SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) February 16, 2000
1st SOURCE CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA
(State or other jurisdiction of incorporation)
0-5907 35-1068133
(Commission File Number) (I.R.S. Employer
Identification No.)
100 North Michigan Street
South Bend, Indiana 46601
(Address of principal executive offices) (Zip Code)
(219) 235-2702
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address if changed since last report.)
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ITEM 5. Other Events
1st Source Corporation, parent company of 1st Source Bank, will be
restating its financial statements for December 31, 1998 as well as the first
three quarters of 1999. The restatement pertains to 1st Source's accounting for
measuring income recognition on securitized loans in accordance with SFAS No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities". Since June 30, 1998, 1st Source has sold
approximately $581 million of capital equipment loans into its securitization
facility. The loan securitization activities have provided an excellent source
of funding for 1st Source to support the growth of its Specialty Finance Group.
The auditors of 1st Source Corporation, PricewaterhouseCoopers LLP, recommended
that 1st Source review its accounting policies and procedures relating to
securitized loans. As a result of the review, an enhanced and more sophisticated
analytical model was developed which enabled 1st Source to refine its method of
estimating the performance of the securitized loans and the value of its
retained interests in the loans. The new model results only in a difference in
timing of the revenue recognition from our securitized loans and has no effect
on the total cash flows of the securitized transactions.
The adoption of the model was applied retroactively to the commencement of
this securitization program in the third quarter of 1998. The application of
this new model resulted in an increase in net income in 1998 and no change to
the previously disclosed estimated full year's net income in 1999. However, the
previously reported quarterly net income for each of the first three quarters of
1999 did change as a result of the new model.
The changes to prior period financial statements are as follows:
(unaudited -- dollars in thousands except Per Share Data)
<TABLE>
<CAPTION>
Quarter Ended Year Ended Quarter Ended
9/30/98 Dec. 31, 1998 3/31/99 6/30/99 9/30/99
------- ------------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Securitization Income
Previous $ 2,902 $ 8,570 $ 2,771 $ 2,749 $ 2,977
As restated 3,700 9,305 3,825 2,012 2,156
Net Income
Previous 7,861 31,020 7,880 8,327 9,117
As restated 8,335 31,457 8,528 7,874 8,613
Diluted EPS
Previous 0.41 1.60 0.41 0.43 0.47
As restated 0.43 1.62 0.44 0.41 0.45
Retained Interest Assets
Previous 7,677 9,100 11,408 13,593 16,175
As restated 7,414 8,371 10,839 11,418 11,917
Reserve for Loan Losses
Previous 40,289 40,929 42,080 43,300 44,903
As restated 38,397 38,629 38,974 39,403 39,814
Shareholders' Equity
Previous 210,452 215,859 222,445 225,491 230,984
As restated 211,421 216,793 223,975 226,521 231,469
</TABLE>
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1st Source will amend its Annual Report on Form 10-K for the year ended
December 31, 1998, and Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1998, March 31, 1999, June 30, 1999, and September 30, 1999, in
connection with the restatement.
After giving effect to the foregoing adjustments, 1st Source reported net
income for the fourth quarter of 1999 of $10.8 million, 24.7 percent higher than
the restated net income of $8.6 million reported for the fourth quarter of 1998.
Diluted net income per common share for the fourth quarter of 1999 amounted to
$0.56, up 24.4 percent from the restated $0.45 per common share reported in the
fourth quarter of 1998.
Net income for 1999 was $35.8 million, 13.7 percent higher than the
restated $31.5 million reported for the year 1998. Diluted net income per common
share for 1999 amounted to $1.86, up 14.8 percent from the $1.62 restated
diluted net income per common share for 1998.
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SIGNATURES
Pursuant to the requirements 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
----------------------
DATE 02/16/00 /s/ Christopher J. Murphy III
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(Signature)
Christopher J. Murphy III
Chairman of the Board, President and CEO
DATE 02/16/00 /s/ Larry E. Lentych
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(Signature)
Larry E. Lentych
Treasurer and Chief Financial Officer
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