<PAGE> 1
CONFORMED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File No. 333-04113
COMMUNITY CENTRAL BANK CORPORATION
(Name of small business issuer in its charter)
Michigan 38-3291744
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 N. Main Street, Mount Clemens, Michigan 48043-5605
(Address of principal executive offices)
(810) 783-4500
(Issuer's telephone number)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: None
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO
----- -----
Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
Issuer's revenue for its most recent fiscal year was $4,133,000
As of March 19, 1998, 1,265,000 shares of Common Stock of the issuer
were outstanding. The aggregate market value of voting stock of the registrant
held by nonaffiliates was approximately $12.3 million as of March 19, 1998;
based on the average of the bid and asked prices ($12.25) on that date. (For
purposes of this calculation, 265,000 shares owned by the members of the
Corporation's Board of Directors have been excluded.)
DOCUMENTS INCORPORATED BY REFERENCE:
Part II Part of Stockholder Report of the issuer
for the year ended December 31, 1997.
Part III Part of the Proxy Statement of the issuer
dated March 27, 1998.
Transitional Small Business Disclosure Format Yes No X
--- ---
<PAGE> 2
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
PART I
ITEM 1. DESCRIPTION OF BUSINESS
THE CORPORATION
Community Central Bank Corporation (the Corporation) is a bank holding
company under the Bank Holding Company Act of 1956, as amended (the Bank Holding
Company Act). As a bank holding company, the Corporation is subject to
regulation by the Federal Reserve Board. The Corporation was organized on April
26, 1996, under the laws of the State of Michigan, and formed Community Central
Bank (the Bank) effective September 16, 1996. The Corporation exists primarily
for the purpose of holding all the stock of the Bank, and of such other
subsidiaries as it may acquire or establish.
The expenses of the Corporation have generally been paid using the
proceeds of its initial public stock offering. The Corporation's principal
source of future operating funds is expected to be dividends from the Bank.
THE BANK
The Bank is a state banking corporation which operates under the laws
of the United States of America, pursuant to a charter issued by the State of
Michigan. The Bank's deposits are insured to the maximum extent provided by the
Federal Deposit Insurance Corporation.
The Bank, through its office at 100 North Main Street, Mount Clemens,
Michigan provides a wide variety of commercial banking services to individuals,
businesses, governmental units, and other institutions. Its services include
accepting time, demand and savings deposits, including regular checking
accounts, NOW and money market accounts, and certificates of deposit. In
addition, the Bank makes secured and unsecured commercial, construction,
mortgage and consumer loans, and provides safe deposit facilities. The Bank has
an automated teller machine (ATM) which participates in the Magic Line system,
a regional network, as well as other ATM networks throughout the country. In
addition to the foregoing services, the Bank provides its customers with
extended banking hours and a system to perform certain transactions by
telephone or personal computer.
EFFECT OF GOVERNMENT MONETARY POLICIES
The earnings of the Corporation are affected by domestic economic
conditions and the monetary and fiscal policies of the United States Government,
its agencies, and the Federal Reserve Board. The Federal Reserve Board's
monetary policies have had, and will likely continue to have, an important
impact on the operating results of commercial banks through its power to
implement national monetary policy in order to, among other things, curb
inflation or combat a recession. The policies of the Federal Reserve Board have
a major effect upon the levels of bank loans, investments and deposits through
its open market operations in United States Government securities, and through
its regulation of, among other things, the discount rate on borrowings of member
banks and the reserve requirements against member bank deposits. It is not
possible to predict the nature and impact of future changes in monetary and
fiscal policies. The Bank has not been required to maintain reserves with
the Federal Reserve Bank based on current deposits.
2
<PAGE> 3
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
REGULATION AND SUPERVISION
The Corporation, as a bank holding company under the Bank Holding
Company Act, is required to file an annual report with the Federal Reserve Board
and such additional information as the Federal Reserve Board may require
pursuant to the Bank Holding Company Act, and is subject to examination by the
Federal Reserve Board.
The Bank Holding Company Act limits the activities which may be engaged
in by the Corporation and its subsidiary to those of banking and the management
of banking organizations, and to certain non-banking activities, including those
activities which the Federal Reserve Board may find, by order or regulation, to
be so closely related to banking or managing or controlling banks as to be a
proper incident thereto. The Federal Reserve Board is empowered to differentiate
between activities by a bank holding company, or a subsidiary thereof, and
activities commenced by acquisition of a going concern.
With respect to non-banking activities, the Federal Reserve Board has,
by regulation, determined that certain non-banking activities are closely
related to banking within the meaning of the Bank Holding Company Act. These
activities include, among other things, operating a mortgage company, finance
company, credit card company or factoring company, performing certain data
processing operations, providing certain investment and financial advice, acting
as an insurance agent for certain types of credit related insurance, leasing
property on a full-payout, nonoperating basis; and, subject to certain
limitations, providing discount securities brokerage services for customers. The
Corporation has no current plans to engage in non-banking activities.
The Bank is subject to certain restrictions imposed by federal law on
any extension of credit to the Corporation for investments in stock or other
securities thereof, and on the taking of such stock or securities as collateral
for loans to any borrower. Federal law prevents the Corporation from borrowing
from the Bank unless the loans are secured in designated amounts.
With respect to the acquisition of banking organizations, the
Corporation is required to obtain the prior approval of the Federal Reserve
Board before it can acquire all or substantially all of the assets of any bank,
or acquire ownership or control of any voting shares of any bank, if, after such
acquisition, it will own or control more than 5% of the voting shares of such
bank. Acquisitions across state lines are subject to certain state and Federal
Reserve Board restrictions.
EMPLOYEES
As of December 31, 1997, the Corporation and the Bank employed 34
persons (full-time equivalent).
COMPETITION
All phases of the business of the Bank are highly competitive. The Bank
competes with numerous financial institutions, including other commercial banks,
in the Macomb County and metropolitan Detroit area. The Bank, along with other
commercial banks, competes with respect to its lending activities, and competes
in attracting demand deposits with savings banks, savings and loan associations,
insurance companies, small loan companies, credit unions and with the issuers of
commercial paper and other securities, such as various mutual funds. Many of
these institutions are substantially larger and have greater financial resources
than the Bank.
3
<PAGE> 4
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
The competitive factors among financial institutions can be classified
into two categories; competitive rates and competitive services. Interest rates
are widely advertised and thus competitive, especially in the area of time
deposits. From a service standpoint, financial institutions compete against each
other in types and quality of services. The Bank is generally competitive with
other financial institutions in its area with respect to interest rates paid on
time and savings deposits, fees charged on deposit accounts, and interest rates
charged on loans. With respect to services, the Bank offers a customer service
oriented atmosphere which management believes is better suited to its customers'
needs than that which is offered by other institutions in the local market.
Pursuant to state regulations, the Bank is limited in the amount that
it may lend to a single borrower. As of December 31, 1997 the legal lending
limit was approximately $1.1 million; however, that limit can be expanded (for
individual loans) to approximately $1.8 million with approval of the Board of
Directors.
LOAN PORTFOLIO
Residential real estate loans are generally for owner occupied, one to
four family homes, which are secured by mortgages. The majority of these loans
have a fixed interest rate. The Bank has no material foreign or agricultural
loans, and no material loans to energy producing customers.
Loans are placed in a nonaccrual status when, in the opinion of
management, uncertainty exists as to the ultimate collection of principal and
interest. For the period ended December 31, 1997, no loans were placed in
nonaccrual status. At December 31, 1997, there were no significant loans where
known information about possible credit problems of borrowers causes management
to have serious doubts as to the ability of the borrower to comply with present
loan repayment terms and which, in management's judgment, may result in
disclosure of such loans. Furthermore, management is not aware of any potential
problem loans which could have a material effect on the Corporation's operating
results, liquidity, or capital resources. Management is not aware of any other
factors that would cause future net loan charge-offs, in total and by loan
category, to significantly differ from those experienced by institutions of
similar size.
4
<PAGE> 5
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
ALLOWANCE FOR LOAN LOSSES
In each accounting period, the allowance for loan losses is adjusted by
management to the amount necessary to maintain the allowance at adequate levels.
Through its credit department, management will attempt to allocate specific
portions of the allowance for loan losses based on specifically identifiable
problem loans. Management's evaluation of the allowance is further based on
consideration of actual loss experience, the present and prospective financial
condition of borrowers, industry concentrations within the portfolio and general
economic conditions. Management believes that the present allowance is adequate,
based on the broad range of considerations listed above.
The primary risk element considered by management with respect to each
installment and residential real estate loan is lack of timely payment.
Management has a reporting system that monitors past due loans and has adopted
policies to pursue its creditor's rights in order to preserve the Bank's
position. The primary risk elements with respect to commercial loans are the
financial condition of the borrower, the sufficiency of collateral, and lack of
timely payment. Management has a policy of requesting and reviewing periodic
financial statements from its commercial loan customers, and periodically
reviews existence of collateral and its value.
Although management believes that the allowance for loan losses is
adequate to absorb losses as they arise, there can be no assurance that the Bank
will not sustain losses in any given period which could be substantial in
relation to the size of the allowance for loan losses.
RETURN ON EQUITY AND ASSETS
The following table contains selected ratios:
<TABLE>
<CAPTION>
Year ended Period from April 26, 1996 (inception)
December 31, 1997 to December 31, 1996
--------------- --------------------------------
<S> <C> <C>
Return on average total assets (3.55%) (18.50%)
Return on average equity (22.20%) (27.62%)
Dividend payout ratio N/A N/A
Average equity to average assets 16.00% 66.96%
</TABLE>
ITEM 2. DESCRIPTION OF PROPERTY
The Bank leases a renovated office in the downtown business district
of Mount Clemens. The executive offices of the Corporation are located in the
same building. The building lease runs through 2011.
ITEM 3. LEGAL PROCEEDINGS
As a depository of funds, the Bank could occasionally be named as a
defendant in lawsuits (such as garnishment proceedings) involving claims to the
ownership of funds in particular accounts. All such litigation is incidental to
the Bank's business.
The Corporation's management believes that no litigation is threatened
or pending in which the Corporation, or its subsidiary, is likely to experience
loss or exposure which would materially affect the Corporation's equity, results
of operations, or liquidity as presented herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
5
<PAGE> 6
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information shown under the caption "Stock Information" on page 29
of the Stockholder Report of the Corporation, for the year ended December 31,
1997, (exhibit 13) is incorporated by reference herein.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information shown under the caption "Plan of Operation" on page 24
of the Stockholder Report of the Corporation, for the year ended December 31,
1997, (exhibit 13) is incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS
The information presented under the captions "Consolidated Balance
Sheet," "Consolidated Statement of Operations," "Consolidated Statement of
Changes in Stockholders' Equity," "Consolidated Statement of Cash Flow," and
"Notes to Consolidated Financial Statements," on pages 1 through 23 of the
Stockholder Report of the Corporation, for the year ended December 31, 1997, as
well as the Independent Auditor's Report of Plante & Moran, LLP, dated January
29, 1998, (both exhibit 13) is incorporated by reference herein.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
6
<PAGE> 7
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information listed under the caption "Information about Directors
and Nominees as Directors" on page 4 of the Proxy Statement of the Corporation
dated March 27, 1998, (exhibit 20) is incorporated by reference herein.
EXECUTIVE OFFICERS
The following is a list of the executive officers of the Corporation,
together with their ages and their present positions. Executive officers of the
Corporation are elected annually by the Corporation's Board of Directors to
serve for the ensuing year and until their successors are elected and qualified.
Name and Position Position Held Since Age
----------------- ------------------- ---
Harold W. Allmacher
Chairman of the Board and
Chief Executive Officer 1996 - present 58
Richard J. Miller
President and Chief Operating Officer 1996 - present 39
Andrew Tassopoulos
Executive Vice President 1996 - present 37
Peter J. Przybocki
Corporate Treasurer 1996 - present 34
In addition, the executive officers listed above held positions with Old Kent
Bank - Macomb (formerly First National Bank in Macomb County) for substantially
all of the three year period prior to the inception of the Corporation.
ITEM 10. EXECUTIVE COMPENSATION
The information detailed in the last two paragraphs under the captions
"Board of Directors Meetings and Committees" on pages 5 and 6, "Report of the
Compensation Committee," on pages 6 and 7, "Summary Compensation Table" and
"Options Granted in 1997" on page 7, and "Aggregated Stock Option Exercises in
1997 and Year End Option Values" on page 8 of the Proxy Statement of the
Corporation dated March 27, 1998, (exhibit 20) is incorporated by reference
herein.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information summarized under the caption "Stock Ownership of
Certain Beneficial Owners and Management" on pages 2 and 3 of the Proxy
Statement of the Corporation dated March 27, 1998, (exhibit 20) is incorporated
by reference herein.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information listed under the caption "Certain Transactions" on page
8 of the Proxy Statement of the Corporation dated March 27, 1998, (exhibit 20)
is incorporated by reference herein.
7
<PAGE> 8
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
A list of exhibits included as part of this Form 10-KSB is shown in the
Exhibit Index, which immediately precedes such exhibits, and is incorporated by
reference herein.
(b) Reports on Form 8-K
The Corporation has not filed any reports on Form 8-K during the last
quarter of the period covered by this Report.
8
<PAGE> 9
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on March 27, 1998:
COMMUNITY CENTRAL BANK CORPORATION
S/ HAROLD W. ALLMACHER
--------------------------------
Harold W. Allmacher; Chief Executive Officer
(Principal Executive Officer)
S/ RICHARD J. MILLER
--------------------------------
Richard J. Miller; President and
Chief Operating Officer
S/ PETER J. PRZYBOCKI
--------------------------------
Peter J. Przybocki, CPA; Corporate Treasurer
(Principal Financial and Accounting officer)
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant, and in the capacities
indicated on March 27, 1998:
S/ HAROLD W. ALLMACHER S/ CELESTINA GILES
- ---------------------------------- --------------------------------
Harold W. Allmacher; Chairman of the Board Celestina Giles; Director
S/ GEBRAN S. ANTON S/ BOBBY L. HILL
- ---------------------------------- --------------------------------
Gebran S. Anton; Director Bobby L. Hill; Director
S/ JOSEPH CATENACCI S/ JOSEPH F. JEANNETTE
- ---------------------------------- --------------------------------
Joseph Catenacci; Director Joseph F. Jeannette; Director
S/ RAYMOND M. CONTESTI S/ RICHARD J. MILLER
- ---------------------------------- --------------------------------
Raymond M. Contesti; Director Richard J. Miller; Director
S/ SALVATORE COTTONE S/ DEAN S. PETITPREN
- ---------------------------------- --------------------------------
Salvatore Cottone; Director Dean S. Petitpren; Director
S/ CAROLE L. SCHWARTZ
--------------------------------
Carole L. Schwartz; Director
9
<PAGE> 10
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
3.1 Articles of Incorporation are incorporated by
reference to exhibit 3.1 of the Corporation's
Registration Statement on Form SB-2 (Commission
File No. 333-04113) which became effective
September 23, 1996
3.2 Bylaws of the Corporation are incorporated by
reference to exhibit 3.2 of the Corporation's
Registration Statement on Form SB-2 (Commission
File No. 333-04113) which became effective
September 23, 1996
10.1 1996 Employee Stock Option Plan is incorporated
by reference to exhibit 10.1 of the Corporation's
Registration Statement on Form SB-2 (Commission
File No. 333-04113) which became effective
September 23, 1996 (Management contract or
compensatory plan)
10.2 1996 Stock Option Plan for Nonemployee Directors,
is incorporated by reference to exhibit 10.2 of
the Corporation's Registration Statement on Form
SB-2 (Commission File No. 333-04113) which became
effective September 23, 1996 (Management contract
or compensatory plan)
10.3 Lease Agreement between the Corporation and
T.A.P. Properties, LLC, dated May 16, 1996, is
incorporated by reference to exhibit 10.3 of the
Corporation's Registration Statement on Form SB-2
(Commission File No. 333-04113) which became
effective September 23, 1996
11 Computation of Per Share Earnings
13 Independent Auditor's Report dated January 29,
1998, and Stockholder Report of the Corporation
for the year ended December 31, 1997. Except for
the portions of the Stockholder Report that are
expressly incorporated by reference in this
10-KSB, the Stockholder Report shall not be
deemed filed as a part hereof.
20 Proxy Statement of the Corporation dated March
27, 1998. Except for the portions of the Proxy
Statement that are expressly incorporated by
reference in this 10-KSB, the Proxy Statement
shall not be deemed filed as a part hereof.
21 Subsidiaries of the Issuer
23 Consent of Independent Auditor
27 Financial Data Schedule
10
<PAGE> 1
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
The information shown under the caption "Earnings Per Share" on page 20 of the
Stockholder Report of the Corporation, for the year ended December 31, 1997,
(exhibit 13) is incorporated by reference herein.
<PAGE> 1
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
EXHIBIT 13
INDEPENDENT AUDITOR'S REPORT
DATED JANUARY 29, 1998, AND
STOCKHOLDER REPORT OF THE CORPORATION
FOR THE YEAR ENDED
DECEMBER 31, 1997
<PAGE> 2
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Community Central Bank Corporation
Mount Clemens, Michigan
We have audited the accompanying consolidated balance sheet of Community Central
Bank Corporation as of December 31, 1997 and 1996, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flow for the
year ended December 31, 1997, and the period from April 26, 1996 (inception) to
December 31, 1996. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform our audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Community Central
Bank Corporation as of December 31, 1997, and 1996, and the results of its
operations and cash flow for the year ended December 31, 1997, and the period
from April 26, 1996 (inception) to December 31, 1996, in conformity with
generally accepted accounting principles.
S/ PLANTE & MORAN, LLP
January 29, 1998
Bloomfield Hills, Michigan
i
<PAGE> 3
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Assets December 31,
1997 1996
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash and Cash Equivalents
Cash and due from banks $2,279 $1,358
Federal funds sold 1,250 14,300
- --------------------------------------------------------------------------------
Total Cash and Cash Equivalents 3,529 15,658
- --------------------------------------------------------------------------------
Securities available for sale (Note 2) 5,392 ----
Investment securities (Note 2) 15,115 ----
Loans (Note 3)
Residential mortgage loans 21,314 3,950
Commercial loans 29,165 1,336
Installment loans 2,656 292
- --------------------------------------------------------------------------------
Total Loans 53,135 5,578
Allowance for loan losses (Note 4) (800) (90)
- --------------------------------------------------------------------------------
Net Loans 52,335 5,488
- --------------------------------------------------------------------------------
Net property and equipment (Note 5) 1,814 1,696
Accrued interest receivable 499 17
Other assets 221 226
- --------------------------------------------------------------------------------
Total Assets $78,905 $23,085
================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 4
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity December 31,
1997 1996
- --------------------------------------------------------------------------------
(in thousands, except share data)
<S> <C> <C>
Deposits
Noninterest bearing demand deposits $7,323 $1,619
NOW and money market accounts 9,834 2,724
Savings deposits 2,057 276
Time deposits (Note 6) 49,141 7,562
- --------------------------------------------------------------------------------
Total deposits 68,355 12,181
- --------------------------------------------------------------------------------
Short term borrowings (Note 7) 1,403 ----
Accrued interest payable 191 32
Other liabilities 84 112
Capitalized lease obligation (Note 8) 1,035 1,020
- --------------------------------------------------------------------------------
Total Liabilities 71,068 13,345
- --------------------------------------------------------------------------------
Stockholders' Equity (Note 9)
Common stock ($5 stated value; 9,000,000 shares
authorized, 1,265,000 shares
issued and outstanding at
12-31-1997, 1,150,000 shares
issued and outstanding at
12-31-1996 6,325 5,750
Additional paid-in capital 4,195 4,770
Accumulated deficit (2,712) (780)
Unrealized gain on securities available
for sale (Note 2) 29 ---
- --------------------------------------------------------------------------------
Total Stockholders' Equity 7,837 9,740
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $78,905 $23,085
================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
2
<PAGE> 5
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Period from April 26,
Year ended 1996 (inception)
December 31, 1997 to December 31, 1996
- ---------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Interest Income
Loans (including fees) $2,708 $42
Securities 707 ----
Federal funds sold 534 158
- --------------------------------------------------------------------------------
Total Interest Income 3,949 200
- --------------------------------------------------------------------------------
Interest Expense
Deposits 2,095 42
Short term borrowings 29 ----
Capitalized lease obligation 137 40
- --------------------------------------------------------------------------------
Total Interest Expense 2,261 82
- --------------------------------------------------------------------------------
Net Interest Income 1,688 118
Provision for loan losses 710 90
- --------------------------------------------------------------------------------
Net Interest Income after Provision 978 28
- --------------------------------------------------------------------------------
Noninterest Income
Deposit service charges 66 1
Mortgage banking income 66 ----
Other income 52 3
- --------------------------------------------------------------------------------
Total Noninterest Income 184 4
- --------------------------------------------------------------------------------
Noninterest Expense
Salaries, benefits and payroll taxes (Note 10) 1,389 222
Premises and fixed asset expense 617 119
Other operating expense (Note 11) 1,088 471
- --------------------------------------------------------------------------------
Total Noninterest Expense 3,094 812
- --------------------------------------------------------------------------------
Loss Before Taxes (1,932) (780)
Provision for income taxes (Note 12) ---- ----
- --------------------------------------------------------------------------------
Net Loss ($1,932) ($780)
================================================================================
Basic earnings (loss) per share (Note 16) ($1.53) ($1.54)
- --------------------------------------------------------------------------------
Basic earnings (loss) per share applicable to public
offering shares (Note 16) ($0.62)
===============================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
3
<PAGE> 6
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Unrealized Gain
Common Paid-in Accumulated on Securities Total
Stock Capital Deficit Available for Sale Equity
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance April 26, 1996 (inception) $ ---- $ ---- $ ---- $ ---- $ ----
Public stock offering 5,750 5,750 ---- ---- 11,500
Stock offering costs ---- (980) ---- ---- (980)
Net loss for period from April 26, 1996
(inception) to December 31, 1996 ---- ---- (780) ---- (780)
- ------------------------------------------------------------------------------------------------------------------
Balance December 31, 1996 5,750 4,770 (780) ---- 9,740
Stock dividend 575 (575) ---- ---- ----
Net loss for 1997 ---- ---- (1,932) ---- (1,932)
Unrealized gain on securities
available for sale ---- ---- ---- 29 29
- ------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997 $6,325 $4,195 ($2,712) $29 $7,837
==================================================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
4
<PAGE> 7
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
Year ended Period from April 26, 1996
December 31, 1997 (inception) to December 31, 1996
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Operating Activities
Net loss ($1,932) ($780)
Adjustments to reconcile net loss to net
cash flow from operating activities:
Net accretion of security discount (25) ----
Gain on sale of mortgage loans (60) ----
Provision for loan losses 710 90
Depreciation expense 466 76
Increase in accrued interest receivable (482) (17)
Decrease (increase) in other assets 5 (226)
Increase in accrued interest payable 159 32
Increase in other liabilities 109 152
- -----------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (1,050) (673)
- -----------------------------------------------------------------------------------------------------------------
Investing Activities
Purchases of securities available for sale (5,368) ----
Prepayments of securities available for sale 6 ----
Purchases of investment securities (18,984) ----
Maturities, calls and prepayments of investment securities 3,893 ----
Sales of residential mortgage loans 5,999 ----
Net increase in loans (53,496) (5,578)
Purchases of property and equipment (584) (772)
- -----------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (68,534) (6,350)
- -----------------------------------------------------------------------------------------------------------------
Financing Activities
Net increase in demand and savings deposits 14,595 4,619
Net increase in time deposits 41,579 7,562
Net increase in short term borrowings 1,403 ----
Repayments of capitalized lease obligation (122) (20)
Public stock offering ---- 10,520
- -----------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 57,455 22,681
- -----------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (12,129) 15,658
Cash and Cash Equivalents at the Beginning
of the Period 15,658 ----
- -----------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at the End of the Period $3,529 $15,658
=================================================================================================================
Supplemental Disclosure of Cash Flow Information:
Interest paid $1,965 $10
=================================================================================================================
Supplemental Disclosure of Non-Cash Transactions:
Capitalization of building lease (Note 8) $ ---- $1,000
=================================================================================================================
The accompanying notes are an integral part of the financial statements.
</TABLE>
5
<PAGE> 8
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Community Central Bank Corporation (the
Corporation) conform to generally accepted accounting principles. Management is
required to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates and assumptions.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Corporation and its wholly-owned subsidiary, Community Central
Bank (the Bank). All significant intercompany transactions are eliminated in
consolidation.
NATURE OF OPERATIONS: The Bank conducts full-service commercial and consumer
banking and provides other financial products and services to communities
located primarily in Macomb County, Michigan, through one office.
SECURITIES: On the balance sheet, investment securities (i.e., those which the
Corporation has the ability and intent to hold to maturity) are stated at cost,
adjusted for amortization of premium and accretion of discount. Securities
available for sale are reported at fair value. Unrealized gains or losses on
securities available for sale are recorded as an adjustment to equity.
LOANS: Loans are generally reported at the principal amount outstanding, net of
unearned income. Non-refundable loan origination fees and certain direct loan
origination costs are deferred and included in interest income over the term of
the related loan as a yield adjustment. Interest on loans is accrued and
credited to income based upon the principal amount outstanding. The accrual of
interest on loans is discontinued when, in the opinion of management, there is
an indication that the borrower may be unable to meet payments as they become
due. Upon such discontinuance, all unpaid interest accrued is reversed. Interest
accruals are generally resumed when all delinquent principal and/or interest has
been brought current or the loan becomes both well secured and in the process of
collection.
ALLOWANCE FOR LOAN LOSSES: The allowance for possible loan losses is maintained
at a level considered by management to be adequate to absorb losses inherent in
existing loans and loan commitments. The adequacy of the allowance is based on
evaluations that take into consideration such factors as prior loss experience,
changes in the nature and volume of the portfolio, overall portfolio quality,
loan concentrations, specific impaired or problem loans and commitments, and
current and anticipated economic conditions that may affect the borrower's
ability to pay.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost, less
accumulated depreciation and amortization. Depreciation, generally computed
using the double-declining balance method, is charged to operations over the
estimated useful lives of the assets. Leasehold improvements are amortized over
the terms of their respective leases or the estimated useful lives of the
improvements, whichever is shorter.
EARNINGS PER SHARE: Earnings per share are based on a weighted average number of
shares outstanding during the period. The effects of unexercised stock options
are not included in the calculation because the Corporation is in a loss
position.
6
<PAGE> 9
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STOCK OPTIONS: Options granted under the Corporation's plans are accounted for
using the intrinsic value method. Using this method, compensation expense is
recorded at the amount by which the market price of the underlying stock exceeds
the option's exercise price at the grant date. Under the Corporation's plans,
the exercise price of options granted equals the fair value of the stock at the
grant date. Accordingly, no compensation expense is recognized as a result of
stock option awards. The Corporation has adopted the pro forma disclosure-only
provisions of Statement of Financial Accounting Standards (SFAS) 123,
"Accounting for Stock-Based Compensation."
7
<PAGE> 10
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) SECURITIES
The following table shows the amortized cost and estimated fair value of the
Corporation's security portfolios as of December 31, 1997:
<TABLE>
<CAPTION>
--------------------------------------------------------------
Amortized Unrealized Fair
Cost Gains Losses Value
------------ ------------ ---------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Securities Available for Sale
United States Government agencies $3,875 $31 $ ---- $3,906
Mortgage backed securities 1,085 ---- (1) 1,084
Collateralized mortgage obligations 403 ---- (1) 402
------------ ------------ ---------- ---------
Total Securities Available for Sale 5,363 31 (2) 5,392
------------ ------------ ---------- ---------
Investment Securities
United States Treasury 1,990 3 ---- 1,993
United States Government agencies 6,613 20 (1) 6,632
Mortgage backed securities 2,839 9 (7) 2,841
Collateralized mortgage obligations 3,673 18 (8) 3,683
------------ ------------ ---------- ---------
Total Investment Securities 15,115 50 (16) 15,149
------------ ------------ ---------- ---------
Total Securities $20,478 $81 ($18) $20,541
=========== =========== ========= =========
</TABLE>
The amortized cost and estimated fair value of securities, generally by
contractual maturity at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
---------------------- -----------------------
Securities Available Investment
for Sale Securities
---------------------- -----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C>
Within one year $ ---- $ ---- $3,733 $3,737
After one year but within five years 3,963 3,981 10,714 10,746
After five years but within ten years 1,400 1,411 668 666
After ten years ---- ---- ---- ----
--------- --------- -------- --------
$5,363 $5,392 $15,115 $15,149
========= ========= ======== ========
</TABLE>
8
<PAGE> 11
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The preceding table shows securities generally by contractual maturity. Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations. Securities which are not due at a single
maturity date, such as mortgage backed securities, have been allocated to
maturity groupings based on average expected life. Average expected life is
based on the best available prepayment estimates as of year end.
Investment securities of $1,403,000 were pledged to secure short term borrowings
at December 31, 1997.
(3) LOANS
Certain Directors and Executive Officers of the Corporation and their associates
are loan customers of the Bank. Such loans were made in the ordinary course of
business and do not involve more than a normal risk of collectibility. The
outstanding loan balance for these persons amounted to $1,497,000 and $369,000
at December 31, 1997 and 1996, respectively. The total unused commitments
related to these loans were $1,280,000 at December 31, 1997. During 1997, new
loans and advances were $1,654,000, while repayments totalled $526,000.
The Corporation grants loans to customers who reside primarily in Macomb County.
Although the Corporation has a diversified loan portfolio, a substantial portion
of the local economy has traditionally been dependent upon the automotive
industry. Additionally, the Corporation had approximately $10,153,000 in
outstanding loans at December 31, 1997, to commercial borrowers in the real
estate rental and property management industry.
(4) ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses is as follows:
<TABLE>
(Caption>
1997 1996
----------- -----------
(in thousands)
<S> <C> <C>
Balance, beginning of the period $ 90 $ ---
Provision 710 90
Charge-offs ---- ---
Recoveries ---- ---
---- -----
Balance, end of year $800 $90
==== =====
As a percentage of total loans 1.51% 1.61%
==== =====
</TABLE>
The Corporation considers a loan impaired when it is probable that all interest
and principal will not be collected in accordance with the contractual terms of
the loan agreement. Consistent with this definition, all nonaccrual and
reduced-rate loans (with the exception of residential mortgages and consumer
loans) are considered impaired. The Corporation had no loans classified as
impaired during the periods ended December 31, 1997, and 1996.
9
<PAGE> 12
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) PROPERTY AND EQUIPMENT
A summary of property and equipment as of December 31 is as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(in thousands)
<S> <C> <C>
Buildings (under capitalized lease) $1,000 $1,000
Leasehold improvements 717 325
Furniture and equipment 620 428
Vehicles 19 19
----------- -----------
2,356 1,772
Less accumulated depreciation and amortization 542 76
----------- -----------
Net property and equipment $1,814 $1,696
=========== ===========
</TABLE>
(6) TIME DEPOSITS
The total amount of jumbo certificates of deposit ($100,000 and over) as of
December 31, 1997, was $23,935,000.
As of December 31, 1997, scheduled maturities of all time deposits are as
follows:
<TABLE>
<CAPTION>
Year ending December 31: (in thousands)
<S> <C>
1998 $48,910
1999 38
2000 7
2001 38
2002 148
Subsequent years ----
---------
Total time deposits $49,141
========
</TABLE>
(7) SHORT TERM BORROWINGS
Short term borrowings at December 31, 1997, consist of securities sold with an
agreement to repurchase them the following day. The Corporation had also
borrowed overnight funds during portions of 1997 in the form of federal funds
purchased. The maximum amount of short term borrowings outstanding at any month
end during 1997 was $1,403,000. The average amount of short term borrowings
outstanding during 1997 was $557,000, at an average rate of 5.26%. The average
rate on the ending balance of short term borrowings at December 31, 1997, was
5.20%.
10
<PAGE> 13
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) LEASES
The Corporation entered into a 15 year lease commitment for its office with an
entity in which two Directors have an ownership interest. The lease commenced in
November, 1996. The lease has been treated as a capitalized lease obligation,
and was recorded at the net present value of the future minimum lease payments
of $1,000,000, at an interest rate of approximately 13%.
Future minimum lease payments as of December 31, 1997, consist of the following:
<TABLE>
<CAPTION>
Year ending December 31: (in thousands)
<S> <C>
1998 $138
1999 150
2000 150
2001 154
2002 173
Subsequent years 1,653
---------
Total minimum lease payments 2,418
Amount representing interest 1,383
---------
Present value of minimum lease payments $1,035
=========
</TABLE>
Operating expense includes rentals on a leased facility and certain equipment in
the amount of $28,000 and $3,000 for 1997 and 1996, respectively. Following is a
schedule of future minimum rental payments required under operating leases that
have remaining lease terms in excess of one year as of December 31, 1997:
<TABLE>
<CAPTION>
Year ending December 31: (in thousands)
<S> <C>
1998 $40
1999 42
2000 39
2001 28
2002 9
--------
Total minimum rental payments $158
========
</TABLE>
11
<PAGE> 14
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) STOCKHOLDERS' EQUITY
The Corporation declared a 10% stock dividend on April 1, 1997. The dividend was
paid on April 30, 1997, to stockholders of record on April 15, 1997. Per share
data from the prior year has been restated to reflect the stock dividend.
The Corporation and the Bank are subject to various regulatory capital
requirements administered by Federal banking agencies. Failure to meet these
requirements can initiate certain mandatory (and possible additional
discretionary) actions by regulators. These actions, if undertaken, could have a
material effect on the Corporation's financial position. Under capital adequacy
guidelines, the Corporation and the Bank must meet specific capital requirements
that involve quantitative measures of assets, liabilities, and certain
off-balance sheet items. Capital amounts are also subject to qualitative
judgments by the regulators about individual components, risk-weightings, and
other factors.
Quantitative measures established by regulation require the Corporation and the
Bank to maintain minimum amounts and ratios of total and Tier I capital (as
defined in the regulations) to risk-weighted assets. The Corporation and the
Bank are also subject to a minimum leverage ratio of Tier I capital to average
assets (as defined). Management believes, as of December 31, 1997, that the
Corporation and the Bank meet all capital adequacy requirements to which they
are subject.
As of December 31, 1997, the most recent notification from the Federal Deposit
Insurance Corporation (FDIC) categorized the Bank as "well capitalized." There
have been no events or conditions since that notification that management
believes have changed the Bank's category.
The following table shows the Corporation's and the Bank's actual capital
amounts and ratios as of December 31, as well as certain minimum requirements:
<TABLE>
<CAPTION>
1997 1996 Ratio Ratio
_____________ _____________ For Capital To Be
Capital Ratio Capital Ratio Adequacy Purposes "Well Capitalized"
------- ----- ------- ----- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Tier I capital to risk-weighted assets:
Consolidated $7,808 15.81% $9,740 110.88% 4% 6%
Bank only 7,278 14.72% 6,922 80.20% 4% 6%
Total capital to risk-weighted assets:
Consolidated 8,427 17.07% 9,830 111.91% 8% 10%
Bank only 7,898 15.98% 7,012 81.24% 8% 10%
Tier I capital to average assets (leverage):
Consolidated 7,808 10.42% 9,740 66.70% 4% 5%
Bank only 7,278 9.73% 6,922 61.09% 4% 5%
</TABLE>
12
<PAGE> 15
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(10) BENEFIT PLANS
DEFINED CONTRIBUTION PENSION PLAN - The Corporation has a 401(k) Plan which is a
defined contribution savings plan for employees. Employer contributions are
discretionary and are determined annually by the Board of Directors. Employer
contributions of $19,000 and $3,000 were paid or accrued for the periods ended
December 31, 1997, and 1996.
STOCK OPTION PLANS - The Corporation has two stock-based compensation plans.
Under the 1996 Employee Stock Option Plan (Employee Plan), the Corporation may
grant options to key employees for up to 44,000 shares of common stock. Under
the 1996 Stock Option Plan for Nonemployee Directors (Director Plan), the
Corporation may grant options for up to 44,000 shares of common stock. Options
granted under the Employee Plan were 5,500 and 16,500 in 1997 and 1996,
respectively. Options granted in 1996 under the Director Plan were 39,600. Under
both plans, only a portion of the options are immediately exercisable. The
remainder become exercisable on specified annual dates in the future. Under both
plans, the exercise price of each option equals the market price of the
Corporation's common stock at the date of grant. Under the Employee Plan and
Director Plan, an option's maximum term is ten and seven years, respectively.
Options under both plans vest based on the achievement of certain events.
The Corporation has estimated fair value of the options issued in 1997 at $5.10
per share, using the Black-Scholes option pricing model. In 1996, the
Corporation had estimated the fair value of the options to be $2.73 per share,
using a "minimum value" concept. If the Corporation had used the fair value
method of accounting and recognized compensation costs for the plans based on
the fair value of awards at the grant date, net loss and loss per share on a pro
forma basis would have been as follows:
<TABLE>
<CAPTION>
Year ended Period from April 26, 1996
December 31, 1997 (inception) to December 31, 1996
--------------- ---------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Net loss As reported ($1,932) ($780)
Pro forma ($1,974) ($816)
======= =====
Basic net loss per share
(Note 16) As reported ($1.53) ($1.54)
Pro forma ($1.56) ($1.61)
====== ======
Basic net loss per public offering share
(Note 16) As reported ($0.62)
Pro forma ($0.65)
======
</TABLE>
13
<PAGE> 16
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Following is a summary of the Corporation's two stock option plans for the year
ended December 31, 1997, and the period from April 26, 1996 (inception) to
December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
-------------------------------- -------------------------------
Number of Weighted Average Number of Weighted Average
Shares Exercise Price Shares Exercise Price
--------- --------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period 56,100 $ 9.09 -- $ --
Granted 5,500 10.91 56,100 9.09
Exercised -- -- -- --
Expired (4,400) 9.09 -- --
------- --------- ------- -----
Outstanding, end of year 57,200 $ 9.27 56,100 $9.09
======= ========= ======= =====
</TABLE>
The following table shows summary information about fixed stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Exercisable
- --------------------------------------------------------------------------- --------------------------------
Weighted Average Weighted
Range of Number Remaining Weighted Average Number of Average Exercise
Exercise Prices of Shares Contractual Life Exercise Price Shares Price
- --------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$9.09 51,700 6.4 years $9.09 24,200 $9.09
10.91 5,500 8.4 years 10.91 1,100 10.91
-------------- ------ --------- ----- ------ -----
$9.09 - $10.91 57,200 6.6 years $9.27 25,300 $9.17
============== ====== ========= ===== ====== =====
</TABLE>
14
<PAGE> 17
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) OTHER OPERATING EXPENSE
The following is a summary of significant components of other operating expense
for the year ended December 31, 1997, and the period from April 26, 1996
(inception) to December 31, 1996:
<TABLE>
<CAPTION>
1997 1996
------- -------
(in thousands)
<S> <C> <C>
Advertising and public relations $306 $35
Data processing 274 70
Professional and regulatory fees 157 50
Printing and supplies 81 36
Telephone 48 8
Loan closing 47 --
Credit card processing 36 --
Insurance 35 8
Pre-opening and organization expenses 32 254
Other 72 10
------ ----
Total other operating expense $1,088 $471
====== ====
</TABLE>
15
<PAGE> 18
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) TAXES ON INCOME
The Corporation and the Bank file a consolidated Federal income tax return. No
tax credit has been provided for the future benefit of the net operating loss
carryforward generated since inception, because the Corporation does not have a
history of earnings. Net operating loss carryfowards available to reduce future
taxable income total approximately $1,701,000 through years ending 2012.
Deferred income taxes are provided for the temporary differences between the
financial reporting bases and the tax bases of the Corporation's assets and
liabilities. The sources of such temporary differences and the resulting net
deferred tax expense are as follows:
<TABLE>
<CAPTION>
Year ended Period from April 26, 1996
December 31, 1997 (inception) to December 31, 1996
--------------- ---------------------------
(in thousands)
<S> <C> <C>
Net operating loss carryforward ($358) ($220)
Provision for loan losses (209) (26)
Depreciation (76) (17)
Deferred loan fees (52) (8)
Original issue discount 52 8
Other 1 (1)
Increase in valuation allowance 642 264
------- --------
Net deferred tax expense $ ---- $ ----
======= ========
</TABLE>
The temporary differences and carryforwards which comprise deferred tax assets
and liabilities at December 31, are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 578 $ 220
Provision for loan losses 235 26
Depreciation 93 17
Deferred loan fees 60 8
Other 19 1
------ ------
Total deferred tax assets 985 272
Valuation allowance for
deferred tax assets (906) (264)
Deferred tax liabilities:
Original issue discount (60) (8)
Other (19) ---
------ ------
Net deferred tax asset (liability) $ ---- $ ---
====== ======
</TABLE>
16
<PAGE> 19
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(13) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimates of fair value of financial instruments have been determined using
available market information and appropriate valuation methods, as outlined
below. Considerable judgment is inherently required to interpret market data to
develop the estimates of fair value. Accordingly, the estimates presented below
do not necessarily represent amounts that the Corporation could realize in a
current market exchange. The following methods and assumptions were used to
estimate the fair value of financial instruments:
CASH AND CASH EQUIVALENTS: For these short term instruments, the carrying amount
is a reasonable estimate of fair value.
SECURITIES: For marketable debt securities, estimated fair value is based on
quoted market prices or dealer quotes.
LOANS: For variable rate loans with no significant change in credit risk since
loan origination, the carrying amount is a reasonable estimate of fair value.
For all other loans, including fixed rate loans, the fair value is estimated
using a discounted cash flow analysis, using interest rates currently offered on
similar loans to borrowers with similar credit ratings and for the same
remaining maturities. The resulting value is reduced by an estimate of losses
inherent in the portfolio.
DEPOSITS: The estimated fair value of demand deposits, certain money market
deposits, and savings deposits is the amount payable on demand at the reporting
date. The fair value of fixed maturity time deposits is estimated using the
rates currently offered for deposits of similar remaining maturities.
SHORT TERM BORROWINGS: The estimated fair value of short term borrowings is the
carrying amount, since they mature the next day.
ACCRUED INTEREST: Accrued interest receivable and payable are short term in
nature; therefore, their carrying amount approximates fair value.
COMMITMENTS: Commitments to extend credit and standby letters of credit are not
recorded on the balance sheet. The fair value of commitments is estimated using
the fees currently charged to enter into similar arrangements, taking into
account the remaining terms of the agreements and the present creditworthiness
of the counterparties. The majority of commitments to extend credit and letters
of credit would result in loans with a market rate of interest if funded. The
fair value of these commitments are the fees that would be charged for similar
arrangements with comparable risk and maturity. The recorded book value of
deferred fee income approximates fair value.
The use of different market assumptions and/or estimation methods may have a
material effect on the estimated fair value amounts.
17
<PAGE> 20
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The recorded carrying amounts and estimated fair values of the Corporation's
financial instruments at December 31, are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ -------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------------------------ -------------------------
(in thousands)
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $3,529 $3,529 $15,658 $15,658
Securities 20,507 20,541 ---- ----
Loans, net of allowance 52,335 52,395 5,488 5,488
Accrued interest receivable 499 499 17 17
Financial Liabilities:
Demand and savings deposits 19,214 19,214 4,619 4,619
Time deposits 49,141 49,282 7,562 7,562
Short term borrowings 1,403 1,403 ---- ----
Accrued interest payable 191 191 32 32
</TABLE>
(14) OFF-BALANCE SHEET RISK
The Corporation is party to financial instruments with off-balance sheet risk in
the normal course of business, to meet financing needs of its customers and to
reduce its own exposure to fluctuations in interest rates. These financial
instruments include commitments to extend credit and financial guarantees. These
instruments involve, to varying degrees, elements of credit and interest rate
risk that are not recognized in the balance sheet.
Commitments to extend credit are agreements to lend to a customer as long as
there are no violations of any conditions established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Fees from issuing these commitments to extend
credit are recognized over the period to maturity. Since a portion of the
commitments is expected to expire without being drawn upon, the total
commitments do not necessarily represent future cash requirements. The
Corporation evaluates each customer's creditworthiness on a case by case basis.
The amount of collateral obtained upon extension of credit is based on
management's credit evaluation of customers. The Corporation also has legally
binding commitments to extend credit in the form of loans that have been
approved but not yet closed. These funds are normally disbursed during the next
quarter, unless the customer fails to comply with any significant terms of the
loan commitment.
Standby letters of credit are issued in connection with agreements between
customers and a third party. If the customer fails to comply with the agreement,
the counterparty may enforce the standby letter of credit as a remedy. Credit
risk arises from the possibility that the customer may not be able to repay the
Corporation after the letter of credit is enforced.
18
<PAGE> 21
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of commitments not recorded on the balance sheet at December 31 is as
follows:
<TABLE>
<CAPTION>
1997 1996
----- -----
(in thousands)
<S> <C> <C>
Unused home equity lines of credit $ 1,121 $ 338
Unused credit card lines 1,115 480
Unused portion of construction lines of credit 3,291 ------
Unused portion of all other credit lines 6,679 259
Loans committed but not yet closed 5,942 3,888
Standby letters of credit 383 ------
------- ------
Total outstanding commitments $18,531 $4,965
======= ======
</TABLE>
(15) RESTRICTIONS ON DIVIDENDS
Dividends paid by the Corporation would be provided primarily by dividends from
the Bank. However, certain restrictions exist regarding the ability of the Bank
to transfer funds to the Corporation in the form of cash dividends, loans, or
advances. The approval of the FDIC would be required in order for the Bank to
pay dividends in excess of regulatory limits.
19
<PAGE> 22
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) EARNINGS PER SHARE
Earnings (loss) per share is calculated in accordance with SFAS 128, "Earnings
Per Share." Accordingly, the denominator average number of shares outstanding is
based on the actual number of shares issued and outstanding during the period.
For the period from April 26, 1996 (inception) through the Corporation's initial
public stock offering on September 23, 1996, there was one share of stock
outstanding. SFAS 128 would therefore prescribe a weighted average calculation
which includes the non-public time period when only one share was outstanding.
Following is a comparison of the calculated loss per share (SFAS 128) with the
per share calculation which applies only to the shares outstanding since the
initial public stock offering:
<TABLE>
<CAPTION>
Year ended Period from April 26, 1996
December 31, 1997 (inception) to December 31, 1996
---------------- ---------------------------
(in thousands, except per share data)
<S> <C> <C>
Net Loss ($1,932) ($780)
Weighted average number of
shares outstanding from inception
through December 31, 1996 ---- 506
Weighted average shares outstanding
in 1997 1,265 ---
------ -----
Net loss per share in accordance with
SFAS 128 ($1.53) ($1.54)
===== =====
Net Loss ($780)
Weighted average number of
shares outstanding from date of public
offering through December 31, 1996 1,265
-----
Net loss per share applicable only to
public offering shares ($0.62)
=====
</TABLE>
20
<PAGE> 23
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(17) PARENT-ONLY FINANCIAL STATEMENTS
The following condensed financial information presents the financial condition
of the Parent Holding Company (the Parent) only, along with the results of its
operations and its cash flow. The Parent has recorded its investment in the Bank
at cost, less the undistributed loss of the Bank since it was formed. The Parent
recognizes undistributed losses of the Bank as a noninterest expense. The
Parent-only financial information should be read in conjunction with the
Corporation's consolidated financial statements.
<TABLE>
<CAPTION>
PARENT-ONLY BALANCE SHEET December 31,
- --------------------------------------------------------------------------------
Assets 1997 1996
- --------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Cash $410 $2,667
Investment in subsidiary 7,308 6,922
Other assets 119 151
- --------------------------------------------------------------------------------
Total Assets $7,837 $9,740
================================================================================
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- --------------------------------------------------------------------------------
Total Liabilities $ ---- $ ----
- --------------------------------------------------------------------------------
Common stock 6,325 5,750
Additional paid-in capital 4,195 4,770
Accumulated deficit (2,683) (780)
- --------------------------------------------------------------------------------
Total Stockholders' Equity 7,837 9,740
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $7,837 $9,740
================================================================================
</TABLE>
21
<PAGE> 24
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PARENT-ONLY STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended Period from April 26, 1996 (inception)
December 31, 1997 to December 31, 1996
- -------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Operating Income
Interest income $28 $59
- -------------------------------------------------------------------------------------------------------------
Total Operating Income 28 59
- -------------------------------------------------------------------------------------------------------------
Operating Expense
Other expense 67 261
- -------------------------------------------------------------------------------------------------------------
Total Operating Expense 67 261
- -------------------------------------------------------------------------------------------------------------
Loss Before Share
in Undistributed Loss of Subsidiary (39) (202)
Share in undistributed loss of
subsidiary (1,893) (578)
- -------------------------------------------------------------------------------------------------------------
Net Loss ($1,932) ($780)
=============================================================================================================
</TABLE>
22
<PAGE> 25
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PARENT-ONLY STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
Year ended Period from April 26, 1996 (inception)
December 31, 1997 to December 31, 1996
- -------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Operating Activities
Net loss ($1,932) ($780)
Adjustments to reconcile net loss to net cash
flow from operating activities
Undistributed loss of subsidiary 1,893 578
Decrease (increase) in other assets 32 (151)
- -------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (7) (353)
- -------------------------------------------------------------------------------------------------------------
Investing Activities
Capital contribution to subsidiary (2,250) (7,500)
- -------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (2,250) (7,500)
- -------------------------------------------------------------------------------------------------------------
Financing Activities
Public stock offering ---- 10,520
- -------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities ---- 10,520
- -------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash (2,257) 2,667
Cash at the Beginning of the Period 2,667 ----
- -------------------------------------------------------------------------------------------------------------
Cash at the End of the Period $410 $2,667
=============================================================================================================
</TABLE>
23
<PAGE> 26
COMMUNITY CENTRAL BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following plan of operation and analysis of the Corporation's operating
results and financial condition for the periods ended December 31, 1997, should
be read in conjunction with the financial statements and statistical data
presented elsewhere. The discussion and analysis contains forward-looking
statements that are based on management's beliefs, assumptions, current
expectations, and projections. These statements are not guarantees of future
performance, and involve certain risks and uncertainties. Actual results may
materially differ from what may be expressed herein.
PLAN OF OPERATION
The Corporation's plan of operation for the next twelve months is to raise funds
by attracting deposits. Management may consider raising additional funds by
other means, if needed, to support additional asset growth. Based on current
growth projections, management believes that the Corporation is likely to have
adequate funds to meet its cash requirements for at least the next several
years. The Corporation has no plans for product research and development which
would be performed within the next 12 months. During the next twelve months, the
Corporation does not anticipate the need for any additional equipment
expenditures. Also, no significant changes are expected in staffing levels over
that same period.
NET INTEREST INCOME
The Corporation expects net interest income to be its principal source of future
income. During 1997 net interest income was $1.7 million. The Corporation's net
interest margin for the year was 3.36%. Net interest income can be expected to
increase in the future, as funds continue to be moved from short term
investments into higher yielding, longer term loans and securities. This will be
accomplished as the Corporation develops its deposit base and loan portfolio.
24
<PAGE> 27
COMMUNITY CENTRAL BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
AVERAGE BALANCE SHEETS
The following table shows the Corporation's consolidated average balances of
assets, liabilities, and equity; the amount of interest income or interest
expense and the average yield or rate for each category of interest earning
asset and interest bearing liability; and the net interest margin for the
periods indicated. Interest on loans includes loan fees.
<TABLE>
<CAPTION>
Year ended Period from April 26, 1996 (inception)
December 31, 1997 to December 31, 1996
- -------------------------------------------------------------------------------------------------------------
Average Average
Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned
Balance Expense Paid Balance Expense Paid
--------- -------- ------- ------- ------- ------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Federal funds sold $9,846 $ 534 5.43% $4,493 $158 5.15%
Securities 11,646 707 6.08 ---- ---- ---
Loans 28,781 2,708 9.41 536 42 11.47
------- ------ ----- ------ ---- ------
Total Earning Assets/
Total Interest Income 50,273 3,949 7.86% 5,029 200 5.82%
------ ----- ---- -----
Cash and due from banks 2,131 373
All other assets 1,998 772
------- ------
Total Assets $54,402 $6,174
======= ======
Liabilities and Equity:
NOW and money market accounts $6,650 255 3.83% $275 7 3.94%
Savings deposits 1,213 37 3.06 44 1 2.41
Time deposits 30,866 1,803 5.84 881 34 5.57
Short term borrowings 557 29 5.26 ---- ---- ---
Capitalized lease obligation 1,019 137 13.50 439 40 13.38
------- ------ ----- ------ ---- ------
Total Interest Bearing
Liabilities/Total Interest
Expense 40,305 2,261 5.61% 1,639 82 7.30%
------ ----- ---- ----
Noninterest bearing
demand deposits 5,238 252
All other liabilities 155 149
Stockholders' equity 8,704 4,134
------- ------
Total Liabilities and
Stockholders' Equity $54,402 $6,174
======= ======
Net Interest Income $1,688 $118
====== ====
Net Interest Margin (Net Interest
Income/Total Earning Assets) 3.36% 3.44%
===== =====
</TABLE>
25
<PAGE> 28
COMMUNITY CENTRAL BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
ALLOWANCE AND PROVISION FOR LOAN LOSSES
It is the Corporation's practice to maintain the allowance for loan losses at a
level adequate to provide for reasonably foreseeable losses. Management's
evaluation is based on a continuing review of the loan portfolio and includes,
but is not limited to, consideration of actual loss experience, the present and
prospective financial condition of borrowers, adequacy of collateral, industry
concentrations within the portfolio, and general economic conditions. As of
December 31, 1997 the Corporation's allowance for possible loan losses was 1.51%
of outstanding loans.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The liquidity of a bank allows it to provide funds to meet loan requests, to
accommodate possible outflows in deposits, and to take advantage of other
investment opportunities. Funding of loan requests, providing for liability
outflows, and managing interest rate margins require continuous analysis in
order to match the maturities of specific categories of loans and investments
with specific types of deposits and borrowings. Bank liquidity is thus normally
defined by the mix of the banking institution's potential sources and uses of
funds. For the Corporation, the major sources of liquidity have been federal
funds sold, securities available for sale, and loans (including demand loans)
which mature within one year. At December 31, 1997, federal funds sold amounted
to $1.3 million, while the fair value of securities available for sale was $5.4
million. Loans (including demand loans) maturing within a year amounted to $10.6
million at December 31, 1997. Additional liquidity is provided by a secured
federal funds borrowing line of credit of $2.0 million. The Corporation's large
deposits which might experience volatile rate changes are closely monitored.
These deposits consist mainly of jumbo time certificates of deposit, of which
the balance was $23.9 million at December 31, 1997.
Managing rates on earning assets and interest bearing liabilities focuses on
maintaining stability in the net interest spread, an important factor in
earnings growth and stability. Emphasis is placed on maintaining a controlled
rate sensitivity position, to avoid wide swings in spreads and to manage risk
due to changes in interest rates.
26
<PAGE> 29
COMMUNITY CENTRAL BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following table shows the maturity and repricing distribution of the
Corporation's interest earning assets and interest bearing liabilities as of
December 31, 1997, the interest rate sensitivity gap (i.e., interest rate
sensitive assets less interest rate sensitive liabilities), cumulative interest
rate sensitivity gap, the interest rate sensitivity gap ratio (i.e., interest
rate sensitive assets divided by interest rate sensitive liabilities), and the
cumulative interest rate sensitivity gap ratio. For the purposes of the
following table, an asset or liability is considered rate sensitive within a
period when it matures or could be repriced within such period, generally
according to its contractual terms.
<TABLE>
<CAPTION>
After Three After One
Within Months But Year But After
Three Within Within Five
Months One Year Five Years Years Total
------- --------- ---------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Federal funds sold $1,250 $ ---- $ ---- $ ---- $1,250
Securities (1) 500 3,233 14,677 2,068 20,478
Loans 19,492 3,278 20,819 9,546 53,135
------- ------- ------- ------- -------
Total 21,242 6,511 35,496 11,614 $74,683
=======
Interest bearing liabilities:
NOW and money market accounts 9,834 ---- ---- ---- $9,834
Savings deposits 2,057 ---- ---- ---- 2,057
Jumbo time deposits 13,509 10,426 ---- ---- 23,935
Time deposits < $100,000 9,486 15,489 231 ---- 25,206
Short term borrowings 1,403 ---- ---- ---- 1,403
Capitalized lease obligation ---- ---- 87 948 1,035
------- ------- ------- ------- -------
Total 36,289 25,915 318 948 63,470
------- ------- ------- ------- =======
Interest rate sensitivity gap ($15,047) (19,404) 35,178 10,666
Cumulative interest rate
sensitivity gap ($34,451) $727 $11,393
Interest rate sensitivity gap ratio 0.59 0.25 111.62 12.25
Cumulative interest ratio
sensitivity gap ratio 0.45 1.01 1.18
</TABLE>
(1) All securities are reported in this table at amortized cost.
The table above indicates the time periods in which interest earning assets and
interest bearing liabilities will mature or may be repriced, generally in
accordance with their contractual terms. However, this table does not
necessarily indicate the impact of general interest rate movements on the
Corporation's net interest yield because the repricing of various categories of
assets and liabilities is discretionary and is subject to competitive and other
pressures. As a result, various assets and liabilities indicated as repricing
within the same period may in fact reprice at different times and at different
rate levels.
Based on the table above, the Corporation is considered to be asset sensitive in
the one-year maturity range at December 31, 1997. In a rising rate environment,
the Corporation might be able to increase prices on interest earning assets
faster than the increase in rates on interest bearing liabilities.
27
<PAGE> 30
COMMUNITY CENTRAL BANK CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The Corporation is also developing a computer model to simulate the effects of
possible interest rate changes. As a general rule, estimated negative exposure
to changing interest rates would be limited to 5% of net interest income. The
exposure estimate will be based on a variety of assumptions built into the
model, and assumed interest rate changes of plus or minus 200 basis points. The
results of this analysis will be reported to the Board of Directors to assist in
the interest rate risk management process.
OTHER MATTERS
The Corporation is in the process of assessing the impact of the arrival of 2000
on its computerized information systems and other electronic equipment. The
"year 2000 problem" is the result of abbreviating an applicable year with two
digits rather than four. As a result, computer programs and other devices may
interpret a date field of "00" as 1900 rather than 2000. Such a miscalculation
could lead to system malfunction or complete failure. The Corporation's main
data processing vendor is undertaking a significant effort to have all systems
renovated or replaced before 2000, and has been providing frequent updates on
progress and testing. In addition, the Corporation has begun an internal
evaluation of equipment and vendor supplied products. While this effort will
involve additional costs, the amount is not expected to have a material adverse
impact on the Corporation's financial position, results of operations, or cash
flow in future periods. However, if the Corporation (or its customers or
vendors) are unable to remedy the problems in a timely manner, it could result
in a material financial risk.
28
<PAGE> 31
COMMUNITY CENTRAL BANK CORPORATION
STOCKHOLDER INFORMATION
SEC FORM 10-KSB
Copies of the Corporation's annual report on Form 10-KSB, as filed with the
Securities and Exchange Commission are available to stockholders without charge,
upon written request. Please mail your request to Peter J. Przybocki, CPA;
Corporate Treasurer, Community Central Bank Corporation, 100 North Main Street,
PO Box 7, Mount Clemens, MI 48046-0007.
STOCK INFORMATION
The common stock of Community Central Bank Corporation is quoted on the OTC
Bulletin Board (OTCBB) under the ticker symbol "CCBD." At December 31, 1997,
there were approximately 250 record holders of the Corporation's common stock.
The following table shows the high and low bid prices by quarter during the
period from the date of the Corporation's public stock offering (September 23,
1996) through the end of the current year. The quotations reflect bid prices as
reported by the OTCBB, and do not include retail mark-up, mark-down or dealer
commission.
1997 Bid Prices
---------------
<TABLE>
<CAPTION>
Cash
Dividends
Quarter High Low Declared
---------------------------------------------------------------
<S> <C> <C> <C>
Fourth $14.00 $11.50 $ ----
Third * * ----
Second 10.91 10.57 ----
First 10.68 9.55 ----
---------------------------------------------------------------
<CAPTION>
1996 Bid Prices
---------------
Cash
Dividends
Quarter High Low Declared
---------------------------------------------------------------
Fourth $9.55 $8.86 $ ----
Third 9.09 9.09 ----
---------------------------------------------------------------
</TABLE>
* No bid information was available from the OTCBB.
Price data has been retroactively adjusted for the 10% stock dividend in April,
1997.
29
<PAGE> 32
COMMUNITY CENTRAL BANK CORPORATION
STOCKHOLDER INFORMATION
MARKET MAKERS
At December 31, 1997, the following firms were registered with the OTCBB as
market makers in Community Central Bank Corporation common stock:
Roney and Co. First of Michigan Corporation
One Griswold 100 Renaissance Center, 26th Floor
Detroit, Michigan 48226 Detroit, MI 48243
Ryan, Beck & Co. Monroe Securities, Inc.
80 Main Street 47 State Street
West Orange, New Jersey 07052 Rochester, New York 14614
STOCK REGISTRAR AND TRANSFER AGENT
Boston EquiServe
PO Box 1728
Boston, Massachusetts 02105-1728
INDEPENDENT AUDITORS
Plante & Moran, LLP
505 N. Woodward Avenue, Suite 2000
Bloomfield Hills, MI 48304-2979
LEGAL COUNSEL
Dickinson Wright PLLC
500 Woodward Avenue, Suite 4000
Detroit, MI 48226-3425
INFORMATION
News media representatives and those seeking additional information about the
Corporation should contact Peter J. Przybocki, CPA; Corporate Treasurer, at
(810) 783-4500, or by writing him at 100 North Main Street, PO Box 7, Mount
Clemens, MI 48046-0007.
ANNUAL MEETING
This year's Annual Meeting will be held at 10:00 A.M., on Tuesday, April 21,
1998, at Fern Hill Country Club, 17600 Clinton River, Clinton Township, MI
48038.
30
<PAGE> 1
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
EXHIBIT 20
PROXY STATEMENT OF THE CORPORATION
DATED MARCH 27, 1998
<PAGE> 2
COMMUNITY CENTRAL BANK CORPORATION
100 NORTH MAIN STREET
PO BOX 7
MOUNT CLEMENS, MI 48046-0007
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 21, 1998
TO THE HOLDERS OF SHARES OF COMMON STOCK OF
COMMUNITY CENTRAL BANK CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
COMMUNITY CENTRAL BANK CORPORATION will be held at the Fern Hill Country Club,
17600 Clinton River, Clinton Township, Michigan, on Tuesday, April 21, 1998, at
10:00 A.M., for the purpose of considering and voting upon the following
matters:
1. ELECTION OF DIRECTORS. To elect four Class I directors for a three
year term, as detailed in the accompanying Proxy Statement.
2. OTHER BUSINESS. To transact such other business as may properly be
brought before the meeting or any adjournment or adjournments thereof.
Only those stockholders of record at the close of business on Monday,
March 23, 1998, shall be entitled to notice of and to vote at the meeting.
We urge you to sign and return the enclosed proxy as promptly as
possible, whether or not you plan to attend the meeting in person. We would
appreciate receiving your proxy by Tuesday, April 14, 1998.
By Order of the Board of Directors,
Harold W. Allmacher Richard J. Miller
Chairman of the Board & President & Chief Operating Officer
Chief Executive Officer
Dated: March 27, 1998
i
<PAGE> 3
COMMUNITY CENTRAL BANK CORPORATION
100 NORTH MAIN STREET
PO BOX 7
MOUNT CLEMENS, MI 48046-0007
March 27, 1998
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to stockholders of Community Central
Bank Corporation (the Corporation) in connection with the solicitation of
proxies by the Board of Directors of the Corporation, for use at the Annual
Meeting of stockholders of the Corporation to be held on Tuesday, April 21,
1998, at 10:00 A.M., at the Fern Hill Country Club, 17600 Clinton River, Clinton
Township, MI and at any and all adjournments thereof. The proxy materials were
mailed to stockholders on or about March 27, 1998.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its exercise. Unless the proxy is revoked,
the shares represented thereby will be voted at the Annual Meeting or any
adjournment thereof.
The entire cost of soliciting proxies will be borne by the Corporation.
Proxies may be solicited by mail or telegraph, or by directors, officers, or
regular employees of the Corporation or its subsidiary, in person or by
telephone. The Corporation will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their out-of-pocket expenses for
forwarding soliciting material to the beneficial owners of Common Stock of the
Corporation.
The Board of Directors, in accordance with the By-Laws of the
Corporation, has fixed the close of business on March 23, 1998, as the record
date for determining the stockholders entitled to notice of and to vote at the
Annual Meeting and at any and all adjournments thereof.
At the close of business on such record date, the outstanding number of
voting securities of the Corporation was 1,265,000 shares of Common Stock, each
of which is entitled to one vote.
ELECTION OF DIRECTORS
The Corporation's Certificate of Incorporation and By-Laws provide that
the number of directors, as determined from time to time by the Board of
Directors, shall be no less than six and no more than fifteen. The Board of
Directors has presently fixed the number of directors at eleven. The Certificate
of Incorporation and By-Laws further provide that the directors shall be divided
into three classes, Class I, Class II and Class III, with each class serving a
staggered three year term and with the number of directors in each class being
as nearly as equal as possible.
The Board of Directors has nominated Salvatore Cottone, Bobby L. Hill,
Richard J. Miller, and Dean S. Petitpren as Class I directors for three year
terms expiring at the 2001 Annual Meeting and upon election and qualification of
their successors. Each of the nominees is
1
<PAGE> 4
presently a Class I director of the Corporation whose term expires at the April
21, 1998, Annual Meeting of the shareholders. The other members of the Board,
who are Class II and Class III directors, will continue in office in accordance
with their previous elections until the expiration of their terms at the 1999 or
2000 Annual Meeting, as the case may be.
It is the intention of the persons named in the enclosed proxy to vote
such proxy for the election of the four nominees listed herein. The proposed
nominees for election as directors are willing to be elected and serve; but in
the event that any nominee at the time of election is unable to serve or is
otherwise unavailable for election, the Board of Directors may select a
substitute nominee, and in that event the persons named in the enclosed proxy
intend to vote such proxy for the person so selected. If a substitute nominee is
not so selected, such proxy will be voted for the election of the remaining
nominees. The affirmative vote of a plurality of the votes cast at the meeting
is required for the nominees to be elected.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information regarding the beneficial
ownership of the Corporation's Common Stock as of February 1, 1998, by the
nominees for election as directors of the Corporation, the directors of the
Corporation whose terms of office will continue after the Annual Meeting, the
executive officer named in the Summary Compensation Table, and all directors and
executive officers of the Corporation as a group.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name of Beneficial Owner Amount Percent of Class
Beneficially Beneficially Owned
Owned (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Harold W. Allmacher............................ 47,200 (2) 3.66%
Gebran S. Anton................................ 29,700 (3) 2.30%
Joseph Catenacci............................... 29,700 (3) 2.30%
Raymond M. Contesti............................ 18,700 (3) 1.45%
Salvatore Cottone.............................. 29,700 (3) 2.30%
Celestina Giles................................ 12,553 (2) 0.97%
Bobby L. Hill.................................. 14,300 (3) 1.11%
Joseph F. Jeannette............................ 32,450 (3) 2.52%
Richard J. Miller.............................. 13,200 (2) 1.02%
Dean S. Petitpren.............................. 29,700 (3) 2.30%
Carole L. Schwartz............................. 32,050 (3) 2.49%
All directors and executive officers of the
Corporation as a group (11 persons)......... 289,253 22.44%
- --------------------------------------------------------------------------------
</TABLE>
(1) Some or all of the Common Stock listed may be held jointly with, or for the
benefit of, spouses and children of, or various trusts established by, the
person indicated.
(2) Includes 2,200 shares that such person has the right to acquire within 60
days of February 1, 1998, pursuant to the Corporation's 1996 Employee Stock
Option Plan. Such person also holds an option under this Plan to purchase
an additional 3,300 shares, which has not yet vested.
(3) Includes 2,200 shares that such person has the right to acquire within 60
days of February 1, 1998, pursuant to the Corporation's 1996 Stock Option
Plan for Nonemployee Directors. Such person also holds an option under this
Plan to purchase an additional 2,200 shares, which has not yet vested.
2
<PAGE> 5
The table below shows the beneficial ownership of the Corporation's Common Stock
by each person who was known by the Corporation to own beneficially more than 5%
of the Corporation's Common Stock as of February 1, 1998. The information is
based on filings that have been made by such persons with the Securities and
Exchange Commission and other information that has been provided to the
Corporation by such person. To the best of the Corporation's knowledge, no other
person owns more than 5% of the Corporation's outstanding Common Stock.
- --------------------------------------------------------------------------------
Name and Address Shares Percent of
of Beneficial Owner Beneficially Common
Owned Stock
- --------------------------------------------------------------------------------
Willard G. Pierce 220,000 17.4%
820 West Clinton Street
Hastings, MI 49058
3
<PAGE> 6
INFORMATION ABOUT DIRECTORS AND NOMINEES AS DIRECTORS
The following information is furnished with respect to each person who
is presently a director of the Corporation whose term of office will continue
after the Annual Meeting of stockholders, as well as those persons who
have been nominated for election as a director, each of whom is presently a
director of the Corporation as well as a director of Community Central Bank (the
Bank), which is the Corporation's subsidiary.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Has Served Year When Term
as Director or Proposed Term
Name, Age, Principal Occupation Since of Office Expires
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harold W. Allmacher, 58......................................................... 1996 1999
Chairman of the Board and Chief Executive Officer;
Community Central Bank Corporation and Community Central Bank
Gebran S. Anton, 65............................................................ 1996 1999
Co-owner; Anton, Zorn & Associates (Commercial & Industrial
Real Estate Brokerage)
President; Gebran Anton Development Co. (Real Estate Development)
Joseph Catenacci, 62............................................................ 1996 2000
Executive Vice President; John Carlo, Inc. (Highway and Heavy
Construction)
Raymond M. Contesti, 62......................................................... 1996 2000
Superintendent; Clintondale Community Schools
Salvatore Cottone, 57........................................................... 1996 2001
President; Resco, Inc. (Real Estate Development)
Celestina Giles, 50............................................................. 1996 2000
Bank Officer; Community Central Bank
Bobby L. Hill, 66............................................................... 1996 2001
County Commissioner; Macomb County Board of Commissioners
Joseph F. Jeannette, 53......................................................... 1996 1999
Assistant Director; Utica Community Schools
Richard J. Miller, 39........................................................... 1996 2001
President and Chief Operating Officer;
Community Central Bank Corporation and Community Central Bank
Dean S. Petitpren, 55........................................................... 1996 2001
President; Petitpren, Inc. (Beer Distribution)
Carole L. Schwartz, 60.......................................................... 1996 1999
Commissioner; Zoning Board of Appeals
</TABLE>
In addition Harold W. Allmacher and Celestina Giles held similar positions,
while Richard J. Miller served as Vice President of Finance, with Old Kent Bank
- - Macomb (formerly First National Bank in Macomb County) for substantially all
of the three year period prior to the inception of the Corporation and the Bank.
4
<PAGE> 7
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Corporation has standing Audit and Compensation Committees of the
Board of Directors.
The members of the Audit Committee consist of Salvatore Cottone,
Chairman; Bobby L. Hill, Joseph F. Jeannette, and Carole L. Schwartz. The Audit
Committee's responsibilities include recommending to the Board of Directors the
selection of independent accountants, approving the scope of audit and non-audit
services performed by the independent accountants, reviewing the results of
their audit, reviewing the Corporation's internal auditing activities and
financial statements, and reviewing the Corporation's system of accounting
controls and recordkeeping.
The members of the Compensation Committee consist of Raymond M.
Contesti, Joseph F. Jeannette and Carole L. Schwartz. The Compensation
Committee's responsibilities include considering and recommending to the Board
of Directors any changes in compensation and benefits for officers of the
Corporation. At present, all officers of the Corporation are also officers of
the Bank, and although they receive compensation from the Bank in their capacity
as officers of the Bank, they presently receive no separate cash compensation
from the Corporation. The Compensation Committee is responsible for awarding
incentive stock options to executive management of the Corporation and the Bank.
The Board of Directors is responsible for reviewing and making
recommendations as to the size and composition of the Board of Directors,
nominating candidates for election as directors at the annual meetings, and
filling any vacancies that may occur between annual meetings. The Board of
Directors will consider as potential nominees persons recommended by
stockholders. Recommendations should be submitted to the Board of Directors in
care of Harold W. Allmacher, Chairman and CEO of the Corporation. Each
recommendation should include a personal biography of the suggested nominee, an
indication of the background or experience that qualifies such person for
consideration, and a statement that such person has agreed to serve if nominated
and elected. Stockholders who themselves wish to effectively nominate a person
for election to the Board of Directors, as contrasted with recommending a
potential nominee to the Board of Directors for its consideration, are required
to comply with the advance notice and other requirements set forth in the
Corporation's Articles of Incorporation.
During the year ended December 31, 1997, there were a total of twelve
meetings of the Board of Directors of the Corporation. Each director attended at
least 75% of the total number of meetings of the Board of Directors held during
the period that the director served. There were two meetings of the Audit
Committee and two meetings of the Compensation Committee during 1997.
During 1997, no compensation was paid to any directors of the
Corporation for their services in such capacities.
5
<PAGE> 8
Members of the Corporation's Board of Directors who are not employees
of the Corporation or any of its affiliates (Nonemployee Directors), each
received an option to purchase 4,400 shares of Common Stock of the Corporation
at a price of $9.09 per share, pursuant to the Corporation's 1996 Stock Option
Plan for Nonemployee Directors which was approved on June 1, 1996. Under this
Plan, each option was immediately exercisable for 1,100 shares when granted.
Thereafter, as of the date of each Annual Meeting, each option is exercisable
for an additional 1,100 shares until it is exercisable in full. Each option
expires not later than seven years after its date of grant. Nonemployee
Directors who are appointed or elected after June 1, 1996, will receive an
option for a lesser number of shares, the number of which will depend on which
annual meeting is the first annual meeting occurring concurrently with, or after
he or she becomes a Nonemployee Director.
REPORT OF THE COMPENSATION COMMITTEE
The Securities and Exchange Commission (SEC) has set rules regarding
the presentation of certain statistical information with regard to salaries and
certain benefits paid to each corporation's CEO and the four most highly
compensated individuals earning over $100,000. This information along with the
Report of the Compensation Committee is presented below. The Corporation's and
the Board's policies and practices pertaining to executive officer compensation
have been in practice since inception.
All employees of the Corporation are also employees of the Bank. All
employees salaries as such are paid by the Bank.
The Bank's Compensation Committee, which is made up of the same
directors as the Corporation's Compensation Committee, is responsible for
setting the salary levels of all officers of the Bank, including its executive
officers. Following review and approval by the Bank's Compensation Committee,
all issues pertaining to officer and executive salaries are submitted to the
full Board of Directors of the Bank for approval.
Salaries and Bonuses
In setting the salary level of and awarding bonuses to the named
executive in the Summary Compensation Table and other executive officers, the
compensation amounts are set based upon the Compensation Committee's perception
of the performance of such persons. The Compensation Committee looks at many
factors which may include, but are not limited to:
- Overall performance of the Bank and Corporation as compared to
strategic goals
- Performance of the Bank and Corporation as compared to peers
- Length of service to the Bank and Corporation
- Comparisons of salary levels to similar executives within the
industry
- The performance of the Corporation's common stock
- The executive's leadership of the Bank and its employees
- The executive's stature in the community and his value as a
representative of the Bank and Corporation
6
<PAGE> 9
Employee Stock Option Plan
Under the Corporation's 1996 Employee Stock Option Plan, stock options
are granted to the Bank's senior management and other key employees. The
Compensation Committee of the Corporation is responsible for awarding the stock
options. These options are awarded to give senior management and other key
employees an additional interest in the success, profitability, and future
growth of the Bank and the Corporation. In making grants, the Compensation
Committee may consider the position and responsibilities of the employee, the
value of his or her services and accomplishments, and such other factors as they
deem relevant.
SUMMARY COMPENSATION TABLE
The following table details the compensation received by the named
executive for the period from April 26, 1996 (inception) to December 31, 1996,
and the year ended December 31, 1997:
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
- ------------------------------------------------------------------- --------------------------
Name and
Principal All Other
Position Year Salary Bonus Options Compensation
--------- ---- ------ ----- -------- ------------
<S> <C> <C> <C> <C> <C>
Harold W. Allmacher,
CEO............................ 1997 $67,500 None None None
1996 $31,154 None 5,500 None
</TABLE>
OPTIONS GRANTED IN 1997
The following table provides information on options granted to the
named executive during the year ended December 31, 1997:
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------
Number of % of Total
Shares Options
Underlying Granted to Exercise or
Options Employees Base Price Expiration
Name Granted in 1997 Per Share Date
---- --------- --------- ---------- --------
<S> <C> <C> <C> <C>
Harold W. Allmacher,
CEO............... None N/A N/A N/A
- --------------------
</TABLE>
7
<PAGE> 10
AGGREGATED STOCK OPTION EXERCISES IN 1997
AND YEAR END OPTION VALUES
The following table provides information on the exercise of stock
options during the year ended December 31, 1997, by the named executive, and the
value of unexercised options at December 31, 1997:
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired on Value 12-31-1997 12-31-1997 (1)
Name Exercise Realized Exercisable / Unexercisable Exercisable / Unexercisable
- ----------------- --------- --------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Harold W. Allmacher,
CEO................. None N/A 2,200 / 3,300 $11,352 / $17,028
</TABLE>
(1) Values are calculated by subtracting the exercise price of the option from
the fair market value of the underlying common stock. For purposes of this
table, fair market value is deemed to be $14.25 per share, the average of
the closing bid and asked prices reported by the OTC Bulletin Board as of
December 31, 1997.
CERTAIN TRANSACTIONS
The Bank has had, and expects in the future to have, loan and other
financial transactions in the ordinary course of business with the Corporation's
directors, executive officers, and principal stockholders (and their associates)
on substantially the same terms as those prevailing for comparable transactions
with others. All such transactions (i) were made in the ordinary course of
business, (ii) were made on substantially the same terms, including interest
rates and collateral on loans, as those prevailing at the time for comparable
transactions with other persons, and (iii) in the opinion of management did not
involve more than the normal risk of collectibility or present other unfavorable
features.
The main office of the Corporation and the Bank is being leased from
T.A.P. Properties, LLC, a company partially owned by two directors; Gebran S.
Anton and Dean S. Petitpren. The lease has a term of 15 years. The term of the
lease and rent payments thereunder are similar to those prevailing at the time
for comparable leases in the local market.
8
<PAGE> 11
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Plante & Moran, LLP as the
Corporation's principal independent auditors for the year ending December 31,
1998. Representatives of Plante & Moran plan to attend the Annual Meeting of
stockholders, will have the opportunity to make a statement if they desire to do
so, and will respond to appropriate questions by stockholders.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
A proposal submitted by a stockholder for the 1999 Annual Meeting of
stockholders should be sent to Lisa Medlock; Corporate Secretary, at 100 North
Main Street, PO Box 7, Mount Clemens, MI 48046-0007. Proposals must be received
by November 27, 1998, in order to be eligible to be included in the
Corporation's Proxy Statement for that meeting.
OTHER MATTERS
The Board of Directors does not know of any other matters to be brought
before the Annual Meeting. If other matters are presented upon which a vote may
properly be taken, it is the intention of the persons named in the proxy to vote
the proxies in accordance with their best judgment.
9
<PAGE> 1
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
EXHIBIT 21
SUBSIDIARIES OF THE ISSUER
Name of State or Jurisdiction of
Subsidiary Incorporation or Organization Description
- ---------- ----------------------------- -----------
Community Central Bank State of Michigan A State Bank
<PAGE> 1
COMMUNITY CENTRAL BANK CORPORATION
FORM 10-KSB (continued)
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITOR
We consent to the incorporation by reference in this Annual Report on Form
10-KSB of our audit report dated January 29, 1998, on the financial statements
of Community Central Bank Corporation for the period ended December 31, 1997,
included in the 1997 Stockholder Report of Community Central Bank Corporation.
S/ PLANTE & MORAN, LLP
Bloomfield Hills, Michigan
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,279
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,250
<TRADING-ASSETS> 0
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<LOANS> 53,135
<ALLOWANCE> 800
<TOTAL-ASSETS> 78,905
<DEPOSITS> 68,355
<SHORT-TERM> 1,403
<LIABILITIES-OTHER> 275
<LONG-TERM> 1,035
0
0
<COMMON> 6,325
<OTHER-SE> 1,512
<TOTAL-LIABILITIES-AND-EQUITY> 78,905
<INTEREST-LOAN> 2,708
<INTEREST-INVEST> 707
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<INTEREST-TOTAL> 3,949
<INTEREST-DEPOSIT> 2,095
<INTEREST-EXPENSE> 2,261
<INTEREST-INCOME-NET> 1,688
<LOAN-LOSSES> 710
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,094
<INCOME-PRETAX> (1,932)
<INCOME-PRE-EXTRAORDINARY> (1,932)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,932)
<EPS-PRIMARY> (1.53)
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<YIELD-ACTUAL> 3.36
<LOANS-NON> 0
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</TABLE>
