. Description of the Plan

General

The Trustcorp Mortgage Company Employee Retirement Savings Plan (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 (the Code). In addition, participants age 50 or older may elect to defer up to an additional amount per year ($5,000 in 2006 and $4,000 in 2005) (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 2006 and 2005, 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 2006 or 2005.

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.

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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 as of the date of the loan. 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 a lump-sum amount equal to the value of his or her vested account. At December 31, 2006 and 2005, 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 distributions.

Plan Termination

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. See Note 7 for description of the merger of the plan with the 1 st Source Employee Stock Ownership and Profit Sharing Plan.

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.

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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.

New Accounting Pronouncement

In December 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position AAG INV-1 and SOP 94-4, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company guide and Defined-Contribution Health and Welfare and Pension Plans (FSP).

The FSP defines the circumstances in which an investment is considered fully benefit-responsive and provides certain reporting and disclosure requirements for fully benefit-responsive investment contracts in defined-contribution health and welfare and pension plans. The financial statement presentation and disclosure provisions of the FSP are effective for financial statements issued for annual periods ending after December 15, 2006, and are required to be applied retroactively to all prior periods presented for comparative purposes. The Plan has adopted the provisions of the FSP at December 31, 2006.

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2. Summary of Significant Accounting Policies (continued)

As required by the FSP, investments in the accompanying statements of net assets available for benefits include fully-benefit responsive investment contracts recognized at fair value. The American Institute of Certified Public Accountants’ SOP 94-4, Reporting of Investment Contracts Held by Health and Welfare Benefit Plans and Defined Contribution Pension Plans , as amended, requires fully benefit responsive investment contracts to be reported at fair value in the Plan’s statements of net assets available for benefits with a corresponding adjustment to reflect these investments at contract value. The requirements of the FSP have been applied retroactively to the statement of net assets available for benefits as of December 31, 2005, presented for comparative purposes. Adoption of the FSP had no effect on the statement of changes in net assets available for benefits for any period presented.

Certain reclassifications have been made to the 2005 financial statements to conform to the 2006 presentation.

3. Investments

During 2006 and 2005, the Plan’s investments (including investments purchased, sold, as well as held during the year) appreciated in value by $739,245 and $111,820, respectively, as follows:

| | Net
Appreciation (Depreciation) in Fair Value During — 2006 | 2005 | |
| --- | --- | --- | --- |
| Common
stock | $ 303,580 | $ (7,402 | ) |
| Mutual
funds | 425,642 | 109,863 | |
| 1st
Source Bank Common Trust Fund | 10,023 | 9,359 | |
| | $ 739,245 | $ 111,820 | |

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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:

	2006	2005
1st
Source Corporation common stock	$ 769,546	$ 739,058
Morgan
Stanley Institutional International Equity	1,069,263	1,028,698
1st
Source Monogram Income Equity Fund	674,830	658,756
1st
Source Monogram Diversified Equity Fund	775,835	753,155
1st
Source Monogram Special Equity Fund	258,412	252,422
1st
Source Monogram Income Fund	346,841	392,932
1st
Source Monogram Long/Short Fund	415,036	337,285
1st
Source Bank Employee Benefit Guaranteed
Income Fund	279,485	322,413

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, 2006, were paid by Trustcorp.

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Trustcorp Mortgage Company

Employee Retirement Savings Plan

Notes to Financial Statements (continued)

4. Transactions With Parties-In-Interest (continued)

The Plan held the following party-in-interest investments at fair value at December 31:

	2006	2005
1st
Source Corporation common stock	$ 769,546	$ 739,058
1st
Source Monogram Income Equity Fund	674,830	658,756
1st
Source Monogram Diversified Equity Fund	775,835	753,155
1st
Source Monogram Special Equity Fund	258,412	252,422
1st
Source Monogram Income Fund	346,841	392,932
1st
Source Monogram Long/Short Fund	415,036	337,285
1st
Source Bank Employee Benefit Guaranteed Income
Fund	279,485	322,413
Loans
to participants	168,575	184,898

Plan transactions with parties-in-interest during the years ended December 31, 2006 and 2005, were as follows:

Identity	Relationship	2006	2005
RSM
McGladrey, Inc.	Recordkeeper
and Tax Accountant	$15,885	$17,147
1st
Source Bank	Trustee	11,771	9,665
		$27,656	$26,812

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 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.

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Trustcorp Mortgage Company

Employee Retirement Savings Plan

Notes to Financial Statements (continued)

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.

7. Subsequent Events

On March 1, 2007, 1st Source Corporation announced that its wholly owned subsidiary, 1st Source Bank, would acquire the business of Trustcorp Mortgage Company, which is also a wholly owned subsidiary of 1st Source Corporation. Management of 1st Source Corporation integrated the operations of Trustcorp into 1st Source Bank in May 2007 with the possibility that a continuing Trustcorp entity will exist for some time afterward to liquidate certain assets of Trustcorp. The Plan was merged into 1st Source Corporation Employee Stock Ownership and Profit Sharing Plan on May 1, 2007, which is managed by 1st Source Corporation.

8. Reconciliation

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

| | December
31 — 2006 | 2005 | | |
| --- | --- | --- | --- | --- |
| Net
assets available for benefits per the financial statements | $ 4,986,831 | $ | 4,904,391 | |
| Adjustment
from fair value to contract value for benefit responsive investment
contracts | (1,207 | ) | (2,436 | ) |
| Net
assets available for benefits per the Form 5500 | $ 4,985,624 | $ | 4,901,955 | |

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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, 2006 |

| | Identity
of Issue, Borrower, — Lessor,
or Similar Party | Description
of Investment | Cost | Current
Value |
| --- | --- | --- | --- | --- |
| Common
stock: | | | | |
| * | 1st
Source Corporation | 23,951
shares | ** | $ 769,546 |
| | Key
Corp | 4,905
shares | ** | 186,537 |
| | | | | 956,083 |
| Mutual
funds: | | | | |
| | Morgan
Stanley Institutional International Equity Fund | 52,415
units | ** | 1,069,263 |
| * | 1st
Source Monogram Income Equity Fund | 46,766
units | ** | 674,830 |
| * | 1st
Source Monogram Diversified Equity Fund | 97,344
units | ** | 775,835 |
| * | 1st
Source Monogram Special Equity Fund | 27,201
units | ** | 258,412 |
| * | 1st
Source Monogram Long/Short Fund | 27,849
units | ** | 346,841 |
| * | 1st
Source Monogram Income Fund | 42,831
units | ** | 415,036 |
| | | | | 3,540,217 |
| Common
trust funds: | | | | |
| * | 1st
Source Bank Employee Benefits | | | |
| | Guaranteed
Income Fund | 10,562
units | ** | 279,485 |
| | | | | 279,485 |
| Loans
to participants | | $168,575
principal amount, interest | | |
| | | rates
ranging from 5.00% to 9.25%, | | |
| | | maturities
through 2012 | ** | 168,575 |
| | | | | 168,575 |
| | | | | $ 4,944,360 |
| Indicates
a party-in-interest to the Plan. | | | | |
| **Historical
cost information is not required for participant-directed
investments. | | | | |

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