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As filed with the Securities and Exchange Commission on July 2, 1998
Registration No. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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COMMUNITY CENTRAL BANK CORPORATION
(Name of small business issuer as in its charter)
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Michigan 6712 38-3291744
(State or other jurisdiction of Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number Identification No.)
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100 North Main Street, PO Box 7
Mount Clemens, Michigan 48046-0007
(810) 783-4500
(Address and telephone number of principal executive
offices and principal place of business or intended principal place of business)
HAROLD W. ALLMACHER, CHAIRMAN
100 North Main Street, PO Box 7
Mount Clemens, Michigan 48046-0007
(810) 783-4500
(Name, address, and telephone number of agent for service)
COPIES TO:
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JEROME M. SCHWARTZ GORDON R. LEWIS
Dickinson Wright PLLC Warner Norcross & Judd LLP
500 Woodward Avenue, Suite 4000 111 Lyon Street, N.W., Suite 900
Detroit, Michigan 48226 Grand Rapids, Michigan 49503
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Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement of the earlier effective registration statement for
the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED PROPOSED
TITLE OF EACH CLASS OF TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
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Common Stock..................... 805,000 $13.50 $10,867,500 $3,294
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(1) Includes 105,000 shares of Common Stock which may be purchased by the
Underwriter to cover over-allotments.
(2) Estimated solely for the purpose of calculating the registration fee, based
on the average of the bid and asked prices of the Common Stock as of June
30, 1998, as reported on the OTC Bulletin Board, pursuant to Rule 457(c).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A) OF THE
SECURITIES ACT OF 1933, MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED JULY 2, 1998
700,000 SHARES
COMMUNITY CENTRAL BANK CORPORATION LOGO
COMMON STOCK
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Community Central Bank Corporation, a Michigan corporation (the "Company"),
is offering for sale 700,000 shares of its common stock (the "Common Stock").
The Company is a bank holding company which owns all of the common stock of
Community Central Bank, a Michigan banking corporation located in Mount Clemens,
Michigan (the "Bank"). The Common Stock of the Company is presently quoted on
the OTC Bulletin Board under the symbol CCBD. On July , 1998, the last
reported sales price for the Common Stock was $ . Roney Capital Markets, a
division of First Chicago Capital Markets, Inc. (the "Underwriter"), has advised
the Company that it anticipates continuing its market making activities in the
Common Stock, although there can be no assurance that an active trading market
will develop.
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THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A SIGNIFICANT AMOUNT OF
RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMPANY'S COMMON STOCK.
THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND THEY ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNTS(1)(2) COMPANY(1)(3)
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Per Share................................ $ $ $
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Total(1)................................. $ $ $
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(1) The Company has granted the Underwriter a 30-day option to purchase up to
105,000 additional shares of its Common Stock solely to cover
over-allotments, if any. If the Underwriter exercises such option in full,
the Price to Public, Underwriting Discounts and Proceeds to Company will be
approximately $ , $ and $ , respectively. See
"Underwriting."
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(3) Before deducting estimated offering expenses payable by the Company of
$195,000.
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The shares of Common Stock are offered by the Underwriter subject to prior
sale, when, as and if delivered to and accepted by the Underwriter, and subject
to the right of the Underwriter to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares of
Common Stock will be made through the facilities of The Depository Trust Company
in New York, New York on or about , 1998, against payment in
immediately available funds.
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[RONEY CAPITAL LOGO]
THE DATE OF THIS PROSPECTUS IS , 1998.
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MAP
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FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements and information
relating to the Company as well as assumptions made by the Company based on
information currently available to the Company. When used in this Prospectus,
words such as "believe," "estimate," "anticipate," "intend," "goal," "expects,"
and similar expressions may identify forward-looking statements. The Company
cautions prospective purchasers of the Common Stock that such statements are not
guarantees of future events. Such statements reflect the current view of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including, but not limited to, those set forth
under "Risk Factors." Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially and adversely from those described in this Prospectus as
anticipated, believed, estimated, expected or intended. The Company undertakes
no obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date of this Prospectus
or to reflect the occurrence of unanticipated events.
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THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE COMPANY'S COMMON STOCK, INCLUDING
OVER-ALLOTMENT, STABILIZING BIDS, AND MARKET MAKING TRANSACTIONS. SUCH
STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A DESCRIPTION
OF THESE ACTIVITIES. SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless the context clearly suggests otherwise, references in
this Prospectus to the Company include the Bank. Except as otherwise indicated,
all information in this Prospectus assumes that the Underwriter's over-allotment
option is not exercised. All information in this Prospectus with respect to the
Common Stock, where applicable, has been adjusted to reflect the 10% stock
dividend paid on May 6, 1998, to shareholders of record on April 21, 1998.
THE COMPANY
Community Central Bank Corporation, a Michigan corporation, is a bank
holding company which owns all of the stock of Community Central Bank (the
"Bank"). The Bank is a Michigan banking corporation which commenced business on
October 28, 1996. The Bank is the only bank headquartered in Mount Clemens,
Michigan, and conducts business primarily in Macomb County, Michigan.
The Bank and its staff have a strong commitment to community banking in
Macomb County. The Bank offers a wide array of financial products and services
for both consumers and small to medium-sized businesses. The Bank specializes in
serving owner-managed businesses by providing a high degree of personal service
to companies and their employees. The Bank provides many types of commercial
financing for businesses, as well as a full range of deposit products. Other
services include cash management, wire transfer, free PC banking, and courier
services. The Bank emphasizes providing special services to employees of
companies that are already customers. The Bank also offers a full range of low
cost consumer services including free personal checking accounts, ATM services,
PC banking, telephone banking, residential mortgages, credit cards, and
automobile and marine financing. The Bank stresses personal service and provides
a well-staffed teller and customer service area without charge to its customers.
The Bank has enjoyed considerable success in attracting customers. It
opened for business on October 28, 1996, and after only 17 months of operations,
at March 31, 1998, the Company had total assets of approximately $104.6 million,
total loans of approximately $69.6 million, and total deposits of approximately
$93.9 million. The ratio of the allowance for possible credit losses to total
loans was 1.38% at March 31, 1998. From the inception of the Company through May
31, 1998, the Company has not had a single loan more than 90 days past due or
classified as nonaccrual.
The Company reported a net loss of $143,000 for the quarter ended March 31,
1998, which included a provision for credit losses of $160,000. The Company
produced modest profits for the months of March, April and May, 1998 and expects
to be profitable for the year.
The Bank operates one banking office located at 100 North Main Street,
Mount Clemens, Michigan 48043. This office also serves as the headquarters of
the Bank and the Company. The Company's telephone number is (810) 783-4500.
MARKET AREA
Mount Clemens is the county seat and the financial center of Macomb County.
Through its customer service, PC banking and courier services, the Bank has the
ability to service a larger geographic area than a traditional bank branch.
Management believes that it can continue to capitalize on these services and
delivery methods, and service a significantly greater population and area using
its existing location and staff.
Macomb County is one of the fastest growing communities in Michigan and has
a stable and diverse economic base. Macomb ranks third in population out of
Michigan's 83 counties and 47th out of 3,100 counties nationally. With a current
population of over 700,000, Macomb County covers 482 square miles and is home to
over 15,000 businesses. It is also an active boating center with 31 miles of
coastline on Lake St. Clair, and over 40,000 registered pleasure craft. Macomb
County is also a large banking market. According to available industry data, as
of June 30, 1997, total deposits in this market, including those held by banks,
thrifts and credit unions, were approximately $11.4 billion.
The Macomb County municipalities surrounding Mount Clemens have experienced
some of the largest growth in new residential construction in the State of
Michigan in the last several years. The area, while very
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much involved with the automobile industry in Metropolitan Detroit, supports a
diverse economy of manufacturing, service and retail businesses.
MANAGEMENT AND BOARD OF DIRECTORS
The Company has assembled a management team, including the Board of
Directors, with strong business experience in the Bank's market area and a
shared vision and commitment to the future growth and success of the Bank.
Harold W. Allmacher, who has been Chairman of the Board and Chief Executive
Officer of the Company and the Bank since their inception, has over 30 years of
banking experience in the Bank's market area. Mr. Allmacher was President and
Chief Executive Officer of First National Bank Corporation ("FNBC"), a bank
holding company headquartered in Macomb County with over $500 million of assets
at the time of its acquisition in February of 1995 by Old Kent Financial
Corporation ("Old Kent"). Mr. Allmacher served as Chief Executive Officer of
FNBC for 10 years.
Richard J. Miller, President and Chief Operating Officer of the Company and
the Bank since their inception, was Corporate Treasurer of FNBC at the time of
its acquisition. Mr. Miller has over 18 years experience in bank financial,
accounting and operations positions.
Andrew Tassopoulos, Executive Vice President of the Company, and Executive
Vice President and Senior Loan Officer of the Bank, since their inception, was
Vice President and Senior Loan Officer of FNBC at the time of its acquisition.
Mr. Tassopoulos has 15 years of banking experience including consumer, mortgage,
and commercial lending, and credit analysis.
Peter J. Przybocki, CPA, Corporate Treasurer of the Company and Vice
President and Controller of the Bank, was Assistant Controller of FNBC at the
time of its acquisition. Mr. Przybocki is a certified public accountant with
five years of public accounting experience and seven years of bank financial
experience.
The Company has attracted a number of other key employees, including the
following persons with substantial commercial lending experience:
Doug Dunkelberg, Vice President and Commercial Loan Division Manager of the
Bank, joined the Bank in November of 1996, and has over six years of commercial
lending and related experience, including five years with Huntington Banks of
Michigan as a commercial Loan Officer and Senior Credit Analyst.
Albert Callewaert, Vice President and Commercial Loan Officer of the Bank,
joined the Bank in May of 1997, and has over 20 years of experience in business
and real estate development, including four years with Huntington Banks of
Michigan in commercial business development, and 16 years with Grand Trunk
Railroad in real estate development.
Christopher Olzem, Commercial Loan officer of the Bank, joined the Bank at
its inception in July of 1996, and has over 10 years of banking and finance
related experience in various capacities.
The Company's Board of Directors is comprised of individuals with broad
backgrounds in business, real estate, banking, and education and extensive
community contacts in the Bank's market area.
BUSINESS STRATEGY
Emphasize Community Banking. The Bank strives to maintain a strong
commitment to community banking. The Bank's goal is to attract as customers
small to medium-sized owner operated businesses and individuals who wish to
conduct business with a local commercial bank that demonstrates an active
interest in their business and personal financial affairs. Management believes
that the Bank is able to deliver timely responses to customer requests, provide
customized financial products and services and offer customers the personal
attention of senior banking officers. The Company believes that its commitment
to service gives it a competitive advantage in the marketplace.
Expand Lending in the Company's Primary Market. The Company's lending
philosophy is to provide a full service lending and deposit relationship to all
customers. The Company's primary lending focus is on the small to medium-sized,
owner operated businesses. Upon obtaining the lending relationship of the
businesses, the Company then tries to expand the relationship through extensive
cross selling efforts to the business owners, their families, associates and
employees. The cross selling includes special loan programs, direct
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payroll deposits, special deposit packages and customized service programs. The
Company also offers residential mortgage loans, automobile and recreational
vehicle financing, credit card loans, home equity loans, and personal loans. The
Company intends to maintain its emphasis on these lending services.
Increase Deposits in Market Area. The Company has been able to attract a
strong base of core deposits from its local market. Management of the Company
has a long history of involvement in the community with strong ties to local
government. The Bank has acquired significant deposits from many governmental
entities as well as local personal and business deposits. The Company has also
been able to develop a significant base of noninterest bearing commercial
checking accounts through its lending relationships and cross selling.
Competitive rate and fee structures and a high level of service have also been
important in increasing deposits for the Company.
Grow Through Cost Effective Expansion. The growth of the Bank to date has
been accomplished through internal expansion and the use of outside vendors
where possible. The Company has a staff of 35 full-time equivalent employees who
are responsible for branch, lending, and administrative functions. It is
management's belief that it is cost effective to use outside sources for the
back office processes of the Bank, thereby making more Bank personnel available
to service the customer. By maintaining this philosophy, the Company is able to
serve a larger number of customers per employee while maintaining a very high
degree of personal customer service. Management believes that the Company has
the infrastructure available to significantly increase the volume of business
with only minimal increases in full-time equivalent employees.
Maintain Competitive Technology. As a new company, the Bank has been able
to invest in the latest technology at a much lower initial cost than some
competing institutions, which must update their systems to be competitive. The
Company has selected computer vendors with a history of maintaining
technological superiority which is expected to allow the Company to remain at
the forefront of technology at a lower long term cost. The Company, as a result,
has a multitude of delivery methods, including telephone banking, wire transfer,
automatic clearing house, consumer and business PC banking, electronic bill
payment, debit card services and networked ATMs.
Achieve Superior Customer Service. The Company strives to maintain an
environment where the customer is the most important focus in the business. From
loan officers highly visible in the community to accessible executive
management, the customer is always viewed as the most important person in the
Bank.
THE OFFERING
Securities Offered by the
Company....................... 700,000 shares of Common Stock. In addition,
the Company has granted the Underwriter an
option to purchase up to an additional 105,000
shares to cover over-allotments. See
"Description of Capital Stock."
Common Stock Outstanding
Before the Offering (1)....... 1,391,455 shares
Common Stock Outstanding After
the Offering (1).............. 2,091,455 shares (2,196,455 shares if the
over-allotment option is exercised in full).
Purpose of the Offering....... All or a substantial portion of the net
proceeds received by the Company from the
shares it is selling in the offering will be
contributed to the Bank. This contribution to
the Bank's capital will support growth in
assets, fund further investments in loans and
securities, and be used for general corporate
purposes. See "Purpose of the Offering."
OTC Bulletin Board Symbol..... "CCBD"
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(1) Excludes 96,800 shares reserved for issuance pursuant to options granted or
that may be granted pursuant to the Company's 1996 Employee Stock Option
Plan and 1996 Stock Option Plan for Nonemployee Directors.
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SUMMARY OF SELECTED FINANCIAL DATA
The following consolidated financial and other data are derived from the
Company's financial statements and should be read with the Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations." The Consolidated Balance
Sheets as of December 31, 1997 and 1996, and March 31, 1998 and 1997
(unaudited), and the Consolidated Statements of Operations for the year ended
December 31, 1997, and the period from April 26, 1996 (inception) to December
31, 1996, and for the quarters ended March 31, 1998 and 1997 (unaudited), are
included elsewhere in this Prospectus.
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AT OR FOR THE PERIOD ENDED
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MARCH 31, DECEMBER 31,
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1998 1997 1997 1996(1)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) --------- --------- --------- ---------
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OPERATIONS
Interest income.................................. $1,804 $ 490 $ 3,949 $ 200
Interest expense................................. 1,034 282 2,261 82
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Net interest income.............................. 770 208 1,688 118
Provision for credit losses...................... 160 170 710 90
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Net interest income after provision.............. 610 38 978 28
Noninterest income............................... 70 16 184 4
Noninterest expense.............................. 823 661 3,094 812
Provision for income taxes....................... -- -- -- --
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Net loss......................................... $(143) $(607) $(1,932) $(780)
========= ========= ========= =========
FINANCIAL CONDITION
Assets........................................... $104,565 $42,812 $78,905 $23,085
Loans............................................ 69,597 17,263 53,135 5,578
Deposits......................................... 93,912 32,544 68,355 12,181
Short term borrowings............................ 1,561 -- 1,403 --
Stockholders' equity............................. 7,693 9,133 7,837 9,740
PER SHARE DATA(2)
Basic and diluted earnings (loss) per share...... $(0.10) $(0.44) $(1.39) $(1.40)
Book value at end of period...................... 5.53 6.56 5.63 7.00
Average shares outstanding....................... 1,391,483 1,391,500 1,391,489 1,391,500
Actual shares outstanding at end of period....... 1,391,483 1,391,500 1,391,483 1,391,500
OTHER DATA
Net interest margin.............................. 3.53% 2.81% 3.36% 3.44%
Interest rate spread............................. 2.71% 1.08% 2.25% (1.48)%
Allowance for credit losses to total loans....... 1.38% 1.51% 1.51% 1.61%
Nonperforming assets to total assets............. 0.00% 0.00% 0.00% 0.00%
Stockholders' equity to total assets............. 7.36% 21.33% 9.93% 42.19%
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(1) The Bank began operations on October 28, 1996.
(2) Restated for 10% stock dividends in 1998 and 1997.
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RISK FACTORS
The Common Stock offered by this Prospectus involves significant risks. The
following constitute some of the potential risks of an investment in the Common
Stock and should be carefully considered by prospective investors prior to
purchasing shares of Common Stock. The order of the following is not intended to
be indicative of the relative importance of any described risk nor is the
following intended to be inclusive of all risks of investment in the Common
Stock.
LENDING RISKS
The risk of nonpayment of loans is inherent in commercial banking, and such
nonpayment, if it occurs, would likely have a material adverse effect on the
Company's earnings and overall financial condition as well as the value of the
Common Stock. Management attempts to minimize the Bank's credit exposure by
carefully monitoring the concentration of its loans within specific industries
and through prudent loan application and approval procedures, but there can be
no assurance that such monitoring and procedures will reduce such lending risks.
Credit losses can cause insolvency and failure of a financial institution, and
in such event, its shareholders could lose their entire investment.
IMPACT OF INTEREST RATES
The results of operations for financial institutions, including the Bank,
may be materially and adversely affected by changes in prevailing economic
conditions, including declines in real estate market values, rapid changes in
interest rates and the monetary and fiscal policies of the federal government.
The Bank's profitability is, in part, a function of the spread between the
interest rates earned on investments and loans and the interest rates paid on
deposits and other interest-bearing liabilities. In the early 1990s, many
banking organizations experienced historically high interest rate spreads. More
recently, interest rate spreads have generally narrowed due to changing market
conditions and competitive pricing pressure, and there can be no assurance that
such factors will not continue to exert such pressure. Like most banking
institutions, the Bank's net interest spread and margin will be affected by
general economic conditions and other factors that influence market interest
rates and the Bank's ability to respond to changes in such rates. At any given
time, the Bank's assets and liabilities will be such that they are affected
differently by a given change in interest rates. As a result, an increase or
decrease in rates could have a material adverse effect on the Bank's net income,
capital and liquidity. While management takes measures intended to limit
interest rate risk, there can be no assurance that such measures will be
effective in minimizing the exposure to such risk.
ECONOMIC CONDITIONS
Although economic conditions in the Bank's market area have been generally
favorable, there can be no assurance that such conditions will continue to
prevail. Substantially all the Bank's loans are to businesses and individuals in
Southeastern Michigan, and any decline in the economy of this area could have an
adverse impact on the Bank. A substantial part of the local economy has
traditionally been dependent upon the automotive industry. A prolonged labor
strike in, or other adverse developments affecting, the automotive industry may
have an adverse effect on the local economy and the Bank.
LACK OF OPERATING HISTORY AND START-UP LOSSES
The Bank commenced business on October 28, 1996, and accordingly has a
limited operating history. The business of the Company and the Bank is subject
to the risks inherent in operating a new business. As a result of the Company's
and the Bank's substantial start-up expenses and funding of the allowance for
credit losses, the Company's and the Bank's first profitable month was not until
March of 1998.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of Harold W. Allmacher,
Chairman of the Board and Chief Executive Officer of the Company, Richard J.
Miller, President and Chief Operating Officer of the Company, Andrew
Tassopoulos, Executive Vice President of the Company, and other members of
management
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who have relationships with customers of the Bank. The loss of these officers
could have an adverse effect on the Company's growth and performance. The
Company has obtained key man life insurance covering the lives of Messrs. Miller
and Tassopoulos, in the amount of approximately $187,000 each.
DISCRETION IN USE OF PROCEEDS
The purpose of the offering is to provide funds that the Company can
contribute to the Bank to support asset growth, fund investments in loans and
securities, and for general corporate purposes. Management, however, will retain
discretion in employing the proceeds of the offering. See "Purpose of the
Offering."
GOVERNMENT REGULATION AND MONETARY POLICY
The Company and the Bank are subject to extensive state and federal
government supervision and regulation. Existing state and federal banking laws
subject the Bank to substantial limitations with respect to loans, purchase of
securities, payment of dividends and many other aspects of its banking business.
There can be no assurance that future legislation or government policy will not
adversely affect the banking industry or the operations of the Bank. Federal
economic and monetary policy may affect the Bank's ability to attract deposits,
make loans and achieve satisfactory interest spreads. See "Supervision and
Regulation."
COMPETITION
The Company and the Bank face strong competition for deposits, loans and
other financial services from numerous banks, savings banks, thrifts, credit
unions and other financial institutions and entities which provide financial
services, including consumer finance companies, securities brokerage firms,
mortgage brokers, insurance companies, mutual funds, and other lending sources
and investment alternatives. Some of the financial institutions and financial
services organizations with which the Bank competes are not subject to the same
degree of regulation as the Bank. Many of the financial institutions and
financial services organizations aggressively compete for business in the Bank's
market area. Most of these competitors have been in business for many years,
have customer bases, deposits and lending limits that are substantially larger
than those of the Bank, and are able to offer certain services that the Bank
does not currently provide, including branch networks, trust services and
international banking services. In addition, most of these entities have greater
capital resources than the Bank, which, among other things, may allow them to
price their services at levels more favorable to the customer and to provide
larger credit facilities than could the Bank. Recently effective legislation
regarding interstate branching and banking may increase competition in the
future from out-of-state banks.
NO ANTICIPATED DIVIDENDS
The Company has not paid cash dividends on its Common Stock and it is
anticipated that no cash dividends will be paid on the Common Stock for the
foreseeable future. The Company is largely dependent upon dividends paid by the
Bank for funds to pay dividends on the Common Stock, if and when such dividends
are declared. No assurance can be given that future earnings of the Bank, and
resulting dividends to the Company, will be sufficient to permit the legal
payment of dividends to Company shareholders at any time in the future. Even if
the Company may legally declare dividends, the amount and timing of such
dividends will be at the discretion of the Company's Board of Directors. The
Board may in its sole discretion decide not to declare dividends. These shares
should not be purchased by persons who need or desire dividend income from this
investment. For a more detailed discussion of other regulatory limitations on
the payment of cash dividends by the Company, see "Dividend Policy" and
"Supervision and Regulation."
ANTI-TAKEOVER PROVISIONS
Chapters 7A and 7B of the Michigan Business Corporation Act ("MBCA")
provide certain supermajority vote and other requirements for certain business
combinations with interested shareholders and limit voting rights of certain
acquirers of control shares. Federal law requires the approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve") prior to
acquisition of "control" of a bank
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holding company. The Company's Articles of Incorporation (i) provide for a Board
of Directors that is divided into three classes of directors, (ii) provide for
removal of directors only for cause, (iii) provide specific advance notice
procedures for shareholders who wish to nominate directors, (iv) prohibit
shareholder action by written consent without a meeting, and (v) require the
affirmative vote of holders of at least 66 2/3 of the voting stock of the
Company to change any of such provisions of the Articles of Incorporation. These
provisions may have the effect of delaying or preventing a change in control of
the Company without action by the shareholders. As a result, these provisions
could adversely affect the price of the Common Stock by, among other things,
preventing a shareholder of the Company's Common Stock from realizing a premium
which might be paid as a result of a change in control of the Company. See
"Description of Capital Stock."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation and Bylaws provide for the
indemnification of its officers and directors and insulate its directors from
liability for certain breaches of the duty of care. It is possible that the
indemnification obligations imposed under these provisions could result in a
charge against the Company's earnings and thereby affect the availability of
funds for payment of dividends to the Company's shareholders. See "Description
of Capital Stock -- Indemnification of Directors and Officers."
LIMITED TRADING MARKET EXPECTED
The Underwriter has advised the Company that it intends to use reasonable
efforts to continue quotations of the Common Stock on the OTC Bulletin Board and
to act as a market maker in the Common Stock, subject to applicable laws and
regulatory requirements, although it is not obligated to do so. Making a market
in securities involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
The development and maintenance of a public trading market depends, however,
upon the existence of willing buyers and sellers, the presence of which is not
within the control of the Company or any market maker. Market makers on the OTC
Bulletin Board are not required to maintain a continuous two sided market, are
required to honor firm quotations for only a limited number of shares, and are
free to withdraw firm quotations at any time. Even with a market maker, factors
such as the limited number of the shares outstanding and the absence of a
reasonable expectation of dividends within the near future mean that there can
be no assurance of an active and liquid market for the Common Stock developing
in the foreseeable future. Even if a market develops, there can be no assurance
that a market will continue, or that shareholders will be able to sell their
shares at or above the price at which these shares are being offered to the
public. Purchasers of Common Stock should carefully consider the limited
liquidity of their investment in the shares being offered by this Prospectus.
DILUTION
In the period following the offering, the offering may have a near-term
dilutive effect on earnings per share and return on equity, because the proceeds
of the offering may be invested by the Bank in short-term investments at
comparatively low interest rates. The Company's long-term strategy is to use the
additional equity raised through the offering as a base to support asset growth
which is expected to enhance per share earnings and return on equity. However,
there is no assurance that the Company will be able to achieve such growth or
enhancement.
YEAR 2000 PROBLEM
The Company 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. This or any similar
error could lead to system malfunction or complete failure. The banking industry
is highly dependent on computer systems due to significant transaction volumes,
and date sensitive calculations for interest accruals on financial instruments
such as loans and deposits.
9
<PAGE> 11
The Company began to prepare for the year 2000 problem in 1997. The plan
began with an internal evaluation of equipment, software applications, and
vendor supplied products. Because the Company was founded in 1996, much of its
equipment and computer technology is new, and in many cases, already year 2000
compliant. The Company's main data processing vendor has represented that it
will be compliant by the end of 1998, and has provided updates on its progress
to the Company. The Company has a written plan which is regularly updated and
reported to the Board of Directors. The next phase of the plan is to begin
testing on systems and equipment. To date, spending on the year 2000 problem has
been negligible. While it is expected that the remainder of the project will
involve additional costs, the amount is not currently expected to exceed
$50,000. Such costs will be expensed as incurred. If any unusual and unforeseen
problems arise during testing, this amount could be significantly higher.
Additionally, if the Company (or its customers or vendors) are unable to remedy
any potential year 2000 problems in a timely manner, there could be a material
adverse effect on the Company's business. Based on information that is currently
available, the Company does not anticipate that the cost of achieving year 2000
compliance will have a material effect on its capital resources, results of
operations, or liquidity as presented herein.
NEED FOR TECHNOLOGICAL CHANGE
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. The Company's
future success will depend in part on its ability to address the needs of its
customers by using technology to provide products and services that will satisfy
customer demands for convenience as well as to create additional efficiencies in
the Bank's operations. Many of the Bank's competitors have substantially greater
resources to invest in technological improvements. Such technology may permit
competitors to perform certain functions at a lower cost than the Bank. There
can be no assurance that the Bank will be able to effectively implement new
technology-driven products and services or be successful in marketing such
products and services to its customers.
DETERMINATION OF OFFERING PRICE
The Common Stock of the Company is quoted on the OTC Bulletin Board under
the ticker symbol "CCBD." However, there has been only limited trading activity
in the Common Stock. Consequently, the public offering price was determined by
negotiation between the Company and the Underwriter. The offering price was
based on a number of factors including, principally, recent bid prices quoted on
the OTC Bulletin Board, but also including the Company's financial history and
prospects, price range of publicly traded banks and bank holding companies and
the prevailing market and general economic conditions at the time of the
offering. The public offering price set forth on the cover page of this
prospectus should not, however, be considered to be an indication of the actual
value of the Common Stock of the Company. Such price is subject to change as a
result of market conditions and other factors. The Underwriter is believed to be
the principal market maker for the common stock of the Company.
PURPOSE OF THE OFFERING
The net proceeds to the Company from the sale of the shares of Common Stock
offered by this Prospectus are estimated to be $ ($ if the
Underwriter's over-allotment option is exercised in full), after deduction of
the underwriting discounts, but before deducting estimated offering expenses of
$195,000.
All or a substantial portion of the net proceeds of the offering will be
contributed by the Company to the capital of the Bank. The purpose of the
offering is to strengthen the Bank's capital position in order to support
further expansion of the Bank's business. Because of regulatory capital
requirements, the level of assets which the Bank may maintain is limited by the
level of its equity capital. An increase in the Bank's equity will support an
expansion of the Bank's assets regardless of the immediate application of the
cash proceeds of the offering.
10
<PAGE> 12
At the time of the authorization of the Bank to commence business in 1996,
under the terms of the Federal Deposit Insurance Corporation ("FDIC") Order
granting the Bank deposit insurance coverage, the FDIC required that the Bank
maintain a ratio of Tier 1 capital to total assets of not less than 8% through
October 28, 1999. The Bank, primarily as a result of recent growth, is not
presently in compliance with this requirement. The investment by the Company in
the Bank of a portion of the proceeds of the offering will bring the Bank back
into compliance with this requirement.
The proceeds of the offering, whether retained by the Company or
contributed to the capital of the Bank, will immediately be deployed in short
term investments. As business opportunities present themselves, the assets will
be redeployed to longer term investment securities and loans. Proceeds of the
offering may be used to open new branches or to acquire other financial
institutions or their branches, although no specific opportunities to do so are
presently planned or under consideration.
The sources and expected uses of the proceeds from the offering are set
forth below:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
(DOLLARS IN THOUSANDS) ------ ----------
<S> <C> <C>
Sources:
Sale of 700,000 shares of Common Stock.................... $ 100%
Uses:
Capital contribution to the Bank(1)....................... $5,000 %
Underwriter's discounts................................... $ %
Offering expenses......................................... $ 195 %
General corporate purposes(2)............................. %
------ ---
Total uses........................................... $ 100%
====== ===
</TABLE>
- -------------------------
(1) It is anticipated that the net proceeds received by the Bank will be used to
support asset growth, fund investments in loans and securities, and for
general corporate purposes.
(2) Proceeds retained by the Company for general corporate purposes may be
contributed to the capital of the Bank when and as needed by the Bank.
DIVIDEND POLICY
The Company has paid no cash dividends since its inception. The Company
expects that Company and Bank earnings, if any, will be retained to finance the
growth of the Company and the Bank for at least the next several years, and the
Company anticipates the payment of no cash dividends by the Company during that
period. After the Bank recovers its operating deficit, the Company may consider
payment of cash dividends. However, the declaration of dividends is at the
discretion of the Board of Directors and there is no assurance that dividends
will be declared at any time. The Company will be largely dependent upon
dividends paid by the Bank for funds to pay dividends on the Common Stock.
Under Michigan law, the Bank will be restricted as to the maximum amount of
cash dividends it may pay on its Common Stock. A Michigan state bank may not
declare cash dividends except out of net profits then on hand after deducting
its losses and bad debts and then only if the bank will have a surplus amounting
to at least 20% of its capital after the payment of the dividend. If the surplus
of a Michigan state bank is at any time less than the amount of its capital,
before the declaration of a cash dividend or dividend in kind, it must transfer
to surplus not less than 10% of its net profits for the preceding half-year (in
the case of quarterly or semi-annual dividends) or the preceding two consecutive
half-year periods (in the case of annual dividends). The ability of the Company
and the Bank to pay cash dividends is also affected by various federal and state
regulatory requirements and policies, such as the requirement to maintain
adequate capital above regulatory guidelines. See "Supervision and Regulation."
Such requirements and policies may limit the Company's ability to obtain
dividends from the Bank for its cash needs, including funds for payment of
dividends by the Company and the payment of operating expenses.
11
<PAGE> 13
MARKET FOR COMMON STOCK AND PRICE RANGE
The common stock of the Company is quoted on the OTC Bulletin Board under
the ticker symbol "CCBD." At March 31, 1998, there were approximately 220 record
holders of the Company's common stock.
The following table shows the high and low bid prices by quarter during the
period from the date of the Company's public stock offering (September 23, 1996)
through June 30, 1998. The quotations reflect bid prices as reported by the OTC
Bulletin Board, and do not include retail mark-up, mark-down or dealer
commission and may not reflect actual transactions. Price data has been
retroactively adjusted for the 10% stock dividends paid on April 30, 1997, and
May 6, 1998.
BID PRICES
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C> <C>
CALENDAR YEAR 1996
Third Quarter............................................... $ 8.26 $ 8.26
Fourth Quarter.............................................. $ 8.68 $ 8.05
CALENDAR YEAR 1997
First Quarter............................................... $ 9.71 $ 8.68
Second Quarter.............................................. $ 9.92 $ 9.61
Third Quarter............................................... $12.25(1) $11.50(1)
Fourth Quarter.............................................. $12.73 $10.45
CALENDAR YEAR 1998
First Quarter............................................... $13.41 $12.73
Second Quarter.............................................. $15.50 $12.00
</TABLE>
- -------------------------
(1) OTC Bulletin Board data is not available for the Third Quarter of 1997. This
data was provided by a market maker and reflects the high and low closing
prices for the period indicated.
12
<PAGE> 14
CAPITALIZATION
The following table, adjusted for the 10% stock dividend which was paid May
6, 1998, sets forth: (i) capitalization of the Company as of March 31, 1998 and
(ii) capitalization of the Company as adjusted on a pro forma basis giving
effect to the issuance of the Common Stock offered and receipt of the net
proceeds of the offering, as if the sale of the Common Stock had been
consummated on March 31, 1998, and assuming no exercise of the Underwriter's
over-allotment option.
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL AS ADJUSTED
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) ------- -----------
<S> <C> <C>
Stockholders' equity:
Common stock -- $5 stated value; 9,000,000 shares
authorized; 1,391,483 shares issued and outstanding;
2,091,483 shares issued and outstanding as
adjusted(1)............................................ $ 6,957 $10,457
Additional paid-in capital.................................. 3,563
Accumulated deficit......................................... (2,855) (2,855)
Unrealized gain on securities available for sale, net of
tax....................................................... 28 28
------- -------
Total stockholders' equity.................................. $ 7,693 $
======= =======
</TABLE>
- -------------------------
(1) Excludes 96,800 shares reserved for issuance pursuant to options granted or
that may be granted pursuant to the Company's 1996 Employee Stock Option
Plan and 1996 Stock Option Plan for Nonemployee Directors.
13
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the Company's operating results and financial
condition for the periods ended March 31, 1998 and 1997, and December 31, 1997
and 1996, should be read in conjunction with the financial statements and
statistical data presented elsewhere.
GENERAL
The Company has experienced significant growth since it's inception in
1996. Total assets have grown to $104.6 million at March 31, 1998, including
$69.6 million in loans. This growth was funded by building a deposit base of
$93.9 million as of March 31, 1998. The Company used the deposit growth to fund
its lending activities, and to invest in securities. As initially expected, due
to the nature of a start-up enterprise, the Company has incurred significant
losses since its inception. The net loss for the partial year of 1996 was
$780,000, followed by a loss of $1.9 million for 1997. For the first quarter of
1998, the net loss was reduced to $143,000 (including a $160,000 provision for
credit losses), as net interest margins continued to improve and expenses
supported a larger asset base. The following discussion provides details of
significant components of financial condition and income.
FINANCIAL CONDITION
Assets. Total assets of the Company increased from $23.1 million at
December 31, 1996, to $78.9 million by the end of 1997. During 1998, total
assets increased by 33%, or $25.7 million, to $104.6 million at March 31,
compared with $78.9 million at December 31, 1997.
During 1997, total deposits increased by $56.2 million, to $68.4 million,
while total loans rose by $47.6 million, to $53.1 million. The Company reduced
federal funds from the previous year, and used the additional proceeds generated
by the deposit growth to invest $24.4 million in securities. During the three
months ended March 31, total deposits rose by $25.6 million, while total loans
increased by $16.5 million, to $69.6 million. The increased liquidity resulting
from the deposit growth is being held as federal funds sold, and is available to
finance continued loan growth.
Investment Securities. The following table shows the amortized cost and
estimated fair value of the Company's security portfolio as of the dates
indicated. On the balance sheet, investment securities (i.e., those which the
Company 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 shown on the balance sheet at estimated fair value.
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996
-------------------- -------------------- ------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
(DOLLARS IN THOUSANDS) --------- ------- --------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
United States Government agencies.... $ 3,381 $ 3,420 $ 3,875 $ 3,906 $-- $--
Mortgage backed securities........... 1,054 1,056 1,085 1,084 -- --
Collateralized mortgage
obligations....................... 901 902 403 402 -- --
------- ------- ------- ------- -- --
Total Securities Available for
Sale............................ 5,336 5,378 5,363 5,392 -- --
------- ------- ------- ------- -- --
INVESTMENT SECURITIES
United States Treasury............... 1,495 1,497 1,990 1,993 -- --
United States Government agencies.... 5,615 5,644 6,613 6,632 -- --
Mortgage backed securities........... 2,753 2,764 2,839 2,841 -- --
Collateralized mortgage
obligations....................... 3,124 3,140 3,673 3,683 -- --
Other securities..................... 202 202 -- -- -- --
------- ------- ------- ------- -- --
Total Investment Securities....... 13,189 13,247 15,115 15,149 -- --
------- ------- ------- ------- -- --
Total Securities.................. $18,525 $18,625 $20,478 $20,541 -- --
======= ======= ======= ======= == ==
</TABLE>
14
<PAGE> 16
Loans. During 1997, commercial loans grew by $27.8 million, and residential
mortgage loans increased by $17.4 million. During the first quarter of 1998,
commercial loans increased by $7.9 million, while residential mortgage loans
rose by $8.0 million. The majority of the Company's commercial loans are secured
by commercial real estate mortgages. In 1997, the Company sold residential
mortgage loans (with a book value of $5.9 million) without recourse to the
Federal National Mortgage Association ("FNMA"). The net gain on these sales
totaled $60,000. During the first quarter of 1998, the Company sold loans to
FNMA with a book value of $1.0 million, yielding a net gain of $7,000.
The following table shows the details of the Company's loan portfolio, as
of the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, % OF DECEMBER 31, % OF DECEMBER 31, % OF
1998 TOTAL 1997 TOTAL 1996 TOTAL
(DOLLARS IN THOUSANDS) --------- ----- ------------ ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Residential mortgage loans............ 2$6,078.. 37.5% $18,499 34.8% $3,888 69.7%
Home equity lines of credit........... 3,206... 4.6 2,815 5.3 62 1.1
Commercial loans secured by real
estate.............................. 25,342.. 36.4 19,411 36.5 781 14.0
Other commercial loans................ 11,759.. 16.9 9,754 18.4 555 9.9
Installment loans..................... 3,212... 4.6 2,656 5.0 292 5.3%
------- ----- ------- ----- ------ -----
Total Loans...................... $69,597 100.0% $53,135 100.0% 5,5$78.... 100.0%
======= ===== ======= ===== ====== =====
</TABLE>
The Company intends to place loans in nonaccrual status when, in the
opinion of management, uncertainty exists as to the ultimate collection of
principal and interest. No loans have been placed in nonaccrual status since the
inception of the Company. In each accounting period management evaluates the
problems and potential losses in the loan portfolio. Consideration is also given
to off-balance sheet items that may involve credit risk, such as commitments to
extend credit and financial guarantees. The results of this evaluation are
reflected in the allowance and periodic provision for credit losses.
At March 31, 1998, 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. Furthermore, management is not aware of any potential problem loans which
management believes could have a material effect on the Company's operating
results, liquidity, or capital resources.
The Company makes loans to customers primarily in Macomb County, Michigan.
Although the Company has a diversified loan portfolio, a substantial portion of
the local economy has traditionally been dependent on the automotive industry.
Additionally, the Company had approximately $11.0 million in outstanding loans
at March 31, 1998, to commercial borrowers in the real estate rental and
property management industry.
Deposits. Total deposits rose by $56.2 million during 1997, and by $25.6
million during the three months ended March 31, 1998. The majority of the
increases in both periods were in time deposits.
The following table shows the details of the Company's deposit portfolio,
as of the dates indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
(DOLLARS IN THOUSANDS) --------- ------------ ------------
<S> <C> <C> <C>
Noninterest bearing demand deposits...................... $10,192 $ 7,323 $ 1,619
NOW accounts............................................. 5,260 4,810 1,317
Money market demand accounts............................. 3,941 5,024 1,407
Savings deposits......................................... 2,046 2,057 276
Jumbo time deposits...................................... 32,839 23,935 6,995
Time deposits less than $100,000......................... 39,634 25,206 567
------- ------- -------
Total deposits......................................... $93,912 $68,355 $12,181
======= ======= =======
</TABLE>
15
<PAGE> 17
Short term borrowings at March 31, 1998, represent securities sold with an
agreement to repurchase them the following day. The maximum amount outstanding
at any month end during 1998 was $1.6 million, and $1.4 million during 1997. The
average rate on the ending balance of short term borrowings at March 31, 1998,
was 4.96%.
The Company declared a 10% stock dividend on April 7, 1998. The dividend
was paid on May 6, 1998, to shareholders of record on April 21, 1998. As a
result, approximately $632,000 was transferred from additional paid-in capital
to common stock. The Company also declared and paid a 10% stock dividend in the
second quarter of 1997.
Following are selected capital ratios for the Company as of the dates
indicated, along with the minimum regulatory requirement for each item:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, DECEMBER 31, MINIMUM TO BE WELL
1998 1997 1996 REQUIREMENT CAPITALIZED
--------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Tier I capital to risk-weighted
assets............................. 12.08% 15.81% 110.88% 4.00% 6.00%
Total capital to risk-weighted
assets............................. 13.33% 17.07% 111.91% 8.00% 10.00%
Tier I capital to quarterly average
assets (leverage).................. 8.35% 10.42% 66.70% 4.00% 5.00%
</TABLE>
As a condition of its initial application for deposit insurance, the Bank
is required to maintain a ratio of Tier 1 capital to unadjusted assets of 8.0%,
through October 28, 1999. Due to its rapid growth, the Bank did not meet this
requirement at March 31, 1998. Management has submitted a capital plan to the
FDIC. All or a substantial portion of the net proceeds of the offering will be
contributed to the Bank as additional capital, which is expected to result in
the Bank again complying with this requirement.
NET INTEREST INCOME
For the year ended December 31, 1997, net interest income increased by $1.6
million over the amount for the Company's 1996 partial year. This was due to a
significant rise in the volume of interest earning assets, especially in loans
and securities. On the liability side, interest bearing liability volumes
increased sharply as the Company began to build a deposit base. The large
percentage increase in both interest earning assets and interest bearing
liabilities was a function of the small average balances in the prior year. This
was the result of the Bank's having commenced operations in the fourth quarter
of 1996. The net interest margin fell slightly to 3.36% in 1997, from 3.44% for
1996. This was due to the favorable impact of investing the proceeds of the
Company's initial public offering in 1996, during a period in which there were
small levels of interest bearing liabilities.
For the quarter ended March 31, 1998, net interest income increased by
270%, or $562,000 over the first quarter of 1997. The net interest margin
improved in the quarter to 3.53%, compared with 2.81% for the first quarter of
1997. The margin improvement was the result of a higher current percentage of
interest bearing assets in loans rather than securities and federal funds,
compared with the prior year. In all periods discussed above, interest rates
were fairly consistent with the comparable prior periods.
16
<PAGE> 18
The following tables show the dollar amount of changes in net interest
income for each major category of interest earning asset and interest bearing
liability, and the amount of change attributable to changes in average balances
(volume) or average rates for the periods shown. Variances that are jointly
attributable to both volume and rate changes have been allocated to the volume
component.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997,
VS. PERIOD FROM APRIL 26, 1996 THREE MONTHS ENDED
(INCEPTION) TO DECEMBER 31, 1996 MARCH 31, 1998 VS. 1997
--------------------------------- ------------------------------
INCREASE INCREASE
(DECREASE) (DECREASE)
DUE TO CHANGES IN DUE TO CHANGES IN
-------------------- ------------------
VOLUME VOLUME
TOTAL AND BOTH RATE TOTAL AND BOTH RATE
(DOLLARS IN THOUSANDS) ------- --------- ----- ------ -------- ----
<S> <C> <C> <C> <C> <C> <C>
Earning Assets -- Interest Income
Federal funds sold................ $ 376 $ 368 $ 8 $ (148) $ (162) $14
Securities........................ 707 707 -- 277 277 --
Loans............................. 2,666 2,674 (8) 1,185 1,190 (5)
------ ------ --- ------ ------ ---
Total........................ 3,749 3,749 -- 1,314 1,305 9
------ ------ --- ------ ------ ---
Deposits and Borrowed Funds --
Interest Expense
NOW and money market accounts..... 248 248 -- 40 44 (4)
Savings deposits.................. 36 36 -- 12 11 1
Time deposits..................... 1,769 1,768 1 684 673 11
Short term borrowings............. 29 29 -- 15 15 --
Capitalized lease obligation...... 97 97 -- 1 1 --
------ ------ --- ------ ------ ---
Total........................ 2,179 2,178 1 752 744 8
------ ------ --- ------ ------ ---
Net Interest Income................. $1,570 $1,571 $(1) $ 562 $ 561 $ 1
====== ====== === ====== ====== ===
</TABLE>
17
<PAGE> 19
AVERAGE BALANCE SHEET
The following tables show the Company's consolidated average balances of
assets, liabilities, and stockholders' equity, the amount of interest income or
interest expense and the average yield or rate for each major category of
interest earning asset and interest bearing liability, and the net interest
margin, for the periods indicated. Average loans are presented net of unearned
income and gross of the allowance for credit losses. Interest on loans includes
loan fees. Average securities are based on amortized cost.
<TABLE>
<CAPTION>
PERIOD FROM APRIL 26, 1996
(INCEPTION) TO
YEAR ENDED DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ----------------------------
AVERAGE AVERAGE
INTEREST RATE INTEREST RATE
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID
(DOLLARS 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>
18
<PAGE> 20
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------------------------------
1998 1997
---------------------------- ----------------------------
AVERAGE AVERAGE
INTEREST RATE INTEREST RATE
AVERAGE INCOME/ EARNED/ AVERAGE INCOME/ EARNED/
BALANCE EXPENSE PAID BALANCE EXPENSE PAID
(DOLLARS IN THOUSANDS) ------- -------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Federal funds sold....................... $ 5,860 $ 80 5.46% $17,763 $228 5.13%
Securities............................... 19,701 310 6.29 2,071 33 6.33
Loans.................................... 61,618 1,414 9.18 9,754 229 9.39
------- ------ ----- ------- ---- -----
Total Earning Assets/Total
Interest Income................ 87,179 1,804 8.28% 29,588 490 6.62%
------ ----- ---- -----
Cash and due from banks.................. 3,004 1,154
All other assets......................... 1,657 1,910
------- -------
Total Assets..................... $91,840 $32,652
======= =======
LIABILITIES AND EQUITY
NOW and money market accounts............ $ 9,042 $ 75 3.32% $ 3,739 $ 35 3.69%
Savings deposits......................... 1,966 15 3.05 520 3 2.56
Time deposits............................ 61,068 894 5.86 15,088 210 5.57
Short term borrowings.................... 1,182 15 5.08 -- -- --
Capitalized lease obligation............. 1,025 35 13.66 1,013 34 13.49
------- ------ ----- ------- ---- -----
Total Interest Bearing
Liabilities/Total Interest
Expense........................ 74,283 1,034 5.57% 20,360 282 5.54%
------ ----- ---- -----
Noninterest bearing demand deposits...... 9,469 2,713
All other liabilities.................... 285 96
Stockholders' equity..................... 7,803 9,483
------- -------
Total Liabilities and Equity..... $91,840 $32,652
======= =======
Net Interest Income...................... $ 770 $208
====== ====
Net Interest Margin (Net Interest Income/
Total Earning Assets)................. 3.53% 2.81%
===== =====
</TABLE>
19
<PAGE> 21
PROVISION FOR CREDIT LOSSES
The following table shows changes in the allowance for credit losses
arising from additions to the allowance that were charged to expense, and a
selected ratio:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
-----------------------------------------
MARCH 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
(DOLLARS IN THOUSANDS) --------- ------------ ------------
<S> <C> <C> <C>
Allowance for credit losses at beginning of period......... $800 $ 90 $--
Provision charged to expense............................... 160 710 90
---- ---- ----
Allowance for credit losses at end of period............... $960 $800 $90
==== ==== ====
Allowance for credit losses as a percentage of loans at
period end............................................... 1.38% 1.51% 1.61%
</TABLE>
In each accounting period, the allowance for credit losses is adjusted by
management, taking a variety of factors into account. Management attempts to
allocate specific portions of the allowance to specific loans based on factors
such as risk rating and past due status. A portion of the allowance is also
allocated to off-balance sheet items that may have elements of credit risk.
Management's evaluation of the allowance is further based on 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. In 1998, management reduced the rate at which
it has provided for credit losses based on an analysis of the known risk
elements in the Bank's loan portfolio. Management believes that the present
allowance is adequate, based on the broad range of considerations listed above.
The primary risk element considered by management regarding 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 concerning 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 annual
financial statements from its commercial loan customers, and periodically
reviews existence of collateral and its value.
Although management believes that the allowance for credit 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 that could be substantial in
relation to the size of the allowance for credit losses.
Management is not aware of any factors that would cause future net loan
charge-offs, in total or by loan category, to significantly differ from those
experienced by institutions of similar size.
NONINTEREST INCOME
Noninterest income increased to $184,000 for 1997, up from $4,000 in 1996.
This was due to the short length of time the Bank was open during the previous
year. In the first quarter of 1998, noninterest income increased over the prior
year quarter by 338%, to $70,000. The largest components of the increase were
overdraft income, gains on sales of residential mortgages, and fees from
processing merchant credit card deposits.
NONINTEREST EXPENSE
Noninterest expense was $3.1 million in 1997, up from $812,000 in 1996.
Again, this was primarily the result of the shortened initial year of operations
in 1996. The largest components of the increase were advertising and data
processing costs, which rose as the Bank's regular operations expanded during
1997. For the first quarter of 1998, noninterest expense increased over the
first three months of 1997 by 25%, to $823,000 in 1998. This was primarily the
result of growth of the Company, and the accompanying rise in payroll and other
operating expenses.
20
<PAGE> 22
PROVISION FOR INCOME TAXES
The Company currently has no recorded provision for income taxes. Net
operating loss carryforwards totaled $1.7 million through tax years ended
December 31, 1997. The Company has recorded a valuation allowance against these
carryforwards, since it has not yet demonstrated a history of earnings.
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 to
match the maturities of specific categories of loans and investments with
specific types of deposits and borrowings. Bank liquidity depends upon the mix
of the banking institution's potential sources and uses of funds. For the
Company, the major sources of liquidity have been deposits, federal funds sold,
and loans which mature within one year. Additional liquidity is provided by a
$2.0 million secured federal funds line of credit, and a $10.0 million secured
line of credit with the Federal Home Loan Bank of Indianapolis ("FHLB"). The
Company's larger deposit balances, which might be more likely to fluctuate in
response to rate changes, are closely monitored. These deposits consist mainly
of jumbo time certificates of deposit.
Managing rates on earning assets and interest bearing liabilities focuses
on maintaining stability in the net interest margin, an important factor in
earnings growth and stability. Emphasis is placed on maintaining a controlled
rate sensitivity position, to avoid wide swings in margins and to manage risk
due to changes in interest rates.
The following table shows the maturity and repricing distribution of the
Company's interest earning assets and interest bearing liabilities as of March
31, 1998. This table displays 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 cumulative interest rate sensitivity gap ratio. For purposes of this table,
an asset or liability is considered
21
<PAGE> 23
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
MONTHS AFTER ONE
WITHIN BUT YEAR BUT AFTER
THREE WITHIN ONE WITHIN FIVE
MONTHS YEAR FIVE YEARS YEARS TOTAL
(DOLLARS IN THOUSANDS) ------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Federal funds sold......................... $10,550 $ -- $ -- $ -- $10,550
Securities................................. 998 2,241 13,072 2,214 18,525
Loans...................................... 24,549 3,359 27,158 14,531 69,597
------- -------- ------- ------- -------
Total................................. 36,097 5,600 40,230 16,745 $98,672
------- -------- ------- ------- -------
INTEREST-BEARING LIABILITIES:
NOW and money market accounts.............. 9,201 -- -- -- $ 9,201
Savings deposits........................... 2,046 -- -- -- 2,046
Jumbo time deposits........................ 12,933 19,906 -- -- 32,839
Time deposits < $100,000................... 4,953 34,255 426 -- 39,634
Short term borrowings...................... 1,561 -- -- -- 1,561
Capitalized lease obligation............... -- 3 97 936 1,036
------- -------- ------- ------- -------
Total................................. 30,694 54,164 523 936 $86,317
------- -------- ------- ------- -------
Interest rate sensitivity gap................ $ 5,403 $(48,564) $39,707 $15,809
Cumulative interest rate sensitivity gap..... $(43,161) $(3,454) $12,355
Interest rate sensitivity gap ratio.......... 1.18 0.10 76.92 17.89
Cumulative interest rate sensitivity gap
ratio...................................... 0.49 0.96 1.14
</TABLE>
The table above does not necessarily indicate the impact that general
interest rate movements would have on the Company's net interest margin, 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 by different increments. At March 31, 1998, the
Company is considered "liability sensitive" according to the preceding table. In
a rising rate environment, the Company might not be able to increase rates on
earning assets faster than the increase in rates on interest bearing
liabilities.
The Company is also working with a vendor to develop a personal
computer-based model to simulate the effects of possible interest rate changes.
The Company intends to limit estimated negative exposure to changing rates
within a one year period. 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.
BUSINESS
THE COMPANY
The Company was incorporated on April 26, 1996, as a Michigan business
corporation. The Company was formed to acquire all of the Bank's capital stock
and to engage in the business of a bank holding company under the federal Bank
Holding Company Act of 1956, as amended (the "BHCA"). In September of 1996, in
connection with the organization of the Company and the Bank, the Company sold
1,150,000 shares of its Common Stock in an underwritten, initial public
offering, at a price of $10 per share (1,391,500 shares and $8.26 as adjusted
for the 1997 and 1998 10% stock dividends). The Company funded the capital of
the Bank and paid certain expenses from the net proceeds of the public offering.
22
<PAGE> 24
The Bank is a Michigan banking corporation that commenced business on
October 28, 1996. All of its outstanding capital stock is owned by the Company.
The Bank is the only bank headquartered in Mount Clemens, Michigan, and conducts
business primarily in Macomb County, Michigan.
The liberalization of Michigan's branch banking laws, together with the
expansion of interstate banking, has led to substantial consolidation of the
banking industry in Michigan, including Macomb County. Several of the financial
institutions within the primary market area of the Bank have either been
acquired by or merged with larger financial institutions or out-of-state
financial institutions. In some cases, when these consolidations occurred, local
boards of directors were dissolved and local management was relocated or
terminated. These actions have, in some cases, resulted in policy and credit
decisions being centralized away from local management.
In the opinion of the Company's management, this situation has created a
favorable opportunity for a financial institution such as the Bank with local
management and directors. Management of the Company believes that the Bank has
and will continue to attract those customers who wish to conduct business with a
locally managed institution that demonstrates an active interest in their
business and personal financial affairs. The Company believes it is able to
quickly respond to customer requests, provide customized financial products and
services, and offer the personal attention of the Bank's senior banking
officers.
The Bank and its staff have a strong commitment to community banking in
Macomb County. The Bank offers a wide array of financial products and services
for both consumers and small to medium-sized businesses. The Bank specializes in
serving owner-managed businesses by providing a high degree of personal service
to companies and their employees. The Bank provides many types of commercial
financing for businesses, as well as a full range of deposit products. Other
services include cash management, wire transfer, free PC banking, and courier
services. The Bank emphasizes providing special services to employees of
customer companies. The Bank also offers a full range of low cost consumer
services including free personal checking accounts, ATM services, PC banking,
telephone banking, residential mortgages, credit cards, and automobile and
marine financing. The Bank stresses personal service and offers a well-staffed
teller and customer service area without charge to its customers.
The Bank has enjoyed considerable success in attracting customers. It
opened for business on October 28, 1996. After only 17 months of operations, at
March 31, 1998, the Company had total assets of approximately $104.6 million,
total loans of approximately $69.6 million, and total deposits of approximately
$93.9 million.
The ratio of the allowance for possible credit losses to total loans was
1.38% at March 31, 1998. From the inception of the Company through April 30,
1998, the Company has not had a single loan more than 90 days past due or
classified as nonaccrual.
The Company reported a net loss of $143,000 for the quarter ended March 31,
1998, which included a provision for credit losses of $160,000. The Company
produced modest profits for the months of March, April and May, 1998 and expects
to be profitable for the year.
The Bank operates one banking office located at 100 North Main Street,
Mount Clemens, Michigan 48043. This office also serves as the headquarters of
the Bank and the Company. The Company's telephone number is (810) 783-4500.
MARKET AREA
Mount Clemens is the county seat and the financial center of Macomb County.
Through its customer service, PC banking and courier services, the Bank has the
ability to service a larger geographic area than a traditional bank branch.
Management believes that it can continue to capitalize on these services and
delivery methods, and service a significantly greater population and area using
its existing location and staff.
Macomb County is one of the fastest growing communities in Michigan and has
a stable and diverse economic base. Macomb ranks third in population out of
Michigan's 83 counties and 47th out of 3,100 counties nationally. With a current
population of over 700,000, Macomb County covers 482 square miles and is home to
over 15,000 businesses. It is also an active boating center with 31 miles of
coastline on Lake St. Clair, and over 40,000 registered pleasure craft. Macomb
County is also a large banking market. According to
23
<PAGE> 25
available industry data, as of June 30, 1997, total deposits in this market,
including those held by banks, thrifts and credit unions, were approximately
$11.4 billion.
The Macomb County municipalities surrounding Mount Clemens have experienced
some of the largest growth in new residential construction in the State of
Michigan in the last several years. The area, while very much involved with the
automobile industry in Metropolitan Detroit, supports a diverse economy of
manufacturing service and retail businesses.
BUSINESS STRATEGY
Emphasize Community Banking. The Bank strives to maintain a strong
commitment to community banking. The Bank's goal is to attract as customers
small to medium-sized owner operated businesses and individuals who wish to
conduct business with a local commercial bank that demonstrates an active
interest in their business and personal financial affairs. Management believes
that the Bank is able to deliver timely responses to customer requests, provide
customized financial products and services and offer customers the personal
attention of senior banking officers. The Company believes that its commitment
to service gives it a competitive advantage in the marketplace.
Expand Lending in the Company's Primary Market. The Company's lending
philosophy is to provide a full service lending and deposit relationship to all
customers. The Company's primary lending focus is on the small to medium-sized
owner operated businesses. Upon obtaining the lending relationship of the
businesses, the Company then tries to expand the relationship through extensive
cross selling efforts to the business owners, their families, associates and
employees. The cross selling includes special loan programs, direct payroll
deposits, special deposit packages and customized service programs. The Company
also offers residential mortgage loans, automobile and recreational vehicle
financing, credit card loans, home equity loans, and personal loans. The Company
intends to maintain its emphasis on these lending services.
Increase Deposits in Market Area. The Company has been able to attract a
strong base of core deposits from its local market. Management of the Company
has a long history of involvement in the community with strong ties to local
government. The Bank has acquired significant deposits from many governmental
entities as well as local personal and business deposits. The Company has also
been able to develop a significant base of noninterest bearing commercial
checking accounts through its lending relationships and cross selling.
Competitive rate and fee structures and a high level of service have also been
important in increasing deposits for the Company.
Grow Through Cost Effective Expansion. The growth of the Bank to date has
been accomplished through internal expansion and the use of outside vendors
where possible. The Company has a staff of 35 full-time equivalent employees who
are responsible for branch, lending, and administrative functions. It is
management's belief that it is cost effective to use outside sources for the
back office processes of the Bank, thereby making more Bank personnel available
to service the customer. By maintaining this philosophy, the Company is able to
serve a larger number of customers per employee while maintaining a very high
degree of personal customer service. Management believes that the Company has
the infrastructure available to significantly increase the volume of business
with only minimal increases in full-time equivalent employees.
Maintain Competitive Technology. As a new company, the Bank has been able
to invest in the latest technology at a much lower initial cost than some
competing institutions which must update their systems to be competitive. The
Company has strategically selected computer vendors with a history of
maintaining technological superiority which is expected to allow the Company to
remain at the forefront of technology at a lower long term cost. The Company, as
a result, has a multitude of delivery methods, including telephone banking, wire
transfer, automatic clearing house, consumer and business PC banking, electronic
bill payment, debit card services and networked ATMs.
Achieve Superior Customer Service. The Company strives to maintain an
environment where the customer is the most important focus in the business. From
loan officers highly visible in the community to accessible executive
management, the customer is always viewed as the most important person in the
Bank.
24
<PAGE> 26
LENDING PRACTICES
Commercial Loans. The Bank's commercial lending group originates commercial
loans primarily in Macomb County, Michigan. Commercial loans are originated by
the six officers, including the Chairman, President, and the Executive Vice
President. The commercial loan group has approximately 100 years of combined
banking experience. The commercial loan portion remains the largest part of the
total lending portfolio, with loans totaling $37.1 million at March 31, 1998.
This total does not reflect unused lines of credit of $10.9 million. The
Company's emphasis on commercial banking remains strong with over $5 million of
committed loans in process that have not closed. The Company targets small to
medium-sized commercial customers with sales of up to $10.0 million. These
customers, in many cases, are owner-managed businesses, the owners of which are
familiar to the staff. The Company stresses quick and efficient service with an
emphasis on personal service. Loans are originated for general business
purposes, including working capital, accounts receivable financing, machinery
and equipment acquisition, and commercial real estate financing including new
construction and land development.
Working capital loans are often structured as a line of credit and are
reviewed annually in connection with the borrower's year end financial
reporting. These loans generally are secured by substantially all of the assets
of the borrower, a personal guaranty by the owners and have an interest rate
tied to the prime rate. Loans for machinery and equipment purposes typically
have a maturity of five years and are fully amortizing. Commercial real estate
loans are usually written with a five year maturity, but are amortized over a 15
to 20 year period. Commercial real estate loans may have an interest rate that
is fixed to maturity, or float with a margin over the prime rate.
The Bank evaluates all aspects of a commercial loan transaction in order to
minimize credit and interest rate risk. Underwriting usually includes an
assessment of management, products, markets, cash flow, capital, income and
collateral. The analysis includes a review of historical and projected financial
results. Appraisals are obtained by independent appraisers who are well known to
the Bank on certain transactions involving real estate and, in some cases,
equipment.
Commercial real estate lending involves more risk than residential lending,
because loan balances are greater and repayment is dependent upon the borrower's
operation. The Bank attempts to minimize risk associated with these transactions
by limiting its exposure to existing well known customers, and new customers
with an established profitable history. Risk is further reduced by limiting the
concentration of credit to any one borrower, as well as the type of commercial
real estate financed. Management has classified all commercial loans by their
Standard Industry Classification ("SIC") codes, and is not aware of any unusual
concentrations within the portfolio.
Residential Real Estate Loans. The Bank originates residential real estate
loans in its market area according to secondary market underwriting standards.
Although many of the residential loan customers are commercial loan customers or
other customers known to staff, loans are originated by commissioned originators
that specialize in visiting the customer's home or business during the day,
evening or weekend to take a loan application. Residential loans primarily
provide borrowers with a fixed interest rate, with terms up to 30 years on 1 to
4 family residential property. Many of these are sold to FNMA, with all interest
rate risk passed to the purchaser. The Bank from time to time may elect to
underwrite certain residential real estate loans to be held in its own loan
portfolio. These loans are generally underwritten with the same standards that
apply to the secondary market. The majority of these loans are five to seven
year balloon notes.
Consumer Loans. The Bank originates consumer loans for a wide variety of
personal financial requirements. Consumer loans include home equity revolving
lines of credit, home equity term loans, new and used automobile loans, boat
loans and overdraft protection for checking account customers. The Bank does not
currently purchase indirect retail installment loans from automobile and boat
dealerships. Consumer loans generally have shorter terms and higher interest
rates than residential mortgage loans and, except for home equity lines of
credit, usually involve more credit risk than mortgage loans because of the type
and nature of the collateral. While the Bank does not utilize a formal credit
scoring system, the Bank believes its loans are underwritten carefully, with a
strong emphasis on credit quality, employment stability, and monthly income.
These loans are generally repaid on a monthly schedule, with the source of
repayment tied to the borrower's
25
<PAGE> 27
periodic income. The Bank believes that the generally higher yields earned on
consumer loans compensate for the increased credit risk associated with such
loans, and that consumer loans are important to its efforts to serve the credit
needs of the communities and customers that it serves.
Lending Limits. Pursuant to state regulations, the Bank is limited in the
amount that it may lend to a single borrower. As of May 31, 1998, the legal
lending limit of the Bank 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. The Bank expects its lending limit to be
increased as a result of the offering.
INVESTMENTS
The principal investment of the Company is its investment in the common
stock of the Bank. Funds retained by the Company are generally invested in
interest bearing accounts with the Bank. From time to time funds may be invested
in various debt instruments. Such instruments include (but are not limited to)
obligations of or guaranteed by the United States, general obligations of a
state or political subdivision or agency thereof, bankers' acceptances or
certificates of deposit of United States commercial banks, or commercial paper
of United States issuers rated in the highest category by a
nationally-recognized investment rating service. The Company is permitted to
make limited portfolio investments in equity securities and to make equity
investments in subsidiary corporations engaged in certain non-banking
activities. These activities may include mortgage banking, community
development, real estate appraisals, arranging equity financing for commercial
real estate, and owning and operating real estate used substantially by the Bank
or acquired for its future use. The Company has no present plans to make any
such equity investments.
The Bank may invest its funds in a wide variety of debt instruments and may
participate in the federal funds market with other depository institutions.
Subject to certain exceptions, the Bank is prohibited from investing in equity
securities. Under one such exception, in certain circumstances (and with the
prior approval of the FDIC) the Bank could invest up to 10% of its total assets
in the equity securities of a subsidiary corporation engaged in certain real
estate related activities. The Bank has no present plans to make such an
investment. Real estate acquired by the Bank in satisfaction of or foreclosure
upon loans may be held by the Bank, subject to approval by the Bank's Board of
Directors, for a period not exceeding 60 months after the date of acquisition,
or such longer period as the Commissioner of the Financial Institutions Bureau
of the Michigan Department of Consumer & Industry Services ("FIB") may approve.
The Bank is also permitted to invest an aggregate amount not in excess of
two-thirds of the capital and surplus of the Bank in such real estate as is
necessary for the convenient transaction of its business. The Bank has no
present plans to make any such investment. The Board of Directors of the Company
or the Bank may alter their investment policies without shareholder approval.
EMPLOYEES
As of June 1, 1998, the Company and the Bank employed approximately 40
persons, 32 of whom were employed on a full time basis. None of the Company's
employees are represented by a collective bargaining unit, and the Company
believes that its employee relations are good.
COMPETITION
The Company and the Bank face strong competition for deposits, loans and
other financial services from numerous banks, savings banks, thrifts, credit
unions, and other entities which provide financial services, including consumer
finance companies, securities brokerage firms, mortgage brokers, insurance
companies, mutual funds, and other lending sources and investment alternatives.
Some of the financial institutions and financial services organizations with
which the Bank competes are not subject to the same degree of regulation as the
Bank. Many of the financial institutions aggressively compete for business in
the Bank's market area. Most of these competitors have been in business for many
years, have established customer bases, are larger, have substantially higher
lending limits than the Bank, and will be able to offer certain services that
the Bank does not expect to provide in the foreseeable future, including
multiple branches, trust services, and international banking services. In
addition, most of these entities have greater capital resources than the Bank,
26
<PAGE> 28
which, among other things, may allow them to price their services at levels more
favorable to the customer and to provide larger credit facilities than could the
Bank. Additionally, recently effective legislation regarding interstate
branching and banking may increase competition in the future from out-of-state
banks.
DESCRIPTION OF PROPERTY
The Bank leases a two-story office building with approximately 9,800 square
feet of office space in the downtown business district of Mount Clemens. The
executive offices of the Company are located in the same building. The building
lease runs through 2011, and provides for payment of approximately $2.6 million
of total fixed rent over the term of the 15 year lease. The monthly lease
payments are currently $11,250 per month, and increase over the term of the
lease to $16,531 per month in the final five years of the lease. The Bank is
also required to make payments for taxes, insurance, and other operating
expenses.
The Bank also leases an office suite in Mount Clemens which it uses for its
mortgage department. The lease runs through 2002, and provides for payment of
approximately $121,000 of fixed rent over the term of the five year lease. The
monthly lease payments are currently $1,895 per month, and increase over the
term of the lease to $2,274 per month in the final year of the lease. This
facility has approximately 1,500 square feet of office space. The Bank has no
present plans to acquire additional facilities. See "Related Party
Transactions."
LEGAL PROCEEDINGS
From time to time, the Company and the Bank may be involved in various
legal proceedings that are incidental to their business. In the opinion of
management, neither the Company nor the Bank is a party to any current legal
proceedings that are material to the financial condition of the Company or the
Bank, either individually or in the aggregate.
27
<PAGE> 29
MANAGEMENT
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about the directors and
executive officers of the Company. Except as noted, all persons listed have held
the position reported for over five years. Positions with the Company and the
Bank have been held since their organization in 1996.
<TABLE>
<CAPTION>
HAS SERVED AS YEAR WHEN
DIRECTOR DIRECTOR'S TERM OF
NAME, AGE, PRINCIPAL OCCUPATION SINCE OFFICE EXPIRES
- ------------------------------------------------------------ ------------- ------------------
<S> <C> <C>
Harold W. Allmacher, 58, Chairman of the Board and Chief
Executive Officer of the Company and the Bank............. 1996 1999
Gebran S. Anton, 65, Co-owner; Anton, Zorn & Associates
(Commercial & Industrial Real Estate Brokerage) President;
Gebran Anton Development Co. (Real Estate Development).... 1996 1999
Joseph Catenacci, 62, Executive Vice President; John Carlo,
Inc. (Highway and Heavy Construction)..................... 1996 2000
Raymond M. Contesti, 63, Superintendent; Clintondale
Community Schools......................................... 1996 2000
Salvatore Cottone, 58, President; Resco, Inc. (Real Estate
Development).............................................. 1996 2001
Celestina Giles, 51, Officer of the Bank.................... 1996 2000
Bobby L. Hill, 65, County Commissioner; Macomb County Board
of Commissioners.......................................... 1996 2001
Joseph F. Jeannette, 53, Assistant Director; Utica Community
Schools................................................... 1996 1999
Richard J. Miller, 39, President and Chief Operating Officer
of the Company and the Bank............................... 1996 2001
Dean S. Petitpren, 55, President; Petitpren, Inc. (Beer
Distribution)............................................. 1996 2001
Peter J. Przybocki, 34, Corporate Treasurer of the Company,
Vice President and Controller of the Bank................. -- --
Carole L. Schwartz, 59, Commissioner; Zoning Board of
Appeals................................................... 1996 1999
Andrew Tassopoulos, 37, Executive Vice President of the
Company, Executive Vice President and Senior Loan Officer
of the Bank............................................... -- --
</TABLE>
Mr. Allmacher and Mrs. Giles held similar positions, while Mr. Miller
served as Vice President and Controller, with Old Kent Bank -- Macomb (formerly
First National Bank in Macomb County), for substantially all of a three or more
year period prior to their election to the positions set forth in the table
above. Messrs. Tassopoulos and Przybocki held various officer positions with Old
Kent Bank -- Macomb for substantially all of a more than three year period prior
to joining the Company and the Bank in 1996, except that Mr. Przybocki held a
financial reporting position with Republic Bancorp Inc. of Owosso, Michigan,
during parts of 1995 and 1996.
The members of the Board of Directors of the Company are divided into three
classes, each class to be as nearly equal in number as possible, with each class
serving a staggered three-year term. The entire Board of Directors of the Bank
is elected annually by its shareholder, the Company. Officers of the Company and
the Bank are elected annually by their respective Boards of Directors and
perform such duties as are prescribed in the Bylaws or by the Board of
Directors.
There are no family relationships among any of the Company's directors or
executive officers.
28
<PAGE> 30
EXECUTIVE COMPENSATION
The following table sets forth compensation received by the Chairman of the
Board and Chief Executive Officer of the Company and the Bank for the year ended
December 31, 1997, and for the period from April 26, 1996 (inception) to
December 31, 1996. There were no executive officers of the Company or the Bank
whose total compensation exceeded $100,000 during 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ---------------------------------------------- ---- ------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Harold W. Allmacher........................... 1997 $67,500 None None None
Chairman of the Board and Chief 1996 $31,154 None 6,050 None
Executive Officer
</TABLE>
OPTIONS GRANTED IN 1997
Under the Company'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 Company 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 Company. 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.
No employee stock options were granted to the Chairman of the Board and
Chief Executive Officer of the Company and the Bank during the year ended
December 31, 1997.
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 Chairman of the Board and Chief
Executive Officer of the Company and the Bank, and the value of unexercised
options at December 31, 1997:
AGGREGATE OPTION EXERCISES AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 12-31-1997 AT 12-31-1997(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- -------------------------------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Harold W. Allmacher............. None N/A 2,420/3,630 $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 $12.95 per share, the average of
the closing bid and asked prices reported by the OTC Bulletin Board as of
December 31, 1997.
DIRECTOR COMPENSATION
During 1997, no director fee or other cash compensation was paid to any
directors of the Company for their services in such capacities. The Company has
no present plans to pay any such compensation during 1998.
Members of the Company's Board of Directors who are not employees of the
Company or any of its affiliates ("Nonemployee Directors"), each received an
option to purchase 4,840 shares of Common Stock of the Company at a price of
$8.26 per share, pursuant to the Company's 1996 Stock Option Plan for
Nonemployee Directors which was approved on June 1, 1996. Under this Plan, each
option was immediately
29
<PAGE> 31
exercisable for 1,210 shares when granted. Thereafter, as of the date of each
Annual Meeting, each option is exercisable for an additional 1,210 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.
RELATED PARTY 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 Company's
directors, executive officers, and principal shareholders (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.
As of May 31, 1998, the Bank had outstanding loans to directors, executive
officers, and their associates totaling approximately $1.2 million in aggregate
amount, under commitments totaling approximately $2.7 million. As of December
31, 1997, the Bank had $1.5 million in loans to directors, executive officers,
and their associates, with outstanding commitments totaling approximately $2.8
million.
The main office of the Company and the Bank is being leased from T.A.P.
Properties, LLC ("TAP"), a company partially owned by two directors of the
Company, Gebran S. Anton and Dean S. Petitpren. TAP expended approximately
$1,000,000 for the acquisition and improvement of the property being leased to
the Bank as its main office, including a portion of the cost for constructing
tenant improvements. The Bank to date has paid for approximately $717,000 of
tenant improvements. The lease has a term of 15 years. The Bank also leases an
office suite for its mortgage department in a building that is owned by Mr.
Anton. The lease term is five years. The terms of these leases and payments
thereunder are similar to those prevailing at the time for local comparable
leases. See "Business -- Description of Property."
30
<PAGE> 32
SECURITY OWNERSHIP
The following table presents information regarding the beneficial ownership
of the Company's Common Stock as of May 10, 1998, by (i) each of the directors
and executive officers of the Company, and (ii) the directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF CLASS
NAME OF BENEFICIAL OWNER OWNED(1) BENEFICIALLY OWNED(5)
- ------------------------------------------------------------ ------------ ---------------------
<S> <C> <C>
Harold W. Allmacher......................................... 53,130(2) 3.81%
Gebran S. Anton............................................. 33,880(2) 2.43%
Joseph Catenacci............................................ 33,880(2) 2.43%
Raymond M. Contesti......................................... 21,780(2) 1.56%
Salvatore Cottone........................................... 33,880(2) 2.43%
Celestina Giles............................................. 15,018(2) 1.08%
Bobby L. Hill............................................... 16,940(2) 1.21%
Joseph F. Jeannette......................................... 39,655(2) 2.84%
Richard J. Miller........................................... 15,730(2) 1.13%
Dean S. Petitpren........................................... 35,491(2) 2.54%
Peter J. Przybocki.......................................... 484 0.03%
Carole L. Schwartz.......................................... 36,465(2) 2.61%
Andrew Tassopoulos.......................................... 5,286(3) 0.38%
All directors and executive officers of the Company as a
group (13 persons)........................................ 341,619(4) 23.83%
</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 options to purchase 3,630 shares exercisable within 60 days of May
10, 1998.
(3) Includes options to purchase 2,420 shares exercisable within 60 days of May
10, 1998.
(4) Includes options to purchase 42,350 shares exercisable within 60 days of May
10, 1998.
(5) The percentages shown are based on the 1,391,455 shares of the Company's
common stock outstanding as of May 10, 1998, plus the number of shares that
the named person or group has the right to acquire within 60 days of May 10,
1998. The percentages shown do not reflect the 700,000 additional shares
that will be outstanding following completion of the offering, or any shares
of Common Stock that may be acquired in the offering. The Company expects
that the percentage ownership shown in the table will decrease significantly
as a result of the issuance of the shares in the offering.
The table below shows the beneficial ownership of the Company's Common
Stock by each person who was known by the Company to own beneficially more than
5% of the Company's Common Stock as of May 10, 1998. The information is based on
filings that have been made by such persons with the Federal Reserve and other
information that has been provided to the Company by such person. To the best of
the Company's knowledge, no other person owns more than 5% of the Company's
outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES PERCENT OF
BENEFICIALLY COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED STOCK
- ------------------------------------------------------------ ------------ ----------
<S> <C> <C>
Estate of Willard G. Pierce................................. 242,000 17.4%
820 West Clinton Street
Hastings, MI 49058
</TABLE>
31
<PAGE> 33
SUPERVISION AND REGULATION
GENERAL
Financial institutions and their holding companies are extensively
regulated under federal and state law and regulations. Such provisions
applicable to banks and their holding companies regulate, among other things,
the scope of business, investments, reserves against deposits, capital levels
relative to operations, lending activities and practices, nature and amount of
collateral for loans, establishment of branches, mergers, consolidations and
dividends. The system of supervision and regulation applicable to the Company
and the Bank establishes a comprehensive framework for their respective
operations and is intended primarily for the protection of the FDIC's deposit
insurance funds, the depositors of the Bank, and the public, rather than
shareholders of the Bank or the Company. Any change in government regulation may
have a material effect on the business of the Company and the Bank.
There has been significant legislative and regulatory change relating to
the financial services industry in recent years. Non-bank financial
institutions, such as securities brokerage firms, insurance companies and money
market funds, have been permitted to engage in activities that directly compete
with traditional bank business. The services that banks are permitted to provide
and the types of accounts banks may offer to depositors have been expanded.
Geographic constraints on the operations of financial institutions and their
holding companies have been relaxed.
THE COMPANY
General. The Company is a registered bank holding company, subject to
supervision and examination by the Federal Reserve. The Company is required to
make periodic reports to the Federal Reserve and to furnish such other
information as the Federal Reserve may require under the BHCA.
Federal Reserve policy requires a bank holding company such as the Company
to serve as a source of financial and managerial strength to its banking
subsidiaries. Under this policy, a bank holding company must use available
resources to provide adequate capital funds to a troubled banking subsidiary,
even if it is not otherwise obligated to do so. In addition, in certain
circumstances a Michigan state bank having impaired capital may be required by
the Commissioner of the FIB either to restore the bank's capital by a special
assessment upon its shareholders, or to initiate the liquidation of the bank.
Investments and Activities. In general, the BHCA requires a bank holding
company to obtain prior approval of the Federal Reserve before it may merge with
or consolidate into another bank holding company, acquire substantially all the
assets of any bank or bank holding company, or acquire ownership or control of
any voting shares of any bank or bank holding company, if after such
acquisition, it would own or control, directly or indirectly, more than 5% of
the voting shares of such bank holding company or bank. In acting on such
applications, the Federal Reserve considers statutory factors, including the
financial and managerial condition of the parties, their record of performance
under the Community Reinvestment Act, and the impact upon competition in
relevant geographic and product markets.
The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company that is not a bank, and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to banks and their subsidiaries. Upon notice to the Federal
Reserve, bank holding companies may engage in, and may own shares of companies
engaged in, certain businesses found by the Federal Reserve to be so closely
related to banking or the management or control of banks as to be a proper
incident thereto. Under current Federal Reserve regulations, a holding company
and its non-bank subsidiaries are permitted to engage in financial and
investment advisory, sales and consumer finance, equipment leasing, data
processing, discount securities brokerage, mortgage banking and brokerage, and
other activities. These activities are subject to certain limitations imposed by
the regulations.
Capital Requirements. The Federal Reserve's capital guidelines establish
the following minimum regulatory capital requirements for bank holding
companies: (i) a leverage capital requirement expressed as a
32
<PAGE> 34
percentage of total assets, (ii) a qualifying capital requirement expressed as a
percentage of risk-weighted assets, (iii) a Tier 1 leverage requirement
expressed as a percentage of total assets, and (iv) for bank holding companies
having defined trading activities equal to 10% or more of total assets (or $1
billion, whichever is less), a risk-based capital ratio adjusted for market
risk. The leverage capital requirement consists of a minimum ratio of total
capital to total assets of 6%, with an expressed expectation that banking
organizations generally should operate above such minimum level. The qualifying
capital requirement consists of a minimum ratio of total qualifying capital to
total risk-weighted assets of 8%, of which at least one-half must be Tier 1
capital (which consists principally of shareholders' equity). The Tier 1
leverage requirement consists of a minimum ratio of Tier 1 capital to total
assets of 3% for the most highly rated companies, with minimum requirements of
4% to 5% for all others. The Company is not currently subject to the capital
ratio requirement relative to market risk.
Each of the capital guidelines currently used by the Federal Reserve is a
minimum requirement, and higher capital levels will be required if warranted by
the particular circumstances or risk profiles of individual banking
organizations. Further, any banking organization (such as the Company)
experiencing or anticipating significant growth would be expected to maintain
capital ratios, including tangible capital positions (i.e., Tier 1 capital less
all intangible assets), well above the minimum levels. The Federal Reserve's
regulations provide that the capital guidelines will generally be applied on a
bank-only (rather than a consolidated) basis in the case of a bank holding
company (such as the Company) with less than $150 million in total consolidated
assets.
THE BANK
General. The Bank is a Michigan-chartered bank, subject to supervision and
examination by the FIB. Deposit accounts with the Bank are insured by the FDIC
pursuant to the Federal Deposit Insurance Act ("FDIA") and regulations issued
thereunder by the FDIC. Federal Reserve and FDIC regulations affect many
activities of the Bank, including the permissible types and amounts of loans,
investments, capital adequacy, branching, interest payable on deposits, required
reserves, and the safety and soundness of the Bank's practices. The regulations
are intended primarily for the protection of the Bank's depositors and
customers, and not the shareholders of the Bank or the Company. The Bank is
regulated and examined by the FDIC, and is not a member of the Federal Reserve
System.
The Bank is subject to certain restrictions imposed by the Federal Reserve
Act on any extensions of credit to the Company or its subsidiaries, on
investments in the stock or other securities of the Company or its subsidiaries,
and the acceptance of the stock or other securities of the Company or its
subsidiaries as collateral for loans to any person. Federal law places
restrictions on the amount and nature of loans to executive officers, directors
and controlling persons of banks insured by the FDIC and holding companies
controlling such banks.
Capital Requirements. The FDIC's capital guidelines for state chartered,
FDIC-insured non-member banks (such as the Bank) include (a) a leverage measure,
consisting of a minimum ratio of Tier 1 capital to total assets of 3% for the
most highly-rated banks and a minimum requirement of 4% to 5% for all others,
and (b) a risk-based capital measure consisting of a minimum ratio of qualifying
total capital to risk-weighted assets of 8%, at least one-half of which must be
Tier 1 capital. Tier 1 capital consists principally of shareholders' equity. In
addition, the FDIC has adopted requirements for each such bank having defined
trading activities as shown on its most recent Consolidated Report of Condition
and Income ("Call Report") in an amount equal to 10% or more of its total assets
(or $1 billion, whichever is less) (i) to measure its market risk using an
internal value-at-risk model conforming to the FDIC's capital guidelines, and
(ii) to maintain a commensurate amount of additional capital to reflect such
risk. The FDIC's capital guidelines establish minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions.
In addition to the foregoing, under the terms of the FDIC Order granting
the Bank deposit insurance coverage, the Bank is required to maintain a ratio of
Tier 1 capital to total assets of not less than 8% through October 28, 1999.
Regulatory capital ratios of the Company and the Bank, respectively, at December
31, 1997 and 1996, are set forth in Note 9 of the Notes to Consolidated
Financial Statements of the Company
33
<PAGE> 35
elsewhere in this Prospectus. Certain regulatory capital ratios of the Company
as of March 31, 1998 and 1997, and as of December 31, 1997, are set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition."
Prompt Corrective Action. Among other things, the FDIA requires the federal
depository institution regulators to take prompt corrective action in respect of
depository institutions that do not meet minimum capital requirements. The scope
and degree of regulatory intervention is linked to the capital category in which
a depository institution falls. The FDIA and the implementing regulations of the
Federal depository institution regulators establish five capital categories,
ranging from "well capitalized" to "critically undercapitalized", based upon an
institution's qualifying capital to risk-based assets, Tier 1 capital to
risk-based assets, and Tier 1 capital to total assets ratios. Each depository
institution is periodically assigned to a capital category, generally on the
basis of its most recent Call Report.
Depending upon the capital category in which an institution falls, the
regulators' corrective powers include: requiring the submission of a capital
restoration plan; placing limits on asset growth and restrictions on activities;
requiring the institution to issue additional capital stock (including
additional voting stock) or to be acquired; restricting transactions with
affiliates; restricting the interest rate the institution may pay on deposits;
ordering a new election of directors of the institution; requiring that senior
executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to divest
certain subsidiaries; prohibiting the payment of principal or interest on
subordinated debt; and ultimately, appointing a receiver for the institution.
DIVIDENDS
The Company is a corporation separate and distinct from the Bank. The
ability of the Company to obtain funds for the payment of dividends and for
other cash requirements will be dependent on the amount of dividends that may be
declared by its subsidiary, the Bank. The Bank is subject to limitations on the
dividends it may pay to the Company.
As a banking corporation organized under Michigan law, the Bank will be
restricted as to the maximum amount of dividends it may pay on its common stock.
The Bank may not pay dividends except out of net profits after deducting its
losses and bad debts. The Bank may not declare or pay a dividend unless it will
have a surplus amounting to at least 20% of its capital after the payment of the
dividend. If the Bank has a surplus less than the amount of its capital it may
not declare or pay any dividend until an amount equal to at least 10% of net
profits for the preceding half year (in the case of quarterly or semiannual
dividends) or full year (in the case of annual dividends) has been transferred
to surplus. The Bank may, with the approval of the Commissioner of the FIB, by
vote of shareholders owning two-thirds of the stock eligible to vote, increase
its capital stock by a declaration of a stock dividend, provided that after the
increase its surplus equals at least 20% of its capital stock, as increased. The
Bank may not declare or pay any dividend on its common stock until the
cumulative dividends on preferred stock (should any such stock be issued and
outstanding) have been paid in full. The Bank has no present plans to issue
preferred stock.
The FDIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. The FDIC may prevent an insured bank from paying dividends if
the bank is in default of payment of any assessment due to the FDIC. In
addition, payment of dividends by a bank may be prevented by the applicable
federal regulatory authority if such payment is determined, by reason of the
financial condition of such bank, to be an unsafe and unsound banking practice.
It is the policy of the Federal Reserve that a bank holding company should
not pay cash dividends unless (i) the organization's net income available to
common equity for the past year is sufficient to fully fund the dividends, and
(ii) the prospective rate of earnings retention appears consistent with the
organization's capital needs, asset quality, and overall financial condition.
For small bank holding companies (those with less than $150 million in assets),
the Federal Reserve's position is that such companies should not pay dividends
so long as they have a debt-to-equity ratio of 1:1 or greater. The Federal
Reserve has also expressed the view that a
34
<PAGE> 36
bank holding company should not pay cash dividends that can only be funded in
ways that weaken the bank holding company's financial health, such as by
borrowing.
Additionally, the Federal Reserve possesses enforcement powers over bank
holding companies and their nonbank subsidiaries to prevent or remedy actions
that represent unsafe or unsound practices or violations of applicable statutes
and regulations. Among these powers is the ability in appropriate cases to
proscribe the payment of dividends by banks and bank holding companies. Similar
enforcement powers over the Bank are possessed by the FDIC. The "prompt
corrective action" provisions of the FDIA impose further restrictions on the
payment of dividends by insured banks which fail to meet specified capital
levels and, in some cases, their parent bank holding companies. In addition to
the restrictions on dividends imposed by the Federal Reserve, the MBCA imposes
certain restrictions on the declaration and payment of dividends by Michigan
corporations such as the Company. See "Description of Capital Stock -- Common
Stock -- Dividend Rights."
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 9,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock. As of the date of this
Prospectus, there are 1,391,455 shares of Common Stock issued and outstanding.
No shares of Preferred Stock have been issued by the Company.
Michigan law allows the Company's Board of Directors to issue additional
shares of stock up to the total amount of Common Stock and Preferred Stock
authorized without obtaining the prior approval of the shareholders.
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue Preferred
Stock, in one or more series, from time to time, with such voting powers, full
or limited but not to exceed one vote per share, or without voting powers, and
with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as may be provided in the resolution or resolutions adopted by the Board of
Directors. The authority of the Board of Directors includes, but is not limited
to, the determination or fixing of the following with respect to shares of such
class or any series thereof: (i) the number of shares and designation of such
series; (ii) the dividend rate and whether dividends are to be cumulative; (iii)
whether shares are to be redeemable, and, if so, whether redeemable for cash,
property or rights; (iv) the rights to which the holders of shares shall be
entitled, and the preferences, if any, over any other series; (v) whether the
shares shall be subject to the operation of a purchase, retirement or sinking
fund, and, if so, upon what conditions; (vi) whether the shares shall be
convertible into or exchangeable for shares of any other class or of any other
series of any class of capital stock and the terms and conditions of such
conversion or exchange; (vii) the voting powers, full or limited, if any, of the
shares; (viii) whether the issuance of any additional shares, or of any shares
of any other series, shall be subject to restrictions as to issuance, or as to
the powers, preferences or rights of any such other series; and (ix) any other
preferences, privileges and powers and relative, participating, optional or
other special rights and qualifications, limitations or restrictions.
COMMON STOCK
Dividend Rights
Subject to any prior rights of any holders of Preferred Stock then
outstanding, the holders of the Common Stock will be entitled to dividends when,
as and if declared by the Company's Board of Directors out of funds legally
available therefor. Under Michigan law, dividends may be legally declared or
paid only if after the distribution the corporation can pay its debts as they
come due in the usual course of business and the corporation's total assets
equal or exceed the sum of its liabilities plus the amount that would be needed
to satisfy the preferential rights upon dissolution of any holders of preferred
stock then outstanding whose preferential rights are superior to those receiving
the distribution.
35
<PAGE> 37
Funds for the payment of dividends by the Company are expected to be
obtained primarily from dividends of the Bank. There can be no assurance that
the Company will have funds available for dividends, or that if funds are
available, that dividends will be declared by the Company's Board of Directors.
Voting Rights
Subject to the rights, if any, of holders of shares of Preferred Stock then
outstanding, all voting rights are vested in the holders of shares of Common
Stock. Each share of Common Stock entitles the holder thereof to one vote on all
matters, including the election of directors. Shareholders of the Company do not
have cumulative voting rights.
Preemptive Rights
Holders of Common Stock do not have preemptive rights.
Liquidation Rights
Subject to any rights of any Preferred Stock then outstanding, holders of
Common Stock are entitled to share on a pro rata basis in the net assets of the
Company which remain after satisfaction of all liabilities.
Transfer Agent
State Street Bank & Trust Company of Boston, Massachusetts, serves as the
transfer agent of the Company's Common Stock.
DESCRIPTION OF CERTAIN CHARTER PROVISIONS
The following provisions of the Company's Articles of Incorporation may
delay, defer, prevent, or make it more difficult for a person to acquire the
Company or to change control of the Company's Board of Directors, thereby
reducing the Company's vulnerability to an unsolicited takeover attempt.
Classification of the Board of Directors
The Company's Articles of Incorporation provide for the Board of Directors
to be divided into three classes of directors, each class to be as nearly equal
in number as possible, and also provides that the number of directors shall be
fixed by majority of the Board at no fewer than six nor more than fifteen.
Pursuant to the Articles of Incorporation, the Company's directors have been
divided into three classes. Four directors have been elected for a term expiring
at the 1999 annual meeting of shareholders, three directors have been elected
for a term expiring at the 2000 annual meeting of shareholders, and four
directors have been elected for a term expiring at the 2001 annual meeting of
shareholders (in each case, until their respective successors are elected and
qualified).
Removal of Directors
The MBCA provides that, unless the articles of incorporation otherwise
provide, shareholders may remove a director or the entire board of directors
with or without cause. The Company's Articles of Incorporation provide that a
director may be removed only for cause and only by the affirmative vote of the
holders of a majority of the voting power of all the shares of the Company
entitled to vote generally in the election of directors.
Filling Vacancies on the Board of Directors
The Company's Articles of Incorporation provide that a new director chosen
to fill a vacancy on the Board of Directors will serve for the remainder of the
full term of the class in which the vacancy occurred.
36
<PAGE> 38
Nominations of Director Candidates
The Company's Articles of Incorporation include a provision governing
nominations of director candidates. Nominations for the election of directors
may be made by the Board of Directors, a nominating committee appointed by the
Board of Directors, or any shareholder entitled to vote for directors. In the
case of a shareholder nomination, the Articles of Incorporation provide certain
procedures that must be followed. The shareholder intending to nominate
candidates for election must deliver written notice containing certain specified
information to the Secretary of the Company at least sixty (60) days but not
more than ninety (90) days prior to the anniversary date of the immediately
preceding annual meeting of shareholders.
Certain Shareholder Action
The Company's Articles of Incorporation require that any shareholder action
must be taken at an annual or special meeting of shareholders, that any meeting
of shareholders must be called by the Board of Directors or the Chairman of the
Board, and prohibit shareholder action by written consent. Shareholders of the
Company are not permitted to call a special meeting of shareholders or require
that the Board call such a special meeting. The MBCA permits shareholders
holding 10% or more of all of the shares entitled to vote at a meeting to
request the Circuit Court of the County in which the Company's principal place
of business or registered office is located to order a special meeting of
shareholders for good cause shown.
Increased Shareholders' Vote for Alteration, Amendment or Repeal of Article
Provisions
The Company's Articles of Incorporation require the affirmative vote of the
holders of at least 66 2/3% of the voting stock of the Company entitled to vote
generally in the election of directors for the alteration, amendment or repeal
of, or the adoption of any provision inconsistent with the foregoing provisions
of the Company's Articles of Incorporation.
CERTAIN ANTI-TAKEOVER PROVISIONS
Michigan Fair Price Act. Certain provisions of the MBCA establish a
statutory scheme similar to the supermajority and fair price provisions found in
many corporate charters (the "Fair Price Act"). The Fair Price Act provides that
a supermajority vote of 90 percent of the shareholders and no less than
two-thirds of the votes of noninterested shareholders must approve a "business
combination." The Fair Price Act defines a "business combination" to encompass
any merger, consolidation, share exchange, sale of assets, stock issue,
liquidation, or reclassification of securities involving an "interested
shareholder" or certain "affiliates." An "interested shareholder" is generally
any person who owns 10 percent or more of the outstanding voting shares of the
corporation. An "affiliate" is a person who directly or indirectly controls, is
controlled by, or is under common control with a specified person.
The supermajority vote required by the Fair Price Act does not apply to
business combinations that satisfy certain conditions. These conditions include,
among others: (i) the purchase price to be paid for the shares of the
corporation in the business combination must be at least equal to the highest of
either (a) the market value of the shares or (b) the highest per share price
paid by the interested shareholder within the preceding two-year period or in
the transaction in which the shareholder became an interested shareholder,
whichever is higher; and (ii) once becoming an interested shareholder, the
person may not become the beneficial owner of any additional shares of the
corporation except as part of the transaction which resulted in the interested
shareholder becoming an interested shareholder or by virtue of proportionate
stock splits or stock dividends.
The requirements of the Fair Price Act do not apply to business
combinations with an interested shareholder that the board of directors has
approved or exempted from the requirements of the Fair Price Act by resolution
prior to the time that the interested shareholder first became an interested
shareholder.
Control Share Act. The MBCA regulates the acquisition of "control shares"
of large public Michigan corporations (the "Control Share Act"). The Control
Share Act is expected to apply to the Company and its shareholders.
37
<PAGE> 39
The Control Share Act establishes procedures governing "control share
acquisitions." A control share acquisition is defined as an acquisition of
shares by an acquiror which, when combined with other shares held by that person
or entity, would give the acquiror voting power, alone or as part of a group, at
or above any of the following thresholds: 20 percent, 33 1/3 percent or 50
percent. Under the Control Share Act, an acquiror may not vote "control shares"
unless the corporation's disinterested shareholders (defined to exclude the
acquiring person, officers of the target corporation, and directors of the
target corporation who are also employees of the corporation) vote to confer
voting rights on the control shares. The Control Share Act does not affect the
voting rights of shares owned by an acquiring person prior to the control share
acquisition.
The Control Share Act entitles corporations to redeem control shares from
the acquiring person under certain circumstances. In other cases, the Control
Share Act confers dissenters' right upon all of the corporation's shareholders
except the acquiring person.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that the Company shall
indemnify its present and past directors, executive officers, and such other
persons as the Board of Directors may authorize, to the fullest extent permitted
by law.
The Company's Bylaws contain indemnification provisions concerning third
party actions as well as actions in the right of the Company. The Bylaws provide
that the Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he or she is or was a director or officer of the Company, or while serving
as such a director or officer, is or was serving at the request of the Company
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorney's fees),
judgments, penalties, fees and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Company or its
shareholders, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
With respect to derivative actions, the Bylaws provide that the Company
shall indemnify any person who was or is a party to or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he or she is or was a director or officer of the Company, or, while serving
as such a director or officer, is or was serving at the request of the Company
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorney's fees) and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with the action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company or its shareholders. No indemnification is provided in
the Bylaws in respect of any claim, issue or matter in which such person has
been found liable to the Company except to the extent that a court of competent
jurisdiction determines upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.
LIMITATION OF DIRECTOR LIABILITY
The MBCA permits corporations to limit the personal liability of their
directors in certain circumstances. The Company's Articles of Incorporation
provide that a director of the Company shall not be personally liable to the
Company or its shareholders for monetary damages for breach of the director's
fiduciary duty. However, they do not eliminate or limit the liability of a
director for any breach of a duty, act or emission for which the elimination or
limitation of liability is not permitted by the MBCA, currently including,
without limitation, the following: (1) breach of the director's duty of loyalty
to the Company or its shareholders; (2) acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law; (3) illegal
38
<PAGE> 40
loans, distributions of dividends or assets, or stock purchases as described in
Section 55l(l) of MBCA; and (4) transactions from which the director derived an
improper personal benefit.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company expects to have 2,091,455
shares of its Common Stock outstanding. The 700,000 shares of the Company's
Common Stock sold in the offering (plus any additional shares sold upon the
Underwriters' exercise of their over-allotment option) have been registered with
the SEC under the Securities Act and may generally be resold without
registration under the Securities Act unless they were acquired by directors,
executive officers, or other affiliates of the Company (collectively,
"Affiliates"). Affiliates of the Company may generally only sell shares of the
Common Stock pursuant to Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, an affiliate (as defined
in Rule 144) of the Company may sell shares of Common Stock within any
three-month period in an amount limited to the greater of 1% of the outstanding
shares of the Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner-of-sale provisions, holding
periods for restricted shares, notice requirements, and the availability of
current public information about the Company.
The Company, and the directors and executive officers of the Company, have
agreed, or will agree, that they will not issue, offer for sale, sell, transfer,
grant options to purchase or otherwise dispose of any shares of Common Stock
without the prior written consent of the Underwriter, for a period of 180 days
from the date of this Prospectus (the "Lock-Up"), except that (i) the Company
may issue shares upon the exercise of options under the Company's 1996 Employee
Stock Option Plan, or 1996 Stock Option Plan for Nonemployee Directors, and (ii)
the directors and executive officers may give Common Stock owned by them to
others who have agreed in writing to be bound by the same agreement.
As of June 1, 1998, the Company had issued options to four employees to
purchase a total of 24,200 shares of its Common Stock at exercise prices ranging
from $8.26 to $9.92 per share, under the Company's 1996 Employee Stock Option
Plan. Of these, options for 8,470 shares are currently exercisable. These
options expire in May, 2006. The Company has also issued options for 38,720
shares to eight directors of the Company under the Company's 1996 Stock Option
Plan for Nonemployee Directors. The exercise price of these options is $8.26 per
share, and options for 19,360 shares are currently exercisable. The nonemployee
director options expire in May, 2003. The Company has reserved 96,800 shares of
Common Stock for issuance under the these two stock options plans, including the
62,920 shares already subject to outstanding options. As of June 1, 1998, no
options granted under either of these plans had been exercised.
Prior to the offering, there has been only a limited public trading market
for the Common Stock, and no predictions can be made as to the effect, if any,
that sales of shares or the availability of shares for sale will have on the
prevailing market price of the Common Stock after completion of the offering.
Nevertheless, sales of substantial amounts of Common Stock in the public market
could have an adverse effect on prevailing market prices.
39
<PAGE> 41
UNDERWRITING
The Underwriter has agreed, subject to the terms and conditions of the
Underwriting Agreement, that it will purchase from the Company, on a firm
commitment basis, 700,000 shares of Common Stock. The Underwriting Agreement
provides that the obligations of the Underwriter thereunder are subject to
certain conditions and provides for the Company's payment of certain expenses
incurred in connection with the review of the underwriting arrangements for the
offering by the National Association of Securities Dealers, Inc. (the "NASD").
The Underwriter is obligated to purchase all 700,000 of the shares of Common
Stock offered by this Prospectus (excluding the additional 105,000 shares
covered by the over-allotment option granted to the Underwriter) if any are
purchased.
If the Underwriting Agreement is terminated, except in certain limited
cases, the Underwriting Agreement provides that the Company will reimburse the
Underwriter for all accountable out-of-pocket expenses incurred by it in
connection with the proposed purchase and sale of the Common Stock, up to a
maximum of $45,000.
The Company and the Underwriter have agreed that the Underwriter will
purchase the 700,000 shares of Common Stock offered hereunder at a price to the
public of $ per share, plus an aggregate amount of $ , less
underwriting discounts of $ per share. The Underwriter proposes to offer the
Common Stock to selected dealers who are members of the NASD at a price of
$ per share less a concession not in excess of $ per share. The
Underwriter may allow, and such dealers may re-allow, concessions not in excess
of $ per share to certain other brokers and dealers. After the Common Stock
is released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Underwriter.
The Company, and the directors and executive officers of the Company, have
agreed to be subject to certain Lock-Up restrictions as described above in
"Shares Eligible for Future Sale."
The underwriter and selling group members, if any, may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. These transactions may include but are not limited to, over-
allotment, stabilizing bids and market making. Stabilizing involves bidding for
and purchasing shares of common stock in connection with the offering for the
purpose of preventing or retarding a decline in the market price of the common
stock. Stabilizing transactions are subject to certain conditions and procedural
limitations imposed by the Securities and Exchange Commission (the "SEC") and
the NASD. Such transactions, if commenced, may be discontinued at any time.
The Company has granted the Underwriter an option, exercisable within 30
days after the date of the offering, to purchase up to an additional 105,000
shares of Common Stock from the Company to cover over-allotments, if any, at the
same price per share as is to be paid by the Underwriter for the other shares
offered by this Prospectus. The Underwriter may purchase such shares only to
cover over-allotments, if any, in connection with the offering.
The Underwriting Agreement contains indemnity provisions between the
Underwriter and the Company and the controlling persons thereof against certain
liabilities, including liabilities arising under the Securities Act. The Company
is generally obligated to indemnify the Underwriter and its controlling persons
in connection with losses or claims arising out of any untrue statement of a
material fact contained in this Prospectus or in related documents filed with
the Commission or with any state securities administrator, or any omission of
certain material facts from such documents.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of Section 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports with the SEC. Such reports can be inspected
and copied at the public reference facilities of the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at Suite
1400, 500 West Madison Street, Chicago, Illinois 60661, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
40
<PAGE> 42
Washington, D.C. 20549, at prescribed rates. The Company is required to file
electronic versions of these documents with the SEC through the SEC's Electronic
Data Gathering, Analysis and Retrieval (EDGAR) system. The SEC maintains a World
Wide Web site at http://www.sec.gov. that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC.
Although the Company is not required by Section 15(d) of the Exchange Act
to do so, the Company intends to furnish its shareholders with annual reports
containing audited financial information.
This Prospectus constitutes a part of a Registration Statement on Form SB-2
filed by the Company with the SEC under the Securities Act. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is made to the Registration Statement and related exhibits for further
information with respect to the Company and the securities offered by this
Prospectus. Any statements contained in this Prospectus concerning the
provisions of any document are not necessarily complete, and in such instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC. Each such statement is
qualified in its entirety by such reference.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by Dickinson Wright PLLC, Detroit, Michigan. Warner Norcross & Judd LLP,
Grand Rapids, Michigan, is acting as counsel for the Underwriter in connection
with certain legal matters relating to the shares of Common Stock offered by
this Prospectus.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997, and 1996, and for the year ended December 31, 1997, and for the period
from April 26, 1996 (inception) to December 31, 1996, have been included herein
and in the Registration Statement in reliance upon the report of Plante & Moran,
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
41
<PAGE> 43
COMMUNITY CENTRAL BANK CORPORATION AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report................................ F-2
Consolidated Balance Sheet as of December 31, 1997, and
1996...................................................... F-3
Consolidated Statement of Operations for the Year Ended
December 31, 1997, and for the period from April 26, 1996
(inception) to December 31, 1996.......................... F-5
Consolidated Statement of Changes in Stockholders' Equity
for the Year Ended December 31, 1997, and for the period
from April 26, 1996 (inception) to December 31, 1996...... F-6
Consolidated Statement of Cash Flow for the Year Ended
December 31, 1997, and for the period from April 26, 1996
(inception) to December 31, 1996.......................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 44
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
F-2
<PAGE> 45
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
(IN THOUSANDS) ------- -------
<S> <C> <C>
Assets
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 credit 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
F-3
<PAGE> 46
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA) ------- -------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
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, 1,264,985 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
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE> 47
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 26, 1996
YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1997 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 credit 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............................. $ (1.39) $(1.40)
======= ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 48
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED GAIN
ADDITIONAL ON SECURITIES
COMMON PAID-IN ACCUMULATED AVAILABLE FOR TOTAL
STOCK CAPITAL DEFICIT 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
====== ====== ======= === =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 49
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 26, 1996
YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1997 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 credit 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
======== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 50
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 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 Credit Losses: The allowance for possible credit 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.
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."
F-8
<PAGE> 51
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 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>
UNREALIZED
AMORTIZED --------------- 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
FOR SALE INVESTMENT 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>
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.
NOTE 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
F-9
<PAGE> 52
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
$1,280,000 at December 31, 1997. During 1997, new loans and advances were
$1,654,000, while repayments totaled $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.
NOTE 4 -- ALLOWANCE FOR CREDIT LOSSES
A summary of the activity in the allowance for credit 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.
NOTE 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>
F-10
<PAGE> 53
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 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>
NOTE 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%.
NOTE 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>
F-11
<PAGE> 54
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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>
NOTE 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.
F-12
<PAGE> 55
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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 FOR CAPITAL RATIO 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>
NOTE 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 48,400 shares of common
stock. Under the 1996 Stock Option Plan for Nonemployee Directors (Director
Plan), the Corporation may grant options for up to 48,400 shares of common
stock. Options granted under the Employee Plan were 6,050 and 18,150 in 1997 and
1996, respectively. Options granted in 1996 under the Director Plan were 43,560.
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
$4.64 per share, using the Black-Scholes option pricing model. In 1996, the
Corporation had estimated the fair value of the options to be $2.48 per share,
using a "minimum value" concept. If the Corporation had used the fair value
method of
F-13
<PAGE> 56
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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>
PERIOD FROM
APRIL 26, 1996
YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1997 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........................ As reported $ (1.39) $(1.40)
Pro forma $ (1.42) $(1.46)
======= ======
</TABLE>
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.......... 61,710 $8.26 -- $ --
Granted................................... 6,050 9.92 61,710 8.26
Exercised................................. -- -- -- --
Expired................................... (4,840) 8.26 -- --
------ ----- ------ -----
Outstanding, end of year.................. 62,920 $8.42 61,710 $8.26
====== ===== ====== =====
</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 ----------------------------
RANGE OF NUMBER OF REMAINING WEIGHTED AVERAGE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
- --------------- --------- ---------------- ---------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
$8.26 56,870 6.4 years $8.26 26,620 $8.26
9.92 6,050 8.4 years 9.92 1,210 9.92
- --------------- ------ --------- ----- ------ -----
$8.26-$9.92 62,920 6.6 years $8.42 27,830 $8.33
=============== ====== ========= ===== ====== =====
</TABLE>
F-14
<PAGE> 57
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 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>
NOTE 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 carryforwards 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>
PERIOD FROM
APRIL 26, 1996
YEAR ENDED (INCEPTION TO)
DECEMBER 31, 1997 DECEMBER 31, 1996
(IN THOUSANDS) ----------------- -----------------
<S> <C> <C>
Net operating loss carryforward............................. $(358) $(220)
Provision for credit 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>
F-15
<PAGE> 58
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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 credit 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>
NOTE 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
F-16
<PAGE> 59
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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.
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>
NOTE 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.
F-17
<PAGE> 60
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
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>
NOTE 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.
F-18
<PAGE> 61
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 16 -- 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.
PARENT-ONLY BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
(IN THOUSANDS) ------- ------
<S> <C> <C>
Assets
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>
PARENT-ONLY STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 26, 1996
YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1997 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>
F-19
<PAGE> 62
COMMUNITY CENTRAL BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
PARENT-ONLY STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
PERIOD FROM
APRIL 26, 1996
YEAR ENDED (INCEPTION) TO
DECEMBER 31, 1997 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>
F-20
<PAGE> 63
COMMUNITY CENTRAL BANK CORPORATION AND SUBSIDIARY
INDEX TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Balance Sheet (unaudited) as of March 31, 1998,
and 1997.................................................. F-22
Consolidated Statement of Operations (unaudited) for the
Three Months Ended March 31, 1998, and 1997............... F-23
Consolidated Statement of Cash Flow (unaudited) for the
Three Months Ended March 31, 1998, and 1997............... F-24
</TABLE>
The financial statements listed above are for interim periods, and do not
include all disclosures normally provided with annual financial statements. The
interim statements should be read in conjunction with the financial statements
and footnotes for the fiscal year ended December 31, 1997, which immediately
precede this section.
In the opinion of management, the interim statements that follow contain
all adjustments (consisting of normal, recurring items) necessary for a fair
presentation of the financial statements. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year.
F-21
<PAGE> 64
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1998 1997
--------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks................................... $ 4,304 $ 1,829
Federal funds sold........................................ 10,550 13,450
-------- -------
Cash and Cash Equivalents............................ 14,854 15,279
-------- -------
Securities available for sale, at fair value.............. 5,378 --
Investment securities, at amortized cost.................. 13,189 8,347
Loans
Residential mortgage loans............................. 29,284 9,283
Commercial loans....................................... 37,101 6,977
Installment loans...................................... 3,212 1,003
-------- -------
Total Loans.......................................... 69,597 17,263
Allowance for credit losses............................... (960) (260)
-------- -------
Net Loans................................................. 68,637 17,003
-------- -------
Net property and equipment................................ 1,723 1,801
Accrued interest receivable............................... 579 162
Other assets.............................................. 205 220
-------- -------
Total Assets......................................... $104,565 $42,812
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest bearing demand deposits.................... $ 10,192 $ 4,384
NOW and money market accounts.......................... 9,201 5,959
Savings deposits....................................... 2,046 739
Time deposits.......................................... 72,473 21,462
-------- -------
Total deposits....................................... 93,912 32,544
Short term borrowings..................................... 1,561 --
Accrued interest payable.................................. 247 65
Other liabilities......................................... 116 46
Capitalized lease obligation.............................. 1,036 1,024
-------- -------
Total Liabilities.................................... 96,872 33,679
Stockholders' Equity
Common stock -- $5 stated value; 9,000,000 shares
authorized; 1,391,483 shares issued and outstanding at
3-31-1998; 1,265,000 shares outstanding at 3-31-
1997................................................... 6,957 6,325
Additional paid-in capital................................ 3,563 4,195
Accumulated deficit....................................... (2,855) (1,387)
Unrealized gain on securities available for sale, net of
tax.................................................... 28 --
-------- -------
Total Stockholders' Equity............................. 7,693 9,133
-------- -------
Total Liabilities and Stockholders' Equity........... $104,565 $42,812
======== =======
</TABLE>
F-22
<PAGE> 65
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1998 1997
------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C>
Interest Income
Loans (including fees).................................... $1,414 $ 229
Securities................................................ 310 33
Federal funds sold........................................ 80 228
------ ------
Total Interest Income.................................. 1,804 490
------ ------
Interest Expense
Deposits.................................................. 984 248
Short term borrowings..................................... 15 --
Capitalized lease obligation.............................. 35 34
------ ------
Total Interest Expense................................. 1,034 282
------ ------
NET INTEREST INCOME......................................... 770 208
Provision for credit losses................................. 160 170
------ ------
NET INTEREST INCOME AFTER PROVISION......................... 610 38
------ ------
Noninterest Income
Deposit service charges................................... 28 11
Net realized security gains............................... 6 --
Mortgage banking income................................... 10 --
Other income.............................................. 26 5
------ ------
Total Noninterest Income............................... 70 16
------ ------
Noninterest Expense
Salaries, benefits, and payroll taxes..................... 392 320
Premises and fixed asset expense.......................... 140 124
Other operating expense................................... 291 217
------ ------
Total Noninterest Expense.............................. 823 661
------ ------
LOSS BEFORE TAXES........................................... (143) (607)
Provision for income taxes.................................. -- --
------ ------
NET LOSS.................................................... $ (143) $ (607)
====== ======
Basic earnings (loss) per share............................. $(0.10) $(0.44)
====== ======
Net Loss as Reported........................................ $ (143) $ (607)
Other Comprehensive Income
Change in unrealized gain on securities available for
sale, net of tax....................................... 9 --
------ ------
Comprehensive Income (Loss)................................. $ (134) $ (607)
====== ======
</TABLE>
F-23
<PAGE> 66
COMMUNITY CENTRAL BANK CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
-------- --------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $ (143) $ (607)
Adjustments to reconcile net loss to net cash flow from
operating activities:
Net accretion of security discount..................... (4) (3)
Net realized security gains............................ (6) --
Gain on sale of mortgage loans......................... (7) --
Provision for credit losses............................ 160 170
Depreciation expense................................... 91 101
Increase in accrued interest receivable................ (80) (145)
Decrease in other assets............................... 16 6
Increase in accrued interest payable................... 56 33
Increase (decrease) in other liabilities............... 53 (32)
-------- --------
Net Cash Provided by (Used in) Operating
Activities....................................... 136 (477)
INVESTING ACTIVITIES
Maturities, calls, and prepayments of securities available
for sale............................................... 529 --
Purchases of investment securities........................ (202) (8,344)
Maturities, calls, and prepayments of investment
securities............................................. 1,636 --
Sales of residential mortgage loans....................... 1,022 --
Net increase in loans..................................... (17,477) (11,685)
Purchases of property and equipment....................... -- (206)
-------- --------
Net Cash Used in Investing Activities............. (14,492) (20,235)
FINANCING ACTIVITIES
Net increase in demand and savings deposits............... 2,225 6,463
Net increase in time deposits............................. 23,332 13,900
Net increase in short term borrowings..................... 158 --
Repayments of capitalized lease obligation................ (34) (30)
-------- --------
Net Cash Provided by Financing Activities......... 25,681 20,333
-------- --------
Increase (Decrease) in Cash and Cash Equivalents............ 11,325 (379)
Cash and Cash Equivalents at the Beginning of the Year...... 3,529 15,658
-------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD.......... $ 14,854 $ 15,279
======== ========
Supplemental Disclosure of Cash Flow Information:
Interest Paid............................................. $ 943 $ 215
======== ========
</TABLE>
F-24
<PAGE> 67
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements........... 2
Prospectus Summary................... 3
Risk Factors......................... 7
Purpose of the Offering.............. 10
Dividend Policy...................... 11
Market for Common Stock and Price
Range.............................. 12
Capitalization....................... 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 14
Business............................. 22
Management........................... 28
Related Party Transactions........... 30
Security Ownership................... 31
Supervision and Regulation........... 32
Description of Capital Stock......... 35
Shares Eligible for Future Sale...... 39
Underwriting......................... 40
Available Information................ 40
Legal Matters........................ 41
Experts.............................. 41
Index to Consolidated Financial
Statements......................... F-1
Index to Consolidated Interim
Financial Statements............... F-21
</TABLE>
================================================================================
================================================================================
700,000 SHARES
COMMUNITY CENTRAL BANK CORPORATION [LOGO]
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
RONEY CAPITAL MARKETS [LOGO]
A division of FIRST CHICAGO CAPITAL MARKETS, INC.
, 1998
================================================================================
<PAGE> 68
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The registrant's Articles of Incorporation provide that the registrant
shall indemnify its present and past directors, executive officers, and such
other persons as the Board of Directors may authorize, to the full extent
permitted by law.
The registrant's Bylaws contain indemnification provisions concerning third
party actions as well as actions in the right of the registrant. The Bylaws
provide that the registrant shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the registrant) by reason of the
fact that he or she is or was a director or officer of the registrant or is, or
while serving as such a director or officer was, serving at the request of the
registrant as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, against expenses (including
attorney's fees), judgments, penalties, fees and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
registrant or its shareholders, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
With respect to derivative actions, the Bylaws provide that the registrant
shall indemnify any person who was or is a party to or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the registrant to procure a judgment in its favor by reason of the fact
that he or she is or was a director or officer of the registrant, or is or was
serving at the request of the registrant as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorney's fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such judgment or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the registrant or its shareholders and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person has been found liable to the registrant unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
The registrant's Articles of Incorporation provide that a director of the
registrant shall not be personally liable to the registrant or its shareholders
for monetary damaged for breach of the director's fiduciary duty. However, it
does not eliminate or limit the liability of a director for any breach of duty,
act or omission for which the elimination or limitation of liability is not
permitted by the MBCA, currently including, without limitation, the following:
(1) breach of the director's duty of loyalty to the registrant or its
shareholders; (2) acts or emissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) illegal loans,
distributions of dividends or assets, or stock purchases as described in Section
551(l) of MBCA; and (4) transactions from which the director derived an improper
personal benefit.
The Company has purchased directors' and officers' liability insurance for
directors and officers of the Company and the Bank.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the Common Stock being registered, other than
underwriting discounts and commissions. All amounts shown are
II-1
<PAGE> 69
estimates, except the SEC registration fee and the NASD filing fee, and assume
the sale of 700,000 shares of Common Stock in the offering.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 3,294
NASD filing fee............................................. 1,587
Printing and mailing expenses............................... 26,000
Fees and expenses of counsel................................ 100,000
Accounting and related expenses............................. 20,000
Blue sky fees and expenses (including counsel fees)......... 35,000
Registrar and Transfer Agent fees........................... 3,500
Miscellaneous............................................... 5,619
--------
Total....................................................... $195,000
========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The registrant borrowed approximately $322,000 from its organizers in 1996
to pay organizational and related expenses of the Company and the Bank. To the
extent that such transactions would be deemed to involve the offer or sale of a
security, the registrant would claim an exemption under Section 4(2) of the
Securities Act of 1933 for such transactions. In addition, in 1996, the
registrant, sold one share of its Common Stock to Harold Allmacher, its Chairman
and Chief Executive Officer, for $10. The registrant also claims an exemption
for such sale pursuant to Section 4(2).
II-2
<PAGE> 70
ITEM 27. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
1 Form of Underwriting Agreement
3.1 Articles of Incorporation of Community Central Bank
Corporation are incorporated by reference to Exhibit 3.1 of
the Company's Registration Statement on Form SB-2
(Commission File No. 333-4113) which became effective on
September 23, 1996
3.2 Bylaws of Community Central Bank Corporation are
incorporated by reference to Exhibit 3.2 of the Company's
Registration Statement on Form SB-2 (Commission File No.
333-4113) which became effective on September 23, 1996
4.2 Specimen of Stock Certificate of Community Central Bank
Corporation is incorporated by reference to Exhibit 4.2 of
the Company's Registration Statement on Form SB-2
(Commission File No. 333-4113) which became effective on
September 23, 1996
5 Opinion of Dickinson Wright PLLC
10.1 1996 Employee Stock Option Plan is incorporated by reference
to Exhibit 10.1 of the Company's Registration Statement on
Form SB-2 (Commission File No. 333-4113) which became
effective on September 23, 1996
10.2 1996 Stock Option Plan for Nonemployee Directors is
incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement on Form SB-2 (Commission File No.
333-4113) which became effective on September 23, 1996
10.3 Lease Agreement is incorporated by reference to Exhibit 10.3
of the Company's Registration Statement on Form SB-2
(Commission File No 333-4113) which became effective on
September 23, 1996
10.4 Data Processing Services Agreement dated as of June 5, 1996
between Community Central Bank and M&I Data Services is
incorporated by reference to Exhibit 10.4 of the Company's
Registration Statement on Form SB-2 (Commission File No.
333-4113) which became effective on September 23, 1996
10.5 Vicant Office Building Lease Agreement dated April 1, 1997
between Gebran S. Anton, Jr. and Community Central Bank
21 List of Subsidiaries of Community Central Bank Corporation
are incorporated by reference to Exhibit 21 of the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1997 (Commission File No. 333-4113)
23.1 Consent of Dickinson Wright PLLC (included in opinion filed
as Exhibit 5)
23.2 Consent of Plante & Moran, LLP
</TABLE>
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against liabilities
arising under the Securities Act (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE> 71
(2) The registrant will:
(i) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this Registration Statement as
of the time the SEC declared it effective; and
(ii) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
II-4
<PAGE> 72
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Mount
Clemens, State of Michigan, on June 30, 1998.
COMMUNITY CENTRAL BANK CORPORATION
By: /s/ HAROLD W. ALLMACHER
-------------------------------------
Harold W. Allmacher, Chairman of the
Board
and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
indicated on June 30, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ HAROLD W. ALLMACHER Chairman of the Board, Chief Executive
- ----------------------------------------------------- Officer and Director
Harold W. Allmacher
/s/ GEBRAN S. ANTON Director
- -----------------------------------------------------
Gebran S. Anton
/s/ JOSEPH CATENACCI Director
- -----------------------------------------------------
Joseph Catenacci
/s/ RAYMOND M. CONTESTI Director
- -----------------------------------------------------
Raymond M. Contesti
/s/ SALVATORE COTTONE Director
- -----------------------------------------------------
Salvatore Cottone
/s/ CELESTINA GILES Director
- -----------------------------------------------------
Celestina Giles
/s/ BOBBY L. HILL Director
- -----------------------------------------------------
Bobby L. Hill
/s/ JOSEPH F. JEANNETTE Director
- -----------------------------------------------------
Joseph F. Jeannette
/s/ RICHARD J. MILLER President, Chief Operating Officer and
- ----------------------------------------------------- Director
Richard J. Miller
/s/ DEAN S. PETITPREN Director
- -----------------------------------------------------
Dean S. Petitpren
/s/ CAROLE L. SCHWARTZ Director
- -----------------------------------------------------
Carole L. Schwartz
/s/ PETER J. PRZYBOCKI Corporate Treasurer (principal financial and
- ----------------------------------------------------- accounting officer)
Peter J. Przybocki
</TABLE>
II-5
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ----
<C> <S> <C>
1 Form of Underwriting Agreement..............................
3.1 Articles of Incorporation of Community Central Bank
Corporation are incorporated by reference to Exhibit 3.1 of
the Company's Registration Statement on Form SB-2
(Commission File No. 333-4113) which became effective on
September 23, 1996..........................................
3.2 Bylaws of Community Central Bank Corporation are
incorporated by reference to Exhibit 3.2 of the Company's
Registration Statement on Form SB-2 (Commission File No.
333-4113) which became effective on September 23, 1996......
4.2 Specimen of Stock Certificate of Community Central Bank
Corporation is incorporated by reference to Exhibit 4.2 of
the Company's Registration Statement on Form SB-2
(Commission File No. 333-4113) which became effective on
September 23, 1996..........................................
5 Opinion of Dickinson Wright PLLC............................
10.1 1996 Employee Stock Option Plan is incorporated by reference
to Exhibit 10.1 of the Company's Registration Statement on
Form SB-2 (Commission File No. 333-4113) which became
effective on September 23, 1996.............................
10.2 1996 Stock Option Plan for Nonemployee Directors is
incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement on Form SB-2 (Commission File No.
333-4113) which became effective on September 23, 1996......
10.3 Lease Agreement is incorporated by reference to Exhibit 10.3
of the Company's Registration Statement on Form SB-2
(Commission File No 333-4113) which became effective on
September 23, 1996..........................................
10.4 Data Processing Services Agreement dated as of June 5, 1996
between Community Central Bank and M&I Data Services is
incorporated by reference to Exhibit 10.4 of the Company's
Registration Statement on Form SB-2 (Commission File No.
333-4113) which became effective on September 23, 1996......
10.5 Vicant Office Building Lease Agreement dated April 1, 1997
between Gebran S. Anton, Jr. and Community Central Bank.....
21 List of Subsidiaries of Community Central Bank Corporation
are incorporated by reference to Exhibit 21 of the Company's
Annual Report on Form 10-KSB for the year ended December 31,
1997 (Commission File No. 333-4113).........................
23.1 Consent of Dickinson Wright PLLC (included in opinion filed
as Exhibit 5)...............................................
23.2 Consent of Plante & Moran, LLP..............................
</TABLE>
II-6
<PAGE> 1
EXHIBIT 1
700,000 SHARES
COMMUNITY CENTRAL BANK CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
____________, 1998
Roney Capital Markets,
A Division of First Chicago Capital
Markets, Inc.
One Griswold
Detroit, Michigan 48226
Dear Sirs:
Community Central Bank Corporation, a Michigan corporation
(the "COMPANY"), proposes to issue and sell 700,000 shares (the "FIRM SHARES")
of its authorized but unissued Common Stock (the "COMMON STOCK") to Roney
Capital Markets, a division of First Chicago Capital Markets, Inc. ("RONEY" or
"UNDERWRITER"). In addition, the Company proposes to grant to the Underwriter an
option to purchase up to an additional 105,000 shares (the "OPTIONAL SHARES") to
cover over-allotments. The Firm Shares and the Optional Shares are called,
collectively, the "SHARES."
1. SALE AND PURCHASE OF THE SHARES.
(a) On the basis of the representations, warranties and
agreements of the Company contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to issue and sell to
the Underwriter, and the Underwriter agrees to purchase the Firm Shares
for a purchase price of $_____ ($_____ per Share plus $20,000).
(b) On the basis of the representations, warranties and
agreements of the Company contained in, and subject to the terms and
conditions herein set forth and to the policies of the National
Association of Securities Dealers, Inc. (the "NASD"), and pursuant to
directions from the Company, Roney will offer to sell to each of the
persons listed on Exhibit A who may purchase alone or with family
members, all to the extent permitted by the Free-Riding and Withholding
Interpretation (the "INTERPRETATION") under the NASD's Conduct Rules,
the number of shares of Common Stock set forth opposite their
respective names on Exhibit A. To the extent such persons offer to buy
such Shares of Common
<PAGE> 2
Stock, Roney agrees to purchase such Shares at the price per Share set
forth in Section 1(a) above, to the extent permitted by the
Interpretation. The Company acknowledges that in order to comply with
the Interpretation, Roney may be required to cancel trades involving
such persons.
(c) On the basis of the representations, warranties and
agreements of the Company contained in, and subject to the terms and
conditions of, this Agreement, the Company grants to the Underwriter an
option to purchase all or any part of the Optional Shares at the price
per Share set forth in Section 1(a) above. The over-allotment option
may be exercised only to cover over-allotments in the sale of the Firm
Shares by the Underwriter and may be exercised in whole or in part at
any time or times on or before 12:00 noon, Detroit time, on the day
before the Firm Shares Closing Date (as defined in Section 2 below),
and only once at any time after that date and within 30 days after the
Effective Date (as defined in Section 4 below), in each case upon
written or transmitted facsimile notice, or verbal notice confirmed by
transmitted facsimile, written or telegraphic notice, by Roney to the
Company no later than 12:00 noon, Detroit time, on the day before the
Firm Shares Closing Date or at least three but not more than five full
business days before the Optional Shares Closing Date (as defined in
Section 2 below), as the case may be, setting forth the number of
Optional Shares to be purchased and the time and date (if other than
the Firm Shares Closing Date) of such purchase.
2. DELIVERY AND PAYMENT. Delivery by the Company of the Firm
Shares to Roney and payment of the purchase price by wire transfer of
immediately available funds or by certified or official bank check payable in
Detroit Clearing House (next day) funds to the Company, shall take place at the
offices of Roney, One Griswold, Detroit, Michigan 48226, at 10:00 a.m., Detroit
time, at such time and date, not later than the third (or, if the Firm Shares
are priced, as contemplated by Rule 15c6-1(c) under the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), after 4:30 p.m., Washington, D.C.
time, the fourth) full business day following the first date that any of the
Shares are released by the Underwriter for sale to the public, as Roney shall
designate by at least 48 hours prior notice to the Company (the "FIRM SHARES
CLOSING DATE"); provided, however, that if the Prospectus (as defined in
Section 4 below) is at any time prior to the Firm Shares Closing Date
recirculated to the public, the Firm Shares Closing Date shall occur upon the
later of the third or fourth, as the case the may be, full business day
following the first date that any of the Shares are released by the Underwriter
for sale to the public or the date that is 48 hours after the date that the
Prospectus has been so recirculated.
To the extent the option with respect to the Optional Shares
is exercised, delivery by the Company of the Optional Shares, and payment of the
purchase price by wire transfer or immediately available funds or by certified
or official bank check payable in Detroit Clearing
2
<PAGE> 3
House (next day) funds to the Company, shall take place at the offices of Roney
specified above at the time and on the date (which may be the Firm Shares
Closing Date) specified in the notice referred to in Section l(c) (such time and
date of delivery and payment are called the "OPTIONAL SHARES CLOSING DATE"). The
Firm Shares Closing Date and the Optional Shares Closing Date are called,
individually, a "CLOSING DATE" and, collectively, the "CLOSING DATES."
Certificates representing the Firm Shares shall be registered
in such names and shall be in such denominations as Roney shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
the Optional Shares, on the day of notice of exercise of the option as described
in Section l(c), and, if requested by Roney, shall be made available to Roney
for checking and packaging, at such place as is designated by Roney, at least
one full business day before the Closing Date.
3. PUBLIC OFFERING. The Company understands that the Underwriter
proposes to make a public offering of the Shares, as set forth in and pursuant
to the Prospectus, as soon after the Effective Date as Roney deems advisable.
The Company hereby confirms that the Underwriter and dealers have been
authorized to distribute each preliminary prospectus and are authorized to
distribute the Prospectus (as from time to time amended or supplemented).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Underwriter and
agrees with the Underwriter as follows:
(a) The Company has carefully prepared in conformity with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT") and the rules and regulations adopted by the Securities and
Exchange Commission (the "COMMISSION") thereunder (the "RULES"), a
registration statement on Form SB-2 (No. 333-_____), including a
preliminary prospectus, and has filed with the Commission the
registration statement and such amendments thereof as may have been
required to the date of this Agreement. Copies of such registration
statement (including all amendments thereof) and of the related
preliminary prospectus have heretofore been delivered by the Company to
you. The term "PRELIMINARY PROSPECTUS" means any preliminary prospectus
(as defined in Rule 430 of the Rules) included at any time as a part of
the registration statement. The registration statement as amended
(including any supplemental registration statement under Rule 462(b) or
any amendment under Rule 462(c) of the Rules) at the time and on the
date it becomes effective (the "EFFECTIVE DATE"), including the
prospectus, financial statements, schedules, exhibits, and all other
documents incorporated by reference therein or filed as a part thereof,
is called the "REGISTRATION STATEMENT;" provided, however, that
"REGISTRATION STATEMENT" shall also include all Rule 430A Information
(as defined below) deemed to be
3
<PAGE> 4
included in such Registration Statement at the time such Registration
Statement becomes effective as provided by Rule 430A of the Rules. The
term "PROSPECTUS" means the Prospectus as filed with the Commission
pursuant to Rule 424(b) of the Rules or, if no filing pursuant to Rule
424(b) of the Rules is required, means the form of final prospectus
included in the Registration Statement at the time such Registration
Statement becomes effective. The term "RULE 430A INFORMATION" means
information with respect to the Shares and the offering thereof
permitted to be omitted from the Registration Statement when it becomes
effective pursuant to Rule 430A of the Rules. Reference made herein to
any preliminary prospectus or to the Prospectus shall be deemed to
refer to and include any document attached as an exhibit thereto or
incorporated by reference therein, as of the date of such preliminary
prospectus or the Prospectus, as the case may be. The Company will not
file any amendment of the Registration Statement or supplement to the
Prospectus to which Roney shall reasonably object in writing after
being furnished with a copy thereof.
(b) Each preliminary prospectus, at the time of filing
thereof, con tained all material statements which were required to be
stated therein in accor dance with the Securities Act and the Rules,
and conformed in all material respects with the requirements of the
Securities Act and the Rules, and did not include any untrue statement
of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
Commission has not issued any order suspending or preventing the use
of any preliminary prospectus. When the Registration Statement shall
become effective, when the Prospectus is first filed pursuant to Rule
424(b) of the Rules, when any post-effective amendment of the
Registration Statement shall become effective, when any supplement to
or pre-effective amendment of the Prospectus is filed with the
Commission and at each Closing Date, the Registration Statement and the
Prospectus (and any amendment thereof or supplement thereto) will
comply with the applicable provisions of the Securities Act and the
Exchange Act and the respective rules and regulations of the
Commission thereunder, and neither the Registration Statement nor the
Prospectus, nor any amendment thereof or supple ment thereto, will
contain any untrue statement of a material fact or will omit to state
any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the
Company makes no representation or warranty as to the information
contained in the Registration Statement or the Prospectus or any
amendment thereof or supplement thereto in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriter, specifically for use in connection with the preparation
thereof.
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<PAGE> 5
(c) All contracts and other documents required to be filed as
exhibits to the Registration Statement have been filed with the
Commission as exhibits to the Registration Statement.
(d) Plante & Moran, LLP, whose report is filed with the
Commission as part of the Registration Statement, are, and during the
periods covered by their report were, independent public accountants as
required by the Securities Act and the Rules.
(e) The Company and its subsidiary, Community Central Bank, a
Michigan banking corporation (the "BANK"), have been duly organized and
are validly existing as a corporation or banking corporation, as
applicable, in good standing under the laws of the State of Michigan.
Neither the Company nor the Bank have any properties or conduct any
business outside of the State of Michigan which would require either of
them to be qualified as a foreign corporation or bank, as the case may
be, in any jurisdiction outside of Michigan. Neither the Company nor
the Bank has any directly or indirectly held subsidiary other than the
Bank. The Company has all power, authority, authorizations, approvals,
consents, orders, licenses, certificates and permits needed to enter
into, deliver and perform this Agreement and to issue and sell the
Shares.
(f) The application for permission to organize the Bank (the
"FIB APPLICATION") was approved by the Commissioner of the Financial
Institutions Bureau for the State of Michigan (the "COMMISSIONER") on
May 9, 1996, pursuant to Order No. BT-0612-96-02, subject to certain
conditions specified in the Order and supplemental correspondence from
the Commissioner dated the same date. The Order and supplemental
correspondence from the Commissioner are collectively referred to in
this Agreement as the "FIB ORDER." All conditions contained in the FIB
Order have been satisfied. The application to the Federal Deposit
Insurance Corporation (the "FDIC") to become an insured depository
institution under the provisions of the Federal Deposit Insurance Act
(the "FDIC APPLICATION") was approved by order of the FDIC dated August
6, 1996 (the "FDIC ORDER"), subject to certain conditions specified in
the Order. Except as described in the Registration Statement with
respect to the ratio of Tier 1 capital to unadjusted assets, all
conditions contained in the FDIC Order required to be satisfied before
the date of this Agreement have been satisfied. The Company's
application to become a bank holding company and acquire all issued
capital stock of the Bank (the "BANK HOLDING COMPANY APPLICATION")
under the Bank Holding Company Act of 1956, as amended, was approved
on September 11, 1996 (the "FEDERAL RESERVE BOARD APPROVAL"), subject
to certain conditions specified in the Federal Reserve Board Approval.
All conditions in the Federal Reserve Board Approval required to be
satisfied before the date of this Agreement have been satisfied. Each
of the FIB Application, FDIC Application, and Bank Holding Company
Application, at the
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<PAGE> 6
time of their respective filings, contained all required information
and such infor mation was complete and accurate in all material
respects. Other than the remaining conditions to be fulfilled under the
FIB Order, FDIC Order and the Federal Reserve Board Approval specified
above, no authorization, approval, consent, order, license, certificate
or permit of and from any federal, state, or local governmental or
regulatory official, body, or tribunal, is required for the Company or
the Bank to commence and conduct their respective businesses and own
their respective properties as described in the Prospectus, except such
authorizations, approvals, consents, orders, licenses, certificates, or
permits as are not material to the commencement or conduct of their
respective businesses or to the ownership of their respective
properties.
(g) The financial statements of the Company and any related
notes thereto, included in the Registration Statement and the
Prospectus, present fairly the financial position of the Company as of
the date of such financial statements and for the periods covered
thereby. Such statements and any related notes have been prepared in
accordance with generally accepted accounting principals applied on a
consistent basis and certified by the independent accountants named in
subsection 4(d) above. No other financial statements are required to be
included in the Prospectus or the Registration Statement.
(h) The Company owns adequate and enforceable rights to use
any patents, patent applications, trademarks, trademark applications,
service marks, copyrights, copyright applications and other similar
rights (collectively, "INTANGIBLES") necessary for the conduct of the
material aspects of its business as described in the Prospectus and the
Company has not infringed, is infringing, or has received any notice of
infringement of, any Intangible of any other person.
(i) The Company has a valid and enforceable leasehold interest
in the premises located at 100 North Main Street, and 59 North Walnut,
Suite 207, Mount Clemens, Michigan, which is as described in the
Prospectus, and is free and clear of all liens, encumbrances, claims,
security interests and defects.
(j) There are no litigation or governmental or other
proceedings or investigations pending before any court or before or by
any public body or board or threatened against the Company or the Bank
and to the best of the Company's knowledge, there is no reasonable
basis for any such litigation, proceedings or investigations, which
would have a material adverse effect on commencement or conduct of the
respective businesses of the Company or the Bank or the ownership of
their respective properties.
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<PAGE> 7
(k) The Company and Bank have filed all federal, state, and
local tax returns required to be filed by them and paid all taxes shown
due on such returns as well as all other material taxes, assessments
and governmental charges which have become due; no material deficiency
with respect to any such return has been assessed or proposed.
(l) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has
not been any material adverse change in the condition (financial or
other), business, properties or prospects of the Company.
(m) No default exists, and no event has occurred which with
notice or lapse of time, or both, would constitute a default, in the
due performance and observance of any material term, covenant or
condition, by the Company, the Bank or, to the best of the Company's
knowledge, any other party, of any lease, indenture, mortgage, note or
any other agreement or instrument to which the Company or the Bank is a
party or by which either of them or either of their businesses may be
bound or affected, except such defaults or events as are not material
to the commencement or conduct of their respective businesses or
ownership of their respective properties.
(n) Neither the Company nor the Bank is in violation of any
term or provision of the articles of incorporation or bylaws of the
Company or the Bank. Neither the Company nor the Bank is in violation
of, nor is either of them required to take any action to avoid any
material violation of, any franchise, license, permit, judgment,
decree, order, statute, rule or regulation.
(o) Neither the execution, delivery or performance of this
Agreement by the Company nor the consummation of the transactions
contemplated hereby (including, without limitation, the issuance and
sale by the Company of the Shares) will give rise to a right to
terminate or accelerate the due date of any payment due under, or
conflict with or result in the breach of any term or provision of, or
constitute a default (or an event which with notice or lapse of time,
or both, would constitute a default) under, or require any consent
under, or result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or the Bank
pursuant to the terms of, any lease, indenture, mortgage, note or other
agreement or instrument to which the Company or the Bank is a party or
by which either of them or either of their businesses may be bound or
affected, or any franchise, license, permit, judgment, decree, order,
statute, rule or regulation or violate any provision of the articles of
incorporation or bylaws of the Company or the Bank, except those which
are immaterial in amount or effect.
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<PAGE> 8
(p) The Company has authorized capital stock as set forth in
the Prospectus. The number of shares of Common Stock of the Company
that are issued and outstanding is set forth in the Prospectus. No
shares of preferred stock are issued and outstanding. The issuance,
sale and delivery of the Shares have been duly authorized by all
necessary corporate action by the Company and, when issued, sold and
delivered against payment therefor pursuant to this Agreement, will be
duly and validly issued, fully paid and nonassessable and none of them
will have been issued in violation of any preemptive or other right.
All of the outstanding capital stock of the Bank is duly authorized
and validly issued, fully paid and nonassessable and owned by the
Company, free and clear of all liens, encumbrances and security
interests (subject to the provisions of the Michigan Banking Code of
1969 (the "BANKING CODE"), including, without limitation, Sections 77
and 201 of the Banking Code). There is no outstanding option, warrant
or other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any share of stock of the Company or the Bank or
any security convertible into or exchangeable for stock of the Company
or the Bank, except for stock options described in the Registration
Statement (the "STOCK OPTIONS") under the 1996 Employee Stock Option
Plan and the 1996 Stock Option Plan for Nonemployee Directors
(collectively, the "STOCK OPTION PLANS"). The Common Stock, the Shares
and the Stock Options conform to all statements in relation thereto
contained in the Registration Statement and the Prospectus.
(q) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, neither the
Company nor the Bank has (1) issued any securities or incurred any
material liability or obligation, direct or contingent, (2) entered
into any material transaction, or (3) declared or paid any dividend or
made any distribution on any of their stock, except liabilities,
obligations, and transactions reasonably expected based on the
disclosures in the Prospectus.
(r) This Agreement has been duly and validly authorized,
executed and delivered by the Company and is the legal, valid and
binding agreement and obligation of the Company.
(s) The Commission has not issued any order preventing or
suspending the use of any preliminary prospectus.
(t) Neither the Company, nor the Bank, nor, to the Company's
knowledge any director, officer, agent, employee or other person
associated with the Company or the Bank, acting on behalf of the
Company or the Bank, has used
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<PAGE> 9
any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expense relating to political activity; made any
direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the Foreign Corrupt Practices Act of
1977; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment.
(u) Neither the Company nor the Bank nor any affiliate of
either of them has taken, and they will not take, directly or
indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of the Common
Stock in order to facilitate the sale or resale of any of the Shares.
(v) No transaction has occurred between or among the Company
or the Bank and any of their officers, directors, organizers or the
Company's shareholder or any affiliate or affiliates of any such
officer, director, organizer, or shareholder, that is required to be
described in and is not described in the Prospectus.
(w) The Company is not and will not after the offering be an
"investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended.
(x) The Company has obtained from all of its executive
officers and directors their written agreement that for a period of 180
days from the date of the Effective Date, they will not offer to sell,
sell, transfer, contract to sell, or grant any option for the sale of
or otherwise dispose of, directly or indirectly, any shares of Common
Stock of the Company (or any securities convertible into or exercisable
for such shares of Common Stock), except for (1) the exercise of Stock
Options under the Stock Option Plans or (2) gifts of Common Stock (or
other securities) to a donee or donees who agree in writing to be bound
by this clause.
(y) No person holds a right to (i) require or participate in
the registration under the Act of the Shares to be affected by the
Registration Statement, or (ii) require any other registration
statement to be filed in connection with any capital stock of the
Company within 180 days from the date of the Prospectus, without your
prior written consent.
(z) The Company has filed all reports, proxy statements and
other information, and all amendments to previously filed reports,
proxy statements and
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<PAGE> 10
other information, required to be filed by it pursuant to Sections 13,
14 or 15(d) of the Exchange Act.
5. CONDITIONS OF THE UNDERWRITER'S OBLIGATIONS. The obligation
of the Underwriter to purchase the Shares shall be subject to the accuracy of
the representations and warranties of the Company in this Agreement as of the
date of this Agreement and as of the Firm Shares Closing Date or Optional Shares
Closing Date, as the case may be, to the accuracy of the statements of Company
officers made pursuant to the provisions of this Agreement, to the performance
by the Company of its obligations under this Agreement, and to the following
additional terms and conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M., Detroit time, on the date of this Agreement or on
such later date and time as shall be consented to in writing by Roney;
if the filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b) of the Rules, the Prospectus shall have been
filed in the manner and within the time period required by Rule 424(b)
of the Rules; at each Closing Date, if any, no stop order shall have
been issued or proceedings therefor initiated or threatened by the
Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement, or otherwise,
shall have been complied with to the reasonable satisfaction of Roney
(b) At each Closing Date, Roney shall have received the
favorable opinion of Dickinson Wright PLLC, counsel for the Company,
dated the Firm Shares Closing Date or the Optional Shares Closing Date,
as the case may be, addressed to the Underwriter and in form and scope
reasonably satisfactory to counsel for Roney to the effect that:
(i) Each of the Company and the Bank (A) is a
corporation or banking corporation, as applicable, existing
and in good standing under the laws of the State of Michigan
and (B) is not required to be qualified to do business in any
jurisdiction outside Michigan.
(ii) Each of the Company and the Bank has full
corporate power and authority and all material authorizations,
approvals, orders, licenses, certificates and permits of and
from all governmental bank regulatory officials and bodies
necessary to own its properties and to com mence and conduct
its business as described in the Registration Statement and
Prospectus, including, without limitation, the FIB Order, the
FDIC Order and the Federal Reserve Board Approval all as
described in Section 4(f) above, except for such
authorizations, approvals, orders,
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<PAGE> 11
licenses, certificates and permits as are not material to the
ownership of their properties or commencement or conduct of
their businesses;
(iii) The Company has authorized and outstanding
capital stock as set forth in the Prospectus; the Shares have
been duly and validly authorized and issued and upon receipt
by the Company of payment therefor in accordance with the
terms of this Agreement will be fully paid and nonassessable
and are not and will not be subject to preemptive rights; the
Shares and the other capital stock and Stock Options of the
Company conform in all material respects to the descriptions
thereof contained in the Registration Statement and the
Prospectus;
(iv) To such counsel's knowledge, after due inquiry,
the Company has no directly or indirectly held subsidiary
other than the Bank;
(v) The Company is the registered holder of all of
the outstanding capital stock of the Bank, and all such shares
of stock so held are validly issued and outstanding, fully
paid and nonassessable and are owned free and clear of any
liens, encumbrances or other claims or restrictions
whatsoever, subject to the provisions of the Banking Code,
including, without limitation, Sections 77 and 201 of the
Banking Code;
(vi) the certificates evidencing the Shares are in
the form approved by the Board of Directors of the Company,
comply with the bylaws and the articles of incorporation of
the Company, comply as to form and in all other material
respects with applicable legal requirements;
(vii) this Agreement has been duly and validly
authorized, executed and delivered by the Company, and is the
legal, valid and binding agreement and obligation of the
Company enforceable in accordance with its terms, except (a)
as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating
to or affecting enforcement of creditors' rights or by general
equity principles (including requirements of reasonableness
and good faith in the exercise of rights and remedies),
whether applied by a court of equity or a court of law in an
action at law or in equity, or by the discretionary nature of
specific performance, injuncture relief, and other equitable
remedies, including the appointment of a receiver, and (b),
with respect to provisions relating to indemnification and
contribution, to the extent they are held by a court of
competent jurisdiction to be void or unenforceable as against
public policy or limited by applicable laws or the policies
embodied in them;
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<PAGE> 12
(vii) the Company is conveying to the Underwriter
good and valid title to the Shares that are issued in its
name, free and clear of any adverse claims, except to the
extent the Underwriter has notice of any adverse claim;
(ix) to the best of such counsel's knowledge,
after due inquiry, there are (A) no contracts or other
documents which are required to be filed as exhibits to the
Registration Statement other than those filed as ex hibits
thereto, (B) no legal or governmental proceedings pending or
threatened against the Company or the Bank, and (C) no
statutes or regulations applicable to the Company or the
Bank, or certificates, permits, grants or other consents,
approvals, orders, licenses or authorizations from regula
tory officials or bodies, which are required to be obtained
or maintained by the Company or the Bank and which are of a
character required to be disclosed in the Registration
Statement and Prospectus which have not been so disclosed;
(x) the statements in the Registration Statement
and the Prospectus, insofar as they are descriptions of
corporate documents, stock option plans, contracts, or
agreements or descriptions of laws, regulations, or
regulatory requirements, or refer to compliance with law
or to statements of law or legal conclusions, are correct in
all material respects;
(xi) to the best of such counsel's knowledge,
after due inquiry, the execution, delivery and performance
of this Agreement, the consum mation of the transactions
herein contemplated and the compliance with the terms
and provisions hereof by the Company will not give rise to a
right to terminate or accelerate the due date of any payment
due under, or conflict with or result in a breach of any of
the terms or provisions of, or constitute a default (or an
event which, with notice or lapse of time, or both, would
constitute a default) under, or require any consent under, or
result in the execution or imposition of any lien, charge or
encumbrance upon any properties or assets of the Company or
the Bank pursuant to the terms of, any lease, indenture,
mortgage, note or other agreement or instrument to which the
Company or the Bank is a party or by which either of them or
either of their properties or businesses is or may be bound
or affected, nor will such action result in any violation of
the provisions of the articles of incorporation or bylaws of
the Company or the Bank or any statute or any order, rule, or
regulation applicable to the Company or the Bank of any court
or any federal, state, local or other regulatory authority or
other governmental body, the effect of which, in any such
case, would be expected to be materially adverse to the
Company or the Bank;
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<PAGE> 13
(xii) to the best of such counsel's knowledge,
after due inquiry, no consent, approval, authorization or
order of any court or governmental agency or body,
domestic or foreign, is required to be obtained by the
Company in connection with the execution and delivery of this
Agreement or the sale of the Shares to the Underwriter as
contemplated by this Agreement, except those which have been
obtained;
(xiii) to the best of such counsel's knowledge, after
due inquiry, (A) neither the Company nor the Bank is in breach
of, or in default (and no event has occurred which, with
notice or lapse of time, or both, would constitute a default)
under, any lease, indenture, mortgage, note, or other
agreement or instrument to which the Company or the Bank, as
the case may be, is a party; or (B) neither the Company nor
the Bank is in violation of any term or provision of either of
their articles of incorporation or bylaws, or of any
franchise, license, grant, permit, judgment, decree, order,
statute, rule or regulation; and (C) neither the Company nor
the Bank has received any notice of conflict with the asserted
rights of others in respect of Intangibles necessary for the
commencement or conduct of its business, the effect of which,
in any such case, would be expected to be materially adverse
to the Company or the Bank;
(xiv) the Registration Statement and the Prospectus
and any amendments or supplements thereto (other than the
financial statements as to which no opinion need be rendered)
comply as to form with the requirements of the Securities Act
and the Rules in all material respects; and
(xv) the Registration Statement is effective under
the Securities Act, and, to the best of such counsel's
knowledge, after due inquiry, no proceedings for a stop order
are pending or threatened under the Securities Act.
In rendering the foregoing opinion, such counsel may rely upon
certificates of public officials (as to matters of fact and law) and
officers of the Company (as to matters of fact), and include
qualifications in its opinion as are reasonably acceptable to Roney
Copies of all such certificates shall be furnished to counsel to Roney
on the Closing Date.
In addition, such counsel shall state that they have
participated in conferences with officers of the Company and a
representative of the Underwriter at which the contents of the
Registration Statement and Prospectus and related
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<PAGE> 14
matters were discussed and although such counsel did not independently
verify the accuracy or completeness of the statements made in the
Registration Statement and Prospectus and does not assume any
responsibility for the accuracy or completeness of the statements in
the Registration Statement and Prospectus, on the basis of the
foregoing, nothing has come to the attention of such counsel that would
lead them to believe that the Registration Statement or Prospectus, as
amended or supplemented, if amended or supplemented, contains any
untrue statement of a material fact or omits a material fact required
to be stated therein or necessary to make the statements therein not
misleading; except that such statement may exclude financial
statements, financial data, and statistical information included in the
Registration Statement and Prospectus.
(c) On or prior to each Closing Date, Roney shall have been
furnished such documents, certificates and opinions as they may
reasonably require for the purpose of enabling them to review the
matters referred to in subsection (b) of this Section 5, and in order
to evidence the accuracy, completeness or satisfaction of the
representations, warranties or conditions herein contained.
(d) Prior to each Closing Date, (i) there shall have been no
material adverse change in the condition or prospects, financial or
otherwise, of the Company or the Bank; (ii) there shall have been no
material transaction, not in the ordinary course of business, entered
into by the Company or the Bank except as set forth in the Registration
Statement and Prospectus, other than transactions referred to or
contemplated therein or to which Roney has given its written consent;
(iii) neither the Company nor the Bank shall be in default (nor shall
an event have occurred which, with notice or lapse of time, or both,
would constitute a default) under any provision of any material
agreement, understanding or instrument relating to any outstanding
indebtedness that is material in amount; (iv) no action, suit or
proceeding, at law or in equity, shall be pending or threatened against
the Company or the Bank before or by any court or Federal, state or
other commission, board or other administrative agency having
jurisdiction over the Company or the Bank, as the case may be, which is
expected to have a material adverse effect on the Company or the Bank;
and (v) no stop order shall have been issued under the Securities Act
and no proceedings therefor shall have been initiated or be threatened
by the Commission.
(e) At each Closing Date, Roney shall have received a
certificate signed by the Chairman of the Board and the President of
the Company dated the Firm Shares Closing Date or Optional Shares
Closing Date, as the case may be, to the effect that the conditions set
forth in subsection (d) above have been satisfied and as to the
accuracy, as of the Firm Shares Closing Date or the Optional
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<PAGE> 15
Shares Closing Date, as the case may be, of the representations and
warranties of the Company set forth in Section 4 hereof.
(f) At or prior to each Closing Date, Roney shall have
received a "blue sky" memorandum of Dickinson Wright PLLC, counsel for
the Company, addressed to Roney and in form and scope reasonably
satisfactory to Roney concerning compliance with the blue sky or
securities laws of the states listed in Exhibit B attached to this
Agreement.
(g) All proceedings taken in connection with the sale of the
Shares as herein contemplated shall be reasonably satisfactory in form
and substance to Roney and to counsel for Roney, and Roney shall have
received from counsel for Roney a favorable opinion, dated as of each
Closing Date, with respect to such of the matters set forth under
Subsections (b) (i), (iii), (vi), (vii), and (xv) of this Section 5,
and with respect to such other related matters as Roney may reasonably
require, if the failure to receive a favorable opinion with respect to
such other related matters would cause Roney to deem it inadvisable to
proceed with the sale of the Shares.
(h) There shall have been duly tendered to Roney certificates
representing all the Shares agreed to be sold by the Company on the
Firm Shares Closing Date or the Optional Shares Closing Date, as the
case may be.
(i) No order suspending the sale of the Shares prior to each
Closing Date, in any jurisdiction listed in Exhibit B, shall have been
issued on the Firm Shares Closing Date or the Optional Shares Closing
Date, as the case may be, and no proceedings for that purpose shall
have been instituted or, to Roney's knowledge or that of the Company,
shall be contemplated.
(j) The NASD, upon review of the terms of the public offering
of the Shares, shall not have objected to the Underwriter's
participation in the same.
(k) At the time this Agreement is executed and at each Closing
Date, you shall have received a letter, addressed to Roney,
substantially in the form of Exhibit C attached hereto from Plante &
Moran, LLP, dated as of the date of this Agreement and as of each
Closing Date.
If any condition to the Underwriter's obligations hereunder to
be fulfilled prior to or at the Firm Shares Closing Date or the Optional Shares
Closing Date, as the case may be, is not so fulfilled, Roney may terminate this
Agreement pursuant to Section 9(c) hereof or, if Roney so elects, waive any such
conditions which have not been fulfilled or extend the time of their
fulfillment.
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<PAGE> 16
6. COVENANTS.
The Company covenants and agrees that it will:
(a) Use its best efforts to cause the Registration Statement
to become effective and will notify Roney immediately, and confirm the
notice in writing, (i) when the Registration Statement and any
post-effective amendment thereto becomes effective, (ii) of the
issuance by the Commission of any stop order or of the initiation, or
the threatening, of any proceedings for that purpose and (iii) of the
receipt of any comments from the Commission. The Company will make
every reasonable effort to prevent the issuance of a stop order, and,
if the Commission shall enter a stop order at any time, the Company
will make every reasonable effort to obtain the lifting of such order
at the earliest possible moment.
(b) During the time when a prospectus is required to be
delivered under the Securities Act, comply so far as it is able with
all requirements imposed upon it by the Securities Act, as now and
hereafter amended, and by the Rules, as from time to time in force, so
far as necessary to permit the continuance of sales of or dealings in
the Shares. If at any time when a prospectus relating to the Shares is
required to be delivered under the Securities Act any event shall have
occurred as a result of which, in the reasonable opinion of counsel for
the Company or counsel for Roney, the Registration Statement or
Prospectus as then amended or supplemented includes an untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
or if it is necessary at any time to amend or supplement the
Registration Statement or Prospectus to comply with the Securities Act,
the Company will notify Roney promptly and prepare and file with the
Commission an appropriate amendment or supplement in form satisfactory
to Roney. The cost of preparing, filing and delivering copies of such
amendment or supplement shall be paid by the Company.
(c) Deliver to the Underwriter such number of copies of each
preliminary prospectus as may reasonably be requested by Roney and, as
soon as the Registration Statement, or any amendment or supplement
thereto, becomes effective, deliver to the Underwriter three signed
copies of the Registration Statement, including exhibits, and all
post-effective amendments thereto and deliver to the Underwriter such
number of copies of the Prospectus, the Registration Statement and
supplements and amendments thereto, if any, without exhibits, as Roney
may reasonably request.
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<PAGE> 17
(d) Endeavor in good faith, in cooperation with Roney and its
counsel, at or prior to the time the Registration Statement becomes
effective, to qualify the Shares for offering and sale under the
securities laws relating to the offering or sale of the Shares of the
states listed in Exhibit B. In each jurisdiction where such
qualification shall be effected, the Company will, unless Roney agrees
that such action is not at the time necessary or advisable, file and
make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction. The Company will advise
Roney promptly of the suspension of the qualification of the Shares for
offering, sale or trading in any jurisdiction, or any initiation or
threat of any proceeding for such purpose, and in the event of the
issuance of any order suspending such qualification, the Company, with
the cooperation of Roney, will use all reasonable efforts to obtain the
withdrawal thereof.
(e) Furnish its security holders as soon as practicable an
earnings statement (which need not be certified by independent
certified public accountants unless required by the Securities Act or
the Rules) covering a period of at least twelve months beginning after
the effective date of the Registration Statement, which shall satisfy
the provisions of Section 11(a) of the Securities Act and the Rules
thereunder.
(f) For a period of five years from the Effective Date,
furnish to its shareholders annual audited consolidated financial
statements with respect to the Company including balance sheets and
income statements.
(g) For a period of five years from the Effective Date,
furnish to Roney the following:
(i) at the time they have been sent to shareholders
of the Company or filed with the Commission three copies of
each annual, quarterly, interim, or current financial and
other report or communication sent by the Company to its
shareholders or filed with the Commission;
(ii) as soon as practicable, three copies of every
press release and every material news item and article in
respect of the Company or the affairs of the Company which was
released by the Company;
(iii) all other information reasonably requested by
Roney with respect to the Company to comply with Rule 15c2-11
of the Rules and Section 4 of Schedule H of the NASD By-Laws;
and
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<PAGE> 18
(iv) such additional documents and information with
respect to the Company and its affairs as Roney may from time
to time reasonably request.
(h) Apply the net proceeds from the offering in the manner set
forth under "Purpose of the Offering" in the Prospectus.
(i) Not file any amendment or supplement to the Registration
Statement or Prospectus after the effective date of the Registration
Statement to which Roney shall reasonably object in writing after being
furnished a copy thereof.
(j) Timely file with the Commission reports on Form SR (if
applicable) containing the information required by that Form in
accordance with the provisions of Rule 463 of the Regulation under the
Act.
(k) Comply with all registration, filing and reporting
requirements of the Securities Act or the Exchange Act, which may from
time to time be applicable to the Company.
(l) Use every reasonable effort to affect the quotation of the
Firm Shares and any Additional Shares on the OTC Bulletin Board as
promptly as practicable.
(m) Pay, or reimburse if paid by the Underwriter, whether or
not the transactions contemplated hereby are consummated or this
Agreement is termi nated, all costs and expenses incident to the
performance of the obligations of the Company under this Agreement,
including those relating to (1) the preparation, printing, filing and
delivery of the Registration Statement, including all exhibits thereto,
each preliminary prospectus, the Prospectus, all amendments of and
supplements to the Registration Statement and the Prospectus, and the
printing of the Underwriting Agreement and related agreements
including, without limitation, the Dealer Agreement, (2) the issuance
of the Shares and the preparation and delivery of certificates for the
Shares to the Underwriter, (3) the registration or qualification of the
Shares for offer and sale under the securities or "blue sky" laws of
the various jurisdictions referred to in Exhibit B, including the fees
and disbursements of counsel in connection with such registration and
qualification and the preparation and printing of preliminary,
supplemental, and final blue sky memoranda, (4) the furnishing
(including costs of shipping and mailing) to the Underwriter of copies
of each preliminary prospectus, the Prospectus and all amendments of or
supplements to the Prospectus, and of the several documents required by
this Section to be so furnished, (5) the filing requirements and fees
18
<PAGE> 19
of the NASD in connection with its review of the terms of the public
offering and the underwriting, (6) the furnishing (including costs of
shipping and mailing) of copies of all reports and information required
by Section 6(g), (7) all transfer taxes, if any, with respect to the
sale and delivery of the Shares by the Company to the Underwriter, (8)
the inclusion of the Shares on the OTC Bulletin Board; and (9) the
Underwriter's out-of-pocket expenses, including without limitation,
road show expenses and legal fees of counsel to Roney (such
out-of-pocket expenses and legal fees payable by the Company shall not
exceed $45,000). Upon a successful completion of the offering, the
Underwriter will credit the out-of-pocket and legal fee reimbursement
described in Section 6(m)(9) against the underwriting discount.
(n) Not, without the prior written consent of Roney, sell,
contract to sell or grant any option for the sale of or otherwise
dispose of, directly or indirectly, or register with the Commission,
any shares of Common Stock of the Company (or any securities
convertible into or exercisable for such shares of Common Stock) within
180 days after the date of the Prospectus, except as provided in this
Agreement and except for grants and exercises of Stock Options under
the Stock Option Plans as described in the Prospectus.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation,
legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they may become subject under the Securities Act,
the Exchange Act or other Federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or
any amendment thereof or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that such indemnity shall
19
<PAGE> 20
not inure to the benefit of the Underwriter (or any person controlling
the Under writer) on account of any losses, claims, damages or
liabilities arising from the sale of the Shares in the public offering
to any person by the Underwriter if such untrue statement or omission
or alleged untrue statement or omission was made in such preliminary
prospectus, the Registration Statement or the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with
information furnished in writing to the Company by or on behalf of the
Underwriter specifically for use therein. The Company shall not be
liable hereunder to the Underwriter (or any controlling person thereof)
to the extent that any loss, claim, damage or other liability incurred
by the Underwriter arises from the Underwriter's fraudulent act or
omission.
(b) The Underwriter agrees to indemnify and hold harmless the
Company, each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, each director of the Company and each officer of the
Company, to the same extent as the foregoing indemnity from the
Company to the Underwriter, but only insofar as such losses, claims,
damages or liabilities arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which
was made in any preliminary prospectus, the Registration Statement or
the Prospectus, or any amendment thereof or supplement thereto, in
reliance upon and in conformity with information furnished in writing
to the Company by the Underwriter specifically for use therein;
provided, however, that the obligation of the Underwriter to indemnify
the Company (including any controlling person, director or officer
thereof) hereunder shall be limited to the total price at which the
Shares purchased by the Underwriter hereunder were offered to the
public. The Underwriter shall not be liable hereunder to the Company
(including any controlling person, director or officer thereof) to the
extent that any loss, claim, damage or other liability incurred by the
Company arises from a fraudulent act or omission by the Company.
(c) Any party that proposes to assert the right to be
indemnified under this Section will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or
parties under this Section, notify each such indemnifying party of the
commencement of such action, suit or proceeding, enclosing a copy of
all papers served, but the omission so to notify such indemnifying
party of any such action, suit or proceeding shall not relieve it from
any liability that it may have to any indemnified party otherwise than
under this Section. In case any such action, suit or proceeding shall
be brought against any indemnified party and it shall notify the
indemnifying party of the commencement
20
<PAGE> 21
thereof, the indemnifying party shall be entitled to participate in,
and, to the ex tent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such in demnified party, and
after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof and the approval by the
indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses,
except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (1) the employment of counsel by such indemnified party
has been authorized in writing by the indemnifying parties, (2) the
indemnified party shall have reasonably concluded that, because of the
existence of different or additional defenses available to the
indemnified party or of other reasons, there may be a conflict of
interest between the indemnifying parties and the indemnified party in
the conduct of the defense of such action (in which case the
indemnifying parties shall not have the right to direct the defense of
such action on behalf of the indemnified party) or that, under the
circumstances, it is otherwise appropriate, or (3) the indemnifying
parties shall not have employed counsel to assume the defense of such
action within a reasonable time after notice of the commencement
thereof, in each of which cases the fees and expenses of counsel shall
be at the expense of the indemnifying parties. An indemnifying party
shall not be liable for any settlement of any action, suit, proceeding
or claims effected without its written consent.
8. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Section 7(a) or 7(b) is due in accordance with its terms but for any reason is
held to be unavailable, the Company and the Underwriter shall contribute to the
aggregate losses, claims, damages and liabilities (including any investigation,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting any contribution received from other persons), to which the
Company and the Underwriter may be subject, in such proportion so that the
Underwriter is responsible for that portion represented by the percentage that
the underwriting discount appearing on the front cover page of the Prospectus
bears to the public offering price appearing thereon and the Company is
responsible for the balance; provided, however, that (a) in no case shall the
Underwriter be responsible for any amount in excess of the underwriting discount
applicable to the Shares purchased by the Underwriter hereunder and (b) no
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section, each person, if any, who controls the Underwriter within the
meaning of the Securities Act or
21
<PAGE> 22
the Exchange Act shall have the same rights to contribution as the Underwriter,
and each person, if any, who controls the Company within the meaning of the
Securities Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to clauses
(a) and (b) of this Section. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be made
against another party or parties under this Section, notify such party or
parties from whom contribution may be sought, but the omission so to notify such
party or parties from whom contribution may be sought shall not relieve the
party or parties from whom contribution may be sought from any other obligation
it or they may have hereunder or otherwise than under this Section. No party
shall be liable for contribution with respect to any action, suit, proceeding or
claim settled without its written consent.
In any proceeding relating to the Registration Statement, any
preliminary prospectus, the Prospectus or any supplement thereto or amendment
thereof, each party against whom contribution may be sought under this Section 8
hereby consents to the jurisdiction of any court in Michigan, agrees that
process issuing from such court may be served upon him or it by any other
contributing party and consents to the service of such process and agrees that
any other contributing party may join him or it as an additional defendant in
any such proceeding in which such other contributing party is a party.
9. TERMINATION. This Agreement may be terminated by Roney by
notifying the Company at any time:
(a) before the earliest of (1) 11:00 a.m., Detroit time, on
the business day following the Effective Date, (2) the time of release
by Roney for publication of the first newspaper advertisement with
respect to the Shares and (3) the time when the Shares are first
generally offered by the Underwriter to dealers by letter or telegram
or other means;
(b) at or before any Closing Date if, in the judgment of
Roney, payment for and delivery of the Shares is rendered impracticable
or inadvisable because (1) additional material governmental
restrictions, not known to be in force and effect when this Agreement
is signed, shall have been imposed upon trading in securities generally
or minimum or maximum prices shall have been generally established on
the New York Stock Exchange, on the American Stock Exchange or on the
over-the-counter market, or trading in securities generally shall have
been suspended on either such Exchange or on the over-the-counter
market or a general banking moratorium shall have been established by
federal, New York or Michigan authorities, (2) a war or other calamity
shall have occurred or shall have accelerated to such an extent as to
affect adversely the
22
<PAGE> 23
marketability of the Shares, (3) the Company or the Bank shall have
sustained a material loss by fire, flood, accident, hurricane,
earthquake, theft, sabotage or other calamity or malicious act, which,
whether or not said loss shall have been insured, will in Roney's
opinion, make it inadvisable to proceed with the offering of the
Shares, or (4) there shall have been such material change in the
condition, business operations or prospects of the Company or the
market for the Shares or similar securities as in Roney's judgment
would make it inadvisable to proceed with the offering of the Shares;
or
(c) at or before any Closing Date, if any of the conditions
specified in Section 5 or any other agreements, representations or
warranties of the Company in this Agreement shall not have been
fulfilled when and as required by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, except as
otherwise provided in this Agreement, the Company shall not be under any
liability to the Underwriter (other than for obligations assumed in Section 6
hereof), and the Underwriter shall not be under any liability to the Company;
provided, however, that if this Agreement is terminated by Roney because of any
failure, refusal or inability on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or for any reasons
provided in subparagraphs (b) (other than (b)(4)) and (c) above, the Company
will reimburse the Underwriter for all accountable out-of-pocket expenses
(including, without limitation, road show expenses and fees and disbursements of
counsel to Roney) up to a maximum of $45,000 incurred by it in connection with
the proposed purchase and sale of the Shares or in contemplation of performing
its obligations hereunder.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements contained in this Agreement shall be
deemed to be representations, warranties and agreements at the Closing Dates,
and such representations, warranties and agreements of the Company, including,
without limitation, the payment and reimbursement agreements contained in
Section 6 hereof and the indemnity and contribution agreements contained in
Sections 7 and 8 hereof, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Underwriter or any
controlling person and shall survive termination of this Agreement and/or
delivery of the Shares to and payment for the Shares by the Underwriter pursuant
to this Agreement. In addition, the covenants contained in Section 6 hereof, the
agreements contained in this Section 10 and in Sections 7, 8 and 9 shall survive
termination of this Agreement and/or delivery of the Shares to and payment for
the Shares by the Underwriter pursuant to this Agreement.
11. MISCELLANEOUS. This Agreement has been and is made for the
benefit of the Underwriter, the Company and their respective successors and
assigns, and, to the extent expressed herein, for the benefit of persons
controlling the Underwriter or the Company, and
23
<PAGE> 24
directors and certain officers of the Company, and their respective successors
and assigns, and no other person, partnership, association or corporation shall
acquire or have any right under or by virtue of this Agreement. The term
"SUCCESSORS AND ASSIGNS" shall not include any purchaser of Shares from the
Underwriter merely because of such purchase.
If any action or proceeding shall be brought by the
Underwriter or the Company in order to enforce any right or remedy under this
Agreement, the Underwriter and the Company hereby consent to, and agree that
they will submit to, the jurisdiction of the courts of the State of Michigan and
of any Federal court sitting in the State of Michigan.
All notices and communications hereunder shall be in writing
and mailed or delivered or by telephone or telegraph, if subsequently confirmed
in writing, to Roney, at One Griswold, Detroit, Michigan 48226 (facsimile No.
(313) 963-2303) (with a copy to Gordon R. Lewis, Warner Norcross & Judd LLP, 900
Old Kent Building, 111 Lyon Street, N.W., Grand Rapids, Michigan 49503
(facsimile No. (616) 752-2500)); and to the Company at 100 North Main Street,
Mount Clemens, Michigan 48043, Attention: Harold W. Allmacher, Chairman of the
Board and Chief Executive Officer (facsimile No. (810) 465-9501) (with a copy to
Jerome M. Schwartz, Dickinson Wright PLLC, 500 Woodward Avenue, Suite 4000,
Detroit, Michigan 48226 (facsimile No. (313) 223-3598)).
This Agreement shall be construed in accordance with the laws
of the State of Michigan, without giving effect to principles of conflicts of
laws.
Please confirm that the foregoing correctly sets forth the
agreement between us.
Very truly yours,
COMMUNITY CENTRAL BANK CORPORATION
By:________________________________
Richard J. Miller
Its: President
Confirmed by Roney
RONEY CAPITAL MARKETS,
A DIVISION OF FIRST CHICAGO CAPITAL
MARKETS, INC.
By:________________________________________
John C. Donnelly
Its: Managing Director-Corporate Finance
24
<PAGE> 25
EXHIBIT A
Directed Sales
Name Number of Shares
<PAGE> 26
EXHIBIT B
States
Michigan
Florida
Illinois
Indiana
Kentucky
Missouri
New Jersey
New York
Ohio
Wisconsin
<PAGE> 1
EXHIBIT 5
DICKINSON WRIGHT PLLC
500 WOODWARD AVENUE
SUITE 4000
DETROIT, MICHIGAN 48226
TEL: (313) 223-3500
FACSIMILE: (313) 223-3598
July 2, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: COMMUNITY CENTRAL BANK CORPORATION
Ladies and Gentlemen:
We are acting as counsel to Community Central Bank Corporation, a
Michigan corporation (the "Company") in connection with the proposed issuance
and sale by the Company of shares of its common stock ("Common Stock"). The
Common Stock is described in a registration statement on Form SB-2 (the
"Registration Statement") being concurrently filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act").
Based upon our examination of such corporate records and other
documents and certificates as we deemed it necessary to examine, it is our
opinion that:
1. The Company is a corporation validly existing
under the laws of the State of Michigan; and
2. The Common Stock, when issued and sold by the
Company as contemplated by the Registration
Statement, will be legally issued, fully paid
and non-assessable.
We hereby consent to the use of this opinion as Exhibit 5 to the
Registration Statement and to the use of our firm name under the caption "Legal
Matters" in the related Prospectus. In giving such consent, we do not concede
that we are experts within the meaning of the Act or the rules or regulations
thereunder or that this consent is required by Section 7 of the Act.
Very truly yours,
/s/ Dickinson Wright PLLC
<PAGE> 1
EXHIBIT 10.5
VICANT OFFICE BUILDING LEASE AGREEMENT
This LEASE, made this 1st day of April, 1997, by and between
GEBRAN S. ANTON, JR., ("LANDLORD" HEREIN) whose address is 79 Macomb Place,
Mount Clemens, Michigan, 48043, and COMMUNITY CENTRAL BANK, A STATE BANKING
CORPORATION, ("TENANT" HEREIN) whose address is 100 North Main Street, Mt.
Clemens, Michigan, 48043.
W I T N E S S E T H:
1. DESCRIPTION OF PREMISES. Landlord, for and in consideration of the
rents to be paid and the covenants and agreements to be performed by Tenant,
does hereby lease to Tenant premises ("Leased Premises" herein) situated in the
Vicant Office Building ("Building" herein) in the City of Mount Clemens, Macomb
County, Michigan, more particularly described as:
SUITE 207, CONTAINING APPROXIMATELY 1,516 SQUARE FEET
LOCATED ON THE 2ND FLOOR IN THE BUILDING SITUATED AT
59 NORTH WALNUT, MOUNT CLEMENS, MICHIGAN, SAID LEASED
PREMISES BEING MORE PARTICULARLY DESCRIBED AS THE PREMISES
OUTLINED IN RED ON THE ATTACHED EXHIBIT "A" WHICH IS
INCORPORATED HEREIN BY REFERENCE AND SPECIFICALLY MADE
A PART HEREOF.
2. TERM. The term of this Lease shall be for a period of FIVE (5) YEARS.
The Commencement date of the term will be MAY 1, 1997. The expiration of the
term shall be at 11:59 on the last day of APRIL 30, 2002. Tenant is assuming
the Leased Premises in its "as is" condition, except that Landlord, at his
expense, will:
a) Patch and paint as required.
b) Clean carpet.
c) Provide Suite and Directory signage.
If the Leased Premises are not delivered to Tenant on the commencement date for
any reason whatsoever, Landlord shall not be liable to Tenant for damages as a
result of delay in such delivery and Tenant shall not have the right to
terminate this Lease. In the event of delay in such delivery, the commencement
date shall be the date Landlord delivers a written notice to Tenant that the
Leased Premises are ready for occupancy and the termination date of this Lease
shall be extended for a period equivalent to the period of such delay.
<PAGE> 2
3. RENT. Tenant shall and hereby agrees to pay Landlord as fixed rent for
the Leased Premises, the sum of ONE HUNDRED TWENTY-ONE THOUSAND TWO HUNDRED
EIGHTY AND 00/100 ($121,280.00) DOLLARS to be paid in advance, in equal monthly
installments as follows:
5-1-1997 THRU 4-30-1998 . . . . . . . . . . . . . $1,768.67 PER MONTH
5-1-1998 THRU 4-30-1999 . . . . . . . . . . . . . $1,895.00 PER MONTH
5-1-1999 THRU 4-30-2000 . . . . . . . . . . . . . $2,021.34 PER MONTH
5-1-2000 THRU 4-30-2001 . . . . . . . . . . . . . $2,147.67 PER MONTH
5-1-2001 THRU 4-30-2002 . . . . . . . . . . . . . $2,274.00 PER MONTH
Without any prior demand therefor and without any deduction or setoff whatsoever
in lawful money of the United States, on the 1st day of each and every calendar
month during the term of this Lease, at the offices of the Landlord, or at such
other place as Landlord may designate in writing from time to time; provided
however, that if the lease term shall commence on a day other than the 1st day
of a calendar month then the rental for such month shall be prorated daily
based on a thirty day calendar month. Any installment of rent due or
accruing hereunder and any other sum, whether termed rent or otherwise and
payable hereunder by Tenant to Landlord which is not paid when due, shall bear
interest at the rate of ten (10%) percent per annum from the date when the same
shall respectively become payable until the same is paid. Time is of the
essence of this Lease.
4. USE AND OCCUPANCY. During the term of this Lease, the Leased Premises
shall be used for the following purposes and for no other purpose whatsoever:
Mortgage Offices. Tenant agrees to keep the premises in accordance with all
police, sanitary and other regulations imposed by any governmental authority,
and to observe all reasonable regulations and requirements of underwriters
concerning the use and condition of the Leased Premises tending to reduce fire
hazards and insurance rates. Tenant shall not perform any act or carry on any
practice which may injure the Leased Premises or the Building or which will be
a nuisance, disturbance or menace to the other tenants in the Building. Tenant
shall keep the Leased Premises in good repair and order and shall at all times
maintain the same in a neat, clean and sanitary condition and at the expiration
of the term hereof shall surrender the Leased Premises in good order, repair
and condition.
5. UTILITIES AND SERVICES. Landlord shall furnish the Leased Premises
with heat, air conditioning, electricity, water, sewage, trash disposal and
janitorial services. Said utilities shall be provided when, in Landlord's
judgment, the same are
2
<PAGE> 3
necessary for the comfort able occupancy and use of the Leased Premises;
provided however, that in no event shall Landlord furnish heat and/or air
conditioning more often than during the hours from 8:00 A.M. to 6:00 P.M. on
Monday through Friday and 8:00 A.M. to 1:00 P.M. on Saturday. Landlord shall not
be liable or responsible for any interruption in such utilities or other
services caused by riots, strike, labor disputes or accidents or other causes
beyond the immediate control of Landlord, or for stoppages or interruptions of
any such services for the purpose of making necessary repairs or improvements.
Failure, interruption or delay in furnishing heat, electricity and other
services described herein shall not be construed as an act of eviction against
Tenant by Landlord nor shall such failure, interruption or delay in any way
operate as a release from the prompt and punctual performance by Tenant of the
covenants contained herein. Electricity furnished by Landlord shall be used only
for purposes of illumination and the operation of office equipment which is
considered common and normal low electrical consumption office equipment at the
date of execution hereof. The only lighting equipment which Landlord shall be
responsible to replace under this paragraph shall be fluorescent tubes,
ballasts and starters.
Anything hereinabove to the contrary notwithstanding, Landlord and Tenant
agree that Landlord's obligation to furnish heat, electricity or air
conditioning to the Leased Premises shall be subject to and limited by all
laws, rules and regulations of any governmental authority affecting the supply,
distribution, availability of or consumption of energy, including but not
limited to, heat, electricity, gas, oil and/or water. Landlord shall abide by
all such governmental laws, rules and regulations and, in so doing, Landlord
shall not be in default in any manner whatsoever under the terms of this Lease
and Landlord's compliance therewith shall not affect in any manner whatsoever,
Tenant's obligation to pay the full rental set forth in this Lease.
6. ALTERATIONS. Tenant agrees that the Leased Premises shall not be
altered, improved or changed without prior written consent of Landlord. All
alterations, improvements and changes which may be approved by Landlord shall
be made at such times and in such manner as Landlord may reasonably designate
and shall be done either by or under the direction of Landlord, but at the cost
of Tenant. All alternations, improvements and changes except movable office
furniture installed at the expense of the Tenant and removable without defacing
or injuring the Building or Leased Premises, shall, unless otherwise provided
by written agreement, be the property of Landlord, and remain upon and be
surrendered with
3
<PAGE> 4
the Leased Premises; provided however, that Landlord may designate by written
notice to Tenant, those alterations, improvements and changes which shall be
removed by Tenant at the expiration of this Lease and Tenant shall promptly
remove the same and repair any damage to the Leased Premises caused by such
removal. All damage or injury done to the Leased Premises by the Tenant, or by
any person who may be in or upon the premises with the consent, invitation or
license of Tenant, shall be paid for by Tenant.
7. REPAIRS BY LANDLORD. Landlord shall make all necessary repairs and
replacements to the Building and to the common areas, heating, air conditioning
and electrical systems located therein together with all repairs to the Leased
Premises which are structural in nature or required due to fire or casualty
subject to Paragraph 15, provided however, that Tenant shall be responsible for
all repairs and replacements described in the immediately succeeding Paragraph
8. Landlord shall have reasonable opportunity to obtain the necessary materials
and workmen to complete said repairs. There shall be no allowance to Tenant nor
any diminution in rent and no liability on the part of Landlord by reason of
inconvenience, annoyance, or injury to business arising from repairs in or to
any portion of the Building or the Leased Premises by Landlord.
8. REPAIRS BY TENANT. Tenant agrees to maintain and keep the Leased
Premises in good repair and condition. All damage or injury to the Leased
Premises and/or the Building or its fixtures and equipment caused by or
resulting from the willful omission or negligence of Tenant, its servants,
employees, contractors, agents, visitors or licensees shall be repaired or
replaced promptly by Tenant at its expense and to the satisfaction of Landlord,
and Tenant shall, at the termination of this Lease surrender the Leased
Premises (together with all alterations, repairs and improvements thereon) to
Landlord in the same condition as they were at the commencement of this Lease,
reasonable use and wear expected. All such repairs and replacements shall be in
quality and class equal to the original work or installations. If Tenant fails
to make such repairs or replacements, they made be made by Landlord at the
expense of Tenant and shall be paid for by Tenant within five (5) days after
rendition of a bill therefor.
9. ADDITIONAL RENTALS. Tenant shall and agrees to pay as additional rental
during the term of this Lease its prorata share of increses in real estate
taxes and assessments, insurance, electricity and gas as follows:
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A. Real Estate Taxes and Assessments. Landlord shall determine the amount
he pays for taxes and assessments with respect to the land and Building of
which the Leased Premises are a part pursuant to tax bills he receives during
the calendar year 1997. To the extent that tax bills for the land and Building
of which the Leased Premises are a part for subsequent calendar years during
the Lease term exceed said amount, Tenant shall pay its prorata share of any
such increases. In the event the State of Michigan or any political subdivision
thereof having taxing authority shall substitute a franchise tax, transfer tax
or net income tax for or in place of said real estate taxes and assessments,
said substitution shall not relieve Tenant of its liability for increases as
provided herein and the calculations required under this paragraph shall
utilize said substituted tax in determining Tenant's liability for any increases
hereunder.
B. Insurance. Landlord shall determine his costs for hazard, fire,
casualty, liability and other insurance on the Building for the calendar year
1997. Tenant shall pay its prorata share of any increases in said premiums for
subsequent calendar years during the Lease term.
C. Electricity and Gas. Landlord shall determine his costs for electricity
and gas to the Building for the calendar year 1997. Tenant shall pay its
prorata share of any increases in electricity and gas over said amount for
subsequent calendar years during the Lease term.
D. Determination of Prorata Share. For purposes of this Lease and the
calculations to be made under this Paragraph 9, Tenant's "prorata share" shall
be equal to the product obtained by multiplying such cost increases by a
fraction, the numerator of which shall be the number of square feet of floor
area in the Leased Premises, and the denominator of which shall be the gross
leasable floor area of the Building.
E. Method of Payment of Increases. All amounts due hereunder shall be
payable to Landlord at the place where the rent provided herein is payable.
Landlord shall invoice Tenant for any obligations owed under this Paragraph as
the same are determined by Landlord which invoice shall contain an explanation
of the amounts determined by Landlord to be due.
Tenant shall have the right to inspect Landlord's records supporting any
increases. Any invoices for increases shall be paid within thirty (30) days of
the date submitted to Tenant by Landlord.
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10. RULES AND REGULATIONS. Tenant covenants and agrees that Tenant, its
agents, employees, visitors and licensees shall comply with all rules and
regulations of the Building which Landlord shall from time to time make said
rules and regulations are hereby expressly made a part of this Lease.
11. INDEMNIFICATION AND INSURANCE. Tenant shall indemnify Landlord and
save Landlord harmless from any and all liability, claims and expense for
damages to any person or property in, or on the Leased Premises from any cause
whatsoever. Tenant shall, during the entire term of this Lease, keep in full
force and effect policies of public liability and property damage insurance
with insurance companies acceptable to Landlord with respect to the Leased
Premises and the business operated by Tenant therein in which both Landlord and
Tenant shall be named as insured parties, and in which the limits of liability
shall not be less than Two Hundred Fifty Thousand ($250,000.00) Dollars per
person, and Five Hundred Thousand ($500,000.00) Dollars for each accident or
occurrence, and Fifty Thousand ($50,000.00) Dollars for property damage.
Tenant shall furnish Landlord with copies of said policies or certificates of
insurance therefor or otherwise acceptable evidence that such insurance is in
full force at all times during the term hereof. In the event Tenant shall fail
to procure such insurance, Landlord may, at its option, procure the same for
the account of Tenant and the cost thereof shall be paid to Landlord by Tenant
immediately upon receipt by Tenant of a statement from Landlord for the cost
thereof.
12. LOSS AND DAMAGE. Tenant agrees that all property kept, stored or
maintained in the Leased Premises or in or around the Building shall be kept,
stored and maintained at the risk of Tenant only. Landlord shall not be liable
for any loss of or damage to any such property from any cause whatsoever
including water or other substance which may leak, issue or flow from any part
of the Building, or by or from the plumbing, gas, steam, sewerage, electric or
water lines, pipes or conduits or from theft, fire or other accident or
casualty or from any other damage otherwise occurring or resulting. Landlord
shall not be liable for any latent defects, structural or otherwise, in
construction, condition, lack of repair or proper operation of the Leased
Premises or the Building or any machinery, equipment or facility therein. It is
further agreed that Landlord shall not be liable for any accident or casualty
arising from acts of other tenants or occupants of the Building, their agents,
employees, invitees or licensees or from any default of Tenant or any
unauthorized acts of Landlord's employees.
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13. ASSIGNMENT AND SUBLETTING. Tenant covenants not to assign or
transfer this Lease or hypothecate or mortgage the same or sublet the Leased
Premises or any part thereof or use or permit them to be used for any purpose
other than above mentioned, without the prior written consent of Landlord.
Consent by Landlord to one or more assignments of this Lease or to one or more
sublettings of the Leased Premises shall not be deemed to be a waiver of the
requirement for consent of Landlord for any future assignments or subletting.
In the event Tenant, with or without the previous consent of Landlord, does
assign or in any manner transfer this Lease or any interest therein, Tenant
shall in no way be released from any of its obligations under this Lease.
14. DAMAGE BY CASUALTY. In the event the Leased Premises or other parts
of the Building are damaged by fire or other casualty, Landlord, unless it
elects to terminate this Lease as provided hereafter, shall repair the damage
with reasonable dispatch after notice thereof. The obligation of Landlord
hereunder shall not include any leasehold improvements which were not
Landlord's original responsibility. Repair by Landlord for any damage caused by
carelessness, negligence or improper conduct of Tenant, its agents, employees,
visitors or licensees shall not prejudice any right of Landlord or its insurer.
If the Leased Premises is so damaged by fire or other casualty that they
are untenantable but are, nevertheless, repaired by Landlord, the rent shall be
adjusted for the time during which and the extent to which the Leased Premises
may have been untenantable. If such repairs are delayed because of Tenant's
failure to adjust Tenant's own insurance claim or because of Tenant's failure
to remove its damaged property, no reduction shall be made beyond a reasonable
time allowed for such adjustment or removal.
If the fire or casualty to the Leased Premises is caused by carelessness,
negligence, or improper conduct by Tenant, or its agents, employees, visitors
or licensees, then, notwithstanding such damage, Tenant shall be liable for the
rent, during the unexpired portion of the term of this Lease, without
abatement, unless Landlord elects to terminate this Lease as provided
hereafter.
If Landlord, in its uncontrolled discretion, shall decide within a
reasonable time after any fire or other casualty (even though the Leased
Premises may not have been affected by such fire or casualty), not to repair,
rebuild or reconstruct the Building containing the Leased Premises, then, upon
written notice given by Landlord to Tenant, this Lease shall terminate on a date
specified
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<PAGE> 8
in such notice as if that date had been originally fixed as the expiration of
the term of this Lease, and the rent shall be adjusted as of the time of the
occurrence of any such fire or other casualty.
Landlord and Tenant do hereby release and discharge the other party and
any officer, agent, employee or representative of such party of and from any
liability whatsoever hereafter arising from loss, damage or injury caused by
fire or other casualty for which insurance (permitting waiver of liability and
containing a waiver of subrogation) is carried by the injured party at the time
of such loss, damage or injury to the extent of any recovery by the injured
party under such insurance.
15. ACCESS TO PREMISES. Tenant shall permit Landlord, its agents and
employees access to the Leased Premises at all reasonable hours to erect, use
and maintain pipes wires and conduits in an through the Leased Premises; to
examine the Leased Premises; to make such decorations, repairs, alterations,
improvements or additions as Landlord may deem necessary or desirable; to
exhibit the Leased Premises to prospective Tenants during the last three months
of the Lease term and during all holdover periods; and for other reasonable
purposes. Landlord may take all material into and upon the Leased Premises that
may be required therefor without constituting an eviction of Tenant in whole or
in part, and the rent shall not abate while said decorations, repairs,
alterations, improvements or additions are being made. Landlord shall not be
liable by reason of loss or interruption of business of Tenant as a result
thereof. Landlord shall also have the right at any time, without the same
constituting an actual or constructive eviction and without incurring any
liability to Tenant therefor (whether for inconvenience or loss of business or
otherwise) to change the arrangements and/or location of entrances or
passageways, doors and doorways, corridors, elevators, stairs, toilets or other
public and common areas of the Building, and to make repairs to, alterations of
or extensions of the Building.
16. EMINENT DOMAIN. If the whole or any substantial part of the Leased
Premises or the Building shall be taken by or conveyed to any public authority
under the power of eminent domain, then the term of this Lease shall cease on
the part so taken or conveyed on the date possession of that party shall be
required for public use, and any rent paid in advance of such date all be
refunded to Tenant, and Landlord and Tenant shall have the right to terminate
this Lease upon written notice to the other, which notice shall be delivered
within thirty (30) days following the date notice is
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<PAGE> 9
received of such taking. In the event that neither Party hereto shall terminate
this Lease, Landlord shall make all necessary repairs to the Leased Premises
and the Building to render and restore the same to a complete architectural
unit and Tenant shall continue in possession of the portion of the Leased
Premises not taken under the power of eminent domain, under the same terms and
conditions as are herein provided, except that the rent reserved herein shall
be reduced in direct proportion to the amount of the Leased Premises so taken.
The obligation of Landlord hereunder to make such repairs to the Leased
Premises shall be limited to the work required to be performed and paid for by
Landlord pursuant to Paragraph 2 of this Lease and the plans and specifications
referred to therein. All damages awarded for such taking or conveyance shall
belong to and be the property of Landlord, whether such damages be awarded
as compensation for diminution in value of the leasehold or to the fee of the
Leased Premises; provided, however, Landlord shall not be entitled to any
portion of any separate award or payment made to Tenant for removal and
reinstallation of fixtures, loss of business or moving expenses.
17. DEFAULT OF TENANT. In the event of any failure of Tenant to pay any
rental or other charges due hereunder within ten (10) days after the same may
be due, or any failure to perform any other of the terms, conditions or
covenants of this Lease to be observed or performed by Tenant for more than
thirty (30) days after written notice of such default shall have been mailed to
Tenant, or if Tenant shall abandon said premises, or permit this Lease to be
taken under any writ of execution, then the Landlord, besides other rights or
remedies it may have, shall have the right to declare this Lease terminated
and/or shall have the immediate right of re-entry and may remove all persons
and property from the Leased Premises and such property may be removed or
stored in a public warehouse or elsewhere at the cost of, and for the account
of Tenant, without evidence of notice or resort to legal process and without
being deemed guilty of trespass, or becoming liable for any loss or damage
which may be occasioned thereby.
Should Landlord elect to re-enter or take possession pursuant to legal
proceedings or any notice provided for Landlord, Landlord may either terminate
this Lease or from time to time, without terminating this Lease relet the
premises or any part thereof on such terms and conditions as Landlord shall in
its sole discretion deem advisable. The proceeds of such reletting shall be
applied: first to the payment of any indebtedness of Tenant to Landlord other
than rent due hereunder; second, to the payment of any reasonable costs of such
reletting, including the cost of any reasonable alterations and repairs to the
premises; third, to the
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<PAGE> 10
payment of rent due and unpaid hereunder; and the residue, if any, shall be
held by Landlord and applied in payment of future rent as the same reletting
during any month be less than the monthly rent reserved hereunder, then Tenant
shall during each such month pay such deficiency to Landlord.
All rights and remedies of Landlord specified above and elsewhere in this
Lease shall be cumulative and none shall exclude another or any other right of
remedy allowed by law, and such rights and remedies may be exercised
concurrently. Tenant shall pay all reasonable attorney fees and expenses of
Landlord in enforcing any of the obligations of the Tenant under this Lease, or
in any litigation or negotiation in which Landlord shall, without its fault,
become involved through or on account of this Lease.
18. BANKRUPTCY. In the event the estate created hereby shall be taken in
execution or by other process of law, or if Tenant shall be adjudicated
insolvent or bankrupt pursuant to the provisions of any state or federal
insolvency or bankruptcy law, or if a receiver or trustee of the property of
Tenant shall be appointed by reason of Teant's insolvency or inability to pay
its debts, or if any assignment shall be made of Tenant's property for the
benefit of creditors, then and in any such events, Landlord may terminate this
Lease by written notice to Tenant; provided, however, if the order of court
creating any of such disabilities shall not be final by reason of pendency of
such proceedings, or appeal from such order, then Landlord shall not have the
right to terminate this Lease so long as Tenant performs its obligations
hereunder.
19. WAIVER. The waiver by Landlord of any agreement, condition or
provision herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any oher agreement, condition or provision hereof, nor
shall any custom or practice which may develop between the parties in the
administration of the terms hereof construed to waive or lessen the right of
Landlord to insist upon the performance by Tenant in strict accordance with
said terms. The sublessor at such other address as either part shall have
designated to the other, and the time of the rendition or receipt of such shall
be the time when the same is deposited with an official United States Post
Office, postage and fees fully prepaid thereon for first class mail.
20. SUBORDINATION. Landlord reserves the right to subject and subordinate
this Lease at all times to the lien of any mortgage or mortgages now or
hereafter placed on the Building and/or Leased
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<PAGE> 11
Premises and to all advances made or hereafter to be made upon the security
thereof. Tenant will execute and deliver such further instrument or instruments
subordinating this Lease to the lien of any such mortgage or mortgages as shall
be desired by and mortgagee or proposed mortgagee. Tenant hereby appoints
Landlord as attorney-in-fact of Tenant, irrevocably, to execute and deliver any
such instrument or instruments for Tenant. In the event Landlord's interest in
the premises shall be mortgaged and transferred by foreclosure of such mortgage
or deed in lieu thereof, Landlord's interest shall not be merged with the fee
so as to release Tenant hereunder and in the event of any such merger by
operation of law, this Lease shall not terminate and Tenant shall attorn to
such owner.
21. HOLDING OVER. It is hereby agreed that in the event Tenant holds over
after the termination of this Lease, the tenancy shall be from month to month,
but for no longer period and shall be subject to all the terms and
considerations of this lease except that the rental to be paid by Tenant during
said hold-over period shall be a rental equal to double the highest rate at any
time payable during the terms of this Lease unless Landlord and Tenant agree to
another rent during said hold-over period. In the event such new rent is agreed
to by Landlord and Tenant, said new rent shall be binding only if contained in
writing signed by both of the parties.
22. TENANT'S ACCEPTANCE LETTER. Tenant agrees within ten (10) days after
request therefor by Landlord to execute in recordable form and deliver to
landlord for Landlord's mortgagee, a statement in writing certifying (a) that
this lease is in full force and effect, (b) the dates of commencement and
expiration of the term of this Lease, (c) that rent is paid currently without
any off-set or defense thereto, (d) the amount of rent, if any, paid in advance,
(e) that there are no uncured defaults by Landlord or, a statement of any
uncured defaults claimed by Tenant, and (f) any other necessary information
requested by said mortgagee.
23. NOTICES. Any bill, statement, notice, communication or payment which
Landlord or Tenant may desire will be required to give to the other party shall
be in writing and shall be sent to the other party addressed as follows:
LANDLORD: TENANT:
Gebran S. Anton, Jr. Community Central Bank
79 Macomb Place 100 North Main Street
Mt. Clemens, Michigan 48043 Mt. Clemens, Michigan 48043
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24. ADVERTISEMENTS. Tenant shall not erect or install any exterior or
interior window or door signs or advertising media, or window or door
lettering, or placards without the previous written consent of Landlord. Tenant
agrees not to use any advertising media that shall be deemed objectionable to
Landlord, or other tenants, such as loudspeakers, phonographs or radio
broadcasts in a manner to be heard outside the Leased Premises. Tenant shall
not install any exterior lighting or plumbing fixtures, shades or awnings, or
any exterior decorations or paintings, or build any fences or make any changes
in the front of the Leased Premises without the previous written consent of
Landlord.
25. QUIET ENJOYMENT. Upon payment by Tenant of the rents and other
charges due hereunder, and upon the observance and performance of all
covenants, terms and conditions on Tenant's part to be observed and performed,
Tenant shall peaceably and quietly hold and enjoy the Leased Premises for the
term hereby demised without hindrance or interruptions by Landlord or any other
person or persons lawfully or equitably claiming by, through or under Landlord,
subject, however, to the terms and conditions of this Lease.
26. ATTORNMENT. In the event any proceedings are brought for the
foreclosure of or in the event of exercise of the power of sale under any
mortgage made by Landlord covering the Leased Premises, Tenant shall, at the
option and request of the holder of said mortgage, attorn to said holder upon
any such foreclosure or sale and recognize said holder as the Landlord under
this Lease.
27. LIABILITY OF LANDLORD. If Landlord shall fail to perform any
covenant, term or condition of this lease upon Landlord's part to be performed,
and if as a consequence of such default Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the proceeds of
sale received upon execution of such judgment and levied thereon against the
right, title and interest of Landlord in the Building and land of which the
Leased Premises are a part and out of rents or other income from such property
receivable by Landlord, and neither Landlord nor any of the co-partners
comprising the partnership which is the Landlord herein shall be liable for any
deficiency.
28. SUCCESSORS. rights, liabilities, covenants, obligations and
agreements hereingiven to, or imposed upon the parties hereto shall, except as
provided in the preceding paragraph, extend to, benefit and bind their
respective heirs, executors, administrators, successors and assigns as well as
their directors, officers, stockholders, partners and associates, and if there
is more than
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one Tenant, they shall all be bound jointly and severally by the terms,
covenants and agreements herein. No rights, however, shall inure to the benefit
of any assignee of Tenant unless the assignment of said assignee has been
approved by Landlord in writing.
29. Entire Agreement and Controlling Law. This Lease shall constitute the
entire agreement of the parties hereto. All prior agreements between the
parties, whether written or oral, are merged herein, and shall be of no force
and effect. This Lease cannot be changed, modified, or discharged except by an
agreement in writing, signed by the party against whom enforcement of the
change, modification or discharge is sought. This Lease shall be governed by
and construed in accordance with the laws of the State of Michigan. If any
provision of this Lease or the application thereof to any person or
circumstances shall, to any extent, the invalid or unenforceable, the remainder
of this Lease shall not be affected thereby and each provision of the Lease
shall be valid and enforceable to the fullest extent permitted by the law.
30. Transfer of Landlord's Interest. In the event of any transfer or
transfers of Landlord's interest in this Lease or the Building or land, the
transferor shall be automatically relieved of any and all obligations and
liabilities on the part of Landlord accruing from and after the date of such
transfer.
31. Definition. For purposes of this Lease, the term "gross leasable floor
area" shall mean the total number of square feet of floor area in the Building
excluding therefrom the floor area of the following areas not located in
premises leased to Tenant or other occupants of the Building:
1. Employee bathrooms and lounges.
2. Stairways, corridors and hallways.
3. Lobbies and entries.
4. Telephone and electrical equipment rooms, boiler rooms and
janitor's closets.
5. Duct shafts and elevator shafts.
32. Mortgage Protection Clause. Tenant agrees to give any Mortgagees by
Register Mail, a copy of any Notice of Default served upon Landlord, provided
that prior to such notice Tenant has been notified, in writing, (by way of
Notice of Assignment of Rents and Leases, or otherwise) of the address of such
Mortgagees.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the
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Mortgagees shall have an additonal thirty (30) days within which to cure such
default or if such default cannot be cured within that time, then such
additional time as may be necessary if within such thirty (30) days, any
Mortgagee has commenced and is diligently pursuing the remedies necessary to
cure such default, (including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure) in which event this Lease shall
not be terminated while such remedies are being so diligently pursued.
IN THE WITNESS WHEREOF, Landlord and Tenant have signed and
sealed this Lease on the day and date first above written.
LANDLORD:
/s/ Marge Murphy By: /s/Gebran S. Anton
- ------------------------ ----------------------------
Witness Gebran S. Anton
TENANT:
COMMUNITY CENTRAL BANK,
A STATE BANKING CORPORATION
By: /s/ Harold Allmacher
- ------------------------ ----------------------------
Witness Harold Allmacher
Its: Chairman of the Board
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<PAGE> 15
EXHIBIT A
(MAP OF SUITE)
<PAGE> 16
EXHIBIT "B"
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, elevators, vestibules,
stairways, corridors, or halls shall not be obstructed or encumbered by
any Tenant or used for any purpose other than ingress and egress to and
from the leased premises.
2. No sign, picture, lettering, notice or advertisement of any kind
shall be painted or displayed on or from the windows, doors, roof, or
outside walls of the building in which the leased premises are located.
All of Tenant's interior sign painting or lettering shall be done in a
manner approved by Landlord, and the cost thereof shall be paid by
Tenant. In the event of the violation of the foregoing by any Tenant,
Landlord may remove same without any liability and may charge the expense
incurred for such removal to the Tenant.
3. No curtains, blinds, shades, screens, awnings, or other projections shall
be attached to or hung in, or used in connection with, any window or door
of the leased premises or outside wall of the building without the prior
written consent of the Landlord.
4. Any carpeting cemented down shall be installed with a releasable
adhesive.
5. The water and wash closets and other plumbing fixtures shall not be used
for any purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein.
All damages resulting from any misuse of the fixtures shall be borne by
the Tenant who, or whose servants, employees, agents, visitors or
licenses, shall have caused the same.
6. No Tenant shall mark, paint, drill into, or in any way deface any part of
the leased premises or the building of which they form a part. No
boring, cutting or stringing of wires shall be permitted, except with the
prior written consent of the Landlord, and as the Landlord may
direct.
7. No bicycle or other vehicle, and no dog or other animal shall be allowed
in offices, halls, corridors, or elsewhere in the building.
<PAGE> 17
8. Tenant shall no cause or permit unusual or objectionable odor to be
produced upon or permeate from the premises, including duplicating or
printing equipment emitting noxious fumes. Tenant shall not allow any
cooking on the premises. Tenant shall not disturb any occupants of
this or neighboring buildings or premises by the use of any musical
instruments, radio, television, loudspeaker, or by any unseemly or
disturbing noise.
9. No Tenant shall throw anything out of the door, windows, or down any
passageways or elevator shafts.
10. All loading, unloading, receiving or delivery of goods, supplies or
disposal of garbage or refuse shall be made only through entry ways
provided for such purposes and indicated by Landlord.
11. Tenant is not permitted to use any part of the building or the common
areas for any manufacturing, storage, or sale of merchandise, or
property of any kind; or for lodging or sleeping, or for any immoral or
illegal purpose.
12. All safes, freight, furniture, or other bulky matter of any description
shall be carried in or out of the premises only at such times and in
such manner as shall be prescribed in writing by Landlord, and Landlord
shall in all cases have the right to specify the proper position of any
such safe, furniture, or other bulky article, which shall only be used
by Tenant in a manner which will not interfere with or cause damage to
the demised premises or the building in which they are located, or to
the other Tenants or occupants of said building. Tenant shall be
responsible for any damage to the building or the property of its
tenants or others and injuries sustained by any person whomsoever
resulting from the use or moving of such articles in or out of the
leased premises, and shall make all repairs and imporvements required
by landlord or governmental authorities in connection with the use or
moving of such articles.
13. Tenant shall not bring in or allow to be kept upon the leased premised
any inflammable, combustible or explosive fluid, chemical or substance
or any article deemed extra hazardous on account of fire or other
dangerous properties.
14. No additional locks or bolts of any kind shall be placed
<PAGE> 18
upon any of the doors and windows by any Tenant, nor shall any changes
be made in existing locks or the mechanism thereof. Each Tenant must,
upon the termination of his tenancy, restore to the Landlord all keys of
stores, offices, and toilet rooms, either furnished to or otherwise
procured by Tenant and in the event of the loss of any keys, so
furnished, such Tenant shall pay to the Landlord the cost thereof.
15. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the
building or its desirability for offices, and upon written notice from
Landlord, Tenant shall refrain from or discontinue such advertising.
16. The Landlord reserves the right to exclude from the building between the
hours of 6:00 p.m. and 8:00 a.m. and at all hours on Sundays and legal
holidays all persons who do not present a pass to the building signed by
the Landlord. The Landlord will furnish passes to persons from whom any
Tenant requests same in writing. Each Tenant shall be responsible for
all persons for whom he requests such pass and shall be liable to the
Landlord for all acts of such persons.
17. Canvassing, soliciting, and peddling in the building is prohibited and
each Tenant shall co-operate to prevent the same.
18. Wherever the word "Tenant" occurs, it is understood and agreed that it
shall mean Tenant's associates, agents, clerks, servants and visitors.
Wherever the word "Landlord" occurs, it is understood and agreed that it
shall mean Landlord's assigns, agents, clerks, servants, and visitors.
<PAGE> 19
EXHIBIT "C"
JANITORIAL SERVICES
DAILY SERVICES: (Five (5) times per week):
1) Empty waste baskets.
2) Empty and clean ash trays.
3) Dust desk tops that are clear of working papers.
4) Vacuum carpeted areas and dust mop resilient floors.
5) Toilet rooms:
a) Empty and disinfect all waste receptacles.
b) Sweep and wet mop floors.
c) Clean and disinfect all fixtures and clean
mirrors and shelves.
d) Refill towel and soap dispensers as needed.
6) Clean and disinfect drinking fountains.
WEEKLY SERVICES:
1) Damp mop floors, stairways, lobbies, and corridors.
2) Wash and disinfect all ceramic tile, toilet,
partitioning, and fixtures.
3) Wash entrance door glass.
MONTHLY SERVICES:
1) Wax and polish floor in reception area, lunchroom,
and aisles.
2) Wash all glass in office partitions.
3) Dust tops of file cabinets, ledges, baseboards
and heat conductors.
QUARTERLY SERVICES:
1) Strip and re-wax entire floor area with wax
or floor treatment.
2) Wash first floor windows, (upper floor windows
shall be washed twice a year).
SEASONAL SERVICES:
1) Landscaping service as required.
2) Snow plowing service provided upon occasion of a
snowfall as required.
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the use of our report dated January 29, 1998, on the
consolidated financial statements of Community Central Bank Corporation for the
period ended December 31, 1997, to be included within the Registration
Statement on SB-2 and the Prospectus of Community Central Bank Corporation. We
also consent to the use of our name as "Experts" in the Prospectus.
/s/ Plante & Moran, LLP
Plante & Moran, LLP
Bloomfield Hills, Michigan
July 2, 1998
