Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-7638
FIRST MICHIGAN BANK CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2024376
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Financial Plaza, Holland, Michigan 49423
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 396-9200
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
The number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date: 18,166,420 shares of the Company's
Common Stock ($1 par value) were outstanding as of June 30, 1995.
Page 1 of a Total of 15 Pages
The Exhibit Index Appears
on Page 14
<PAGE> 1
INDEX
Page
Number
Part I. Financial Information (unaudited):
Item 1.
Financial Statements 3
Notes to Consolidated Financial Statements 6
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information 12
Signatures 13
<PAGE> 2
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
CONSOLIDATED BALANCE SHEETS
<S> <C> <C> <C>
June 30, December 31, June 30,
1995 1994 1994
(dollars in thousands)
Assets
Cash and due from banks. . . . . . . . $ 114,362 $ 122,872 $ 103,759
Federal funds sold . . . . . . . . . . 29,650 1,150 20,700
Total cash and cash equivalents . 144,012 124,022 124,459
Interest bearing deposits with banks . 3,822 3,912 4,241
Securities:
Available-for-sale . . . . . . . . . 168,022 134,746 144,345
Held-to-maturity (market values $534,107;
$569,453 and $547,979 respectively) 523,181 579,287 545,455
Loans. . . . . . . . . . . . . . . . . 2,036,253 1,891,480 1,760,977
Allowance for loan losses. . . . . . . (25,203) (23,758) (22,627)
Premises and equipment . . . . . . . . 66,465 64,567 61,282
Other assets . . . . . . . . . . . . . 49,533 53,005 49,086
Total assets. . . . . . . . . . . $2,966,085 $2,827,261 $2,667,218
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing . . . . . . . . $ 313,272 $ 301,884 $ 266,600
Interest bearing:
Savings and NOW accounts . . . . . 851,332 872,360 891,656
Time . . . . . . . . . . . . . . . 1,410,912 1,230,425 1,146,593
Total deposits. . . . . . . . . . 2,575,516 2,404,669 2,304,849
Short-term borrowings. . . . . . . . . 126,511 172,779 121,564
Other liabilities. . . . . . . . . . . 25,126 24,531 20,921
Long-term debt . . . . . . . . . . . . 6,609 7,412 8,637
Total liabilities . . . . . . . . 2,733,762 2,609,391 2,455,971
Shareholders' equity:
Preferred stock - no par value; 1,000,000 shares
authorized . . . . . . . . . . . . . -- -- --
Common stock - $1 par value; 24,000,000 shares
authorized; issued and outstanding:
18,166,420 at June 30, 1995;
17,253,664 at December 31, 1994;
17,353,143 at June 30, 1994. . . . . 18,166 17,254 17,353
Surplus. . . . . . . . . . . . . . . . 142,560 121,603 123,881
Retained earnings. . . . . . . . . . . 70,875 81,898 71,046
Securities valuation, net of tax . . . 722 (2,885) (1,033)
Total shareholders' equity. . . . 232,323 217,870 211,247
Total liabilities and shareholders'
equity . . . . . . . . . . . . . $2,966,085 $2,827,261 $2,667,218
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans . . . . . $48,544 $36,600 $93,671 $69,681
Interest on securities: Taxable. . . 7,295 6,676 14,567 13,395
Tax-exempt. 3,482 3,592 7,019 7,169
Other interest income. . . . . . . . 342 102 659 204
Total interest income . . . . . . 59,663 46,970 115,916 90,449
Interest Expense
Interest on deposits . . . . . . . . 27,244 17,524 52,046 33,942
Interest on short-term borrowings. . 1,541 1,040 3,051 1,846
Interest on long-term debt . . . . . 163 201 333 407
Total interest expense. . . . . . 28,948 18,765 55,430 36,195
Net Interest Income. . . . . . . . . . 30,715 28,205 60,486 54,254
Provision for loan losses. . . . . . 1,880 1,529 3,628 3,092
Net interest income after
provision for loan loss . . . . 28,835 26,676 56,858 51,162
Non-Interest Income
Service charges on deposits. . . . . 3,220 2,961 6,169 5,644
Trust income . . . . . . . . . . . . 1,306 1,293 2,549 2,595
Other operating income . . . . . . . 2,730 2,446 5,515 5,926
Securities gains (losses). . . . . . 16 (145) 18 (134)
Total non-interest income . . . . 7,272 6,555 14,251 14,031
Non-Interest Expense
Salaries and employee benefits . . . 13,093 11,948 26,048 23,828
Occupancy. . . . . . . . . . . . . . 1,592 1,441 3,190 2,984
Equipment. . . . . . . . . . . . . . 1,427 1,397 2,830 2,773
FDIC Insurance . . . . . . . . . . . 1,348 1,225 2,696 2,450
Other operating. . . . . . . . . . . 7,126 6,689 14,140 13,176
Total non-interest expense. . . . 24,586 22,700 48,904 45,211
Income Before Income Taxes . . . . . . 11,521 10,531 22,205 19,982
Income taxes . . . . . . . . . . . . 2,916 2,579 5,496 4,595
Net Income . . . . . . . . . . . . . . $ 8,605 $ 7,952 $ 16,709 $ 15,387
Net income per share . . . . . . . . $.47 $.43 $.91 $.83
Cash dividends declared per share. . .19 .16 .37 .31
Average shares outstanding
(in thousands). . . . . . . . . . . 18,407 18,460 18,384 18,458
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Six Months Ended June 30,
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . $ 16,709 $ 15,387
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses. . . . . . . . . . . 3,628 3,092
Origination of loans for sale in secondary
market. . . . . . . . . . . . . . . . . . . . (57,344) (80,342)
Proceeds from sale of loans. . . . . . . . . . 57,757 80,997
Gain on sale of loans. . . . . . . . . . . . . (413) (655)
Realized securities (gains) losses . . . . . . (18) 134
Provision for depreciation, amortization
and accretion . . . . . . . . . . . . . . . . 3,400 4,369
Deferred income taxes. . . . . . . . . . . . . (24) 33
(Increase) decrease in interest receivable. . . 244 (1,545)
Increase (decrease) in interest payable. . . . 1,978 (43)
Other - net. . . . . . . . . . . . . . . . . . (410) (1,137)
Total adjustments. . . . . . . . . . . . . . 8,798 4,903
Net cash provided by operating activities. . 25,507 20,290
Cash Flows From Investing Activities
Net (increase) decrease in interest bearing
deposits with banks . . . . . . . . . . . . . . . 90 (1,557)
Purchase of securities available-for-sale. . . . . (37,159) (33,203)
Proceeds from sales of securities
available-for-sale. . . . . . . . . . . . . . . . 2,057 3,255
Proceeds from maturities and prepayments of
securities available-for-sale . . . . . . . . . . 7,220 3,753
Purchase of securities held-to-maturity. . . . . . (1,421) (42,446)
Proceeds from maturities and prepayments of
securities held-to-maturity . . . . . . . . . . . 57,537 92,083
Net increase in loans. . . . . . . . . . . . . . . (146,350) (144,747)
Purchase of premises and equipment and other
assets. . . . . . . . . . . . . . . . . . . . . . (5,694) (5,997)
Net cash used in investing activities . . . . (123,720) (128,859)
Cash Flows From Financing Activities
Net increase (decrease) in non-interest bearing
demand and savings deposits and NOW accounts. . . (9,640) 3,420
Net increase in time deposits. . . . . . . . . . . 180,487 129,096
Net increase (decrease) in short-term borrowings . (46,268) 6,701
Repayment of long-term debt. . . . . . . . . . . . (803) (708)
Cash dividends and fractional shares . . . . . . . (6,479) (5,107)
Proceeds from sales of stock . . . . . . . . . . . 2,131 1,873
Common stock repurchased . . . . . . . . . . . . . (1,225) (1,729)
Net cash provided by financing activities . . 118,203 133,546
Increase in Cash and Cash Equivalents. . . . . . . 19,990 24,977
Cash and Cash Equivalents, at Beginning of Period. 124,022 99,482
Cash and Cash Equivalents, at End of Period. . . . $ 144,012 $ 124,459
</TABLE>
<PAGE> 5
Notes to Consolidated Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
1. In the opinion of management of the Registrant, the unaudited consolidated
financial statements contained herein include all adjustments (consisting
of only normal recurring accruals) necessary to present fairly the
consolidated financial position of the Registrant as of June 30, 1995,
June 30, 1994 and December 31, 1994 and consolidated results of operations
for the three and six months ended June 30, 1995 and 1994 and consolidated
cash flows for the six months ended June 30, 1995 and 1994.
2. On March 10, 1995, First Michigan Bank Corporation (First Michigan)
acquired Superior Financial Corporation (Superior), a one bank holding
company located in Sault Ste. Marie, Michigan. The acquisition was
effected through the exchange of 22.931 shares of First Michigan common
stock (616,699 shares in total) for each outstanding share of Superior.
The acquisition was accounted for as a pooling-of-interests. Accordingly,
the accompanying consolidated statements have been restated to include
the balances and results of operation of Superior prior to the
acquisition.
3. On January 1, 1995, First Michigan adopted the accounting provisions for
impaired loans promulgated by Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan" (as amended
by Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures").
Under this new accounting standard, a loan is considered to be impaired
when it is probable that a subsidiary bank will be unable to collect all
principal and interest amounts due according to the contractual terms of
the loan agreement. Under this definition, loans that have been placed
on non-accrual status or which have been involved in a troubled debt
restructuring (TDR; also termed "renegotiated") are considered impaired.
Prior to 1995, all of those loans which would meet this newly-promulgated
definition of impairment were included in the non-accrual and
renegotiated classifications within the nonperforming loan totals
disclosed in management's discussion and analysis in First Michigan's
annual report. In accordance with the new standard, this accounting
change and the disclosures associated therewith have been adopted
prospectively.
A portion of the total allowance for loan losses is related to impaired
loans as defined under this new accounting standard. The allowance for
loan losses for an impaired loan is recorded at the amount by which the
outstanding recorded principal balance exceeds the fair market value of
the collateral on the impaired loan. For a loan that is not collateral-
dependent, the allowance for loan losses is recorded at the amount by
which the outstanding recorded principal balance exceeds the current
best estimate of the future cash flows on the loan, discounted at the
loan's effective interest rate. Prior to 1995, the portion of the total
allowance for loan losses related to loans which would meet this new
definition of impairment was also based, in most cases, on the fair
market value of the collateral on that loan. As such, the implementation
of this new accounting standard has had virtually no impact on the
operations of First Michigan.
For impaired loans that are on non-accrual status, cash payments received
on impaired loans are generally applied to reduce the outstanding
recorded principal balance of the impaired loans. However, at the
discretion of the subsidiary bank, all or a portion of a cash payment
received on a non-accrual loan may be recognized as interest income to
the extent allowed by the loan contract, provided that the borrower's
financial condition or the underlying collateral on the loan support
the collection in full of the remaining outstanding recorded principal
balance of the loan. For an impaired loan that has been involved in a
formal troubled debt restructuring, interest income is recognized on an
accrual basis according to the modified contractual terms so long as
the restructured loan continues to perform in accordance with the modified
contractual terms.
<PAGE> 6
4. The results of operations for the six months ended June 30, 1995 are not
necessarily indicative of the results to be expected for the full year.
5. The accompanying unaudited consolidated financial statements should be
read in conjunction with the Notes to Consolidated Financial Statements
contained in the Registrant's Form 10-K for the year ended December 31,
1994.
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Interim Financial Statements
The following is a discussion of First Michigan Bank Corporation's
("Company's") results of operations for the three months and six months
ended June 30, 1995 and 1994 and information relating to the Company's
financial condition, focusing on its liquidity and capital resources.
Net income of $8,605,000 for the three months ended June 30, 1995 increased
8.2% from the $7,952,000 earned during the three months ended June 30, 1994.
Earnings per share for the second quarter 1995 were $.47 versus $.43 for the
same period in 1994 and $.91 versus $.83 for the six month periods ending
June 30, 1995 and 1994 respectively. The increase in earnings is primarily
attributable to the continued growth in average earning assets and
improvements in non-interest income. Offsetting this, in part, were
increases in the provision for loan losses and non-interest expense. These
changes are addressed in the analyses that follow.
<TABLE>
Net Interest Income Second Quarter Year-to-Date
(in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income $ 59,663 $ 46,970 $115,916 $ 90,449
Interest Expense 28,948 18,765 55,430 36,195
Net Interest Income $ 30,715 $ 28,205 $ 60,486 $ 54,254
</TABLE>
The Company's second quarter 1995 net interest income of $30,715,000 increased
by $2,510,000 (8.9%) when compared with the same period of 1994. As shown in
the following table, in the second quarter of 1995 the rate on interest
earning assets increased 101 basis points from 8.00 to 9.01 while the rate
for interest bearing liabilities increased 135 basis points from 4.87 to
3.52. These changes resulted in a decrease of 34 basis points in the
interest spread. Primarily because of the decrease in spread, the net
interest margin decreased by 17 basis points when comparing the two periods.
The effect of the decrease in spread on the net interest margin was mitigated
by the 11.8% increase in average earning assets versus the second quarter of
1994. The following table shows a comparison of average volumes, effective
yields earned, and rates paid during the comparable periods.
<PAGE> 7
<TABLE>
<CAPTION>
TABLE 1
INTEREST EARNING ASSETS AND INTEREST BEARING
LIABILITIES BY MAJOR CATEGORIES
June 30, 1995 and 1994
------------Second Quarter Averages------------
Yield Earned/
Volumes Rate Paid
1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C>
Interest Earning Assets
Loans $2,010,625 $1,727,565 9.72% 8.52%
Securities: Taxable 485,308 481,107 5.98 5.53
Tax-exempt 217,641 228,505 9.49 9.46
Short-term investments 22,231 9,977 6.17 4.10
Total interest earning assets 2,735,805 2,447,154 9.01 8.00
Interest Bearing Liabilities
Savings deposits 848,768 891,091 3.20 2.56
Time deposits 1,395,441 1,102,008 5.88 4.30
Short-term borrowings 134,896 138,782 4.58 3.01
Long-term debt 6,780 8,651 9.59 9.28
Total interest bearing
liabilities 2,385,885 2,140,532 4.87 3.52
Interest spread $ 349,920 $ 306,622 4.14% 4.48%
Net interest margin 4.76% 4.93%
------------Year-to-Date Averages------------
Yield Earned/
Volumes Rate Paid
1995 1994 1995 1994
(in thousands)
Interest Earning Assets
Loans $1,965,576 $1,684,242 9.63% 8.36%
Securities: Taxable 485,612 484,059 5.98 5.52
Tax-exempt 222,179 228,366 9.39 9.44
Short-term investments 22,355 11,013 5.94 3.74
Total interest earning assets 2,695,722 2,407,680 8.92 7.87
Interest Bearing Liabilities
Savings deposits 855,099 896,091 3.23 2.52
Time deposits 1,356,636 1,072,613 5.70 4.28
Short-term borrowings 135,245 130,602 4.54 2.85
Long-term debt 6,927 8,864 9.60 9.17
Total interest bearing
liabilities 2,353,907 2,108,170 4.75 3.46
Interest spread $ 341,815 $ 299,510 4.17% 4.41%
Net interest margin 4.77% 4.84%
</TABLE>
<PAGE> 8
Average yields in the above table have been adjusted to a tax-equivalent
basis, and exclude the effect of any market value adjustments recorded under
Statement of Financial Standards No. 115.
<PAGE> 9
Interest Earning Assets/ Interest Income
Interest income for the second quarter of 1995 increased $12,692,000 (27.0%)
from the second quarter of 1994. This is due both to the increase in
average volume of earning assets during the second quarter 1995 versus 1994
and to the increase in average yield on the earning assets as indicated in
the previous table. Virtually all of the increase in average earning assets,
98% of the $288,042,000 total, is due to the growth in the loan portfolios.
Quarterly average loan volume increased 16.4% from that of the second quarter
1994. Mortgage, commercial and installment loans all showed strong increases
versus the prior year. The increase in installment loan volume was the
largest of these due to special marketing campaigns, continuing economic
strength in the Company's markets and consumer confidence. Considerable
strength was also seen in commercial loan volume due, primarily, to the
continued economic health of the Company's marketplace. The increased
average loan yield results from the overall sensitivity of the Company's
portfolios to the multiple increases in Prime Rate since the first
quarter 1994.
With the increasing loan demand there has been a small decrease in the average
volume of securities. A change in the mix of taxable securities, as maturing
investments have been replaced by higher yielding ones, resulted in a 46
basis point increase in taxable securities yield. The 5 basis point decline
seen in the yield of the tax-exempt portion of the securities portfolio is
attributable to the early retirement of certain high-yielding municipal
issues during 1994.
Interest Bearing Liabilities/Interest Expense
The volume of interest bearing liabilities increased by $245,353,000 when
compared to the second quarter 1994. All of this 11.5% increase occurred
in the time deposit category as seen in the table on the previous page.
This is due to growth in large certificates of deposit and those with
maturities of 24 months and longer. The volume growth in these deposits
is due to consumer preference for locking in higher rates, special marketing
campaigns of limited duration that have included rate incentives alone or
rate and service incentives combined, as well as utilization of large
CDs to fund loan growth. The rate paid on all deposit categories and
short-term borrowings increased with the competitive pressures in the
marketplace. The average rate on long- term debt reflects an increase as
certain lower rate obligations have been paid as scheduled since the second
quarter 1994. The overall rate on quarterly average interest bearing
liabilities increased 135 basis points to 4.87% in this quarter from the
second quarter 1994 average rate of 3.52%.
Liquidity/Source of Funds
Liquidity is monitored in order to meet the needs of customers, such as
depositors withdrawing funds or borrowers requesting funds to meet their
credit needs. The Company's current internal and external sources of funds
are adequate to meet its liquidity needs.
Deposit gathering is a principal source of funds for the Company. Development
of consumer deposits is achieved by paying competitive rates and by maintaining
an active marketing program. Larger certificates of deposit, issued to
public authorities and the private sector, also provide an important source
of funds for the Company. These certificates of deposit are purchased
primarily from within the Company's market areas and are considered a
reliable source of funds.
Another principal source of funds derives from the routine payments on loans
and the maturities of loans and securities. The Company's securities
portfolio is invested almost exclusively in investment grade issues, and,
as discussed in the next section, the Company continues to have a high-quality
loan portfolio. As a result, payments and maturities on these assets are
also a reliable source of funds.
<PAGE> 10
Externally, the Company has the ability to enter the federal funds market as
a purchaser to meet daily liquidity needs. In addition, the Company has the
ability to enter into funding arrangements with other financial institutions.
<TABLE>
Provision for Loan Losses Second Quarter Year-to-Date
(in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Total $1,880 $1,529 $3,628 $3,092
</TABLE>
The provision for loan losses increased $351,000 for the second quarter of
1995 versus the 1994 period. The provision for the second quarter 1995 is
consistent with management's evaluation of the loan portfolio and its recent
growth, while giving due consideration to the consistently low nonperforming
asset ratios. The reserve for loan losses as a percent of loans at June 30,
1995 is 1.24%, down 2 basis points from the 1.26% ratio at December 31, 1994.
In assessing the adequacy of the loan loss allowance, management considers
many factors, including changes in the type and volume of the loan portfolio,
past loan loss experience, existing and anticipated economic conditions and
other factors that might be pertinent. The amount actually provided in any
period may be more or less than actual net loan charge-offs for that period.
Net charge-offs in the second quarter 1995 increased by $666,000 compared to
the second quarter 1994. Net charge-offs as a percent of average loans
outstanding during the quarter were .20% for the second quarter of 1995 and
.08% in 1994. Despite this increase this ratio is within the range of
management's expectations and continues to reflect prudent lending practices.
Nonperforming assets, consisting of non-accrual and renegotiated loans and
other real estate owned, in total were .34% and .52% of total loans
outstanding at June 30, 1995 and June 30, 1994 respectively. The Company
continues to compare favorably with the banking industry nationwide in
these credit quality ratios.
<TABLE>
Non-interest Income Second Quarter Year-to-Date
(in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Total $7,272 $6,555 $14,251 $14,031
</TABLE>
Non-interest income, which includes service charges on deposit accounts, loan
fees, trust income, other operating income and securities transactions,
increased $717,000 (10.9%) during the three months ended June 30, 1995
compared to the same period in 1994. The increase is due primarily to
improvements in brokerage and advisory fees as well as loan fees from
increased mortgage origination and refinancing activity versus the second
quarter 1994. Included in the above total are increases in service charges
on deposits amounting to $258,000, resulting from increased fees initiated
during 1994 as well as volume increases.
<TABLE>
Non-interest Expense Second Quarter Year-to-Date
(in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Total $24,586 $22,700 $48,904 $45,211
</TABLE>
Non-interest expense increased $1,886,000 (8.3%) when comparing the second
quarter of 1995 with 1994. Of the non-interest expense increase, 5.0
percentage points are due to increases in salary and benefits costs and
.8 percentage points are due to occupancy and equipment. Increases in other
costs resulted in 2.5 percentage points of the overall increase.
<PAGE> 11
The salary and benefits costs as a category increased by 9.6% due to annual
merit increases and staffing of new branches. Additional branches and
upgrading of equipment and facilities caused the increase in the occupancy
and equipment categories as well. Management continues to monitor increases
in non-interest expense examining opportunities to enhance operating
efficiencies through functional consolidations.
<TABLE>
Income Taxes Second Quarter Year-to-Date
(in thousands) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Total $2,916 $2,579 $5,496 $4,595
</TABLE>
Fluctuations in income taxes result primarily from changes in the level of
profitability and variations in the amount of tax-exempt income. The
increase in pre-tax income and certain non-deductible expenses account for
the increased income tax expense of $337,000 between the second quarter
1995 and 1994. There was virtually no change in the level of tax-exempt
income in the second quarter 1995 versus 1994.
Capital
Following are statements of changes in shareholders' equity for the three
and six month periods ending June 30, 1995 (amounts in thousands):
<TABLE>
Second Quarter Year-to-Date
<S> <C> <C>
Shareholders' equity at beginning of period $225,167 $217,870
Net income 8,605 16,709
Shares issued upon exercise of employee
stock option plans 44 360
Shares issued under dividend reinvestment,
employee stock purchase and director stock
purchase plans 900 1,772
Dividends to shareholders (3,486) (6,770)
Change in securities valuation, net of tax 1,702 3,607
Common stock repurchased (609) (1,225)
Shareholders' equity at June 30, 1995 $232,323 $232,323
</TABLE>
Shareholder's equity is the Company's principal capital base and it is
important that it increase along with the growth in total assets in order
for adequate capital ratios to be maintained. The ratio of equity to total
assets at June 30, 1995 was 7.8% as compared to the December 31, 1994 ratio
of 7.7%.
The Federal Reserve Board provides guidelines for the measurement of capital
adequacy of bank holding companies. The Company's capital, as adjusted
under these guidelines, is referred to as risk-based capital. The Company's
Tier 1 risk-based capital ratio at June 30, 1995 is 10.5%, and total
risk-based capital ratio is 11.9%. At December 31, 1994 these ratios were
10.5% and 11.9% respectively. Minimum regulatory Tier 1 risk-based and
total risk-based capital ratios under the Federal Reserve Board guidelines
are 4% and 8% respectively.
These same capital ratios are applied at the subsidiary bank level by the
Federal Deposit Insurance Corporation under which a well-capitalized bank
is defined as one with at least a 10% risk-based capital level. All
Company subsidiary banks met this definition at December 31, 1994 and
June 30, 1995.
The capital guidelines also provide for a standard to measure risk-based
capital to total assets. This is referred to as the leverage ratio. The
Company's leverage ratio at June 30, 1995 is 7.6%. The minimum standard
leverage ratio is 3%, and virtually all financial institutions subject to
these requirements are expected to maintain a leverage ratio of 1 to 2
percentage points above the 3% minimum.
<PAGE> 12
In addition to shareholders' equity, the Company had long-term debt of
$6,609,000 at June 30, 1995 and $7,412,000 at December 31, 1994.
<PAGE> 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The registrant's annual meeting of shareholders was held on April 13, 1995.
The shareholders voted on the election of directors and on a proposal to
establish the Company's Deferred Compensation, Deferred Stock and Current
Stock Purchase Plan for Non-Employee Directors.
Following are the directors elected for terms as indicated and the results
of ballots cast for each.
<TABLE>
Shares voted Shares voted
Term "For" "Withhold Authority"
<S> <C> <C> <C>
Robert J. Kapenga 1 year 13,447,854 112,903
Doyle A. Hayes 2 years 13,428,382 132,375
Stephen A. Stream 3 years 13,448,791 111,966
John W. Spoelhof 3 years 13,448,241 112,516
Meriam B. Leeke 3 years 13,267,670 293,087
James H. Bloem 3 years 13,448,013 112,744
The following directors continue in office: Roger A. Andersen, David M.
Cassard, Merle J. Prins, Donald W. Maine, Jack H. Miller and David M. Ondersma.
Following are the results of shares voted on the proposal to establish the
Company's Deferred Compensation, Deferred Stock and Current Stock Purchase
Plan for Non-Employee Directors.
Shares voted for 12,503,562
Shares voted against 584,025
Shares abstaining 473,170
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See exhibit index on page 14
(b) Reports on Form 8-K:
There were no reports on Form 8-K
filed during the second quarter 1995.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 to be signed on its behalf by the undersigned
hereunto duly authorized.
FIRST MICHIGAN BANK CORPORATION
/s/ Larry Fredricks
Larry D. Fredricks
(Executive Vice President and Chief Financial Officer)
/s/ William F. Anderson
William F. Anderson
(Vice President and Controller)
DATE: August 3, 1995
<PAGE> 15
EXHIBIT INDEX
The following exhibits are filed herewith.
Exhibits Page
(11) Computation of Earnings Per Share 15
<PAGE> 16
Part I, Exhibit (11)
</TABLE>
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS PER SHARE
FIRST MICHIGAN BANK CORPORATION
Three Months Six Months
ended June 30, ended June 30,
1995 1994 1995 1994
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Average shares outstanding 18,169.3 18,245.4 18,158.5 18,227.5
Net effect of the assumed
exercise of stock options
(based on the treasury
stock method using higher
of either ending or average) 238.0 214.9 225.8 230.8
Total shares 18,407.3 18,460.3 18,384.3 18,458.3
Net income $8,605 $7,952 $16,709 $15,387
Per share amount $.47 $.43 $.91 $.83
</TABLE>
<PAGE> 17
