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Committee | | Functions | 2022 Meetings |
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Executive(1) | ● | Act for the Board of Directors between meetings subject to certain statutory limitations. | 1 |
| ● | Give guidance to management regarding actions taken as part of its strategic operating or budget plans. | |
| ● | Provide guidance on acquisitions, divestures or other transactions. | |
| | | |
Governance and Nominating(1)(2) | ● | Provide oversight for effective governance of the Company. | 3 |
● | Identify and monitor the appropriate structure of the Board. | |
| ● | Select Board members for committee assignments. | |
| ● | Identify, evaluate, recruit and select qualified candidates for election, re-election or appointment to the Board. | |
| ● | See also “Governance and Nominating Committee Information” below. | |
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Audit, Finance and Risk(1)(2) | ● | Select the Company’s independent registered public accounting firm. | 5 |
| ● | Review the scope and results of the audits by the internal audit staff and the independent registered public accounting firm. | |
| ● | Review the adequacy of the accounting and financial controls and the risk management process and present the results to the Board of Directors with respect to accounting practices and internal procedures. | |
| ● | Make recommendations for improvements in internal procedures. | |
| ● | In addition to financial reporting risks and controls, review and oversight of risk and controls for other operational and compliance risk categories with the potential to cause significant financial loss, consumer harm, regulatory criticism, and/or reputational damage to the Company. | |
| ● | Review and oversight of management’s implementation and maintenance of the Company’s Enterprise Risk Management Program consistent with the Company’s strategies, the Board’s risk appetite, and the board-approved Enterprise Risk Management Policy. | |
| ● | See also “Report of the Audit, Finance and Risk Committee” below. | |
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Executive Compensation and Human Resources(1)(2) | ● | Determine compensation for executive management, review performance of the Chief Executive Officer and oversee the Company’s stock and other incentive compensation plans. | 4 |
| ● | Oversee and approve establishment and administration of wage and benefit policies for the Company and its subsidiaries. | |
| ● | Review human resources guidelines, policies and procedures. | |
| ● | See also the “Executive Compensation and Human Resources Committee Report” below. | |
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Loan and Funds Management | ● | Oversee and approve establishment and administration of the credit policy for the Bank. | 12 |
● | Review Bank lending activities, including approvals of loans to new or existing customers of total commitments in excess of stated amounts. | |
| ● | Oversee and approve quarterly reviews of the adequacy of the allowance for loan and lease losses and loan concentrations as compared to established limits. | |
| ● | Review the Bank’s Funds Management Division in its investment activities, relationships with securities dealers, relationships with other depository institutions, administration of 1st Source’s asset/liability management and liquidity functions and other similar activities related to managing market, interest rate and liquidity risks. | |
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Trust and Investment | ● | Exercise general supervision over the fiduciary activities of the Wealth Advisory Services Group and the Retirement Plan Services Division. | 4 |
| ● | Assign the administration of those fiduciary powers to such officers, employees and committees as the Committee deems appropriate. | |
| ● | Review the actions of individuals or committees used by the Bank in the exercise of the fiduciary powers and services offered to clients. | |
| ● | Oversee and approve establishment and administration of appropriate policies, practices and controls to promote high quality fiduciary administration. | |
| ● | Oversee appropriate policies and procedures to ensure the Bank makes appropriate investments. | |
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(1)The charter of the committee is available at www.1stsource.com. |
(2)The Committee is comprised entirely of independent directors. |
Board Leadership Structure — Under 1st Source’s Corporate Governance Guidelines, the Governance and Nominating Committee is responsible for reviewing and making recommendations to the Board regarding the Board’s leadership structure, including whether one individual should serve as Chairman of the Board and Chief Executive Officer and whether the Board should have a Lead Director. The Governance and Nominating Committee reviews the structure of the Board on at least an annual basis and monitors and makes recommendations to the Board on an ongoing basis on other matters concerning Board policies and corporate governance. Additionally, the Executive Compensation and Human Resources Committee of the Board reviews the performance of the Chief Executive Officer on an annual basis. The Board believes it is in the best interest of 1st Source to have Mr. Murphy serve as Chairman of the Board and Chief Executive Officer. The reasons for this include:
•Mr. Murphy’s past performance in both roles and his continuing ability to serve in both;
•The need for decisive leadership and clear accountability in facing 1st Source’s challenges and opportunities;
•Mr. Murphy’s extensive specialized knowledge regarding those challenges and opportunities as well as his large ownership position;
•The composition of the Board includes a majority of independent directors, providing an appropriate amount of independent board oversight; and
•The Board has an independent Lead Director.
The incumbent chairman of the Governance and Nominating Committee, Mr. Schwabero, presently serves as the Lead Director under the Corporate Governance Guidelines. The Lead Director will normally chair any meetings of the Board at which the Chairman or Vice Chairman (if there is one) of the Board is not present or from which, for whatever reason, each has recused himself. The Lead Director has the power to call meetings of the Board of Directors and to set agendas for meetings. The Lead Director also chairs the executive sessions of the independent directors, which occurred at each Board meeting in 2022.
Board Role in Risk Oversight — The Board exercises oversight of the risk management of 1st Source through the functions of its committees as described above. Additionally, the Board receives quarterly reports from management on major risks and controls that are identified and evaluated by several executive level management committees of 1st Source Bank and overseen by the Strategic Deployment Committee, an executive-level management committee chaired by Mr. Murphy.
Our “ESG” Story — We appreciate the continued growing investor interest in “Environmental, Social, and Corporate Governance” frameworks. This perspective is aligned with the way we have always viewed our corporate purpose and the keys to our success. Simply stated, our long-term success is built and dependent on the long-term, sustainable success of all who live, work, and do business in the communities we serve. It has long been our mission to help individuals, institutions, businesses and communities achieve security, build wealth and realize their dreams. How well we deliver on our mission will determine how well we create and preserve long-term, sustainable value for our shareholders. Put another way, the interests of our long-term shareholders are wholly aligned with the needs and interests of our clients, colleagues, vendors, regulators, and the communities we serve.
While we are proud of our ESG-related practices, we also know that our work for the common interests of our stakeholders, particularly those individuals, businesses, not-for-profits and communities we serve as clients, is never finished. Rather, this requires a commitment that extends well beyond the present to living our shared values, to understanding societal needs and impacts of our actions better and making continuous improvements for delivering on our mission.
Here are some of the ways we address important environmental, social and governance issues for the benefit of our stakeholders:
Our People — As a service-driven business, our long-term success depends on our people. And as the Company grows, the importance of our talent strategy has only intensified. For these reasons, we are committed to taking a multi-dimensional approach to talent and culture.
•Equal Employment Opportunity Employer - 1st Source provides equal employment opportunity to all colleagues and applicants without regard to race, color, religion, sex, age, national origin, disability, veteran status, genetic information, family medical history, gender identity, sexual orientation, or any other legally protected category.
•Diversity, Equity and Inclusion — At 1st Source, we cultivate and advance diversity in all forms as part of building a strong culture, a culture in which inclusion and belonging are paramount, and where all of our colleagues strive to be open and inclusive leaders and teammates. Our culture is what unifies our colleagues across our diverse business model, ensures we are best positioned to serve our diverse clients and propels our continuous evolution. In 2022, Forbes Magazine recognized the Company again as one of America’s best employers for diversity and in 2021 as one of America’s best employers for veterans. While we appreciate such recognition, we are committed to continuous improvement in this area.
•Oversight of Our Progress — Senior-level oversight and ongoing monitoring are critical to informing and improving our recruiting and development practices as we seek to continually create a more inclusive and diverse organization. We are proud of a 50+ year tradition since 1st Source became independent again in 1971 supported by consistent leadership of a Board representative of racial, ethnic, gender, and experiential diversity. We are proud to report that five of our twelve 1st Source Board members (42%) are women or minority.
•Transparency and Accountability — We reinforce oversight and monitoring by, among other things, setting annual goals for diversity, equity and inclusion in our primary performance incentive plans. In 2021, all employees completed a required series of facilitated training sessions on unconscious bias. All new hires in 2022 were required to complete training and participate in a facilitated discussion on unconscious bias within six months of hire. In 2022, our primary incentive plans also included a goal for participants with significant hiring and/or promotional authority for the percentage of diverse candidates hired plus existing diverse employees promoted on a management or professional track who had individual development plans created or in place and updated as a percentage of total exempt staff hired or promoted. In addition, with our workforce, we track and monitor voluntarily disclosed diversity data to review hiring, promotion and attrition at the Company, regional and functional levels. We also review performance data and promotion and compensation information to ensure fair and objective decision-making. During our regular reviews of each business unit, senior management engages in focused conversations with each business about their plans and progress in professional development of their teams and with respect to diversity and inclusion.
•Talent Vision and Strategy — Our people and culture are critical to the Company’s long-term success. As such, our talent vision and strategy focus on:
•Ensuring every candidate selected has a desire to serve others and demonstrates our unique service delivery model in their personal reoccurring patterns of behavior.
•Enabling change management and performance teams that generate career opportunities for our people and create future leaders of the firm.
•Creating an environment of inclusion, belonging and diversity, where we work with purpose and everyone feels seen, heard and engaged.
•Promoting emotional ownership and partnership throughout the Company.
Our talent vision and strategy must be implemented in the context of an evolving business with accelerating velocity of change. To reflect the ongoing transformation in our industry, we are focused on:
•Reinforcing our culture and diversity as a source of competitive advantage.
•Delivering a consistent, fair, and high-quality experience for our people.
•Designing an organizational model that supports our diversified lines of business and growing technology capabilities.
•Developing a scalable technology platform to effectively deploy and manage our people, processes, and technologies.
•Talent Development — We believe a critical driver of our future growth is our ability to grow leaders. We are committed to identifying and developing talent to help our colleagues accelerate their growth and achieve their career goals. We provide developmental opportunities for our colleagues through a robust set of formal and informal programs.
•1st Source University focuses on enabling colleagues to build skills and knowledge in specific facets of our business. These educational experiences and resources include topics such as client relationships, technology, investments, compliance, leadership and management, and professional development.
•In 2022, 1st Source colleagues completed over 38,000 training modules consisting of over 1,180 different courses covering topics such as regulations, leadership development, relationship building, cybersecurity, soft skills, and unconscious bias.
•The 1st Source L.E.A.D. program is a set of immersive experiences and collaborative interactions, developing leadership capabilities over a fourteen-month period. The program is built around a series of best-in-class leadership principles and their application by participants as they lead their current teams.
•The Business of Banking is a year-long set of presentations for new colleagues and early career program participants to share resources and experiences designed to help colleagues explore our history and engage in shaping our future.
•1st Source Mastery Programs provide a deep dive into skill development and mastery of specific roles to enhance role competencies and increase levels of overall performance. These mastery programs are designed to deliver increased levels of outstanding client service by our colleagues, continually differentiating our service above our competitors over time. They also increase talent/diversity attraction, engagement, and retention for the long term.
•The Commercial Banker Development Program is a two-year rotational program for recent college graduates designed to expose participants to fundamentals of commercial banking, including the funding and pricing of commercial loans, credit analysis and relationship sales.
•The Customer Service Representative Career Development Program is a structured approach to developing and improving one’s career serving clients in our Banking Centers.
•The Tuition Reimbursement Program reflects our philosophy of continuous learning and provides for reimbursement of tuition related expenses incurred through approved and accredited public and private not-for-profit institutions of higher education. In 2022, we reimbursed over $137,000 to colleagues for tuition reimbursements with an average of $3,600 per colleague who used the benefit.
•The IVY Tech Bank Cohort Education Program was developed and made available through a partnership between the Company and IVY Tech Community College to provide opportunities for obtaining a college degree among colleagues in the hourly and lower-level salaried workforce. This newly developed program has been an important investment in education and has had an undeniable jumpstart effect. We have moved from a low of 16 colleagues attending eight colleges and universities in the year prior to the program creation, to now almost 50 colleagues who are attending 22 different schools. Many in our first cohort of students have gone on to obtain their bachelor’s degree and found success in new growth opportunities at 1st Source.
•The Banking Apprentice Program attracts locally embedded diverse high school graduates and rising seniors to work for the Company and experience the pride and fulfillment to be found in serving others and introduce them to the business of banking.
•New Employee Orientation introduces new colleagues to our history, vision, mission, and values.
•We engage in talent review and succession planning continuously but engage in a formal review annually to reaffirm existing and identify new high potential, talented and diverse colleagues as we strive to deepen, enhance, and diversify our leadership bench. We then implement multi-year individual development plans for these colleagues which include special assignments, structured learning, assessments, external coaching, sponsorship and hands-on work, and a blend of full cohort, small group, and individually tailored development opportunities.
•As noted above, all employees in 2021 completed a multi-module unconscious bias training program which gave us an opportunity to collectively work together to identify and address our biases that will improve our interactions and make us a stronger organization. We continued this training in 2022, requiring all new hires to complete unconscious bias training and facilitated discussions within six months of hire.
•Wellness/Mental Health - 1st Source continues to work with our partners to provide a robust wellness program for colleagues, offering guidance, support, and tools to lead a healthy life. During the pandemic, we recognized that colleagues needed additional support for themselves and their families, especially in mental health. As a response, we launched an enriched Employee Assistance Program, added an additional personal day as paid time off and accelerated the eligibility for vacation time.
Sustainability and Social Responsibility — We focus on developing business practices that protect and conserve natural resources. This includes using responsible, reputable, and monitored e-recyclers for our electronic assets. All computers, including desktops, laptops, and monitors, are properly recycled. We are also conscious of our paper usage, recognizing that we depend on printed materials for important day-to-day office work, client communications, and acquiring new clients. Increasingly, consumers demand more environmentally sustainable options and prefer online statements and correspondence rather that printed materials. Most of the paper used in our facilities is recycled through our secure shred program and in 2022 we recycled 182,624 pounds of paper. In recent years, we have transitioned away from the traditional proxy model and have utilized the notice and access or “e-proxy” model for supplying shareholder materials for our Annual Meeting. We have also utilized recycled paper to produce shareholder materials which we are required to print upon shareholder request. The paper we use to produce shareholder materials is also certified by the Forest Stewardship Council (FSC). The FSC promotes environmentally appropriate, socially beneficial, and economically viable management of the world’s forests.
Additionally, we are utilizing various sustainable practices in some of our facilities such as LED lights (63 of 79 locations), daylight harvesting sensors, programmable thermostats, 95% or higher efficiency furnace systems (40 of 65 HE HVAC locations), smart irrigation systems (9 of 10 irrigated locations), 90% recycled mats, “no mow grasses,” permeable paving, rain gardens, rain barrels, and sustainable landscaping (44 of 69 landscaped locations). To reduce our carbon footprint, we have utilized solar panels in two of our banking centers for supplemental sustainable power. These banking centers have supplemented approximately 27% of their total electrical usage (per banking center) with renewable solar power.
Integrity and Business Ethics — We are committed to doing what is right, acting with integrity, and holding ourselves accountable. We have a set of formal Moral and Ethical Standards and a Code of Conduct that provide additional clarity and focus on the ethical behavior we expect of all colleagues and members of our Board. The Code is supported by underlying policies as well as by interactive online training that all colleagues complete annually. Members of the Board also annually acknowledge their obligations under the Code of Conduct. It is critical for colleagues to understand our expectations and always do what is right. Our colleagues also need to be comfortable speaking up with no fear of retaliation if they have a concern or see something that does not seem quite right.
Our Code of Conduct requires all colleagues to adhere to our policies, recognize unethical behavior, and report suspected unethical or illegal conduct. The policy also sets additional expectations for managers to report any conduct that may violate policies. We provide for several alternative channels for the reporting of possible illegal or unethical behavior. Under the Code of Conduct, employees are invited to report any possible illegal or unethical activity to their supervisor or anyone else in the reporting line, or to the general Counsel or Chief Auditor, in all cases, without fear of recrimination or retaliation. We also have an Open-Door Policy that encourages colleagues to bring any questions or concerns to their supervisor, their supervisor’s manager, department head, the head of Human Resources or to the Employee Relations Department, without fear of recrimination or retaliation. The procedure for reporting employee concerns directly to the Chief Auditor is yet another channel for escalation of possible illegal or unethical behavior to an executive who is independent from front-line sales and service colleagues.
To further its risk oversight role, our Board adopted an Enterprise Risk Management Policy calling for a culture of honesty and transparency: “Consistent with the Company’s values, built on a foundation of integrity for generations, it is the Board’s expectation that management shall continue its commitment to a culture of transparency that encourages employees to be open, candid and fact-based in discussing risk issues, making all relevant facts and information available so the Company is able to make informed decisions.” Finally, our independent Compliance Review Program and our Customer Complaint Management Program both serve to identify and escalate to executive management and the Board any potentially illegal or unethical behavior or unsafe and unsound practices.
Financial Inclusion & Capacity Building in Our Communities — Community leadership is a core value of 1st Source. For over 160 years, the Company has given back to our communities to help build good places to live, work, worship, raise families, and build businesses. This service to our communities is one of our principal values and has defined who we are and how we do business. To ensure our long-term success, our strategic plan includes strategies for active and effective engagement with all segments of our communities. We serve with a wide range of products and services offered to individuals and to small and medium-sized businesses throughout our footprint. Our aim is to grow our business and achieve appropriate returns for our shareholders by strengthening our communities. Here are some highlights:
•Our priority is to deliver outstanding service to all of our clients without compromising the safe and sound operation of the Company.
•We provide consumer and business products and services designed to support and strengthen all within the communities we serve.
•We give special consideration to the banking needs (including credit needs) of sustainable small businesses, low-to-moderate income individuals and neighborhoods, and community organizations that have a demonstrable positive and lasting impact on our communities.
•For the tenth consecutive year, we were honored to have been recognized with a gold level award from the Indiana District of the U.S. Small Business Administration (SBA). This award recognizes our efforts for delivering the greatest number of SBA loans in the state of Indiana among community banks with less than $10 billion in assets.
•We have an extensive and active financial education program designed to support our own employees and the employees of our business and not-for-profit clients. We have a dedicated Financial Education Manager as well as many colleagues who partner with these clients to provide financial education through presentations, classes, online videos and educational tools. In 2022, we gave 191 formal presentations and reached over 2,500 employees of our clients and community members. We also provide financial education and information on our online and mobile banking platform.
•We seek to strengthen our communities by supplying financial and human resources to civic, charitable, and other demonstrably successful non-profit community service organizations throughout our footprint. One way we reinforce this effort is through the Ernestine M. Raclin Community Leadership Awards established by the Company to honor and encourage leadership in volunteerism through the businesses and governmental agencies in our communities. The award recognizes Ernestine M. Raclin, Chairman Emeritus of 1st Source, who strongly demonstrated the spirit of volunteerism throughout her career by giving of her time and talents to help others.
•We are committed to and accountable for performance under the Community Reinvestment Act (CRA). Our corporate value of supporting our communities aligns closely with the CRA which has helped us receive an ‘outstanding’ rating from the Federal Reserve Bank of Chicago for our overall CRA efforts. We have a dedicated CRA Officer who ensures our accountability to our clients and the people who live and work in our markets. If they are successful, so are we.
•We are also committed to and accountable for oversight and implementation of a compliance management system designed to ensure we are compliant with the laws and regulations to which our industry is subject and that we at all times adhere to our values in service to others of all backgrounds without regard to personal characteristics such as ethnicity, race, religious affiliation, marital status, gender, sexual orientation, or any other personal characteristics. We serve our neighbors in the heart of our local communities, and we do so through our people who embrace and are trained in accordance with our values and who in turn oversee and implement processes and technologies designed to ensure fair and responsible access to the products and services we offer.
•In 2022, 1st Source Foundation supported the United Way in its efforts to eradicate poverty in our home market and supported Habitat for Humanity building affordable housing in most of our community bank markets. The Foundation continues to support the economic development efforts of the South Bend Elkhart Regional Partnership as well as other economic development activities in markets the Company serves across northern Indiana and southwestern Michigan. Additionally, our colleagues volunteered over 13,000 hours of service to organizations that assure a safety net of social services, community development, good health care, opportunities for spiritual development and education, and foster the visual and performing arts. 1st Source employees contributed over $189,000 to local United Way organizations in 2022.
Environmental, Social, and Governance Factors in Credit Analysis — In 2022, we continued our focus on renewable energy sources through lending and investment partnerships with renewable energy providers. We recognize the opportunities and complexities associated with energy financing and understand the value of innovative technology that leverages the sun, wind and water. These are sustainable sources of power from an environmental and financial perspective.
We have particularly focused on solar energy projects and, since developing the line of business seven years ago, we have invested $109 million and provided debt financing in 46 solar projects across 15 states with current loan and lease outstandings of $381 million. We estimate the aggregate power capacity of these projects avoids 277,714 metric tons of carbon greenhouse emissions or 307 million pounds of coal burned annually.
We employ a values-based, relationship-focused approach to financing solar projects and partner with strong developers who have national project pipelines. Many of the solar projects consist of a single or multiple solar arrays that are interconnected with the local utility grid. We have a strategic focus in community solar projects for our energy portfolio where a group of subscribers, including commercial businesses, small businesses, municipalities, and residential homes, participate in the program and receive the benefits of purchasing their electricity from the community solar array. In addition to our focus on community solar projects, we also finance solar projects that provide clean energy to colleges, universities, school districts, utilities, and municipalities.
We have also purchased and installed solar panels in several of our banking centers and are validating the energy savings and environmental impact as we consider wider adoption of this form of electricity among our banking center locations.
We are committed to investing in and financing solar energy projects and are pleased with the current and ongoing environmental benefits of this portfolio that positively impact the lives of people in communities across the United States. We will continue to finance and invest in sustainable opportunities, and we will explore new opportunities to develop products and solutions that support our clients and advance sustainability.
Data Security and Privacy — Our Board and senior management are actively engaged in the oversight of the 1st Source cyber and information security program. Our Audit, Finance and Risk Committee and management's Operational and Compliance Risk Committee (which reports to the Audit, Finance and Risk Committee of the Board) receive quarterly reports on the program and on developments in the cyber and information security sector from our Chief Information Security Officer (CISO). Additionally, an informal subcommittee of the Board comprised of directors with technology industry backgrounds periodically receives reports from the leaders of our digital banking, technology and information security teams. On an annual basis, senior members of the Company’s digital banking, technology, risk and information security teams provide a comprehensive overview of the Bank’s cyber and information security program to the Board. Highlights of our cyber and information security governance include:
•The Company employs an in-depth, multi-layered strategy of control programs, including monitoring external and internal threats and events, managing access, facilitating use of appropriate authentication options, validating controls and programs by internal teams and independent third parties and testing various compromise scenarios that are overseen by our information security team.
•The Company invests in threat intelligence and participates in financial services industry and government forums which track and report on cyber and other information security threats.
•The Company’s CISO actively participates in the Financial Services Sector Coordinating Council and Cyber Risk Institute’s development of the cyber and information security framework for the financial services industry, known as “The Profile.” Our CISO is now active in the Cyber Risk Institute established in 2020 to house and maintain the Profile going forward.
•The Company routinely performs penetration tests.
•The Company’s cyber and information security program regularly incorporates external expertise.
•The Company actively maintains PCI/DSS certification at the service provider level and an Attestation of Compliance is available upon request.
Meetings of the Board of Directors and Directors’ Compensation — The Board of Directors held 5 meetings in 2022. No incumbent directors 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 he or she served.
Directors receive fees as follows:
| | | | | | | | |
Meeting Fees | January 1, 2022 to April 30, 2022 | May 1, 2022 to December 31, 2022 |
Each meeting of Board of Directors attended | $2,500 | $3,000 |
Each meeting of Audit, Finance and Risk Committee attended | $2,500 | $3,000 |
Each meeting of Loan and Funds Management Committee attended | $2,000 | $2,500 |
Each meeting of other Board committee attended | $2,000 | $2,500 |
Annual Retainers(1): | | |
Board member | $49,816 | $64,202 |
Committee chairs: | | |
Audit, Finance and Risk Committee | $10,000 | $15,000 |
Executive Committee(2) | $3,000 | $0 |
Governance and Nominating Committee | $10,000 | $20,000 |
Executive Compensation and Human Resources Committee | $8,000 | $15,000 |
Loan and Funds Management Committee | $10,000 | $10,000 |
Trust and Investment Committee | $5,000 | $10,000 |
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(1) Annual retainers are generally paid in early June. | | |
(2) Mr. Murphy III became the Chair of the Executive Committee in May 2022 and receives no additional compensation for that position. |
Annual Meeting Attendance — Per the Company’s Corporate Governance Guidelines, directors are expected to attend the Annual Meeting of Shareholders. The Chairman of the Board presides at the Annual Meeting, and the Board of Directors holds one of its regular meetings in conjunction with the Annual Meeting of Shareholders. All members of the Board at the time of the Company’s 2022 Annual Meeting of Shareholders attended that meeting.
Code of Ethical Conduct — The Board of Directors has adopted a Code of Ethical Conduct for Financial Managers, which is available on the Company’s website at www.1stsource.com. The Code of Ethical Conduct for Financial Managers constitutes a code of ethics as defined in Section 406(c) of the Sarbanes-Oxley Act of 2002 and applies to the Chief Executive Officer, Chief Financial Officer, Controller and other individuals performing similar accounting or financial reporting functions for the Company.
Shareholder Communications — Communications to the Board of Directors from shareholders are welcomed. All written communications may be submitted through the Company’s website at www.1stsource.com, by e-mail at shareholder@1stsource.com, or by U.S. mail at 1st Source Corporation, 100 North Michigan Street, South Bend, Indiana, 46601, Attn: Chairman, Governance and Nominating Committee, or Attn: Corporate Secretary. The recipient of any such communication shall share it with the Chairman of the Governance and Nominating Committee who shall either (i) relay it to the full Board or an appropriate committee chairperson, or (ii) where he feels that the communication is not appropriate to relay to the Board, provide a copy of the communication and an indication of his proposed disposition to the General Counsel, or another independent director, either of whom may forward the communication to any other directors if he or she deems it prudent or appropriate to do so. The Chairman of the Governance and Nominating Committee shall forward all recommendations for Board nominees submitted by shareholders to the members of the Committee.
GOVERNANCE AND NOMINATING COMMITTEE INFORMATION
The Board of Directors formed an independent Governance and Nominating Committee in January 2004. The charter of the Governance and Nominating Committee is available at www.1stsource.com. See also the description of the Committee under “Board Committees and Other Governance Matters” above. All members of the Governance and Nominating Committee (see “Board Committees” above) comply with the independence requirements of the NASDAQ Stock Market listing rules. One of the purposes of the Governance and Nominating Committee is to identify, evaluate, recruit and select qualified candidates for election, re-election or appointment to the Board. The Governance and Nominating Committee may use multiple sources for identifying and evaluating nominees for directors, including referrals from current directors and executive officers and recommendations by shareholders. Candidates recommended by shareholders will be evaluated in the same manner as candidates identified by any other source. In order to give the Governance and Nominating Committee adequate time to evaluate recommended director candidates, shareholder recommendations should be submitted in writing no earlier than 120 days and no later than 90 days prior to the next Annual Meeting to be held on or before April 25, 2024. Nominations should be addressed to the attention of the Chairman, Governance and Nominating Committee, c/o 1st Source Corporation.
The Governance and Nominating Committee will select new or incumbent nominees or recommend to the Board replacement nominees considering the following criteria:
•Qualifications, including judgment, skill, capability, conflicts of interest, business experience and technical, professional, and educational background;
•Personal qualities and characteristics, accomplishments and reputation in the business community;
•Whether the nominee currently lives in one of the Company’s markets;
•Current knowledge and contacts in the communities or industries in which the Company does business;
•Current knowledge in one or more of the Company’s lines of business;
•Public company experience;
•Ability to qualify as an audit committee financial expert under SEC guidelines;
•Ability and willingness to commit adequate time, or in the case of incumbent directors, past participation and contribution, to Board and committee matters;
•Whether the nominee’s knowledge and experience is complementary to, or duplicative of, that of the other members of the Board;
•If applicable, whether the nominee would be deemed “independent” under listing rules of the NASDAQ Stock Market and SEC rules;
•Whether the nominee is qualified and likely to remain qualified to serve under the Company’s By-laws and Corporate Governance Guidelines;
•Diversity of personal characteristics and background consistent with the Company’s heritage and record, since the Company’s inception in 1971 of maintaining both ethnic and gender diversity among membership of the respective boards of directors of the Company and its subsidiary bank;
•Whether the nominee is under the age of 72; and
•Such other factors the Committee deems relevant.
The Governance and Nominating Committee assesses its own performance, including its effectiveness in achieving a diverse Board, and reviews its charter and recommends any proposed changes every other year coincident with the bi-annual self-assessment of the full Board.
Board Diversity Matrix (As of March 10, 2023)
| | | | | | | | | | | | | | |
Total Number of Directors: | 12 | | | |
| | | | |
| Female | Male | Non-Binary | Did Not Disclose Gender |
Part I: Gender Identity | | | | |
Directors | 2 | 10 | 0 | 0 |
Part II: Demographic Background | | | | |
African American or Black | 1 | 1 | 0 | 0 |
Alaskan Native or Native American | 0 | 0 | 0 | 0 |
Asian | 0 | 1 | 0 | 0 |
Hispanic or Latinx | 0 | 1 | 0 | 0 |
Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 |
White | 1 | 7 | 0 | 0 |
Two or More Races or Ethnicities | 0 | 0 | 0 | 0 |
LGBTQ+ | 0 |
Did Not Disclose Demographic Background | 0 |