1ST SOURCE CORPORATION
Post Office Box 1602
100 North Michigan Street
South Bend, Indiana 46634
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
TO THE SHAREHOLDERS OF 1ST SOURCE CORPORATION
The Annual Meeting of the Shareholders of 1st Source Corporation will be
held at the 1st Source Bank Building, 4th Floor Boardroom, 100 North Michigan
Street, South Bend, Indiana, on April 23, 1996, at 9:00 a.m. local time, for
the purpose of considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. Election of two Directors, one for a
term expiring in 1997 and one for a term expiring in 1999, and
reelection of three Directors for terms expiring in 1999.
2. AMENDMENT OF ARTICLE III OF THE ARTICLES OF INCORPORATION. Adoption of
amendment to Article III increasing the authorized shares of common
stock without par value to 40,000,000.
3. OTHER BUSINESS. Such other matters as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on February 20, 1996, are
entitled to vote at the meeting.
By Order of the Board of Directors
Vincent A. Tamburo
Secretary
South Bend, Indiana
March 15, 1996
PLEASE DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, NEVERTHELESS, VOTE IN
PERSON.
<PAGE>
1ST SOURCE CORPORATION
Post Office Box 1602
100 North Michigan Street
South Bend, Indiana 46634
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of proxies to be voted at the Annual Meeting of Shareholders
of 1st Source Corporation ("1st Source"), to be held on April 23, 1996, at
9:00 a.m. local time, at the 1st Source Bank Building, 4th Floor Boardroom,
100 North Michigan Street, South Bend, Indiana. Only Shareholders of record
at the close of business on February 20, 1996, will be eligible to vote at the
Annual Meeting. The voting securities of 1st Source consist only of Common
Stock, of which 12,569,998 shares were outstanding on the record date. Each
Shareholder of record on the record date will be entitled to one vote for each
share. Cumulative voting is not authorized. The approximate date for making
available this Proxy Statement and the form of proxy to Shareholders is
March 15, 1996.
The cost of solicitation of proxies will be borne by 1st Source. In
addition to the use of mails, proxies may be solicited through personal
interview, telephone, and telegraph by directors, officers and regular
employees of 1st Source without additional remuneration therefor.
REVOCABILITY
Shareholders may revoke their proxies at any time prior to the meeting by
giving written notice to Vincent A. Tamburo, Secretary, 1st Source Corporation,
Post Office Box 1602, South Bend, Indiana 46634, or by voting in person at the
meeting.
PERSONS MAKING THE SOLICITATION
This solicitation is being made by the Board of Directors of 1st Source.
<PAGE>
<TABLE>
<CAPTION>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Ownership of beneficial owners of more than 5% of the Common Stock
outstanding at February 20, 1996:
Name and Address Type of Ownership Amount % of Class
<S> <C> <C> <C>
Ernestine M. Raclin Direct 1,654 .01%
100 North Michigan Street
South Bend, IN 46601 Indirect<F1> 4,097,462 32.60%
Total 4,099,116 32.61%
Christopher J. Murphy III Direct 344,395 2.74%
100 North Michigan Street
South Bend, IN 46601 Indirect<F2> 870,092 6.92%
Total 1,214,487 9.66%
1st Source Bank as Trustee Direct 796,770 6.34%
for the 1st Source
Corporation Employees'
Profit Sharing Plan and
Trust
<FN>
<F1> Owned indirectly by Mrs. Raclin who disclaims beneficial ownership
thereof. Most of these securities are held in trust. While Mrs. Raclin
is an income beneficiary of many of these trusts, the ultimate benefit and
ownership will reside in her children and grandchildren.
<F2> Owned indirectly by Mr. Murphy who disclaims beneficial ownership
thereof. The securities are held by Mr. Murphy's wife and children, or
in trust for the benefit of his wife and children. Mr. Murphy is not a current
income beneficiary of most of the trusts.
</FN>
</TABLE>
INTEREST OF CERTAIN PERSONS IN MATTERS
TO BE ACTED UPON
The Board of Directors knows of no matters to come before the Annual Meeting
other than the matters referred to in this Proxy Statement. However, if any
other matters should properly come before the meeting, the persons named in the
enclosed proxy intend to vote in accordance with their best judgment. No
director, nominee for election as director, nor officer of 1st Source has any
special interest in any matter to be voted upon other than election to the
Board of Directors. Directors, officers, and voting trustees have indicated
that they intend to vote for all directors as listed in Proposal Number 1 and
for Proposal Number 2.
<PAGE>
PROPOSAL NUMBER 1: ELECTION OF DIRECTORS
DIRECTORS AND EXECUTIVE OFFICERS
The last Shareholders' meeting at which directors were elected was held on
April 25, 1995. At that meeting, 94.0% of the shares outstanding were
represented in person or by proxy. Directors were voted upon separately. No
director received negative or withheld votes of 5% or more.
The Board of Directors is divided into three (3) groups of directors whose
terms expire at different times. At this meeting, five (5) directors are to be
elected, one (1) to hold office until April, 1997 and four to hold office until
April, 1999, or until the qualification and election of a successor. Directors
will be elected by a plurality of the votes cast. The following information is
submitted for each nominee as well as each director and each non-director
executive officer continuing in office.
<TABLE>
<CAPTION>
Beneficial Ownership
of Equity Securities<F1>
Year
in Which
Directorship Common % of
Name Age Principal Occupation<F3> Assumed Stock<F2> Class
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
Term Expiring in April, 1997
<S> <C> <C> <C> <C> <C>
William P. Johnson 53 Chairman and Chief 500 -
Executive Officer,
Goshen Rubber Co., Inc.
(rubber and plastic parts
manufacturer); Director,
American United Life
Insurance Co. and Coach-
man Industries, Inc.
Term Expiring in April, 1999
Rex Martin 44 President and Chief 1,000 -
Executive Officer,
NIBCO, Inc. (copper
and plastic plumbing
parts manufacturer)
NOMINEES FOR REELECTION TO THE BOARD OF DIRECTORS
Terms Expiring in April, 1999
Lawrence E. Hiler 50 President, 1992 1,300 -
Hiler Industries, Inc.
(metal castings)
Christopher J. Murphy III 49 President and Chief 1972 1,214,487 9.66%
<F4><F5> Executive Officer,
1st Source Corporation
and 1st Source Bank;
Director, Comair, Inc.,
Quality Dining, Inc. and
Titan Holdings, Inc.
Ernestine M. Raclin 68 Chairman of the Board, 1976 4,099,116 32.61%
<F4><F5> 1st Source Corporation
and 1st Source Bank;
Director, NIPSCO
DIRECTORS CONTINUING IN OFFICE
Terms Expiring in April, 1997
Rev. E. William Beauchamp 53 Executive Vice President, 1989 369 -
University of Notre Dame
Paul R. Bowles 58 Former Vice President, 1988 6,546 -
Corporate Development,
Clark Equipment Company
(off-highway components
and construction machinery
manufacturing)
JoAnn R. Meehan 69 Civic Leader 1972 624 -
Richard J. Pfeil 63 President & Chairman, 1971 20,452 -
Koontz-Wagner Electric
Company, Inc. (electrical
equipment installer and
supplier)
Terms Expiring in April, 1998
Philip J. Faccenda 66 President, Bear Financial, 1983 561,603 4.47%
Inc. (venture capital); Vice
President and General
Counsel Emeritus,
University of Notre Dame;
Director, Hilb, Rogal &
Hamilton
Daniel B. Fitzpatrick 38 Chairman, President, 1995 11,630 -
Chief Executive Officer
and Director, Quality
Dining, Inc. (quick
service and casual dining
restaurant operator)
Leo J. McKernan 57 Former Chairman, Presi- 1989 3,755 -
dent and Chief Executive
Officer, Clark Equipment
Company (off-highway
components and construction
machinery manufacturing)
Dane A. Miller, Ph.D. 50 President, Chief Executive 1987 11,278 -
Officer and Director,
Biomet, Inc. (medical
products and technology)
NON-DIRECTOR EXECUTIVE OFFICERS
Wellington D. Jones III 51 Executive Vice President, 77,598 -
1st Source Corporation
and 1st Source Bank
Richard Q. Stifel 54 Executive Vice President, 32,900 -
1st Source Bank - Prior
thereto, Senior Vice President
Vincent A. Tamburo 61 Senior Vice President, 27,903 -
General Counsel and Secre-
tary, 1st Source Corporation
and 1st Source Bank
Larry E. Lentych 49 Senior Vice President, 27,853 -
Treasurer and Chief Financial
Officer, 1st Source Corpo-
ration and 1st Source Bank-
Prior thereto, Senior Vice
President and Treasurer
All Directors and Executive Officers as a Group (17 persons) 5,514,446 43.87%
<FN>
<F1> Based on information furnished by the directors and executive officers as
of February 20, 1996.
<F2> The amounts shown include shares of Common Stock held directly or
indirectly in the following amounts by spouses and other family members
of the immediate households of the following directors, who disclaim
beneficial ownership of such securities: Christopher J. Murphy III,
870,092 shares; Ernestine M. Raclin, 4,097,462 shares. Voting authority
for 615,358 shares owned beneficially by Mr. Murphy and 3,073,534
shares owned beneficially by Mrs. Raclin is vested in 1st Source Bank as
Trustee for various family trusts. Investment authority for those shares
is held by 1st Source Bank as Trustee of the underlying trusts.
Mr. Faccenda holds 542,454 shares in fiduciary capacity as Trustee of
two (2) trusts for the benefit of Mrs. Raclin.
<F3> The principal occupation represents the employment for the last five
years for each of the named directors. Directorships presently held in
other registered corporations are also disclosed.
<F4> Mr. Murphy is the son-in-law of Mrs. Raclin.
<F5> Mr. Murphy and Mrs. Raclin are control persons as defined under Rule 405
of the Securities Act.
</FN>
</TABLE>
Directors and officers of 1st Source and their associates were customers of
and had transactions with 1st Source and its subsidiaries in the ordinary
course of business during 1995; additional transactions are expected to take
place in the ordinary course of business in the future. All outstanding loans
and commitments were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable trans-
actions with other persons and did not involve more than the normal risk of
collectibility, or present other unfavorable features. Credit underwriting
procedures followed were no less stringent than those for comparable trans-
actions with other borrowers.
In 1987, 1st Source invested in a venture capital limited partnership after
a presentation made by it to 1st Source and a group of 1st Source customers,
directors and officers. As a result, 1st Source subscribed to a $500,000
limited partnership interest in the venture capital limited partnership for its
own account. As an accommodation to Director Raclin and former directors
Van E. Gates and Merlin J. Hanson, 1st Source subscribed to an additional
$250,000 limited partnership interest for their account. 1st Source continues
to own two-thirds (2/3) of this investment for its own account, and one-third
(1/3) for these persons. As of December 31, 1993, the total $750,000
subscription has been paid, $250,000 of which has been paid by the above-named
persons.
During 1992, 1st Source subscribed to a $600,000 limited partnership
interest in a venture capital limited partnership for its own account. As an
accommodation to Director Raclin and former Director Gates, 1st Source
subscribed to an additional $150,000 limited partnership interest for their
account. 1st Source continues to own 80% of this investment for its own
account, and 20% for these persons. As of December 31, 1995, $607,500 of the
total subscription has been paid, $121,500 of which has been paid by the
above-named persons. Each of these persons has paid to 1st Source, when due,
all amounts required to be paid by 1st Source, under the subscription
agreements for these persons' interest. 1st Source may engage in similar
transactions with its customers, directors and officers in the future.
<PAGE>
BOARD COMMITTEES
1st Source and its major subsidiary, 1st Source Bank, share the following
permanent committees made up of board members of both organizations.
Executive, Audit, Human Resources and Executive Compensation Committee
members are appointed annually after the Annual Meeting of Shareholders.
Executive Committee - Members of the Executive Committee are
Ernestine M. Raclin, Chairman; Paul R. Bowles, Philip J. Faccenda, Daniel B.
Fitzpatrick, Christopher J. Murphy III, and Richard J. Pfeil. The committee
met two (2) times in 1995. The committee has the power to act for the Board of
Directors between Board meetings subject to certain statutory limitations. The
committee also carries out the functions of the Nominating Committee and will
consider nominees for election to the Board of Directors recommended by
Shareholders, if submitted in writing at least 120 days prior to the next
Annual Meeting to be held on or about April 22, 1997. Nominations should be
addressed to the attention of the Chairman, Executive Committee, c/o 1st Source
Corporation.
Audit Committee - Members of the Audit Committee are Daniel B.
Fitzpatrick, Chairman; Paul R. Bowles, Lawrence E. Hiler and JoAnn R.
Meehan, 1st Source Directors; Anne M. Hillman, H. Thomas Jackson, Craig A.
Kapson, David L. Lerman and Harold E. Slutsky, 1st Source Bank Directors.
The committee held four (4) meetings in 1995. The function of the Audit
Committee is to review the scope and results of the audits by the internal
audit staff and the independent accountants. The committee also reviews the
adequacy of the accounting and financial controls and presents the results to
the Board of Directors with respect to accounting practices and internal
procedures. It also makes recommendations for improvements in such procedures.
Human Resources Committee - Members of the Human Resources
Committee are Rev. E. William Beauchamp, Chairman; Philip J. Faccenda,
Leo J. McKernan, Dane A. Miller and Richard J. Pfeil, 1st Source Directors;
Terry L. Gerber, John T. Phair and Elmer H. Tepe, 1st Source Bank Directors.
The committee held four (4) meetings in 1995. The purpose of the committee is
to establish wage and benefit policies for 1st Source and its subsidiaries and
to approve individual salary and benefit plans for the senior officers of
1st Source Bank.
Executive Compensation Committee - Members of the Executive Compensation
Committee are Philip J. Faccenda, Chairman; Paul R. Bowles and Richard J.
Pfeil. The committee held two (2) meetings in 1995. The Executive
Compensation Committee determines compensation for senior management personnel,
reviews the Chief Executive Officer and manages the company's stock plans.
Meetings of the Board of Directors and Directors' Compensation - The
Board of Directors held five (5) meetings in 1995. An incumbent director who
attended fewer than 75% of the aggregate total meetings of the Board of
Directors and all committees of the board of 1st Source on which they served
was Dane A. Miller. Directors receive fees in the amount of $5,000 per year,
and $300 per board meeting and committee meeting attended. Committee
chairpersons receive $350 per meeting. Total fees paid in 1995 were $128,700.
REMUNERATION OF EXECUTIVE OFFICERS
The following tables set forth all aggregate remuneration accrued by
1st Source and its subsidiaries for 1995 for 1st Source's chief executive
officer and each of 1st Source's other four most highly compensated executive
officers.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
(A) (B) (C) (D) (E) (F) (G) (H)
Securities
Other Annual Underlying LTIP All Other
Name and Principal Position Year Salary Bonus<F2> Compensation Options (#Sh) Payouts<F2> Compensation<F3>
<S> <C> <C> <C> <C> <C> <C> <C>
Ernestine M. Raclin 1995 $250,000 - $ 7,000 - - $13,594
Chairman of the Board 1994 240,769 - 7,000 - - 12,677
1st Source and 1st Source Bank 1993 228,000 - 7,000 - - 16,956
Christopher J. Murphy III<F1> 1995 368,082 $156,684 19,550 - $138,412 13,594
President & CEO 1994 345,855 100,000 19,617 22,326 116,884 12,677
1st Source and 1st Source Bank 1993 325,692 75,500 18,603 26,047 108,633 17,247
Wellington D. Jones III 1995 176,770 50,985 5,152 - 47,624 13,594
Executive Vice President 1994 166,280 30,211 5,461 11,576 44,818 12,677
1st Source and 1st Source Bank 1993 155,385 23,500 5,145 13,892 41,423 14,376
Richard Q. Stifel 1995 136,820 32,399 3,742 - 29,663 13,527
Executive Vice President 1994 128,889 21,093 3,912 8,684 27,739 12,447
1st Source Bank 1993 120,462 18,500 5,528 10,419 24,936 11,611
Vincent A. Tamburo 1995 121,221 17,569 1,077 - 21,636 11,755
Senior Vice President, 1994 115,250 15,456 1,061 - 16,911 10,766
General Counsel and Secretary 1993 111,696 8,125 1,035 4,341 15,497 9,844
1st Source and 1st Source Bank
<PAGE>
<FN>
<F1> Mr. Murphy's Employment Agreement (the "Agreement") provides for a
$300,000 base salary, with annual increases of not less than 5% and cash
bonus payments based on a formula which is computed in a manner similar
to the awards to executives under the Executive Incentive Plan and
Long-Term Executive Award Program. The Agreement is a five-year
contract which is extended from year to year unless either party gives
notice not to extend. In the event of his disability, the Agreement
terminates and Mr. Murphy will receive his base salary for up to one
year, in addition to other disability programs in effect for all officers
of 1st Source. In the event of his death, 1st Source shall pay to the
estate or other designated beneficiary a death benefit equal to three
times his base salary and bonus paid in the preceding year, in addition
to life insurance benefits. If Mr. Murphy terminates his employment
because of any adverse change in his status as President or Director,
resulting in a diminution of his duties, he shall continue to receive his
base salary for a period of twelve months after such termination. If
Mr. Murphy's employment terminates within one year of a change in control
(which term includes any third party which becomes beneficial owner of
20% or more of the outstanding stock of 1st Source or any approval of any
transaction which results in a disposition of substantially all of the
assets of 1st Source), he shall receive severance pay in cash equal to
2.99 times his "Annualized Includable Compensation" (as defined under the
Internal Revenue Code). The Agreement also contains restrictive
covenants which provide, among other things, that Mr. Murphy not compete
with 1st Source in bank or bank-related services for a twelve-month
period, within certain designated counties of Indiana, after his
termination of employment.
<F2> 1st Source has an Executive Incentive Plan (the "Plan") which is
administered by the Executive Compensation Committee (the "Committee")
of the Board. Awards under the Plan consist of cash and "Book Value"
shares of Common Stock. "Book Value" shares are awarded annually on a
discretionary basis and are subject to forfeiture over a period of
five (5) years. The Plan shares may only be sold to 1st Source, and such
sale is mandatory in the event of death, retirement, disability or
termination of employment. 1st Source may terminate or extend the Plan
at any time.
During February 1996 and March 1991, 1st Source granted special
long-term incentive awards (the "Awards") to participants in the
Executive Incentive Plan administered by the Committee. The 1996 Award
was granted for the attainment of the company's long-term goals for 1995
which were set in 1990. The 1991 Award was granted for the attainment of
the company's long-term return on assets goal for 1990, set in 1986. Both
Awards were split between cash and 1st Source Common Stock valued at
the market price at the time of the award. Such shares are subject to
forfeiture over a period of ten (10) years. The first 10% of these
shares was vested at the grant of the Award. Subsequent vesting requires
(i) the participant to remain an employee of 1st Source and (ii) that
1st Source be profitable on an annual basis based on the determination of
the Committee.
1st Source also has a Restricted Stock Award Plan (the "Restricted
Plan") for key employees. Awards under the Restricted Plan are made to
employees recommended by the Chief Executive Officer and approved by
the Committee. Shares awarded under the Restricted Plan are subject to
forfeiture over a ten (10) year period. Vesting is based upon meeting
certain criteria, including continued employment by 1st Source.
<PAGE>
The bonus amounts represent the annual cash awards under the Plan.
Vested stock under the Plan, the Awards and the Restricted Plan is
included in the LTIP column. The value placed on "Book Value" shares is
the book value per share as of December 31 of each year. The value
placed on market value shares is market value as of December 31 of each
year. Mr. Murphy receives this vested amount in cash.
Unvested stock holdings under the Plan, the Awards and the Restricted
Plan as of December 31, 1995 are as follows:
Book Value Market Value Calculated
Name Shares Shares Value
Christopher J. Murphy III 25,484 13,170 $607,739
Wellington D. Jones III 8,091 4,142 192,067
Richard Q. Stifel 5,460 2,577 124,704
Vincent A. Tamburo 2,632 1,362 62,808
<F3> All amounts reported in the "All Other Compensation" column represent
1st Source contributions to defined contribution retirement plans.
</FN>
</TABLE>
<TABLE>
<CAPTION>
EXECUTIVE INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
Number of Performance Number Performance
Book Value Period Until of Market Period Until
Name Shares<F1> Payout<F2> Value Shares Payout<F3>
<S> <C> <C> <C> <C>
Christopher J. Murphy III 8,594 5 years 6,889 10 years
Wellington D. Jones III 2,698 5 years 1,869 10 years
Richard Q. Stifel 1,663 5 years 1,253 10 years
Vincent A. Tamburo 882 5 years 452 10 years
<FN>
<F1> Mr. Murphy will receive his vested awards in cash.
<F2> Vesting of awards is tied to 1st Source achieving a 7% annual increase
in net income over the next five years. Twenty percent (20%) of the
award vests each year based on attaining the performance.
<F3> Vesting of awards is tied to 1st Source being profitable on an annual
basis as determined by the Committee. Ten percent (10%) of the award
vests each year based on attaining the performance. The first 10% was
vested at the time of the award.
</FN>
</TABLE>
PENSION PLAN BENEFITS
Annual pension benefits payable to executive officers under annuity
contracts received from the terminated Pension Plan are as follows:
Annual Pension
Name Benefits
Ernestine M. Raclin $11,226
Christopher J. Murphy III 17,078
Wellington D. Jones III 6,694
Richard Q. Stifel 3,879
<PAGE>
EXECUTIVE COMPENSATION COMMITTEE REPORT
1st Source officers are reviewed once a year by their immediate supervisor.
The review covers a variety of management and professional characteristics and
performance relative to individual, group, and company goals.
The performance review is an integral part of 1st Source's Salary
Administration Program. All positions are rated and placed in a salary range.
Annually, with our approval, management establishes a salary performance grid
that sets the range of merit increases that may be given to officers depending
on their review and their respective position (lower, middle or upper third) in
their respective salary range.
The categories of performance under the company's review program are:
- Substantially and consistently exceeds job requirements;
- Often exceeds job requirements;
- Meets and sometimes exceeds job requirements;
- Meets some job requirements, improvement is required; and,
- Does not meet minimal job requirements.
Management awards salary increases as determined under the guidelines of the
Salary Administration Program in conformance with the salary performance grid
and the annual budget.
All of the officers reported herein, including Mr. Murphy, are under the
1st Source Salary Administration Program. In his case, he is evaluated by us
against a series of objectives set in the company's annual budget plan and in
its long-term strategic plan as annually approved by our full Board. We
reviewed Mr. Murphy's salary in December 1995. We reviewed his performance
relative to achieving 1994's goals and his progress toward 1995's. The company
had exceeded its quantitative objectives in 1994 and met most of its
qualitative objectives as well. We determined that Mr. Murphy's performance
"often exceeds job requirements" and he was therefore eligible to receive a 4%
to 8% base salary increase.
In addition to using the company's salary administration program, we
compared Mr. Murphy's compensation, both base salary and bonus, with
compensation levels for CEO's of bank holding companies of comparable size
and performance in the Midwest and nationally. We reviewed compensation
comparisons and bank performance data prepared by Ben S. Cole Financial
Corporation, the Bank Administration Institute, Sheshunoff and Company,
Wyatt Company, and the Indiana Bankers Association. Based on these factors,
we increased Mr. Murphy's base salary 6.1% in December 1995.
Bonuses under 1st Source's Executive Incentive Plan are determined annually
following the close of the year. The bonus is calculated based on the
officer's "partnership level" adjusted for the company's performance relative
to plan and for the individual's performance relative to weighted objectives
set at the beginning of the year. In Mr. Murphy's case, the base bonus
calculation is 15% of his salary. For each 1% that the company varies from its
profit plan for the year, the base bonus is adjusted up or down by 2.5%.
<PAGE>
Once the base bonus is calculated, an officer can receive 100% to 300% of
the amount depending on their individual performance. As with all Executive
Incentive Plan participants, the reviewer assesses performance relative to an
agreed upon set of objectives. In Mr. Murphy's case, these are the annual
business objectives and company's long-term goals as approved by the Board.
In 1995, the company achieved its long-term return on assets goal, expanded its
branch network, and exceeded its annual financial and credit quality goals.
Accordingly, Mr. Murphy was awarded a bonus of $210,031 for 1995's performance.
Under the company's Executive Incentive Plan, 50% of this bonus will be paid
in cash in March 1996 to Mr. Murphy. The other 50% is subject to forfeiture
over the next five (5) years. The forfeiture lapses ratably for each year
Mr. Murphy remains with the company and for each year the company grows its
net income by a minimum of 7% per year. During this period, the "at risk"
portion of the bonus is delineated in book value stock but is paid in cash to
Mr. Murphy as the forfeiture lapses. The company's Executive Incentive
Program limits bonuses, at time of award, to 75% of salary.
In addition, bonuses under 1st Source's special long-term incentive award
program were determined following the end of 1995 for the current five-year
period. The bonus is calculated based on the officer's "partnership level"
adjusted for the company's performance relative to the 1995 long-term goals set
in 1990 and for the individual's performance over the five-year period. The
Company achieved or exceeded its long-term profitability growth and credit
quality goals and generally met its qualitative goals. Accordingly, Mr. Murphy
was awarded a bonus of $206,675 for 1991 to 1995 performance, a portion of
which is subject to forfeiture over the next ten (10) years.
Under the company's Long-Term Incentive Plan, 25% of this bonus will be
paid in cash in March 1996 to Mr. Murphy. The other 75% will be paid in stock.
These shares are subject to forfeiture as described in footnote (2) to the
Summary Compensation Table.
EXECUTIVE COMPENSATION COMMITTEE
Philip J. Faccenda, Chairman
Paul R. Bowles
Richard J. Pfeil
OPTION GRANTS IN LAST FISCAL YEAR
There have been no option grants in the last fiscal year.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1995 OPTION VALUES
(a) (b) (c) (d) (e)
Number of Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options at Options at
December 31, 1995 December 31, 1995
Shares Acquired Value
Name on Exercise Realized Exerciseable Unexerciseable Exerciseable Unexerciseable
<S> <C> <C> <C> <C> <C> <C>
Christopher J. Murphy III - - 253,819 32,558 $3,510,395 $434,975
Wellington D. Jones III - - 57,948 5,127 857,416 38,606
Richard Q. Stifel - - 20,276 11,851 211,674 119,612
Vincent A. Tamburo - - 4,341 - 38,288 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN<F1>
AMONG 1ST SOURCE, NASDAQ MARKET INDEX
AND PEER GROUP INDEX<F2>
31-Dec-90 31-Dec-91 31-Dec-92 31-Dec-93 31-Dec-94 31-Dec-95
<S> <C> <C> <C> <C> <C> <C>
1st Source 100 174 266 271 320 454
NASDAQ Index 100 128 130 156 163 212
Peer Group 100 167 215 225 210 306
<FN>
<F1> Assumes $100 invested on December 31, 1990 in 1st Source Corporation
common stock, NASDAQ market index, and peer group index.
<F2> The peer group is a market-capitalization weighted stock index of
banking companies in Indiana, Illinois, Michigan, Ohio and Wisconsin.
NOTE: Total return assumes reinvestment of dividends.
</FN>
</TABLE>
<PAGE>
COMPLIANCE WITH SECURITIES EXCHANGE ACT
The Securities Exchange Act of 1934 requires executive officers and
directors to file reports of ownership and changes in ownership of 1st Source
Corporation stock with the Securities and Exchange Commission and to furnish
1st Source with copies of all reports filed. Based solely on a review of the
copies of such reports furnished to 1st Source and written representations from
the executive officers and directors that no other reports were required,
1st Source believes that all filing requirements were complied with during the
last fiscal year, except that an initial report of ownership was filed late by
Director Fitzpatrick.
PROPOSAL NUMBER 2
Amendment of Article III of the Articles of Incorporation
On January 22, 1996, the Board of Directors unanimously approved the
following Proposal, subject to the approval of the holders of a majority of the
outstanding Common Stock of 1st Source. If approved by the Shareholders, this
proposal which amends the Articles of Incorporation will become effective upon
the filing of Articles of Amendment with the Indiana Secretary of State.
1st Source intends to make such filing as soon as practicable after the annual
Shareholders' meeting.
Article III, as amended, would authorize 1st Source to issue 40,000,000
common shares without par value. The number of preferred shares 1st Source
has authority to issue remains unchanged at 10,000,000.
The Board has concluded that it is in the best interest of 1st Source and
its Shareholders to increase the authorized Common Stock from 15,000,000 to
40,000,000 so that additional shares would be available for general corporate
purposes, including acquisitions, financings, stock dividends, stock splits or
funding of employee incentive plans. The additional shares authorized by the
proposed amendments would, therefore, be available to provide flexibility in
the event the shares should be needed for any desirable corporate purpose.
This could, however, result in some dilution of the voting power of
shareholders. Further, one or more acquisitions could have the possible effect
of diluting earnings and/or book value per share.
This amendment to Article III is not intended as an anti-takeover measure,
but it may have that effect. Although the Board presently has no intention of
doing so, the authorized but unissued common shares, including the preferred
shares, could be used to defeat certain takeover attempts through the issuance
of a number of shares sufficient to dilute the interest of a person seeking
control or to increase the total amount of consideration necessary for a person
to obtain control.
There are no current plans, arrangements, or understandings that would
result in the issuance of shares to be authorized by this Proposal Number 2.
The amended Article III is attached in full text as Exhibit A.
THE BOARD RECOMMENDS A VOTE FOR THE AMENDMENT TO ARTICLE III.
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of 1st Source are audited annually by independent
accountants. For the year ended December 31, 1995, and the six preceding
years, the audit was performed by Coopers & Lybrand, South Bend, Indiana.
Representatives of the firm of Coopers & Lybrand will be available to respond
to questions during the Annual Meeting. These representatives have indicated
that they do not presently intend to make a statement at the Annual Meeting.
PROPOSALS OF SECURITY HOLDERS
Proposals submitted by security holders for presentation at the next Annual
Meeting must be submitted in writing to the Secretary, 1st Source Corporation,
on or before November 6, 1996.
ADDITIONAL INFORMATION
As to the proposals presented for approval, a plurality of the shares voted
is required for approval.
COPIES OF 1ST SOURCE'S MOST RECENT FORM 10-K WILL BE PROVIDED, WITHOUT
CHARGE, ON WRITTEN REQUEST TO: TREASURER, 1ST SOURCE CORPORATION, POST OFFICE
BOX 1602, SOUTH BEND, INDIANA 46634.
A copy of 1st Source's Annual Report is furnished herewith to Shareholders
for the calendar year ended December 31, 1995, containing financial statements
for such year. The financial statements and the Report of Independent
Accountants are incorporated by reference in this Proxy Statement.
By order of the Board of Directors,
Vincent A. Tamburo
Secretary
Dated March 15, 1996
<PAGE>
EXHIBIT A
AMENDMENT TO ARTICLE III OF THE ARTICLES OF INCORPORATION
ARTICLE III
AMOUNT OF CAPITAL STOCK
The total number of shares of capital stock which the Corporation has
authority to issue is 50,000,000, all of which shall be divided into two
classes of shares to be designated "Common Stock" and "Preferred Stock,"
respectively, as follows:
40,000,000 shares of Common Stock, no par value; and,
10,000,000 shares of Preferred Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ernestine M. Raclin, Christopher J.
Murphy III, and Vincent A. Tamburo and each of them Proxies; to represent the
undersigned, with full power of substitution, at the Annual Meeting of
Shareholders of 1st Source Corporation to be held on April 23, 1996 and at any
and all adjournments thereof.
1. ELECTION OF DIRECTORS.
___ FOR all nominees listed below (except as marked to the contrary)
___ WITHHOLD AUTHORITY to vote for all nominees listed below
INSTRUCTION: to withhold authority to vote for any individual nominee, strike
a line through or otherwise strike the nominee's name in the list
below.
TERM EXPIRES APRIL, 1997: William P. Johnson
TERMS EXPIRE APRIL, 1999: Lawrence E. Hiler Rex Martin
Christopher J. Murphy III Ernestine M. Raclin
2. AMENDMENT OF ARTICLE III OF THE ARTICLES OF INCORPORATION.
___ FOR ___ AGAINST ___ ABSTAIN
3. SUCH OTHER BUSINESS AS MAY PROPERLY BE BROUGHT BEFORE THE MEETING.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
1ST SOURCE CORPORATION
Post Office Box 1602
South Bend, Indiana 46634
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted for all nominees listed in Proposal 1 and for Proposal 2.
Please sign exactly as shares are registered. When shares are held by joint
tenants, both should sign. When signing as attorney, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Please mark, sign, date and return the Proxy
promptly using the enclosed envelope.
____________________________________________
Signature
____________________________________________
Signature If Held Jointly
Dated: _______________________________, 1996
