<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1995 Commission file number: 2-54663
FIRST MANISTIQUE CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2062816
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
130 S. CEDAR STREET, MANISTIQUE, MI 49854
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (906) 341-8401
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, no
par value.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [ X ].
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 1, 1996: The aggregate market value (based on
limited trading) of the voting stock held by non-affiliates of the Registrant
based on a per share price of $70.00 as of March 1, 1996, was $33,993,940
(common stock, no par value).
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date: Common stock, no par value,
702,988 shares outstanding, as of March 1, 1996.
Documents incorporated by reference: Portions of the Registrant's proxy
statement for it's annual meeting to be held April 23, 1996, are incorporated
by reference into Part III.
<PAGE> 2
PART I
Item 1. Business
First Manistique Corporation (the "Registrant") was incorporated under the laws
of the state of Michigan on December 16, 1974. The Registrant owns all of the
outstanding stock of it's banking subsidiaries, First Northern Bank & Trust
("First Northern") and the South Range State Bank ("South Range"). The
Registrant also owns all of the outstanding stock of three nonbank
subsidiaries: First Manistique Agency ("Agency"), an insurance agency which
sells title, life, and health insurance, First Northern Services Company
("Service Company"), a real estate appraisal company, and First Rural Relending
Company ("First Rural"), a non-profit relending company which assists qualified
borrowers with discounted loan rates creating cash flow and growth potential to
new or established businesses. First Northern represents the principal assets
of the Registrant.
The Registrant became a registered bank holding company under the Bank Holding
Company Act of 1956, as amended (the "Act"), on April 1, 1976, when it acquired
First Northern and Manistique Lakes Bank. Manistique Lakes Bank merged with
First Northern on May 1, 1986, with the survivor being First Northern. The
Registrant acquired all of the outstanding stock of the Bank of Stephenson on
February 8, 1994, in exchange for cash and common stock. The Bank of
Stephenson was operated as a separate banking subsidiary of the Registrant
until September 30, 1995, when it was merged into First Northern with First
Northern being the survivor. First Northern acquired a substantial portion of
the banking assets and assumed a substantial portion of the banking liabilities
of Newberry State Bank on December 8, 1994, in exchange for cash. First
Northern acquired the fixed assets and assumed the deposits of the Rudyard
branch of First of America Bank on September 15, 1995, in exchange for cash.
The Registrant acquired all of the outstanding stock of South Range on January
31, 1996, in exchange for cash and notes. South Range operates as a separate
banking subsidiary of the Registrant.
First Northern is engaged in the general commercial banking business, providing
a full range of loan and deposit products. These banking services include
customary retail and commercial banking services, including checking and
savings accounts, time deposits, interest bearing transaction accounts, safe
deposit facilities, real estate mortgage lending, commercial lending, and
direct and indirect consumer financing.
<PAGE> 3
The principal source of revenue for the Registrant is interest and fees on
loans and investments. The sources of income for the three most recent years
are as follows:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
------ ------ ------
Interest and fees on loans 85.1% 78.2% 76.2%
Investment income 6.5% 12.8% 11.5%
Other interest income 2.6% 1.5% 1.4%
Non-interest income 5.8% 7.5% 10.9%
------ ------ ------
100.0% 100.0% 100.0%
------ ------ ------
</TABLE>
First Northern's primary market area is the area within a radius of 30 miles
from it's various offices in the Upper Peninsula of Michigan. First Northern
is headquartered in Manistique, Michigan. The executive offices and mailing
address are located at 130 S. Cedar Street, Manistique, Michigan 49854. First
Northern maintains offices in Schoolcraft, Delta, Mackinac, Luce, Alger,
Menominee, Dickinson, Marquette, and Chippewa counties, as well as in the
Garden Peninsula and on Mackinac Island. The population of these counties
combined is approximately 240,000. First Northern operates twenty branch
offices, provides drive-in convenience at sixteen locations, and has automatic
teller machines operating at eight locations. First Northern has no foreign
offices. The main office of South Range is located in South Range, Houghton
County, Michigan, and it has two branch offices.
As of December 31, 1995, First Northern employed approximately 150 full-time
and 13 part-time employees.
Banking is a highly competitive business. First Northern competes primarily
with financial institutions in it's market area for loans and deposits. In
it's primary market, namely the Upper Peninsula of Michigan, First Northern
maintains the third largest deposit base, or approximately ten percent of the
deposit market share. There are seventeen banking and savings institutions and
twenty-eight credit unions with offices in the Upper Peninsula of Michigan.
In addition to the other banks, First Northern also competes for loans and
deposits with savings and loan associations, credit unions, investment firms,
and large national retailers, and competes for deposits with money market
funds. In order to successfully compete, management has developed a sales and
service culture, stresses and rewards excellent customer service, and designs
products to meet the needs of the customer. First Northern also utilizes its
ability to sell loans in the secondary market.
First Northern makes mortgage, commercial, and installment loans to customers
primarily in the Upper Peninsula of Michigan. Fees may be charged for these
services. Historically, First Northern has predominantly sold it's secondary
market conforming residential mortgage loans.
<PAGE> 4
The Corporation is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet financing needs of its customers.
These financial instruments include commitments to make loans, unused lines of
credit, and standby letters of credit. The Corporation's exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument is represented by the contractual amount of those instruments. The
Corporation follows the same credit policy to make such commitments as it uses
for on-balance-sheet items.
The Corporation had the following fixed and variable rate commitments
outstanding at December 31 (in thousands):
<TABLE>
<CAPTION>
-- 1995 -- -- 1994 --
---- ----
Fixed Variable Fixed Variable
----- -------- ----- --------
<S> <C> <C> <C> <C>
Outstanding letters of credit $ 1,288 $ 1,741
Unused lines of credit $ 3,474 8,556 $ 2,707 6,204
Loan commitments outstanding 6,882 400 6,957
------- --------- ------- --------
$ 3,474 $ 16,726 $ 3,107 $ 14,902
======= ========= ======= ========
</TABLE>
Fixed rates on unused lines of credit range from 9.5% to 10.5% at December 31,
1995.
Since many commitments to make loans expire without being used, the amount does
not necessarily represent future cash commitments. Collateral obtained upon
exercise of the commitment is determined using management's credit evaluation
of the borrower and may include real estate, vehicles, business assets,
deposits and other items.
<PAGE> 5
First Northern supports the growth of the service industry, with its year
round resort and related businesses, logging, manufacturing, and many other
activities important to the growth in the Upper Peninsula. The economy of the
market areas of First Northern is affected by summer and winter tourism
activities and, accordingly, First Northern experiences seasonal consumer and
commercial deposit growth, with substantial growth increases from May to
September.
There are no material concentrations of credit to, nor have other material
portions of First Northern deposits been received from, a single person,
persons, industry, or group.
In 1993, First Northern joined the Federal Home Loan Bank of Indianapolis,
which generates an additional source of liquidity and long-term funds.
Membership in the Federal Home Loan Bank also provides access to additional
advantageous lending programs. The Community Investment Program makes advances
to be used for funding community-oriented mortgage lending, and the Affordable
Housing Program grants advances to fund lending for long-term low- and moderate
income owner occupied and affordable rental housing at subsidized interest
rates.
First Northern regularly assesses it's ability to raise funds through the
issuance of certificates of deposit in denominations of $100,000 or more in the
local and regional market area and has established conservative guidelines for
the total funding to be provided by these deposits. These deposits were
slightly more than five percent at December 31, 1995. First Northern also uses
federal funds purchased from correspondent banks and the Federal Reserve Bank
to respond to deposit fluctuations and temporary loan demands.
As of December 31, 1995, First Northern had no material risks attendant to
foreign sources. Compliance with federal, state, and local statutes and/or
ordinances relating to the protection of the environment is not expected to
have material effect upon First Northern's capital expenditures, earnings, or
competitive position.
SUPERVISION AND REGULATION
Banking is a highly regulated industry, with numerous federal and state
laws and regulations governing the organization and operation of banks, bank
holding companies, and their affiliates. As a bank holding company registered
under the Bank Holding Company Act of 1956, as amended (the "Act"), the
Registrant is subject to supervision and examination by the Board of Governors
of the Federal Reserve Board (Federal Reserve Board) and is required to file
with the Federal Reserve Board annual reports and information regarding it's
business operations and those of it's subsidiaries. The Act requires the
Registrant to obtain Federal Reserve Board approval before: (a) acquiring
(except in certain limited circumstances) more than a five percent ownership
interest in any class of the voting securities of any bank or bank holding
company; (b) acquiring all or substantially all of the assets of a bank or bank
holding company; or ( c) merging or consolidating with another bank holding
company.
<PAGE> 6
As of September 29, 1994, the Riegle-Neal Interstate Banking and
Branching Efficiency Act was signed into law. This legislation authorizes
adequately capitalized and adequately managed bank holding companies, beginning
September 29, 1995, to acquire banks located outside their respective home
state, irrespective of state law. The Federal Reserve Board is authorized to
approve bank acquisitions by out-of-state bank holding companies whether or not
such acquisition is prohibited by state law. This legislation also authorizes,
effective June 1, 1997 (subject to individual state rights to (a) accelerate
this date or (b) to prohibit interstate branching within it's borders), banking
organizations to branch nationwide by acquisition or consolidation of existing
banks in other states. Michigan opted to accelerate the June 1, 1997 date to
November 29, 1995 and now permits interstate branching from other states which
also permit interstate branching. Interstate acquisitions and branching are
subject to the approval of various federal and state agencies and other
conditions. While it is too early to assess the impact of this legislation, it
is reasonable to assume it could foster further industry consolidation. The
Registrant could benefit indirectly from this legislation through lower
supervisory costs related to overall improved quality in the industry.
First Northern is organized as a Michigan banking corporation and is regulated
and supervised by the Financial Institutions Bureau of the Michigan Department
of Commerce. Michigan law permits Michigan state-chartered banks to
consolidate on a state-wide basis and to operate the offices of merged banks as
branches of a surviving bank. Also, with the written approval of the Financial
Institutions Bureau, a Michigan bank may relocate it's main office to any
location in the state, establish and operate branch banks anywhere in the
state, and contract with other banks to act as branches thereof.
First Northern accepts customer deposits, and the deposits are insured by the
Federal Deposit Insurance Corporation (FDIC). Consequently, First Northern is
subject to the provisions of the Federal Deposit Insurance Act and to
examination by the FDIC. As a result of such supervision and regulation, First
Northern is subject to requirements to maintain reserves against deposits,
restrictions on the nature and amount of loans which may be made and the
interest which may be charged thereon, restrictions relating to investments and
other activities, limitations based on capital and surplus, limitations on
branching, and limitations on the payment of dividends on common stock. These
regulations are intended primarily for the protection of the depositors and
customers of First Northern, rather than shareholders of the Registrant.
The provisions of the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 (FIRREA) directly affect banks and bank holding companies. FIRREA
requires the FDIC to maintain two funds to insure customer deposits: for banks
the Bank Insurance Fund (BIF), and for savings and loan associations, the
Savings Association Insurance Fund. FIRREA also allows bank holding companies
to acquire financially sound thrift institutions. Previously, bank holding
<PAGE> 7
companies could acquire only failing thrift institutions. Through a
"cross-guarantee" provision in FIRREA, the FDIC may hold commonly controlled
depository institutions liable if an affiliated depository institution fails.
In such an event, the interests of the FDIC are placed ahead of the bank
holding company shareholders.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
significantly affects the operation of banks and their relationship with
federal regulatory agencies. Under FDICIA, the FDIC has implemented a system
of risk based premiums for deposit insurance pursuant to which the premiums
paid by a depository institution are based on the probability that the
applicable insurance fund will incur a loss in respect of such institution.
Also, under FDICIA, federal regulatory agencies are developing comprehensive
safety and soundness standards. FDICIA also prescribes various supervisory
actions by federal regulatory agencies based on an insured institution's level
of capital. These prescribed actions increase restrictions on and heighten
regulatory scrutiny of the institution as it's capital declines.
Federal law also regulates transactions between the Registrant and First
Northern, including the amount and nature of loans or other extensions of
credit.
The Federal Reserve has established guidelines with respect to the maintenance
of appropriate levels of capital for First Northern. The Federal Reserve Board
has also established similar guidelines for the Registrant. Compliance with
such standards can also limit the amount of dividends which First Northern can
pay to the Registrant and the amount of dividends the Registrant can pay to
it's shareholders.
The banking industry is also affected by the monetary and fiscal policies of
the federal government, including the Federal Reserve Board, which exerts
considerable influence over the cost and availability of funds obtained for
lending and investing.
Proposals to change the laws and regulations governing the operations and
taxation of banks, and companies which control banks and other financial
institutions, are frequently raised by Congress. The likelihood of any major
changes and the impact such changes might have on the Registrant are, however,
impossible to determine.
The Registrant and it's subsidiary bank are engaged in a single industry
segment, commercial banking, broadly defined to include commercial and retail
banking and trust activities along with other permitted activities closely
related to banking, namely credit life and accident and health insurance.
The following table details the key determinants of net interest income: the
average daily balance sheet for each year - - including the components of
earning assets and supporting liabilities - - the related interest income on a
fully taxable equivalent basis and interest expense, as well as the average
rates earned and paid on these assets and liabilities.
<PAGE> 8
Net Interest Income
For Year Ended December 31, 19xx
(Fully taxable equivalent, in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------------
1995 1994 1993
----------------------------------------------------------------------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
-------------------------- ---------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earnings assets:
Loans (domestic) (1) (2) (3) $202,570 $20,540 10.14% $137,444 $12,151 8.84% $80,332 $7,168 8.92%
Taxable investment securities 25,876 1,398 5.40% 31,618 1,645 5.20% 16,501 857 5.19%
Tax-exempt investment
securities (2) 2,751 195 7.09% 5,564 438 7.87% 3,736 260 6.96%
Federal funds sold 5,180 273 5.27% 3,942 167 4.24% 3,669 108 2.95%
Federal Home Loan Bank 921 83 9.01% 0 0 n/a 0 0 n/a
Interest-bearing deposits
with other banks 4,127 251 6.08% 415 35 8.43% 232 20 8.62%
-------- ------- ------ -------- ------- ----- -------- ------ -----
Total interest-bearing assets $241,425 $22,740 9.42% $178,983 $14,436 8.07% $104,470 $8,413 8.05%
Non-interest earning assets:
Cash and due from banks $9,789 $6,787 $4,272
Premises and equipment, net 10,036 6,543 3,857
Other assets 8,860 3,628 2,083
Less: allowance for loan
losses ($2,561) ($1,863) ($849)
-------- -------- --------
TOTAL $267,549 $194,078 $113,833
-------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits and interest-
bearing demand deposits $118,162 $4,447 3.76% $71,148 $2,035 2.86% $36,358 $1,000 2.75%
Time deposits 88,462 4,689 5.30% 82,761 3,713 4.49% 55,909 2,437 4.36%
Federal funds purchased,
securities sold under
repurchase agreements,
and other 8,548 425 4.97% 5,306 305 5.75% 2,435 106 4.35%
-------- ------- ------ -------- ------- ----- -------- ------ -----
Total interest-bearing
liabilities $215,172 $9,561 4.44% $159,215 $6,053 3.80% $94,702 $3,543 3.74%
-------- ------- ------ -------- ------- ----- -------- ------ -----
Non-interest bearing liabilities
Domestic demand deposits $25,802 $17,513 $8,409
Other 3,653 3,546 1,102
Shareholders' equity 22,922 13,804 9,620
-------- -------- --------
TOTAL $267,549 $194,078 $113,833
-------- -------- --------
Net interest earnings $13,179 $8,383 $4,870
------- ------- ------
Net yield on interest-earning
assets 5.46% 4.68% 4.66%
------ ----- -----
</TABLE>
(1) For the purpose of these computations, non-accruing loans are included in
the average loans amounts outstanding.
(2) Total interest income includes the effect of tax-equivalent adjustments
using a 34% tax rate.
(3) Interest income on loans includes loan fees
<PAGE> 9
An analysis of the changes in net interest income from period to period is
presented in the following table. This analysis highlights the relative effect
of the changes in interest income or expense due to changes in the average
balances of earning assets and interest-bearing liabilities and changes in
interest rates.
Analysis of Changes in Net Interest Income
For Year Ended December 31, 19xx
(Fully taxable equivalent, in thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1995 compared to 1994 1994 compared to 1993
Increase (decrease) Due to (1) Increase (decrease) Due to (1)
-----------------------------------------------------------------------------------------
Volume Rate Net Volume Rate Net
------------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earnings assets:
Loans (domestic) $5,757 $2,632 8,389 $5,094 ($111) $4,983
Taxable investment securities (299) 52 (247) 785 3 788
Tax-exempt investment
securities (222) (21) (243) 127 51 178
Federal funds sold 52 54 106 8 51 59
Federal Home Loan Bank 83 0 83 0 0 0
Interest-bearing deposits
with other banks 312 (96) 216 16 (1) 15
--------- -------- ------- ---------- ----- --------
Total interest-bearing assets $5,683 $2,621 $8,304 $6,030 ($7) $6,023
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits and interest-
bearing demand deposits $1,345 $1,067 2,412 $956 $79 $1,035
Time deposits 256 720 976 1,170 106 1,276
Federal funds purchased,
securities sold under
repurchase agreements,
and other 186 (66) 120 125 74 199
--------- -------- ------- ---------- ----- --------
Total interest-bearing
liabilities $1,787 $1,721 $3,508 $2,251 $259 $2,510
<CAPTION>
--------------------------------------------
1993 compared to 1992
Increase (decrease) Due to (1)
--------------------------------------------
Volume Rate Net
--------------------------------------------
<S> <C> <C> <C>
ASSETS
Interest-earnings assets:
Loans (domestic) $1,335 ($666) $669
Taxable investment securities (530) (312) (842)
Tax-exempt investment
securities 266 (73) 193
Federal funds sold 72 (10) 62
Federal Home Loan Bank 0 0 0
Interest-bearing deposits
with other banks (34) 0 (34)
-------- -------- -------
Total interest-bearing assets $1,109 ($1,061) $48
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Savings deposits and interest-
bearing demand deposits $83 ($481) ($398)
Time deposits 343 (168) 175
Federal funds purchased,
securities sold under
repurchase agreements,
and other 11 (33) (22)
-------- -------- -------
Total interest-bearing
liabilities $437 ($682) ($245)
-------- -------- -------
</TABLE>
1) The change in interest due to both rate and volume has been
allocated to change due to volume and change due to rate in
proportion to the relationship of the absolute dollar amounts of
change in each.
<PAGE> 10
The following table is an analysis of the changes in average balances.
Analysis of Changes in Average Balances
For the Year Ended December 31, 19xx
(In thousands)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
1995 1994 1993
----------------------------------------------------------------------------------------
Increase (decrease) Increase (decrease)
------------------------ -----------------------
Average Average Average
Balance Amount Percent Balance Amount Percent Balance
---------------------------------- -------------------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans $202,570 $65,126 47.38% $137,444 $57,112 71.09% $80,332
Taxable investment securities 25,876 (5,742) -18.16% 31,618 15,117 91.61% 16,501
Tax-exempt investment
securities 2,751 (2,813) -50.56% 5,564 1,828 48.93% 3,736
Federal funds sold 5,180 1,238 31.41% 3,942 273 7.44% 3,669
Federal Home Loan Bank 921 921 N/A 0 0 N/A 0
Interest-bearing deposits
with other banks 4,127 3,712 894.46% 415 183 78.88% 232
---------------------------------- ------------------------------- -------
Total interest-bearing assets 241,425 62,442 34.89% 178,983 74,513 71.32% 104,470
Non-interest earning assets:
Cash and due from other banks 9,789 3,002 44.23% 6,787 2,515 58.87% 4,272
Premises and equipment, net 10,036 3,493 53.39% 6,543 2,686 69.64% 3,857
Other assets 8,860 5,232 144.21% 3,628 1,545 74.17% 2,083
Less: allowance for loan
losses (2,651) (788) -42.30% (1,863) (1,014) -119.43% (849)
--------------------------------- -------------------------------- --------
TOTAL $267,459 $73,381 37.81% $194,078 $80,245 70.49% $113,833
================================= ================================ ========
LIABILITIES AND SHAREHOLDER'S EQUITY
Interest-bearing liabilities:
Savings deposits and interest-
bearing demand deposits $118,162 $47,014 66.08% $71,148 $34,790 95.69% $36,358
Time deposits 88,462 5,701 6.89% 82,761 26,852 48.03% 55,909
Federal funds purchased,
securities sold under
repurchase agreements,
and other 8,548 3,242 61.10% 5,306 2,871 117.91% 2,435
-------------------------------- ------------------------------- -------
Total interest-bearing
liabilities 215,172 55,957 35.15% 159,215 64,513 68.12% 94,702
Net-interest bearing liabilities
Domestic demand deposits 25,802 8,289 47.33% 17,513 9,104 108.26% 8,409
Other 3,653 107 3.02% 3,546 2,444 221.78% 1,102
Shareholders' equity 22,922 9,118 66.05% 13,804 4,184 43.49% 9,620
--------------------------------- -------------------------------- --------
TOTAL $267,549 $73,471 37.86% $194,078 $80,245 70.49% $113,833
================================= ================================ ========
</TABLE>
Additional information relative to the allowance for loan losses is presented
in the following table. This table summarizes loan balances at the end of each
period and daily average balances, changes in the allowance for loan losses
arising from loans charged off, and recoveries on loans previously charged off
by loan category, and addition to the allowance for loan losses through
provisions charged to expense. Factors which influence management's judgement
in determining the provision for loan losses each period include establishing
specific loss
<PAGE> 11
allowances for selected loans (including large loans, non-accrual loans, and
problem and delinquent loans) and consideration of historical loss information
and local economic conditions.
Additional Information Relative to Allowance for Loan Losses
As of December 31, 19xx
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance of allowance for
possible loan losses at
beginning of period $2,350 $917 $834 $625 $452
Loans charged off:
Commercial, financial and
agricultural 90 92 45 35 40
Real Estate-construction 0 0 0 0 0
Real Estate-mortgage 0 34 0 0 0
Consumer 252 149 10 22 43
Leases 98 0 0 0 0
-----------------------------------------------------------
TOATAL LOANS CHARGED OFF 440 275 55 57 83
-----------------------------------------------------------
Recoveries of loans previously
charged off:
Commercial, financial and
agricultural 336 118 9 19 14
Real-estate Construction 0 0 0 0 0
Real-Estate-mortgage 22 31 0 0 0
Consumer 98 44 4 8 10
-----------------------------------------------------------
TOTAL RECOVERIES 456 193 13 27 24
-----------------------------------------------------------
Net Loans Charged Off (16) 82 42 30 59
Provisions charged to expense 771 330 125 239 232
Allowance from purchase of
Bank of Stephenson 0 1,185 0 0 0
-----------------------------------------------------------
BALANCE AT END OF PERIOD $3,137 $2,350 $917 $834 $625
===========================================================
Total loans outstanding at
end of period $221,507 $183,169 $87,145 $73,108 $61,958
===========================================================
Average total loans outstanding
for the year $202,570 $137,444 $80,332 $66,639 $57,449
===========================================================
Ratio of net charge-offs during
period to average loans
outstanding (.01)% 0.06% 0.05% 0.05% 0.10%
===========================================================
</TABLE>
<PAGE> 12
The allocation of the allowance for possible loan losses for the years ended
December 31 is shown on the following table.
Allocation of the Allowance for Loan Losses
As of December 31, 19xx
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
--------------------------------------------------------------------------------------------------------------
Percent of Percent of Percent of Percent of Percent of
Loans in each Loans in each Loans in each Loans in each Loans in each
category to category to category to category to category to
Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans Amount Total Loans
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural $583 48.3% $655 51.6% $410 61.7% $400 59.7% $300 56.8%
Real Estate--
Construction 0 1.0% 0 0.7% 0 0.0% 0 0.0% 0 0.0%
RealEstate-Mortgage 59 26.4% 270 32.1% 180 29.0% 175 30.0% 150 31.0%
Consumer 112 13.5% 125 15.6% 75 9.3% 75 10.3% 50 12.2%
Leases 23 10.8%
Unallocated 2,360 N/A 1,300 N/A 252 N/A 184 N/A 125 N/A
--------------------------------------------------------------------------------------------------------------
$3,137 100.0% $2,350 100.0% $917 100.0% $834 100.0% $625 100.0%
==============================================================================================================
</TABLE>
<PAGE> 13
The following table presents the remaining maturity of total loans outstanding
(excluding residential real estate mortgage and consumer loans) at December 31,
1995, according to scheduled repayments of principal. The amounts due after
one year are classified according to the sensitivity to changes in interest
rates.
Maturity and Rate Sensitivity of Selected Loans
As of December 31, 19xx
(In thousands)
<TABLE>
<CAPTION>
Commercial
Financial
Agricultural Construction
------------ ------------
<S> <C> <C>
In one year or less $84,434 $2,012
After one year but within five years
Variable interest rates 36,650 223
Fixed interest rates 1,174 0
After five years
Variable interest rates 0 0
Fixed interest rates 8,663 0
-------- ------
Total $130,921 $2,235
======== ======
</TABLE>
<PAGE> 14
The following table presents a summary of non-performing assets.
Non-Performing Assets and Problem Loans
As of December 31, 19xx
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $579 none none none $20
Accruing loans past-due 90 days
or more. 1,439 $142 $116 $175 2
Restructured loans none none none none none
Interest income that would have been
recorded under original terms none none none none none
Interest income recorded during period none none none none none
</TABLE>
<PAGE> 15
The following table is an analysis of securities.
Investment Securities
As of December 31, 19xx
(In thousands)
<TABLE>
<CAPTION>
Available for Sale
----------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------ ----- ----
<S> <C> <C> <C> <C> <C>
U.S. treasury and federal agency $20,899 $17,057 $6,211 $0 $0
State and political subdivisions 481 3,130 3,413 0 0
Other securities 4,840 1,742 0 0 0
------- ------- ----- ---- ----
TOTAL $26,220 $21,929 $9,624 $0 $0
======= ======= ====== ===== ====
Held to Maturity
------------------------------------------------------------------
1995 1994 1993 1992 1991
------- -------- ------ ------- ---------
U.S. treasury and federal agency $0 $8,799 $4,531 $19,067 $24,045
State and political subdivisions 835 1,150 1,265 1,599 540
Other securities 0 3,917 1,915 441 420
------- -------- ------ ------- -------
TOTAL $835 $13,866 $7,711 $21,107 $25,005
======= ======== ====== ======= =======
</TABLE>
<PAGE> 16
The following table presents the maturity schedule of securities held, and a
weighted average of those securities, as of December 31, 1995.
Maturities of Investment Securities
As of December 31, 1995
(Fully taxable equivalent, in thousands)
<TABLE>
<CAPTION>
Weighted
U.S. Treasury State & Political Other Average
& Federal Agency Subdivision Securities Yield
---------------- ----------------- ---------- --------
<S> <C> <C> <C> <C>
One year or less $6,749 $910 $1,667 5.22%
One through five years 5,874 250 1,537 5.75%
five through 10 years 8,276 156 500 6.66%
Over 10 years 0 0 1,136 8.26%
---------------- --------------- ----------
$20,899 $1,316 $4,840
================ =============== ==========
</TABLE>
Registrant holds no securities with one issuer in which the aggregate book
value and aggregate market value of the securities held with that single issuer
exceeds ten percent of stockholder's equity.
<PAGE> 17
Item 2. Properties
The Registrant conducts business from 20 banking and administrative offices.
Of these, 17 are owned in fee simple covering approximately 78,000 square feet,
and 3 are leased covering approximately 3,000 square feet. The Registrant's
headquarters, which were remodeled in 1994, are located at 130 S. Cedar Street,
Manistique, Michigan 49854, and at approximately 20,000 square feet is the
largest of the owned properties. This facility is used for centralized support
services and corporate administration as well as serving First Northern's main
banking office. Other owned and leased properties are banking branches. All
of the facilities are believed to be in good condition and adequate to meet
the Registrant's present needs.
Item 3. Legal Proceedings
At the date hereof, there were no material pending legal proceedings, other
than routine litigation incidental to the business of banking, to which the
Registrant or any of its subsidiaries is a party of or which any of its
properties is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of fiscal 1995 to a vote of
the Registrant's stockholders.
Additional Item - Executive Officers
Name Age Position
-------------- --- ------------------------------------
Ernest D. King 72 Chairman of the Registrant and First
Northern Bank & Trust
Michael Henricksen 53 Vice-Chairman of the Registrant and
Director of First Northern Bank & Trust
Ronald G. Ford 48 President & Chief Executive Officer of the
Registrant and First Northern Bank & Trust
Richard B. Demers 36 Executive Vice-President of the Registrant
and First Northern Bank & Trust
Sherry Littlejohn 35 Executive Vice-President of the Registrant
and First Northern Bank & Trust
Fred LaMuth 48 Secretary and Treasurer of the Registrant
<PAGE> 18
The foregoing officers serve at the pleasure of the Board of Directors and are
appointed by the Board annually. There is one family relationship among the
directors of the Registrant and the executive officers - Ernest D. King, listed
above, is the father of Thomas G. King, a Director of the Registrant. There
are no arrangements or understandings between any officer and any other person
pursuant to which the officer was elected.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters
On February 8, 1994, the Registrant issued 175,779 shares of common stock in
acquiring the Bank of Stephenson. The shares were valued at $37.50 per share
for purposes of that transaction. During the third and fourth quarters of 1994,
the Registrant offered and sold 108,105 shares of common stock to the public at
a per share price of $43.10.
There is no active market for the Registrant's common stock, and there is no
published information with respect to it's market price. There are occasional
direct sales by shareholders of which the Registrant's management is generally
aware. It is the understanding of the management of the Registrant that over
the last two years the Registrant's common stock has sold at a premium to book
value. From January 1, 1994, through December 31, 1995, there were, so far as
the Registrant's management knows, approximately 100 sales of shares of the
Registrant's common stock, involving a total of approximately 5,000 shares. The
price was reported to management in most of these transactions, and management
has no way of confirming the prices which were reported. During this period,
the highest price known to be paid was $62.00 per share in the last half of
1995, and the lowest price was $40.00 in the first quarter of 1994. To the
knowledge of management, the last sale of common stock occurred on March 20,
1996, at a price of $70.00 per share. As of March 1, 1996, there were
approximately 1,177 holders of record of the Registrant's common stock.
The following table sets forth the range of high and low sales prices of the
Registrant's common stock during 1994 and 1995, based on information made
available to management. Although management is not aware of any transactions
at higher or lower prices, there may have been transactions at prices outside
the ranges listed in the table.
<TABLE>
<CAPTION>
Sales Price per share
---------------------
1994 High Low
-------------- ------ ------
<S> <C> <C>
First Quarter $40.10 $40.00
Second Quarter $40.88 $40.10
Third Quarter $43.10 $40.88
Fourth Quarter $43.10 $43.10
</TABLE>
<PAGE> 19
<TABLE>
Sales Price per share
---------------------
1995 High Low
-------------- ------ ------
<S> <C> <C>
First Quarter $53.00 $43.10
Second Quarter $58.00 $53.00
Third Quarter $58.00 $58.00
Fourth Quarter $62.00 $58.00
</TABLE>
The Registrant had approximately 1,177 shareholders of record, as of March 1,
1996.
Item 6. Selected Financial Data
For Year Ended December 31,
(In thousands, except per share data)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Interest Income $ 22,100 $ 13,798 $ 7,942 $ 8,035 $ 8,085
Interest Expense 9,561 6,053 3,543 3,788 4,551
-------- -------- -------- -------- -------
Net interest income 12,539 7,745 4,399 4,247 3,534
Security Gains (losses) (19) 75 175 191 323
Provision for loan losses 771 330 125 239 232
Other income 1,373 1,037 795 577 407
Other expenses 9,368 6,101 3,715 3,277 2,714
-------- -------- -------- -------- -------
Income before tax 3,754 2,426 1,529 1,499 1,318
Cumulative effect of change
in accounting for income taxes 0 0 13 0 0
Applicable income taxes 1,084 458 260 331 321
-------- -------- -------- -------- -------
Net income $ 2,670 $ 1,968 $ 1,282 $ 1,168 $ 997
======== ======== ======== ======== =======
Per Share:
Earnings $ 3.81 $ 3.41 $ 3.14 $ 2.86 $ 2.45
Dividends 1.22 0.59 1.47 0.92 0.87
Book Value 35.73 39.05 24.37 22.70 20.78
Ratios Based on Net Income
Return on average equity 11.65% 14.25% 13.33% 13.25% 12.24%
Return on average assets 1.00% 1.01% 1.13% 1.15% 1.11%
Dividend payout ratio 38.58% 17.30% 46.82% 32.17% 35.51%
Shareholders' equity as a
percent of average assets 8.57% 7.11% 8.45% 8.67% 9.46%
Financial Condition:
Assets $282,791 $253,098 $117,279 $106,798 $94,237
Loans 221,507 183,168 87,144 73,108 61,958
Securities 27,056 35,796 17,183 21,107 25,005
Deposits 244,407 223,436 103,717 94,257 82,786
Long-term borrowings 10,087 3,552 2,250 2,000 1,000
Shareholder's Equity 25,006 22,483 9,943 9,260 8,467
</TABLE>
<PAGE> 20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
HIGHLIGHTS
For First Manistique Corporation ("the Corporation"), 1995 was the
second consecutive year of significant growth. During 1995 and 1994, the
Corporation acquired the Bank of Stephenson ("Stephenson"), substantially all
of the banking assets and liabilities of Newberry State Bank ("Newberry"), and
the Rudyard branch of First of America Bank ("Rudyard"). Further, in 1995 and
1994 the Corporation opened four and one new branches, respectively. At
December 31, 1993, the Corporation had total assets of $117.28 million. Total
assets increased to $253.10 million during 1994 and reached $282.79 million by
the end of 1995, an increase of 141% in two years. While the largest portion
of this growth, approximately $100 million, came through acquisitions, the
remaining $65 million was internally generated. During the same two year time
period, outstanding loan balances increased 155%, to $221.51 million, an even
greater rate of growth. Further, on a percentage basis, more loan growth than
asset growth was internally generated. Of the total increase in loans of
$134.48 million from the end of 1993 to the end of 1995, only $58.09 million,
or 43.2% came from the acquisitions. The remaining $76.39 million, or 56.8%,
was internally generated.
Earnings also increased significantly from 1993 to 1995. Net income was $2.67
million, $1.97 million and $1.28 million for 1995, 1994 and 1993. Net income
for 1995 was 110% greater than in 1993. Return on average shareholders' equity
was 11.25%, 11.92%, and 13.3% for 1995, 1994 and 1993. Earnings per share was
$3.81 in 1995, a 12% increase over the $3.41 of 1994, which in turn was a 9%
increase over 1993's $3.14. Earnings per share has not increased as quickly as
net income because of the 175,779 shares issued in connection with the
acquisition of the Bank of Stephenson and the 108,105 shares issued prior to
the cash acquisition of the banking assets and liabilities of Newberry State
Bank.
The Corporation's most significant strength is its lending expertise. The
acquisitions to date have been primarily motivated by a desire to obtain access
to additional lending markets and to obtain additional retail deposits to
finance lending activities. This strategy has continued into 1996, with the
acquisition of South Range State Bank ("South Range") on January 31, 1996.
This acquisition gives the Corporation a new presence in the northwest corner
of Michigan's Upper Peninsula. At the date of the acquisition, South Range had
total assets of $37.75 million, total loans of $27.05 million, and total
deposits of $32.86 million. A key management objective is to increase the loan
to deposit ratio at South Range to levels consistent with the Corporation in
total.
Growth remains a critical element of the Corporation's strategy and selective
bank and branch acquisitions may continue to occur. However, management
anticipates the rate of asset growth in the next few years will be somewhat
slower than recently experienced. The Corporation's banking offices are
located exclusively in Michigan's Upper Peninsula, an area which covers a large
geographic area and has a low population density. Because of the nature of
this market area, the cost of operating the Corporation's banking network is
higher than the average for banking companies the same size as the Corporation.
Management's primary focus in the near future is to increase the operating
efficiency of its banking network by increasing the average deposit level per
branch, increasing lending capabilities in each local market, and closely
monitoring and controlling operating costs.
<PAGE> 21
When the Corporation acquired Stephenson in February 1994, Stephenson was owned
and operated as a separate banking subsidiary from First Northern Bank and
Trust ("First Northern"), the Corporation's only banking subsidiary at that
time. On October 1, 1995, Stephenson was merged into First Northern.
FINANCIAL CONDITION
LOANS
Loans represented 78.3% of total assets at the end of 1995 compared to 72.4% of
total assets at the end of 1994. The loan to deposit ratio also increased,
rising from 82.0% at December 31, 1994 to 90.6% at December 31, 1995. Loans
provide the most attractive earning asset yield available to the Corporation
and management believes that the trained personnel and controls are in place to
successfully manage a growing loan portfolio. Accordingly, management intends
to continue to maintain loans at the highest level which is consistent with
maintaining adequate liquidity.
Following is a summary of the Corporations loan balances at December 31, 1995
and 1994 (in thousands):
<TABLE>
<CAPTION>
Percent
1995 1994 Change
---- ---- ------
<S> <C> <C> <C>
Commercial real estate $ 51,609 $ 32,833 57.2
Commercial, financial and agricultural 55,445 45,329 22.3
Leases
Commercial 5,806 2,070 180.5
Governmental 18,061 19,165 (5.8)
1-4 family residential real estate 58,434 55,729 4.9
Consumer 29,918 26,785 11.6
Construction 2,235 1,258 77.7
----------- ----------- -----
Total $ 221,507 $ 183,169 21
=========== =========== =====
</TABLE>
The Corporation has five major categories of lending activities. Four
categories, commercial real estate, commercial, residential real estate and
consumer, are generally with customers in Michigan, primarily in the Upper
Peninsula. The fifth major lending line, commercial and governmental leasing,
takes place on a nationwide basis. As shown in the table above, the amount of
outstanding loans increased in all categories in 1995 when compared to 1994,
except for governmental leases which declined $1.1 million.
Commercial real estate balances increased $18.78 million, or 57.2% during the
year. At December 31, 1995, this category accounted for 23.3% of total
outstanding loans. The most prominent types of properties financed include
hotels, motels and similar properties, which accounted for $15.5 million of the
outstanding balance at December 31, 1995. The significant growth in 1995 was a
result of an emphasis on this type of lending.
<PAGE> 22
General commercial lending, consisting of loans to a wide variety of
businesses, also increased significantly. Commercial loans outstanding
increased $10.1 million. The rate of growth, 22.3%, was only slightly greater
than the overall growth rate of the lending portfolio. At the end of 1995 this
category accounts for one-fourth of all outstanding loans. A significant
portion of this growth was in the Stephenson area. Most of the Corporation's
commercial lending customers are in Michigan's Upper Peninsula.
The Corporation finances commercial and governmental leases throughout the
country. Over 95% of these leases were acquired from one originator.
Management visits this originator twice a year to review their operations and
credit controls. The Corporation acquires leases from 3 other originators, and
management is working to diversify its sources of lease paper. Management
closely reviews the credit quality of each proposed lease before entering into
a financing agreement. Such reviews may include visits to major equipment
vendors which produce the equipment to be leased or to the lease customers,
including governmental organizations. The lease agreements are strictly
financing; while the Corporation has access to the underlying equipment as
collateral, there is no interest in the residual value of the equipment. As
illustrated in the table above, most of the leasing activity is to state and
local governmental units, including Native American organizations. While
Management aggressively pursues leases, the falling rates in 1995 caused
significant refinancing activity, which can be accomplished by high quality
governmental lessors on a cost-effective basis. The makeup of the lease
portfolio at December 31, 1994 was substantially the same as 1995. Interest
income from certain of the governmental leases is exempt from federal income
taxes.
Real estate lending on 1-4 family residences consists of just over one-fourth
of the Corporation's outstanding loan balances and is the single largest
lending category. Most of these loans (67% at December 31, 1995 and 47% at
December 31, 1994) are written at interest rates which adjust annually. Such
adjustments are generally limited to two percentage points annually and five
percentage points over the life of the loan. The significant increase in the
percentage of variable rate loans is due to the acquisition of Stephenson.
Stephenson's traditional residential mortgage loan products were three and five
year fixed rate balloon loans. As these loans mature, they are being rewritten
as adjustable rate loans. Proportionally fewer of the properties in the
Corporation's market area qualify as collateral for loans to be sold in the
secondary market than in Michigan in general; accordingly relatively few loans
are originated for resale. Loans originated for resale amounted to $3.28
million, $2.74 million and $1.94 million in 1995, 1994 and 1993. Servicing on
these loans is retained. The servicing portfolio has under $8.00 million in
loans at December 31, 1995.
The remaining significant loan category ($29.95 million outstanding at December
31, 1995) is consumer lending. This category consists of loans to individuals
for a wide variety of purposes. Included are indirect auto loans of $12.69
million, which were acquired from six auto dealers in the Upper Peninsula.
Management first began acquiring indirect paper midway through 1994, and less
then one million dollars were on the books at the end of that year. In the
middle of 1995, Management ceased writing such paper after concluding the yield
was not commensurate with the cost and credit risk, particularly when compared
to other alternatives. Management has no current plans to re-enter the
indirect market.
<PAGE> 23
CREDIT QUALITY
The higher yields on loans in comparison to investments are available because
the risk that principal and interest will not be repaid is typically higher for
loans than for investment securities permitted to be held by the Corporation
under banking laws and regulations. The cornerstone of maintaining credit
quality is effective underwriting. Lending arrangements are generally
structured to provide more than one source of repayment. In commercial real
estate loans the Corporation generally requires that cash flow from the
collateral property be sufficient to service all related debt.
In spite of effective underwriting, some borrowers become unwilling or unable
to make payments on a timely basis. Management aggressively monitors
delinquencies. Commercial loan officers contact borrowers the day after a
payment is missed. Mortgage and consumer loan customers are contacted 10 days
after a payment is missed by the Corporation's collection staff. Management is
aggressive in seizing collateral, or initiating foreclosure, in the event late
payments are not quickly resolved.
The Corporation's success in maintaining excellent credit quality is
demonstrated in the following table (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Allowance to total loans at end of year 1.42% 1.28% 1.05%
Net chargeoffs (recoveries) $ (16) $ 81 $ 42
Net chargeoffs (recoveries) to average
outstanding loans (.01)% .06% .02%
Net chargeoffs (recoveries) to beginning
allowance balance (.7)% 8.84% 5.04%
Nonaccrual loans - - -
Loans 90 days or more delinquent
(excluding nonaccrual loans) $ 1,439 $ 142 $ 116
</TABLE>
Management analyzes the allowance for loan losses in detail on a monthly basis
to ensure that losses inherent in the portfolio are properly recognized. In
addition to the input of lending officers, management uses an external loan
review contractor to examine large commercial real estate, lease and commercial
loans relationships. An internal loan review function is also in place, with a
primary objective of reviewing loans below the scope established by management
for the external contractor.
The Corporation adopted new accounting guidance for impaired loans in 1995 as
described in notes 2 and 6 to the accompanying consolidated financial
statements.
INVESTMENTS
During 1995, the Corporation's total investments, including interest-bearing
deposits in banks, decreased $9.49 million, from $38.22 million to $28.73
million. This decrease was primarily the result of an increase in the
Corporation's outstanding loans. The primary use of the investment portfolio
is to provide a source of liquidity. Accordingly, most of the portfolio is
invested in U.S. Treasury and agency securities which have little credit risk
and are highly liquid. Consistent with the use of the portfolio as a liquidity
source, the Corporation took advantage of the one-time reclassification
opportunity permitted by the Financial Accounting Standards Board and
reclassified virtually all securities to the available for sale category at the
end of 1995. The only securities now classified as held to maturity are state
and local political subdivision issues from small issuers which have little
liquidity.
<PAGE> 24
DEPOSITS
Deposit growth has been a key element of the Corporation's expansion strategy.
Total deposits at December 31, 1995 were $244.41 million, compared to $223.44
million and $103.72 million at the end of 1994 and 1993. The acquisitions of
Stephenson, Newberry and Rudyard accounted for $109.96 million, or 78.1% of the
total increase of $140.69 million from the end of 1993 to the end of 1995.
Further, deposits of $13.25 million were held at December 31, 1995 at branches
opened during 1994 and 1995. Deposits over $100,000 consist primarily of
stable, governmental balances and balances from retail customers. There were
no brokered deposits at December 31, 1995, and Management has no current plans
to solicit such deposits.
The Corporation is constantly looking for stable sources of deposits. One
innovative approach is the premium-based certificate of deposit program.
Customers can elect to receive one of several products in place of cash
payments for interest on term certificates. The Corporation offers firearms,
golf clubs and grandfather clocks under these programs. The most successful
and long-standing of the programs is the firearm program, which is offered to
sportsmen nationally. Under this program the Corporation records the cost of
the product given as a discount from the face amount of the certificate of
deposit and recognizes interest expense on the effective interest method over
the life of the certificate. Total certificates of deposits outstanding under
this program were $986,000 and $306,000 at December 31, 1995 and 1994.
Another nontraditional source of deposits is the Corporation's CANSAVE program.
CANSAVE accounts are savings accounts denominated in Canadian dollars. These
accounts are offered in the Sault Ste. Marie banking offices and had total
balances of $3.10 US million at December 31, 1995. Such accounts are available
only to Canadian citizens who are attracted to such accounts due to very low
interest rates paid at domestic Canadian banks.
BORROWINGS
As previously discussed, the Corporation's branching network is a relatively
high cost network in comparison to peer banking companies. Accordingly, the
Corporation has begun to use alternative funding sources to provide funds for
lending activities. Other borrowings increased to $10.09 million at the end of
1995 from $3.55 million in 1994. At December 31, 1995, $8.09 million of the
borrowings were from the Federal Home Loan Bank of Indianapolis. From
time-to-time alternative sources of funding can be obtained at interest rates
which are competitive with, or lower than, retail deposit rates and with
inconsequential administrative costs. Management anticipates that such
borrowings will become a more permanent part of the overall funding makeup of
the Corporation.
LIQUIDITY
The Corporation's sources of liquidity include principal payments on loans and
investments, sales of securities available for sale, deposits from customers,
borrowings from the Federal Home Loan Bank, other bank borrowings, and the
issuance of common stock. The Corporation has ready access to significant
sources of liquidity on an almost immediate basis. Management anticipates no
difficulty in maintaining liquidity at the levels necessary to conduct the
Corporation's day-to-day business activities.
<PAGE> 25
RESULTS OF OPERATIONS
SUMMARY
Earnings increased significantly from 1993 to 1995 as a direct result of the
Corporation's asset growth. Net income was $2.67 million, $1.97 million and
$1.28 million for 1995, 1994 and 1993. Net income for 1995 was 110% greater
than in 1993. Earnings per share was $3.81 in 1995, a 12% increase over the
$3.41 of 1994, which in turn was a 9% increase over 1993's $3.14. Earnings per
share has not increased as quickly as net income because of the shares issued
in connection with the acquisition of Stephenson and prior to the cash
acquisition of the banking assets and liabilities of Newberry.
Net interest income is the primary source of earnings growth, increasing to
$12.61 million in 1997 from $7.75 million and $4.40 million in 1994 and 1993,
for a total two-year increase of 186%. Noninterest income did not keep pace
with the asset growth. Noninterest income of $1.28 million in 1995 was only
32% higher than the 1993 amount of $.97 million. The increase in noninterest
expense to $9.37 million in 1995 from $6.10 million and $3.71 million in 1994
and 1993 was more in proportion to the total asset growth. The two-year
increase in noninterest expense was 153%, compared to total asset growth of
141%.
NET INTEREST INCOME
The Corporation's strong lending function is evident in the net interest income
measurement. Net interest income as a percentage of total interest income was
56.9%, 56.1% and 55.4% in 1995, 1994 and 1993, respectively. Net interest
margin was 5.46%, 4.68% and 4.66% for the same periods.
Interest income from loans represented 90.4% of total interest income in 1995,
compared to approximately 85% in both 1994 and 1993. In all cases, the total
amount of interest income and the yield on total earning assets is heavily
determined by the results from lending activities. The yield on earning assets
was 9.45%, 8.07% and 8.05% in 1995, 1994 and 1993 respectively.
Total interest expense was $9.56 million in 1995, an increase from $6.05
million and $3.54 million in 1994 and 1993, for an increase of 170% from 1993
to 1995. While other sources of funding are beginning to become an important
part of the Corporation's funding strategy, interest expense on deposits still
represented over 95% of total interest expense in 1995. The yield on
interest-bearing liabilities was 4.44%, 3.80% and 3.74% in 1995, 1994 and 1993.
PROVISION FOR LOAN LOSSES
The Corporation maintains the allowance for loan losses at a level considered
adequate to cover losses inherent in the portfolio. The Corporation records a
provision for loan losses necessary to maintain the allowance at that level
after considering factors such as loan charge-offs and recoveries, changes in
the mix of loans in the portfolio, loan growth, and other economic factors more
fully described in Note 2 to the accompanying consolidated financial
statements. The increase in the provision for loan losses, to $771,000 in 1995
from $330,000 in 1994 and $125,000 in 1993 is primarily a result of loan
growth, particularly in the commercial real estate portfolio.
<PAGE> 26
NONINTEREST INCOME
Noninterest income was $1.28 million, $1.11 million and $.97 million in 1995,
1994 and 1993. The principal source of noninterest income is service charges
on deposit accounts. In 1995 such fees were $.56 million, just over twice the
amount recorded in 1993. Fees on deposit accounts have not kept pace with
overall asset growth since the institutions acquired had lower fee structures
than the Corporation. Management has generally maintained the former fee levels
for competitive purposes.
NONINTEREST EXPENSE
Noninterest expense has steadily increased from 1993 through 1995. The
two-year growth rate was 162% for salaries and benefits, 161% for furniture and
equipment expense and 181% for occupancy expense. As expected, these increases
were all consistent with the Corporation's asset growth. While the growth was
expected, a primary objective of management is to hold the rate of increase in
these categories below future asset growth. Management believes that
significant efficiencies can be obtained and is increasing the level of
management emphasis in this area.
The application of purchase accounting to the acquisitions described above
created two intangible assets, the core deposit intangible and goodwill, which
are being amortized as described in the notes to the consolidated financial
statements. This expense did not exist prior to the acquisitions. The
amortization of acquisition intangibles was $.57 million in 1995, compared to
$.19 million in 1994 and zero in 1993.
Somewhat offsetting the intangible amortization is the decrease in deposit
insurance costs. The Corporation qualifies for the lowest risk-based insurance
premiums available from the Bank Insurance Fund (BIF) of the Federal Deposit
Insurance Corporation (FDIC). Virtually all of the Corporation's deposits are
insured by BIF. From 1993 to 1994, deposit insurance costs increased in
proportion to deposits as the insurance rate of 23 basis points for the
Corporation was unchanged. Effective May 1, 1995, the FDIC reduced the
Corporation's insurance rate to 4 basis points. That reduction is evident in
the decrease in deposit insurance costs to $.26 million in 1995 compared to
$.37 million in 1994, despite continuing increases in insured deposit balances.
The rate has been further reduced to zero for the first half of 1996.
FEDERAL INCOME TAXES
The provision for income taxes was 28.8% of income before income tax in 1995,
compared to 18.9% in 1994 and 17.0% in 1993. The difference between these
rates and the federal corporate income tax rate of 34% is primarily due to
tax-exempt interest earned on loans and investments. The effective tax rate
has increased from 1993 to 1995 as tax-exempt income has become a smaller
portion of total interest income.
<PAGE> 27
INTEREST RATE AND FOREIGN EXCHANGE RATE RISK MANAGEMENT
Management actively manages the Corporation's interest rate risk. In the
relatively low interest rate environment which has been in place the last few
years, borrowers have generally tried to extend the maturities and repricing
periods on their loans and place deposits in demand, or very short-term
accounts. Management has taken various actions to offset the imbalance which
those tendencies would otherwise create. In general, management tries to write
commercial and real estate loans at variable rates or, when forced to offer
fixed rates due to competitive pressures, write fixed rate loans for relatively
short terms. Conversely, management has attempted to offer deposit products
designed to steer depositors to longer periods. Management has generally been
successful, with over 63% of loans repricing within one year and almost 30% of
certificates of deposit maturing over one year.
Beyond the general efforts to shorten loan pricing periods and extend deposit
maturities, management can manage interest rate risk by the maturity periods of
securities purchased, selling securities available for sale, and borrowing
funds with targeted maturity periods, among others. Also, the rate of interest
rate changes can impact the actions taken since the speed of change affects
various borrowers and depositors differently.
Presented below is the Corporation's GAP table at December 31, 1995.
Management considers the GAP acceptable.
<TABLE>
<CAPTION>
GAP Table
(In thousands)
1-90 91-180 181-365 1-2 2-5 Over
days days days years years 5 years Total
---- ---- ---- ----- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS
Federal funds sold $ 4,000 $ 4,000
Interest-bearing
deposits in banks 1,678 1,678
Securities and other 2,995 $ 5,071 $ 3,900 $ 11,514 $ 1,529 $ 1,912 26,921
Loans 74,374 20,986 43,570 28,177 36,635 17,765 221,507
-------- -------- --------- -------- --------- --------- ----------
Total earning assets 83,047 26,057 47,470 39,691 38,164 19,677 254,106
COSTING LIABILITIES
Savings and NOW
accounts 51,624 3,509 10,527 17,545 18,943 4,701 106,849
Certificates of deposit 23,890 31,830 22,111 16,478 15,012 562 109,883
Repurchase agreements 700 700
Other borrowed funds 2,000 303 1,397 2,255 4,133 10,088
-------- -------- --------- -------- --------- --------- ----------
Total costing liabilities 76,214 37,339 32,941 35,420 36,210 9,396 227,520
-------- -------- --------- -------- --------- --------- ----------
GAP $ 6,833 $(11,282) $ 14,529 $ 4,271 $ 1,954 $ 10,281 $ 26,586
======== ======== ========= ======== ========= ========= ==========
Cumulative GAP $ 6,833 $ (4,449) $ 10,008 $ 14,351 $ 16,305 $ 26,586 $ 26,586
======== ======== ========= ======== ========= ========= ==========
</TABLE>
<PAGE> 28
The Corporation provides foreign exchange services, primarily in its banking
offices in Sault Ste. Marie. Income from exchange activities during 1995 was
less that $200,000. The Corporation conducts other business in Canadian
dollars, including the deposit program described above and lending activities
(currently less the $1 US million outstanding). Further, the Corporation
maintains currency balances and investments in Canadian dollars.
Maintaining assets and liabilities in Canadian dollars exposes the Corporation
to foreign exchange risk. The Corporation has adopted detailed policies
regarding this exposure. The policy requires the purchase or sale of foreign
exchange futures contracts to hedge the net mismatch in Canadian denominated
assets and liabilities. The policy generally requires management to maintain
the foreign exchange exposure to a $100,000 mismatch, including futures
contracts (contracts are traded in $100,000 increments). Management uses an
outside consultant to assist in managing the risk. At December 31, 1995 the
Corporation held $3.91 million in Canadian assets and $4.22 million in Canadian
liabilities. The net exposure was substantially hedged with futures contracts.
CAPITAL
It is the policy of the Corporation to maintain capital at a level consistent
with both safe and sound operations and proper leverage to generate an
appropriate return on shareholders' equity. Capital formation has been key to
the Corporation's growth. During 1994, the Corporation raised $11.50 million
in capital through the issuance of common stock. Net income exceeded cash
dividends by $1.82 million in 1995 and $1.62 million in 1994. In addition, in
1995 $48,600 of the $854,000 in cash dividends were reinvested in the
Corporation through the new dividend reinvestment program. The issuance of
shares, retained income, and the dividend reinvestment program served to
increase shareholder's equity, and regulatory capital, by $15.1 million between
the end of 1993 and December 31,1995. Management believes that significant
demand for the Corporation's common stock exists in its market area, and that
the capital required to take advantage of expansion opportunities is available
in the local market, to the extent that such capital cannot be internally
generated.
As a banking company, the Corporation is required to maintain certain levels of
capital under government regulation. There are several measurements of
regulatory capital and the Corporation is required to meet minimum requirements
under each measurement. The Federal banking regulators have also established
capital classifications beyond the minimum requirements in order to risk-rate
deposit insurance premiums and to provide trigger points for prompt corrective
action in the event an institution becomes financially troubled.
Regulatory capital is not the same as shareholders' equity reported in the
accompanying consolidated financial statements. Certain assets cannot be
considered assets for regulatory purposes. The Corporation's acquisition
intangibles are examples of such assets.
<PAGE> 29
Presented below is a summary of the Corporation's consolidated capital position
in comparison to regulatory requirements:
<TABLE>
<CAPTION>
Tier 1 Risk Total Risk
Leverage Based Capital Based Capital
Ratio Ratio Ratio
----- ----- -----
<S> <C> <C> <C>
Regulatory minimum 4.00% 4.00% 8.00%
Regulatory designation as well capitalized 5.00% 8.00% 10.00%
The Corporation:
December 31, 1995 7.36% 10.00% 11.35%
December 31, 1994 8.51% 11.03% 12.23%
</TABLE>
ISSUED BUT NOT YET ADOPTED ACCOUNTING POLICIES
See Note 2 to the accompanying consolidated financial statements for a
discussion of accounting pronouncements issued by the Financial Accounting
Standards Board which the Corporation is not required to implement until
periods subsequent to December 31, 1995.
IMPACT OF INFLATION AND CHANGING PRICES
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which require the
measurement of financial position and results of operations in historical
dollars without considering the change in the relative purchasing power of
money over time due to inflation. The impact of inflation is reflected in the
increased cost of the Corporation's operations. Nearly all the assets and
liabilities of the Corporation are financial, unlike industrial or commercial
companies. As a result, the Corporation's performance is directly impacted by
changes in interest rates, which are indirectly influenced by inflationary
expectations. The Corporation's ability to match the interest sensitivity of
its financial assets to the interest sensitivity of it financial liabilities
tends to minimize the effect of changes in interest rates on the Corporation's
performance. Changes in interest rates do not necessarily move to the same
extent as changes in the price of goods and services.
<PAGE> 30
ITEM 8. Financial Statements and Supplementary Data
FIRST MANISTIQUE CORPORATION
Manistique, Michigan
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
CONTENTS
<TABLE>
<S> <C>
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . 1
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . 2
CONSOLIDATED STATEMENTS OF INCOME . . . . . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY . . . . . 4
CONSOLIDATED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 31
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
First Manistique Corporation
Manistique, Michigan
We have audited the accompanying consolidated balance sheet of First Manistique
Corporation as of December 31, 1995, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for the year then ended.
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. The financial statements of First Manistique
Corporation as of and for each of the two years in the period ended December
31, 1994 were audited by other auditors whose report dated March 10, 1995,
expressed an unqualified opinion on those statements and noted that the
Corporation changed its method of accounting for securities in 1994.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of First Manistique
Corporation as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
As discussed in Note 2 to the consolidated financial statements, the
Corporation changed its method of accounting for impaired loans in 1995 to
conform to new accounting guidance.
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
February 9, 1996
1.
<PAGE> 32
FIRST MANISTIQUE CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 10,492,357 $ 10,219,409
Federal funds sold 4,000,000 4,100,000
---------------- ----------------
Total cash and cash equivalents 14,492,357 14,319,409
Interest-bearing deposits with banks 1,678,080 2,421,909
Securities available for sale (Note 4) 26,220,378 21,929,198
Securities held to maturity (fair value of
$836,753 in 1995 and $13,198,295 in 1994) (Note 4) 835,049 13,865,925
Loans (Note 5) 221,507,410 183,168,825
Allowance for loan losses (Note 6) (3,137,315) (2,349,957)
---------------- ----------------
Net loans 218,370,095 180,818,868
Bank premises and equipment - net (Note 7) 11,787,365 9,802,577
Accrued interest receivable 2,194,968 1,859,121
Acquisition intangibles (Notes 3 and 8) 4,261,255 4,234,048
Other assets 2,951,827 3,847,569
---------------- ----------------
$ 282,791,374 $ 253,098,624
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 27,674,414 $ 24,272,032
Interest-bearing (Note 9) 216,732,281 199,163,534
---------------- ----------------
244,406,695 223,435,566
Securities sold under agreement to repurchase 700,000 700,000
Other borrowings (Note 10) 10,087,735 3,552,531
Accrued interest payable 1,418,547 1,069,793
Other liabilities (Note 13) 1,171,520 1,857,307
---------------- ----------------
257,784,497 230,615,197
Commitments and contingencies (Note 12 and 16)
Shareholders' equity (Notes 15 and 20)
Common stock, no par value, 2,000,000 shares
authorized; outstanding: 702,299 in 1995 and
699,024 in 1994 13,195,269 13,037,296
Retained earnings 11,831,455 10,014,844
Net unrealized loss on securities available for sale,
net of tax of $9,081 and $297,108 in 1995 and 1994,
respectively (19,847) (568,713)
---------------- ----------------
25,006,877 22,483,427
---------------- ----------------
$ 282,791,374 $ 253,098,624
================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 33
FIRST MANISTIQUE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest income
Loans, including fees $ 19,966,340 $ 11,667,088 $ 6,788,026
Securities:
Taxable 1,397,953 1,625,314 856,378
Exempt from federal taxation 128,776 284,881 169,170
Other 606,906 221,266 128,599
--------------- --------------- --------------
22,099,975 13,798,549 7,942,173
Interest expense
Deposits 9,136,243 5,748,404 3,437,055
Other borrowed funds and
securities sold under agreements
to repurchase 425,105 304,997 106,074
--------------- --------------- --------------
9,561,348 6,053,401 3,543,129
--------------- --------------- --------------
NET INTEREST INCOME 12,538,627 7,745,148 4,399,044
Provision for loan losses (Note 6) 771,000 330,000 125,000
--------------- --------------- --------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,767,627 7,415,148 4,274,044
Noninterest income
Service charges on deposit accounts 562,806 406,262 262,355
Loan service charges 157,989 154,957 177,427
Securities gains (losses) (Note 4) (19,083) 75,438 175,372
Other 652,382 475,640 354,607
--------------- --------------- --------------
1,354,094 1,112,297 969,761
Noninterest expense
Salaries and employee benefits
(Notes 13 and 14) 4,049,844 2,488,694 1,547,161
Furniture and equipment expense 904,189 603,010 345,942
Occupancy expense 705,551 409,813 251,107
Other (Note 18) 3,707,929 2,600,386 1,570,478
--------------- --------------- --------------
9,367,513 6,101,903 3,714,688
--------------- --------------- --------------
INCOME BEFORE INCOME TAX 3,754,208 2,425,542 1,529,117
Provision for income tax (Note 11) 1,083,893 458,000 260,174
--------------- --------------- --------------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 2,670,315 1,967,542 1,268,943
Cumulative effect of change in
accounting for income taxes (Note 11) 13,002
--------------- --------------- --------------
NET INCOME $ 2,670,315 $ 1,967,542 $ 1,281,945
=============== ============== ==============
Earnings per share (Note 2)
Income before cumulative effect
of accounting change $ 3.81 $ 3.41 $ 3.11
Cumulative effect of accounting change .03
--------- -------- --------
Net income $ 3.81 $ 3.41 $ 3.14
========= ======== ========
Average common shares outstanding 699,960 575,710 408,000
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 34
FIRST MANISTIQUE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Net Unrealized
Gain (Loss)
Shares of on Securities
Common Common Retained Available
Stock Stock Earnings for Sale Total
----- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 408,000 $ 1,546,565 $ 7,713,332 $ 9,259,897
Net income 1,281,945 1,281,945
Cash dividends - ($1.47 per share) (598,400) (598,400)
-------- -------------- -------------- ------------
BALANCE AT DECEMBER 31, 1993 408,000 1,546,565 8,396,877 9,943,442
Effect of initial application of
SFAS No. 115 at January 1, 1994,
net of tax of ($51,553) $ 100,075 100,075
Net income 1,967,542 1,967,542
Shares issued in the acquisition
of the Bank of Stephenson 175,779 6,591,712 6,591,712
Issuance of common stock 115,545 4,911,284 4,911,284
Cash dividends - ($.59 per share) (349,575) (349,575)
Purchase of outstanding shares (300) (12,265) (12,265)
Change in unrealized gain (loss)
on securities available for sale,
net of tax of $348,661 (668,788) (668,788)
-------- -------------- -------------- ----------- ------------
BALANCE AT DECEMBER 31, 1994 699,024 13,037,296 10,014,844 (568,713) 22,483,427
Net income 2,670,315 2,670,315
Cash dividends - ($1.22 per share) (853,704) (853,704)
Issuance of common stock 3,275 157,973 157,973
Change in unrealized loss
on securities available for sale,
net of tax of ($288,027) 548,866 548,866
-------- -------------- -------------- ----------- ------------
BALANCE AT DECEMBER 31, 1995 702,299 $ 13,195,269 $ 11,831,455 $ (19,847) $ 25,006,877
======== ============== ============== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 35
FIRST MANISTIQUE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,670,315 $ 1,967,542 $ 1,281,945
Adjustments to reconcile net income
to net cash from operating activities
Provision for loan losses 771,000 330,000 125,000
Deferred taxes 325,650 (169,301) (25,186)
Depreciation 816,720 565,075 311,802
Amortization 640,365 374,991 85,211
Proceeds from sale of mortgage loans 3,307,457 2,773,213 1,971,316
Origination of mortgage loans for sale (3,275,010) (2,742,021) (1,939,000)
Effect of change in accounting for
income taxes (13,002)
(Gains) losses on sale
Loans held for sale (32,447) (31,192) (32,316)
Securities 19,083 (75,438) (175,372)
Premises and equipment (29,050) (19,584) (7,752)
Other real estate (1,000) 2,441
Changes in assets and liabilities
Interest receivable and other assets 568,322 (922,632) (666,549)
Interest payable and other liabilities (662,220) 558,073 (102,056)
--------------- --------------- --------------
Net cash from operating
activities 5,119,185 2,611,167 814,041
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in interest-bearing deposits
with banks 743,829 (2,226,909) 280,000
Purchase of securities available for sale (6,114,932) (4,563,979)
Purchase of securities held to maturity (500,000) (7,677,780)
Securities purchased (22,266,140)
Proceeds from sales of securities 25,380,822
Proceeds from sale of securities
available for sale 10,821,380 9,199,024
Proceeds from maturing securities 907,790
Proceeds from maturities, calls, or
paydowns of securities available for sale 3,702,740 6,391,486
Proceeds from maturity and calls of
securities held to maturity 1,495,677 1,301,563
Net increase in loans (38,338,850) (60,287,160) (14,148,678)
Purchase of other assets (2,490,000)
Proceeds from sale of premises
and equipment 153,976 (33,267) 49,158
Purchase of premises and equipment (2,811,612) (4,632,129) (1,277,292)
Proceeds from sale of other real estate 20,000 92,196
Net cash provided from acquisitions 8,006,430 2,915,646
--------------- --------------- --------------
Net cash from investing activities (22,821,362) (62,011,309) (11,074,340)
</TABLE>
(Continued)
<PAGE> 36
FIRST MANISTIQUE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposits $ 12,035,652 $ 61,085,578 $ 9,460,829
Proceeds from notes payable 6,634,125 1,315,875 250,000
Payment on notes payable (98,921) (20,344) (7,000)
Proceeds from issuance of common stock 157,973 4,911,284
Repurchase of common stock (12,265)
Payment of dividends (853,704) (542,697) (405,280)
--------------- --------------- --------------
Net cash from investing activities 17,875,125 66,737,431 9,298,549
--------------- --------------- --------------
Net increase (decrease) in cash and cash
equivalents 172,948 7,337,289 (961,750)
Cash and cash equivalents at
beginning of year 14,319,409 6,982,120 7,943,870
--------------- --------------- --------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 14,492,357 $ 14,319,409 $ 6,982,120
=============== =============== ==============
Supplemental disclosures of cash flow
information
Cash paid during the period for
Interest $ 9,212,594 $ 5,783,912 $ 4,092,493
Income taxes 1,397,394 521,000 300,860
Supplemental disclosure of noncash investing
activities
Transfer from securities held to maturity
to securities available for sale (Note 2) 11,944,338
Transfer of foreclosures from loans
to other real estate owned 16,623
Fair value of shares exchanged for Bank
acquisition 6,591,712
Assets and liabilities acquired in acquisitions
(Note 3)
Premises and equipment 439,310 1,360,778
Acquisitions intangibles 514,902 4,175,000
Other assets and accrued interest receivable 11,994 647,775
Loans, net 0 34,633,411
Investment securities 0 24,846,498
Deposits 8,935,477 59,332,539
Other liabilities and accrued
interest payable 37,159 2,654,857
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 37
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - NATURE OF OPERATIONS
The consolidated financial statements include the accounts of First Manistique
Corporation ("Corporation") and its wholly-owned subsidiaries, First Northern
Bank & Trust, Rural Relending, and other minor subsidiaries, after elimination
of intercompany transactions and accounts. The Corporation is engaged in the
business of commercial and retail banking, with operations conducted throughout
Michigan's Upper Peninsula. In addition, a significant portion of its
commercial loan portfolio consists of leases to commercial government entities
which are secured by equipment and vehicles. These leases are disbursed
geographically throughout the country.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in the Preparation of Financial Statements: The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates. The primary estimates incorporated into the
Corporation's financial statements which are susceptible to change in the near
term include the allowance for loan losses, fair values of certain financial
instruments, the accrued liability associated with the deferred compensation
plan, and the carrying value of impaired loans.
Cash and Cash Equivalents: For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks, and federal funds sold. The Bank
reports net cash flows for interest-bearing deposits with banks, loans and
deposit transactions.
Securities: Securities available for sale consist of those securities not
classified as trading or held to maturity. Such securities might be sold prior
to maturity due to changes in interest rates, prepayment risks, yield and
availability of alternative investments, liquidity needs, or other factors.
Effective January 1, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities (SFAS No. 115). As required by SFAS No. 115, securities
classified as available for sale on and after January 1,1994 are reported at
their fair value and the related net unrealized holding gain or loss is
reported, net of related income tax effects, as a separate component of
shareholders' equity until realized. Securities for which management has the
positive intent and the Corporation has the ability to hold to maturity are
reported at amortized cost.
In November 1995, the Financial Accounting Standards Board issued its Special
Report, A Guide to Implementation of Statement No. 115 on Accounting for
Certain Investments in Debt and Equity Securities (Guide). As permitted by the
Guide, on December 8, 1995, the Corporation made a one-time reassessment and
transferred securities from the held-to-maturity portfolio to the
available-for-sale portfolio in order to increase management's ability to
manage liquidity requirements and interest rate risk. At the date of transfer,
these securities had an amortized cost of $11,944,338, fair value of
$11,876,979, gross unrealized gains of $522 and gross unrealized losses of
$67,881. The transfer increased the unrealized loss on securities available
for sale in stockholders' equity by approximately $44,000, net of tax.
(Continued)
<PAGE> 38
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Premiums and discounts on securities are recognized in interest income using
the interest method over the estimated life of the security. Gains and losses
on the sale of securities are determined using the specific identification
method.
Loans: Loans for which management has the intent and the Corporation has the
ability to hold for the foreseeable future or payoff are stated at unpaid
principal balances, less the allowance for loan losses, and net of deferred
loan origination fees, costs and discounts. Loans for which management does
not have the intent to hold until payoff are stated at the lower of cost or
fair value and recorded as loans held for sale.
Allowance for Loan Losses: Because some loans are not repaid in full, an
allowance for loan losses is recorded. Increases to the allowance are recorded
by a provision for loan losses charged to expense. Estimating the risk of loss
and the amount of loss on any loan is necessarily subjective. The estimates
may change depending on changes in economic conditions, the interest rate
environment or specific situations of individual borrowers. Accordingly, the
allowance is maintained by management at a level considered adequate to cover
losses that are currently anticipated based on past loss experience, general
economic conditions and collateral values, and other factors and estimates
which are subject to change over time. While management may periodically
allocate portions of the allowance for specific problem loan situations, the
whole allowance is available for any loan charge-offs that may occur. A
problem loan is charged-off by management as a loss when deemed uncollectible,
although collection efforts may continue and future recoveries may occur.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for Impairment
of a Loan (SFAS No. 114), and later amended by SFAS No. 118. These Standards,
adopted by the Corporation at January 1, 1995, require that impaired loans, as
defined, be measured based on the present value of expected cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
at the loan's observable market price or at the fair value of collateral if the
loan is collateral dependent. Under these standards, loans considered to be
impaired are reduced to the present value of expected future cash flows or to
the fair value of collateral, by allocating a portion of the allowance for loan
losses to such loans. If these allocations cause the allowance for loan losses
to increase, such increase is reported as additional provision for loan losses.
The effect of adopting SFAS Nos. 114 and 118 did not have a significant impact
on the consolidated financial position or results of operations of the
Corporation.
Smaller-balance homogeneous loans are residential first mortgage loans secured
by one-to-four family residences, residential construction loans, automobile,
home equity and second mortgage loans and are collectively evaluated for
impairment. Commercial loans and first mortgage loans secured by other
properties are evaluated individually for impairment. Management uses the
Corporation's normal credit analysis information, including delinquency
reports, non-accrual listings and the watch list, to identify loans which
should be evaluated for impairment. A loan is considered impaired when
management concludes it is probable that the borrower will not remit payments
in accordance with the terms of the agreement. Loans, or portions thereof, are
charged off when deemed uncollectible. The nature of disclosures for impaired
loans is considered generally comparable to prior nonaccrual, past due, trouble
debt restructurings and nonperforming asset disclosures.
(Continued)
<PAGE> 39
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interest Income: Interest on loans is accrued over the term of the loans based
upon the principal outstanding. Management reviews loans delinquent 90 days or
more to determine if interest accrual should be discontinued based on the
estimated fair market value of the collateral on a present value basis, or the
present value of estimated future cash flows. Under SFAS No. 114 as amended by
SFAS No. 118, the carrying values of impaired loans are periodically adjusted
to reflect cash payments, revised estimates of future cash flows, and increases
in the present value of expected cash flows due to the passage of time. Cash
payments representing interest income are reported as such. Other cash
payments are reported as reductions in carrying value, while increases or
decreases due to changes in estimates of future payments and due to the passage
of time are reported as reductions or increases in the provision for loan
losses.
Foreclosed Real Estate: Real estate properties acquired through, or in lieu
of, loan foreclosure are initially recorded at fair value at the date of
foreclosure establishing a new cost basis. After foreclosure, valuations are
periodically performed by management and the real estate is carried at the
lower of cost or fair value minus estimated costs to sell.
Premises and Equipment: The Corporation's premises and equipment are stated at
cost less accumulated depreciation. Premises and related components are
depreciated using the straight-line method with useful lives ranging from 5 to
39 years. Furniture and equipment are depreciated using the straight-line
method with useful lives ranging from 3 to 12 years.
Acquisition Intangibles: The Corporation's intangible assets include the value
of ongoing customer relationships (core deposits) and the excess of cost over
the fair value of net assets acquired (goodwill) arising from the purchase of a
financial institution and the acquisition of certain assets and the assumption
of certain liabilities of other financial institutions. Core deposit
intangibles are amortized to income over a ten-year period on an accelerated
basis and goodwill is amortized on a straight-line basis over a fifteen-year
period.
Federal Income Taxes: Effective January 1, 1993, the Corporation adopted SFAS
No. 109, Accounting for Income Taxes. The Corporation records income tax
expense based on the amount of taxes due on its income tax return plus deferred
taxes computed based on differences between the financial statement and tax
bases of assets and liabilities using enacted tax rates. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The effect of the adoption of SFAS No. 109, as of
January 1, 1993, is shown as the cumulative effect of a change in accounting
principle in the 1993 consolidated statement of income. Apart from the
cumulative effect adjustment, the impact of the change on net income for 1993
was not material.
The Corporation and its subsidiaries file a consolidated federal income tax
return on a calendar year basis.
(Continued)
<PAGE> 40
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Share: Earnings per share is calculated on the weighted average
number of common shares outstanding during the year, retroactively adjusted to
give effect to all stock splits and stock dividends.
Issued But Not Yet Adopted Accounting Standards: The Financial Accounting
Standards Board has issued Statement of Financial Accounting Standards No. 121,
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of (SFAS No. 121). This Statement requires that long-lived assets and
certain identifiable intangibles held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable, and establishes criteria
for evaluating recoverability. The Statement also requires that long-lived
assets and certain identifiable intangibles to be disposed of be reported at
the lower of carrying amount or fair value less cost to sell, with certain
exceptions. The Statement is effective for fiscal years beginning after
December 15, 1995. Management does not expect the Statement to have a material
impact on the consolidated financial condition or results of operations of the
Corporation.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122, Accounting for Mortgage Servicing Rights (SFAS
No. 122). This Statement changes the accounting for mortgage servicing rights
retained by the loan originator. Under the Statement, if the originator sells
or securitizes mortgage loans and retains the related servicing rights, the
total cost of the mortgage loan is allocated between the loan (without the
servicing rights) and the servicing rights, based on their relative fair
values. Under current practice, all such costs are assigned to the loan. The
costs allocated to mortgage servicing rights will be recorded as a separate
asset and amortized in proportion to, and over the life of, the net servicing
income. The carrying value of the mortgage servicing rights will be
periodically evaluated for impairment. Impairment will be recognized using the
fair value of individual stratum of servicing rights based on the underlying
risk characteristics of the serviced loan portfolio, compared to an aggregate
portfolio approach under existing accounting guidance. The Corporation does
not currently retain servicing on mortgage loans sold. Accordingly, unless the
Corporation begins to retain servicing, this statement will have no impact on
the consolidated financial condition or results of operations of the
Corporation.
(Continued)
<PAGE> 41
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-based Compensation (SFAS No.
123). The Statement establishes a "fair value-based method" of accounting for
employee stock options and similar equity instruments, such as warrants, and
encourages all companies to adopt that method of accounting for all of their
employee stock compensation plans. However, the Statement allows companies to
continue measuring compensation cost for such plans using accounting guidance
in place prior to SFAS No. 123. Corporations that elect to remain with the
former method of accounting must make pro forma disclosures of net income and
earnings per share as if the fair value method provided for in SFAS No. 123 has
been adopted. The accounting requirements of the Statement are required for
transactions entered into in fiscal years that begin after December 15, 1995,
although early adoption is permitted. Management has concluded that the
Corporation will not adopt the fair value accounting provisions of SFAS No. 123
and will continue to apply its current method of accounting. Accordingly,
adoption of SFAS No. 123 will have no impact on the Corporation's consolidated
financial condition or results of operations.
Reclassifications: Certain prior years' amounts have been reclassified to
conform to the current year's presentation.
(Continued)
<PAGE> 42
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 3 - ACQUISITIONS
Since early 1994, the Corporation has completed four acquisitions which have
resulted in significant asset and earnings growth. The acquisitions have or
will be accounted for under the purchase method of accounting. Accordingly,
for those completed before December 31, 1995, the assets, liabilities, and
results of operations are included in the Corporation's consolidated financial
statements as of, and subsequent to, the acquisition date. The acquisition of
South Range State Bank occurred on January 31, 1996 and is not reflected in the
accompanying consolidated financial statements. Following is a summary of the
acquisitions. Additional information regarding assets acquired and liabilities
assumed is presented supplementally on the accompanying consolidated statements
of cash flows.
<TABLE>
<CAPTION>
Assets
Acquired Resulting
Date of Acquisition (excludes Acquisition
Acquisition Transaction Cost intangibles) Intangibles
----------- ----------- ---- ------------ -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
February 8, 1994 Acquired 100% of the
outstanding stock of Bank of
Stephenson in exchange for
cash ($4.49 million) and
common stock (175,779 shares) $ 11,084 $ 70,000 $ 1,584
December 8, 1994 Acquired a substantial portion
of the banking assets and
assumed a substantial portion
of the banking liabilities of
Newberry State Bank in
exchange for cash 4,150 22,000 2,591
September 15, 1995 Acquired the fixed assets and
assumed the deposits of the
Rudyard branch of First of
America in exchange for cash 769 8,935 515
January 31, 1996 Acquired 100% of the
outstanding stock of South
Range State Bank in exchange
for cash and notes 4,310 35,623 800
</TABLE>
Following is unaudited, proforma information regarding the acquisition of the
Bank of Stephenson, assuming the bank had been acquired January 1, 1993:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Total revenues $ 15,446,435 $ 14,491,918
Net income before cumulative effect of accounting change 1,998,467 2,025,943
Net income 1,998,467 2,038,945
Net income before cumulative effect of accounting change
per common and common equivalent share 3.36 3.47
Net income per common and common equivalent share 3.36 3.49
</TABLE>
(Continued)
<PAGE> 43
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 4 - SECURITIES
The carrying amount of securities and their approximate fair value as of
December 31, were as follows:
AVAILABLE FOR SALE
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
1995
U.S. Treasury and federal agency $ 20,949,728 $ 20,454 $ 70,878 $ 20,899,304
State and political subdivisions 477,035 4,239 751 480,523
Other 4,822,543 24,430 6,422 4,840,551
--------------- ---------- ------------ ---------------
$ 26,249,306 $ 49,123 $ 78,051 $ 26,220,378
=============== ========== ============ ===============
1994
U.S. Treasury and federal agency $ 17,696,243 $ 2,927 $ 642,258 $ 17,056,912
State and political subdivisions 3,347,737 2,087 219,609 3,130,215
Other securities 1,751,039 8,968 1,742,071
--------------- ---------- ------------ ---------------
$ 22,795,019 $ 5,014 $ 870,835 $ 21,929,198
=============== ========== ============ ===============
HELD TO MATURITY
1995
State and political subdivisions $ 835,049 $ 1,964 $ 260 $ 836,753
=============== ========== ============ ===============
1994
U.S. Treasury and federal agency $ 8,799,276 $ 476,851 $ 8,322,425
State and political subdivisions 1,150,092 $ 1,986 9,301 1,142,777
Other 3,916,557 183,464 3,733,093
--------------- ---------- ------------ ---------------
$ 13,865,925 $ 1,986 $ 669,616 $ 13,198,295
=============== ========== ============ ===============
</TABLE>
(Continued)
<PAGE> 44
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 4 - SECURITIES (Continued)
Proceeds, gains and losses from the sales of securities available for sale for
the years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Gross proceeds $ 10,821,380 $ 9,199,024 $ 25,380,822
Gains recognized 14,942 126,337 195,210
Losses recognized 34,025 50,899 19,838
</TABLE>
The amortized cost and estimated fair value of securities at December 31, 1995,
by contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without penalties.
<TABLE>
<CAPTION>
Securities Securities
------Available for Sale------ ------Held to Maturity-------
Amortized Amortized
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
<S> <C> <C> <C> <C>
Due in one year or less $ 8,516,862 $ 8,491,561 $ 835,049 $ 836,753
Due after one year through
five years 7,655,058 7,660,825
Due after five years through
ten years 8,963,369 8,932,021
Due after ten years 1,114,017 1,135,971
--------------- --------------- -------------- ---------------
$ 26,249,306 $ 26,220,378 $ 835,049 $ 836,753
=============== =============== ============== ===============
</TABLE>
The carrying value of securities pledged to secure public deposits and treasury
deposits was $2,278,048 as of December 31, 1995.
(Continued)
<PAGE> 45
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 5 - LOANS
Loans presented in the consolidated balance sheet are comprised of the
following classifications:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Loans:
Commercial, financial and agricultural $ 130,921,057 $ 99,397,306
1-4 family residential real estate 58,433,457 55,728,439
Consumer 29,954,025 26,851,376
Construction 2,235,030 1,258,000
----------------- ----------------
221,543,569 183,235,121
Less: unearned income (36,159) (66,296)
----------------- ----------------
$ 221,507,410 $ 183,168,825
================= ================
</TABLE>
Included in the loan portfolio are loans made to certain executive officers,
directors, principal shareholders and companies in which they have an interest.
The following is a summary of such loans:
<TABLE>
<S> <C>
Balance - January 1 $ 4,249,119
New Loans 5,467,891
Repayments (3,113,808)
-----------------
Balance - December 31 $ 6,603,202
=================
</TABLE>
NOTE 6 - ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses for the years ending December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 2,349,957 $ 916,633 $ 833,907
Add:
Allowance from acquisitions
and purchased loans 1,184,666
Provision for loan losses 771,000 330,000 125,000
Loan recoveries 456,702 193,660 13,385
Loans charged off (440,344) (275,002) (55,659)
-------------- --------------- -------------
Balance at end of year $ 3,137,315 $ 2,349,957 $ 916,633
============== =============== =============
</TABLE>
(Continued)
<PAGE> 46
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 6 - ALLOWANCE FOR LOAN LOSSES (Continued)
Information regarding impaired loans is as follows for the year ended December
31, 1995:
<TABLE>
<S> <C>
Average investment in impaired loans $ 659,412
Interest income recognized on impaired loans including
interest income recognized on cash basis 40,856
Interest income recognized on impaired loans on cash basis 40,856
Information regarding impaired loans at December 31, 1995 was as follows:
Balance of impaired loans $ 570,847
Less portion for which no allowance for loan losses is allocated 22,548
------------
Portion of impaired loan balance for which an allowance
for credit losses is allocated $ 548,299
============
Portion of allowance for loan losses allocated to the impaired
loan balance $ 200,000
============
</TABLE>
There are no significant nonaccrual or restructured loans included in loans
outstanding as of December 31, 1995 and 1994. In addition, there was no
material effect on interest income due to nonaccrual or restructured loans for
1994 and 1993.
NOTE 7 - BANK PREMISES AND EQUIPMENT
Bank premises and equipment as of December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land $ 828,713 $ 696,636
Buildings and improvements 9,435,229 6,885,538
Furniture, fixtures and equipment 4,659,299 3,823,961
Construction in progress 850,222
------------- --------------
14,923,241 12,256,357
Allowance for depreciation (3,135,876) (2,453,780)
------------- --------------
$ 11,787,365 $ 9,802,577
============= ==============
</TABLE>
(Continued)
<PAGE> 47
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 8 - ACQUISITION INTANGIBLES
Intangible assets, which were principally acquired through the acquisitions
described in Note 3, consist of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Goodwill $ 1,403,232 $ 1,104,930
Core deposit intangible 3,427,023 3,319,737
--------------- ----------------
4,830,255 4,424,667
Less accumulated amortization 569,000 190,619
--------------- ----------------
$ 4,261,255 $ 4,234,048
=============== ================
</TABLE>
Amortization expense related to the acquisition intangibles was $378,381,
$177,638 and $3,080 for each year ended December 31, 1995, 1994 and 1993,
respectively.
NOTE 9 - INTEREST-BEARING DEPOSITS
The following is an analysis of interest-bearing deposits as of December 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Savings and interest-bearing checking $ 118,956,109 $ 103,326,164
Time: In denominations under $100,000 82,752,399 84,157,370
In denominations of $100,000 or more 15,023,773 11,680,000
---------------- ---------------
$ 216,732,281 $ 199,163,534
================ ===============
</TABLE>
Interest expense on time deposits issued in denominations of $100,000 or more
was $513,114, $506,298 and $373,213 for the year ended December 31, 1995, 1994
and 1993, respectively.
At December 31, 1995, scheduled maturities of the Bank's time deposits are as
follows:
<TABLE>
<S> <C>
1996 $ 71,426,922
1997 14,050,622
1998 7,884,928
1999 1,123,925
2000 2,727,507
Thereafter 562,268
----------------
$ 97,776,172
================
</TABLE>
(Continued)
<PAGE> 48
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 10 - OTHER BORROWINGS
Other borrowings consist of the following at December 31,
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Federal Home Loan Bank
Adjustable rate advance, maturing November 21, 1996:
5.65% interest rate at December 31, 1995, adjusting
period is semi-annually. $ 2,000,000 $ 2,000,000
Fixed-rate advance at 5.86%, maturing December 15, 2003. 213,907 236,656
Fixed-rate advance at 7.37%, maturing April 15, 2004. 237,440 250,000
Fixed-rate advance at 7.59%, maturing May 17, 2004. 436,388 500,000
Fixed-rate advance at 5.79%, maturing June 2, 1997. 1,000,000
Fixed-rate advance at 6.13% maturing June 2, 2000. 1,000,000
Fixed-rate advance at 6.5%, maturing October 17, 2005. 3,200,000
-------------- ---------------
8,087,735 2,986,656
Farmer's Home Administration
$2,000,000 fixed-rate line agreement with Farmers
Home Administration maturing August 24, 2024:
interest payable at 1% 2,000,000 565,875
-------------- ---------------
$ 10,087,735 $ 3,552,531
============== ===============
</TABLE>
Maturities of other borrowings outstanding at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 2,302,820
1997 1,397,459
1998 402,142
1999 417,148
2000 1,435,587
Thereafter 4,132,579
--------------
$ 10,087,735
==============
</TABLE>
The Federal Home Loan Bank borrowings are collateralized by a blanket
collateral agreement on the Corporation's residential mortgage loans.
Prepayment of the advances is subject to the provisions and conditions of the
credit policy of the Federal Home Loan Bank of Indianapolis in effect as of
December 31, 1995.
(Continued)
<PAGE> 49
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 11 - INCOME TAXES
The components of federal income taxes attributable to continuing operations
for the years ending December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current tax expense $ 1,409,543 $ 627,300 $ 285,360
Deferred tax expense (benefit) (325,650) (169,300) (25,186)
------------- ------------- --------------
$ 1,083,893 $ 458,000 $ 260,174
============= ============= ==============
</TABLE>
The tax effects of temporary differences that give rise to deferred tax assets
and deferred tax liabilities at December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets
Allowance for loan loss $ 689,982 $ 488,739
Nonaccrual loan interest 9,957
Deferred compensation 171,533 147,969
Unrealized loss on securities available for sale 9,081 297,108
------------- --------------
880,553 933,816
Deferred tax liabilities
Bank premises and equipment 384,308 390,191
Core deposit intangible 418,302 503,305
------------- --------------
Net deferred tax asset $ 77,943 $ 40,320
============= ==============
</TABLE>
A valuation allowance related to deferred tax assets is required when it is
considered more likely than not that all or part of the benefits related to
such assets will not be realized. Management has determined that no such
allowance was required at December 31, 1995, 1994 or 1993.
The reasons for the difference between income tax expense and the amount
computed by applying the statutory federal income tax rate to income before tax
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal income tax computed at the
statutory rate of 34% $ 1,276,431 $ 824,684 $ 519,900
Add (deduct) effect of:
Tax-exempt interest income (372,381) (363,978) (269,780)
Other items, net 179,843 (2,706) 10,054
------------- ------------- -------------
$ 1,083,893 $ 458,000 $ 260,174
============= ============= =============
</TABLE>
(Continued)
<PAGE> 50
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 12 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Corporation is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet financing needs of its customers.
These financial instruments include commitments to make loans, unused lines of
credit, and standby letters of credit. The Corporation's exposure to credit
loss in the event of nonperformance by the other party to the financial
instrument is represented by the contractual amount of those instruments. The
Corporation follows the same credit policy to make such commitments as it uses
for on-balance-sheet items.
The Corporation has the following fixed and variable rate commitments
outstanding at December 31 (in thousands):
<TABLE>
<CAPTION>
---------1995---------- ---------1994---------
---- ----
Fixed Variable Fixed Variable
----- -------- ----- --------
<S> <C> <C> <C> <C>
Outstanding letters of credit $ 1,288 $ 1,741
Unused lines of credit $ 3,474 8,556 $ 2,707 6,204
Loan commitments outstanding 6,882 400 6,957
----------- ----------- ----------- ----------
$ 3,474 $ 16,726 $ 3,107 $ 14,902
=========== =========== =========== ==========
</TABLE>
Fixed rates on unused lines of credit range from 9.5% to 10.5% at December 31,
1995.
Since many commitments to make loans expire without being used, the amount does
not necessarily represent future cash commitments. Collateral obtained upon
exercise of the commitment is determined using management's credit evaluation
of the borrower and may include real estate, vehicles, business assets,
deposits and other items.
NOTE 13 - DEFERRED COMPENSATION PLAN
As an incentive to retain key members of management and directors, the Bank has
a deferred compensation plan. Benefits are based on the number of years the
key members have served in the Bank and a vested percentage of the monthly
benefit received upon retirement. A liability is recorded on a present value
basis and discounted using current market rates. This liability may change
depending upon changes in long-term interest rates. Deferred compensation
expense included in salaries and wages was approximately $89,955 and $82,284
for the years ended December 31, 1995 and 1994, respectively. The liability at
December 31, 1995 and 1994, for vested benefits was approximately $471,075 and
$409,284, respectively. It is anticipated that the death benefits received
from the life insurance policies on the plan's participants will reimburse the
Corporation for the obligations under the plan. The cash surrender value of
these policies was $689,918 and $559,508 at December 31, 1995 and 1994,
respectively, and is included in other assets in the accompanying financial
statements.
(Continued)
<PAGE> 51
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 14 - PROFIT SHARING AND EMPLOYEE STOCK OWNERSHIP PLAN
The Corporation has established a 401(k) profit sharing and deferred
compensation plan. Employees who have completed one year of service and
attained the age of 18 are eligible to participate in the plan. Eligible
employees can elect to have a portion, not to exceed 15%, of their annual
compensation paid into the plan. In addition, the Corporation may make
discretionary contributions into the plan. The total discretionary
contributions to the plan for the years ended December 31, 1995, 1994 and 1993
were $120,722, $68,453 and $59,627, respectively.
Effective January 1, 1993, sponsorship of the then existing profit sharing plan
was transferred to the Corporation and the plan was amended and restated to
include employee stock ownership plan features. Effective December 28, 1993,
the Corporation registered 100,000 shares of currently authorized common stock
for use in the profit sharing and employee stock ownership plan. Effective
December 21, 1994, the Corporation approved the termination of the existing
profit sharing/employee stock ownership plan and the distribution of employer
stock in the plan to plan participants. Other assets in the plan were merged
into the current 401(k) plan. The Corporation's request from the Internal
Revenue Service for a determination letter on the termination of the former
plan is pending.
NOTE 15 - STOCK OPTION PLAN
The Corporation adopted a stock option plan during 1992. Participants of the
plan generally include senior officers and directors who do not participate in
the subsidiary banks' deferred compensation plan discussed in Note 13.
Under the terms of the plan, 16,500 shares of the Corporation's common stock
was reserved for awards. The options issued have a ten year life but cannot be
exercised until a minimum of two years after their issue date.
(Continued)
<PAGE> 52
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 15 - STOCK OPTION PLAN (Continued)
The following is a summary of stock options, granted and exercised, for the
years presented, restated for any stock splits or stock dividends.
<TABLE>
<CAPTION>
Exercise
Number Price Range
------ -----------
<S> <C> <C>
Outstanding - January 1, 1993 4,200 $ 33
Granted 5,250 37
--------
Outstanding - December 31, 1993 9,450 33-37
Granted 7,050 38
Exercised (2,100) 33
--------
Outstanding December 31, 1994 14,400 33-37
Exercised (1,950) 33-37
-------- --------
Outstanding - December 31, 1995 12,450 $ 33-37
======== ========
</TABLE>
At December 31, 1995, 5,400 of the above options were exercisable. No
additional shares are available to be granted under the plan. At December 31,
1995, 12,450 shares of common stock were reserved for outstanding options.
NOTE 16 - CONTINGENCIES
From time to time certain claims are made against the Corporation in the normal
course of business. At December 31, 1995, there were no outstanding matters
which in management's opinion could have a material impact on the Corporation's
consolidated financial condition or results of operations.
(Continued)
<PAGE> 53
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure is made in accordance with the requirements of
Statement of Financial Accounting Standards No. 107, Disclosure About Fair
Value of Financial Instruments (SFAS No. 107). Where quoted market prices are
not available, as is the case for a significant portion of the Corporation's
financial instruments, the fair values are based on estimates using present
value of expected cash flows or other valuation techniques. These techniques
are significantly affected by the assumptions used, including the discount rate
and the timing of estimated cash payments and receipts. Accordingly, certain
of the fair value estimates presented herein cannot be substantiated by
comparison to independent markets and are not necessarily indicative of the
amounts the Corporation could realize in a current market exchange.
In addition, the fair value estimates are limited to existing on and off
balance sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are
not considered financial instruments. Other significant assets and liabilities
that are not considered financial assets or liabilities include the
Corporation's premises and equipment, goodwill, and deposit-based intangible
assets. In addition, tax ramifications related to the realization of
unrealized gains and losses such as those within the investment securities
portfolio can also have a significant effect on fair values and have not been
considered in the estimates. Accordingly, the aggregate fair value amounts do
not represent the underlying value of the Corporation.
The carrying amounts and estimated fair values of the Corporation's financial
instruments were as follows:
<TABLE>
<CAPTION>
1 9 9 5
-------
Carrying Fair
Amount Value
------ -----
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 14,492,357 $ 14,492,357
Interest-bearing deposits with banks 1,678,080 1,678,080
Securities available for sale 26,220,378 26,220,378
Securities held to maturity 835,049 836,753
Loans receivable, net of allowance for loan losses 218,370,095 218,106,381
Accrued interest receivable 2,194,968 2,194,968
Financial liabilities:
Deposits (244,406,695) (244,723,891)
Securities sold under agreement to repurchase (700,000) (700,000)
Other borrowed funds (10,087,735) (9,471,893)
Accrued interest payable (1,418,547) (1,418,547)
</TABLE>
(Continued)
<PAGE> 54
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The Bank's loan commitments, standby letters of credit and undisbursed loans
have been estimated to have no material fair value, as such commitments are
generally fulfilled at current market rates.
The carrying amounts of the following financial instruments are a reasonable
approximation of their fair values:
- Cash and cash equivalents
- Accrued interest receivable
- Securities sold under agreement to repurchase
- Accrued interest payable
NOTE 18 - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Details of other expense in the consolidated statements of income are as
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Forms and supplies $ 438,123 $ 283,003 $ 182,637
Amortization of acquisition intangibles 434,397 151,948
Legal and consulting fees 344,971 274,980 89,183
FDIC assessment 261,941 374,263 218,466
Telephone 206,495 133,975 84,673
Postage 200,366 136,933 90,357
Directors' fees 161,184 101,116 82,300
Business promotion 150,426 120,427 91,456
Advertising 140,275 141,858 69,000
Audit and examination fees 125,051 101,855 84,252
State taxes 96,000 95,849 87,121
Other 1,148,700 684,179 491,033
--------------- -------------- --------------
$ 3,707,929 $ 2,600,386 $ 1,570,478
=============== ============== ==============
</TABLE>
(Continued)
<PAGE> 55
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 19 - FIRST MANISTIQUE CORPORATION (PARENT CORPORATION ONLY)
FINANCIAL INFORMATION
The following summarizes parent corporation financial information as of
December 31, 1995 and 1994 and for the years ended December 31, 1995, 1994 and
1993:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Assets
Cash $ 269,221 $ 1,379,373
Investment in subsidiaries 24,311,172 20,865,699
Other assets 426,484 238,355
-------------- --------------
$ 25,006,877 $ 22,483,427
============== ==============
Stockholders' equity $ 25,006,877 $ 22,483,427
============== ==============
</TABLE>
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income
Dividends from subsidiaries $ 6,272,000 $ 770,000
Expenses
Salaries and wages $ 102,699 36,393 16,840
Professional fees 177,270 59,755 38,935
Interest expense 95,942
Other expenses 62,377 54,118 28,522
------------- ------------- -------------
Income before income tax and equity in
undistributed net income of subsidiaries (342,346) 6,025,792 685,703
Income tax benefit 116,398 (80,000) (28,690)
------------- ------------- -------------
(225,948) 6,105,792 714,393
Equity in undistributed net income of
subsidiaries 2,896,263 (4,138,250) 567,552
------------- ------------- -------------
NET INCOME $ 2,670,315 $ 1,967,542 $ 1,281,945
============= ============= =============
</TABLE>
(Continued)
<PAGE> 56
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 19 - FIRST MANISTIQUE CORPORATION (PARENT CORPORATION ONLY)
FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,670,315 $ 1,967,542 $ 1,281,945
Adjustments to reconcile net income to
net cash from operating activities
Undistributed earnings of subsidiaries (2,896,263) 4,138,250 (567,552)
Loss on investment security 25,000
Change in other assets (116,083) (124,775) (81,157)
Depreciation and amortization 7,610 7,220
------------- ------------- --------------
Net cash from operating activities (334,421) 6,013,237 633,236
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiaries (9,193,538)
Securities purchased (10,000) (25,000)
Purchase of equipment (80,000)
------------- ------------- --------------
Net cash from investing activities (80,000) (9,203,538) (25,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 157,973 4,911,284
Repurchase of common stock (12,265)
Dividends paid (853,704) (542,697) (405,280)
------------- ------------- --------------
Net cash from financing activities (695,731) 4,356,322 (405,280)
------------- ------------- --------------
Increase (decrease) in cash (1,110,152) 1,166,021 202,956
Cash at beginning of year 1,379,373 213,352 10,396
------------- ------------- --------------
CASH AT END OF YEAR $ 269,221 $ 1,379,373 $ 213,352
============= ============= ==============
</TABLE>
(Continued)
<PAGE> 57
FIRST MANISTIQUE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE 20 - CAPITAL STRUCTURE AND RESTRICTIONS ON RETAINED EARNINGS
Effective May 1, 1994, the Corporation's articles of incorporation were amended
to increase authorized shares from 500,000 shares of $2.50 par value common
stock to 2,000,000 shares of no par value common stock. Concurrent with the
increase of authorized common shares, the Corporation also authorized a 3 for 1
stock split for shares outstanding on May 1, 1994 which resulted in the
issuance of an additional 392,444 shares. All share and per share amounts have
been adjusted for the stock split. Subsequent to April 30, 1994, the proceeds
from the issuance of common stock are fully recorded in the common stock
account.
The Corporation has authorized 750,000 shares for use in its dividend
reinvestment plan. At December 31, 1995, 749,125 shares remain unissued under
this plan.
Federal and state banking laws and regulations place certain restrictions on
the amount of dividends a bank can pay and capital levels that must be
maintained. Under the most restrictive of these regulations, the Bank could
pay approximately $6,300,000 in dividends plus current year earnings without
prior regulatory approval.
<PAGE> 58
Item 9. Changes in and Disagreements with Accountants and Financial Disclosure
There have been no disagreements with accountants. Crowe, Chizek and Company
LLP was appointed as the Registrant's independent accountants for the year
ended December 31, 1995, effective January 2, 1995, as disclosed on the
Registrant's Current Report on Form 8-K filed January 17, 1995.
<PAGE> 59
PART III
Item 10. Directors and Executive Officers of the Registrant:
The information set forth on page 3, under the caption "Information About
Directors and Director Nominees", of the Registrant's definitive Proxy
Statement dated March 29, 1996, is hereby incorporated by reference.
Item 11. Executive Compensation
Information relating to compensation of the Registrant's executive officers is
contained on pages 12 to 14, under the caption "Compensation of Executive
Officers", in the Registrant's definitive Proxy Statement dated March 29,
1996, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information relating to security ownership of certain beneficial owners and
management is contained on page 15, under the caption "Ownership of Common
Stock" in the Registrant's definitive Proxy Statement dated March 29, 1996,
and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information relating to certain relationships and related transactions is
contained on page 14, under the caption "Indebtedness of and Transactions with
Management" in the Registrant's definitive Proxy Statement dated March 29,
1996, and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(a)(1) Financial Statements. The following documents are filed as part of Item
8 of this report:
Report of Independent Auditors
Consolidated Balance Sheets as of December 31,
1995, and 1994
Consolidated Statements of Income for the years ended
December 31, 1995, 1994, and 1993
Consolidated Statement of Changes in Shareholders'
<PAGE> 60
Equity for the years ended December 31, 1995, 1994,
and 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
(2) Schedules to the consolidated financial statements required by Article 9 of
Regulation S-X are not required under the related instructions or are
inapplicable, and therefore have been omitted.
(3) The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
Number Exhibit
------ -------
<S> <C>
3(a) Restated Articles of Incorporation. Filed herewith.
3(b) Amended and Restated Bylaws. Filed herewith.
4 Dividend Reinvestment Plan. Previously filed as an
exhibit to the Registrant's Registration Statement on Form
S-3 (Registration No. 033-61533) filed on August 1, 1995.
Here incorporated by reference.
10(a) Stock Option Plan. Previously filed in the
Registrant's definitive proxy statement for it's annual
meeting of shareholders held April 21, 1994. Here
incorporated by reference.
10(b) First Manistique Corporation Executive and Board
Member Restricted Stock Plan. Previously filed in the
Registrant's definitive proxy statement for it's annual
meeting of shareholders held April 18, 1995. Here
incorporated by reference.
10(c) Employment Contract between First Northern Bank &
Trust and Ronald G. Ford. Filed herewith.
21 Subsidiaries of the Registrant. Filed herewith.
</TABLE>
<PAGE> 61
<TABLE>
<S> <C>
23(a) Consent of Schneider, Larche, Haapala & Co.. Filed herewith.
23(b) Consent of Crowe, Chizek and Company LLP. Filed herewith.
27 Financial Data Schedule. Filed herewith.
</TABLE>
The Registrant will furnish a copy of any exhibit listed above to any
shareholder of the Registrant without charge upon written request to Fred
LaMuth, First Manistique Corporation, 130 South Cedar Street, P.O. Box 369,
Manistique, MI 49854.
(b) Reports on Form 8-K. During the last quarter of the period covered by this
report, the Registrant filed no Current Reports on Form 8-K.
<PAGE> 62
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FIRST MANISTIQUE CORPORATION
(Registrant)
/s/ Ronald G. Ford
----------------------------
Ronald G. Ford
President
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below as of March 20, 1996, by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Charles B. Beaulieu /s/ Thomas G. King
- ------------------------------ ---------------------------
CHARLES B. BEAULIEU, Director THOMAS G. KING, Director
/s/ Stanley J. Gerou II /s/ C. Ronald Dufina
- ------------------------------ ----------------------------
STANLEY J. GEROU II, Director C. RONALD DUFINA, Director
/s/ John B. Clark /s/ John D. Lindroth
- ------------------------------ ----------------------------
JOHN B. CLARK, Director JOHN D. LINDROTH, Director
/s/ Ronald G. Ford /s/ John P. Miller
- ------------------------------ ----------------------------
RONALD G. FORD, Director, JOHN P. MILLER, Director
CEO, and President
/s/ Michael C. Henricksen /s/ Richard B. Demers
- ------------------------------ ----------------------------
MICHAEL C. HENRICKSEN,Director RICHARD B. DEMERS, Executive
and Vice Chairman Vice President
/s/ Daniel Purcell
- ------------------------------
DANIEL PURCELL, Chief Financial
Officer and Chief Accounting Officer
<PAGE> 63
EXHIBIT INDEX
Number Exhibit
- ------ -------
3(a) Restated Articles of Incorporation. Filed herewith.
3(b) Amended and Restated Bylaws. Filed herewith.
4 Dividend Reinvestment Plan. Previously filed as an exhibit to the
Registrant's Registration Statement on Form S-3 (Registration No.
033-61533) filed on August 1, 1995. Here incorporated by reference.
10(a) Stock Option Plan. Previously filed in the Registrant's definitive
proxy statement for it's annual meeting of shareholders held April 21,
1994. Here incorporated by reference.
10(b) First Manistique Corporation Executive and Board Member Restricted
Stock Plan. Previously filed in the Registrant's definitive proxy
statement for it's annual meeting of shareholders held April 18, 1995.
Here incorporated by reference.
10(c) Employment Contract between First Northern Bank & Trust and Ronald G.
Ford. Filed herewith.
21 Subsidiaries of the Registrant. Filed herewith.
23(a) Consent of Schneider, Larche, Haapala & Co. Filed herewith.
23(b) Consent of Crowe, Chizek and Company LLP. Filed herewith.
27 Financial Data Schedule. Filed herewith.
<PAGE> 1
EXHIBIT 3(a)
RESTATED ARTICLES OF INCORPORATION
OF
FIRST MANISTIQUE CORPORATION
The following Restated Articles of Incorporation are executed by the
undersigned corporation pursuant to the provisions of Sections 641-651, Act
284, Public Acts of 1972, as amended.
1. The present name of the corporation, and its only name since its
incorporation is First Manistique Corporation.
2. The corporation identification number (CID) assigned by the bureau is
063-316.
3. All of the former names of the corporation are: None
4. The date of filing the original Articles of Incorporation was December
6, 1974.
5. The following Restated Articles of Incorporation supersede the original
Articles of Incorporation, as heretofore amended, and shall be the Articles of
Incorporation of the corporation.
ARTICLE I
The name of the corporation is First Manistique Corporation.
ARTICLE II
The purpose or purposes for which the corporation is organized is to
engage in any activity within the purposes for which corporations may be
organized under the Business Corporation Act of Michigan, as amended from time
to time, and including without limitation the power to act as a bank holding
company as permitted by the Federal Bank Holding Company Act of 1956, as
amended, or hereafter supplemented or amended.
ARTICLE III
The total authorized shares:
1. Common Shares 2,000,000
---------
Preferred Shares 25,000
---------
<PAGE> 2
2. A statement of all or any of the relative rights, preferences
and limitations of the shares of each class is as follows:
The Board of Directors may cause the Corporation to
issue Preferred Shares in one or more series, each
series to bear a distinctive designation and to have
such relative rights and preferences as shall be
prescribed by resolution of the Board. Such
resolutions, when filed, shall constitute amendments
to these Articles of Incorporation.
ARTICLE IV
1. The address of the current registered office is: 130 South Cedar
Street, P.O. Box 369, Manistique, Michigan 49854, which is also the mailing
address of the current registered office.
2. The name of the current resident agent is: Ronald G. Ford
ARTICLE V
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them,
a court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number
representing 3/4 in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement, agree to a compromise or arrangement, or a reorganization of
this corporation as a consequence of the compromise or arrangement, the
compromise or arrangement and the reorganization, if sanctioned by the court to
which the application has been made, shall be binding on all the creditors or
class of creditors, or on all the shareholders or class of shareholders and
also on this corporation.
ARTICLE VI
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for a breach of fiduciary
duty as a director, except for liability: (a) for any breach of the director's
duty of loyalty to the Corporation or its shareholders; (b) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (c) resulting from a violation Section 551(1) of the
Michigan Business Corporation Act; or (d) for any transaction from which the
director derived an improper personal benefit. In the event the Michigan
Business Corporation Act is amended, after approval by the shareholders of this
Article VII, to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of
-2-
<PAGE> 3
a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Michigan Business Corporation Act, as so amended. Any
repeal, modification or adoption of any provision in these Articles of
Incorporation inconsistent with this Article VI shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal, modification or adoption.
These Restated Articles of incorporation were duly adopted by the Board of
Directors without a vote of the shareholders in accordance with the provisions
of Section 642, Act 284, Public Acts of 1972, as amended. These Restated
Articles of Incorporation only restate and integrate and do not further amend
the provisions of the Articles of Incorporation as heretofore amended and there
is no material discrepancy between those provisions and the provisions of these
Restated Articles.
Signed this 28th day of December, 1995.
FIRST MANISTIQUE CORPORATION
By: /s/ Ronald G. Ford
-------------------------------
(Name)
Its: President & CEO
-------------------------------
-3-
<PAGE> 1
EXHIBIT 3(b)
AMENDED AND RESTATED BYLAWS
OF
FIRST MANISTIQUE CORPORATION
A MICHIGAN CORPORATION
ARTICLE I. OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be as specified in the Articles of Incorporation. The Corporation shall
keep records containing the names and addresses of all shareholders, the
number, class and series of shares held by each, and the dates when they
respectively became holders of record thereof, at its registered office or at
the office of its transfer agent.
Section 2. Other Offices. The business of the Corporation may be
transacted in such locations other than the registered office, within or
outside the State of Michigan, as the Board of Directors may from time to time
determine.
ARTICLE II. CAPITAL STOCK
Section 1. Stock Certificates. Certificates representing shares of the
Corporation shall be in such form as is approved by the Board of Directors.
Certificates shall be signed by the Chairman of the Board of Directors, Vice
Chairman of the Board of Directors, Chief Executive Officer, President or a
Vice President, and by the Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary of the Corporation, and shall be sealed with the seal of
the Corporation, or a facsimile thereof, if one be adopted. The signatures of
the officers may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the Corporation itself,
or its employees. In the event an officer who has signed, or whose facsimile
signature has been placed upon, a certificate ceases to be such officer before
the certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer at the date of issue.
Section 2. Replacement of Lost or Destroyed Certificates. In the event
of the loss or destruction of a stock certificate, no new certificate shall be
issued in place thereof until the Corporation has received from the registered
holder such assurances, representations, warranties and/or guarantees as the
Board of Directors, in its sole discretion, shall deem advisable, and until the
Corporation receives sufficient indemnification protecting it against any claim
that may be made on account of such loss or destroyed certificate, or the
issuance of any new certificate in place thereof, including an indemnity bond
in such amount and with sureties, if any, as the Board of Directors, in its
sole discretion, deems advisable. Any new certificate issued in place of any
such lost or destroyed certificate shall be plainly marked "duplicate" upon its
face.
<PAGE> 2
Section 3. Transfer of Shares. Shares of stock of the Corporation shall
be transferrable only upon the books of the Corporation. The old certificates
shall be surrendered to the Corporation by delivery thereof to the person in
charge of the stock transfer books of the Corporation, or to such other person
as the Board of Directors may designate, properly endorsed for transfer, and
such certificates shall be cancelled before a new certificate is issued. The
Corporation shall be entitled to treat the person in whose name any share,
right or option is registered as the owner thereof for all purposes, and shall
not be bound to recognize any equitable or other claim with respect thereto,
regardless of any notice thereof, except as may be specifically required by the
laws of the State of Michigan.
Section 4. Rules Governing Stock Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration of
certificates of stock, and may appoint a transfer agent and a registrar of
transfer, and may require all such certificates to bear the signature of such
transfer agent and/or such registrar of transfers.
Section 5. Record Date for Stock Rights. The Board of Directors may fix,
in advance, a date not exceeding sixty (60) days preceding the date of payment
of any dividend, or the date for the allotment of rights, or the date when any
change or conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the shareholders entitled to receive
payment of any such dividends, or any such allotment of rights, or to exercise
the rights with respect to any such change, conversion, or exchange of capital
stock; and in such case, only shareholders of record on the date so fixed shall
be entitled to receive payment of such dividends, or allotment of rights, or
exercise such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date is fixed.
In the event the Board of Directors shall fail to fix a record date as
provided in this Section 5 of Article II, the record date for the purposes
specified herein shall be the close of business on the day on which the
resolution of the Board of Directors relating thereto is adopted.
Section 6. Dividends. The Board of Directors, in its discretion, may
from time to time declare and direct payment of dividends or other
distributions upon its outstanding shares out of funds legally available for
such purposes, which dividends may be paid in cash, the Corporation's bonds or
the Corporation's property, including the shares or bonds of other
corporations. In the event a dividend is paid or any other distribution made,
in any part, from sources other than earned surplus, payment or distribution
thereof shall be accompanied by written notice to the shareholders (a)
disclosing the amounts by which the dividend or distribution affects stated
capital, capital surplus and earned surplus, or (b) if such amounts are not
determinable at the time of the notice, disclosing the approximate effect of
the dividend or distribution upon stated capital, capital surplus and earned
surplus, and stating that the amounts are not yet determinable.
-2-
<PAGE> 3
In addition to the declaration of dividends and other distributions
provided in the preceding paragraph of this Section 6 of Article II, the Board
of Directors, in its discretion, from time to time may declare and direct the
payment of a dividend in shares of this Corporation, upon its outstanding
shares, in accordance with and subject to the provisions of the Michigan
Business Corporation Act. A share dividend or other distribution of shares of
the Corporation shall be accompanied by a written notice to shareholders (a)
disclosing the amounts by which the distributions affects stated capital,
capital surplus and earned surplus, or (b) if such amounts are not determinable
at the time of the notice, disclosing the approximate effect of the
distribution upon stated capital, capital surplus and earned surplus, and
stating that the amounts are not yet determinable.
Section 7. Acquisition of Shares. Subject to the limitations of the
Michigan Business Corporation Act, the Board of Directors may authorize the
Corporation to acquire its own shares, and shares so acquired shall constitute
authorized but unissued shares.
Section 8. Redemption of Control Shares. Control shares acquired in a
control share acquisition, with respect to which no acquiring person statement
has been filed with the Corporation, shall, at any time during the period
ending 60 days after the last acquisition of control shares or the power to
direct the exercise of voting power of control shares by the acquiring person,
be subject to redemption by the Corporation. After an acquiring person
statement has been filed with the Corporation and after the meeting at which
the voting rights of the control shares acquired in a control share acquisition
are submitted to the shareholders, the shares shall be subject to redemption by
the Corporation unless the shares are accorded full voting rights by the
shareholders as provided in Section 798 of the Michigan Business Corporation
Act or any successor provision thereof. Redemptions of shares pursuant to this
Section 8 of Article II of the Bylaws shall be at the fair value of the shares
pursuant to procedures adopted by the Board of Directors of the Corporation.
The terms "control shares," "control share acquisition," "acquiring person
statement," "acquiring person" and "fair value" as used in this Section 8 of
Article II of the Bylaws, shall have the meanings ascribed to them,
respectively, in Chapter 7B of the Michigan Business Corporation Act or any
successor provision thereof.
ARTICLE III. SHAREHOLDERS
Section 1. Place of Meetings. Meetings of shareholders shall be held at
the registered office of the Corporation or at such other place, within or
outside the State of Michigan, as may be determined from time to time by the
Board of Directors; provided, however, if a meeting of shareholders is to be
held at a place other than the registered office of the Corporation, the notice
of the meeting shall designate such place.
Section 2. Annual Meeting. Annual meetings of shareholders for election
of directors and for such other business as may come before the meeting shall
be held on the third Tuesday of April in each year but, if such day is a legal
holiday, then the meeting shall be held on the first full business day
following, at such hour as may be fixed in the notice.
-3-
<PAGE> 4
If the annual meeting is not held as specified, the Board of Directors shall
cause a meeting to be held as soon thereafter as convenient.
Section 3. Special Meetings. Special meetings of shareholders may be
called by the Chairman of the Board, the President or the Secretary, and shall
be called by either of them pursuant to resolution therefor by the Board of
Directors.
Section 4. Record Date for Notice and Vote. For the purpose of
determining shareholders entitled to notice of and to vote at a meeting of
shareholders or an adjournment of a meeting, the Board of Directors may fix a
record date which shall not precede the date on which the resolution fixing the
record date is adopted by the Board. The date shall be not more than sixty
(60) nor less than ten (10) days before the date of the meeting. If a record
date is not fixed, the record date for determination of shareholders entitled
to notice of or to vote at a meeting of shareholders shall be the close of
business on the day next preceding the day on which notice is given or, if no
notice is given, the day next preceding the day on which the meeting is held.
When a determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders has been made as provided in this Section 4, the
determination applies to any adjournment of the meeting, unless the Board fixes
a new record date under this section for the adjourned meeting.
For the purpose of determining shareholders entitled to express consent to
or to dissent from a proposal without a meeting, the Board of Directors may fix
a record date which shall not precede the date on which the resolution fixing
the record date is adopted by the Board and shall be not more than ten (10)
days after the Board resolution. If a record date is not fixed and prior
action by the Board is required with respect to the corporate action to be
taken without a meeting, the record date shall be the close of business on the
day on which the resolution of the Board is adopted. If a record date is not
fixed and prior action by the Board is not required, the record date shall be
the first date on which a signed written consent is delivered to the
Corporation as provided in Section 407 of the Michigan Business Corporation
Act.
Section 5. Notice of Shareholder Meetings. Written notice of the time,
place and purposes of any meeting of shareholders shall be given not less than
ten (10) nor more than sixty (60) days before the date of the meeting to each
shareholder of record entitled to vote at the meeting. Such notice may be
given either by delivery in person to such shareholders or by mailing such
notice to shareholders at their addresses as the same appear on the stock books
of the Corporation.
A shareholder's attendance at a meeting, in person or by proxy,
constitutes a waiver of his objection to lack of notice or defective notice of
the meeting unless, at the beginning of the meeting, the shareholder objects to
holding the meeting or transacting business at the meeting, and constitutes a
waiver of his objection to consideration of a particular matter at the meeting
that is not within the purpose or purposes described in the meeting notice,
unless the shareholder objects to considering the matter when it is presented.
-4-
<PAGE> 5
Section 6. Voting Lists. The Corporation's officer or agent having
charge of its stock transfer books shall prepare and certify a complete list of
the shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof, which list shall be arranged alphabetically within each class and
series, and shall show the address of, and the number of shares held by each
shareholder. The list shall be produced at the time and place of the meeting
of shareholders and be subject to inspection by any shareholder at any time
during the meeting. If for any reason the requirements with respect to the
shareholder list specified in this Section 6 of Article III have not been
complied with, any shareholder, either in person or by proxy, who in good faith
challenges the existence of sufficient votes to carry any action at the
meeting, may demand that the meeting be adjourned and the same shall be
adjourned until the requirements are complied with; provided, however, that
failure to comply with such requirements does not affect the validity of any
action taken at the meeting before such demand is made.
Section 7. Voting. Except as may otherwise be provided in the Articles
of Incorporation, each shareholder entitled to vote at a meeting of
shareholders, or to express consent or dissent without a meeting, shall be
entitled to one (1) vote, in person or by proxy, for each share of stock
entitled to vote held by such shareholder, provided however, no proxy shall be
voted after three (3) years from its date unless such proxy provides for a
longer period. A vote may be cast either orally or in writing as announced or
directed by the chairperson of the meeting prior to the taking of the vote.
When an action other than the election of directors is to be taken by vote of
the shareholders, it shall be authorized by a majority of the votes cast by the
holders of shares entitled to vote thereon, unless a greater plurality is
required by express requirement of the Michigan Business Corporation Act or of
the Articles of Incorporation, in which case such express provision shall
govern and control the decision of such question. Except as otherwise expressly
required by the Articles of Incorporation, directors shall be elected by a
plurality of the votes cast at an election.
Section 8. Quorum. Shares equalling a majority of all of the voting
shares of the capital stock of the Corporation issued and outstanding
represented in person or by proxy, shall constitute a quorum at the meeting.
Meetings at which less than a quorum is represented may be adjourned by a vote
of a majority of the shares present to a further date without further notice
other than the announcement at such meeting, and when the quorum shall be
present upon such adjourned date, any business may be transacted which might
have been transacted at the meeting as originally called. Shareholders present
in person or by proxy at any meeting of shareholders may continue to do
business until adjournment, notwithstanding the withdrawal of shareholders to
leave less than a quorum.
Section 9. Conduct of Meetings. The Chairman of the Board of Directors
of the Corporation or his designee shall call meetings of the shareholders to
order and shall act as chairman of such meetings unless otherwise determined by
the affirmative vote of a majority of all the voting shares of the capital
stock of the Corporation issued and outstanding. The Secretary of the
Corporation shall act as secretary of all meetings of shareholders, but in the
absence of the Secretary at any meeting of shareholders, or his
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inability or refusal to act as secretary, the presiding officer may appoint any
person to act as secretary of the meeting.
Section 10. Inspector of Elections. The Board of Directors may, in
advance of a meeting of shareholders, appoint one or more inspectors to act at
the meeting or any adjournment thereof. In the event inspectors are not so
appointed, or an appointed inspector fails to appear or act, the person
presiding at the meeting of shareholders may, and on request of a shareholder
entitled to vote shall, appoint one or more persons to fill such vacancy or
vacancies, or to act as inspector. The inspector(s) shall determine the number
of shares outstanding and the voting power of each, the shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine challenges and
questions arising in connection with the right to vote, count and tabulate
votes, ballots or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all shareholders.
Section 11. Notification of Shareholder Proposals. The Board of
Directors of the Corporation shall submit for consideration and vote by the
shareholders, at any meetings of the shareholders, only those proposals that
are first brought before the meeting by or at the direction of the Board of
Directors, or by any shareholder entitled to vote at such meeting (a) who
submits to the Corporation a timely Notice of Proposal in accordance with the
requirements of this Section 11 and the proposal is a proper subject for action
by shareholders under Michigan law, or (b) whose proposal is included in the
Corporation's proxy materials in compliance with all the requirements set forth
in the applicable rules and regulations in the Securities and Exchange
Commission.
Each shareholder's Notice of Proposal shall set forth:
(a) The name and address of the shareholder submitting the proposal,
as they appear on the Corporation's books and records;
(b) A representation that the shareholder (i) is a holder of record
of stock of the Corporation entitled to vote at such meeting, (ii) will
continue to hold such stock through the date on which the meeting is
held, and (iii) intends to appear in person or by proxy at the meeting to
submit the proposal for shareholder vote;
(c) A brief description of the proposal desired to be submitted to
the meeting for shareholder vote and the reasons for conducting such
business at the meeting; and
(d) A description of any financial or other interest of such
shareholder in the proposal.
A Notice of Proposal must be given, either by personal delivery or by
United States mail, postage prepaid, and received by the Corporation not less
than thirty (30) days prior to the date of the originally scheduled meeting,
regardless of any adjournments thereof to
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a later date; provided that, if less than forty (40) days' notice of the
meeting of shareholders is given by the Corporation, the Notice of Proposal
must be received by the Corporation not later than the close of business on the
tenth (10th) day following the date on which the notice of the scheduled
meeting was first mailed to the shareholders.
The secretary of the Corporation shall notify a shareholder in writing
whether his or her Notice of Proposal has been made in accordance with all the
requirements of this Section 11. The chairman of the meeting may refuse to
acknowledge the proposal of any shareholder not made in compliance with all
such requirements.
ARTICLE IV. DIRECTORS
Section 1. Board of Directors. Except as may otherwise be provided in
the Articles of Incorporation or these Bylaws, the general management of the
business and affairs of the corporation shall be vested in a Board consisting
of not less than five (5) directors and not more than fifteen (15) directors,
as determined by the Board from time to time. Commencing with the annual
meeting of the shareholders at which this by-law Section 1 is adopted, the
directors shall be divided into three (3) classes, with the first class
consisting of one-third (1/3) of the total number of directors, rounded up to
the nearest whole number, the second class consisting of one-third (1/3) of the
total number of directors, rounded up to the nearest whole number, and the
third class consisting of one-third (1/3) of the total number of directors,
rounded down to the nearest whole number. The term of office of directors in
the first class shall expire at the first annual meeting of the shareholders
after their election, the second class shall expire at the second annual
meeting after their election, and the third class shall expire at the third
annual meeting after their election. At each succeeding annual meeting, a
number of directors equal to the number of the class whose term expires at the
time of the meeting shall be elected to hold office until the third succeeding
annual meeting. A director's term of office may not be shortened by a Board
action reducing the number of directors on the Board. If the Board authorizes
an increase in the number of directors in between annual meetings of the
shareholders, the new director positions so created shall be treated as
vacancies, and the new director positions shall be distributed among the three
classes of directors so that the classes will be as nearly equal in number as
possible. Vacancies in the Board of Directors may be filled by the remaining
members of the Board and each person so elected shall be a director until the
next election of directors by the shareholders. No person shall be eligible
for election as a director after he or she has attained age 65.
Section 2. Nominations for Board. Nominations for the election of
directors may be made by the Board of Directors or by a shareholder entitled to
vote in the election of directors. A shareholder entitled to vote in the
election of directors, however, may make such a nomination only if written
notice of such shareholder's intent to do so has been given, either by personal
delivery or by United States mail, postage prepaid, and received by the
Corporation (a) with respect to an election to be held at an annual meeting of
shareholders, not later than sixty (60) nor more than ninety (90) days prior to
the first anniversary of the preceding year's annual meeting (or, if the date
of the annual meeting is changed by more than twenty (20) days from such
anniversary date, within ten (10) days after the date the
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Corporation mails or otherwise gives notice of the date of such meeting), and
(b) with respect to an election to be held at a special meeting of shareholders
called for that purpose, not later than the close of business on the tenth
(10th) day following the date on which notice of the special meeting was first
mailed to the shareholders by the Corporation.
Each shareholder's notice of intent to make a nomination shall set forth:
(i) the name(s) and address(es) of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (ii) a representation
that the shareholder (a) is a holder of record of stock of the Corporation
entitled to vote at such meeting, (b) will continue to hold such stock through
the date on which the meeting is held, and (c) intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (iii) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination is to be made by the
shareholder; (iv) such other information regarding each nominee proposed by
such shareholder as would be required to be included in a proxy statement filed
pursuant to Regulation 14A promulgated under Section 14 of the Securities
Exchange Act of 1934, as amended, as now in effect or hereafter modified; and
(v) the consent of each nominee to serve as a director of the Corporation if so
elected. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the qualifications of such proposed nominee to serve as a director.
No person shall be eligible for election as a director unless nominated
(i) by a shareholder in accordance with the foregoing procedure or (ii) by the
Board of Directors.
Section 3. Place of Meetings and Records. The directors shall hold their
meetings, and maintain the minutes of the proceedings of meetings of
shareholders, Board of Directors, and executive and other committees, if any,
and keep the books and records of account for the Corporation, in such place or
places, within or outside the State of Michigan, as the Board may from time to
time determine.
Section 4. Annual Meetings of Directors. The newly elected Directors
shall hold their first meeting, without notice other than these Bylaws, at the
same place and immediately after the annual meeting of the Shareholders at
which they are elected, or the time and place of such meeting may be fixed by
consent in writing of all the Directors.
Section 5. Regular Meetings of the Board. Regular meetings of the Board
of Directors may be held at such times and places and pursuant to such notice,
if any, as may be established from time to time by resolution of the Board of
Directors.
Section 6. Special Meetings of the Board. Special meetings of the Board
of Directors may be called by the Chairman of the Board, the President or the
Secretary, and shall be called by one of them upon the written request of a
majority of the Directors. Written notice of the time and place of special
meetings of the Board shall be delivered personally or mailed to each director
at least forty-eight (48) hours prior thereto. Attendance of a Director at a
special meeting constitutes a waiver of notice of the meeting,
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except where a director attends the meeting for the express purpose of
objecting to the transaction of any business because the meeting is not
lawfully called or convened.
Section 7. Meeting Participation By Means Of Communication Equipment.
Members of the Board of Directors or any committee designated by the Board of
Directors may participate in the meeting of the Board of Directors or of such
committee by means of a conference telephone or similar communication equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
Section 8. Quorum and Vote. At all meetings of the Board or a committee
thereof, a majority of the members of the Board of Directors then in office or
members of such committee, but not less than two (2) (if there are at least two
(2) members of the Board or such committee), shall constitute a quorum for the
transaction of business. The act of a majority of the members present at any
meeting at which there is a quorum shall be the act of the Board of Directors
or the committee. If a quorum shall not be present at any meeting of the Board
of Directors or a committee, the members present thereat may adjourn the
meeting from time to time into another place without notice other than an
announcement at the meeting until a quorum shall be present.
Section 9. Action of the Board Without a Meeting. Any action required or
permitted to be taken pursuant to authorization voted at a meeting of the Board
of Directors, or any committee thereof, may be taken without a meeting if,
before or after the action, all members of the Board of Directors then in
office, or of such committee, consent thereto in writing. Such written consent
shall be filed with the minutes of the proceedings of the Board of Directors
and the consent shall have the same effect as a vote of the Board of Directors
for all purposes.
Section 10. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member of any
committee. In the absence or in the event of the disqualification of a member
of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. A committee
and each member thereof shall serve at the pleasure of the Board.
Any committee, to the extent provided in the resolution of the Board or in
these Bylaws, shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation. No
committee, however, shall have the power or authority to amend the Articles of
Incorporation or Bylaws of the Corporation, adopt an agreement of merger or
consolidation, recommend to the shareholders the sale, lease or exchange of all
or substantially all of the Corporation's property and assets, recommend to the
shareholders a dissolution of the Corporation or a
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revocation of a dissolution, or fill vacancies in the Board of Directors.
The committee shall not have the power or authority to declare a distribution,
dividend or authorize the issuance of stock unless such power is granted to
such committee by specific resolution of the Board of Directors. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. The committees
shall keep regular minutes of their proceedings and report the same to the
Board when required. If a committee is designated as an Executive Committee,
its members shall consist of the Chairman of the Board, the President, and such
other directors as shall be designated by the Board of Directors.
Section 11. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board or of any committees of which they are a member, and may be paid a
fixed sum for attendance at each meeting of the Board or such committee, or a
stated fee for serving as a director or for serving on any such committee.
ARTICLE V. OFFICERS
Section 1. Designation of Officers. The officers of the Corporation
shall consist of such officers as the Board of Directors shall determine from
time to time, and may include a Chairman of the Board, a Chief Executive
Officer, a President, a Secretary, a Treasurer, one or more Vice Presidents,
and such other or different offices as may be established by the Board of
Directors. The officers of the Corporation need not be directors or
shareholders. Any two or more offices may be held by the same person, but an
officer shall not execute, acknowledge or verify any instrument in more than
one capacity if the instrument is required by law to be executed, acknowledged
or verified by two or more officers.
Section 2. Election of Officers. The officers of the Corporation shall
be elected at the first meeting of the Board of Directors, or by action taken
pursuant to written consent, after the annual meeting of shareholders.
Officers shall hold office for the term of their election and until their
respective successors are elected and qualified, or until resignation or
removal.
Section 3. Resignation and Removal. An officer may resign by written
notice to the Corporation, which resignation is effective upon its receipt by
the Corporation or at a subsequent time specified in the notice of resignation.
The Chairman and Chief Executive Officer may be removed at any time, with or
without cause, but only on the affirmative vote of a majority of the full Board
of Directors. The President and all vice presidents, the secretary and the
treasurer may be removed at any time, with or without cause, by the Chief
Executive Officer or by majority vote of the directors present at any meeting.
Any assistant secretary or assistant treasurer, or subordinate officer or agent
appointed pursuant to Section 2 of Article V of these Bylaws may be removed at
any time, with or without cause, by a majority vote of directors present in a
meeting, by the Chief Executive Officer, or any committee or other officer in
power to do so by resolution of the Board.
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Section 4. Compensation of Officers. The Board of Directors, by
affirmative vote or a majority or Directors in office and irrespective of any
personal interest of any of them, may establish reasonable compensation of
officers for services to the Corporation.
Section 5. Chairman of the Board. The Chairman of the Board of
Directors, if one be elected, shall be elected by the directors from among the
directors then serving. The Chairman of the Board shall preside at all
meetings of the Board of Directors and meetings of the shareholders, and shall
perform such other duties as from time to time may be determined by resolution
of the Board of Directors not inconsistent with these Bylaws.
Section 6. Chief Executive Officer. The Chief Executive Officer of the
Corporation shall have such authority and shall perform such duties in the
management of the Corporation as usually are vested in or incident to the
office of a chief executive officer of a corporation. In the absence or
nonelection of the Chairman of the Board of Directors, the Chief Executive
Officer shall preside at all meetings of the Board of Directors and meetings of
the shareholders.
Section 7. President. The President of the Corporation shall have such
authority and shall perform such duties as shall be assigned to him by the
Board of Directors.
Section 8. Vice Presidents. The Vice Presidents shall have such
authority and shall perform such duties as shall be assigned to them by the
Board of Directors and may be designated by such special titles as the Board of
Directors shall approve.
Section 9. Treasurer. The Treasurer, or other officer performing the
duties of a Treasurer, shall have custody of the corporate funds and securities
and shall keep full and accurate account of receipts and disbursements in books
belonging to the Corporation. The Treasurer shall deposit all money and other
valuables in the name and to the credit of the Corporation in such depositories
as may be designated by the Board of Directors. The Treasurer shall disburse
the funds of the Corporation as may be ordered by the Board of Directors or the
Chief Executive Officer taking proper vouchers for such disbursements. The
Treasurer shall render to the Chief Executive Officer and Board of Directors,
or any member thereof, at such times as they may request within reason, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. In general the Treasurer shall perform all duties incident to
the office of Treasurer and such other duties as may be assigned by the Board
of Directors. The Treasurer may be required to give bond for the faithful
performance of his duties in such sum and with such surety, at the expense of
the Corporation, as the Board of Directors may from time to time require.
Section 10. Secretary. The Secretary shall give or cause to be given
notice or all meetings of shareholders and Directors and all other notices
required by law or by these Bylaws, and in case of his absence or refusal or
neglect to do so, any such notice may be given by the shareholders upon whose
requisition the meeting is called, as provided in these Bylaws. The Secretary
shall record all the proceedings of the meetings of the shareholders and of the
Directors in one or more books provided for that purpose. The Secretary shall
have custody of the seal of the Corporation, if one be provided, and shall
affix the same to
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all instruments requiring it when authorized by the Directors or the Chief
Executive Officer. The Secretary shall have such authority and perform such
other duties as may be assigned by the Board of Directors. All records in the
possession or custody of the Secretary shall be open to examination by the
Chairman of the Board, Chief Executive Officer and Board of Directors, or any
member thereof, during regular business hours.
Section 11. Other Offices. Other officers elected by the Board of
Directors shall have such authority and shall perform such duties in the
management of the Corporation as may be determined by resolution of the Board
of Directors not inconsistent with these Bylaws.
Section 12. Bonds. If the Board of Directors shall so require, the
treasurer, and the assistant treasurer and/or other officer or agent of the
Corporation, shall give bond to the Corporation in such amount and with such
surety as the Board of Directors may deem sufficient, conditioned upon the
faithful performance of the respective duties and offices.
ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation, and no evidences of indebtedness shall be issued in its name,
unless authorized by resolution of the Board of Directors. Such authorization
may be general or confined to specific instances.
Section 3. Checks. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, agent or agents of the
Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation, not otherwise
employed, shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may determine.
ARTICLE VII. INDEMNIFICATION
Section 1. Right to Indemnification. Each person who was or is threatened
to be made a party to or is involved in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, formal or informal
(hereinafter referred to as a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director, officer, employee or agent of the corporation or, while serving as a
director, officer, employee or agent of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, or other
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enterprise, whether for profit or not, including service with respect to
employee benefit plans, whether the basis of the proceeding is alleged action
in an official capacity as a director, officer, employee, or agent or in any
other capacity while serving as a director, officer, employee or agent, shall
be indemnified and held harmless by the corporation to the fullest extent
authorized by the Michigan Business Corporation Act (MBCA), as it exists or may
be amended (but, in the case of any such amendment, only to the extent that the
amendment permits the corporation to provide broader indemnification rights
than the MBCA permitted the corporation to provide before the amendment),
against all expenses, liability, and loss (including attorney fees, judgments,
fines, ERISA excise taxes, or penalties and amounts to be paid in settlement)
reasonably incurred by the person in connection therewith, and the
indemnification shall continue for a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of his or her heirs,
executors, and administrators; provided, however, that except with respect to
proceedings seeking to enforce rights to indemnification, the corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding, or part thereof, initiated by the person only if the proceeding, or
part thereof, was authorized by the Board of Directors of the corporation. To
the extent authorized by the MBCA, the corporation may, but shall not be
required to, pay expenses incurred in defending a proceeding in advance of its
final disposition. The right to indemnification conferred in this article
shall be a contract right.
Section 2. Non-Exclusivity of Rights. The right to indemnification
conferred in this article shall not be exclusive of any other right that any
person may have or acquire under any statute, provision of the articles of
incorporation, bylaws, agreement, vote of shareholders or disinterested
directors, or otherwise.
Section 3. Insurance. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee, or agent of the
corporation or of another corporation, partnership, joint venture, trust, or
other enterprise against any expense, liability, or loss, whether or not the
corporation would have the power to indemnify the person against the expenses,
liability, or loss under the MBCA.
Section 4. Amendment. If this Article VII is repealed, amended or
modified, it shall not affect any right or protection existing at the time of
such repeal, amendment or modification.
ARTICLE VIII. MISCELLANEOUS
Section 1. Fiscal Year. The fiscal year of this Corporation shall end on
the last Saturday of December of each year.
Section 2. Notices. Whenever any notice is required to be given under
the provisions of any law, the Articles of Incorporation for this Corporation,
or by these Bylaws, it shall not be construed or interpreted to mean personal
notice, unless expressly so stated, and any notice so required shall be deemed
to be sufficient if given in writing by mail, by depositing the same in a Post
Office box, postage prepaid, addressed to the person entitled thereto at his
last known Post Office address, and such notice shall be deemed to have been
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given on the day of such mailing. Shareholders not entitled to vote shall not
be entitled to receive notice of any meetings, except as otherwise provided by
law or these Bylaws.
Section 3. Waiver of Notice. Whenever any notice is required to be given
under the provisions of any law, or the Articles of Incorporation for this
Corporation, or these Bylaws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto.
Section 4. Voting of Securities. Securities of another corporation,
foreign or domestic, standing in the name of this Corporation which are
entitled to vote shall be voted, in person or by proxy, by the Chief Executive
Officer of this Corporation or by such other or additional persons as may be
designated by the Board of Directors.
ARTICLE IX. AMENDMENTS
Except as may otherwise be provided in the Articles of Incorporation or
these Bylaws, these Bylaws may be amended, repealed or new Bylaws adopted
either by a majority vote of the Board of Directors at a regular or special
meeting of the Board, or by vote of the holders of a majority of the
outstanding voting stock of the Corporation at any annual or special meeting,
if notice of the proposed amendment, repeal or adoption be contained in the
notice of such meeting.
The foregoing Amended and Restated Bylaws were adopted by the Board of
Directors of First Manistique Corporation on October 4, 1995.
/s/ Fred LaMuth
-------------------------------
Authorized Officer Fred LaMuth
Secretary
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EXHIBIT 10(c)
EMPLOYMENT CONTRACT
THIS CONTRACT, made and effective this 1st day of July, 194, between FIRST
NORTHERN BANK & TRUST, a Michigan banking corporation, 130 South Cedar Street,
Manistique, Michigan 49854, ("Bank"), and RONALD G. FORD, HC 01, Box 3288A,
Manistique, Michigan 49854, ("Ford"), joined in by FIRST MANISTIQUE CORPORATION
("FMC").
1. General. Bank has its main office at the above address in Manistique,
with sundry branches now operating, and further branches contemplated. Ford is
the President and Chief Executive Officer ("CEO") of Bank. Ford is also
President and CEO of FMC, which owns all the voting stock of the Bank. The
parties hereto deem it mutually desirable that this Contract be entered into be
binding upon each of them.
2. Term. Unless sooner terminated by (i) mutual agreement evidenced in
writing, or (ii) by the Board of Directors of the Bank for cause, because of
nonperformance and/or mal-performance on the part of Ford, the employment by
Bank of Ford as President and CEO shall continue for a three year term
commencing with the date hereof.
3. Extension of Contract. Unless this Contract is terminated pursuant to
another provision of this Contract, after the first calendar year during which
the Contract is in effect, the term of this Contract shall annually be extended
for one additional year, unless at least six months prior to the end of the
calendar year the Bank gives written notice to Ford that it does not intend
further to extend the Contract. For example, if the initial three year term of
the Contract were from January 1, 1994 to December 31, 1996, and the Bank did
not so notify Ford by June 30, 1995, then the term of the Contract would
automatically b extended to December 31, 1997. Likewise, if by June 30, 1996,
the Bank did not so notify Ford, the term of the Contract automatically would
be extended until December 31, 1998.
4. Duties. The duties, responsibilities and administrative authority of
Ford, absent written agreement to the contrary, shall, as President and CEO,
respectively, of the Bank and FMC, continue as presently constituted.
5. Compensation. Unless and to the extent in writing mutually agreed to
the contrary, the present compensation (salary and/or any other prevailing
benefits/benefit plan) accorded Ford as President and CEO of the Bank and FMC
shall remain unchanged and fully effective during the term hereof.
6. Change in Control. For purposes of this Contract, a Change in Control
of FMC shall be deemed to have occurred if
(a) there shall be consummated (i) any consolidation or merger of FMC in
which FMC is not the continuing or surviving corporation or pursuant
to which shares of FMC's common stock would be converted into
cash, securities or other property, other than a merger of FMC in
which the
<PAGE> 2
holders of FMC's common stock immediately prior to the merger have
the same proportionate ownership of common stock of the surviving
corporation immediately after the merger or (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transaction) of all, or substantially all, of the assets of FMC
(including, without limitation, more than 10% of FMC's equity
interest in the Bank), or
(b) the stockholders of FMC approved any plan or proposal for the
liquidation or dissolution of FMC, or
(c) except for any Employees Stock Ownership Plan of FMC or its
affiliates, any person (as such term is used in Section 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 25% or more of FMC's outstanding
common stock, or
(d) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors of
FMC shall cease for any reason to constitute a majority thereof
unless the election, or the nomination for election by FMC's
stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period.
7. Provisions Applicable in the Event of a Change in Control.
(a) If a Change in Control of FMC shall have occurred while Ford is still
an employee of the Bank, he shall be entitled to the compensation
provided in Section 8 upon the subsequent termination of his
employment with the Bank by Ford or by the Bank unless such
termination is as a result of (i) Ford's death; (ii) Ford's
Disability (as defined in Section 7(b) below; (iii) Ford's
Retirement (as defined in Section 7(c) below); (iv) Ford's
termination by the Bank for Cause (as defined in Section 2 above or
(v) Ford's decision to terminate employment other than for Good
Reason (as defined in Section 7(d) below).
(b) "Disability" is defined as Ford's incapacity due to physical or
mental illness, to have been able to perform his duties with
the Bank for a period of three consecutive months. In such event,
the Bank shall be entitled to terminate this Contract (subject to
payment of then-accrued bonus and any other benefits).
(c) The term "Retirement" as used in this Contract shall mean termination
by the Bank or Ford of Ford's employment based on his having reached
age 65 or such other age as shall have been fixed in any
arrangement established with Ford's consent.
<PAGE> 3
(d) Ford may terminate his employment for Good Reason at any time during
the term of this Contract. For purposes of this Contract "Good
Reason" shall mean any of the following (without Ford's express
written consent):
(i) the assignment to Ford by the Bank after a Change in Control
of duties inconsistent with Ford's position, duties,
responsibilities and status with the Bank immediately prior to
a Change in Control of FMC, or a change in Ford's titles or
offices as in effect immediately prior to a Change in Control
of FMC, except in connection with the termination of his
employment for Disability, Retirement or Cause or as a result
of Ford's death or by Ford other than for Good Reason;
(ii) any failure by the Bank to continue in effect any benefit
plan or arrangement in which Ford is participating at
the time of a Change in Control of FMC (or any other plans
providing Ford with substantially similar benefits,
hereinafter referred to as "Benefit Plans"), or the taking of
any action by the Bank which would adversely affect Ford's
participation in or materially reduce Ford's benefits under
any such Benefit Plan or deprive Ford of any material fringe
benefit enjoyed by Ford at the time of a Change in Control of
FMC;
(iii) any failure by the Bank to continue in effect any incentive
plan or arrangement (including, without limitation, bonus and
contingent bonus arrangements) in which Ford is
participating at the time of a Change in Control of FMC (or
any other plans or arrangements providing him with
substantially similar benefits, hereinafter referred to as
"Incentive Plans") or the taking of any action by the Bank
which would adversely affect Ford's participation in any such
Incentive Plan or reduce Ford's benefits under any such
Incentive Plan;
(iv) any failure by FMC to continue in effect any plan or
arrangement to receive securities of FMC (including,
without limitation, any plan or arrangement to receive and
exercise stock options, stock appreciation rights, restricted
stock or grants thereof) in which Ford is participating at the
time of a Change in Control of FMC (or plans or arrangement
providing him with substantially similar benefits, hereinafter
referred to as "Securities Plans") or the taking of any action
by FMC which would adversely affect Ford's participation in or
materially reduce Ford's benefits under any such Securities
Plan;
<PAGE> 4
(v) any material breach by FMC or the Bank of any provision of this
Contract; or
(vi) any failure by FMC to obtain the assumption of this Contract
by any successor or assign of FMC.
8. Payment upon Premature Termination.
(a) If, other than after a Change in Control, the Bank shall terminate
Ford's employment (other than in accordance with Section 2 above),
the Bank shall pay to Ford the balance which would otherwise be
due under this contract.
(b) If after a Change in Control the Bank shall terminate Ford's
employment other than pursuant to Section 7(b) or Section 7(c),
above, or, if Ford shall terminate his employment for Good Reason,
then Bank shall pay Ford as severance pay twenty quarterly payments
(commencing on the date of termination) each equal to 25% of the
average of his aggregate annual base salary for the three
immediately preceding years received from FMC and any of its
subsidiaries (including the Bank).
9. (a) FMC will require any successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of FMC, by
agreement in form and substance satisfactory to Ford, expressly,
absolutely and unconditionally to assume and agree to perform this
Contract in the same manner and to the same extent that FMC would
be required to perform it if no such succession or assignment had
taken place. Any failure of FMC to obtain such agreement prior to
the effectiveness of any such succession or assignment shall be a
material breach of this Contract and shall entitle Ford to
terminate his employment for Good Reason. As used in the Contract,
"FMC" shall mean FMC as hereinbefore defined and any successor or
assign to its business and/or assets as aforesaid which executes
and delivers the agreement provided for in this Section 9 or which
otherwise becomes bound by all the terms and provisions of this
Contract by operation of law. In event of failure to obtain such
agreement from a successor or assign, FMC agrees that it shall pay
or shall cause such employer to pay any amounts owed to Ford
pursuant to Section 8 hereof.
(b) This Contract shall inure to the benefit of and be enforceable by
Ford's personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. If Ford should die while any amounts are still payable
thereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this
<PAGE> 5
Contract to Ford's devisee, legatee, or other designee or, if
there be no such designee, to Ford's estate.
10. Notice. For purposes of this Contract, notices and all other
communications provided for in this Contract shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to FMC and the Bank:
Chairman of the Board
First Manistique Corporation
130 South Cedar Street
Manistique, MI 49854
If to Ford:
Mr. Ronald G. Ford
HC 01, Box 3288A
Manistique, Michigan 49854
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
11. Miscellaneous. No provisions of this Contract may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by Ford, FMC and the Bank. No waiver by any party hereto at any
time of any breach by another party hereto of, or compliance with, any
condition or provision of this Contract to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly in this
Contract. This Contract shall be governed by and construed in accordance with
the laws of the State of Michigan.
12. Validity. The invalidity or unenforceability of any provision of this
Contract shall not affect the validity or enforceability of any other provision
of this Contract, which shall remain in full force and effect. By way of
example, but not of limitation, if any payments provided for hereunder are
found to be beyond limits permissible to be paid by FMC and/or the Bank by
statute or regulation, it is intended that the payments shall be made to the
maximum of any such lesser amount as is permissible to be paid by FMC and/or
Bank.
13. FMC agrees that the services Ford performs for any of its
subsidiaries, including the Bank, ultimately redound to the benefit of FMC.
Accordingly, FMC agrees that insofar as
<PAGE> 6
the Bank, for any reason whatsoever, is unable to perform any obligations
assumed hereunder, FMC shall fully and timely perform the same.
14. FMC, THE BANK, AND FORD ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS
A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. FMC, THE BANK AND FORD
ACKNOWLEDGE THAT EACH HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL OF
CHOICE, BEFORE SIGNING THIS CONTRACT, AND FMC, THE BANK AND FORD EACH HEREBY
KNOWINGLY AND VOLUNTARILY, WITHOUT COERCION, WAIVES ALL RIGHTS TO TRIAL BY JURY
OF ALL DISPUTES BETWEEN THEM.
IN WITNESS WHEREOF, the parties have executed this Contract, effective as
of the date first above written.
FIRST NORTHERN BANK & TRUST FIRST MANISTIQUE CORPORATION
By Ernest D. King By Ernest D. King
- ------------------------------ --------------------------------
Ernest D. King Ernest D. King
Chairman of the Board Chairman of the Board
Ronald G. Ford
- ------------------------------
Ronald G. Ford
6
<PAGE> 1
EXHIBIT 21
Exhibit 21 - Subsidiaries of the Registrant.
1. First Northern Bank & Trust, incorporated in the State of Michigan,
100% owned.
2. South Range State Bank, incorporated in the State of Michigan, 100%
owned.
3. First Manistique Agency, incorporated in the State of Michigan, 100%
owned.
4. First Northern Services Company, incorporated in the State of
Michigan, 100% owned.
5. First Rural Relending Company, incorporated in the State of Michigan,
100% owned.
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
First Manistique Corporation on Form S-3 (Registration No. 33-6153), of our
report dated March 10, 1995 on the consolidated financial statements of First
Manistique Corporation as of and for each of the two years in the period ended
December 31, 1994, which report is included in the 1995 Annual Report on Form
10-K of First Manistique Corporation.
Schneider, Larche, Haapala & Company
Schneider, Larche, Haapala & Company
Escanaba, Michigan
March 21, 1996
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
First Manistique Corporation on Form S-3 (Registration No. 33-6153), of our
report dated February 9, 1996 on the 1995 consolidated financial statements of
First Manistique Corporation, which report is included in the 1995 Annual
Report on Form 10-K of First Manistique Corporation.
Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
March 21, 1996
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