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, 1996
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) 355-9200
------------------
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: 26,314,240 shares of the Company's
Common Stock ($1 par value) were outstanding as of July 31, 1996.
<PAGE>
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-
Interim Financial Statements 6
Part II. Other Information 13
Item 4.
Submission of Matters to a Vote of Security Holders 13
Item 6.
Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
June 30, December 31, June 30,
1996 1995 1995
(dollars in thousands)
<S> <C> <C> <C>
Assets
Cash and due from banks $ 126,942 $ 128,168 $ 118,557
Federal funds sold 1,450 117,100 34,500
---------- ---------- ----------
Total cash and cash
equivalents 128,392 245,268 153,057
Interest bearing deposits
with banks 1,310 5,361 3,822
Securities:
Available-for-sale 418,194 323,503 168,022
Held-to-maturity (market
values $319,696, $362,787
and $541,800 respectively) 312,374 355,412 535,401
Loans 2,345,385 2,216,947 2,111,580
Allowance for loan losses (30,363) (28,163) (26,390)
Premises and equipment 69,489 68,551 67,067
Other assets 59,799 53,728 50,495
---------- ---------- ----------
Total assets $3,304,580 $3,240,607 $3,063,054
========== ========== ==========
Liabilities and Shareholders'
Equity Deposits:
Non-interest bearing $ 332,204 $ 337,238 $ 324,199
Interest bearing:
Savings and NOW accounts 942,028 893,732 878,717
Time 1,565,525 1,582,590 1,462,085
---------- ---------- ----------
Total deposits 2,839,757 2,813,560 2,665,001
Short-term borrowings 168,534 134,323 126,511
Other liabilities 33,532 33,218 25,775
Long-term debt 4,714 5,678 7,159
---------- ---------- ----------
Total liabilities 3,046,537 2,986,779 2,824,446
---------- ---------- ----------
Shareholders' equity:
Preferred stock - no par
value; 1,000,000
shares authorized -- -- --
Common stock - $1 par
value; 50,000,000
shares authorized;
issued and outstanding:
19,736,038, 18,848,338
and 18,777,835,
respectively 19,736 18,848 18,778
Surplus 170,902 146,930 145,539
Retained earnings 69,951 86,232 73,561
Securities valuation,
net of tax (2,546) 1,818 730
---------- ---------- ----------
Total shareholders' equity 258,043 253,828 238,608
---------- ---------- ----------
Total liabilities and
shareholders' equity $3,304,580 $3,240,607 $3,063,054
========== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
(in thousands, except for per share data)
<S> <C> <C> <C> <C>
Interest Income
Interest and fees on loans $53,984 $50,383 $106,896 $97,233
Interest on securities:
Taxable 8,163 7,446 15,494 14,873
Tax-exempt 3,239 3,494 6,497 7,042
Other interest income 291 410 1,561 747
------- ------- -------- -------
Total interest income 65,677 61,733 130,448 119,895
------- ------- -------- -------
Interest Expense
Interest on deposits 29,213 28,291 59,039 53,979
Interest on short-term
borrowings 1,721 1,541 3,175 3,052
Interest on long-term debt 122 178 255 363
------- ------- ------- -------
Total interest expense 31,056 30,010 62,469 57,394
------- ------- ------- -------
Net Interest Income 34,621 31,723 67,979 62,501
Provision for loan losses 2,317 1,953 4,689 3,769
------- ------- ------- -------
Net interest income after
provision for loan losses 32,304 29,770 63,290 58,732
------- ------- ------- -------
Non-Interest Income
Service charges on deposits 3,562 3,263 6,816 6,255
Trust income 1,996 1,767 4,016 3,463
Other operating income 3,275 2,400 6,608 4,845
Securities gains (losses) (100) 16 (84) 18
------- ------ ------- -------
Total non-interest income 8,733 7,446 17,356 14,581
------- ------ ------- -------
Non-Interest Expense
Salaries and employee benefits 14,524 13,419 29,182 26,691
Occupancy 1,772 1,637 3,613 3,281
Equipment 1,737 1,465 3,401 2,903
FDIC insurance 7 1,393 14 2,787
Other operating 8,871 7,293 17,234 14,465
------- ------ ------- -------
Total non-interest expense 26,911 25,207 53,444 50,127
------- ------ ------- -------
Income Before Income Taxes 14,126 12,009 27,202 23,186
Income taxes 3,925 3,081 7,422 5,830
------- ------ ------- -------
Net Income $10,201 $ 8,928 $19,780 $17,356
======= ====== ======= =======
Net income per share $.38 $.33 $.74 $.65
Cash dividends declared per share .16 .13 .31 .26
Average shares outstanding
(in thousands) 26,822 26,626 26,784 26,594
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Six months ended June 30,
1996 1995
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 19,780 $ 17,356
--------- ---------
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 4,689 3,769
Origination of loans for sale in
secondary market (125,472) (57,344)
Proceeds from sale of loans 126,144 57,757
Gain on sale of loans (672) (413)
Realized securities (gains) losses 84 (19)
Provision for depreciation, amortization
and accretion 1,236 3,506
Deferred income taxes (737) (2)
(Increase) decrease in interest receivable (193) 315
Increase (decrease) in interest payable (847) 2,071
Other - net (539) (932)
--------- --------
Total adjustments 3,693 8,708
--------- --------
Net cash provided by operating activities 23,473 26,064
--------- --------
Cash Flows From Investing Activities
Net decrease in interest bearing deposits
with banks 4,051 144
Purchase of securities available-for-sale (189,222) (38,564)
Proceeds from sales of securities
available-for-sale 27,906 2,056
Proceeds from maturities and prepayments
of securities available-for-sale 68,137 11,325
Purchase of securities held-to-maturity (6,959) (1,421)
Proceeds from sales of securities
held-to-maturity 1,049 0
Proceeds from maturities and prepayments of
securities held-to-maturity 40,380 57,537
Net increase in loans (130,677) (153,954)
Purchase of premises and equipment
and other assets (6,139) (5,689)
--------- ---------
Net cash used in investing activities (188,906) (128,566)
--------- ---------
Cash Flows From Financing Activities
Net increase (decrease) in non-interest
bearing demand, savings and NOW deposit
accounts 43,262 (8,765)
Net increase (decrease) in time deposits (17,065) 185,934
Net increase (decrease) in short-term
borrowings 34,210 (46,268)
Repayment of long-term debt (964) (903)
Cash dividends and fractional shares (7,695) (6,479)
Proceeds from sales of stock 2,928 2,131
Common stock repurchased (6,119) (1,225)
--------- ---------
Net cash provided by financing activities 48,557 124,425
--------- ---------
Increase (decrease) in Cash and Cash
Equivalents (116,876) 21,923
Cash and Cash Equivalents, beginning
of period 245,268 131,134
--------- ---------
Cash and Cash Equivalents, end of period $ 128,392 $ 153,057
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
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 Company, 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 Company as of June 30, 1996,
June 30, 1995 and December 31, 1995 and consolidated results of
operations for the three months and six months ended June 30, 1996 and
1995.
2. On April 15, 1996, the Company acquired Arcadia Financial Corporation
(Arcadia), a one-bank holding company located in Kalamazoo, Michigan,
through the issuance of 653,749 shares of common stock (915,246 shares
adjusted for the May, 1996 stock dividend and the July, 1996 four-for-
three stock split). The acquisition has been accounted for as a pooling-
of-interests. Accordingly, the accompanying consolidated financial
statements have been restated to include the balances and results of
operations of Arcadia prior to acquisition.
3 Effective January 1, 1996, the Company adopted the accounting provisions
for the capitalization of mortgage servicing rights promulgated by
Statement of Financial Accounting Standards No. 122, "Accounting for
Mortgage Servicing Rights" ("SFAS No. 122"). Prior to the adoption of
SFAS No. 122, only purchased mortgaging servicing rights were subject to
capitalization, and the Company had no such activity.
4. One June 14, 1996, the Board of Directors of the Company approved a
four-for-three split on common shares outstanding, payable July 26, 1996
to shareholders of record July 1, 1996. Accordingly, average share data
and earnings per share have been retroactively adjusted for the stock
split.
5. The results of operations for the three months and six months ended
June 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
6. 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,
1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following is a discussion of the Company's results of operations for the
three months ended June 30, 1996 and 1995, and also provides information
relating to the Company's financial condition, focusing on its liquidity and
capital resources.
Net income of $10,201,000 for the three months ended June 30, 1996 increased
14.3% from the $8,928,000 earned during the three months ended June 30, 1995.
Earnings per share for the second quarter 1996 were $.38 versus $.33 for the
same period in 1995. The increase in earnings is primarily attributable to
improvements in net interest income and non-interest income. Offsetting this,
in part, was an increase in non-interest expense. These changes are addressed
in the analyses that follow.
<PAGE>
<TABLE>
Net Interest Income Second Quarter Year-to-date
(in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income $ 65,677 $ 61,733 $130,448 $119,895
Interest expense 31,056 30,010 62,469 57,394
Net interest income $ 34,621 $ 31,723 $ 67,979 $ 62,501
</TABLE>
The Company's second quarter 1996 net interest income of $34,621,000 increased
by $2,898,000 (9.1%) when compared with the same period of 1995. As shown in
the following table, in the second quarter of 1996 the rate on interest
earning assets at 8.85% reflected a decline of 17 basis points from the year-
ago period, while the rate for interest bearing liabilities decreased 18 basis
points from 4.89 to 4.71. These changes resulted in an increase of 1 basis
point in the interest spread for the comparative second quarters. Year-to-
date, the Company's net interest spread declined 9 basis points, while its
net interest margin decreased from 4.77% to 4.71%. The following table shows
a comparison of average volumes, effective yields earned, and rates paid
during the comparable periods.
<PAGE>
<TABLE>
TABLE 1
INTEREST EARNING ASSETS AND INTEREST BEARING
LIABILITIES BY MAJOR CATEGORIES
June 30, 1996 and 1995
--------Second Quarter Averages----------
Volumes In Thousands Yield Earned/
of Dollars Rate Paid
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Earning Assets
Loans $2,296,308 $2,082,954 9.47% 9.73%
Securities:
Taxable 531,790 496,683 6.11 5.97
Tax-exempt 205,869 218,794 9.39 9.47
Short-term investments 21,075 26,782 6.11 6.14
---------- ---------- ---- ----
Total interest earning assets 3,055,042 2,825,213 8.85 9.02
---------- ---------- ---- ----
Interest Bearing Liabilities
Savings deposits 930,453 877,646 2.84 3.25
Time deposits 1,555,454 1,443,184 5.86 5.89
Short-term borrowings 158,837 134,902 4.35 4.58
Long-term debt 4,959 7,414 9.87 9.57
---------- ---------- ---- ----
Total interest bearing
liabilities 2,649,703 2,463,146 4.71 4.89
---------- ---------- ---- ----
Interest spread $ 405,339 $ 362,067 4.14% 4.13%
========== ========== ==== ====
Net interest income margin 4.77% 4.76%
==== ====
</TABLE>
<TABLE>
----------Year-to-date Averages--------
Volumes In Thousands Yield Earned/
of Dollars Rate Paid
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Earning Assets
Loans $2,266,706 $2,036,482 9.50% 9.64%
Securities:
Taxable 508,279 497,523 6.07 5.96
Tax-exempt 206,341 223,316 9.38 9.38
Short-term investments 57,276 25,312 5.48 5.95
---------- ---------- ---- ----
Total interest earning assets 3,038,602 2,782,633 8.84 8.93
---------- ---------- ---- ----
Interest Bearing Liabilities
Savings deposits 917,190 883,742 2.84 3.27
Time deposits 1,570,401 1,402,366 5.90 5.70
Short-term borrowings 148,417 135,311 4.29 4.54
Long-term debt 5,212 7,569 9.80 9.58
---------- ----------
Total interest bearing
liabilities 2,641,220 2,428,988 4.76 4.76
---------- ----------
Interest spread $ 397,382 $ 353,645 4.08% 4.17%
========== ========== ==== ====
Net interest income margin 4.71% 4.77%
==== ====
</TABLE>
Average yields in the above table have been adjusted to a tax-equivalent
basis, and are computed using amortized cost for the securities portfolio.
Non-accruing loans are not significant for the periods presented and are
included in the average loan volumes above.
<PAGE>
Interest Earning Assets/Interest Income
Interest income for the second quarter of 1996 increased $3,944,000 (6.4%)
from the second quarter of 1995. This is due to an 8.1% increase in average
volume of earning assets during the second quarter 1996 versus 1995 offset,
in part, by the 17 basis point decline in the average yield on earning assets
from the year-ago quarter as indicated in the previous table. Virtually all
of the increase in average earning assets volume, 93% of the $229,829,000
total, is due to the growth in the loan portfolios. Average quarterly volumes
in the loan portfolios increased 10.2% from those of the second quarter 1995.
Mortgage, commercial and installment loans all showed strong average volume
percentage increases versus the prior year period averages. Considerable
strength was seen in commercial lending with an 11.6% average volume increase
due primarily to the economic health of the Company's marketplace.
With the above increasing loan demand there has been a smaller growth (3.1%)
in the average volume of investment securities. Increases in the overall
taxable portfolio yield and the tax equivalent yield of the exempt portfolio
between the periods reflect the generally rising market of investment security
yields in the last year.
Interest Bearing Liabilities/Interest Expense
The average volume of interest bearing liabilities increased by $186,557,000
when compared to the second quarter 1995. Essentially all of this 7.6%
increase occurred in the time deposit category as seen in the previous table.
This is due primarily to growth in large certificates of deposit. The rate
paid on time deposits remained essentially unchanged with a 3 basis point
decline from second quarter 1995 levels. The average rate paid on short-term
borrowings decreased with rate reduction in the Company's Cash Investment
Checking product, a one-day retail repurchase agreement for commercial
accounts. The average rate on long term debt reflects an increase as certain
lower rate obligations have been amortized as scheduled since the second
quarter 1995. The overall rate on quarterly average interest bearing
liabilities decreased 18 basis points to 4.71% in this quarter from the second
quarter 1995 average rate of 4.89%.
Asset/Liability Management
The Company maintains an asset/liability management process whereby strategies
are developed and implemented to maintain the proper level of liquidity while
maximizing net interest income and minimizing the impact on earnings from
major interest rate changes. Particular attention is placed on the Company's
interest sensitivity, which is the degree net interest income is affected by
a change in market interest rates. Monitoring the balance of assets and
liabilities that are rate sensitive within 90 days and one year is a
continuing aspect of this process. When a cumulative rate sensitive ratio
of 1.00 is maintained, both the interest income and the interest expense
increase or decline in tandem with changes in market interest rates, with
the net interest income of the Company not changing significantly as a direct
result.
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. The Company also purchases brokered certificates of deposit
(CDs) from time to time for varying periods of up to three years. Such
purchases, when they occur, are made within established Company guidelines.
Current balances represent approximately 12% <PAGE> of large CDs and 2% of
total deposits. The Company made no brokered CD purchases during the current
quarter.
Another principal source of funds derives from 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 are
liable source of funds. The Company transferred securities with an amortized
cost of $110,674,000 from the held-to-maturity (HTM) category to available-
for-sale (AFS) on December 27, 1995 as allowed by the transition provisions
in the guide to implementation of Statement of Accounting Standards No. 115
issued in November 1995. The balance sheet change between these two
securities classifications is due primarily to this transfer, as well as
purchases, primarily in the AFS category, from maturities and sales of both
HTM and AFS since the end of the second quarter of 1995.
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>
Allowance for Loan Losses Second Quarter Year-to-Date
(in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance, at beginning of period $29,417 $25,492 $28,163 $24,839
Provision for loan losses 2,317 1,953 4,689 3,769
Loans charged-off (1,747) (1,589) (3,755) (3,238)
Recoveries of loans previously
charged-off 376 534 1,266 1,020
------- ------- ------- -------
Balance, at end of period $30,363 $26,390 $30,363 $26,390
======= ======= ======= =======
</TABLE>
The provision for loan losses increased $364,000 for the second quarter versus
the 1995 period. The provision for the second quarter 1996 is consistent with
management's evaluation of the loan portfolio and its recent growth, while
giving due consideration to the consistently low non-performing asset ratios.
The reserve for loan losses as a percent of loans at June 30, 1996 is 1.29%,
up 2 basis points from the 1.27% ratio at December 31, 1995.
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 1996 increased by $577,000 compared
to the second quarter 1995. Net charge-offs as a percent of average loans
outstanding during the quarter were .24% for the second quarter of 1996 and
.20% in 1995. This ratio is within the range of management's expectations
and is considered a reflection of prudent lending practices. Non-accrual,
past due 90 day and renegotiated loans in total were .56% and .46% of total
loans outstanding at June 30, 1996 and June 30, 1995 respectively. The
Company compares favorably with the banking industry nationwide in these
credit ratios.
<PAGE>
Following are the balances constituting the nonperforming assets and loans
90 days past due and still accruing as of the end of the respective periods.
<TABLE>
June 30,
1996 1995
(in thousands)
<S> <C> <C>
Non-accrual loans $6,841 $5,579
Renegotiated loans 1,168 719
Other real estate owned 1,493 1,406
------ ------
Total nonperforming assets $9,502 $7,704
====== ======
Loans 90 days past due $5,235 $3,377
====== ======
</TABLE>
<TABLE>
Non-interest Income Second Quarter Year-to-date
(in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Total $8,733 $7,446 $17,356 $14,581
====== ====== ======= =======
</TABLE>
Non-interest income, which includes service charges on deposit accounts, loan
fees, trust and investment management fees, other operating income and
securities transactions, increased $1,287,000 (17.3%) during the three months
ended June 30, 1996 compared to the same period in 1995. Overall the non-
interest income was favorably impacted both by mortgage banking, which
consists of mortgage loan origination, sales and servicing, and by trust and
financial services revenue improvements. The largest increases were seen in
fees and gains on sale of loans amounting to approximately $975,000. By
comparison the second quarter 1995 had an relatively low level of mortgage
banking income resulting from gradually increasing mortgage interest rates
during 1995. Trust and investment management fees increased by $229,000
(13.0%) over the year ago period. This is due both to asset growth in managed
mutual funds and to trust account asset increases. Service charges on
deposits increased $299,000, or 9.2%, primarily due to inter-period volume
increases. Securities transactions in the second quarter 1996 resulted in a
$100,000 loss compared to a gain of $16,000 in the year ago quarter.
<TABLE>
Non-interest Expense Second Quarter Year-to-date
(in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Total $26,911 $25,207 $53,444 $50,127
======= ======= ======= =======
</TABLE>
Non-interest expense increased $1,704,000 (6.8%) when comparing the second
quarter of 1996 with 1995. Of the total non-interest expense increase, salary
and benefits costs and other expenses contributed to the majority of this
increase. Other operating expense increases occurred in communications
expenses, computer processing and software support, which are related to
the improved delivery of retail products and services. FDIC insurance
premiums were virtually eliminated in 1996 as a result of the Bank Insurance
Fund (BIF) achieving the statutory level for the reduction of premiums versus
a $1,393,000 expense in 1995. The decline in FDIC premiums offset increases
in other categories. Management expects FDIC insurance premiums to be
nominal in future periods presuming the continued maintenance of the BIF
at its current ratio and the Company maintaining the appropriate risk-based
capital levels.
The 8.2% increase in salary and benefits expense in the second quarter 1996
versus 1995 is due primarily to annual merit increases which approximated
4.5% corporate-wide. These merit increases along with promotional increases
and recruitment to fill certain key management positions for the
implementation of the Company's retail strategy accounted for substantially
all of the salary increase. Overall the number of full time equivalent
employees has increased by less than 1%.
<PAGE>
<TABLE>
Income Tax Expense Second Quarter Year-to-date
(in thousands) 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Total $3,925 $3,081 $7,422 $5,830
====== ====== ====== ======
</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 decline in tax-exempt income account for the increased
income tax expense between the periods. The level of tax-exempt income in
the second quarter 1996 declined by approximately $228,000 from 1995.
Capital
Following is a statement of changes in shareholders' equity, restated for the
acquisition of Arcadia on a pooling of interests basis, for the six month
period ended June 30, 1996 (in thousands):
<TABLE>
<S> <C>
Shareholders' Equity at December 31, 1995 $253,828
Net income 19,780
Shares issued upon exercise of employee stock option plans 772
Shares issued under dividend reinvestment and employee and
director stock purchase plans 2,156
Dividends to shareholders (8,010)
Change in securities valuation, net of tax (4,364)
Common stock repurchased (6,119)
Shareholders' Equity at June 30, 1996 $258,043
</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, 1996 was 7.8%, unchanged from the December 31, 1995 ratio.
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, 1996 is 10.4%, and the total risk-based
capital ratio is 11.8%. 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 June 30, 1996 and December 31, 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, 1996 is 7.7%. 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.
In addition to shareholders' equity, the Company had long-term debt of
$4,714,000 at June 30, 1996 and $5,678,000 at December 31, 1995.
<PAGE>
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 18, 1996.
The shareholders voted on the election of directors and on a proposal to amend
the Registrant's Articles of Incorporation to increase the authorized common
stock.
Following are the directors elected for terms as indicated and the results of
ballots cast for each.
<TABLE>
Shares voted
Term Shares voted "For" "Withhold Authority"
<S> <C> <C> <C>
Robert J. Kapenga 3 years 15,218,436 206,153
David M. Cassard 3 years 15,195,731 228,858
Roger A. Andersen 3 years 15,233,868 190,721
</TABLE>
The following directors continue in office: James H. Bloem, Doyle A. Hayes,
Meriam B. Leeke, Donald W. Maine, Jack H. Miller, David M. Ondersma, John W.
Spoelhof and Stephen A. Stream. Mr. Merle J. Prins did not stand for re-
election to the Board.
Following are the results of shares voted on the proposal to amend the
Articles of Incorporation to increase the authorized common stock from
24,000,000 shares to 50,000,000 shares.
Shares voted for 13,598,905
Shares voted against 1,641,090
Shares abstaining 184,594
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See exhibit index on page 16.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the second quarter 1996.
<PAGE>
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, 1996 to be signed on its behalf by the undersigned hereunto
duly authorized.
FIRST MICHIGAN BANK CORPORATION
/s/ Larry D. Fredricks
Larry D. Fredricks
(Executive Vice President and Chief Financial Officer)
/s/ William F. Anderson
William F. Anderson
(Vice President and Controller)
DATE: August 10, 1996
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith.
Exhibits Page
(11) Computation of Earnings Per Share 16
<PAGE>
<TABLE>
<CAPTION>
Part I, Exhibit (11)
COMPUTATION OF EARNINGS PER SHARE
FIRST MICHIGAN BANK CORPORATION
Three Months Six months
ended June 30, ended June 30,
1996 1995 1996 1995
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Average shares outstanding 26,391.1 26,293.1 26,373.0 26,278.0
Net effect of the assumed
exercise of stock options
(based on the treasury stock
method using higher of
either ending or average) 431.4 333.2 411.3 316.0
-------- -------- -------- --------
Total shares 26,822.5 26,626.3 26,784.3 26,594.0
======== ======== ======== ========
Net income $ 10,201 $ 8,928 $ 19,780 $ 17,356
======== ======== ======== =========
Per share amount $ .38 $ .33 $ .74 $ .65
======== ======== ======== =========
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 126,942
<INT-BEARING-DEPOSITS> 1,310
<FED-FUNDS-SOLD> 1,450
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 418,194
<INVESTMENTS-CARRYING> 312,374
<INVESTMENTS-MARKET> 319,696
<LOANS> 2,345,385
<ALLOWANCE> 30,363
<TOTAL-ASSETS> 3,304,580
<DEPOSITS> 2,839,757
<SHORT-TERM> 168,534
<LIABILITIES-OTHER> 33,532
<LONG-TERM> 4,714
0
0
<COMMON> 19,736
<OTHER-SE> 238,307
<TOTAL-LIABILITIES-AND-EQUITY> 3,304,580
<INTEREST-LOAN> 106,896
<INTEREST-INVEST> 21,991
<INTEREST-OTHER> 1,561
<INTEREST-TOTAL> 130,448
<INTEREST-DEPOSIT> 59,039
<INTEREST-EXPENSE> 62,469
<INTEREST-INCOME-NET> 67,979
<LOAN-LOSSES> 4,689
<SECURITIES-GAINS> (84)
<EXPENSE-OTHER> 53,444
<INCOME-PRETAX> 27,202
<INCOME-PRE-EXTRAORDINARY> 19,780
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,780
<EPS-PRIMARY> .74
<EPS-DILUTED> .74
<YIELD-ACTUAL> 4.71
<LOANS-NON> 6,841
<LOANS-PAST> 5,235
<LOANS-TROUBLED> 1,168
<LOANS-PROBLEM> 311
<ALLOWANCE-OPEN> 28,163
<CHARGE-OFFS> 3,755
<RECOVERIES> 1,266
<ALLOWANCE-CLOSE> 30,363
<ALLOWANCE-DOMESTIC> 30,363
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 113,890
<INT-BEARING-DEPOSITS> 3,789
<FED-FUNDS-SOLD> 56,550
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 379,675
<INVESTMENTS-CARRYING> 339,229
<INVESTMENTS-MARKET> 349,748
<LOANS> 2,252,039
<ALLOWANCE> 29,417
<TOTAL-ASSETS> 3,244,593
<DEPOSITS> 2,803,178
<SHORT-TERM> 143,939
<LIABILITIES-OTHER> 35,410
<LONG-TERM> 5,383
0
0
<COMMON> 18,851
<OTHER-SE> 237,832
<TOTAL-LIABILITIES-AND-EQUITY> 3,244,593
<INTEREST-LOAN> 52,912
<INTEREST-INVEST> 10,589
<INTEREST-OTHER> 1,270
<INTEREST-TOTAL> 64,771
<INTEREST-DEPOSIT> 29,826
<INTEREST-EXPENSE> 31,413
<INTEREST-INCOME-NET> 33,358
<LOAN-LOSSES> 2,372
<SECURITIES-GAINS> 16
<EXPENSE-OTHER> 26,533
<INCOME-PRETAX> 13,076
<INCOME-PRE-EXTRAORDINARY> 9,579
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,579
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 4.65
<LOANS-NON> 6,010
<LOANS-PAST> 4,521
<LOANS-TROUBLED> 756
<LOANS-PROBLEM> 1,033
<ALLOWANCE-OPEN> 28,163
<CHARGE-OFFS> 2,008
<RECOVERIES> 890
<ALLOWANCE-CLOSE> 29,417
<ALLOWANCE-DOMESTIC> 29,417
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10-K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 128,168
<INT-BEARING-DEPOSITS> 5,361
<FED-FUNDS-SOLD> 117,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 323,503
<INVESTMENTS-CARRYING> 355,412
<INVESTMENTS-MARKET> 362,787
<LOANS> 2,216,947
<ALLOWANCE> 28,163
<TOTAL-ASSETS> 3,240,607
<DEPOSITS> 2,813,560
<SHORT-TERM> 134,323
<LIABILITIES-OTHER> 33,218
<LONG-TERM> 5,678
0
0
<COMMON> 18,848
<OTHER-SE> 234,980
<TOTAL-LIABILITIES-AND-EQUITY> 3,240,607
<INTEREST-LOAN> 202,395
<INTEREST-INVEST> 43,200
<INTEREST-OTHER> 3,002
<INTEREST-TOTAL> 278,597
<INTEREST-DEPOSIT> 113,037
<INTEREST-EXPENSE> 119,527
<INTEREST-INCOME-NET> 129,070
<LOAN-LOSSES> 7,991
<SECURITIES-GAINS> 324
<EXPENSE-OTHER> 101,614
<INCOME-PRETAX> 50,636
<INCOME-PRE-EXTRAORDINARY> 37,312
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,312
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 4.78
<LOANS-NON> 4,754
<LOANS-PAST> 3,919
<LOANS-TROUBLED> 1,021
<LOANS-PROBLEM> 4,874
<ALLOWANCE-OPEN> 24,839
<CHARGE-OFFS> 6,845
<RECOVERIES> 2,178
<ALLOWANCE-CLOSE> 28,163
<ALLOWANCE-DOMESTIC> 28,163
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 113,241
<INT-BEARING-DEPOSITS> 6,914
<FED-FUNDS-SOLD> 52,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 201,899
<INVESTMENTS-CARRYING> 501,209
<INVESTMENTS-MARKET> 494,327
<LOANS> 2,159,353
<ALLOWANCE> 27,217
<TOTAL-ASSETS> 3,128,024
<DEPOSITS> 2,720,248
<SHORT-TERM> 125,239
<LIABILITIES-OTHER> 30,050
<LONG-TERM> 7,125
0
0
<COMMON> 18,799
<OTHER-SE> 227,563
<TOTAL-LIABILITIES-AND-EQUITY> 3,128,024
<INTEREST-LOAN> 149,027
<INTEREST-INVEST> 32,595
<INTEREST-OTHER> 1,675
<INTEREST-TOTAL> 183,297
<INTEREST-DEPOSIT> 83,149
<INTEREST-EXPENSE> 88,081
<INTEREST-INCOME-NET> 95,216
<LOAN-LOSSES> 5,833
<SECURITIES-GAINS> 36
<EXPENSE-OTHER> 75,541
<INCOME-PRETAX> 36,420
<INCOME-PRE-EXTRAORDINARY> 27,067
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,067
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
<YIELD-ACTUAL> 4.77
<LOANS-NON> 5,530
<LOANS-PAST> 3,569
<LOANS-TROUBLED> 1,236
<LOANS-PROBLEM> 1,110
<ALLOWANCE-OPEN> 24,839
<CHARGE-OFFS> 5,041
<RECOVERIES> 1,586
<ALLOWANCE-CLOSE> 27,217
<ALLOWANCE-DOMESTIC> 27,217
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
SEC Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 118,557
<INT-BEARING-DEPOSITS> 3,822
<FED-FUNDS-SOLD> 34,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 168,022
<INVESTMENTS-CARRYING> 535,401
<INVESTMENTS-MARKET> 541,800
<LOANS> 2,111,580
<ALLOWANCE> 26,390
<TOTAL-ASSETS> 3,063,054
<DEPOSITS> 2,665,001
<SHORT-TERM> 126,511
<LIABILITIES-OTHER> 25,775
<LONG-TERM> 7,159
0
0
<COMMON> 18,778
<OTHER-SE> 219,830
<TOTAL-LIABILITIES-AND-EQUITY> 3,063,054
<INTEREST-LOAN> 97,234
<INTEREST-INVEST> 21,915
<INTEREST-OTHER> 746
<INTEREST-TOTAL> 119,895
<INTEREST-DEPOSIT> 53,979
<INTEREST-EXPENSE> 57,394
<INTEREST-INCOME-NET> 62,501
<LOAN-LOSSES> 3,769
<SECURITIES-GAINS> 18
<EXPENSE-OTHER> 50,158
<INCOME-PRETAX> 23,186
<INCOME-PRE-EXTRAORDINARY> 17,356
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,356
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
<YIELD-ACTUAL> 4.77
<LOANS-NON> 5,579
<LOANS-PAST> 3,377
<LOANS-TROUBLED> 719
<LOANS-PROBLEM> 2,518
<ALLOWANCE-OPEN> 24,839
<CHARGE-OFFS> 3,238
<RECOVERIES> 1,020
<ALLOWANCE-CLOSE> 26,390
<ALLOWANCE-DOMESTIC> 26,390
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
