December 2014 Volume 2 — Issue 3

1st Source Gazette ON REGULATIONS AND REASONS

THE fourth quarter

nursing home caring for a client’s loved one. This

process to collect and maintain the records, and the

time commitment of our staff to gather the forms,

adds additional costs to our operation and requires the

allocation of additional human resources to the effort.

A second change which is effective January 1, 2015 will

require us to separately record and report the nature

of the fees we charge to our clients for our services.

In the future, we will be required to report that

portion of our fees allocated to investment management

services as a separate item from the portion of our

fee used to provide administrative, accounting and

overhead costs. This is necessary because when

preparing a fiduciary trust income tax return,

the portion of the fee attributed to investment

management will be subject to the 2% of

Adjusted Gross Income limitation while there is no

limitation on the administrative portion of the fee.

This change will not affect your personal income tax

returns, since these investment and administrative

fees have always been subject to the 2% AGI

when reported on your Schedule A. We have

completed an analysis of our costs so we can make this

information available to clients beginning in 2015.

As we always have, we will continue to make full

disclosure of any and all fees we charge for our services.

Financial institutions, already subjected to very

100 North Michigan Street, South Bend, IN 46601 v 574-235-2790 v 800-882-6935 v www.1stSource.com

BY: STEVEN J. WESSELL, Executive Vice President

There has been much in the news in recent months about the

acceleration in the rate at which the federal government has

been imposing new regulations on businesses. There have

been two recent regulatory actions which impact 1st Source

Personal Asset Management Group and our clients.

The first regulatory change requires us to collect

information about individuals and/or companies to whom

we make payments for the benefit of our clients. In what

the government claims is an effort to increase scrutiny on

potential money laundering operations, we are now

required to obtain a form W-9 from any payee to whom we

issue a check, electronic payment or wire transfer. This form

requires the payee to provide us with name, address and

federal ID number or social security number. If the

payee refuses to provide the information, we will be

required to withhold a portion of the payment for

payment to the Internal Revenue Service as a tax

payment. While all of us would support the effort to

reduce money laundering, it seems unlikely, for

example, that we will be making a significant dent in the

volume of money laundering by requiring this form from

the handyman working for one of our clients or from the

significant regulatory burdens, have been hit hard

by many of the new regulations issued since the

turmoil of the 2009 financial meltdown. To be fair, the

federal government issued many of these regulations in

response to terrible abuses of consumers by large banks

and Wall Street firms. As it often is, the unethical

actions of some make it difficult for everyone in the

industry. Several years after the meltdown, we still see

Pe r sonal As set Manageme nt Group v December 2014 v Volume 2 I s sue 3

LIFE’S GOALS — INVESTING’S ROLEBY: PAUL GIFFORD, Jr., CFA, Chief Investment Officer

There seem to be many more commercials on television lately that talk about personal

investments. One commercial shows people walking around carrying a dollar value to

represent the amount they “need” in retirement, and another shows people running a

ribbon that represents their retirement savings to their anticipated life expectancy and

the ribbon runs short to the person’s dismay. Retirement is a main financial goal for

people, and while the lifestyle of retiring has definitely changed over the past couple

generations, the milestone remains and related goals need to be set. As the baby boomer

some of these big firms paying the price for their

accounting methods. We take great pride in the

recognition by Forbes of 1st Source Corporation

as one of the country’s 100 Most Trustworthy

Corporations as selected from among over 12,000 public

companies in America. We promise to always live up to

the principles established by those who came before us

during the first 150 years of 1st Source’s existence.

generation transitions into retirement and as life expectancies and quality of life continue to rise, the activities and needs

of today’s retirees demand more from investments and for a longer period of time.

In addition to retirement as a goal, supplemental goals such as maintaining financial security and a desired lifestyle,

traveling, bequeathing to the family and charity and assisting with grandchildren’s educational expenses play into the

quality of one’s retirement. Smart investments and comprehensive strategies help avoid income and estate taxes and help

create larger estates in order to help achieve these goals.

As we meet with clients to discuss their personal situation regarding lifestyle, changes in health, family, liquidity and

other matters, our commitment to remain highly knowledgeable ensures that each client’s portfolio is managed to meet

his or her specific needs. Equally important to a client’s current needs are the more complex questions that surround

asking of oneself personally and financially, “What sort of legacy do I hope to leave?”

The money you have accumulated or desire to accumulate works to meet your particular and unique set of life

goals. As we build a portfolio for each client, we focus on seven core areas as a basis for investing, and our team

asks the right investment questions and provide analysis that directs your investment policy to help you reach

your goals. The seven core areas include: Risk - the investor’s tolerance for price changes in their investments;

Return – the projected earnings needed to meet goals, and what we expect to be produced by various investments;

Time Horizon – the varying length of time for each goal; Liquidity – the anticipated need for cash, such as a monthly

distribution, or as an irregular distribution for items such as housing expense or purchase of a vehicle; Taxes – the tax

consequences of different investments, and understanding and applying strategies to maximize after-tax returns;

Legal – the documentation and compliance actions and

records that help you meet your goals; Unique

circumstances – the issues and situations that are unique

to you and your family and that influence investment decisions.

When we have this information, we compile it into your

investment policy statement to help us manage each

portfolio by constructing investments to meet each client’s

goals, whether short-term in nature such as lending money to

an adult child to buy a house, or long-term such as leaving

an inheritance to children.

As lives change and years pass, goals tend to change a bit

too. Since the investment policy statement and each client’s

portfolio are flexible, they can be adjusted to meet those

changing goals. Therefore regular communications with

clients is a keystone element of the relationship. Our

dedicated and experienced team is honored to guide you

and your investments toward your goals. While the goals

always remain yours, we are pleased you allow us the

responsibility and accountability to help you achieve them.

INVESTMENT MANAGEMENT

Our investment philosophy is focused on the needs and objectives of our clients, while placing a high value on long-term,

consistent investment returns.d

We believe in broad diversification as a way to mitigate risk and preserve assets within

each client’s investment portfolio.d

Economic and financial markets are cyclical; therefore, we believe value can be added through tactical adjustments to

a portfolio’s asset allocation.d

We track measures of investor sentiment to look for indicators that help us make prudent investment decisions on behalf of our clients.

Pe r sonal As set Manageme nt Group v December 2014 v Volume 2 I s sue 3

providing Estate Administration services to clients,

Judy has been involved with several community

efforts including serving on the Board of Directors

for the South Bend Education Foundation, as the

Vice-Chairman and Chairman of REAL Services Inc.

and with the Indiana University South Bend Paralegal

Advisory Committee.

To My Dear Clients,

With the reality of my retirement comes the realization I am leaving not only my dedicated and caring co-workers but all of you who have been a part of my life for the past 23 years. We have shared many memorable moments. I appreciate being allowed into your lives, both public and private, that enabled me to contribute to the management of your finances and sense of well-being. Your keen life interests and vitality have been an inspiration as I encounter the challenges and adventures ahead in this lifetime transition. My life has been forever changed and enriched for knowing you. I am truly grateful for that privilege. I wish you every blessing as you continue with our 1st Source family and their commitmentto you, your family and your financial success and security. Sincerely,

Judy Dominy

GRATITUDE & BEST WISHES After 23 years of service

with 1st Source, Judy

Dominy, Vice President and

Trust Officer, retired in

December 2014. In

addition to her expertise

THE STRENGTH OF PEOPLE

Pe r sonal As set Manageme nt Group v December 2014 v Volume 2 I s sue 3

Allyson (Ally) Powers joined our team in October as Vice President and Manager of

Personal Trust. In this position, Ally is responsible for the management of our personal

trust efforts, including administration and business development for our group. Ally has

a long history in the financial services industry with her most recent position at

JPMorgan Chase Bank in St. Louis. In her most recent role, she managed a team of

230 people across 23 offices in 12 states. At Citibank from 1995 through 2008, Ally

played an integral role in the development and execution of several new business ventures,

including the Smith Barney Home Lending Program at Citibank, where she last served

as Senior Vice President, National Sales Director.

The bulk of Ally’s experience has been in business development, client service and program

Not FDIC Insured Not Bank Guaranteed May Lose Value Not Insured by any Federal Government Agency Not a Bank Deposit

HERE TO SERVE CLIENTS. We greatly appreciate the opportunity to assist you in your

trust, investment and banking matters and encourage you to contact us if you have any questions or suggestions. If you have friends

or family members we might be able to assist, we would appreciate your recommendation. (574) 235-2790 / (800) 882-6935.

development in mortgage lending, private banking and related services. This is a unique opportunity for us to focus our efforts

further on our client needs and how to best serve our region with a proven national leader of client service and

initiatives. Ally, while having years of success with large national firms, is excited to join our very experienced team

that serves clients comprehensively with focus on deeper customer relationships and building local and community

connections. Ally earned her Bachelor of Arts degree from Truman State University and her MBA from Maryville

University. She and her family, including their two young children, Waylon and Ebbe, have recently relocated to South Bend.

Please join us in welcoming Ally to 1st Source.