SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
____ Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to
____________________
Commission File Number: 0-12216
OLD KENT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-1986608
(State of Incorporation) (I.R.S. Employer Identification No.)
One Vandenberg Center
Grand Rapids, Michigan 49503
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (616) 771-5000
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1 Par Value
(Title of Class)
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. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to
the filing.
Aggregate Market Value as of February 28, 1994: $1,075,000,000
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common stock outstanding at February 28, 1994: 39,469,389 shares
Documents Incorporated By Reference
Portions of the registrant's proxy statement for its April 18, 1994, annual
meeting of shareholders are incorporated by reference in Part III.
-2-
PART I
Item 1. Business.
Old Kent Financial Corporation ("Old Kent") is a bank holding
company. As of December 31, 1993, Old Kent owned directly and indirectly
all of the stock of 16 commercial banks and five operating nonbank
subsidiaries which have their principal offices in various cities in
Michigan and Illinois.
Old Kent's business is concentrated in a single industry
segment--commercial banking. Old Kent's subsidiaries offer a full range of
commercial banking services. These include accepting deposits, commercial
lending, consumer financing, real estate financing, equipment leasing, bank
credit cards, debit cards, safe deposit services, automated teller
machines, cash management, electronic banking, money transfer services,
international banking services, corporate and personal trust services,
personal investment and securities brokerage services, credit life
insurance and other banking services.
The principal markets for these financial services are the
communities within the states of Michigan and Illinois in which Old Kent
subsidiaries are located and the areas immediately surrounding those
communities. As of December 31, 1993, Old Kent and its subsidiaries served
these markets through 213 banking offices located in and around those
communities. Old Kent Bank and Trust Company, which has its headquarters
in Grand Rapids, Michigan, accounted for 42% of total deposits and 45% of
total loans of Old Kent and its subsidiaries on a consolidated basis as of
December 31, 1993.
The principal source of revenues for Old Kent is interest and
fees on loans, which accounted for 51.9% of total revenues in 1993, 53.5%
in 1992, and 61.4% in 1991. Interest on securities is also a significant
source of revenue, accounting for 28.9% of total revenues in 1993, 29.7% in
1992, and 23.4% in 1991.
Old Kent has had no foreign loans at any time during the last
five years. The foreign activities of the Corporation primarily involve
time deposits with banks and placements for domestic customers of the
banks. These activities did not significantly impact the Corporation's
financial condition or results of operations. More detailed information
concerning foreign activities is contained in Note 20 to the consolidated
financial statements in Item 8 of this report.
Effective January 1, 1993, Old Kent acquired University Financial
Corporation, a one thrift holding company, headquartered in Elgin,
Illinois. The acquisition was effected by a merger of University Financial
Corporation with an Old Kent subsidiary corporation. As part of the
transaction, the thrift merged with and into Old Kent Bank (Illinois). At
-3-
the effective date, University Financial Corporation had assets totaling
approximately $275 million dollars on a consolidated basis with its thrift
subsidiary having deposits of approximately $198 million. The bank merger
gave Old Kent Bank new branches in Elgin, Dundee, and Hampshire, Illinois.
On March 1, 1994, Old Kent acquired Princeton Financial
Corp. ("Princeton"). Princeton is a mortgage company headquartered
in Orlando, Florida. It conducts a traditional mortgage lending business,
originating and servicing one- to four-family residential mortgage loans.
Princeton has both retail and wholesale mortgage operations. Its retail
operations are conducted through its headquarters in Orlando and 13
satellite offices, all of which are located in Florida. Princeton's
wholesale operations are conducted from Princeton's headquarters. For
Princeton's fiscal year ended March 31, 1993, Princeton closed
approximately $550 million in mortgages through its retail and wholesale
operations. At December 31, 1993, Princeton had assets of $65.1 million
and stockholders' equity of $5.4 million.
The respective boards of directors of Old Kent and EdgeMark
Financial Corporation ("EdgeMark") have approved an Agreement and Plan of
Merger dated as of November 1, 1993 (the "Plan of Merger"). Under the Plan
of Merger, EdgeMark will be merged with and into Old Kent - Illinois, Inc.,
a wholly owned subsidiary of Old Kent. EdgeMark stockholders will receive
shares of common stock of Old Kent having an aggregate value of
approximately $62 million. The affirmative vote of the holders of a
majority of the outstanding shares of EdgeMark common stock is required to
adopt the Plan of Merger. The transaction is subject to shareholder
approval, regulatory approvals and other conditions.
EdgeMark is a bank holding company located in Chicago, Illinois.
At December 31, 1993, EdgeMark had, on a consolidated basis, assets of $534
million, deposits of $469 million, a net loan portfolio of $350 million and
stockholders' equity of $41 million. EdgeMark owns all the stock of five
commercial banks located in Chicago, Countryside, Lombard, Lockport, and
Rosemont, Illinois, that operate eight banking offices in six Illinois
communities. EdgeMark and its subsidiaries are engaged in the commercial
banking and trust business and other related activities. The principal
market for the financial services offered by EdgeMark and its subsidiaries
is downtown Chicago and the surrounding metropolitan area. It is
anticipated that EdgeMark's subsidiary banks in Chicago, Countryside,
Lombard, and Rosemont will be consolidated with Old Kent Bank after the
merger is completed.
The business of banking is highly competitive. In addition to
competition from other commercial banks, banks face significant competition
from nonbank financial institutions. Savings associations compete
aggressively with commercial banks for deposits and loans. Credit unions
and finance companies are significant factors in the consumer loan market.
Insurance companies, investment firms and retailers are significant
competitors for some types of business. Banks compete for deposits with a
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broad spectrum of other types of investments such as mutual funds, debt
securities of corporations and debt securities of the federal government,
state governments and their respective agencies. The principal methods of
competition for financial services are price (interest rates paid on
deposits, interest rates charged on borrowings and fees charged for
services) and service (convenience and quality of services rendered to
customers).
Banks and bank holding companies are extensively regulated. Old
Kent's subsidiary banks are chartered under state law and are supervised
and regulated by the Federal Deposit Insurance Corporation ("FDIC") and
either the Financial Institutions Bureau of the State of Michigan or the
Commissioner of Banks and Trust Companies of the State of Illinois. Some
of the banks are members of the Federal Reserve System and are supervised,
examined and regulated by the Federal Reserve System. Deposits of all of
the banks are insured by the FDIC to the extent provided by law.
Federal and state laws which govern banks significantly limit
their business activities in a number of respects. Prior approval of the
Board of Governors of the Federal Reserve System ("Federal Reserve Board"),
and in some cases various other governing agencies, is required for Old
Kent to acquire control of any additional banks. The business activities
of Old Kent and its subsidiaries are limited to banking and to other
activities which are determined by the Federal Reserve Board to be closely
related to banking.
Old Kent is a legal entity separate and distinct from its
subsidiary banks and other subsidiaries. Transactions between Old Kent's
subsidiary banks are significantly restricted. There are legal limitations
on the extent to which Old Kent's subsidiary banks can lend or otherwise
supply funds to Old Kent or certain of its affiliates. In addition,
payment of dividends to Old Kent by subsidiary banks is subject to various
state and federal regulatory limitations. Federal and state banking laws
and regulations place certain restrictions on the amount of dividends and
loans a bank may make to its parent company.
Federal law contains a "cross-guarantee" provision which could
result in insured depository institutions owned by Old Kent being assessed
for losses incurred by the FDIC in connection with assistance provided to,
or the failure of, any other insured depository institution owned by Old
Kent. Under Federal Reserve Board policy, Old Kent is expected to act as a
source of financial strength to each subsidiary bank and to commit
resources to support each subsidiary bank. Under federal law, the FDIC
also has authority to impose special assessments on insured depository
institutions to repay FDIC borrowings from the United States Treasury or
other sources and to establish semiannual assessment rates on Bank
Insurance Fund ("BIF") member banks so as to maintain the BIF at the
designated reserve ratio defined in the law.
-5-
Banks are subject to a number of federal and state laws and
regulations which have a material impact on their business. These include,
among others, state usury laws, state laws relating to fiduciaries, the
Truth In Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Expedited Funds Availability Act, the Community
Reinvestment Act, electronic funds transfer laws, redlining laws, antitrust
laws, environmental laws and privacy laws. The instruments of monetary
policy of authorities such as the Federal Reserve Board may influence the
growth and distribution of bank loans, investments and deposits, and may
also affect interest rates on loans and deposits. These policies may have
a significant effect on the operating results of banks.
The nature of the business of Old Kent's subsidiaries is such
that they hold title, on a temporary or permanent basis, to a number of
parcels of real property. These include property owned for branch offices
and other business purposes as well as properties taken in or in lieu of
foreclosure to satisfy loans in default. Under current state and federal
laws, present and past owners of real property are exposed to liability for
the cost of clean up of contamination on or originating from such
properties, even if they are wholly innocent of the actions which
caused the contamination. Such liabilities can be material and can exceed
the value of the contaminated property.
Old Kent is authorized to acquire subsidiary banks in any state
in which state laws permit such acquisitions. Out-of-state bank holding
companies in any state are permitted to acquire banks located in Michigan
and Illinois if the laws of the state in which the out-of-state bank
holding company is located authorize a bank holding company located in
Michigan or Illinois to acquire ownership of banks in that state on a
reciprocal basis.
In the aggregate, Old Kent and its subsidiaries had approximately
4,745 employees at December 31, 1993. Old Kent and its subsidiaries are
equal opportunity employers whose affirmative action programs comply with
applicable federal laws and executive orders.
-6-
The following table lists Old Kent's operating subsidiaries as of
December 31, 1993:
<TABLE>
Banking Affiliates
<CAPTION>
Balance December 31, 1993 (in millions)
<S> <C> <C> <C> <C>
Assets Deposits Loans Equity
Old Kent Bank and Trust Company (Grand Rapids, MI) $4,232.9 $3,343.6 $2,477.5 $ 266.3
Old Kent Bank - Illinois (Elmhurst/Chicago, IL) 1,489.9 1,181.8 694.2 112.0
Old Kent Bank - Southwest (Kalamazoo, MI) 1,263.3 1,048.0 642.0 80.7
Old Kent Bank - Grand Traverse (Traverse City, MI) 425.6 350.7 235.7 26.5
Old Kent Bank - Central (Owosso, MI) 408.6 340.5 227.2 27.5
Old Kent Bank - East (Brighton, MI) 369.4 331.0 122.7 30.8
Old Kent Bank of Grand Haven (Grand Haven, MI) 343.1 299.9 265.3 22.8
Old Kent Bank of Holland (Holland, MI) 297.5 266.0 226.7 19.6
Old Kent Bank - Southeast (Trenton, MI) 271.3 248.3 71.1 17.7
Old Kent Bank of Gaylord (Gaylord, MI) 159.5 147.2 87.6 10.4
Old Kent Bank of Petoskey (Petoskey, MI) 147.4 133.9 114.7 9.3
Old Kent Bank of Big Rapids (Big Rapids, MI) 122.4 113.7 68.7 8.1
Old Kent Bank of Cadillac (Cadillac, MI) 111.4 99.7 71.5 7.3
Old Kent Bank of St. Johns (St. Johns, MI) 102.2 91.6 76.2 6.3
Old Kent Bank of Hillsdale (Hillsdale, MI) 99.2 91.5 62.2 6.3
Old Kent Bank of Ludington (Ludington, MI) 82.3 68.3 39.3 5.2
-7-
Non-Banking Affiliates
Hartger & Willard Mortgage Associates, Inc. (Grand Rapids, MI)
Old Kent Brokerage Services, Inc. (Grand Rapids, MI)
Old Kent Financial Life Insurance Company (Grand Rapids, MI)
Old Kent Mortgage Company (Grand Rapids, MI)
Vanguard Financial Service Corp. (Lombard, IL)
</TABLE>
The statistical information on the following pages further describes
certain aspects of the business of the registrant.
-8-
DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDER'S EQUITY; INTEREST
RATES AND INTEREST DIFFERENTIAL
<TABLE>
Average Consolidated Balance Sheets
<CAPTION>
1993 1992 1991
Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Assets
Loans (1) (2) $5,166,933 $420,702 8.14% $4,966,622 $438,379 8.83% $5,173,142 $533,522 10.31%
Taxable securities 3,070,845 222,678 7.25 2,854,410 230,082 8.06 2,165,169 188,657 8.71
Tax-exempt securities (2) 188,218 15,940 8.47 190,162 17,709 9.31 210,379 19,586 9.31
Interest-earning deposits:
Domestic 10,590 575 5.43 11,918 813 6.82 10,269 801 7.80
Foreign 61,027 3,387 5.55 51,825 3,387 6.54 100,804 8,224 8.16
Federal funds sold and resale
agreements 72,188 2,249 3.12 70,339 2,659 3.78 90,710 5,045 5.56
Trading account securities(2) 57,138 1,927 3.37 57,552 2,333 4.05 48,260 2,889 5.99
Total earning assets 8,626,939 667,458 7.74 8,202,827 695,362 8.48 7,798,733 758,724 9.73
Allowance for credit losses (131,474) (101,790) (78,095)
Cash and due from banks 377,850 350,906 333,622
Other Assets 380,318 309,968 292,848
Total Assets $9,253,633 $8,761,913 $8,347,108
Average Liabilities and
Shareholders' Equity:
Savings Deposits $3,030,380 $ 78,063 2.58% $2,761,215 $ 91,669 3.32% $2,387,584 $115,757 4.85%
Time Deposits:
Negotiable 1,059,313 35,862 3.39 909,757 37,932 4.17 917,813 59,169 6.45
Foreign 210,916 6,862 3.25 222,605 8,328 3.74 101,322 6,015 5.94
Other time 2,318,061 110,704 4.78 2,487,137 139,650 5.61 2,743,162 193,712 7.06
Total interest-bearing
deposits 6,618,670 231,491 3.50 6,380,714 277,579 4.35 6,149,881 374,653 6.09
Federal funds purchased and
repurchase agreements 452,296 12,796 2.83 565,072 18,464 3.27 425,843 22,418 5.26
Other borrowed funds 272,838 8,729 3.20 115,717 4,131 3.57 124,075 6,739 5.43
Long-term debt 2,994 264 8.82 31,176 1,412 4.53 77,644 5,999 7.73
Total interest-bearing funds 7,346,798 253,280 3.45 7,092,679 301,586 4.25 6,777,443 409,809 6.05
Demand deposits 1,024,964 905,941 859,015
Other liabilities 113,710 79,463 72,544
Shareholders' equity 768,161 683,830 638,106
Total Liabilities and
Shareholders' Equity $9,253,633 $8,761,913 $8,347,108
Fully Taxable - Equivalent
Net Interest Income $ 414,178 4.29% $393,776 4.23% $348,915 3.68%
Net Interest Income as a
Percentage of Average
Earning Assets 4.80% 4.80% 4.47%
Percentage of Total Assets:
Foreign Assets .66% .59% 1.21%
Foreign Liabilities 2.28% 2.54% 1.21%
-9-
<FN>
(1) Loan fees are included in interest income and are used to calculate average rates earned.
Non-accrual loans are included in the average loan balances.
(2) Yields are computed on a fully taxable-equivalent basis using a federal tax rate of 35% for
1993, and 34% for prior years.
</TABLE>
-10-
The changes in Old Kent's interest income and expense related to changes
in balance sheet volume as well as to changes in interest rates appears
in the following table:
<TABLE>
<CAPTION>
1993 Compared to 1992 1992 Compared to 1991
Increase (Decrease)* Increase (Decrease)*
Change in Change in
(fully taxable-equivalent, Income/ Due to Due to Income/ Due to Due to
in thousands) Expenses Volume Rate Expenses Volume Rate
<S> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Loans ($17,677) $17,315 ($34,992) ($ 95,143) ($20,702) ($ 74,441)
Taxable securities (7,404) 16,702 (24,106) 41,425 56,360 (14,935)
Tax-exempt securities (1,769) (180) (1,589) (1,877) (1,877) --
Interest-earning deposits:
Domestic (238) (84) (154) 12 120 (108)
Foreign -- 554 (554) (4,837) (3,434) (1,403)
Federal funds sold and
resale agreements (410) 68 (478) (2,386) (984) (1,402)
Trading account securities (406) (17) (389) (556) 491 (1,047)
Change in Interest Income (27,904) 34,358 (62,262) (63,362) 29,974 (93,336)
Interest-Bearing Liabilities:
Savings deposits (13,606) 8,294 (21,900) (24,088) 16,238 (40,326)
Time deposits:
Negotiable (2,070) 5,670 (7,740) (21,237) (515) (20,722)
Foreign (1,466) (419) (1,047) 2,313 5,171 (2,858)
Other (28,946) (9,113) (19,833) (54,062) (16,891) (37,171)
Federal funds purchased and
repurchase agreements (5,668) (3,385) (2,283) (3,954) 6,024 (9,978)
Other borrowed funds 4,598 5,068 (470) (2,608) (429) (2,179)
Long-term debt (1,148) (1,867) 719 (4,587) (2,711) (1,876)
Change in Interest Expense (48,306) 4,248 (52,554) (108,223) 6,887 (115,110)
Change in Net Interest Income $20,402 $30,110 ($ 9,708) $ 44,861 $23,087 $21,774
<FN>
*The change in interest due to both volume and rate has been allocated between the factors in
proportion to the relationship of the absolute dollar amounts of the change in each.
</TABLE>
-11-
INVESTMENT PORTFOLIO
The amortized cost of securities held-to-maturity and securities
available-for-sale as of the dates indicated are summarized as follows (in
thousands of dollars):
<TABLE>
<CAPTION>
December 31,
1993 1992 1991
<S> <C> <C> <C>
U.S. Treasury and federal agencies $1,962,248 $1,665,473 $1,366,879
States and political subdivisions 204,685 196,139 206,335
Mortgage-backed securities 1,385,010 1,134,101 1,103,071
Other securities 15,389 11,736 15,893
Total securities $3,567,332 $3,007,449 $2,692,178
</TABLE>
-12-
INVESTMENT PORTFOLIO (continued)
The following table shows, by class of maturities as of
December 31, 1993, the amounts and weighted average yields of securities
held-to-maturity and securities available-for-sale:
<TABLE>
<CAPTION>
MATURING
After One but After Five but
Within One Year Within Five Years Within Ten Years After Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and other U.S. govern-
ment agencies and corporations $289,369 5.46% $1,421,917 6.99% $249,203 6.67% $ 1,759 8.46%
States and other political
subdivisions(3) 70,694 5.69 77,265 9.57 39,206 9.40 17,520 10.18
Other Securities 1,569 8.75 1,615 5.62 0 -- 12,205 --
Total $361,632 5.52% $1,500,797 7.12% $288,409 7.04% $ 31,484 6.14%
<FN>
NOTES: (1) The effective yields are weighted for the scheduled maturity of each security and
weighted average yields are calculated on the basis of par value.
(2) Mortgage-backed securities of $1,385,010, having a weighted average yield of 6.32% at
December 31, 1993, are not included in the table shown above.
(3) Weighted average interest rates have been computed on a fully taxable equivalent
basis. The rates shown on securities issued by states and political subdivisions
have been restated, assuming a 35% tax rate. The amount of the adjustment, due to
restating the rates, is as follows:
Tax-Exempt Rate of Taxable
Rate Adjustment Equivalents Basis
<S> <C> <C> <C> <C>
Under 1 Year 3.70% 1.99% 5.69%
1 to 5 Years 6.22 3.35 9.57
5 to 10 Years 6.11 3.29 9.40
Over 10 Years 6.62 3.56 10.18
Total 5.45% 2.93% 8.38%
(4) The aggregate book value of the securities of no single issuer except the U.S.
Government exceeds 10 percent of Old Kent's consolidated shareholders' equity.
</TABLE>
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LOAN PORTFOLIO
For the period from January 1, 1989, to December 31, 1993, Old
Kent had no foreign loans outstanding.
The following table presents the amount of loans outstanding at
the indicated dates according to the type of loan:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991 1990 1989
(In Thousands of Dollars)
Domestic Loans -
<S> <C> <C> <C> <C> <C>
Commercial, financial and agricultural $1,351,693 $1,210,477 $1,227,273 $1,603,025 $1,909,274
Real estate-construction 136,565 177,373 181,163 141,710 135,483
Real estate-mortgage 2,823,803 2,556,837 2,727,739 2,577,625 2,036,802
Installment 1,124,415 916,376 934,248 954,745 947,699
Lease financing 55,108 46,566 40,946 40,893 40,674
Total domestic loans $5,491,584 $4,907,629 $5,111,369 $5,317,998 $5,069,932
</TABLE>
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LOAN PORTFOLIO (continued)
The following table shows the maturity of loans (excluding
residential mortgages of 1-4 family residences, installment loans and
lease financing) outstanding at December 31, 1993. Also provided are
the amounts due after one year classified according to their sensitivity
to changes in interest rates.
<TABLE>
<CAPTION>
Due in One Due in One Due After
Year or Less to Five Years Five Years
(In Thousands of Dollars)
<S> <C> <C> <C>
Commercial, financial and agricultural $ 797,061 $ 490,861 $ 63,771
Real estate-construction 92,032 40,628 3,905
Real estate-non-residential 370,090 727,506 70,383
Total $1,259,183 $1,258,995 $ 138,059
Loans due after one year:
With fixed rates $ 830,634 $ 81,774
With floating rates 428,361 56,285
Total $1,258,995 $ 138,059
</TABLE>
-15-
LOAN PORTFOLIO (continued)
The following table summarizes nonaccrual, past due and
restructured loans at the dates indicated:
<TABLE>
<CAPTION>
December 31,
1993 1992 1991 1990 1989
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
(A) Nonaccrual loans $53,330 $75,878 $92,647 $93,259 $55,429
(B) Accruing loans past due 90 days or more 9,038 9,859 11,064 13,145 12,073
(C) Restructured loans 5,426 2,288 4,226 5,912 5,476
</TABLE>
At December 31, 1993, the Company had $77,247,000 in domestic
commercial loans for which payments are presently current, but the
borrowers are currently experiencing severe financial difficulties. Those
loans are subject to constant management attention and their classification
is reviewed on a monthly basis.
Additional information with respect to nonaccrual and restructured
loans at December 31, 1993, is as follows:
<TABLE>
<S> <C>
Interest income which would have been recorded under original terms $5,410,000
Interest income recorded during the period $1,107,000
</TABLE>
Loan performance is reviewed regularly by loan review personnel,
loan officers and senior management. Loans are placed on nonaccrual status
when principal or interest is past due 90 days or more and the loan is not
well-secured and in the process of collection, or when reasonable doubt
exists concerning collectibility of interest or principal. Any interest
previously accrued but not collected is reversed and charged against current
earnings.
-16-
LOAN PORTFOLIO (continued)
Foreign Outstandings: A summary of significant foreign
outstandings for the three years ended December 31, 1993, is as follows:
<TABLE>
<CAPTION>
Outstandings to Foreign
Banks and Percent
other financial of total
institutions(1) Total assets
(Dollars in Thousands)
<S> <C> <C> <C>
At December 31, 1993
All Countries(2) $ 21,992 $ 21,992 .22%
At December 31, 1992
All Countries(2) $ 56,427 $ 56,427 .65%
At December 31, 1991
All Countries(2) $110,785 $110,785 1.26%
<FN>
(1) All foreign outstandings at the dates indicated were to banks and other financial institutions.
These consist primarily of interest-earning deposits with foreign banks and foreign branches of
U.S. banks.
(2) Outstandings in each unnamed country were less than .75% of Old Kent's total assets.
</TABLE>
-17-
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes loan balances at the end of each
period and daily averages; changes in the allowance for credit losses
arising from loans charged off and recoveries on loans previously charged
off, by loan category; and additions to the allowance which have been
charged to expense:
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990 1989
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Amount of loans outstanding at end
of period (net of unearned interest) $5,491,584 $4,907,629 $5,111,369 $5,317,998 $5,069,932
Daily average amount of loans outstanding
for the period (net of unearned interest) $5,166,933 $4,966,622 $5,173,142 $5,186,627 $4,927,935
Balance of allowance for credit
losses at beginning of period $ 120,790 $87,025 $73,080 $64,769 $57,296
Allowances of purchased entities 2,105 -- -- -- --
Allowances of sold entities -- -- -- -- (432)
Loans charged off:
Commercial, financial and
agricultural 7,657 15,930 13,953 14,241 12,552
Real estate-construction 1,198 500 570 -- 556
Real estate-mortgage 7,879 10,007 8,410 6,832 737
Installment 7,092 8,318 9,889 8,579 7,935
Lease Financing 1,007 834 954 1,134 836
Total loans charged off 24,833 35,589 33,776 30,786 22,616
</TABLE>
-18-
SUMMARY OF LOAN LOSS EXPERIENCE (continued)
<TABLE>
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990 1989
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Recoveries of loans previously charged off:
Commercial, financial and
agricultural $3,246 $5,618 $3,844 $3,989 $3,507
Real estate-construction 76 122 79 5 --
Real estate-mortgage 2,416 2,577 984 321 275
Installment 2,721 2,932 2,780 2,593 2,161
Lease Financing 207 393 222 92 468
Total recoveries 8,666 11,642 7,909 7,000 6,411
Net loan charge-offs 16,167 23,947 25,867 23,786 16,205
Additions to allowance charged
to operating expense (1) 33,997 57,712 39,812 32,097 24,110
Allowance at end of period $140,725 $120,790 $87,025 $73,080 $64,769
Ratio of net charge-offs during
period to average loans outstanding .31% 0.48% 0.50% 0.46% 0.33%
<FN>
(1) The provision for credit losses charged to expense is based on credit loss experience and such
other factors as, in management's judgment, deserve current recognition in maintaining an
adequate allowance for credit losses. These other factors include, but are not limited to, a
review of current economic conditions as they relate to loan collectibility and reviews of
specific loans to evaluate their collectibility. Loan performance is reviewed regularly by
loan review personnel, loan officers and senior management. The allowance for credit losses is
established by charges to operations based on management's evaluation of loans, economic
conditions and other factors considered necessary to maintain the allowance at a level adequate
to absorb probable losses. The allowance for credit losses is based on estimates, and ultimate
losses may vary from the current estimates. These estimates are reviewed periodically and, as
adjustments become necessary, they are reported in earnings in the periods in which they become
known.
</TABLE>
-19-
SUMMARY OF LOAN LOSS EXPERIENCE (continued)
The allowance for credit losses has been allocated according
to the amount deemed to be reasonably necessary to provide for the
probable losses being incurred within the following categories at the
dates indicated:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992 December 31, 1991 December 31, 1990 December 31, 1989
Percent Percent Percent Percent Percent
of Loans of Loans of Loans of Loans of Loans
in in in in in
Category Category Category Category Category
to Total to Total to Total to Total to Total
Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial,
financial and
agricultural $45,000 24.6% $40,000 24.7% $33,000 24.0% $28,000 30.0% $27,000 37.6%
Real estate-
construction 3,000 2.5 3,000 3.6 2,000 3.5 1,500 2.7 1,000 2.7
Real estate-
mortgage 35,000 51.4 30,000 52.1 21,000 53.4 15,000 48.5 8,500 40.2
Installment 26,000 20.5 16,000 18.7 12,500 18.3 12,000 18.0 10,000 18.7
Lease Financing 900 1.0 860 0.9 725 0.8 700 0.8 600 0.8
Not allocated 30,825 n/a 30,930 n/a 17,800 n/a 15,880 n/a 17,669 n/a
$140,725 100% $120,790 100% $87,025 100% $73,080 100% $64,769 100%
</TABLE>
-20-
DEPOSITS
The daily average amounts of deposits and rates paid on such
deposits for the periods indicated are:
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1992 1991
Amount Rate Amount Rate Amount Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
In Domestic Offices:
Non-interest-bearing demand deposits $1,024,964 $ 905,941 $ 859,015
Savings deposits 3,030,380 2.58% 2,761,215 3.32% 2,387,584 4.85%
Time deposits 3,377,374 4.34 3,396,894 5.22 3,660,975 6.91
In Foreign Office:
Time deposits 210,916 3.25 222,605 3.74 101,322 5.94
Total $7,643,634 $7,286,655 $7,008,896
</TABLE>
The time remaining until maturity of time deposits (all of which are time
certificates of deposit) of $100,000 or more at December 31, 1993, is as
follows:
<TABLE>
<CAPTION>
Time Certificates
of Deposit
(Dollars in Thousands)
<S> <C>
3 months or less $ 897,202
Over 3 through 6 months 109,776
Over 6 through 12 months 46,450
Over 12 months 63,619
Total $1,117,047
Time deposits in the foreign office are all in amounts of $100,000 or more.
</TABLE>
-21-
<TABLE>
RETURN ON EQUITY AND ASSETS
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Return on average common equity 16.65% 16.25% 14.57%
Return on average total equity 16.65 16.25 14.57
Return on average assets 1.38 1.27 1.11
Average total equity to average total assets 8.30 7.80 7.64
Dividend payout ratio 34.1 33.3 35.6
</TABLE>
SHORT-TERM BORROWED FUNDS
Short-term borrowed funds consist of bank notes, federal funds
purchased and securities sold under agreements to repurchase, and treasury
tax and loan demand notes. The following amounts and rates applied during
the last three years:
<TABLE>
<CAPTION>
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase: Aggregate Short-Term Borrowings
1993 1992 1991 1993 1992 1991
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts outstanding
at year-end $484,658 $481,339 $509,979 $958,295 $627,161 $695,405
Average amount
outstanding
during year $452,296 $565,072 $425,843 $725,134 $680,789 $549,917
Maximum amount
outstanding at
any month-end $529,327 $693,227 $549,143 $958,295 $800,179 $695,405
Weighted average
interest rate
at year-end 2.77% 2.88% 3.86% 2.96% 2.85% 3.91%
Weighted average
interest rate
during year 2.83% 3.27% 5.26% 2.97% 3.32% 5.30%
The weighted average interest rates are derived by dividing the interest expense for the
period by the daily average balance during the period.
</TABLE>
-22-
Item 2. Properties.
The executive offices of Old Kent and the main office of Old Kent
Bank and Trust Company are located in an office complex in downtown Grand
Rapids, Michigan. This complex consists of two interconnected buildings,
including a 10-story office building. Approximately 65% of the 281,000
square feet of space in the complex is occupied by Old Kent and Old Kent
Bank and Trust Company. The balance is leased to others for terms of
varying lengths.
Old Kent's operations center is housed in two buildings located
near Grand Rapids. The two buildings, which have a total of 340,000 square
feet, are owned by Old Kent Bank and Trust Company.
Banking offices of Old Kent Bank (Illinois) in Chicago, Illinois,
are located in space leased in the Sears Tower in Chicago, Illinois. The
leased premises consist of approximately 25,000 square feet on the street,
concourse and mezzanine levels of the building.
Old Kent's subsidiary banks conduct business from a total of 213
banking offices. These offices are located in or in the vicinity of the
cities in which the banks have their main offices. Of the banking offices,
162 are owned by the banks or their subsidiaries, and 51 are leased from
various independent parties for various lease terms.
Item 3. Legal Proceedings.
Old Kent's subsidiaries are parties, as plaintiff or defendant,
to a number of legal proceedings, none of which is considered material, and
all of which arose in the ordinary course of their operations.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
-23-
Supplemental Item. Executive Officers of the Registrant.
Old Kent's executive officers are appointed annually by, and
serve at the pleasure of, the Old Kent board of directors. Biographical
information concerning executive officers who are not directors or
nominated for election to the board of directors is presented below:
Martin J. Allen, Jr. (age 57) has been secretary of Old Kent
since 1986 and a senior vice president of Old Kent since 1985.
Prior to that, he served Old Kent in various other executive
capacities. Mr. Allen is also a member of Old Kent's Management
Committee.
David A. Dams (age 41) has been an executive vice president
of Old Kent Bank and Trust Company since 1986. Prior to that, he
served Old Kent in various other executive capacities. Mr. Dams
is also a member of Old Kent's Management Committee and a
director of Old Kent Financial Life Insurance Company, an Old
Kent subsidiary.
E. Philip Farley (age 54) has been an executive vice
president of Old Kent Bank and Trust Company since 1987. Prior
to that, he served Old Kent in various other executive
capacities. Mr. Farley is also a member of Old Kent's Management
Committee.
Ralph W. Garlick (age 57) has been an executive vice
president-senior credit officer of Old Kent since 1989. He was
an executive vice president of Old Kent Bank and Trust Company
from 1984 until 1989. Prior to that, he served Old Kent in
various other executive capacities. Mr. Garlick is also a member
of Old Kent's Management Committee.
Richard L. Haug (age 54) has been a senior vice president
and general auditor of Old Kent since 1986.
Charles W. Jennings, Jr. (age 54) has been a senior vice
president of human resources of Old Kent since 1984. Prior to
that, he served Old Kent in various other executive capacities.
Mr. Jennings is also a member of Old Kent's Management Committee.
Kevin T. Kabat (age 37) has been a senior vice president and
manager of corporate operations and technology of Old Kent since
1993. He was a senior vice president and manager of corporate
operations from 1990 until 1993, and a vice president and
director of human resources of Old Kent Bank and Trust Company
from 1986 until 1990. Prior to that, he served Old Kent in
various other executive capacities. Mr. Kabat is also a member
of Old Kent's Management Committee.
-24-
David L. Kerstein (age 50) became an executive vice
president, retail banking, of Old Kent and Old Kent Bank and
Trust Company in 1992. Prior to that, he was a senior vice
president of Bank One (Texas), a bank, from 1990 until 1992, and
a senior vice president of Citibank FSB (Chicago), a bank, from
1987 until 1990. Mr. Kerstein is also a member of Old Kent's
Management Committee.
Leigh I. Sherman (age 45) has been a senior vice president
and marketing director of Old Kent since 1989. He was formerly a
senior vice president and marketing director of American Security
Bank for over 5 years. Mr. Sherman is also a member of Old
Kent's Management Committee.
Robert H. Warrington (age 46) has been president of Old Kent
Mortgage Company, an indirect subsidiary of Old Kent, since 1993.
He was a senior vice president of Old Kent Bank and Trust Company
from 1988 until 1993. Prior to that, he served Old Kent in
various other executive capacities. Mr. Warrington is also a
director of Old Kent Mortgage Company, president and a director
of Old Kent Mortgage Services Inc., Chairman of the Board and
a director of Princeton Financial Corporation, and a member of
Old Kent's Management Committee.
Thomas D. Wisnom (age 55) has been an executive vice
president of Old Kent since 1985. Prior to that, he served Old
Kent in various other executive capacities. Mr. Wisnom is also a
member of Old Kent's Management Committee and is also Chairman of
the Board, President and Chief Executive Officer of Old Kent
Bank-Southeast.
Richard W. Wroten (age 41) has been an executive vice
president and chief financial officer of Old Kent since September
1991. From 1989 until 1991 he was an executive vice president
and chief financial officer of First City Bancorporation of
Texas, Inc., a bank holding company, and chief financial officer
and a director of First City, Texas-Houston N.A., a commercial
bank. 1 Until 1989, Mr. Wroten was a partner of Arthur Andersen &
Co., an accounting firm. Mr. Wroten is also a member of Old
Kent's Management Committee and a director of Old Kent Financial
Life Insurance Company and Old Kent Mortgage Company, Old Kent
subsidiaries.
________________________________
1 On October 30, 1992, over a year after Mr. Wroten joined Old Kent,
First City, Texas-Houston N.A. was placed in Federal Deposit Insurance
Corporation receivership by bank regulators, and an involuntary, but
uncontested, petition was filed placing First City Bancorporation of
Texas, Inc., into a proceeding under Chapter 11 of the Federal Bankruptcy
Code.
-25-
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Old Kent has paid regular cash dividends every quarter since it
was organized as a bank holding company in 1972. The following table
summarizes the quarterly cash dividends paid to shareholders of common
stock during the last two years, adjusted for a three-for-two stock split
paid in September of 1992:
<TABLE>
<CAPTION>
Quarter 1993 1992
<S> <C> <C> <C>
1st $ 26 $.20 2/3
2nd .26 .20 2/3
3rd .26 .23
4th .29 .26
Total $1.07 $.90 1/3
</TABLE>
The earnings of Old Kent's subsidiary banks are the principal
source of funds to pay cash dividends. Consequently, cash dividends are
dependent upon the earnings, capital needs, regulatory constraints and
other factors affecting each individual bank. Based on the projected
earnings and liquidity, management expects the Corporation to declare and
pay regular quarterly cash dividends on its common shares in 1994.
Old Kent Common Stock is traded over the counter and is quoted in
the NASDAQ National Market System under the symbol OKEN. The following
table sets forth the range of bid prices quoted on the National Market
System for Old Kent Common Stock for the periods indicated, adjusted for a
three-for-two stock split paid September 15, 1992. These quotations
reflect inter-dealer prices, without retail mark-up, mark-downs or
commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Period 1993 1992
Low High Low High
<S> <C> <C> <C> <C>
First Quarter $32.63 $37.38 $22.50 $27.33
Second Quarter 30.38 37.50 25.17 28.67
Third Quarter 32.25 35.38 26.75 30.25
Fourth Quarter 29.75 35.63 26.25 34.25
</TABLE>
As of February 28, 1994, there were 39,469,389 shares of Old Kent Common
Stock issued and outstanding, held by approximately 12,800 holders of
record.
-26-
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
(Dollars in thousands,
except per share data) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
For the Year
Net interest income $ 406,740 $ 385,608 $ 339,198 $ 311,253 $ 289,630
Provision for credit losses 33,997 57,712 39,812 32,097 24,110
Net income 127,902 111,091 92,981 87,476 85,397
Cash dividends 43,380 36,413 31,492 29,041 27,761
Average for the Year
Assets $9,253,633 $8,761,913 $8,347,108 $7,975,849 $7,984,582
Deposits 7,643,634 7,286,655 7,008,896 6,716,032 6,679,455
Loans 5,166,933 4,966,622 5,173,142 5,186,627 4,927,935
Total interest-earning assets 8,626,939 8,202,828 7,798,733 7,413,607 7,396,173
Long-term debt 2,994 31,176 77,644 83,313 89,530
Shareholders' equity 768,161 683,830 638,106 585,997 567,191
At Year-end
Assets $9,855,704 $8,698,574 $8,826,139 $8,205,041 $8,127,210
Deposits 7,971,152 7,253,540 7,313,979 6,960,865 6,780,206
Loans 5,491,584 4,907,629 5,111,369 5,317,998 5,069,932
Long-term debt 1,215 16,217 74,734 80,937 87,550
Shareholders' equity 812,767 726,277 672,610 607,636 600,102
Per Common Share** (in dollars)
Net income:
Primary $ 3.14 $ 2.75 $ 2.31 $ 2.19 $ 2.15
Fully diluted 3.14 2.71 2.21 2.08 1.93
Cash dividends 1.07 .90 1/3 .78 2/3 .72 1/3 .63 2/3
Book value at year-end:
Primary $ 20.05 $ 17.96 $ 16.75 $ 15.22 $ 14.93
Fully diluted 20.05 17.96 16.74 15.21 14.05
Dividend payout ratio 34.1% 33.3% 35.6% 34.8% 33.0%
Performance Measurements
Return on average common equity 16.65% 16.25% 14.57% 14.96% 15.29%
Return on average total equity 16.65 16.25 14.57 14.93 15.06
Return on average assets 1.38 1.27 1.11 1.10 1.07
Average total equity to average
assets 8.30 7.80 7.64 7.35 7.10
Yield on average interest-earning
assets 7.74 8.48 9.73 10.54 10.64
Cost of average interest-bearing
liabilities 3.45 4.25 6.05 7.13 7.55
Net interest spread 4.29 4.23 3.68 3.41 3.09
Net interest margin 4.80 4.80 4.47 4.36 4.10
-27-
Capital Ratios at Year-end
Equity to assets 8.25% 8.35% 7.62% 7.41% 7.38%
Tangible equity to tangible assets 7.78 7.83 7.06 6.80 6.74
Risk-based capital ratio - Tier 1 12.73 12.82 11.11 9.59 9.75
Risk-based capital ratio -
Tiers 1 & 2 13.99 14.13 13.36 12.21 12.44
Credit Quality Ratios
Credit loss reserve to total loans 2.56% 2.46% 1.70% 1.37% 1.28%
Nonperforming assets to total loans 1.24 1.76 2.16 1.97 1.26
Nonperforming assets to total assets 0.69 .99 1.25 1.28 .79
Credit loss reserve to nonperforming
assets 206 140 79 70 101
Net charge-offs to average loans 0.31 .48 .50 .46 .33
<FN>
__________________________
**Per share amounts are adjusted for a three-for-two stock split paid September 15,
1992.
</TABLE>
-28-
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
This financial review presents management's discussion and
analysis of financial condition and results of operations. This discussion
should be read in conjunction with the consolidated financial statements in
Item 8, the selected financial data in Item 6, and the financial
statistical presentation in Item 1.
Overview
Net income for 1993 was $127.9 million, the highest in Old Kent's
twenty-one year history as a bank holding company. This represented a
15.1% increase over net income of $111.1 million for 1992. Fully diluted
net income per share was $3.14 for 1993, up by 15.9% over the $2.71 fully
diluted net income per share for 1992. Old Kent has reported increases in
its annual per share earnings in each of the twenty-one years since the
holding company was formed in 1972. Net income has increased at a compound
annual growth rate of 10.7% over the last five years, and fully diluted net
income per common share has grown at an annual compound rate of 12.4% over
that same period.
Effective with the fourth quarter of 1993, the quarterly cash
dividend rate on common stock was increased to $.29 per share. The new
annualized rate of $1.16 per share is 11.5% greater than the rate paid in
the fourth quarter of 1992. Old Kent has paid increased cash dividends in
each of its twenty-one years. The compound annual growth rate for the
Corporation's per share dividend payment for the last five years is 12.9%
and the dividend payout ratio has averaged 34% over that same period of
time.
Old Kent's corporate culture is geared toward maximizing
shareholder value. The graph in the proxy statement which is in part
incorporated by reference in this report compares the performance of Old
Kent Common Stock with the S&P 500 and the KBW 50 indices. The total
return as shown in this graph is measured using both stock price
appreciation and the effect of continuous reinvestment of dividend
payments. The S&P 500 index includes the performance of five hundred
individual stocks selected by Standard & Poor's Corporation to be a
representative indicator of a broad base of industries whose stocks are
traded and available to the investing public. The KBW 50 index is based
upon the stock performance of 50 large banks selected by Keefe, Bruyette &
Woods, Inc., specialists in the banking and thrift industries. The total
return of the KBW 50 index is calculated in the same manner as the S&P 500
index. Old Kent's stock performance on a total return basis compares
favorably with the total return of the broad based S&P 500 index as well as
the banking industry specific KBW 50 index. The graph indicates that an
initial $100 investment in Old Kent Common Stock on December 31, 1988,
would have been worth $232 on December 31, 1993, providing that all
quarterly dividends paid within the intervening five year period were
-29-
reinvested in Old Kent Common Stock at the market prices in effect when
dividends were paid. This increase in value is equivalent to a compound
annual return of 18.4% over those five years for such an investment in Old
Kent Common Stock compared to 14.5% for the S&P 500 index and 12.7% for the
KBW 50 index.
The Corporation's return on average total equity in 1993 was
16.65%, up from an equity return of 16.25% for 1992. Old Kent's return on
equity has averaged 15.5% over the past five years. Old Kent's return on
average assets was 1.38% for 1993 compared to 1.27% in 1992, and has
averaged 1.2% over the last five years.
Steady annual earnings increases have been attributable to
balance sheet growth and to increases in non-interest income. Total
average interest-earning assets increased by $424 million, or 5.2%, in 1993,
and by $404 million, or 5.2%, in 1992. Over the last five years, total
average interest-earning assets have increased at a compound annual growth
rate of 4.8%. Interest-earning assets primarily consist of securities
(defined herein to include those classified as available-for-sale and those
classified as held-to-maturity) and loans. Average securities increased by
$214 million, or 7%, in 1993, and by $669 million, or 28%, in 1992. In 1993,
total loans averaged $5,167 million, up by $200 million, or 4% more than
1992. In 1992, average total loans were $4,967 million, a 4% decrease from
1991. During 1992 and, to a lesser extent, early 1993, loan demand was
adversely affected by weaknesses in the national economy. Loan totals were
also affected by sales of residential mortgage loans of $1,990 million in
1993, and $1,169 million in 1992.
Summary of Operating Results
The following is a summary of the major components of the
Corporation's operating results for the last five years:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Net interest income $406,740 $385,608 $339,198 $311,253 $289,630
Add: taxable adjustment 7,438 8,168 9,717 11,734 13,617
Taxable equivalent net interest income 414,178 393,776 348,915 322,987 303,247
Provision for credit losses (33,997) (57,712) (39,812) (32,097) (24,110)
Other income 146,790 128,046 113,467 100,972 89,472
Other expenses (325,980) (291,985) (279,482) (256,920) (236,986)
Income taxes, including
taxable-equivalent adjustment (73,089) (61,034) (50,107) (47,466) (46,226)
Net income $127,902 $111,091 $ 92,981 $ 87,476 $ 85,397
</TABLE>
-30-
The following table summarizes the relative contribution to fully
diluted net income per common share of the various components of net income
for the last three years.
<TABLE>
Contribution to Fully Diluted Net Income Per Common Share
<CAPTION>
Increase (Decrease)
(FTE - Fully taxable-equivalent amount 1993 to 1992 to
per share on a fully diluted basis) 1993 1992 1991 1992 1991
<S> <C> <C> <C> <C> <C>
Net interest income - FTE (excluding
interest on convertible debt) $9.98 $9.38 $7.95 $ .60 $1.43
Provision for credit losses (.83) (1.40) (.92) .57 (.48)
Net interest income after
provision for credit losses - FTE 9.15 7.98 7.03 1.17 .95
Trust income .99 .93 .82 .06 .11
Service charges on deposit accounts .73 .64 .58 .09 .06
Security transactions .04 .14 .17 (.10) (.03)
Gains on sales of residential mortgages .51 .36 .15 .15 .21
Mortgage servicing revenue .23 .15 .12 .08 .03
Other 1.10 .89 .79 .21 .10
Total other income 3.60 3.11 2.63 .49 .48
Adjusted gross income after
provision for credit losses - FTE 12.75 11.09 9.66 1.66 1.43
Salaries and employee benefits (3.58) (3.22) (3.01) (.36) (.21)
Occupancy (.55) (.48) (.48) (.07) -
Equipment (.46) (.41) (.39) (.05) (.02)
FDIC deposit insurance (.40) (.39) (.33) (.01) (.06)
Nonrecurring charges (.04) (.18) (.10) .14 (.08)
Other (2.97) (2.42) (2.17) (.55) (.25)
Total other expense (8.00) (7.10) (6.48) (.90) (.62)
Income before income taxes - FTE 4.75 3.99 3.18 .76 .81
Applicable income taxes (1.61) (1.28) (.97) (.33) (.31)
Fully diluted net income per common share $3.14 $2.71 $2.21 $ .43 $ .50
Change in fully diluted net income per common share calculated using
previous year average fully diluted shares outstanding $ .40 $ .37
Change in average fully diluted shares outstanding .03 .13
Change in fully diluted net income per common share $ .43 $ .50
</TABLE>
Net Interest Income
In the previous summaries, the taxable-equivalent adjustment
increases tax-exempt income to an amount equivalent to interest income
subject to income taxes at statutory rates. The federal income tax rate
was 35% for 1993, and 34% for the prior years. The increase of $20.4
million in taxable-equivalent net interest income for 1993 is primarily due
-31-
to an increase in average total earning assets. During 1993, total average
interest-earning assets increased by $424 million, or 5.2%. In that same
period, total average interest-bearing liabilities increased to a lesser
extent, $254 million or 3.6%.
Net interest margin is calculated by dividing taxable-equivalent
net interest income by average interest-earning assets. Interest spread is
the difference between the average yield on earning assets and the average
cost of interest-bearing liabilities. The net interest margin was 4.80% in
both 1993 and 1992. The interest spread was 4.29% for 1993, up from 4.23%
for 1992. The average yield on interest-earning assets decreased to 7.74%
in 1993 from 8.48% in 1992, a decrease of .74%. In contrast, the average
cost of interest-bearing liabilities declined by .80%, slightly more than
the asset yield. The average cost of interest-bearing liabilities was
3.45% in 1993 compared to 4.25% in 1992. As a result, the interest spread
improved modestly, by .06% for the year.
The increase of $44.9 million in taxable-equivalent net interest
income in 1992 is also attributable to increased average earning assets as
well as a higher net interest margin and interest spread as compared to
1991. The 1992 increase in average earning assets amounted to $404
million, 5.2% more than 1991. The 1992 improvements in net interest margin
and spread resulted from a decline in Old Kent's cost of interest-bearing
liabilities which exceeded the decrease in yield on average earning assets.
The net interest margin in 1992 was 4.80%, up from 4.47% in 1991. The net
interest spread for 1992 was 4.23% compared to 3.68% for 1991. The average
yield on interest-earning assets declined to 8.48% in 1992 from 9.73% in
1991, a decrease of 1.25%. However, the cost of interest-bearing
liabilities declined more, by 1.80%. The average cost of interest-bearing
liabilities decreased to 4.25% in 1992 from 6.05% in 1991. Hence, the
interest spread improved by .55% in 1992 as compared to 1991.
Interest rates were relatively stable during 1993 and, on
average, down slightly from 1992. In this environment, repricing of
interest-earning assets and interest-bearing liabilities tended to
decrease asset yields and liability costs as described above.
<TABLE>
<CAPTION>
Three month
Prime Interest Rate U.S. Treasury Bill Rate
Percentage 1993 1992 1991 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Simple average during year 6.00% 6.25% 8.48% 3.08% 3.41% 5.20%
At December 31 6.00% 6.00% 6.50% 3.05% 3.14% 3.96%
</TABLE>
As shown in the table above, interest rates trended downward in
1992 as they had in 1991. The decreases were principally due to the
effects of a weakened national economy and the monetary policies of the
Federal Reserve System. The downward interest rate cycle had a greater
impact on the Corporation's borrowing costs than it had on its rates on
earning assets, thus leading to improvement in the net interest margin and
interest spread. Borrowing costs were held down throughout the banking
-32-
industry by soft loan demand while Old Kent's asset/liability management
disciplines served to limit the relative decline in earning asset yields.
There are a number of factors which affect net interest income,
including the mix of interest-earning assets, the mix of interest-bearing
liabilities, and the interest rate sensitivity of the various categories.
As of December 31, 1993, Old Kent's management believes that the
Corporation is essentially neutral to changes in interest rates. This
means that net interest income is not expected to be materially impacted by
upward or downward movements in prevailing interest rates within
anticipated ranges. See "Liquidity and Interest Rate Sensitivity."
Analysis of Net Interest Income
The following table allocates net interest income to
interest-earning assets by showing how much was attributable to
interest-bearing liabilities, and how much was attributable to
non-interest-bearing liabilities and equity capital. The interest spread
on earning assets funded by interest-bearing liabilities is simply the
difference between the average yield on earning assets and the average cost
of interest-bearing liabilities. The interest spread on earning assets
funded by non-interest-bearing liabilities and equity is the average yield
on earning assets.
<TABLE>
<CAPTION>
1993 1992 1991
Average Net Average Net Average Net
(fully taxable-equivalent, Earning Interest Interest Earning Interest Interest Earning Interest Interest
dollars in millions) Assets Spread Income Assets Spread Income Assets Spread Income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Source of Funding:
Interest-bearing liabilities $7,346.8 4.29% $315.1 $7,092.7 4.23% $300.0 $6,777.4 3.68% $249.5
Non-interest-bearing
liabilities and equity capital 1,280.1 7.74% 99.1 1,110.1 8.48% 93.8 1,021.3 9.73% 99.4
Total $8,626.9 $414.2 $8,202.8 $393.8 $7,798.7 $348.9
</TABLE>
The following table shows the relative importance of changes
in interest spread, earning asset volumes and changes in funding sources:
<TABLE>
<CAPTION>
1993 Over (Under) 1992 1992 Over (Under) 1991 1991 Over (Under) 1990
Average Net Average Net Average Net
(fully taxable-equivalent, Earning Interest Interest Earning Interest Interest Earning Interest Interest
dollars in millions) Assets Spread Income Assets Spread Income Assets Spread Income
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Source of Funding:
Interest-bearing liabilities $254.1 .06% $ 15.1 $315.3 .55% $ 50.5 $352.8 .27% $ 30.6
Non-interest-bearing
liabilities and equity capital 170.0 (.74%) 5.3 88.8 (1.25%) (5.6) 32.3 (.81%) (4.7)
Total $424.1 $ 20.4 $404.1 $ 44.9 $385.1 $ 25.9
</TABLE>
-33-
Loan Portfolio
As a financial intermediary, the acceptance and management of
credit risk is an integral part of Old Kent's business activities. The
Corporation has established strict credit underwriting standards. These
standards include a policy of granting loans only within Old Kent's defined
market areas and prohibition of foreign loans. Lending standards are
codified in a comprehensive lending policy which is uniform throughout the
organization. Old Kent's lending staff is highly skilled and experienced.
The Corporation's conservative lending philosophy is implemented through
strong administrative and reporting requirements. Old Kent maintains a
centralized, independent loan review function which monitors asset quality
at each of Old Kent's subsidiary banks. The Corporation also employs a
centralized group of specialists which assists the subsidiary banks in
resolving troubled loans.
One of Old Kent's strengths is its diversified loan portfolio.
Nearly one-half of Old Kent's loan assets are comprised of credits granted
to consumers in the form of residential mortgages and a variety of other
consumer credit products, such as credit cards, student loans, and other
open and closed-end consumer financings.
Loans to commercial borrowers represent approximately one-half of
Old Kent's loan portfolio. These loans are grouped by their nature and
industry diversification as non-real estate related and as real estate
related.
At December 31, 1993, Old Kent's commercial loan portfolio,
excluding real estate related loans, approximated $1.4 billion, or about
26% of total loans. Loans to manufacturers represented the largest
component at only 28% of total non-real estate commercial loans. These
loans are diversified among a large number of borrowers who produce a wide
variety of durable and non-durable goods.
Commercial real estate and construction loans at December 31,
1993, aggregated approximately $1.3 billion, or 24%, of total loans. These
loans have been grouped as owner-occupied (borrowers who occupy and utilize
the loan related property in their respective businesses) and as
non-owner-occupied (borrowers whose principal purpose of ownership lies in
the production of rental receipts from the related property). As
indicated, loans to the various categories of owner-occupied properties
were 35% of commercial real estate and construction loans and loans for
non-owner occupied properties were 65% of that total. Non-owner occupied
loans totaled $0.8 billion, or 15% of total loans, and are distributed over
a diverse base of borrowers. The largest grouping within
non-owner-occupied loans was housing related loans at 21% of total
commercial real estate and construction loans.
-34-
Old Kent has no foreign loans. In addition, Old Kent's policy is
to be highly restrictive in granting credit to borrowers in businesses
which are highly cyclical, such as agriculture and petroleum production,
and the Corporation is extremely selective in participating in loan
syndications.
Provision for Credit Losses
The provision for credit losses is the amount added to the
allowance for credit losses to absorb probable credit losses. The amount
of the credit loss provision is determined by management after reviewing
the risk characteristics of the loan portfolio, historical credit loss
experience and economic conditions. These determinations are reviewed by
Old Kent's centralized, independent loan review function which monitors the
credit quality of the Corporation's loan portfolio through its uniform
procedures, credit grading and reporting systems.
The following table summarizes the credit loss provisions, net
credit losses and the allowance for credit losses for the last five years:
<TABLE>
<CAPTION>
Year ended December 31 (dollars in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Provision for credit losses $ 33,997 $ 57,712 $39,812 $32,097 $24,110
Net credit losses 16,167 23,947 25,867 23,786 16,205
Allowance for credit losses at year-end 140,725 120,790 87,025 73,080 64,769
Allowance as a percentage of:
Year-end loans 2.56% 2.46% 1.70% 1.37% 1.28%
Year-end loans, excluding loans secured
by residential real estate 3.67% 3.44% 2.42% 1.86% 1.72%
Nonaccrual loans, restructured loans
and other real estate owned 206% 140% 79% 70% 101%
Ratio of net charge-offs to average
loans outstanding during the year .31% .48% .50% .46% .33%
Credit loss recoveries as a percentage
of prior year charge-offs 24% 34% 26% 31% 42%
</TABLE>
The provision for credit losses for 1993 was $23.7 million less
than that of 1992 as a result of credit quality improvements. The improved
credit quality was evidenced by a $7.8 million, or 32.5%, reduction in net
credit losses and by a 21% decrease in total nonperforming assets to $68.2
million as shown below. At December 31, 1993, the allowance for credit
losses stood at $140.7 million, having been increased by $17.8 million.
This represented the amount by which the provision for credit losses
exceeded net credit losses charged to the allowance, and by the $2.1
million allowance acquired with University Financial Corporation. At
December 31, 1993, the ratio of the allowance to total nonperforming assets
was 206%. Over the past five years, the Corporation's actual loss
experience on residential real estate loans has been negligible. At
December 31, 1993, the ratio of the allowance to total loans exclusive of
residential real estate loans was 3.67%.
-35-
During 1992, Old Kent's management, because of its recognition of
a continued weak economic environment and its continuous reassessment of
the credit quality of its loan portfolios, determined that a higher level
of allowance for credit losses was prudent. As a result, the Corporation's
provision for credit losses exceeded actual net credit losses by $33.8
million and represents the amount by which the Corporation's allowance for
credit losses increased between December 31, 1992, and the preceding
year-end date. This addition to the allowance for credit losses brought
the allowance up to $120.8 million, or 2.46% of total loans at December 31,
1992.
Nonperforming Assets
The following is a summary of nonperforming assets for the last
five years:
<TABLE>
<CAPTION>
December 31 (dollars in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $53,330 $75,878 $ 92,647 $ 93,259 $55,429
Restructured loans 5,426 2,288 4,226 5,912 5,476
Other real estate owned 9,480 8,163 13,359 5,503 3,104
Total nonperforming assets $68,236 $86,329 $110,232 $104,674 $64,009
As a percentage of total loans:
Nonaccrual loans .97% 1.54% 1.81% 1.75% 1.09%
Restructured loans .10 .05 .08 .11 .11
Other real estate owned .17 .17 .26 .10 .06
Total nonperforming assets 1.24% 1.76% 2.15% 1.96% 1.26%
</TABLE>
The following table summarizes the changes in nonperforming
assets during 1993:
<TABLE>
<CAPTION>
Total Non-
Performing Nonaccrual Restructured Other Real
(dollars in thousands) Assets Loans Loans Estate Owned
<S> <C> <C> <C> <C>
Balance, January 1, 1993 $86,329 $75,878 $2,288 $8,163
Additions 49,995 45,953 1,236 2,806
Payments and cures (43,255) (35,174) (738) (7,343)
Charge-offs (gross, exclusive of recoveries) (24,833) (24,833) -- --
Transfers within nonperforming assets -- (8,494) 2,640 5,854
Balance, December 31, 1993 $68,236 $53,330 $5,426 $9,480
</TABLE>
-36-
Loans past due 90 days or more, but for which interest income
continues to be recognized, are not included in the Corporation's
nonperforming assets. The following table summarizes such loans for the
last five years:
<TABLE>
<CAPTION>
December 31 (dollars in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Loans past due ninety days or more $9,038 $9,859 $11,064 $13,145 $12,073
Loans past due ninety days or more,
as a percentage of total loans .16% .20% .22% .25% .24%
</TABLE>
The loan portfolio has been reviewed and analyzed for the purpose
of estimating probable credit losses. The management of Old Kent has
concluded that the allowance for credit losses at December 31, 1993, is
adequate to absorb probable credit losses inherent in the loan portfolio.
Old Kent's policy dictates that specifically identified credit
losses be recognized immediately by a charge to the allowance for credit
losses. This determination is made for each loan at the time of transfer
into nonperforming status after giving consideration to collateral value
and the borrower's ability to repay loan principal. Since the Corporation
immediately recognizes losses on its nonperforming assets, it does not
attach to them specific amounts from the allowance for credit losses.
Because the ultimate collection of interest of Old Kent's nonperforming
assets is in doubt, no interest income is recognized on these assets, and
virtually all payments received are recorded as a reduction of principal.
Other Income
Total non-interest income increased $18.7 million, or 14.6%, in
1993. Excluding the impact of gains on securities transactions and
non-recurring revenue, the increase was $20.8 million, or 17.0%, for the
year. The increase in total non-interest income in 1992, excluding
securities transactions, was $16.3 million, or 15.4%.
Trust activities contribute a significant amount of revenue for
Old Kent and represent the largest category of non-interest income.
Reported trust fees increased $1.8 million, or 4.8%, in 1993. This
compares with an increase of $3.1 million, or 8.8%, in 1992. The 1991
decrease is attributable to the decline in fees related to a
marginally-performing trust processing business which Old Kent sold in
early 1992. The disposal of this business had a favorable impact on net
income. Excluding fees attributable to this activity, revenue related to
Old Kent's continuing trust products and services has risen by 14.5% in
1992 and by 6.0% in 1991. Trust fees have been enhanced by new business
development. First year fees resulting from new account relationships were
up over 9% in 1993 and up by nearly 20% in 1992. The new business
-37-
relationships established in these years will also favorably influence
subsequent periods. The continued favorable performance in Old Kent's
investment management products also had a positive influence on trust fee
income in 1993 and 1992. During 1993, assets managed for these products
increased by 14%.
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Trust fee income (as reported) $40,305 $38,472 $35,346 $36,000 $34,113
Less amount attributable
to trust accounting services -- -- 1,756 4,312 3,287
Trust fee income attributable
to continuing trust activities $40,305 $38,472 $33,590 $31,688 $30,826
</TABLE>
Service charges on deposit accounts increased by nearly $3.5
million in 1993, an increase of 13.0%. This compares to an increase of
$1.3 million, or 5.1% in 1992. The increase is partially due to an
expanded account base resulting from Old Kent's acquisitions of financial
institutions and branch banking sites in recent years. It is also due to
the Corporation's continuing focus on improving non-interest revenues.
Net gains on sales of securities during 1993 were $1.6 million
compared to $5.7 million in 1992 and $7.4 million in 1991. For further
discussion, refer to "Securities Available for Sale."
The low rate environment during 1993 and 1992 caused an increase
in demand for loan refinancings. As a result, revenues from mortgage
banking activities improved. These activities include the origination and
acquisition of residential mortgage loans, a large portion of which are
intended to be sold in the secondary market and to be serviced by Old Kent
for the purpose of generating fee income. Sales of these loans usually
result in the recognition of gains.
The following table summarizes the Corporation's mortgage banking
activity for the last five years:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Residential mortgage loans
originated and acquired $2,386,127 $1,343,559 $721,034 $496,700 $448,200
Residential mortgage loans sold 1,990,245 1,169,298 538,359 283,620 160,400
</TABLE>
At December 31, 1993, Old Kent had $475 million of residential
mortgage loans held-for-sale. At that same date, the Corporation also had
outstanding commitments to sell $510 million of such loans in 1994.
-38-
Approximately $1 million of gains are expected to be realized in 1994 on
fulfillment of those outstanding sales commitments.
The following table summarizes the Corporation's revenue from its
mortgage banking activities:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Gains on sales of residential mortgage
loans $20,763 $14,651 $ 6,496 $2,672 $1,955
Mortgage loan servicing revenues 9,403 6,287 5,297 3,582 2,655
Total mortgage banking related revenues $30,166 $20,938 $11,793 $6,254 $4,610
</TABLE>
Gains on sales of residential mortgages in 1993 were $20.8
million, up by 41.7% from the amount realized in the preceding year. The
1992 gains totaled $14.7 million, 125.5% more than the 1991 gains. Old
Kent's management expects that demand for refinancing of residential
mortgages in 1994 will be less than that of 1993. Hence, total gains on
the sales of residential mortgage loans may be less than those realized
during 1993. Revenue from the Corporation's mortgage servicing activities
was $9.4 million in 1993, 49.6% better than that of the preceding year. As
shown below, this increase is due to growth in Old Kent's third party
servicing portfolio over the past few years. In 1992, mortgage servicing
revenue totaled $6.3 million and represented an 18.7% improvement over that
of 1991. Old Kent anticipates that mortgage servicing revenues will be
enhanced in 1994 due to recent growth in its third party servicing
portfolio and, once completed, its acquisition of Princeton Financial
Corporation.
Other expenses included the expense for the amortization of
purchased mortgage servicing rights. In 1993, this expense significantly
increased to $5.2 million from $0.1 million in 1992. The primary reason
for this increase was amortization of servicing rights acquired with
University Financial Corporation on January 1, 1993. The amortization of
this asset was also influenced by the effects of prepayments. Notes 1 and
9 to the consolidated financial statements contain further information
regarding purchased mortgage servicing rights.
The following table lists the aggregate balances of residential
mortgage loans serviced by Old Kent as of the dates indicated. During
1993, residential mortgage loans serviced for third parties increased by
approximately $1.5 billion. This increase included the effect of the
Corporation's January 1, 1993, purchase of University Financial Corporation
(Elgin, Illinois), which at the time of acquisition serviced approximately
$827 million of residential mortgages for third parties. On March 1, 1994,
Old Kent acquired Princeton Financial Corp. (Orlando, Florida). At
December 31, 1993, Princeton serviced approximately $340 million of
residential mortgage loans for third party investors.
-39-
<TABLE>
<CAPTION>
December 31 (dollars in thousands) 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Residential mortgage loans
serviced for third parties $3,177,092 $1,662,832 $1,065,131 $ 713,680
Residential mortgage loans serviced
by Old Kent for its own portfolio
(including mortgage loans held-for-sale) 1,229,442 1,017,900 1,145,077 1,095,061
Total mortgage loans serviced by
Old Kent for itself and third parties $4,406,534 $2,680,732 $2,210,208 $1,808,741
</TABLE>
Merchant discount and fees from credit card transactions totaled
$16.4 million in 1993, up by 21.1% from 1992. The primary reasons for this
increase have been growth in the Corporation's merchant customer base and
improved pricing practices. In 1992, these revenues totaled $13.5 million
and represented a 10.7% increase over the 1991 amount.
Transaction processing fees include items such as fees and
commissions on money orders and traveler checks, foreign exchange fees,
check cashing and collection charges. These revenues totaled $7.2 million
in 1993, up by $1.0 million or 16.3% from 1992. This increase included a
$0.8 million increase in commission revenue on Old Kent's sales of third
party money order products; until 1992 Old Kent offered its own money order
products which enhanced net income by acting as a source of interest-free
funding. In 1992, transaction processing fees amounted to $6.2 million and
represented a $1.2 million, or 22.9% increase over 1991. This included
$1.0 million of increase related to commissions in the initial year (1992)
of sales of third party money order products.
Trading account gains were $1.6 million in 1993, compared to $1.9
million in 1992 and $2.6 million in 1991. The trend reflects a lower level
of trading account activity both with customers and for the Corporation's
own account.
During 1990, Old Kent's banks began leasing space at their
various Michigan sites to an unrelated company which offers annuity and
mutual fund products to Old Kent customers. As a result, this lease
revenue has risen over the last few years.
The following table summarizes the major categories of other
income for the last five years:
-40-
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Trust income $40,305 $38,472 $35,346 $36,000 $34,113
Service charges on deposit accounts 29,972 26,516 25,233 23,467 22,544
Securities transactions 1,575 5,676 7,401 1,854 10
Gain on sales of residential mortgage loans 20,763 14,651 6,496 2,672 1,955
Mortgage servicing revenues 9,403 6,287 5,297 3,582 2,655
Merchant discount revenue and
fees from credit card transactions 16,358 13,510 12,200 11,247 8,169
Transaction processing fees 7,203 6,192 5,038 4,232 4,376
Credit life insurance premiums 2,972 2,529 2,463 2,454 2,544
Automated teller machine network revenues 2,606 2,109 1,799 1,548 1,139
Trading account gains 1,594 1,908 2,647 4,697 1,718
Safe deposit box rental income 1,765 1,625 1,617 1,590 1,497
Cash management
and corporate banking fees 1,294 1,500 1,505 1,903 2,765
Lease revenue from
financial products provider 1,471 1,154 830 80 --
Brokerage commissions 1,141 883 628 459 579
Gain on sales of other real estate owned
and other assets 1,155 388 528 659 620
Letter of credit fees 834 931 998 1,285 1,253
Non-recurring revenue 2,089 -- -- -- --
Other 4,290 3,715 3,441 3,243 3,535
Total other income $146,790 $128,046 $113,467 $100,972 $89,472
</TABLE>
Other Expenses
Salaries and employee benefits represent the largest category of
non-interest expense. These personnel costs increased by $13.4 million, or
10.2%, in 1993, largely due to staffing increases associated with
acquisitions over the last two years. This compares with an increase of
$2.8 million, or 2.2%, in 1992. Old Kent measures its staff size in terms
of full-time equivalent ("FTE") employees. Full-time equivalency expresses
staff size by translating the efforts of part-time employees and over-time
hours into the equivalent efforts of full-time employees. At December 31,
1993, Old Kent employed 4,745 persons on an "FTE" basis. This compares to
4,570 and 4,610 persons at December 31, 1992 and 1991, respectively.
Occupancy expense increased $2.4 million, or 12.2%, in 1993.
This compares with a decrease of $0.9 million, or 4.1%, in 1992. Key
influences to the 1993 increase were: (a) the effect of the acquisitions
which occurred in late 1992 and early 1993; (b) the mid 1993 expansion of
Old Kent's Corporate Service Center (Grand Rapids, Michigan); and (c) a
reduction in sublet rental income. The 1992 decrease is primarily due to a
reduction in housing requirements at Old Kent's downtown Chicago, Illinois,
banking offices. This benefit was partially offset in 1992 by a loss,
-41-
comparable in amount, which recognized the expense of future lease payments
associated with the space vacated by Old Kent Bank (Illinois).
In 1993, equipment expense increased by $1.8 million, or 10.9%.
In 1992, equipment expense decreased slightly, by 0.8%, from 1991. A
portion of the 1993 increase related to the previously mentioned
acquisitions, the remainder related to expanded usage of technological
advances to either reduce operating costs (e.g. data storage using optical
technology rather than hardcopy imagery) or to enhance business
effectiveness (e.g. enhanced branch bank automation). During the first
quarter of 1993, Old Kent recognized a nonrecurring charge of $1.5 million
to reflect a loss on the cancellation of a data processing equipment lease.
This coincided with the installation of more advanced technology intended
to improve efficiency and reduce operational costs.
Included in other expense for the last three years are charges
which Old Kent views as nonrecurring in nature. These charges are as
follows for the years indicated:
<TABLE>
<CAPTION>
Nonrecurring charges (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Severance charges for staff reductions
related to restructurings
of operational functions -- $2,600 $3,104
Loss on equipment lease cancellation $1,525 -- --
Charge to record cumulative liability
for nonpension post-retirement benefits -- -- 1,000
Loss reserve established for
certain non-loan receivables -- 2,332 --
Contribution to private charitable foundation -- 1,500 --
Other nonrecurring charges -- 767 --
Total nonrecurring charges $1,525 $7,199 $4,104
</TABLE>
The 1992 charge of $2.3 million shown above for the establishment
of a non-loan loss reserve was offset in 1993 by $2.1 million of
nonrecurring revenue. This revenue reflected substantial recovery of the
amounts originally at risk of loss on December 31, 1992.
The deposit insurance assessment of the Federal Deposit Insurance
Corporation (FDIC) increased negligibly in 1993, by 1.5%. In 1992, this
cost rose by $1.7 million, or 12.0%. In 1993, Old Kent's subsidiary banks
were subjected to the same rate of assessment as they were in 1992. Hence,
the modest increase for 1993 related entirely to the amount of deposits on
which the assessment is based. In 1992, only a small part of the increase
related to growth in the Corporation's deposit base. The primary reason
for the increase was an 8.2% increase in the rate of assessment (as shown
in the table below):
-42-
<TABLE>
<CAPTION>
FDIC insurance rate cost per $100 of insured deposits 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Average rate for year $.2300 $.2300 $.2125 $.1200 $.0833
Percentage increase over prior year .0% 8.2% 77.1% 44.1% --
</TABLE>
The following table summarizes the major categories of other
expenses for the last five years:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
Salaries $121,905 $109,245 $109,581 $105,933 $ 98,971
Employee benefits 24,009 23,222 20,091 20,212 18,096
Occupancy 22,415 19,974 20,825 19,121 18,192
Equipment 18,571 16,743 16,873 17,247 16,859
FDIC deposit insurance 16,375 16,134 14,403 7,966 5,259
Taxes other than income taxes 10,474 9,307 8,259 7,819 6,335
Stationery and supplies 8,250 7,114 7,659 7,149 8,209
Postage and courier charges 8,207 8,057 8,285 7,027 6,815
Credit card interchange expense 10,950 8,449 7,161 6,741 4,310
Advertising and public relations 8,372 6,634 6,762 5,981 6,157
Professional services 9,202 7,023 6,336 5,474 3,737
Legal, audit and examination fees 6,774 6,197 6,214 5,369 4,619
Amortization of goodwill
and core deposit intangibles 6,924 5,784 5,193 4,734 5,032
Amortization of purchased
mortgage servicing rights 5,190 128 31 24 24
Telephone 5,832 5,111 4,782 4,742 4,444
Credit, collections, foreclosure
and other real estate expenses 6,687 4,688 4,878 3,381 2,801
Charitable contributions 1,304 2,503 721 1,258 575
Mortgage servicing costs 932 239 189 -- --
Severance benefits 956 2,600 3,104 1,600 --
Cumulative, non-pension
post-retirement benefit charge -- -- 1,000 -- --
Other losses (including
certain nonrecurring charges) 5,161 6,146 2,803 2,668 3,004
Other 27,490 26,687 24,332 22,474 23,547
Total other expenses $325,980 $291,985 $279,482 $256,920 $236,986
</TABLE>
In 1993, severance benefits costs of $956 thousand were primarily
the result of Old Kent's decision to close certain branch banking sites.
These closures are expected to enhance future profitability by enabling the
Corporation to more efficiently provide customer service.
-43-
Income Taxes
The income tax provision was $65.7 million in 1993, compared to
$52.9 million in 1992, and $40.4 million in 1991. Income tax expense as a
percentage of income before income taxes was 33.9% in 1993. This compares
with 32.2% in 1992, and 30.3% in 1991. Effective January 1, 1993, the
Corporation adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The statement calls for a
balance sheet approach in determining income tax expense. Old Kent's
financial statements for 1992 and preceding years reflected income taxes
calculated under the deferred method, which was an income statement
approach. The statutory federal income tax rate for Old Kent was 35% for
1993, and 34% for 1992 and 1991. The one percent increase in the federal
tax rate for 1993 caused an increase in income taxes of approximately $1.9
million. The cumulative effect of implementing SFAS No. 109 in 1993 was an
increase in income taxes of $1.9 million. A reconciliation of income taxes
calculated at the statutory rates and income tax expense appears in Note 15
to the consolidated financial statements in Item 8.
Capital
At December 31, 1993, the Corporation's total equity capital was
$813 million, almost 12% more than the balance at December 31, 1992. The
ratio of total shareholders' equity to total assets was 8.25% at December
31, 1993, and 8.35% at December 31, 1992. The tangible equity ratio was
7.78% at December 31, 1993, compared to 7.83% twelve months earlier.
Under the "risk-based" capital guidelines presently in effect for
banks and bank holding companies, minimum capital levels are based on the
perceived risk in the various asset categories, and certain
off-balance-sheet instruments, such as loan commitments and letters of
credit, require capital allocations. Bank holding companies are required
to maintain minimum risk-based capital ratios as shown in the following
table. Old Kent's ratios exceed the regulatory guidelines.
The following table compares Old Kent's capital ratios at
December 31, 1993, with regulatory guidelines:
<TABLE>
<CAPTION>
Risk-based Capital
Leverage Tier 1 Total
(dollars in millions)
<S> <C> <C> <C>
Old Kent's capital balances at December 31, 1993 $763.2 $771.3 $847.9
Required regulatory capital 294.2 242.4 484.7
Old Kent's capital in excess of regulatory minimums $469.0 $528.9 $363.2
Old Kent's capital ratios at December 31, 1993 7.78% 12.73% 13.99%
Regulatory capital ratios - "well capitalized" definition 5.00% 6.00% 10.00%
Regulatory capital ratios - minimum requirement 3.00% 4.00% 8.00%
</TABLE>
-44-
As shown in the accompanying balance sheets, total long-term debt
decreased by $15 million during 1993. The primary reason for this decrease
was Old Kent's election to extinguish a variable rate long-term note prior
to its contractual maturity.
As described earlier in this financial review and in the
consolidated financial statements, the Corporation expects to issue
approximately $62 million of its common stock to acquire EdgeMark Financial
Corporation in early 1994. It also intends to repurchase shares, similar
in number to those which are anticipated to be used to acquire EdgeMark.
The Corporation has generally financed its growth through the
retention of earnings and the issuance of long-term debt. It is expected
that future growth can be financed through internal earnings retention,
additional long-term debt offerings, or the issuance of additional common
or preferred stock.
Liquidity and Interest Rate Sensitivity
Old Kent manages its liquidity to ensure that funds are available
to each of its banks to satisfy the cash flow requirements of depositors
and borrowers and to ensure that the Corporation's own cash requirements
are met. Old Kent maintains liquidity by availing itself of funds
accessible from a variety of sources.
The most readily available source of liquidity for Old Kent is
that which is already resident on the Corporation's balance sheet. Old
Kent's securities available-for-sale which totaled $1.4 billion at December
31, 1993, represent a highly accessible source of liquidity. The
Corporation's portfolio of securities held-to-maturity which totaled $2.2
billion at December 31, 1993, produces liquidity from maturities and
amortization payments. Residential mortgage loans held-for-sale also
afford liquidity; at December 31, 1993, such loans totaled $475 million.
Depositors within Old Kent's defined markets are another source
of liquidity as evidenced by a growing core deposit base. These same
markets offer a fourth source of liquidity in the form of large liabilities
which are accessible to Old Kent by negotiations in which interest rate
offerings are key considerations. The national capital markets represent a
fifth source of liquidity to Old Kent. The Corporation may make use of
brokers to place large deposit instruments or bank note offerings when
advantageous, may access federal funds markets, or may utilize
collateralized borrowings. A further source of liquidity is available
through debt offerings.
The following table shows the publicly disseminated securities
ratings assigned to Old Kent and the securities issued by Old Kent and
certain of its subsidiaries by nationally recognized statistical rating
organizations. A security rating is not a recommendation to buy, sell or
hold securities, may be subject to revision or withdrawal at any time by
the assigning rating organization, and should be evaluated independently of
any other rating.
-45-
<TABLE>
<CAPTION>
Credit ratings at December 31, 1993: Thomson BankWatch Moody's Standard & Poor's
<S> <C> <C> <C>
Old Kent Financial Corporation:
Issuer rating A/B
Short-term rating TBW-1
Subordinated debt rating A+ Baa1 A-
Old Kent Bank and Trust Company
(Grand Rapids, MI):
Short-term deposits TBW-1 PI A-1
Long-term deposits Al A
Old Kent Bank (IL):
Short-term deposits TBW-1 PI A-1
Long-term deposits A2 A
Old Kent Bank - Southwest
(Kalamazoo, MI):
Short-term deposits TBW-1 PI A-1
Long-term deposits Al A
</TABLE>
In early 1992, Old Kent filed, and had ordered effective, a
"shelf" registration with the Securities and Exchange Commission which
registered up to $150 million in debt securities for future sale. The
amounts, terms and timing of offerings would be determined in the future
when and as the Corporation decides to sell securities under the
registration. In early 1993, Old Kent and its three largest subsidiaries
approved implementation of a bank note program which would permit those
banks to place up to $600 million of short-term and mid-term notes. These
programs are expected to enhance liquidity by enabling Old Kent to sell its
debt instruments in the public markets in the future without the delays
which would otherwise be incurred. As shown in Note 10 to the consolidated
financial statements in Item 8, there were $235 million of bank notes
outstanding at December 31, 1993.
Federal and state banking laws place certain restrictions on the
amount of dividends and loans which a bank may make to its parent company.
Such restrictions have not had and are not expected to have any material
effect on the Corporation's ability to meet its cash obligations.
The management of interest rate sensitivity includes monitoring
the maturities and repricing opportunities of interest-earning assets and
interest-bearing liabilities. The following table summarizes the interest
rate repricing gaps for selected maturity periods as of December 31, 1993:
-46-
<TABLE>
<CAPTION>
0-30 31-90 91-365 Over 1
(in millions) Days Days Days Year Total
<S> <C> <C> <C> <C> <C>
Non-loan interest-earning assets $ 325.8 $ 243.3 $ 906.2 $2,256.4 $3,731.7
Loans 2,608.2 651.1 681.8 1,550.5 5,491.6
Total interest-earning assets 2,934.0 894.4 1,588.0 3,806.9 9,223.3
Savings and time deposits* 1,608.3 883.3 1,302.2 2,685.0 6,478.8
Foreign deposits 72.4 155.3 120.0 -- 347.7
Purchased funds and long-term debt 790.9 2.5 165.0 1.1 959.5
Total interest-bearing liabilities 2,471.6 1,041.1 1,587.2 2,686.1 7,786.0
Interest-earning assets less
interest-bearing liabilities 462.4 (146.7) .8 1,120.8 1,437.3
Impact of interest rate swaps (40.0) (200.0) 25.0 215.0 --
Asset (liability) gap $ 422.4 ($ 346.7) $25.8 $1,335.8 $1,437.3
Cumulative asset gap $ 422.4 $ 75.7 $ 101.5 $1,437.3
Cumulative gap as a percentage
of earning assets 14.4% 8.5% 6.4% 37.8%
<FN>
* Although savings accounts, for which interest rates are not readjusted on a pre-established deposit contract cycle, are
subject to the possibility of immediate withdrawal, it has been Old Kent's experience that these deposits are relatively
insensitive to gradual changes in interest rates and generally tend to behave like deposits with longer maturities. The
following assumptions concerning repricing of savings accounts were used to apportion the balances of both "fixed rate" and
"variable rate" savings deposits which totaled $3.1 billion at December 31, 1993; 30.8% in 0-30 days, 1.4% in 31-90 days,
5.9% in 91-365 days, and 61.9% over one year. These assumptions are based upon management's judgment and are believed to be
consistent with Old Kent's historical experience and that of the industry.
</TABLE>
Total interest-earning assets exceeded interest-bearing
liabilities by $1.4 billion at December 31, 1993. This difference was
funded through non-interest-bearing liabilities and shareholders' equity.
The above table shows that total assets maturing or repricing within one
year exceed liabilities maturing or repricing within one year by $101
million. However, the repricing of certain categories of assets and
liabilities is subject to competitive and other influences that are beyond
the control of Old Kent. As a result, certain assets and liabilities
indicated as maturing or repricing within a stated period may, in fact,
mature or reprice in other periods or at different volumes.
Old Kent recognizes the limitations of static gap analysis as a
tool in managing its interest rate risk, and relies more heavily on
computer-based modeling techniques to project the potential effects of
various interest rate environments on the balance sheet structure and net
interest income. These simulation techniques involve changes in interest
rate relationships, asset and liability mixes, and prepayment options
inherent in financial instruments, as well as interest rate levels in order
to quantify risk potentials. Based on these analyses, the Corporation's
management believes that Old Kent's net interest income would not be
materially impacted throughout a broad range of possible economic
scenarios.
-47-
The table below shows the projected effect of changes in market
interest rates on Old Kent's consolidated net interest income. The
projections are based on Old Kent's balance sheet as of December 31, 1993,
and were prepared using the modeling techniques and assumptions which Old
Kent was then using for asset-liability management purposes. This
projected interest sensitivity profile illustrates one important tool used
by management to monitor and control the company's interest rate risk
exposure. It must be recognized, however, that modeling techniques are an
imperfect means of predicting future events, and that the results projected
are dependent upon the assumptions used, which may or may not be consistent
with future reality. Accordingly, there is no assurance that the effect of
actual future changes in market interest rates will have the same effect on
Old Kent as is projected by the model.
The table below displays that net interest income for the next
twelve months is projected to be nonvolatile even if over that period
market interest rates were to gradually increase or decrease in a uniform
manner by as much as 2.0%. In this context, "market interest rates" refers
to rates that Old Kent considers as having significant economic influence,
such as the prime interest rate, rates on United States Treasury
instruments, and the discount rate as set by the Federal Reserve. The
projection below indicates that if rates were to increase or decrease as
described above, net interest income would be expected to increase by .7%
or decrease by .9% compared to expected results under a flat rate
environment. This narrow projected exposure to interest rate risk is
consistent with management's desire to limit the sensitivity of net
interest income to changes in interest rates in order to reduce risk to
earnings and capital. This model is based solely on gradual, uniform
changes in market rates and does not reflect the levels of interest rate
risk thatmay arise from other factors such as changes in the spreads
between key market rates or in the shape of the Treasury yield curve.
<TABLE>
<CAPTION>
Market Interest Projected Effect
Rate Change on Net Interest Income
<S> <C> <C>
+2% 0.7%
+1 0.4
0 --
-1 -0.4
-2 -0.9
</TABLE>
An important component of Old Kent's management of interest rate
risk is the company's use of interest rate swaps. As of December 31, 1993,
the total notional amount (the amount used to calculate interest) of
outstanding interest rate swap agreements was $486 million. These swaps
primarily involve receipt of interest at fixed rates and payment of
interest at floating rates. These agreements were executed to hedge the
Company's exposure to decreasing rates, particularly the impact on the
yield of Old Kent's floating rate commercial loans. Swaps such as these
-48-
have performed well over the past two years as market rates have decreased
significantly. The remaining swaps are used as either "micro hedges" to
secure the return of a specific asset or as balance sheet management tools
to counter the projected interest rate risk exposure of a future period.
The following summarizes the Corporation's interest rate swaps at
December 31 of the years indicated:
<TABLE>
<CAPTION>
Notional amount (in millions) 1993 1992
<S> <C> <C>
Pay Floating/Receive Fixed $340 $283
Pay Floating/Receive Floating 121 --
Pay Fixed/Receive Floating 25 --
Total $486 $283
</TABLE>
Old Kent's use of interest rate swaps as a means of managing its
interest rate risk profile has enhanced net interest income over the last
two years. For 1993 and 1992, interest rate swaps have increased net
interest income by approximately $10.8 million and $13.6 million
respectively. This improved the Corporation's net interest margin by .13%
in 1993 and by .17% in 1992. The table below illustrates how the interest
rate swaps portfolio hedges the Company's overall interest rate risk by
decreasing the volatility of net interest income under both rising and
declining rate possibilities on a projected basis using the model described
above.
<TABLE>
<CAPTION>
(Decrease) Increase
12-Month Gradual Change in Interest Rates (2.0%) (1.0%) 1.0% 2.0%
<S> <C> <C> <C> <C>
Sensitivity Of Net Interest
Income Compared to Flat Rates:
Sensitivity without swaps (1.2%) (.5%) .5% 1.0%
Sensitivity with swaps (.9%) (.4%) .4% .7%
Favorable/(unfavorable) hedge effect .3% .1% (.1%) (.3%)
</TABLE>
Securities Held-to-Maturity
Securities held-to-maturity are purchased with the intent and
ability to hold for long-term investment for the purpose of generating
interest income over the lives of the investments. Thus they are carried
on the books at cost, adjusted for amortization of premium and accretion of
discount. Decisions to purchase securities are based upon current
assessments of economic and financial conditions, including the interest
rate environment.
Old Kent's investment strategy is dynamic. As conditions change
over time, the Corporation's overall interest rate risk, liquidity risk and
-49-
potential return on the investment portfolio will change. Old Kent
regularly re-evaluates the marketable securities in its portfolio based on
circumstances as they evolve. In consideration of these factors,
management's objective is to optimize the ongoing total return of its
securities portfolios.
Securities Available-For-Sale
In 1992, Old Kent's management re-evaluated the conditions under
which it might sell any of its investment securities. As a result of that
re-evaluation, the Corporation determined that approximately $1 billion of
its investment securities might be sold to manage interest rate risk, to
respond to changes in interest rates, prepayment or credit risk, to take
profits, or to increase liquidity. Hence at December 31, 1992, Old Kent
classified these selected investments as securities available-for-sale.
Securities available-for-sale are presented on the accompanying
consolidated balance sheets at the lower of aggregate market value or
amortized cost.
During 1993, the principal reason for sales of securities
available-for-sale was Old Kent's desire to manage the average maturity of
the combined securities portfolios. The average maturity of securities
available-for-sale and securities held-to-maturity was 2.4 years at
December 31, 1993, compared to 3.3 years at the preceding year-end.
In 1993, net gains on the sale of securities were $1.6 million.
This compares to net gains of $5.7 million in 1992 and $7.4 million in
1991. At December 31, 1993, the combined net unrealized gains in the
securities available-for-sale and the securities held-to-maturity portfolio
were $107.2 million, consisting of unrealized gains of $123.2 million and
unrealized losses of $16.0 million. At December 31, 1992, the portfolios
had net unrealized gains of $106.3 million, consisting of unrealized gains
of $113.9 million and unrealized losses of $7.6 million.
Effective January 1, 1994, the Corporation adopted the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." This
statement specifies that securities available-for-sale are to be carried at
fair value with a corresponding (after-tax) offset in shareholders' equity.
Under this statement, fluctuations in market value are not reflected in net
income unless and until they are realized. If this statement were to have
been adopted by Old Kent as of December 31, 1993, securities
available-for-sale would have been increased by $51.1 million and
shareholders' equity would have been increased by $33.2 million. When
adopted by Old Kent, this statement will have no effect on net income or
liquidity. Its future impact on the Corporation's balance sheet is not
estimable.
-50-
Sources and Uses of Funds Trends
As shown on the accompanying consolidated balance sheets, total
assets at December 31, 1993, were $9.9 billion, up by $1.2 billion, or
13.3%, from the preceding year-end. This increase in total assets includes
the effect of Old Kent's acquisition of University Financial Corporation,
which at the time of acquisition had assets of $275 million. It is also
due to growth in deposits and short-term borrowed funds. At December 31,
1993, total deposits were nearly $8.0 billion, up 9.9% from the previous
year-end. Short-term borrowings increased to $958 million at December 31,
1993, over 50% more than the year-ago level. The cash procured through
these increased liabilities was deployed into investments in loans and
securities. Total loans were $5.5 billion at December 31, 1993, an
increase of 11.9% over the prior year-end total. Securities totaled nearly
$3.6 billion at December 31, 1993, up by 18.6% over total securities twelve
months earlier. The consolidated statements of cash flows contains further
details concerning sources and uses of cash.
-51-
The following table of average balances summarizes the trends in
sources and uses of funds:
<TABLE>
<CAPTION>
1993 1992
Average Increase (Decrease) Average Increase (Decrease)
(Dollars in millions) Balance Amount Percent Balance Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Funding Uses:
Loans $5,166.9 $200.3 4.0% $4,966.6 ($206.5) (4.0)%
Taxable securities 3,070.8 216.4 7.6 2,854.4 689.3 31.8
Tax-exempt securities 188.2 (1.9) (1.0) 190.2 (20.2) (9.6)
Interest-earning deposits:
Domestic 10.6 (1.3) (11.1) 11.9 1.6 15.9
Foreign 61.0 9.2 17.8 51.8 (49.0) (48.6)
Federal funds sold and
resale agreements 72.2 1.8 2.6 70.3 (20.4) (22.5)
Trading account securities 57.1 (.4) (.7) 57.6 9.3 19.4
Total Uses $8,626.9 $424.1 5.2% $8,202.8 $404.1 5.2%
Funding Sources:
Demand deposits $1,025.0 $119.0 13.1% $ 905.9 $ 46.9 5.5%
Savings deposits 3,030.4 269.2 9.7 2,761.2 373.6 15.6
Time deposits:
Negotiable 1,059.3 149.6 16.4 909.8 (8.0) (.9)
Foreign 210.9 (11.7) (5.3) 222.6 121.3 119.7
Other 2,318.1 (169.1) (6.8) 2,487.1 (256.1) (9.3)
Federal funds purchased
and resale agreements 452.3 (112.8) (20.0) 565.1 139.3 32.7
Other borrowed funds 272.8 157.1 135.8 115.7 (8.4) (6.7)
Long-term debt 3.0 (28.2) (90.4) 31.2 (46.4) (59.8)
Other 255.2 51.0 25.0 204.2 41.9 25.9
Total Sources $8,626.9 $424.1 5.2% $8,202.8 $404.1 5.2%
</TABLE>
-52-
During 1993, average total loans increased by $200.3 million, or
4.0%. This compares to a 4.0% decrease in 1992 of $206.5 million. The
1993 increase was primarily due to an increase in loan demand in an
environment of continued low interest rates and a mending economy.
Average total loans decreased $206.5 million, or 4.0%, in 1992,
compared to a decrease of $13.5 million, or 0.3%, in 1991. The decrease in
average total loans in 1992 was, to a great extent, due to weak economic
conditions which began in mid 1991. Loan demand was comparatively low
during 1992 and the latter part of 1991. Additionally, Old Kent's strong
credit underwriting standards dictated that it be highly selective in
granting new credit and renewing some existing credit in the environment of
a weaker economy.
Average non-loan interest earning assets, which consist of
interest-earning deposits, federal funds sold and resale agreements,
trading account securities, securities available-for-sale, and securities
held-to-maturity, increased by $224 million, or 6.9% in 1993. In 1992,
they had increased by $611 million, or 23.3%. The 1993 increase is modest
in comparison to 1992, due to the increase in total average loans in 1993.
Average deposits increased by $357 million, or 4.9%, in 1993.
This compares to a 1992 increase of $277.8 million, or 4.0%. Core
deposits, which include demand, savings, and consumer time deposits,
increased by $219.1 million, or 3.6%, in 1993. This compares with an
increase in core deposits of $164.5 million, or 2.7%, in 1992. This growth
includes the deposits of the acquired institutions as previously discussed
in this financial review.
The low rates over the past few years have had an effect on the
relative mix in Old Kent's core deposit components as shown in the table
below. During 1993, average savings deposits increased by $269.2 million,
or 9.7%, compared to an increase in 1992 of $373.6 million, or 15.6%. In
the low rate environment, consumers shifted to increased usage of savings
products. This led to decreases in other time deposits. In 1993, average
other time deposits decreased by $169.1 million, or 6.8%. During 1992,
average other time deposits decreased by 9.3%, or $256.0 million.
<TABLE>
<CAPTION>
Relative average core 1993 1992 1991 1990 1989
deposit mix
<S> <C> <C> <C> <C> <C>
Demand deposits 16.1% 14.7% 14.3% 15.6% 17.1%
Savings deposits 47.5 44.9 39.9 39.1 40.5
Other time deposits 36.4 40.4 45.8 45.3 42.4
Total Core Deposits 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
-53-
Disclosures About Fair Values
Pursuant to the requirements of Statement of Financial Accounting
Standard No. 107, Disclosures about Fair Value of Financial Instruments
("SFAS No. 107"), Note 18 to the consolidated financial statements in Item
8 sets forth the estimated fair value of each significant class of financial
instrument. These values were determined using available market
information, current pricing information applicable to the Corporation and
various valuation methodologies. Where market quotations were not
available, considerable judgment was exercised by Old Kent's management in
the determination of estimated fair values. Hence, the estimated fair
values of financial instruments presented may not be representative of
amounts at which they could be exchanged. Due to the inherent
uncertainties of expected cash flows of financial instruments, the use of
other valid, alternate valuation assumptions and methods could result in
estimated fair values which may differ significantly from those presented
in the December 31, 1993, consolidated financial statements. Additionally,
these estimated fair values represent an estimate at a given point in time.
Factors, including but not limited to, changes in the general levels of
interest rates, may have significant favorable or unfavorable effects on
estimated market values in periods subsequent to December 31, 1993.
Therefore, the estimated fair values presented by Old Kent are subject to
the possibility of significant change after December 31, 1993.
Old Kent has disclosed in its consolidated financial statements
the estimated fair value of its significant classes of financial
instruments at December 31, 1993. Beyond financial instruments, the
Corporation has assets, both tangible and intangible in nature, which Old
Kent's management believes to have significant estimated fair value in
excess of carrying value at December 31, 1993. Such assets include, but
are not limited to, "core deposit intangible" assets, premises whose
appreciated value significantly exceeds carrying value based upon
historical cost, and residential mortgage servicing rights. Old Kent's
management believes that its "core deposit intangible" asset had the most
significant estimated fair value in excess of carrying value at December
31, 1993.
Core deposits generally include demand and savings deposits as
well as consumer time deposits. Old Kent's core deposits totaled over $6.4
billion at December 31, 1993, and included over $4.2 billion of demand and
savings deposits. Old Kent's management believes that these deposits have
significant fair value which is not reflected in the estimated fair values
in Note 18 to the consolidated financial statements in Item 8 at December
31, 1993. Prices involved in sales, mergers and acquisitions of financial
institutions or their banking offices and related deposits are usually
influenced by the value of core deposit intangible assets. Such assets
typically have value based on measurements which estimate the cost of
procuring an equivalent base of deposit customers with similar life
expectancies for the deposit account relationships. Also, non-
interest-bearing deposits and interest-bearing deposits having no fixed
-54-
maturity dates usually have a value associated with their nature as lesser
cost funding sources which tend to have duration behavior characteristics
similar to time deposits. At December 31, 1993, the carrying value of
unamortized core deposit intangible assets acquired through various
purchase transactions, was $14.5 million, only 0.23% of the Corporation's
total core deposits at that date.
-55-
Item 8. Financial Statements and Supplementary Data.
Report of Independent Public Accountants
To the Shareholders and the Board of Directors of Old Kent
Financial Corporation:
We have audited the accompanying consolidated balance sheets of
Old Kent Financial Corporation (a Michigan corporation) and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated statements of
income, cash flows and shareholders' equity for each of the three years in
the period ended December 31, 1993. 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 audits.
We conducted our audits 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Old
Kent Financial Corporation and subsidiaries as of December 31,1993 and
1992, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen & Co.
Chicago, Illinois,
January 18, 1994
-56-
Consolidated Financial Statements
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31
1993 1992
(dollars in thousands)
<S> <C> <C>
Assets:
Cash and due from banks $ 371,789 $ 419,803
Federal funds sold and resale agreements 93,200 9,575
Total cash and cash equivalents 464,989 429,378
Interest-earning deposits 32,596 66,706
Trading account securities 38,558 62,655
Securities available-for-sale:
Collateralized mortgage obligations
and other mortgage-backed securities 394,251 177,477
Other securities 988,373 850,430
Total securities available-for-sale
(market value of approximately $1,433,744
and $1,071,504 in 1993 and 1992,
respectively) 1,382,624 1,027,907
Securities held-to-maturity:
Collateralized mortgage obligations and
other mortgage-backed securities 990,759 956,624
Other securities 1,193,949 1,022,918
Total securities held-to-maturity
(market values of $2,240,798 and
$2,042,252 in 1993 and 1992,
respectively) 2,184,708 1,979,542
Loans 5,491,584 4,907,629
Less allowance for credit losses 140,725 120,790
Net loans 5,350,859 4,786,839
Leasehold improvements, premises and
equipment 133,888 117,128
Other assets 267,482 228,419
Total Assets $9,855,704 $8,698,574
Liabilities and Shareholders' Equity:
Liabilities:
Deposits:
Non-interest-bearing $1,144,700 $1,035,804
Interest-bearing 6,478,800 5,967,028
Foreign - interest-bearing 347,652 250,708
Total deposits 7,971,152 7,253,540
Short-term borrowed funds 958,295 627,161
Other liabilities 112,275 75,379
Long-term debt 1,215 16,217
Total Liabilities 9,042,937 7,972,297
-57-
Shareholders' Equity:
Preferred stock: 25,000,000 shares
authorized and unissued -- --
Common stock, par value $1:150,000,000
shares authorized; 40,538,910 and
40,441,892 shares issued and outstanding
in 1993 and 1992, respectively 40,539 40,442
Capital surplus 120,109 118,238
Retained earnings 652,119 567,597
Total Shareholders' Equity 812,767 726,277
Total Liabilities and Shareholders' Equity $9,855,704 $8,698,574
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
-58-
<TABLE>
Consolidated Statements of Income
<CAPTION>
Year ended December 31
1993 1992 1991
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans $418,563 $435,922 $529,953
Interest on securities
available-for-sale 79,001 -- --
Interest on securities
held-to-maturity 154,375 242,168 202,185
Interest on deposits 3,962 4,200 9,025
Interest on federal funds sold
and resale agreements 2,249 2,659 5,045
Interest on trading account
securities 1,870 2,245 2,799
Total interest income 660,020 687,194 749,007
Interest Expense:
Interest on domestic deposits 224,629 269,251 368,638
Interest on foreign deposits 6,862 8,328 6,015
Interest on short-term borrowed
funds 21,525 22,595 29,157
Interest on long-term debt 264 1,412 5,999
Total interest expense 253,280 301,586 409,809
Net Interest Income 406,740 385,608 339,198
Provision for Credit Losses 33,997 57,712 39,812
Net Interest Income after Provision
for Credit Losses 372,743 327,896 299,386
Other Income:
Trust income 40,305 38,472 35,346
Service charges on deposit accounts 29,972 26,516 25,233
Securities transactions 1,575 5,676 7,401
Gains on sales of residential mortgage
loans 20,763 14,651 6,496
Mortgage servicing revenue 9,403 6,287 5,297
Other 44,772 36,444 33,694
Total other income 146,790 128,046 113,467
-59-
Other Expenses:
Salaries and employee benefits 145,914 132,467 129,672
Occupancy 22,415 19,974 20,825
Equipment 18,571 16,743 16,873
FDIC deposit insurance 16,375 16,134 14,403
Other 122,705 106,667 97,709
Total other expenses 325,980 291,985 279,482
Income before Income Taxes 193,553 163,957 133,371
Income taxes 65,651 52,866 40,390
Net Income $127,902 $111,091 $ 92,981
Average number of shares used to
compute:
Primary net income per common share 40,748,316 40,356,791 40,244,576
Fully diluted net income per common
share 40,748,316 41,097,570 43,101,245
Net income per common share:
Primary $3.14 $2.75 $2.31
Fully diluted $3.14 $2.71 $2.21
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $127,902 $111,091 $ 92,981
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for credit losses 33,997 57,712 39,812
Depreciation, amortization and
accretion 27,174 16,885 13,520
Deferred income taxes (6,524) (13,727) (6,237)
Net gains on sales of assets (24,628) (22,034) (16,366)
Net decrease (increase) in trading
account securities 25,247 550 (44,713)
Net decrease (increase) in other
assets 1,248 (1,829) (733)
Net (decrease) increase in other
liabilities (7,210) (19,816) 1,991
Net cash provided by operating
activities 177,206 128,832 80,255
Cash Flows from Investing Activities:
Maturities and prepayments of
securities available-for-sale 145,469 -- --
-60-
Proceeds from sales of securities
available-for-sale 753,992 -- --
Purchases of securities
available-for-sale (1,215,439) -- --
Maturities and prepayments of
securities held-to-maturity 902,009 513,090 396,845
Proceeds from sales of securities
held-to-maturity -- 983,945 1,189,315
Purchases of securities
held-to-maturity (1,110,706) (1,807,325) (2,317,880)
Net decrease in interest-earning
deposits 35,379 55,122 74,559
Net (increase) decrease in loans (351,417) 197,558 191,048
Purchases of leasehold improvements,
premises and equipment, net (30,477) (18,175) (11,812)
Purchase of business (net of cash
acquired) (7,522) -- --
Net cash used for investing
activities (878,712) (75,785) (477,925)
Cash Flows from Financing Activities:
Increase (decrease) in time deposits 364,814 (503,001) (41,411)
Increase in demand and savings
deposits 154,844 442,562 394,525
Increase (decrease) in short-term
borrowed funds 274,709 (68,244) 214,002
Payments of long-term debt
obligations (15,002) (12,677) (6,080)
Repurchases of common stock -- (69,994) --
Proceeds from common stock
issuances 1,132 3,161 1,347
Dividends paid to shareholders (43,380) (36,413) (31,492)
Net cash provided by (used for)
financing activities 737,117 (244,606) 530,891
Net increase (decrease) in
cash and cash equivalents 35,611 (191,559) 133,221
Cash and cash equivalents at
beginning of year 429,378 620,937 487,716
Cash and cash equivalents at
end of year $464,989 $429,378 $620,937
Supplemental disclosures of cash
flow information:
Interest paid on deposits,
short-term borrowings and
long-term debt $244,482 $316,613 $416,299
Federal income taxes paid 71,755 66,461 44,335
Convertible debentures retired in
exchange for common stock issuances -- 45,870 171
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
-61-
<TABLE>
Consolidated Statements of Shareholders' Equity
<CAPTION>
Total
Share-
Common Capital Retained holders'
Stock Surplus Earnings Equity
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Balance at January 1, 1991 $26,613 $137,860 $443,163 $607,636
Net income for the year 92,981 92,981
Cash dividends:
$ .78 2/3 per common share (31,492) (31,492)
Common stock issued for conversion of
debentures, under employee stock plans, and other 157 1,449 1,606
Change in unrealized depreciation of equity securities 1,795 1,795
Tax benefit relating to employee stock plans 84 84
Balance at December 31, 1991 26,770 139,393 506,447 672,610
Net income for the year 111,091 111,091
Cash dividends:
$ .90 1/3 per common share (36,413) (36,413)
Common stock repurchased (1,781) (68,213) (69,994)
Common stock issued for conversion of
debentures, under employee stock plans, and other 1,987 46,689 48,676
Common stock issued in payment of 3-for-2 stock split
(cash paid in lieu of fractional shares - $62) 13,466 (13,528) (62)
Tax benefit relating to employee stock plans 369 369
Balance at December 31, 1992 40,442 118,238 567,597 726,277
Net income for the year 127,902 127,902
Cash dividends:
$1.07 per common share (43,380) (43,380)
Common stock issued under employee
stock plans, and other - 97,018 shares 97 1,269 1,366
Tax benefit relating to employee stock plans 602 602
Balance at December 31, 1993 $40,539 $120,109 $652,119 $812,767
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
-62-
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
The consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and reporting
practices prescribed for the banking industry. A description of
significant accounting policies follows:
Basis of Presentation
The consolidated financial statements for Old Kent (The
Corporation) include the accounts of Old Kent Financial Corporation (Parent
Company) and its wholly owned subsidiaries. Significant intercompany
balances and transactions have been eliminated in consolidation.
Cash Equivalents
Old Kent has defined cash and cash equivalents as those amounts
included in the consolidated balance sheets as "cash and due from banks,
federal funds sold and resale agreements."
Trading Account Securities
Trading account securities, which primarily consist of debt
securities, are carried at market value. Gains and losses on trading
activities are included in other income in the consolidated statements of
income.
Securities Available-for-Sale
Securities available-for-sale includes those securities which
might be sold as part of Old Kent's management of interest rate risk, in
response to changes in interest rates, prepayment or credit risk or due to
desire to increase capital or liquidity. While Old Kent has no current
intention to sell these securities, they may not be held for long-term
investment. Securities available-for-sale were carried at the lower of
aggregate market or cost adjusted for amortization of premium and accretion
of discount computed on the interest method over the terms of the
securities. Gains and losses on sales of such securities are determined
using the specific identification method and are classified as other income
in the consolidated statements of income. Adjustments to carrying value
resulting from unrealized aggregate market value losses are classified as
other income in the consolidated statements of income. Effective January
1, 1994, Old Kent will adopt the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" (see Note 4).
-63-
Securities Held-to-Maturity
Securities held-to-maturity are stated at amortized cost.
Designation as such a security is made at the time of acquisition and is
based on the intent and ability to hold the security for long-term
investment. Gains and losses on disposition are based on the net proceeds
and the adjusted carrying amount of the securities sold, using the specific
identification method. Gains and losses are included in other income in
the consolidated statements of income.
Interest Rate Swaps
The Corporation enters into interest rate swap contracts as a
means of managing the variability between interest income and interest
expense. Income and expense associated with swap transactions is accrued
over the periods prescribed by the contracts.
Mortgage Banking Activities
The Corporation routinely sells to investors its originated
residential mortgage loans, as well as those acquired from third parties.
The Corporation typically retains the servicing rights related to the
mortgages sold. Gains on sales of mortgages are recorded to the extent
proceeds exceed the carrying value of the loans after allowing for the
recognition of a normal servicing fee over the estimated lives of the
loans. Mortgage loans held-for-sale are carried at the lower of cost or
market, which is determined under the aggregate method. The carrying value
of such loans is adjusted by gains and losses associated with the
corresponding financial instruments used to hedge against increases in
interest rates.
Old Kent capitalizes the cost of servicing rights acquired from
independent sources. Amortization of purchased mortgage servicing rights
is recorded over the estimated lives of the related loans. The Corporation
evaluates the recoverability of each year's purchased mortgage servicing
rights separately considering such factors as estimated prepayment rates,
current economic conditions and other portfolio characteristics and, if
necessary, adjusts the carrying value to reflect net realizable value.
Loans
Except for residential mortgages held-for-sale, loans are stated
at their principal amount outstanding, net of unearned income. Loan
performance is reviewed regularly by loan review personnel, loan officers
and senior management. A loan is placed on nonaccrual status when
principal or interest is past due 90 days or more, and the loan is not well
secured and in the process of collection, or when, in the opinion of
management, there is sufficient reason to doubt collectibility. Interest
-64-
previously accrued, but not collected, is reversed and charged against
interest income at the time the loan is placed on nonaccrual status.
Payments received on nonaccrual loans are recorded as principal
reductions if principal repayment is doubtful. Loans are returned to
accrual status when principal and interest payments are brought current and
collectibility is no longer in doubt. Interest income on restructured
loans is recognized according to the terms of the restructure, subject to
the above described nonaccrual policy.
Certain commitment and loan origination fees are deferred and
amortized as an adjustment of the related loan's yield over its contractual
life using the interest method, or other methods which approximate the
interest method. All remaining commitment and loan origination fees and
all direct costs associated with originating or acquiring loans are
recognized currently, which is not materially different than the prescribed
method.
Allowance for Credit Losses
The allowance for credit losses is maintained at a level that, in
management's judgment, is adequate to absorb probable credit losses. The
amount is based on management's specific review and analysis of the loan
portfolio, as well as evaluation of the effects of current economic
conditions on the loan portfolio.
This process is based on estimates, and ultimate losses may vary
from current estimates. As changes in estimates occur, adjustments to the
level of the allowance are recorded in the provision for credit losses in
the period in which they become known.
Leasehold Improvements, Premises and Equipment
Leasehold improvements, premises and equipment are stated at
original costs, less accumulated depreciation and amortization computed on
the straight-line method over the estimated useful lives of the assets or
terms of the leases, whichever period is shorter. For income tax purposes,
minimum lives and accelerated methods are used.
Other Real Estate Owned
Other real estate owned consists of properties acquired in
partial or total satisfaction of debt and properties treated as
in-substance foreclosures. Other real estate owned is stated at the lower
of the related loan value or fair value. Losses arising at acquisition are
charged against the allowance for credit losses. Reductions in fair value
subsequent to acquisition are recorded in other expense in the consolidated
statements of income, while any gains realized on the disposition of such
properties are included in other income.
-65-
Intangible Assets
Goodwill, representing the cost of investments in subsidiaries in
excess of the fair value of the net assets at acquisition, is amortized
over periods ranging from ten to twenty years. Other acquired intangible
assets, such as those associated with acquired core deposits, are amortized
over periods not exceeding fifteen years.
Trust Assets
Property, other than cash deposits, held in a fiduciary or agency
capacity is not included in the consolidated balance sheets, since such
assets are not owned by Old Kent.
Pension Benefits
A defined benefit pension plan covers substantially all
employees. The plan provides for normal and early retirement, deferred
benefits for vested employees and, under certain circumstances, survivor
benefits in the event of death. Benefits are based on the employees' years
of service and their five highest consecutive years of compensation over
the last ten years of service. The proportion of average compensation paid
as a pension is determined by age and length of service, as defined in the
plan. Contributions to the plan satisfy or exceed the minimum funding
requirement of the Employee Retirement Income Security Act (ERISA). Assets
held by the plan consist primarily of investments in several of Old Kent's
collective investment trust funds and mutual funds.
Old Kent also maintains a noncontributory nonqualified pension
plan for certain participants whose retirement benefit payments under the
qualified plan are expected to exceed the limits imposed by ERISA. Old
Kent maintains nonqualified trusts, referred to as "rabbi" trusts,
primarily to fund and secure the benefits in excess of those permitted in
certain of the Old Kent qualified pension plans. These arrangements offer
certain officers and directors of the Corporation a degree of assurance for
ultimate payment of benefits. The assets remain subject to the claims of
creditors of Old Kent and are not the property of the employees. Hence,
they are accounted for as assets of the Corporation in the consolidated
balance sheets.
Retirement Savings Plans
Old Kent maintains a defined contribution retirement savings plan
covering substantially all employees. The Corporation's contribution is
equal to 50% of the amount contributed by the participating employees. Old
Kent's contribution is limited to a maximum of 3% of base wages as
described under terms of the plans. The estimated contribution by Old Kent
is charged to expense during the year in which the employee contribution is
-66-
received and is included in employee benefits in the consolidated
statements of income.
Income Taxes
Effective January 1, 1993, the Corporation adopted the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." SFAS No. 109 required a change from the
deferral method of accounting for income taxes of Accounting Principles
Board Opinion No. 11 to the asset and liability method of accounting for
income taxes. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using the
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be reversed. Old Kent and its
subsidiaries file a consolidated federal income tax return.
Income per Common Share
Primary earnings per common share are computed by dividing net
income by the weighted average number of common shares outstanding and
common equivalent shares with a dilutive effect. Common equivalent shares
are shares which may be issuable to employees upon exercise of outstanding
stock options.
Fully diluted earnings per common share are determined on the
assumption that the weighted average number of common shares and common
equivalent shares outstanding is further increased by conversion of the
convertible debentures. Net income is increased by the after tax interest
expense related to convertible debentures.
Reclassification
Certain reclassifications have been made to prior periods'
financial statements to place them on a basis comparable with the current
period's financial statements.
Note 2. Acquisitions
Effective January 1, 1993, Old Kent acquired all of the
outstanding common stock of University Financial Corporation (Elgin,
Illinois) for approximately $12.5 million in cash. University Financial
Corporation owned First Federal of Elgin, F.S.A. which, upon acquisition,
was merged into Old Kent's Illinois banking subsidiary. When acquired,
University Financial Corporation had assets of approximately $275 million
and deposits of approximately $198 million. This acquisition was accounted
for as a purchase. If this purchase had been effective January 1, 1992,
there would have been no material effect on the consolidated results of
operations or financial condition.
-67-
In August 1993, Old Kent purchased a retail banking site located
in Southfield, Michigan, and its related deposits of approximately $18
million. This acquisition became a branch of Old Kent Bank - East
(Brighton, Michigan).
In September 1992, the Corporation acquired five banking offices,
and their related deposits of approximately $53 million, in the Lansing,
Michigan area from a federal savings bank for approximately $4.6 million in
cash. This acquisition was accounted for as a purchase. If this purchase
had been effective January 1, 1991, there would have been no material
effect on the consolidated results of operations or financial condition for
1992 or 1991.
Pending at December 31, 1993, is Old Kent's acquisition of
EdgeMark Financial Corporation (Chicago, Illinois). At December 31, 1993,
EdgeMark Financial Corporation (EdgeMark) had assets of approximately $534
million and deposits of approximately $469 million. Old Kent expects to
exchange approximately $62 million of its common stock for all the shares
of EdgeMark. In a related transaction, Old Kent intends to repurchase a
similar number of its shares in the open market. The acquisition is
subject to approval by EdgeMark shareholders, regulatory authorities and
other customary conditions. Both the acquisition and stock repurchase are
expected to be completed by June 30, 1994. The acquisition of EdgeMark
will be accounted for as a purchase, and is not expected to have a material
effect on Old Kent's future results of operations or financial condition.
On March 1, 1994, Old Kent purchased Princeton Financial Corp.
(Orlando, Florida). Princeton Financial Corp. (Princeton) is a mortgage
company which originates and sells residential mortgages, while retaining a
substantial portion of the related servicing rights. At December 31, 1993,
Princeton had assets of approximately $65 million and serviced loans of
approximately $340 million for third party investors. Princeton will be
acquired in a cash transaction which is expected to occur on, or about,
March 1, 1994. This acquisition will be accounted for as a purchase, and
is not expected to have a material effect on Old Kent's future results of
operations or financial condition.
Note 3. Cash and Due From Banks
The Federal Reserve requires the banking subsidiaries to maintain
certain average reserve balances. These average reserves approximated $56
million during 1993 and $38 million during 1992.
-68-
Note 4. Securities Available-for-Sale
The following summarizes amortized cost and market value of
securities available-for-sale:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1993 (in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agency securities $ 976,097 $ 50,615 $ 958 $1,025,754
Collateralized mortgage obligations and
other mortgage-backed securities 394,251 1,765 4,642 391,374
Equity securities 12,276 4,340 -- 16,616
Total $1,382,624 $ 56,720 $ 5,600 $1,433,744
</TABLE>
The amortized cost and market value of securities
available-for-sale at December 31, 1993, are shown below by their
contractual maturity. Expected maturities may differ from contractual
maturities because issuers may have the right to call or prepay the
obligation with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
December 31, 1993 (in thousands) Cost Value
<S> <C> <C>
Due in one year or less $ 42,532 $ 42,847
Due after one year through five years 710,789 749,078
Due after five years through ten years 222,776 233,829
976,097 1,025,754
Collateralized mortgage obligations
and other mortgage-backed securities 394,251 391,374
Equity securities 12,276 16,616
Total $1,382,624 $1,433,744
</TABLE>
Effective January 1, 1994, the Corporation will adopt the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." This
statement requires that "securities available-for-sale" be carried on the
balance sheet at fair value, with corresponding (after tax) valuation
adjustments included in shareholders' equity. As of December 31, 1993, and
for prior periods, Old Kent carried these assets at the lower of amortized
cost or aggregate market value. The Corporation's adoption of SFAS No. 115
will have the effect of increasing the carrying value of securities
available-for-sale by approximately $51.1 million and shareholders' equity
by approximately $33.2 million.
-69-
The following summarizes amortized cost and market value of
securities available-for-sale at the previous year-end:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1992 (in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agency securities $ 850,430 $ 39,425 $ 244 $ 889,611
Collateralized mortgage obligations and
other mortgage-backed securities 177,477 5,389 973 181,893
Total $1,027,907 $ 44,814 $ 1,217 $1,071,504
</TABLE>
Note 5. Securities Held-To-Maturity
The following summarizes amortized cost and market value of
securities held-to-maturity:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1993 (in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal
agency securities $ 986,151 $ 40,103 $ 1,059 $1,025,195
Collateralized mortgage obligations and
other mortgage-backed securities 990,759 16,894 8,441 999,212
State and political subdivision securities 204,685 9,019 896 212,808
Other securities 3,113 471 1 3,583
Total $2,184,708 $ 66,487 $10,397 $2,240,798
</TABLE>
The amortized cost and market value of securities held-to-
maturity at December 31, 1993, are shown below by their contractual
maturity. Expected maturities may differ from contractual maturities
because issuers may have the right to call or prepay the obligation with or
without call or prepayment penalties.
-70-
<TABLE>
<CAPTION>
Estimated
Amortized Market
December 31, 1993 (in thousands) Cost Value
<S> <C> <C>
Due in one year or less $ 319,100 $ 320,346
Due after one year through five years 790,008 830,805
Due after five years through ten years 65,633 70,083
Due after ten years 19,208 20,352
1,193,949 1,241,586
Collateralized mortgage obligations and other
mortgage-backed securities 990,759 999,212
Total $2,184,708 $2,240,798
</TABLE>
Securities having an amortized cost of $861.2 million at December
31, 1993, were pledged to secure public and trust deposits and for other
purposes, as required by law.
The following summarizes amortized cost and market value of
securities held-to-maturity at the previous year-end:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1992 (in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and federal agency securities $ 815,043 $ 36,157 $ 1,217 $ 849,983
Collateralized mortgage obligations and
other mortgage-backed securities 956,624 24,585 4,839 976,370
State and political subdivision securities 196,139 8,180 338 203,981
Other securities 11,736 183 1 11,918
Total $1,979,542 $ 69,105 $ 6395 $2,042,252
</TABLE>
Note 6. Loans and Nonperforming Assets
The following summarizes loans:
<TABLE>
<CAPTION>
December 31 (in thousands) 1993 1992
<S> <C> <C>
Commercial $ 1,351,693 $1,210,477
Real estate - Commercial 1,167,979 1,155,678
Real estate - Construction 136,565 177,373
Real estate - Residential mortgages
held-for-sale 474,898 183,505
Real estate - Residential mortgages 754,544 834,395
Real estate - Consumer home equity 426,382 383,259
Consumer 1,062,019 855,515
Credit card loans 62,396 60,861
Lease financing 55,108 46,566
Total Loans $ 5,491,584 $4,907,629
</TABLE>
-71-
During 1993, 1992, and 1991, Old Kent originated and acquired
residential mortgage loans totaling $2,386 million, $1,344 million, and
$721 million, respectively. Old Kent also sold residential mortgage loans
aggregating $1,990 million, $1,169 million and $538 million in 1993, 1992
and 1991, respectively, while retaining a substantial portion of the
servicing rights associated with those loans.
At December 31, 1993, Old Kent had outstanding commitments to
sell residential mortgage loans of approximately $510 million. Also at
that date, the Corporation's total loans included approximately $475
million of residential mortgage loans whose characteristics would enable
Old Kent to fulfill outstanding sales commitments.
Loans made by Old Kent to its directors and executive officers,
including their family members and associated entities, aggregated $174
million and $116 million at December 31, 1993 and 1992, respectively.
During 1993, new loans and other additions amounted to $192 million and
repayments were $134 million. These loans were made in the ordinary course
of business under normal credit terms, including interest rate and
collateralization and do not represent more than a normal risk of
collection.
The table below summarizes nonperforming assets:
<TABLE>
<CAPTION>
December 31 (in thousands) 1993 1992
<S> <C> <C>
Nonaccrual loans $ 53,330 $ 75,878
Restructured loans 5,426 2,288
Other real estate owned 9,480 8,163
Total nonperforming assets $ 68,236 $ 86,329
</TABLE>
Loans past due 90 days or more, but for which interest income
continues to be recognized, totaled $9.0 million and $9.9 million at
December 31, 1993 and 1992, respectively. Gross interest income that would
have been recorded in 1993 for nonaccrual and restructured loans as of
December 31, 1993, assuming interest had been accrued throughout the year
in accordance with original terms, was $5.4 million. The comparable total
for 1992 was $6.7 million. The amount of interest included in income on
these loans was $1.1 million and $1.9 million in 1993 and 1992,
respectively.
Although Old Kent has a diversified loan portfolio, a substantial
natural geographic concentration of credit risk exists within the
Corporation's defined customer market areas. These geographic market areas
are the State of Michigan, the greater Grand Rapids, Michigan area, and the
Chicago, Illinois metropolitan and suburban markets. There are no
significant concentrations of credit where customers' ability to honor loan
terms is dependent upon a single economic sector.
-72-
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 114, "Accounting
by Creditors for Impairment of a Loan." Old Kent is required to adopt this
statement after December 31, 1994. This statement requires that the
recorded investment in certain impaired loans (as defined by the statement)
be adjusted by means of a valuation allowance to reflect a net carrying
value determined by one of the following methods: (1) the present value of
expected future cash flows discounted at the loan's effective interest
rate, (2) the loan's observable market price, or (3) at the fair value of
the collateral, if the loan is collateral dependent. It is anticipated
that, when adopted, the provisions of SFAS No. 114 will not have a material
effect on the Corporation's financial condition and results of operations.
Note 7. Allowance for Credit Losses
The following summarizes the changes in the allowance for credit
losses:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Balance at beginning of year $120,790 $ 87,025 $ 73,080
Additions:
Provision charged to operations 33,997 57,712 39,812
154,787 144,737 112,892
Deductions:
Credit losses 24,833 35,589 33,776
Less recoveries 8,666 11,642 7,909
Net credit losses 16,167 23,947 25,867
Allowance of acquired institution 2,105 - -
Balance at end of year $140,725 $120,790 $ 87,025
</TABLE>
Note 8. Leasehold Improvements, Premises and Equipment
The following summarizes leasehold improvements, premises and
equipment:
<TABLE>
<CAPTION>
December 31 (in thousands) 1993 1992
<S> <C> <C>
Land $ 22,560 $ 20,643
Land improvements 6,088 5,093
Buildings and improvements 125,536 110,105
Leasehold improvements 19,536 17,472
Furniture and equipment 86,748 83,412
Total 260,468 236,725
Less accumulated depreciation and amortization 126,580 119,597
Net leasehold improvements, premises and
equipment $133,888 $ 117,128
</TABLE>
-73-
Note 9. Intangible Assets
Other assets, as shown on the consolidated balance sheets,
includes the following intangible assets (net of accumulated amortization):
<TABLE>
<CAPTION>
December 31 (in thousands) 1993 1992
<S> <C> <C>
Goodwill $ 35,095 $ 38,061
Core deposit intangibles 14,519 11,194
Total $ 49,614 $ 49,255
</TABLE>
In 1993, the Corporation prospectively adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Pursuant to this statement, Old Kent increased the carrying value
of certain intangibles and related amortization expenses to reflect the
reclassification of certain deferred income taxes associated with previous
business combinations. Under this new accounting standard, deferred income
taxes are recorded as such, rather than as reductions of the carrying
values of the intangibles. The effect of this reclassification on
associated amortization expense was not material.
Other expense, as shown in the consolidated statements of income,
includes amortization expense associated with the intangible assets shown
above. For the years 1993, 1992 and 1991, this amortization expense
totaled $6,924,000, $5,784,000 and $5,193,000, respectively.
Other assets, as shown on the consolidated balance sheets also
includes the value of unamortized mortgage servicing rights purchased by
the Corporation. At December 31,1993, these assets totaled $4,609,000.
For the years 1993, 1992, and 1991, amortization expense related to these
assets were $5,190,000, $128,000, and $31,000, respectively.
Note 10. Short-Term Borrowed Funds
The following summarizes short-term borrowed funds:
<TABLE>
<CAPTION>
December 31 (in thousands) 1993 1992
<S> <C> <C>
Federal funds purchased $251,085 $303,298
Bank notes 235,000 -
Securities sold under agreements to repurchase 233,573 178,041
Treasury tax and loan demand notes 164,140 111,954
Other borrowed funds 74,497 33,868
Total $958,295 $627,161
</TABLE>
-74-
At December 31, 1993, short-term borrowed funds included bank
notes totaling $235 million which had original maturities of one year or
less and are scheduled to mature at various dates in 1994. The rates of
interest on these notes range from 3.32% to 3.48%.
Note 11. Capital Stock
On November 2, 1993, the Corporation announced that, in
connection with its anticipated acquisition of EdgeMark Financial
Corporation in 1994, it would repurchase shares of Old Kent Common Stock
similar in number to the amount which are expected to be issued for that
acquisition. The aggregate amount of such repurchases is expected to
approximate $62 million.
At the Annual Meeting of Shareholders held on April 19, 1993,
shareholders approved a proposal to amend the Articles of Incorporation to
increase the number of authorized shares of common stock from 50 million to
150 million shares.
On September 15, 1992, the Corporation issued 13,466,117 shares
in payment of a three-for-two common stock split, effected in the form of a
share dividend. All per share data, presented in these financial
statements, have been restated for the effects of the split.
During 1992, the Corporation repurchased 1,781,659 shares
(pre-split basis) of its common stock at an aggregate cost of $69,994,000.
The purpose of this stock repurchase was to meet expected needs for shares
of Old Kent Common Stock. These needs included the issuance of shares in
connection with the exercise of conversion rights by holders of Old Kent
Financial Corporation 8% Convertible Subordinated Debentures, due 2010
("Debentures").
During 1992, Old Kent issued 1,811,979 shares (pre-split basis)
of its common stock to Debenture holders who exercised conversion rights.
As a result of the Debentures being called for an early redemption, nearly
all holders of the $45,897,000 of Debentures outstanding at December 31,
1991, exercised their conversion rights. This conversion process resulted
in additional shareholders' equity of approximately $46 million. At
December 31, 1993 and 1992, there were no Debentures outstanding.
At December 31, 1993 and 1992, there were 25,000,000 shares of
preferred stock authorized but not issued, of which 3,000,000 are
designated Series A Preferred Stock and 300,000 are designated Series B
Preferred Stock.
On December 31, 1993, the Corporation had outstanding 27,025,940
Series B Preferred Stock Purchase Rights ("Rights"). The Rights were
originally issued in January 1989 as a dividend to holders of the
Corporation's common stock at the rate of one right for each share of
common stock outstanding. As a result of the three-for-two split of the
-75-
Corporation's stock which occurred in 1992, each share of the Corporation's
common stock presently represents 2/3rds of a Right. Each full Right
entitles the holder thereof, until January 10, 1999, to buy one
one-hundredth (1/100) of a share of Series B Preferred Stock at an exercise
price of $80.00. The exercise price and the number of shares of Series B
Preferred Stock issuable upon the exercise to the Rights are subject to
adjustment in certain cases to prevent dilution. The Rights are evidenced
by common stock certificates and are not exercisable or transferable apart
from the common stock until the occurrence of certain events set forth in a
Rights Agreement under which the Rights were issued. The Rights do not
have any voting rights and are redeemable, at the option of the
Corporation, at a price of $0.01 per Right prior to any person acquiring
beneficial ownership of at least 20% of the common stock. The Rights
expire on January 10, 1999. So long as the Rights are not separately
transferable, the Corporation will issue 2/3rds of a Right (subject to
possible future adjustment) with each new share of common stock issued.
Note 12. Long-Term Stock Incentive Plans
Old Kent has stock option plans under which options may be
granted to certain officers and employees at not less than the market price
of Old Kent's common stock on the date of grant. The options granted are
exercisable immediately and expire within ten years of the date of grant,
subject to certain cancellation provisions relating to employment. At
December 31, 1993, a total of 2,004,678 shares were reserved for stock
options, consisting of 720,430 shares for options granted at prices from
$7.85 to $31.63, and 1,284,248 shares available for future option grants.
The following table summarizes stock option transactions for the
last three years:
<TABLE>
<CAPTION>
Number of Exercise
Shares Price Range
<S> <C> <C>
Options outstanding January 1, 1991 1,091,008 $3.41 - $ 17.44
Granted 197,365 $ 18.42
Exercised (461,544) $3.41 - $ 18.42
Canceled (675) $ 16.83
Options outstanding December 31, 1991 826,154 $4.59 - $ 18.42
Granted 140,598 $ 26.92
Exercised (273,640) $4.59 - $ 26.92
Options outstanding December 31, 1992 693,112 $7.85 - $ 26.92
Granted 133,118 $ 31.63
Exercised (105,800) $7.85 - $ 26.92
Options outstanding December 31, 1993 720,430 $7.85 - $ 31.63
</TABLE>
(Amounts shown above have been adjusted to reflect the effect of stock
splits subsequent to grant dates.)
-76-
Old Kent also has restricted stock plans under which certain
officers and employees may be awarded restricted stock. The plans provide
for the issuance of a maximum of 1,080,844 authorized but previously
unissued shares of Old Kent's common stock, subject to certain antidilution
adjustments, as defined in the plans. Shares issued pursuant to the plans
are restricted as to sale or transfer for a period of up to five years, but
provide the recipients with all other rights and benefits of ownership.
During 1993, 1992, and 1991, Old Kent issued 23,170 shares, 30,996 shares
and 26,766 shares of its common stock with total market values of $733,000,
$887,000 and $505,000, respectively, which are being amortized ratably to
expense over the period of restriction. At December 31, 1993, there were
247,447 shares reserved for future restricted stock plan awards.
Old Kent also has a deferred stock compensation plan under which
key employees may be awarded shares of stock as deferred compensation to be
received at a specified later date, which may be up to five years after the
date of the award. The plan provides for the issuance of a maximum of
300,000 authorized but previously unissued shares of Old Kent's common
stock. Shares awarded under the plan would not be issued until the end of
the deferral period, unless there is a change of control of the
Corporation, in which case the shares would be issued to a trust where they
are to be held and distributed at the end of the deferral period.
Employees who receive awards under this plan will receive additional
compensation equal to the dividends which would have been paid on the
shares awarded if they were outstanding during the deferral period. During
1993, 1992 and 1991, Old Kent awarded 20,835 shares, 22,925 shares and
36,810 shares of its common stock valued at $659,000, $629,000 and
$678,000, respectively at their award dates, as deferred compensation
which are ratably charged to expense from the date of award to the end
of the deferral period based on current market value. At December 31,
1993, there were 256,240 shares reserved for future deferred stock
compensation plan awards.
Note 13. Other Income and Other Expense
Other income, as shown on the consolidated statements of income,
includes the following:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Revenue from credit card transactions $ 16,358 $ 13,510 $ 12,200
Transaction processing fees 9,809 8,301 6,837
Credit life insurance premiums 2,972 2,529 2,463
Trading account gains 1,594 1,908 2,647
Safe deposit box rental income 1,765 1,625 1,617
Non-recurring revenue 2,089 - -
Other revenues 10,185 8,571 7,930
Total other income $ 44,772 $ 36,444 $ 33,694
</TABLE>
-77-
Other expense, as shown on the consolidated statements of income,
includes the following:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Taxes other than income taxes $ 10,474 $ 9,307 $ 8,259
Stationery and supplies 8,250 7,114 7,659
Postage and courier charges 8,207 8,057 8,285
Credit card interchange expense 10,950 8,449 7,161
Advertising and public relations 8,372 6,634 6,762
Professional services 9,202 7,023 6,336
Other expenses 67,250 60,083 53,247
Total other expenses $122,705 $106,667 $97,709
</TABLE>
Securities transactions for available-for-sale and
held-to-maturity securities, as shown on the consolidated statements of
income, includes gross gains and gross losses as follows:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Gross gains on sales of securities $1,889 $ 6,571 $ 8,838
Gross losses on sales of securities (314) (895) (1,437)
Securities transactions $1,575 $ 5,676 $ 7,401
Income tax expense applicable to
securities transactions $ 551 $ 1,930 $ 2,584
</TABLE>
Note 14. Employee Benefits
The Corporation provides pension benefits to substantially all of
its employees under the terms of the "Old Kent Retirement Income Plan."
Old Kent also provides its key executives with pension benefits under the
provisions of the "Old Kent Executive Retirement Income Plan." The
following table sets forth the funded status of the pension plans and the
amounts included in Old Kent's consolidated balance sheets:
-78-
<TABLE>
<CAPTION>
December 31 (in thousands) 1993 1992
<S> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits
of $59,326 and $45,506 $60,338 $46,108
Projected benefit obligation for
service rendered to date ($85,270) ($71,362)
Plan assets at fair value, primarily
listed stocks and bond investment funds 107,547 106,042
Plan assets in excess of projected
benefit obligation 22,277 34,680
Unrecognized net actuarial loss/(gain) 5,937 (5,598)
Unrecognized prior service cost being
recognized over 19 years 5,580 5,991
Unrecognized net transition assets
being recognized over 15 to 19 years (20,363) (22,224)
Prepaid pension cost included in other assets $13,431 $12,849
</TABLE>
Net pension income included the following components:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Service cost (benefits earned during
the year) $4,219 $ 3,785 $ 3,695
Interest cost on projected benefit
obligation 6,812 6,076 5,798
Actual return on plan assets (8,500) (6,945) (17,208)
Net amortization and deferral (3,113) (4,075) 6,697
Net periodic pension income $(582) $(1,159) $(1,018)
</TABLE>
The following assumptions were used in determining the actuarial
present value of the projected benefit obligations as of December 31 for
each of the following years:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Discount rate 7.75% 9.00% 9.00%
Rate of increase in future
compensation levels 4.75 6.00 6.00
Expected long-term rate of
return on plan assets 9.00 10.00 10.00
</TABLE>
-79-
Old Kent has adopted amended assumptions, as shown above, for use
in the actuarial determination of its projected benefit obligations at
December 31, 1993. The amended assumptions reflect a change in outlook
based on management's assessment of expected economic conditions for the
foreseeable future.
Eligible employees may elect to participate in Old Kent's
retirement savings plans whereby the Company contributes a fifty percent
matching contribution for each amount contributed by participating
employees, within limits as defined in the plans. The cost of these
retirement savings plans was $2,194,000, $1,949,000 and $1,771,000 for
1993, 1992 and 1991, respectively.
The Corporation provides post-retirement benefits other than
pensions for a small group of employees who were entitled to such benefits
under plans of predecessor banking organizations acquired by Old Kent.
These benefits primarily consist of health care and life insurance. The
costs of these benefits are not material and are recognized in the
financial statements during the employees' years of service.
In 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 112, "Employers
Accounting for Postemployment Benefits." This statement requires employers
to recognize the obligation to provide postemployment benefits during the
period in which the employee renders service to the employer. Such
benefits may include, but are not limited to, salary continuation,
severance benefits, job training, outplacement and counseling services, and
continuation of health care and life insurance benefits. For 1993 and
prior, Old Kent recognized the estimated expense of such benefits at the
date of the event giving rise to such obligations. Adoption of SFAS No.
112 is required in 1994 and the Corporation's management believes that its
adoption will not materially impact Old Kent's financial condition or
results of operations.
Note 15. Income Taxes
As described in Note 1, effective January 1, 1993, the
Corporation began accounting for income taxes under the provisions of SFAS
No. 109. As permitted under SFAS No. 109, the Corporation recorded the
cumulative effect of this change; thus, prior year financial statements
have not been restated. The net effect of adopting SFAS No. 109 was not
material to the Corporation's results of operations or its financial
condition.
-80-
Components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Current $72,175 $66,593 $46,627
Deferred (benefit) (6,524) (13,727) (6,237)
Total provision $65,651 $52,866 $40,390
</TABLE>
Income tax expense differs from that computed at the federal
statutory rate as follows:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Tax at 35% statutory rate (34% for
1992 and 1991) $67,743 $55,745 $45,346
Tax effect of:
Tax-exempt interest (4,986) (5,484) (6,489)
Amortization of goodwill 1,038 1,096 1,141
Cumulative effect of adopting
SFAS No. 109 1,900 - -
Impact of statutory rate increase
on deferred balances (1,044) - -
Other (net) 1,000 1,509 392
Income tax expense $65,651 $52,866 $40,390
Effective Tax Rate 33.9% 32.2% 30.3%
</TABLE>
Components of the deferred tax assets and liabilities were as
follows:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993
<S> <C>
Deferred tax assets:
Allowance for credit losses $ 48,884
Deferred compensation 6,344
Other 5,210
Total deferred tax assets 60,438
Valuation allowance -
Deferred tax assets $ 60,438
Deferred tax liabilities:
Business combinations $ 2,104
Prepaid pension 5,844
Depreciation 3,289
Other 5,189
Deferred tax liabilities $ 16,426
Net deferred tax assets $ 44,012
</TABLE>
-81-
Components of the deferred tax provision (benefit) are as
follows:
<TABLE>
<CAPTION>
Year ended December (in thousands) 1992 1991
<S> <C> <C>
Provision for credit losses ($11,705) ($4,693)
Other (2,022) (1,544)
Total deferred benefit ($13,727) ($6,237)
</TABLE>
Note 16. Commitments and Contingencies
Certain facilities and equipment are leased under noncancelable
operating lease agreements which expire at various dates through the year
2013. The aggregate minimum rental commitments are as follows:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) Premises Equipment Total
<S> <C> <C> <C>
1994 $ 3,357 $ 4,931 $ 8,288
1995 2,865 4,325 7,190
1996 2,062 403 2,465
1997 1,863 154 2,017
1998 1,516 48 1,564
Thereafter 7,289 - 7,289
Total minimum payments $18,952 $ 9,861 $28,813
</TABLE>
Rental expense charged to operations in 1993, 1992, and 1991,
amounted to approximately $8,584,000, $8,866,000, and $9,568,000,
respectively, including amounts paid under short-term cancelable leases.
Certain leases contain provisions for renewal and purchase options, and
require payment of property taxes, insurance and related expenses.
Included as a reduction of Old Kent's occupancy expense is
building rental income of approximately $4,032,000, $4,350,000, and
$4,226,000, for 1993, 1992, and 1991, respectively.
At December 31, 1993, Old Kent and its subsidiaries were parties,
both as plaintiff and as defendant, to a number of lawsuits which arose in
the ordinary course of business. In the opinion of management, after
consultation with the Corporation's counsel, the ultimate resolution of
these matters will not have a material effect on the Corporation's
consolidated financial position and results of operations.
-82-
Note 17. Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, Old Kent is a party to
financial instruments with off-balance-sheet risk in order to meet the
financing needs of its customers and to reduce its own exposure to
fluctuating interest rates. These financial instruments include
commitments to extend credit, standby and commercial letters of credit,
interest rate swap agreements and commitments to purchase foreign
currencies. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amounts recognized in the
consolidated balance sheets. The contract or notional amounts of such
instruments reflect the extent of involvement that Old Kent has in
particular classes of financial instruments.
The Corporation's exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for
commitments to extend credit, and to potential credit loss associated with
letters of credit issued, is represented by the contractual amount of those
instruments. Old Kent uses the same credit policies in making commitments
and conditional obligations as it does for loans and other such
on-balance-sheet instruments. Old Kent is not subject to any credit loss
based on the contract or notional amounts of interest rate swap agreements.
Notional principal amounts are used in such transactions to express their
volume; however, the amounts potentially subject to credit risk are much
smaller. Risk of loss associated with these agreements is limited to
amounts due for interest. Old Kent controls the credit risk of its
interest rate swap agreements through credit approvals, limits and
monitoring procedures.
At December 31, Old Kent was a party to the following financial
instruments having off-balance-sheet risk:
<TABLE>
<CAPTION>
Contract or Notional Amount
December 31 (in millions) 1993 1992
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $ 2,229 $ 1,854
Standby and commercial letters of credit 275 223
Financial instruments whose notional or
contract amounts exceed the amount
of credit risk:
Interest rate swap agreements - as
a counterparty $ 486 $ 283
Commitments to purchase foreign currencies
and U.S. dollar exchange 8 12
</TABLE>
-83-
Commitments to extend credit are agreements to lend cash to a
customer as long as there is no breach of any condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee. Since many of
the commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Old Kent evaluates the creditworthiness of each customer on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by Old Kent,
upon extension of credit is based upon management's credit evaluation of
the counterparty.
Standby letters of credit are Old Kent's conditional commitments
to guarantee the performance of a customer to another party. For such
letters of credit, the credit risk to and underwriting standards issued by
Old Kent are essentially the same as those of commitments to extend credit
to a customer.
Interest rate swap transactions generally involve the exchange of
fixed and floating rate interest payment obligations without the exchange
of the underlying principal amounts. Old Kent's primary use of interest
rate swap instruments has been, as a counterparty, for the management of
its interest rate risk exposures.
Commitments to purchase foreign currencies and U.S. dollar
exchanges represent Old Kent's obligation to acquire or to settle
transactions based upon foreign denominated currencies. These arrangements
are entered into by Old Kent in the normal course of business for the
purpose of servicing its customers who may generate transactions involving
or based upon foreign currency denominations. On such transactions, Old
Kent's risk is limited to short-term fluctuations in the rate of exchange
between the U.S. dollar and the respective value of a foreign denominated
currency.
Note 18. Estimated Fair Value of Financial Instruments
In accordance with Statement of Financial Accounting Standards
No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS No.
107"), the following methods and assumptions were used to estimate the fair
value of each significant class of financial instrument, as defined by SFAS
No. 107, for which it is practicable to estimate that value.
The estimated fair values of financial instruments, as shown
below, are not intended to reflect the estimated liquidation or market
value of the Corporation taken as a whole. The disclosed fair value
estimates are limited to Old Kent's significant financial instruments at
December 31, 1993. These include financial instruments recognized as
assets and liabilities on the consolidated balance sheet as well as certain
off-balance-sheet financial instruments. The estimated fair values shown
-84-
below do not include any value for assets and liabilities which are not
financial instruments as defined by SFAS No. 107, such as the value of real
property, the value of "core deposit intangibles," the value of mortgage
servicing rights, nor the value of anticipated future business.
The estimated fair value amounts were determined using available
market information, current pricing information applicable to Old Kent and
various valuation methodologies. Where market quotations were not
available for financial instruments, considerable management judgment was
involved in the determination of estimated fair values. Therefore, the
estimated fair value of financial instruments shown below may not be
representative of the amounts at which they could be exchanged in a current
or future transaction. Due to the inherent uncertainties of expected cash
flows of financial instruments, the use of alternate valuation assumptions
and methods could have a significant effect on the derived estimated fair
value amounts.
Cash and cash equivalents, interest receivable, short-term borrowed funds
and interest payable
For these short-term instruments, the carrying amount was deemed
to be a reasonable estimate of fair value.
Interest-earning deposits
The estimated fair value of these holdings was calculated by
discounting the expected future cash flows using rates applicable to
similar instruments with the same remaining maturity.
Trading account securities, securities available-for-sale and securities
held-to-maturity
The estimated fair values were based upon quoted market or dealer
prices.
Net loans (including residential mortgages held-for-sale)
Generally, the fair value of loans was estimated by discounting
the expected future cash flows using current interest rates at which
similar loans would be made to borrowers with similar credit ratings and
remaining maturities. The fair value for credit card loans, student loans
and certain "open-end" consumer loans was based upon available market
prices for similar loans, adjusted for differences in loan characteristics.
The fair value of loans on nonaccrual status was estimated at a discount of
their carrying amounts. For certain variable rate loans that reprice
frequently, the estimated fair value is equal to the carrying value. The
estimated fair value of mortgages held-for-sale includes the estimated fair
value of directly related financial instruments used as hedges.
-85-
Deposit liabilities
The fair value of fixed-maturity time deposits was estimated
using the rates currently offered for deposits of similar remaining
maturities. The fair value of demand and savings deposits is the amount
payable on demand at the reporting date.
Long-term debt obligations
The fair value of long-term debt obligations at December 31,
1992, was estimated by discounting the future cash flows using current
interest rates available to the Corporation for debt of similar terms and
remaining maturities. The fair value of long-term debt obligations at
December 31, 1993, approximated the carrying value.
Off-balance-sheet financial instruments
The estimated fair value of interest rate swap agreements was
based upon dealer quotations for the amount which might be realized from a
transfer, sale or termination of such agreements. The fair value of Old
Kent's commitments to extend credit and its outstanding letters of credit
are insignificant and therefore not presented.
The following summarizes the carrying value and estimated fair
value of financial instruments:
<TABLE>
<CAPTION>
1993 1992
Carrying Estimated Carrying Estimated
December 31 (in thousands) Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash equivalents $ 464,989 $ 464,989 $ 429,378 $ 429,378
Interest-earning deposits 32,596 32,700 66,706 68,000
Trading account securities 38,558 38,558 62,655 62,655
Securities available-for-sale 1,382,624 1,433,744 1,027,907 1,071,504
Securities held-to-maturity 2,184,708 2,240,798 1,979,542 2,042,252
Net loans 5,350,859 5,553,616 4,786,839 4,946,000
Interest receivable 79,239 79,239 77,456 77,456
Financial Liabilities:
Non-interest bearing deposits $1,144,700 $1,144,700 $1,035,804 $ 1,035,804
Interest bearing deposits - no maturities 3,104,353 3,104,353 2,958,201 2,958,201
Interest bearing deposits - fixed maturities 3,722,099 3,754,789 3,259,535 3,297,260
Short-term borrowed funds 958,295 958,295 627,161 627,161
Interest payable 38,531 38,531 29,733 29,733
Long-term debt 1,215 1,215 16,217 16,245
Off-Balance-Sheet Financial Instruments:
Interest rate swap agreements, net asset $ 2,289 $ 8,215 $ 3,093 $ 12,750
</TABLE>
-86-
Note 19. Condensed Financial Information of the Parent Company
The condensed financial information of the parent company, Old
Kent Financial Corporation, is summarized as follows:
<TABLE>
Condensed Balance Sheets
<CAPTION>
December 31
1993 1992
(in thousands)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 3,691 $ 10,187
Interest-earning deposits and other securities 106,952 53,901
Leasehold improvements, premises and equipment 7,455 6,454
Investment in and advances to subsidiaries 671,013 620,176
Other assets 49,761 51,881
Total Assets $838,872 $742,599
Liabilities and Shareholders' Equity:
Long-term debt $ 293 $ 340
Accrued expenses and other liabilities 25,812 15,982
Total liabilities 26,105 16,322
Shareholders' equity 812,767 726,277
Total Liabilities and Shareholders' Equity $838,872 $ 742,599
</TABLE>
-87-
<TABLE>
Condensed Statements of Income
<CAPTION>
Year ended December 31
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Income:
Dividends from subsidiaries $106,350 $ 94,200 $ 64,900
Service fees from subsidiaries 45,286 41,980 37,999
Interest and other 3,986 2,239 5,371
Securities transactions - 216 (1,172)
Total income 155,622 138,635 $ 107,098
Expenses:
Interest 366 808 5,329
Salaries and benefits 31,112 28,228 24,461
Occupancy 3,738 3,438 3,496
Equipment 8,008 7,812 7,492
Other 23,056 21,435 19,675
Total expenses 66,280 61,721 60,453
Income before income taxes and
equity in undistributed net
income of subsidiaries 89,342 76,914 46,645
Income tax benefit 3,557 3,707 4,632
Income before equity in undistributed
net income of subsidiaries 92,899 80,621 51,277
Equity in undistributed net income
of subsidiaries 35,003 30,470 41,704
Net Income $127,902 $111,091 $ 92,981
</TABLE>
-88-
<TABLE>
Condensed Statements of Cash Flows
<CAPTION>
Year ended December 31
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $127,902 $111,091 $ 92,981
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in undistributed net income
of subsidiaries (35,003) (30,470) (41,704)
Depreciation, amortization and
accretion 10,514 8,181 7,430
Net losses (gains) on sales of assets 9 (153) 1,172
(Increase) decrease in other assets (1,636) (1,621) 1,458
Increase in other liabilities 4,670 90 3,696
Net cash provided by operating
activities 106,456 87,118 65,033
Cash flows from investing activities:
(Increase) decrease in interest-earning
assets (53,256) 35,014 (19,433)
Increase in investment in and advances
to subsidiaries (14,479) (4,174) (12,238)
Purchases of leasehold improvements,
premises and equipment, net (2,922) (1,748) (1,771)
Net cash (used for) provided by
investing activities (70,657) 29,092 (33,442)
Cash flows from financing activities:
Proceeds from common stock issuances 1,132 3,161 1,347
Repurchases of common stock - (69,994) -
Dividends paid to shareholders (43,380) (36,413) (31,492)
Payments of long-term debt obligations (47) (5,838) (681)
Net cash used for financing activities (42,295) (109,084) (30,826)
Net (decrease) increase in cash and
cash equivalents (6,496) 7,126 765
Cash and cash equivalents at beginning
of year 10,187 3,061 2,296
Cash and cash equivalents at end
of year $ 3,691 $ 10,187 $ 3,061
</TABLE>
-89-
Federal and state banking laws and regulations place certain
restrictions on the amount of dividends and loans a bank may make to its
parent company. In 1994, the subsidiary banks may distribute to the parent
company, in addition to their 1994 net income, approximately $140 million
in dividends without written approval from bank regulatory agencies. The
remaining net assets of subsidiary banks, approximating $517 million at
December 31, 1993, are unavailable for transfer to the parent company.
Note 20. Foreign Activities
The following is a summary of assets attributable to foreign
activities:
<TABLE>
<CAPTION>
December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Interest-earning deposits with
foreign banks and foreign branches
of U.S. banks $21,992 $56,427 $110,785
</TABLE>
The foreign activities of Old Kent are integrated with domestic
activities and, therefore, it is not possible to segregate with precision
the operating results relating solely to foreign activities. Rates used to
determine the internal allocation of funds were based on the average rates
of selected interest-bearing sources of funds. Income taxes have been
provided at statutory U.S. federal tax rates.
The following is selected income data related to foreign
activities:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands) 1993 1992 1991
<S> <C> <C> <C>
Interest income $3,390 $ 3,387 $ 8,224
Income before income taxes 1,214 1,171 2,049
Net income 789 773 1,352
</TABLE>
-90-
Quarterly Financial Data (Unaudited)
The following is a summary of selected quarterly results of
operations for the years ended December 31, 1993 and 1992. This unaudited
financial information is not a part of the previously presented financial
statements.
<TABLE>
<CAPTION>
(In thousands, except per share data) Three Months Ended
1993 March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Interest income $163,658 $167,937 $162,902 $165,523
Net interest income 99,766 104,119 99,448 103,407
Provision for credit losses 9,449 10,399 6,581 7,568
Income before income taxes 47,366 49,755 50,760 45,672
Net income 30,104 33,421 33,893 30,484
Net income per common share:
Primary $ .74 $ .82 $ .83 $ .75
Fully diluted .74 .82 .83 .75
</TABLE>
<TABLE>
<CAPTION>
(In thousands, except per share data) Three Months Ended
1992 March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
Interest income $175,297 $174,381 $170,341 $167,175
Net interest income 89,743 95,867 99,284 100,714
Provision for credit losses 15,208 11,889 15,840 14,775
Income before income taxes 36,487 41,857 42,317 43,296
Net income 24,580 28,325 28,815 29,371
Net income per common share:*
Primary $ .61 $ .71 $ .71 $ .72
Fully diluted .59 .69 .71 .72
<FN>
*Per share data is shown adjusted for a three-for-two stock split paid in September 1992.
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
-91-
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information set forth under the captions "Board of Directors"
and "Compliance with Section 16(a) of the Exchange Act" in the registrant's
definitive Proxy Statement for its April 18, 1994, annual meeting of
shareholders is here incorporated by reference.
Item 11. Executive Compensation.
The information set forth under the captions "Compensation of
Executive Officers and Directors," "Executive Severance Agreements" and
"Compensation of Directors" in the registrant's definitive Proxy Statement
for its April 18, 1994, annual meeting of shareholders is here incorporated
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information set forth under the caption "Voting Securities"
in the registrant's definitive Proxy Statement for its April 18, 1994,
annual meeting of shareholders is here incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
The information set forth under the caption "Certain
Relationships and Related Transactions" in the registrant's definitive
Proxy Statement for its April 18, 1994, annual meeting of shareholders is
here incorporated by reference.
-92-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements. The following financial statements
and independent auditors' report of Old Kent Financial Corporation and its
subsidiaries are filed as part of this report:
Report of Independent Public Accountants dated January 18,
1994
Consolidated Balance Sheets--December 31, 1993 and 1992
Consolidated Statements of Income for each of the three
years in the period ended
December 31, 1993
Consolidated Statements of Cash Flows for each of the three
years in the period
ended December 31, 1993
Consolidated Statements of Shareholders' Equity for each of
the three years in the
period ended December 31, 1993
Notes to Consolidated Financial Statements
The financial statements, the notes to financial statements, and
the independent auditors' report listed above are set forth in Item 8 of
this report.
(2) Financial Statement Schedules. Not applicable.
(3) Exhibits. The following exhibits are filed as part of this
report:
<TABLE>
<CAPTION>
Number Exhibit
<S> <C> <C>
3 (a) Restated Articles of Incorporation. Previously filed
as Exhibit 3(a) to the registrant's Form 10-Q
Quarterly Report for the quarter ended March 31, 1993.
Here incorporated by reference.
(b) Restated Bylaws.
4 (a) Certificate of Designation, Preferences, and Rights of
Series B Preferred Stock. Rights Agreement.
Previously filed as an exhibit to the registrant's Form
8--A Registration Statement filed December 20, 1988.
Here incorporated by reference.
-93-
Number Exhibit
(b) Long-term Debt. The registrant has outstanding long-
term debt which at the time of this report does not
exceed 10% of the registrant's total consolidated
assets. The registrant agrees to furnish copies of
the agreements defining the rights of holders of such
long-term indebtedness to the Securities and Exchange
Commission upon request.
10 (a) Incentive Stock Option Plan of 1982.* Previously filed
as Exhibit 10(a) to the registrant's Form 10-K Annual
Report for its fiscal year ended December 31, 1991.
Here incorporated by reference.
(b) Amendment to Incentive Stock Option Plan of 1982.*
Previously filed as Exhibit 10(b) to the registrant's
Form 10-K Annual Report for its fiscal year ended
December 31, 1991. Here incorporated by reference.
(c) Old Kent Executive Retirement Income Plan and Related
Trust.* Previously filed as Exhibit 10(c) to the
registrant's Form 10-K Annual Report for its fiscal
year ended December 31, 1991. Here incorporated by
reference.
(d) Executive Stock Option Plan of 1986.* Previously filed
as Exhibit 10(d) to the registrant's Form 10-K Annual
Report for its fiscal year ended December 31, 1991.
Here incorporated by reference.
(e) Restricted Stock Plan of 1987.* Previously filed as
part of the registrant's Definitive Proxy Statement
dated March 6, 1992. Here incorporated by reference.
(f) Old Kent Executive Thrift Plan and Related Trust.*
Previously filed as Exhibit 10(f) to the registrant's
Form 10-K Annual Report for its fiscal year ended
December 31, 1991. Here incorporated by reference.
(g) Rights Agreement. Previously filed as an exhibit to
the registrant's Form 8--A Registration Statement filed
December 20, 1988. Here incorporated by reference.
(h) Deferred Stock Compensation Plan.* Previously filed as
part of the registrant's Definitive Proxy Statement
dated March 6, 1992. Here incorporated by reference.
-94-
Number Exhibit
(i) Executive Severance Agreements for Messrs. Canepa,
Sherwood, Sadler, Wagner and Wisnom.* Previously filed
as Exhibit 10(k) to the registrant's Form 10-K Annual
Report for its fiscal year ended December 31, 1989.
Here incorporated by reference.
(j) Stock Option Incentive Plan of 1992.* Previously filed
as part of the registrant's Definitive Proxy Statement
dated March 6, 1992. Here incorporated by reference.
(k) Old Kent Deferred Compensation Plan and Related Trust.*
Previously filed as Exhibit 10(m) to the registrant's
Form 10-K Annual Report for its fiscal year ended
December 31, 1991. Here incorporated by reference.
(l) Old Kent Directors' Deferred Compensation Plan and
Related Trust.* Previously filed as Exhibit 10(n) to
the registrant's Form 10-K Annual Report for its fiscal
year ended December 31, 1991. Here incorporated by
reference.
(m) Amended and Restated Old Kent Directors' Deferred
Compensation Plan.* Previously filed as the Appendix
to the registrant's Definitive Proxy Statement dated
March 12, 1993. Here incorporated by reference.
11 Statement Re Computation of Earnings per Common Share.
12 Statement Re Computation of Other Ratios.
21 Subsidiaries of Registrant.
23 Consent of Independent Public Accountants.
24 Powers of Attorney.
99 Old Kent Thrift Plan Performance Table.
______________________
<FN>
* These agreements are management contracts or compensation plans or
arrangements required to be filed as exhibits to this Form 10-K.
</TABLE>
Old Kent will furnish a copy of any exhibit listed above to any
shareholder of the registrant without charge upon written request to Mr.
Martin J. Allen, Jr., Secretary, Old Kent Financial Corporation, One
Vandenberg Center, Grand Rapids, Michigan 49503.
-95-
(b) Reports on Form 8-K.
Old Kent filed no Current Reports on Form 8-K during the last
quarter of the period covered by this report.
-96-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
OLD KENT FINANCIAL CORPORATION
(registrant)
Date: March 29, 1994 By /s/ Richard W. Wroten
Richard W. Wroten
Executive Vice President and
Chief Financial Officer
-97-
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities indicated.
March 29, 1994 /s/ John M. Bissell*
John M. Bissell
Director
March 29, 1994 /s/ John D. Boyles*
John D. Boyles
Director
March 29, 1994 /s/ John C. Canepa*
John C. Canepa
Chairman of the Board and
Chief Executive Officer, and Director
(Principal Executive Officer)
March 29, 1994 /s/ Earl D. Holton*
Earl D. Holton
Director
March 29, 1994 /s/ Michael J. Jandernoa*
Michael J. Jandernoa
Director
March 29, 1994 /s/ John P. Keller*
John P. Keller
Director
March 29, 1994 /s/ Jerry K. Myers*
Jerry K. Myers
Director
March 29, 1994 /s/ William U. Parfet*
William U. Parfet
Director
March 29, 1994 /s/ Percy A. Pierre*
Percy A. Pierre
Director
-98-
March 29, 1994 /s/ Robert L. Sadler*
Robert L. Sadler
Vice Chairman of the Board and
Director
March 29, 1994 /s/ Peter F. Secchia*
Peter F. Secchia
Director
March 29, 1994 /s/ B. P. Sherwood, III*
B. P. Sherwood, III
Vice Chairman of the Board, Treasurer,
and Director
March 29, 1994 /s/ Martha L. Thornton*
Martha L. Thornton
Director
March 29, 1994 /s/ David J. Wagner*
David J. Wagner
Executive Vice President and
Director
March 29, 1994 /s/ Richard W. Wroten
Richard W. Wroten
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
*By /s/ Richard W. Wroten
Richard W. Wroten
Attorney-in-Fact
-99-
Commission File No. 0-12216
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM 10-K
For the Fiscal Year Ended
December 31, 1993
Old Kent Financial Corporation
One Vandenberg Center
Grand Rapids, Michigan 49503
<TABLE>
EXHIBIT INDEX
<CAPTION>
Number Exhibit Page
<S> <C> <C>
3 (a) Restated Articles of Incorporation. Previously *
filed as Exhibit 3(a) to the registrant's
Form 10-Q Quarterly Report for the quarter
ended March 31, 1993. Here incorporated by
reference.
(b) Restated Bylaws.
4 (a) Certificate of Designation, Preferences, and *
Rights of Series B Preferred Stock. Rights
Agreement. Previously filed as an exhibit to
the registrant's Form 8--A Registration
Statement filed December 20, 1988. Here
incorporated by reference.
(b) Long-term Debt. The registrant has outstanding n/a
long-term debt which at the time of this report
does not exceed 10% of the registrant's total
consolidated assets. The registrant agrees to
furnish copies of the agreements defining the
rights of holders of such long-term indebtedness
to the Securities and Exchange Commission upon
request.
10 (a) Incentive Stock Option Plan of 1982. Previously *
filed as Exhibit 10(a) to the registrant's Form
10-K Annual Report for its fiscal year ended
December 31, 1991. Here incorporated by reference.
(b) Amendment to Incentive Stock Option Plan of 1982. *
Previously filed as Exhibit 10(b) to the registrant's
Form 10-K Annual Report for its fiscal year ended
December 31, 1991. Here incorporated by reference.
(c) Old Kent Executive Retirement Income Plan and *
Related Trust. Previously filed as Exhibit 10(c)
to the registrant's Form 10-K Annual Report for
its fiscal year ended December 31, 1991. Here
incorporated by reference.
(d) Executive Stock Option Plan of 1986. Previously *
filed as Exhibit 10(d) to the registrant's Form
10-K Annual Report for its fiscal year ended
December 31, 1991. Here incorporated by reference.
Number Exhibit Page
(e) Restricted Stock Plan of 1987. Previously filed *
as part of the registrant's Definitive Proxy
Statement dated March 6, 1992. Here incorporated
by reference.
(f) Old Kent Executive Thrift Plan and Related Trust. *
Previously filed as Exhibit 10(f) to the registrant's
Form 10-K Annual Report for its fiscal year ended
December 31, 1991. Here incorporated by reference.
(g) Rights Agreement. Previously filed as an exhibit to *
the registrant's Form 8--A Registration Statement filed
December 20, 1988. Here incorporated by reference.
(h) Deferred Stock Compensation Plan. Previously filed *
as part of the registrant's Definitive Proxy
Statement dated March 6, 1992. Here incorporated
by reference.
(i) Executive Severance Agreements for Messrs. Canepa, *
Sherwood, Sadler, Wagner and Wisnom. Previously
filed as Exhibit 10(k) to the registrant's Form
10-K Annual Report for its fiscal year ended
December 31, 1989. Here incorporated by reference.
(j) Stock Option Incentive Plan of 1992. Previously *
filed as part of the registrant's Definitive Proxy
Statement dated March 6, 1992. Here incorporated
by reference.
(k) Old Kent Deferred Compensation Plan and Related *
Trust. Previously filed as Exhibit 10(m) to the
registrant's Form 10-K Annual Report for its
fiscal year ended December 31, 1991. Here
incorporated by reference.
(l) Old Kent Directors' Deferred Compensation Plan and *
Related Trust. Previously filed as Exhibit 10(n)
to the registrant's Form 10-K Annual Report for
its fiscal year ended December 31, 1991. Here
incorporated by reference.
(m) Amended and Restated Old Kent Directors' Deferred *
Compensation Plan. Previously filed as the
Appendix to the registrant's Definitive Proxy
Statement dated March 12, 1993. Here incorporated
by reference.
11 Statement Re Computation of Earnings per Common Share.
12 Statement Re Computation of Other Ratios.
Number Exhibit Page
21 Subsidiaries of Registrant.
23 Consent of Independent Public Accountants.
24 Powers of Attorney.
99 Old Kent Thrift Plan Performance Table.
_____________________________
<FN>
*Previously filed
</TABLE>
EXHIBIT 3(B)
BYLAWS
of
OLD KENT FINANCIAL CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office shall be
in the City of Grand Rapids, County of Kent, State of Michigan.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of
Michigan as the board of directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Times and Places of Meetings. All meetings of
the shareholders shall be held at such times and places, within
or without the State of Michigan, as may be fixed from time to
time by the board of directors. If no designation of the place
of a meeting is made, such meeting shall be held at the principal
office of Old Kent Bank and Trust Company in Grand Rapids,
Michigan.
Section 2. Annual Meetings. Annual meetings of the share-
holders shall be held each year at such time on such business day
in the month of April as may be designated by the board of
directors, or if no such designation is made, at 10 a.m. on the
third Monday in April, or if that day is a legal holiday, then on
the next succeeding business day at such place and hour as shall
be fixed by the board of directors.
Section 3. Special Meetings. Special meetings of the
shareholders may be called by resolution of a majority of the
board of directors or by the Chairman of the Board or Chief
Executive Officer of the Corporation, and shall be held on a date
fixed by the board of directors or the Chairman of the Board or
Chief Executive Officer.
Section 4. Notice of Meetings. Written notice of each
meeting of shareholders, stating the time, place and purposes
thereof, shall be given to each shareholder entitled to vote at
the meeting not less than ten (10) nor more than sixty (60) days
before the date fixed for the meeting. Notice of a meeting need
not be given to any shareholder who signs a waiver of notice
before or after the meeting. Attendance of a shareholder at a
meeting shall constitute both (a) a waiver of notice or defective
notice except when the shareholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to
holding the meeting or transacting any business because the
meeting has not been lawfully called or convened, and (b) a
waiver of objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes described
in the meeting notice, except when the shareholder objects to
considering the matter when it is presented.
Section 5. Shareholder List. The officer or agent who has
charge of the stock ledger of the Corporation shall prepare and
make a complete list of the shareholders entitled to vote at each
meeting, arranged by class or series of shares in alphabetical
order, showing the address of and the number of shares registered
in the name of each shareholder. The list shall be produced and
kept at the time and place of the meeting and may be inspected
during the whole time of the meeting by any shareholder who is
present at the meeting.
Section 6. Quorum. Unless a greater or lesser quorum is
provided in the Articles of Incorporation or by law, shares
entitled to cast a majority of the votes at a meeting constitute
a quorum at the meeting. Except when the holders of a class or
series of shares are entitled to vote separately on an item of
business, shares of all classes and series entitled to vote shall
be combined as a single class and series for the purpose of
determining a quorum. When the holders of a class or series of
shares are entitled to vote separately on an item of business,
shares of that class or series entitled to cast a majority of the
votes of that class or series at a meeting constitute a quorum of
that class or series at the meeting, unless a greater or lesser
quorum is provided in the Articles of Incorporation or by law.
If there is no quorum, the officer of the Corporation presiding
as chairman of the meeting shall have the power to adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present, when any business may
be transacted which might have been transacted at the meeting as
first convened had there been a quorum. However, if the
adjournment is for more than thirty (30) days, or if after the
adjournment the board fixes a new record date for the adjourned
meeting, notice of the time, place and purposes of such meeting
shall be given to each shareholder of record on the new record
date. Once a quorum is determined to be present, the
shareholders present in person or by proxy at such meeting may
continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
-2-
If a meeting is adjourned solely for the purpose of receiving the
results of voting by shareholders, such meeting need not be
reconvened. If not reconvened, such meeting shall stand
adjourned pending submission of the results of voting to the
Secretary of the Corporation, whereupon such meeting shall stand
adjourned until the next regular or special meeting of
shareholders.
Section 7. Vote Required. When a quorum is present at a
meeting, any action to be taken by a vote of the shareholders,
other than the election of directors, shall be authorized by a
majority of the votes cast by the holders of shares entitled to
vote on the action, unless a greater vote is required by the
Articles of Incorporation or express provision of statute.
Except as otherwise provided by the Articles of Incorporation,
directors shall be elected by a plurality of the votes cast at an
election.
Section 8. Voting Rights. Except as otherwise provided by
the Articles of Incorporation or the resolution or resolutions of
the board of directors creating any class of stock, each
shareholder shall at every meeting of the shareholders be
entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such shareholder. Each
proxy to vote shall be in writing and signed by the shareholder
or his or her duly authorized representative, and no proxy shall
be voted after three years from its date, unless the proxy
provides for a longer period.
Section 9. Conduct of Meetings. Meetings of shareholders
generally shall follow accepted rules of parliamentary procedure,
subject to the following:
(a) The chairman of the meeting shall have
absolute authority over matters of procedure, and there
shall be no appeal from the ruling of the chairman.
If, in his or her absolute discretion, the chairman
deems it advisable to dispense with the rules of
parliamentary procedure as to any meeting of
shareholders or part thereof, he or she shall so state
and shall clearly state the rules under which the
meeting or appropriate part thereof shall be conducted.
(b) If disorder should arise which, in the
absolute discretion of the chairman, prevents the
continuation of the legitimate business of the meeting,
the chairman may quit the chair and announce the
adjournment of the meeting, and upon his or her so
doing, the meeting is immediately adjourned without the
necessity of any vote or further action of the
shareholders.
-3-
(c) The chairman may require any person who is
not a bona fide shareholder of record on the record
date, or a validly appointed proxy of such a
shareholder, to leave the meeting.
(d) The chairman may introduce nominations,
resolutions or motions submitted by the board of
directors for consideration by the shareholders without
a motion or second. Except as the chairman shall
direct, a resolution or motion not submitted by the
board of directors shall be considered for a vote only
if proposed by a shareholder of record on the record
date or a validly appointed proxy of such a
shareholder, and seconded by such a shareholder or
proxy other than the individual who proposed the
resolution or motion.
(e) Except as the chairman shall direct, no
matter may be presented to the meeting which has not
been submitted in writing to the Secretary for
inclusion in the agenda at least 10 days before the
date of the meeting.
(f) When all shareholders present at a meeting in
person or by proxy have been offered an opportunity to
vote on any matter properly before a meeting, the
chairman may at his or her discretion declare the polls
to be closed, and no further votes may be cast or
changed after such declaration. If no such declaration
is made by the chairman, the polls shall remain open
and shareholders may cast additional votes or change
votes until the inspectors of election have delivered
their final report to the chairman.
(g) When the chairman has declared the polls to
be closed on all matters then before a meeting, the
chairman may declare the meeting to be adjourned
pending determination of the results by the inspectors
of election. In such event, the meeting shall be
considered adjourned for all purposes, and the business
of the meeting shall be finally concluded upon delivery
of the final report of the inspectors of election to
the chairman at or after the meeting.
(h) When the chairman determines that no further
matters may properly come before a meeting, he or she
may declare the meeting to be adjourned, without
motion, second, or vote of the shareholders.
-4-
(i) When the chairman has declared a meeting to
be adjourned, unless the chairman has declared the
meeting to be adjourned until a later date, no further
business may properly be considered at the meeting
even though shareholders or holders of proxies
representing a quorum may remain at the site of the
meeting.
Section 10. Inspectors of Election. The board of directors
or, if they shall not have so acted, the chairman may appoint, at
or prior to any meeting of shareholders, one or more persons (who
may be directors and/or employees of the Corporation) to serve as
inspectors of election. The inspectors so appointed 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 or ballots, hear and determine challenges and questions
arising in connection with the right to vote, count and tabulate
votes or ballots, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all
shareholders.
Section 11. Voting. When any vote is taken by written
ballot at any meeting of shareholders, an unrevoked proxy
submitted in accordance with its terms shall be accepted in lieu
of, and shall be deemed to constitute, a written ballot marked as
specified in such proxy.
ARTICLE III
RECORD DATE
Section 1. Fixing of Record Date by Board. For the purpose
of determining the shareholders entitled to notice of or to vote
at any meeting of shareholders, or any adjournment thereof, or to
express consent to or dissent from any corporate action in
writing without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividend or the
distribution or allotment of any rights or evidences of interests
arising out of any change, conversion or exchange of capital
stock, or for the purpose of any other action, the board of
directors may fix, in advance, a date as the record date for any
such determination of shareholders. Such date shall not be more
than sixty (60) days nor less than ten (10) days before the date
of any such meeting, nor more than sixty (60) days prior to the
effectuation of any other action proposed to be taken. Only
shareholders of record on a record date so fixed shall be
entitled to notice of, and to vote at, such meeting or to receive
payment of any dividend or the distribution or allotment of any
rights or evidences of interests arising out of any change,
conversion or exchange of capital stock.
-5-
Section 2. Provision for Record Date in the Absence of
Board Action. If a record date is not fixed by the board of
directors: (a) 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; and (b) the
record date for determining shareholders entitled to express
consent to corporate action in writing, without a meeting, when
no prior action by the board of directors is necessary, shall be
the day on which the first written consent is expressed; and (c)
the record date for determining shareholders for any other
purpose shall be the close of business on the day on which the
resolution of the board relating thereto is adopted.
Section 3. Adjournments. 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
Article, the determination applies to any adjournment of the
meeting, unless the board fixes a new record date for the
adjourned meeting.
ARTICLE IV
DIRECTORS
Section 1. Number and Qualification of Directors. Each
director shall be at least twenty-one (21) years of age. A
director need not be a shareholder, a citizen of the United
States, or a resident of the State of Michigan. The number of
directors shall be fixed by resolution of the board of directors
as provided in the Articles of Incorporation.
Section 2. Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized
number of directors shall be filled in the manner provided in the
Articles of Incorporation.
Section 3. Powers. The business and affairs of the
Corporation shall be managed by its board of directors which may
exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Articles
of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders.
Section 4. Fees and Expenses. The directors may be paid
their expenses, if any, of attendance at each meeting of the
board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from
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serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee
meetings.
Section 5. Resignation and Removal. Any director may
resign at any time and such resignation shall take effect upon
receipt of written notice thereof by the Corporation, or at such
subsequent time as set forth in the notice of resignation.
Directors may be removed only as provided by statute or the
Articles of Incorporation.
ARTICLE V
MEETINGS OF DIRECTORS
Section 1. Place of Meetings. The board of directors of
the Corporation may hold meetings, both regular and special,
either within or without the State of Michigan.
Section 2. First Meeting of Newly Elected Board. The first
meeting of each newly elected board of directors shall be held
immediately following the annual meeting of shareholders, and no
notice of such meeting shall be necessary to the newly elected
directors to legally constitute the meeting, provided a quorum
shall be present. In the event such meeting is not held
immediately following the annual meeting of shareholders, the
meeting may be held at such time and place as shall be specified
in a notice given as hereinafter provided for special meetings of
the board of directors, or as shall be specified in a written
waiver signed by all of the directors.
Section 3. Regular Meetings. Regular meetings of the board
of directors may be held with or without notice at such time and
at such place as shall from time to time be determined by the
board.
Section 4. Special Meetings. Special meetings of the board
may be called by the Chairman of the Board or the Chief Executive
Officer on two (2) days' notice to each director, either
personally, by mail, by telegram or by facsimile transmission;
special meetings shall be called by the Chairman of the Board
or Chief Executive Officer in like manner and on like
notice on the written request of two (2) directors.
Section 5. Purpose Need Not Be Stated. Neither the
business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in
the notice of such meeting.
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Section 6. Quorum. At all meetings of the board of
directors a majority of the total number of directors shall
constitute a quorum for the transaction of business, and the acts
of a majority of the directors present at any meeting at which
there is a quorum shall be the acts of the board of directors,
except as may be otherwise specifically provided by statute or by
the Articles of Incorporation. If a quorum is not present at any
meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present.
Section 7. Action Without a Meeting. Unless otherwise
restricted by the Articles of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the
board of directors or of any committee thereof may be taken
without a meeting if, before or after the action, all members of
the board or of such committee, as the case may be, consent
thereto in writing and such written consent is filed with the
minutes or proceedings of the board or committee.
Section 8. Meeting by Telephone or Similar Equipment.
Members of the board of directors or any committee designated by
the board of directors may participate in a meeting of such
board, or committee, by means of conference telephone or similar
communications equipment by means through which all persons
participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section shall
constitute presence in person at the meeting.
Section 9. Waiver of Notice. Attendance of a director at
or participation in a meeting of the board of directors or any
committee constitutes a waiver of notice of the meeting, except
where a director attends a meeting for the express purpose of
objecting, at the beginning of the meeting or upon his or her
arrival, to the meeting or the transaction of any business
because the meeting has not lawfully been called or convened, and
the person does not thereafter vote for or assent to any action
taken at the meeting. Notice of any meeting of the board or a
committee need not be given to any person entitled thereto who
waives such notice in writing, either before or after the
meeting.
ARTICLE VI
COMMITTEES OF DIRECTORS
Section 1. Committees. The board of directors may from
time to time appoint committees, whose membership shall consist
of such members of the board of directors as it may deem
advisable, to serve at the pleasure of the board. The board of
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directors may also appoint directors to serve as alternates for
members of each committee in the absence or disability of regular
members. The board of directors may fill any vacancies in any
committee as they occur.
Section 2. Executive Committee. The Executive Committee,
if there is one, shall have and may exercise the full powers and
authority of the board of directors in the management of the
business affairs and property of the Corporation during the
intervals between meetings of the board of directors. The
Executive Committee shall also have the power and authority to
declare distributions and dividends and to authorize the issuance
of stock.
Section 3. Audit Committee.
(a) Function. The Audit Committee shall perform
the function of an audit committee for the Corporation
and each of its subsidiaries as that function may be
defined for the purpose of compliance with laws and
regulations applicable to the Corporation and each of
its subsidiaries. The Audit Committee shall have the
following duties and responsibilities:
(i) causing a suitable examination of the
financial records and operations of the
Corporation and each of its subsidiaries to be
made by the internal auditor of the Corporation;
(ii) recommending to the board of directors
the employment of independent public accountants
who fulfill the requirements established by
Section 36 of the Federal Deposit Insurance Act,
as amended, and any regulations issued pursuant to
such act by the Federal Deposit Insurance
Corporation or any successor of such corporation;
(iii) reviewing with the independent
public accountants and management of the
Corporation and its subsidiaries the bases for
reports required by Section 36 of the Federal
Deposit Insurance Act, as amended, and any
regulations issued pursuant to such act by the
Federal Deposit Insurance Corporation or any
successor of such corporation;
(iv) reviewing examination reports of the
Corporation prepared by regulatory authorities and
such other information concerning examination
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reports of the Corporation's subsidiaries as the
committee deems advisable; and
(v) reporting to the board of directors at
least once each calendar year concerning the
results of examinations made and such conclusions
and recommendations as the Audit Committee deems
advisable.
(b) Eligibility of Members. Directors who
fulfill all of the following conditions shall be
eligible to serve on the Audit Committee:
(i) members may not be current employees of
the Corporation or any of its subsidiaries; and
(ii) members must satisfy the requirements
established by Section 36 of the Federal Deposit
Insurance Act, as amended, and any regulations
issued pursuant to such act by the Federal Deposit
Insurance Corporation or any successor of such
corporation.
(c) Authorized Actions. The Audit Committee
shall have the power to take and effect such actions as
it deems necessary or advisable in the performance of
its duties. The committee may engage counsel and other
consultants to assist the committee in performing its
duties. Such counsel and other consultants may but
need not be otherwise engaged by the Corporation unless
otherwise prohibited by applicable laws or regulations.
Section 4. Personnel Committee.
(a) Function. The Personnel Committee shall
perform the function of a compensation committee as
that function may be defined for the purpose of
compliance with laws and regulations applicable to the
Corporation. The Personnel Committee shall have the
following duties and responsibilities:
(i) administering the option plans and
benefit plans of the Corporation which are
approved by the board of directors;
(ii) determining the compensation policy of
the Corporation, reviewing the personnel policies
and programs of the Corporation, and submitting
recommendations to the board of directors;
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(iii) determining the compensation of the
Chief Executive Officer, reviewing individual
salaries of other executive officers, and
submitting recommendations to the board of
directors; and
(iv) preparing an annual report that may be
submitted to the Corporation's shareholders
concerning the compensation policy of the
Corporation and the committee's compensation
decisions during the previous fiscal year.
(b) Eligibility of Members. Directors who
fulfill all of the following conditions shall be
eligible to serve on the Personnel Committee:
(i) members may not be current or former
employees of the Corporation or any of its
subsidiaries;
(ii) members must be disinterested persons as
such term may be defined for purposes of Section
16 of the Securities Exchange Act of 1934, as
amended; and
(iii) members must not have an
Interlocking Relationship with any executive
officer of the Corporation.
An Interlocking Relationship shall include a
relationship where an executive officer of the
Corporation serves as a member of the board of
directors of another entity of which a director of the
Corporation is an executive officer, or any other
relationship that would be required to be disclosed
pursuant to Item 402(j)(3) of Regulation S-K issued by
the Securities and Exchange Commission.
(c) Authorized Actions. The Personnel Committee
shall have the power to take and effect the following
actions:
(i) authorize the issuance of stock pursuant
to the option plans and benefit plans of the
Corporation which are approved by the board of
directors;
(ii) interpret the option plans and benefit
plans of the Corporation which it administers to
the extent that such power does not conflict with
the terms of the applicable plan document; and
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(iii) engage counsel and other
consultants as the committee may deem necessary or
advisable to assist the committee in performing
its duties, which counsel and other consultants
may but need not be otherwise engaged by the
Corporation.
Section 5. Committee on Directors. The Committee on
Directors, if there is one, shall consider candidates for the
board of directors, propose to the board of directors candidates
for directors for submission to the shareholders at the annual
meeting, and review the retirement policy for directors and make
recommendations to the board of directors concerning this policy.
Section 6. Other Committees. The board of directors may
designate such other committees as it may deem appropriate, and
such committees shall exercise the authority delegated to them.
Section 7. Meetings. Each committee provided for above
shall meet as often as its business may require and may fix a day
and time for regular meetings, notice of which shall not be
required. Whenever the day fixed for a meeting shall fall on a
holiday, the meeting shall be held on the following business day
or on such other day as the chairman of the committee may
determine. Special meetings of committees may be called by any
member, and notice thereof may be given to the members by
telephone, telegram, letter or facsimile transmission. A
majority of the members of a committee shall constitute a quorum
for the transaction of the business of the committee. A record
of the proceedings of each committee shall be kept and presented
to the board of directors.
Section 8. Substitutes. In the absence or disqualification
of a member of a committee, the members thereof present at a
meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another member of
the board to act at the meeting in place of such absent or
disqualified member.
ARTICLE VII
OFFICERS AND TITLED POSITIONS
Section 1. Appointment of Officers. The board of directors
at its first meeting after the annual meeting of shareholders, or
as soon as practicable after the election of directors in each
year, shall appoint from its number a Chairman of the Board and a
President. The board of directors shall also appoint a
Secretary, a Treasurer and a Chief Financial Officer, all of whom
shall be officers of the Corporation. The board of directors may
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also appoint and expressly designate such other individuals as it
may deem proper to be officers of the Corporation, with such
titles as the board of directors may deem appropriate. If the
offices of Chairman of the Board and President are held by a
single person, that officer shall be the Chief Executive Officer
of the Corporation; if not, the board of directors shall
designate either the Chairman of the Board or the President to be
the Chief Executive Officer of the Corporation. The dismissal of
an officer, the appointment of an officer to fill the office of
one who has been dismissed or has ceased for any reason to be an
officer, the appointment of any additional officers, and the
change of an officer to a different or additional office, may be
made by the board of directors at any later meeting. Any two or
more offices may be filled by the same person.
Section 2. Appointments to Titled Positions. The board may
from time to time designate and appoint individuals to fill
titled positions as it may deem proper. Such holders of other
titled positions as may from time to time be appointed by the
board of directors pursuant to this Article shall hold such
titles as are assigned by the board of directors and shall
perform such duties and exercise such authority as may be
assigned by the board of directors or the Chief Executive
Officer. The dismissal of the holder of a titled position, the
appointment of a replacement for the holder of a titled position
to fill the place of one who has been dismissed or has ceased for
any reason to hold a titled position, the appointment of any
additional titled position holders, and the change of a titled
position holder to a different or additional position, may be
made by the board of directors at any meeting. Any two or more
titled positions may be filled by the same person.
Section 3. Authority of Officers. The Chief Executive
Officer, the President (if not also the Chief Executive Officer),
the Secretary, the Treasurer, the Chief Financial Officer and
such other persons as the board of directors shall have appointed
and expressly designated as officers shall be the only officers
of the Corporation. Only the officers of the Corporation shall
have discretionary authority to determine the fundamental
policies of the Corporation. Holders of titled positions who
have not been expressly designated as officers of the Corporation
in this Section or by the board of directors shall not be
officers of the Corporation regardless of their titles.
Section 4. Authority of Titled Positions. Holders of
titled positions who are not officers shall not have
discretionary authority to determine fundamental policies of the
Corporation and shall not, by reason of holding such titled
positions, be entitled to have access to any files, records or
other information relating or pertaining to the Corporation, its
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business and finances, or to attend or receive the minutes of any
meetings of the board of directors or any committee of the
Corporation, except as and to the extent expressly authorized and
permitted by the board of directors or the Chief Executive
Officer.
Section 5. Term of Service. Each officer and holder of a
titled position shall serve at the pleasure of the board. The
board of directors may remove any officer or holder of a titled
position from that office or position for cause or without cause.
Any officer or holder of a titled position may resign his or her
office or position at any time, such resignation to take effect
upon receipt of written notice thereof by the Corporation unless
otherwise specified in the resignation.
Section 6. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the shareholders and all
meetings of the board of directors.
Section 7. President. The President shall, subject to the
direction of the board of directors, see that all orders and
resolutions of the board are carried into effect, and shall
perform all other duties necessary or appropriate to his or her
office, subject, however, to his or her right and the right of
the directors to delegate any specific powers to any other
officer or officers of the Corporation. In case of the absence
or inability to act of the Chairman of the Board, the President
shall exercise all of the duties and responsibilities of the
Chairman until the board shall otherwise direct.
Section 8. Chief Executive Officer. The Chief Executive
Officer, in addition to his or her duties as Chairman of the
Board or President, as the case may be, shall have final
authority, subject to the control of the board of directors, over
the general policy and business of the Corporation and shall have
the general control and management of the business and affairs of
the Corporation. The Chief Executive Officer shall have the
power, subject to the control of the board of directors, to
appoint, suspend or discharge and to prescribe the duties and to
fix the compensation of such agents and employees of the
Corporation, other than the officers appointed by the board, as
he or she may deem necessary.
Section 9. Vice-Chairmen of the Board. Each Vice-Chairman
of the Board shall have such powers and perform such duties as
may be assigned to him or her from time to time by the board of
directors or the Chief Executive Officer. In case of the absence
or inability to act of the Chairman of the Board and the
President, the duties of his or her office shall, unless
otherwise specified by these Bylaws, be performed by the Vice-
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Chairmen of the Board in the order of their seniority or such
other priority as may be established by the board or by the Chief
Executive Officer, unless and until the board shall otherwise
direct, and, when so acting, the duly authorized Vice- Chairman
of the Board shall have all the powers of, and shall be subject
to the restrictions upon, the Chairman of the Board or the
President.
Section 10. Vice Presidents. Each Executive Vice
President, Senior Vice President, Vice President, Assistant Vice
President and such other vice presidents as may be designated by
the board of directors shall have such powers and perform such
duties as may be assigned to him or her from time to time by the
board of directors or the Chief Executive Officer. In case of
the absence or inability to act of the President, and in the
absence or inability to act of the Vice-Chairmen of the Board,
the duties of the President shall, unless otherwise specified by
these Bylaws, be performed by the Executive Vice Presidents, the
Senior Vice Presidents, the Vice Presidents, the Assistant Vice
Presidents and then such other vice presidents as may be
designated by the board in the order of their seniority or such
other priority as may be established by the board or by the Chief
Executive Officer, unless and until the board shall otherwise
direct, and, when so acting, the duly authorized Executive Vice
President, Senior Vice President, Vice President or Assistant
Vice President shall have all the powers of, and shall be subject
to the restrictions upon, the President. Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents and Assistant
Vice Presidents have the authority to sign or execute contracts
and other documents which shall be binding on the Corporation and
to fulfill the terms thereof, but such Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents and Assistant Vice
Presidents shall not have the discretionary policy-making
authority conferred upon the officers by these Bylaws unless
expressly designated as an officer by the board of directors.
Section 11. Secretary. The Secretary shall attend all
sessions of the board of directors and all meetings of the
shareholders and shall record all votes and the minutes of all
proceedings in a book to be kept for that purpose. The Secretary
shall perform like duties for committees when required. He or
she shall give, or cause to be given, notice of all meetings of
the shareholders and meetings of the board of directors. He or
she shall keep in safe custody the seal of the Corporation and
shall see that it is affixed to all documents the execution of
which, on behalf of the Corporation under its seal, is necessary
or appropriate, and when so affixed may attest the same. He or
she shall perform such other duties as may be prescribed by the
board of directors or the Chief Executive Officer.
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Section 12. Treasurer. The Treasurer shall have custody of
the corporate funds and securities, except as otherwise provided
by the board, shall cause to be kept full and accurate accounts
of receipts and disbursements in books belonging to the
Corporation, and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such
depositories as may be designated by the board of directors. He
or she shall disburse the funds of the Corporation as may be
ordered by the board or directors, taking proper vouchers for
such disbursements, and shall render to the directors, at the
regular meetings of the board or whenever they may require it, an
account of all his or her transactions as Treasurer and of the
financial condition of the Corporation.
Section 13. Absence. In the case of the absence or
inability to act of any officer or holder of any titled position,
or for any other reason that the board may deem sufficient, the
board of directors or the Chief Executive Officer may delegate
for the time being the powers or duties of such officer or holder
of any titled position, to any other director or officer. To the
extent that the enumerated powers or duties do not involve
participation in major policy-making functions of the Corporation
or the exercise of discretionary authority to that end, said
powers or duties may be delegated for the time being to the
holder of a titled position, but shall be exercised under the
supervision of an officer.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification Other Than in Actions by or in
the Right of the Corporation. Any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he or
she is or was a director or executive officer of the Corporation
or a subsidiary, or, while serving as such a director or
executive officer, is or was serving at the request of the
Corporation or a subsidiary as a director, officer, partner,
trustee, employee or agent of another foreign or domestic -
Corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, shall be indemnified by
the Corporation against expenses (including attorneys' fees),
judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Corporation or its
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shareholders, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation or its
shareholders, or with respect to any criminal action or
proceeding, that he or she had reasonable cause to believe that
his or her conduct was unlawful. Persons who are not directors
or executive officers of the Corporation or a subsidiary may be
similarly indemnified in respect of such service to the extent
authorized at any time by the board of directors, except as
otherwise provided by statute or the Articles of Incorporation.
Section 2. Indemnification in Actions by or in the Right of
the Corporation. Any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he or
she is or was a director or executive officer of the Corporation
or a subsidiary, or, while serving as such a director or
executive officer, is or was serving at the request of the
Corporation or a subsidiary as a director, officer, partner,
trustee, employee or agent of another foreign or domestic
Corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, shall be indemnified by
the Corporation against expenses (including attorneys' fees) and
amounts paid in settlement actually and reasonably incurred by
him or her in connection with the action or suit if he or she
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation
or its shareholders. Indemnification shall not be made for any
claim, issue or matter in which such person has been found liable
to the Corporation except to the extent authorized in Section 6
of this Article. Persons who are not directors or executive
officers of the Corporation or a subsidiary may be similarly
indemnified in respect of such service to the extent authorized
at any time by the board of directors, except as otherwise
provided by statute or the Articles of Incorporation.
Section 3. Expenses. To the extent that a director or
executive officer, or other person whose indemnification is
authorized by the board of directors, has been successful on the
merits or otherwise, including the dismissal of an action without
prejudice, in the defense of any action, suit or proceeding
referred to in Section 1 or 2 of this Article, or in the defense
of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually
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and reasonably incurred by him or her in connection therewith and
any action, suit or proceeding brought to enforce the mandatory
indemnification provided in this Section.
Section 4. Authorization of Indemnification. Any
indemnification under Section 1 or 2 of this Article (unless
ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the person
has met the applicable standard of conduct set forth in this
Article and upon an evaluation of the reasonableness of expenses
and amounts paid in settlement. Such determination shall be made
(a) by the board of directors by a majority vote of a quorum
consisting of directors who are not parties or threatened to be
made parties to such action, suit or proceeding, or if such a
quorum cannot be obtained, by a majority vote of a committee duly
designated by the board consisting solely of two or more
directors not at the time parties or threatened to be made
parties to such action, suit or proceeding; (b) by independent
legal counsel (who may be the regular counsel of the Corporation)
in a written opinion, which counsel shall be selected as provided
in (a) above, provided that if a committee cannot be designated
as provided in (a) above, then the board shall select such
independent counsel; (c) by all Independent Directors (as that
term is defined in the Michigan Business Corporation Act) who are
not parties or threatened to be made parties to such action, suit
or proceeding; or (d) by the shareholders, but shares held by
directors, officers, employees or agents who are parties or
threatened to be made parties to such action, suit or proceeding
may not be voted. In designating a committee under (a) above, or
in the selection of independent legal counsel in the event a
committee cannot be designated pursuant to (b) above, all
directors may participate. The Corporation may indemnify a
person for a portion of expenses (including reasonable attorneys'
fees), judgments, penalties, fines and amounts paid in settlement
for which the person is entitled to indemnification under Section
1 or 2 of this Article, even though the person is not entitled to
indemnification for the total amount of such expenses, judgments,
penalties, fines and amounts paid in settlement.
Section 5. Advancing of Expenses. Expenses incurred by any
person who is or was serving as a director or executive officer
of the Corporation or a subsidiary in defending a civil or
criminal action, suit or proceeding described in Section 1 or 2
of this Article shall be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding if (a)
the person furnishes the Corporation a written affirmation of his
or her good faith belief that he or she has met the applicable
standard of conduct set forth in Section 1 or 2 of this Article;
(b) the person furnishes the Corporation a written undertaking,
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executed personally or on his or her behalf, to repay the advance
if it is ultimately determined that he or she did not meet the
applicable standard of conduct; and (c) a determination is made
that the facts then known to those making the determination would
not preclude indemnification under the Michigan Business
Corporation Act. Persons who are or were not serving as a
director or executive officer of the Corporation or a subsidiary
may receive similar advances of expenses to the extent authorized
at any time by the board of directors, except as otherwise
provided by statute or the Articles of Incorporation.
Determinations under this Section shall be made in the manner
specified in Section 4 of this Article. Notwithstanding the
foregoing, in no event shall any advance be made in instances
where the board or independent legal counsel reasonably
determines that such person deliberately breached his or her duty
to the Corporation or its shareholders.
Section 6. Right to Indemnification Upon Application;
Procedure Upon Application. A director, executive officer or
other person who is a party or threatened to be made a party to
an action, suit or proceeding may apply for indemnification to
the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court
may order indemnification if it determines that the person is
fairly and reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not he or she met the
applicable standard of conduct set forth in Section 1 or 2 of
this Article or was adjudged liable as described in Section 2 of
this Article, provided, however, that if he or she was adjudged
liable, his or her indemnification shall be limited to reasonable
expenses incurred.
Section 7. Indemnification Under Bylaws Not Exclusive. The
indemnification or advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under the Articles of Incorporation, any bylaw,
agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the
heirs, executors and administrators of such a person. The total
amount of expenses advanced or indemnified from all sources shall
not exceed the amount of actual expenses incurred by the person
seeking indemnification or advancement of expenses. All rights
to indemnification under this Article shall be deemed to be
provided by a contract between the Corporation and the director,
officer, employee or agent who serves in such capacity at any
time while these Bylaws and other relevant provisions of the
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general corporation law and other applicable law, if any, are in
effect. Any repeal or modification thereof shall not affect any
rights or obligations then existing.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another
Corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability
under the provisions of this Article.
Section 9. Mergers. For the purposes of this Article,
references to the "Corporation" include all constituent
Corporations absorbed in a consolidation or merger, as well as
the resulting or surviving Corporation, so that any person who is
or was a director, officer, employee or agent of such constituent
Corporation, or is or was serving at the request of such
constituent Corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic Corporation,
partnership, joint venture, trust or other enterprise, whether
for profit or not, shall stand in the same position under the
provisions of this Article with respect to the resulting or
surviving Corporation if he or she had served the resulting or
surviving Corporation in the same capacity.
Section 10. Savings Clause. If this Article or any portion
thereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless
indemnify each director, executive officer or other person whose
indemnification is authorized by the board of directors as to
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding and an action by
the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated or
by any other applicable law.
ARTICLE IX
SUBSIDIARIES
Section 1. Subsidiaries. The board of directors, the Chief
Executive Officer, or any executive officer designated by the
board of directors may vote the shares of stock owned by the
-20-
Corporation in any subsidiary, whether wholly or partly owned by
the Corporation, in such manner as they may deem in the best
interests of the Corporation, including, without limitation, for
the election of directors of any subsidiary corporation, or for
any amendments to the charter or bylaws of any such subsidiary
corporation, or for the liquidation, merger or sale of assets of
any such subsidiary corporation. The board of directors, the
Chief Executive Officer, or any executive officer designated by
the board of directors may cause to be elected to the board of
directors of any such subsidiary corporation such persons as they
shall designate, any of whom may, but need not be, directors,
executive officers, or other employees or agents of the
Corporation. The board of directors, the Chief Executive
Officer, or any executive officer designated by the board of
directors may instruct the directors of any such subsidiary
corporation as to the manner in which they are to vote upon any
issue properly coming before them as the directors of such
subsidiary corporation, and such directors shall have no
liability to the Corporation as the result of any action taken in
accordance with such instructions.
Section 2. Subsidiary Officers Not Executive Officers. The
officers of any subsidiary corporation shall not, by virtue of
holding such title and position, be deemed to be executive
officers of the Corporation, nor shall any such officer of a
subsidiary corporation, unless he or she is also a director or
executive officer of the Corporation, be entitled to have access
to any files, records or other information relating or pertaining
to the Corporation, its business and finances, or to attend or
receive the minutes of any meetings of the board of directors or
any committee of the Corporation, except as and to the extent
expressly authorized and permitted by the board of directors or
the Chief Executive Officer.
ARTICLE X
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the
name of the Corporation by, the Chairman of the Board, a Vice
Chairman of the Board, the President, an Executive Vice
President, a Senior Vice President, or a Vice President and the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares
owned by him or her in the Corporation. The certificate may, but
need not be, sealed with the seal of the Corporation, or a
facsimile thereof.
-21-
Section 2. Facsimile Signatures. Where a certificate is
signed (a) by a transfer agent or an assistant transfer agent,
or (b) by a transfer clerk acting on behalf of the Corporation
and a registrar, the signatures of the Chairman of the Board,
Vice Chairman of the Board, President, Executive Vice President,
Senior Vice President, Vice President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary may be facsimiles.
In case any officer(s) or any holder(s) of a titled position who
has signed, or whose facsimile signature(s) has been used on, any
certificate shall cease to be such officer(s) or holder(s) before
such certificate has been delivered by the Corporation, such
certificate may nevertheless be issued and delivered as though
the person(s) who signed such certificate or whose facsimile
signature(s) appears thereon continued to be such officer(s) or
holder(s) of such titled position.
Section 3. Lost Certificates. The officers may direct a new
certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or
certificates, the officers may, in their discretion and as a
condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed certificate, or his or her legal
representative, to advertise the same in such manner as it shall
require and/or to give the Corporation a bond in such sum as they
may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Registered Owner. The Corporation shall be
entitled to recognize the exclusive rights of a person registered
on its books as the owner of shares to receive dividends and to
vote as such owner, and to hold liable for calls and assessments
a person registered on its books as the owner of shares; the
Corporation shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Michigan.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Checks. Any signature on any check, demand or
note may be signed by the facsimile signature of any person
authorized by the board of directors to sign under this Section 1
of Article XI. If any officer who has signed or whose facsimile
signature has been used shall cease to be such officer, such
-22-
document may nevertheless be signed by means of such facsimile
signature and delivered as though the person who signed such
document or whose facsimile signature has been used thereon had
not ceased to be such officer.
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the board of directors.
Section 3. Seal. The corporate seal shall have inscribed
thereon the name of the Corporation and the words "Corporate
Seal, Michigan." The seal may be used by causing it or a
facsimile thereof to be impressed, affixed, reproduced or
otherwise.
Section 4. Voting Securities. The Chief Executive Officer
or any executive officer designated by the board of directors
shall have full power and authority on behalf of the Corporation
to attend and to act and to vote, or to execute in the name or on
behalf of the Corporation a proxy authorizing an agent or
attorney-in-fact for the Corporation to attend and to act and to
vote, at any meetings of security holders of corporations in
which the Corporation may hold securities, and at such meetings
he or she and his or her duly authorized agent or attorney-in-
fact shall possess and may exercise any and all rights and powers
incident to the ownership of such securities and which, as the
owner thereof, the Corporation might have possessed and exercised
if present.
Section 5. Dividends. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Articles of
Incorporation, if any, may be declared by the board of directors
at any regular or special meeting pursuant to law. Dividends may
be paid in cash, in property, or in shares of capital stock,
subject to the provisions of the Articles of Incorporation.
Section 6. Reserves. Before payment of any dividends, there
may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the directors from time to
time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to
the interests of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
-23-
ARTICLE XII
AMENDMENTS
These Bylaws may be amended, altered, changed, added to or
repealed by the shareholders at any regular or special meeting of
the shareholders if notice of such action be contained in the
notice of such meeting, or by the board of directors at any
regular or special meeting of the board of directors.
-24-
EXHIBIT 11
<TABLE>
EARNINGS PER SHARE CALCULATIONS - PRIMARY AND FULLY DILUTED
<CAPTION>
For the year ended December 31:
(Restated for stock splits) 1993 1992 1991
<S> <C> <C> <C>
Primary
Net income $127,902,000 $111,091,000 $92,981,000
Deduct dividends on preferred stock 0 0 0
Income for Primary E.P.S. Calculation $127,902,000 $111,091,000 $92,981,000
Average common shares 40,500,375 40,063,456 40,017,162
Common stock equivalents 247,941 293,335 227,415
Shares for Primary E.P.S. Calculation 40,748,316 40,356,791 40,244,577
Primary E.P.S. $3.14 $2.75 $2.31
Fully Diluted
Net income $127,902,000 $111,091,000 $92,981,000
Add back interest on convertible debt
(net of income tax) 0 101,000 2,433,000
Income for Fully Diluted E.P.S. Calculation $127,902,000 $111,192,000 $95,414,000
Average common shares outstanding 40,500,375 40,063,456 40,017,162
Common stock equivalents 247,941 349,025 339,102
Additional common shares issuable to
preferred shareholders and debt holders 0 685,089 2,746,482
Shares for Fully Diluted E.P.S. Calculation 40,748,316 41,097,570 43,102,746
Fully Diluted E.P.S. $3.14 $2.71 $2.21
</TABLE>
EXHIBIT 12
<TABLE>
STATEMENT OF COMPUTATION OF OTHER RATIOS
<CAPTION>
(Dollars in thousands, except per share data)
For the year ended December 31: 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Net income $ 127,902 $ 111,091 $ 92,981 $ 87,476
Less: preferred stock dividends -- -- -- (636)
Net income available to common shareholders 127,902 111,091 92,981 86,840
Average common equity 768,161 683,830 638,106 580,430
Average total equity 768,161 683,830 638,106 585,997
Average assets 9,253,633 8,761,913 8,347,108 7,975,849
Fully diluted net income per common share* $ 3.14 $ 2.71 $ 2.21 $ 2.08
Dividends per common share* $ 1.07 $ .90 1/3 $ .78 2/3 $ .72 1/3
Ratios:
Return on average common equity 16.65% 16.25% 14.57% 14.96%
(net income available to common shareholders
divided by average common equity)
Return on average total equity 16.65% 16.25% 14.57% 14.93%
(net income divided by average total equity)
Return on average assets 1.38% 1.27% 1.11% 1.10%
(net income divided by average assets)
Average total equity to average assets 8.30% 7.80% 7.64% 7.35%
Dividend payout ratio 34.1% 33.3% 35.6% 34.8%
(dividends per common share divided by
fully diluted net income per common share)
_____________________________
<FN>
*Per share amounts are shown adjusted for a 3-for-2 stock split paid September 1992.
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
as of December 31, 1993
1. Old Kent Bank and Trust Company
Jurisdiction of Incorporation: Michigan
2. Old Kent Bank
Jurisdiction of Incorporation: Illinois
3. Old Kent Bank-Central
Jurisdiction of Incorporation: Michigan
4. Old Kent Bank-Grand Traverse
Jurisdiction of Incorporation: Michigan
5. Old Kent Bank-Southwest
Jurisdiction of Incorporation: Michigan
6. Old Kent Bank of Grand Haven
Jurisdiction of Incorporation: Michigan
7 Old Kent Bank of Holland
Jurisdiction of Incorporation: Michigan
8. Old Kent Bank-Southeast
Jurisdiction of Incorporation: Michigan
9. Old Kent Bank of Brighton
Jurisdiction of Incorporation: Michigan
10. Old Kent Bank of Gaylord
Jurisdiction of Incorporation: Michigan
11. Old Kent Bank of Petoskey
Jurisdiction of Incorporation: Michigan
12. Old Kent Bank of Big Rapids
Jurisdiction of Incorporation: Michigan
13. Old Kent Bank of Cadillac
Jurisdiction of Incorporation: Michigan
14. Old Kent Bank of Hillsdale
Jurisdiction of Incorporation: Michigan
15. Old Kent Bank of St. Johns
Jurisdiction of Incorporation: Michigan
16. Old Kent Bank of Ludington
Jurisdiction of Incorporation: Michigan
17. Hartger & Willard Mortgage Associates, Inc.
Jurisdiction of Incorporation: Michigan
18. Old Kent Brokerage Services, Inc.
Jurisdiction of Incorporation: Michigan
19. Old Kent Financial Life Insurance Company
Jurisdiction of Incorporation: Arizona
20. Vanguard Financial Service Corp.
Jurisdiction of Incorporation: Illinois
21. Old Kent Mortgage Company
Jurisdiction of Incorporation: Michigan
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated January 18, 1994, included in this Form 10-K, into the
Corporation's previously filed registration statements, as amended, for Old
Kent Financial Corporation's offering of senior and subordinated debt
(Registration No. 33-46205), Incentive Stock Option Plan of 1982
(Registration No. 2-78222), Old Kent Thrift Plan (Registration
No. 33-17309), Executive Stock Option Plan of 1986 (Registration
No. 33-4723), Stock Option Incentive Plan of 1992 (Registration
No. 33-49896), Employee Stock Purchase Plan (Registration No. 33-57334),
Dividend Reinvestment Plan (Registration No. 33-33058), and the offering of
common stock (Registration No. 33-51997).
/s/ Arthur Andersen & Co.
Chicago, Illinois
March 29, 1994
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 19, 1994 /s/ John M. Bissell
John M. Bissell
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 18, 1994 /s/ John D. Boyles
John D. Boyles
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 25, 1994 /s/ John C. Canepa
John C. Canepa
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 21, 1994 /s/ Earl D. Holton
Earl D. Holton
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 31, 1994 /s/ Michael J. Jandernoa
Michael J. Jandernoa
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 18, 1994 /s/ John P. Keller
John P. Keller
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 21, 1994 /s/ Jerry K. Myers
Jerry K. Myers
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 19, 1994 /s/ William U. Parfet
William U. Parfet
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 19, 1994 /s/ Percy A. Pierre
Percy A. Pierre
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
March 29, 1994 /s/ Robert L. Sadler
Robert L. Sadler
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 16, 1994 /s/ Peter F. Secchia
Peter F. Secchia
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 25, 1994 /s/ B. P. Sherwood, III
B. P. Sherwood, III
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 25, 1994 /s/ Martha L. Thornton
Martha L. Thornton
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 26, 1994 /s/ David J. Wagner
David J. Wagner
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN\, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 25, 1994 /s/ Richard W. Wroten
Richard W. Wroten
Officer
EXHIBIT 99
OLD KENT THRIFT PLAN
PERFORMANCE TABLE
March 25, 1994
The following table illustrates the comparative investment
performance of the four investment options offered under the Old Kent
Thrift Plan. The performance of some or all of these options also serves
as a measure for determining benefits under the Executive Thrift Plan and
the Deferred Compensation Plan. The table shows the value of a
hypothetical initial investment of $1,000 invested on December 31, 1990
and its value as of December 31 of each subsequent year shown below:
<TABLE>
<CAPTION>
Initial
Invest-
ment on 12/31/91 12/31/92 12/31/93
Fund 12/31/90 Value Value Value
<S> <C> <C> <C> <C>
Savings Fund $1,000 $1,063 $1,103 $1,139
Diversified
Equity Fund $1,000 $1,302 $1,396 $1,579
Short Term
Bond Fund $1,000 $1,100 $1,156 $1,208
Old Kent
Stock Fund $1,000 $1,559 $2,359 $2,149
</TABLE>
This document constitutes part of a prospectus covering securities that
have been registered under the Securities Act of 1933.
EXHIBIT 11
<TABLE>
EARNINGS PER SHARE CALCULATIONS - PRIMARY AND FULLY DILUTED
<CAPTION>
For the year ended December 31:
(Restated for stock splits) 1993 1992 1991
<S> <C> <C> <C>
Primary
Net income $127,902,000 $111,091,000 $92,981,000
Deduct dividends on preferred stock 0 0 0
Income for Primary E.P.S. Calculation $127,902,000 $111,091,000 $92,981,000
Average common shares 40,500,375 40,063,456 40,017,162
Common stock equivalents 247,941 293,335 227,415
Shares for Primary E.P.S. Calculation 40,748,316 40,356,791 40,244,577
Primary E.P.S. $3.14 $2.75 $2.31
Fully Diluted
Net income $127,902,000 $111,091,000 $92,981,000
Add back interest on convertible debt
(net of income tax) 0 101,000 2,433,000
Income for Fully Diluted E.P.S. Calculation $127,902,000 $111,192,000 $95,414,000
Average common shares outstanding 40,500,375 40,063,456 40,017,162
Common stock equivalents 247,941 349,025 339,102
Additional common shares issuable to
preferred shareholders and debt holders 0 685,089 2,746,482
Shares for Fully Diluted E.P.S. Calculation 40,748,316 41,097,570 43,102,746
Fully Diluted E.P.S. $3.14 $2.71 $2.21
</TABLE>
EXHIBIT 12
<TABLE>
STATEMENT OF COMPUTATION OF OTHER RATIOS
<CAPTION>
(Dollars in thousands, except per share data)
For the year ended December 31: 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Net income $ 127,902 $ 111,091 $ 92,981 $ 87,476
Less: preferred stock dividends -- -- -- (636)
Net income available to common shareholders 127,902 111,091 92,981 86,840
Average common equity 768,161 683,830 638,106 580,430
Average total equity 768,161 683,830 638,106 585,997
Average assets 9,253,633 8,761,913 8,347,108 7,975,849
Fully diluted net income per common share* $ 3.14 $ 2.71 $ 2.21 $ 2.08
Dividends per common share* $ 1.07 $ .90 1/3 $ .78 2/3 $ .72 1/3
Ratios:
Return on average common equity 16.65% 16.25% 14.57% 14.96%
(net income available to common shareholders
divided by average common equity)
Return on average total equity 16.65% 16.25% 14.57% 14.93%
(net income divided by average total equity)
Return on average assets 1.38% 1.27% 1.11% 1.10%
(net income divided by average assets)
Average total equity to average assets 8.30% 7.80% 7.64% 7.35%
Dividend payout ratio 34.1% 33.3% 35.6% 34.8%
(dividends per common share divided by
fully diluted net income per common share)
_____________________________
<FN>
*Per share amounts are shown adjusted for a 3-for-2 stock split paid September 1992.
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
as of December 31, 1993
1. Old Kent Bank and Trust Company
Jurisdiction of Incorporation: Michigan
2. Old Kent Bank
Jurisdiction of Incorporation: Illinois
3. Old Kent Bank-Central
Jurisdiction of Incorporation: Michigan
4. Old Kent Bank-Grand Traverse
Jurisdiction of Incorporation: Michigan
5. Old Kent Bank-Southwest
Jurisdiction of Incorporation: Michigan
6. Old Kent Bank of Grand Haven
Jurisdiction of Incorporation: Michigan
7 Old Kent Bank of Holland
Jurisdiction of Incorporation: Michigan
8. Old Kent Bank-Southeast
Jurisdiction of Incorporation: Michigan
9. Old Kent Bank of Brighton
Jurisdiction of Incorporation: Michigan
10. Old Kent Bank of Gaylord
Jurisdiction of Incorporation: Michigan
11. Old Kent Bank of Petoskey
Jurisdiction of Incorporation: Michigan
12. Old Kent Bank of Big Rapids
Jurisdiction of Incorporation: Michigan
13. Old Kent Bank of Cadillac
Jurisdiction of Incorporation: Michigan
14. Old Kent Bank of Hillsdale
Jurisdiction of Incorporation: Michigan
15. Old Kent Bank of St. Johns
Jurisdiction of Incorporation: Michigan
16. Old Kent Bank of Ludington
Jurisdiction of Incorporation: Michigan
17. Hartger & Willard Mortgage Associates, Inc.
Jurisdiction of Incorporation: Michigan
18. Old Kent Brokerage Services, Inc.
Jurisdiction of Incorporation: Michigan
19. Old Kent Financial Life Insurance Company
Jurisdiction of Incorporation: Arizona
20. Vanguard Financial Service Corp.
Jurisdiction of Incorporation: Illinois
21. Old Kent Mortgage Company
Jurisdiction of Incorporation: Michigan
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated January 18, 1994, included in this Form 10-K, into the
Corporation's previously filed registration statements, as amended, for Old
Kent Financial Corporation's offering of senior and subordinated debt
(Registration No. 33-46205), Incentive Stock Option Plan of 1982
(Registration No. 2-78222), Old Kent Thrift Plan (Registration
No. 33-17309), Executive Stock Option Plan of 1986 (Registration
No. 33-4723), Stock Option Incentive Plan of 1992 (Registration
No. 33-49896), Employee Stock Purchase Plan (Registration No. 33-57334),
Dividend Reinvestment Plan (Registration No. 33-33058), and the offering of
common stock (Registration No. 33-51997).
/s/ Arthur Andersen & Co.
Chicago, Illinois
March 29, 1994
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 19, 1994 /s/ John M. Bissell
John M. Bissell
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 18, 1994 /s/ John D. Boyles
John D. Boyles
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 25, 1994 /s/ John C. Canepa
John C. Canepa
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 21, 1994 /s/ Earl D. Holton
Earl D. Holton
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 31, 1994 /s/ Michael J. Jandernoa
Michael J. Jandernoa
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 18, 1994 /s/ John P. Keller
John P. Keller
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 21, 1994 /s/ Jerry K. Myers
Jerry K. Myers
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 19, 1994 /s/ William U. Parfet
William U. Parfet
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 19, 1994 /s/ Percy A. Pierre
Percy A. Pierre
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
March 29, 1994 /s/ Robert L. Sadler
Robert L. Sadler
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 16, 1994 /s/ Peter F. Secchia
Peter F. Secchia
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 25, 1994 /s/ B. P. Sherwood, III
B. P. Sherwood, III
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 25, 1994 /s/ Martha L. Thornton
Martha L. Thornton
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 26, 1994 /s/ David J. Wagner
David J. Wagner
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Old Kent Financial Corporation, does hereby
appoint MARTIN J. ALLEN, JR.; JOHN C. CANEPA; B. P. SHERWOOD, III; and
RICHARD W. WROTEN\, or any of them, his or her attorneys or attorney to
execute in his or her name an Annual Report of Old Kent Financial
Corporation on Form 10-K for its fiscal year ended December 31, 1993, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
Date Signature
January 25, 1994 /s/ Richard W. Wroten
Richard W. Wroten
Officer
EXHIBIT 3(B)
BYLAWS
of
OLD KENT FINANCIAL CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office shall be
in the City of Grand Rapids, County of Kent, State of Michigan.
Section 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of
Michigan as the board of directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Times and Places of Meetings. All meetings of
the shareholders shall be held at such times and places, within
or without the State of Michigan, as may be fixed from time to
time by the board of directors. If no designation of the place
of a meeting is made, such meeting shall be held at the principal
office of Old Kent Bank and Trust Company in Grand Rapids,
Michigan.
Section 2. Annual Meetings. Annual meetings of the share-
holders shall be held each year at such time on such business day
in the month of April as may be designated by the board of
directors, or if no such designation is made, at 10 a.m. on the
third Monday in April, or if that day is a legal holiday, then on
the next succeeding business day at such place and hour as shall
be fixed by the board of directors.
Section 3. Special Meetings. Special meetings of the
shareholders may be called by resolution of a majority of the
board of directors or by the Chairman of the Board or Chief
Executive Officer of the Corporation, and shall be held on a date
fixed by the board of directors or the Chairman of the Board or
Chief Executive Officer.
Section 4. Notice of Meetings. Written notice of each
meeting of shareholders, stating the time, place and purposes
thereof, shall be given to each shareholder entitled to vote at
the meeting not less than ten (10) nor more than sixty (60) days
before the date fixed for the meeting. Notice of a meeting need
not be given to any shareholder who signs a waiver of notice
before or after the meeting. Attendance of a shareholder at a
meeting shall constitute both (a) a waiver of notice or defective
notice except when the shareholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to
holding the meeting or transacting any business because the
meeting has not been lawfully called or convened, and (b) a
waiver of objection to consideration of a particular matter at
the meeting that is not within the purpose or purposes described
in the meeting notice, except when the shareholder objects to
considering the matter when it is presented.
Section 5. Shareholder List. The officer or agent who has
charge of the stock ledger of the Corporation shall prepare and
make a complete list of the shareholders entitled to vote at each
meeting, arranged by class or series of shares in alphabetical
order, showing the address of and the number of shares registered
in the name of each shareholder. The list shall be produced and
kept at the time and place of the meeting and may be inspected
during the whole time of the meeting by any shareholder who is
present at the meeting.
Section 6. Quorum. Unless a greater or lesser quorum is
provided in the Articles of Incorporation or by law, shares
entitled to cast a majority of the votes at a meeting constitute
a quorum at the meeting. Except when the holders of a class or
series of shares are entitled to vote separately on an item of
business, shares of all classes and series entitled to vote shall
be combined as a single class and series for the purpose of
determining a quorum. When the holders of a class or series of
shares are entitled to vote separately on an item of business,
shares of that class or series entitled to cast a majority of the
votes of that class or series at a meeting constitute a quorum of
that class or series at the meeting, unless a greater or lesser
quorum is provided in the Articles of Incorporation or by law.
If there is no quorum, the officer of the Corporation presiding
as chairman of the meeting shall have the power to adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until a quorum is present, when any business may
be transacted which might have been transacted at the meeting as
first convened had there been a quorum. However, if the
adjournment is for more than thirty (30) days, or if after the
adjournment the board fixes a new record date for the adjourned
meeting, notice of the time, place and purposes of such meeting
shall be given to each shareholder of record on the new record
date. Once a quorum is determined to be present, the
shareholders present in person or by proxy at such meeting may
continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
-2-
If a meeting is adjourned solely for the purpose of receiving the
results of voting by shareholders, such meeting need not be
reconvened. If not reconvened, such meeting shall stand
adjourned pending submission of the results of voting to the
Secretary of the Corporation, whereupon such meeting shall stand
adjourned until the next regular or special meeting of
shareholders.
Section 7. Vote Required. When a quorum is present at a
meeting, any action to be taken by a vote of the shareholders,
other than the election of directors, shall be authorized by a
majority of the votes cast by the holders of shares entitled to
vote on the action, unless a greater vote is required by the
Articles of Incorporation or express provision of statute.
Except as otherwise provided by the Articles of Incorporation,
directors shall be elected by a plurality of the votes cast at an
election.
Section 8. Voting Rights. Except as otherwise provided by
the Articles of Incorporation or the resolution or resolutions of
the board of directors creating any class of stock, each
shareholder shall at every meeting of the shareholders be
entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such shareholder. Each
proxy to vote shall be in writing and signed by the shareholder
or his or her duly authorized representative, and no proxy shall
be voted after three years from its date, unless the proxy
provides for a longer period.
Section 9. Conduct of Meetings. Meetings of shareholders
generally shall follow accepted rules of parliamentary procedure,
subject to the following:
(a) The chairman of the meeting shall have
absolute authority over matters of procedure, and there
shall be no appeal from the ruling of the chairman.
If, in his or her absolute discretion, the chairman
deems it advisable to dispense with the rules of
parliamentary procedure as to any meeting of
shareholders or part thereof, he or she shall so state
and shall clearly state the rules under which the
meeting or appropriate part thereof shall be conducted.
(b) If disorder should arise which, in the
absolute discretion of the chairman, prevents the
continuation of the legitimate business of the meeting,
the chairman may quit the chair and announce the
adjournment of the meeting, and upon his or her so
doing, the meeting is immediately adjourned without the
necessity of any vote or further action of the
shareholders.
-3-
(c) The chairman may require any person who is
not a bona fide shareholder of record on the record
date, or a validly appointed proxy of such a
shareholder, to leave the meeting.
(d) The chairman may introduce nominations,
resolutions or motions submitted by the board of
directors for consideration by the shareholders without
a motion or second. Except as the chairman shall
direct, a resolution or motion not submitted by the
board of directors shall be considered for a vote only
if proposed by a shareholder of record on the record
date or a validly appointed proxy of such a
shareholder, and seconded by such a shareholder or
proxy other than the individual who proposed the
resolution or motion.
(e) Except as the chairman shall direct, no
matter may be presented to the meeting which has not
been submitted in writing to the Secretary for
inclusion in the agenda at least 10 days before the
date of the meeting.
(f) When all shareholders present at a meeting in
person or by proxy have been offered an opportunity to
vote on any matter properly before a meeting, the
chairman may at his or her discretion declare the polls
to be closed, and no further votes may be cast or
changed after such declaration. If no such declaration
is made by the chairman, the polls shall remain open
and shareholders may cast additional votes or change
votes until the inspectors of election have delivered
their final report to the chairman.
(g) When the chairman has declared the polls to
be closed on all matters then before a meeting, the
chairman may declare the meeting to be adjourned
pending determination of the results by the inspectors
of election. In such event, the meeting shall be
considered adjourned for all purposes, and the business
of the meeting shall be finally concluded upon delivery
of the final report of the inspectors of election to
the chairman at or after the meeting.
(h) When the chairman determines that no further
matters may properly come before a meeting, he or she
may declare the meeting to be adjourned, without
motion, second, or vote of the shareholders.
-4-
(i) When the chairman has declared a meeting to
be adjourned, unless the chairman has declared the
meeting to be adjourned until a later date, no further
business may properly be considered at the meeting
even though shareholders or holders of proxies
representing a quorum may remain at the site of the
meeting.
Section 10. Inspectors of Election. The board of directors
or, if they shall not have so acted, the chairman may appoint, at
or prior to any meeting of shareholders, one or more persons (who
may be directors and/or employees of the Corporation) to serve as
inspectors of election. The inspectors so appointed 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 or ballots, hear and determine challenges and questions
arising in connection with the right to vote, count and tabulate
votes or ballots, determine the result, and do such acts as are
proper to conduct the election or vote with fairness to all
shareholders.
Section 11. Voting. When any vote is taken by written
ballot at any meeting of shareholders, an unrevoked proxy
submitted in accordance with its terms shall be accepted in lieu
of, and shall be deemed to constitute, a written ballot marked as
specified in such proxy.
ARTICLE III
RECORD DATE
Section 1. Fixing of Record Date by Board. For the purpose
of determining the shareholders entitled to notice of or to vote
at any meeting of shareholders, or any adjournment thereof, or to
express consent to or dissent from any corporate action in
writing without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividend or the
distribution or allotment of any rights or evidences of interests
arising out of any change, conversion or exchange of capital
stock, or for the purpose of any other action, the board of
directors may fix, in advance, a date as the record date for any
such determination of shareholders. Such date shall not be more
than sixty (60) days nor less than ten (10) days before the date
of any such meeting, nor more than sixty (60) days prior to the
effectuation of any other action proposed to be taken. Only
shareholders of record on a record date so fixed shall be
entitled to notice of, and to vote at, such meeting or to receive
payment of any dividend or the distribution or allotment of any
rights or evidences of interests arising out of any change,
conversion or exchange of capital stock.
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Section 2. Provision for Record Date in the Absence of
Board Action. If a record date is not fixed by the board of
directors: (a) 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; and (b) the
record date for determining shareholders entitled to express
consent to corporate action in writing, without a meeting, when
no prior action by the board of directors is necessary, shall be
the day on which the first written consent is expressed; and (c)
the record date for determining shareholders for any other
purpose shall be the close of business on the day on which the
resolution of the board relating thereto is adopted.
Section 3. Adjournments. 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
Article, the determination applies to any adjournment of the
meeting, unless the board fixes a new record date for the
adjourned meeting.
ARTICLE IV
DIRECTORS
Section 1. Number and Qualification of Directors. Each
director shall be at least twenty-one (21) years of age. A
director need not be a shareholder, a citizen of the United
States, or a resident of the State of Michigan. The number of
directors shall be fixed by resolution of the board of directors
as provided in the Articles of Incorporation.
Section 2. Vacancies. Vacancies and newly created
directorships resulting from any increase in the authorized
number of directors shall be filled in the manner provided in the
Articles of Incorporation.
Section 3. Powers. The business and affairs of the
Corporation shall be managed by its board of directors which may
exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Articles
of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders.
Section 4. Fees and Expenses. The directors may be paid
their expenses, if any, of attendance at each meeting of the
board of directors and may be paid a fixed sum for attendance at
each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from
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serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee
meetings.
Section 5. Resignation and Removal. Any director may
resign at any time and such resignation shall take effect upon
receipt of written notice thereof by the Corporation, or at such
subsequent time as set forth in the notice of resignation.
Directors may be removed only as provided by statute or the
Articles of Incorporation.
ARTICLE V
MEETINGS OF DIRECTORS
Section 1. Place of Meetings. The board of directors of
the Corporation may hold meetings, both regular and special,
either within or without the State of Michigan.
Section 2. First Meeting of Newly Elected Board. The first
meeting of each newly elected board of directors shall be held
immediately following the annual meeting of shareholders, and no
notice of such meeting shall be necessary to the newly elected
directors to legally constitute the meeting, provided a quorum
shall be present. In the event such meeting is not held
immediately following the annual meeting of shareholders, the
meeting may be held at such time and place as shall be specified
in a notice given as hereinafter provided for special meetings of
the board of directors, or as shall be specified in a written
waiver signed by all of the directors.
Section 3. Regular Meetings. Regular meetings of the board
of directors may be held with or without notice at such time and
at such place as shall from time to time be determined by the
board.
Section 4. Special Meetings. Special meetings of the board
may be called by the Chairman of the Board or the Chief Executive
Officer on two (2) days' notice to each director, either
personally, by mail, by telegram or by facsimile transmission;
special meetings shall be called by the Chairman of the Board
or Chief Executive Officer in like manner and on like
notice on the written request of two (2) directors.
Section 5. Purpose Need Not Be Stated. Neither the
business to be transacted at, nor the purpose of, any regular or
special meeting of the board of directors need be specified in
the notice of such meeting.
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Section 6. Quorum. At all meetings of the board of
directors a majority of the total number of directors shall
constitute a quorum for the transaction of business, and the acts
of a majority of the directors present at any meeting at which
there is a quorum shall be the acts of the board of directors,
except as may be otherwise specifically provided by statute or by
the Articles of Incorporation. If a quorum is not present at any
meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present.
Section 7. Action Without a Meeting. Unless otherwise
restricted by the Articles of Incorporation or these Bylaws, any
action required or permitted to be taken at any meeting of the
board of directors or of any committee thereof may be taken
without a meeting if, before or after the action, all members of
the board or of such committee, as the case may be, consent
thereto in writing and such written consent is filed with the
minutes or proceedings of the board or committee.
Section 8. Meeting by Telephone or Similar Equipment.
Members of the board of directors or any committee designated by
the board of directors may participate in a meeting of such
board, or committee, by means of conference telephone or similar
communications equipment by means through which all persons
participating in the meeting can communicate with each other.
Participation in a meeting pursuant to this Section shall
constitute presence in person at the meeting.
Section 9. Waiver of Notice. Attendance of a director at
or participation in a meeting of the board of directors or any
committee constitutes a waiver of notice of the meeting, except
where a director attends a meeting for the express purpose of
objecting, at the beginning of the meeting or upon his or her
arrival, to the meeting or the transaction of any business
because the meeting has not lawfully been called or convened, and
the person does not thereafter vote for or assent to any action
taken at the meeting. Notice of any meeting of the board or a
committee need not be given to any person entitled thereto who
waives such notice in writing, either before or after the
meeting.
ARTICLE VI
COMMITTEES OF DIRECTORS
Section 1. Committees. The board of directors may from
time to time appoint committees, whose membership shall consist
of such members of the board of directors as it may deem
advisable, to serve at the pleasure of the board. The board of
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directors may also appoint directors to serve as alternates for
members of each committee in the absence or disability of regular
members. The board of directors may fill any vacancies in any
committee as they occur.
Section 2. Executive Committee. The Executive Committee,
if there is one, shall have and may exercise the full powers and
authority of the board of directors in the management of the
business affairs and property of the Corporation during the
intervals between meetings of the board of directors. The
Executive Committee shall also have the power and authority to
declare distributions and dividends and to authorize the issuance
of stock.
Section 3. Audit Committee.
(a) Function. The Audit Committee shall perform
the function of an audit committee for the Corporation
and each of its subsidiaries as that function may be
defined for the purpose of compliance with laws and
regulations applicable to the Corporation and each of
its subsidiaries. The Audit Committee shall have the
following duties and responsibilities:
(i) causing a suitable examination of the
financial records and operations of the
Corporation and each of its subsidiaries to be
made by the internal auditor of the Corporation;
(ii) recommending to the board of directors
the employment of independent public accountants
who fulfill the requirements established by
Section 36 of the Federal Deposit Insurance Act,
as amended, and any regulations issued pursuant to
such act by the Federal Deposit Insurance
Corporation or any successor of such corporation;
(iii) reviewing with the independent
public accountants and management of the
Corporation and its subsidiaries the bases for
reports required by Section 36 of the Federal
Deposit Insurance Act, as amended, and any
regulations issued pursuant to such act by the
Federal Deposit Insurance Corporation or any
successor of such corporation;
(iv) reviewing examination reports of the
Corporation prepared by regulatory authorities and
such other information concerning examination
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reports of the Corporation's subsidiaries as the
committee deems advisable; and
(v) reporting to the board of directors at
least once each calendar year concerning the
results of examinations made and such conclusions
and recommendations as the Audit Committee deems
advisable.
(b) Eligibility of Members. Directors who
fulfill all of the following conditions shall be
eligible to serve on the Audit Committee:
(i) members may not be current employees of
the Corporation or any of its subsidiaries; and
(ii) members must satisfy the requirements
established by Section 36 of the Federal Deposit
Insurance Act, as amended, and any regulations
issued pursuant to such act by the Federal Deposit
Insurance Corporation or any successor of such
corporation.
(c) Authorized Actions. The Audit Committee
shall have the power to take and effect such actions as
it deems necessary or advisable in the performance of
its duties. The committee may engage counsel and other
consultants to assist the committee in performing its
duties. Such counsel and other consultants may but
need not be otherwise engaged by the Corporation unless
otherwise prohibited by applicable laws or regulations.
Section 4. Personnel Committee.
(a) Function. The Personnel Committee shall
perform the function of a compensation committee as
that function may be defined for the purpose of
compliance with laws and regulations applicable to the
Corporation. The Personnel Committee shall have the
following duties and responsibilities:
(i) administering the option plans and
benefit plans of the Corporation which are
approved by the board of directors;
(ii) determining the compensation policy of
the Corporation, reviewing the personnel policies
and programs of the Corporation, and submitting
recommendations to the board of directors;
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(iii) determining the compensation of the
Chief Executive Officer, reviewing individual
salaries of other executive officers, and
submitting recommendations to the board of
directors; and
(iv) preparing an annual report that may be
submitted to the Corporation's shareholders
concerning the compensation policy of the
Corporation and the committee's compensation
decisions during the previous fiscal year.
(b) Eligibility of Members. Directors who
fulfill all of the following conditions shall be
eligible to serve on the Personnel Committee:
(i) members may not be current or former
employees of the Corporation or any of its
subsidiaries;
(ii) members must be disinterested persons as
such term may be defined for purposes of Section
16 of the Securities Exchange Act of 1934, as
amended; and
(iii) members must not have an
Interlocking Relationship with any executive
officer of the Corporation.
An Interlocking Relationship shall include a
relationship where an executive officer of the
Corporation serves as a member of the board of
directors of another entity of which a director of the
Corporation is an executive officer, or any other
relationship that would be required to be disclosed
pursuant to Item 402(j)(3) of Regulation S-K issued by
the Securities and Exchange Commission.
(c) Authorized Actions. The Personnel Committee
shall have the power to take and effect the following
actions:
(i) authorize the issuance of stock pursuant
to the option plans and benefit plans of the
Corporation which are approved by the board of
directors;
(ii) interpret the option plans and benefit
plans of the Corporation which it administers to
the extent that such power does not conflict with
the terms of the applicable plan document; and
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(iii) engage counsel and other
consultants as the committee may deem necessary or
advisable to assist the committee in performing
its duties, which counsel and other consultants
may but need not be otherwise engaged by the
Corporation.
Section 5. Committee on Directors. The Committee on
Directors, if there is one, shall consider candidates for the
board of directors, propose to the board of directors candidates
for directors for submission to the shareholders at the annual
meeting, and review the retirement policy for directors and make
recommendations to the board of directors concerning this policy.
Section 6. Other Committees. The board of directors may
designate such other committees as it may deem appropriate, and
such committees shall exercise the authority delegated to them.
Section 7. Meetings. Each committee provided for above
shall meet as often as its business may require and may fix a day
and time for regular meetings, notice of which shall not be
required. Whenever the day fixed for a meeting shall fall on a
holiday, the meeting shall be held on the following business day
or on such other day as the chairman of the committee may
determine. Special meetings of committees may be called by any
member, and notice thereof may be given to the members by
telephone, telegram, letter or facsimile transmission. A
majority of the members of a committee shall constitute a quorum
for the transaction of the business of the committee. A record
of the proceedings of each committee shall be kept and presented
to the board of directors.
Section 8. Substitutes. In the absence or disqualification
of a member of a committee, the members thereof present at a
meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another member of
the board to act at the meeting in place of such absent or
disqualified member.
ARTICLE VII
OFFICERS AND TITLED POSITIONS
Section 1. Appointment of Officers. The board of directors
at its first meeting after the annual meeting of shareholders, or
as soon as practicable after the election of directors in each
year, shall appoint from its number a Chairman of the Board and a
President. The board of directors shall also appoint a
Secretary, a Treasurer and a Chief Financial Officer, all of whom
shall be officers of the Corporation. The board of directors may
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also appoint and expressly designate such other individuals as it
may deem proper to be officers of the Corporation, with such
titles as the board of directors may deem appropriate. If the
offices of Chairman of the Board and President are held by a
single person, that officer shall be the Chief Executive Officer
of the Corporation; if not, the board of directors shall
designate either the Chairman of the Board or the President to be
the Chief Executive Officer of the Corporation. The dismissal of
an officer, the appointment of an officer to fill the office of
one who has been dismissed or has ceased for any reason to be an
officer, the appointment of any additional officers, and the
change of an officer to a different or additional office, may be
made by the board of directors at any later meeting. Any two or
more offices may be filled by the same person.
Section 2. Appointments to Titled Positions. The board may
from time to time designate and appoint individuals to fill
titled positions as it may deem proper. Such holders of other
titled positions as may from time to time be appointed by the
board of directors pursuant to this Article shall hold such
titles as are assigned by the board of directors and shall
perform such duties and exercise such authority as may be
assigned by the board of directors or the Chief Executive
Officer. The dismissal of the holder of a titled position, the
appointment of a replacement for the holder of a titled position
to fill the place of one who has been dismissed or has ceased for
any reason to hold a titled position, the appointment of any
additional titled position holders, and the change of a titled
position holder to a different or additional position, may be
made by the board of directors at any meeting. Any two or more
titled positions may be filled by the same person.
Section 3. Authority of Officers. The Chief Executive
Officer, the President (if not also the Chief Executive Officer),
the Secretary, the Treasurer, the Chief Financial Officer and
such other persons as the board of directors shall have appointed
and expressly designated as officers shall be the only officers
of the Corporation. Only the officers of the Corporation shall
have discretionary authority to determine the fundamental
policies of the Corporation. Holders of titled positions who
have not been expressly designated as officers of the Corporation
in this Section or by the board of directors shall not be
officers of the Corporation regardless of their titles.
Section 4. Authority of Titled Positions. Holders of
titled positions who are not officers shall not have
discretionary authority to determine fundamental policies of the
Corporation and shall not, by reason of holding such titled
positions, be entitled to have access to any files, records or
other information relating or pertaining to the Corporation, its
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business and finances, or to attend or receive the minutes of any
meetings of the board of directors or any committee of the
Corporation, except as and to the extent expressly authorized and
permitted by the board of directors or the Chief Executive
Officer.
Section 5. Term of Service. Each officer and holder of a
titled position shall serve at the pleasure of the board. The
board of directors may remove any officer or holder of a titled
position from that office or position for cause or without cause.
Any officer or holder of a titled position may resign his or her
office or position at any time, such resignation to take effect
upon receipt of written notice thereof by the Corporation unless
otherwise specified in the resignation.
Section 6. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the shareholders and all
meetings of the board of directors.
Section 7. President. The President shall, subject to the
direction of the board of directors, see that all orders and
resolutions of the board are carried into effect, and shall
perform all other duties necessary or appropriate to his or her
office, subject, however, to his or her right and the right of
the directors to delegate any specific powers to any other
officer or officers of the Corporation. In case of the absence
or inability to act of the Chairman of the Board, the President
shall exercise all of the duties and responsibilities of the
Chairman until the board shall otherwise direct.
Section 8. Chief Executive Officer. The Chief Executive
Officer, in addition to his or her duties as Chairman of the
Board or President, as the case may be, shall have final
authority, subject to the control of the board of directors, over
the general policy and business of the Corporation and shall have
the general control and management of the business and affairs of
the Corporation. The Chief Executive Officer shall have the
power, subject to the control of the board of directors, to
appoint, suspend or discharge and to prescribe the duties and to
fix the compensation of such agents and employees of the
Corporation, other than the officers appointed by the board, as
he or she may deem necessary.
Section 9. Vice-Chairmen of the Board. Each Vice-Chairman
of the Board shall have such powers and perform such duties as
may be assigned to him or her from time to time by the board of
directors or the Chief Executive Officer. In case of the absence
or inability to act of the Chairman of the Board and the
President, the duties of his or her office shall, unless
otherwise specified by these Bylaws, be performed by the Vice-
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Chairmen of the Board in the order of their seniority or such
other priority as may be established by the board or by the Chief
Executive Officer, unless and until the board shall otherwise
direct, and, when so acting, the duly authorized Vice- Chairman
of the Board shall have all the powers of, and shall be subject
to the restrictions upon, the Chairman of the Board or the
President.
Section 10. Vice Presidents. Each Executive Vice
President, Senior Vice President, Vice President, Assistant Vice
President and such other vice presidents as may be designated by
the board of directors shall have such powers and perform such
duties as may be assigned to him or her from time to time by the
board of directors or the Chief Executive Officer. In case of
the absence or inability to act of the President, and in the
absence or inability to act of the Vice-Chairmen of the Board,
the duties of the President shall, unless otherwise specified by
these Bylaws, be performed by the Executive Vice Presidents, the
Senior Vice Presidents, the Vice Presidents, the Assistant Vice
Presidents and then such other vice presidents as may be
designated by the board in the order of their seniority or such
other priority as may be established by the board or by the Chief
Executive Officer, unless and until the board shall otherwise
direct, and, when so acting, the duly authorized Executive Vice
President, Senior Vice President, Vice President or Assistant
Vice President shall have all the powers of, and shall be subject
to the restrictions upon, the President. Executive Vice
Presidents, Senior Vice Presidents, Vice Presidents and Assistant
Vice Presidents have the authority to sign or execute contracts
and other documents which shall be binding on the Corporation and
to fulfill the terms thereof, but such Executive Vice Presidents,
Senior Vice Presidents, Vice Presidents and Assistant Vice
Presidents shall not have the discretionary policy-making
authority conferred upon the officers by these Bylaws unless
expressly designated as an officer by the board of directors.
Section 11. Secretary. The Secretary shall attend all
sessions of the board of directors and all meetings of the
shareholders and shall record all votes and the minutes of all
proceedings in a book to be kept for that purpose. The Secretary
shall perform like duties for committees when required. He or
she shall give, or cause to be given, notice of all meetings of
the shareholders and meetings of the board of directors. He or
she shall keep in safe custody the seal of the Corporation and
shall see that it is affixed to all documents the execution of
which, on behalf of the Corporation under its seal, is necessary
or appropriate, and when so affixed may attest the same. He or
she shall perform such other duties as may be prescribed by the
board of directors or the Chief Executive Officer.
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Section 12. Treasurer. The Treasurer shall have custody of
the corporate funds and securities, except as otherwise provided
by the board, shall cause to be kept full and accurate accounts
of receipts and disbursements in books belonging to the
Corporation, and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such
depositories as may be designated by the board of directors. He
or she shall disburse the funds of the Corporation as may be
ordered by the board or directors, taking proper vouchers for
such disbursements, and shall render to the directors, at the
regular meetings of the board or whenever they may require it, an
account of all his or her transactions as Treasurer and of the
financial condition of the Corporation.
Section 13. Absence. In the case of the absence or
inability to act of any officer or holder of any titled position,
or for any other reason that the board may deem sufficient, the
board of directors or the Chief Executive Officer may delegate
for the time being the powers or duties of such officer or holder
of any titled position, to any other director or officer. To the
extent that the enumerated powers or duties do not involve
participation in major policy-making functions of the Corporation
or the exercise of discretionary authority to that end, said
powers or duties may be delegated for the time being to the
holder of a titled position, but shall be exercised under the
supervision of an officer.
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification Other Than in Actions by or in
the Right of the Corporation. Any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he or
she is or was a director or executive officer of the Corporation
or a subsidiary, or, while serving as such a director or
executive officer, is or was serving at the request of the
Corporation or a subsidiary as a director, officer, partner,
trustee, employee or agent of another foreign or domestic -
Corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, shall be indemnified by
the Corporation against expenses (including attorneys' fees),
judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Corporation or its
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shareholders, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation or its
shareholders, or with respect to any criminal action or
proceeding, that he or she had reasonable cause to believe that
his or her conduct was unlawful. Persons who are not directors
or executive officers of the Corporation or a subsidiary may be
similarly indemnified in respect of such service to the extent
authorized at any time by the board of directors, except as
otherwise provided by statute or the Articles of Incorporation.
Section 2. Indemnification in Actions by or in the Right of
the Corporation. Any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he or
she is or was a director or executive officer of the Corporation
or a subsidiary, or, while serving as such a director or
executive officer, is or was serving at the request of the
Corporation or a subsidiary as a director, officer, partner,
trustee, employee or agent of another foreign or domestic
Corporation, partnership, joint venture, trust or other
enterprise, whether for profit or not, shall be indemnified by
the Corporation against expenses (including attorneys' fees) and
amounts paid in settlement actually and reasonably incurred by
him or her in connection with the action or suit if he or she
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Corporation
or its shareholders. Indemnification shall not be made for any
claim, issue or matter in which such person has been found liable
to the Corporation except to the extent authorized in Section 6
of this Article. Persons who are not directors or executive
officers of the Corporation or a subsidiary may be similarly
indemnified in respect of such service to the extent authorized
at any time by the board of directors, except as otherwise
provided by statute or the Articles of Incorporation.
Section 3. Expenses. To the extent that a director or
executive officer, or other person whose indemnification is
authorized by the board of directors, has been successful on the
merits or otherwise, including the dismissal of an action without
prejudice, in the defense of any action, suit or proceeding
referred to in Section 1 or 2 of this Article, or in the defense
of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually
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and reasonably incurred by him or her in connection therewith and
any action, suit or proceeding brought to enforce the mandatory
indemnification provided in this Section.
Section 4. Authorization of Indemnification. Any
indemnification under Section 1 or 2 of this Article (unless
ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification is proper in the circumstances because the person
has met the applicable standard of conduct set forth in this
Article and upon an evaluation of the reasonableness of expenses
and amounts paid in settlement. Such determination shall be made
(a) by the board of directors by a majority vote of a quorum
consisting of directors who are not parties or threatened to be
made parties to such action, suit or proceeding, or if such a
quorum cannot be obtained, by a majority vote of a committee duly
designated by the board consisting solely of two or more
directors not at the time parties or threatened to be made
parties to such action, suit or proceeding; (b) by independent
legal counsel (who may be the regular counsel of the Corporation)
in a written opinion, which counsel shall be selected as provided
in (a) above, provided that if a committee cannot be designated
as provided in (a) above, then the board shall select such
independent counsel; (c) by all Independent Directors (as that
term is defined in the Michigan Business Corporation Act) who are
not parties or threatened to be made parties to such action, suit
or proceeding; or (d) by the shareholders, but shares held by
directors, officers, employees or agents who are parties or
threatened to be made parties to such action, suit or proceeding
may not be voted. In designating a committee under (a) above, or
in the selection of independent legal counsel in the event a
committee cannot be designated pursuant to (b) above, all
directors may participate. The Corporation may indemnify a
person for a portion of expenses (including reasonable attorneys'
fees), judgments, penalties, fines and amounts paid in settlement
for which the person is entitled to indemnification under Section
1 or 2 of this Article, even though the person is not entitled to
indemnification for the total amount of such expenses, judgments,
penalties, fines and amounts paid in settlement.
Section 5. Advancing of Expenses. Expenses incurred by any
person who is or was serving as a director or executive officer
of the Corporation or a subsidiary in defending a civil or
criminal action, suit or proceeding described in Section 1 or 2
of this Article shall be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding if (a)
the person furnishes the Corporation a written affirmation of his
or her good faith belief that he or she has met the applicable
standard of conduct set forth in Section 1 or 2 of this Article;
(b) the person furnishes the Corporation a written undertaking,
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executed personally or on his or her behalf, to repay the advance
if it is ultimately determined that he or she did not meet the
applicable standard of conduct; and (c) a determination is made
that the facts then known to those making the determination would
not preclude indemnification under the Michigan Business
Corporation Act. Persons who are or were not serving as a
director or executive officer of the Corporation or a subsidiary
may receive similar advances of expenses to the extent authorized
at any time by the board of directors, except as otherwise
provided by statute or the Articles of Incorporation.
Determinations under this Section shall be made in the manner
specified in Section 4 of this Article. Notwithstanding the
foregoing, in no event shall any advance be made in instances
where the board or independent legal counsel reasonably
determines that such person deliberately breached his or her duty
to the Corporation or its shareholders.
Section 6. Right to Indemnification Upon Application;
Procedure Upon Application. A director, executive officer or
other person who is a party or threatened to be made a party to
an action, suit or proceeding may apply for indemnification to
the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court
may order indemnification if it determines that the person is
fairly and reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not he or she met the
applicable standard of conduct set forth in Section 1 or 2 of
this Article or was adjudged liable as described in Section 2 of
this Article, provided, however, that if he or she was adjudged
liable, his or her indemnification shall be limited to reasonable
expenses incurred.
Section 7. Indemnification Under Bylaws Not Exclusive. The
indemnification or advancement of expenses provided by this
Article shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under the Articles of Incorporation, any bylaw,
agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in his or her official capacity and
as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the
heirs, executors and administrators of such a person. The total
amount of expenses advanced or indemnified from all sources shall
not exceed the amount of actual expenses incurred by the person
seeking indemnification or advancement of expenses. All rights
to indemnification under this Article shall be deemed to be
provided by a contract between the Corporation and the director,
officer, employee or agent who serves in such capacity at any
time while these Bylaws and other relevant provisions of the
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general corporation law and other applicable law, if any, are in
effect. Any repeal or modification thereof shall not affect any
rights or obligations then existing.
Section 8. Insurance. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another
Corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability
under the provisions of this Article.
Section 9. Mergers. For the purposes of this Article,
references to the "Corporation" include all constituent
Corporations absorbed in a consolidation or merger, as well as
the resulting or surviving Corporation, so that any person who is
or was a director, officer, employee or agent of such constituent
Corporation, or is or was serving at the request of such
constituent Corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic Corporation,
partnership, joint venture, trust or other enterprise, whether
for profit or not, shall stand in the same position under the
provisions of this Article with respect to the resulting or
surviving Corporation if he or she had served the resulting or
surviving Corporation in the same capacity.
Section 10. Savings Clause. If this Article or any portion
thereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless
indemnify each director, executive officer or other person whose
indemnification is authorized by the board of directors as to
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding and an action by
the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated or
by any other applicable law.
ARTICLE IX
SUBSIDIARIES
Section 1. Subsidiaries. The board of directors, the Chief
Executive Officer, or any executive officer designated by the
board of directors may vote the shares of stock owned by the
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Corporation in any subsidiary, whether wholly or partly owned by
the Corporation, in such manner as they may deem in the best
interests of the Corporation, including, without limitation, for
the election of directors of any subsidiary corporation, or for
any amendments to the charter or bylaws of any such subsidiary
corporation, or for the liquidation, merger or sale of assets of
any such subsidiary corporation. The board of directors, the
Chief Executive Officer, or any executive officer designated by
the board of directors may cause to be elected to the board of
directors of any such subsidiary corporation such persons as they
shall designate, any of whom may, but need not be, directors,
executive officers, or other employees or agents of the
Corporation. The board of directors, the Chief Executive
Officer, or any executive officer designated by the board of
directors may instruct the directors of any such subsidiary
corporation as to the manner in which they are to vote upon any
issue properly coming before them as the directors of such
subsidiary corporation, and such directors shall have no
liability to the Corporation as the result of any action taken in
accordance with such instructions.
Section 2. Subsidiary Officers Not Executive Officers. The
officers of any subsidiary corporation shall not, by virtue of
holding such title and position, be deemed to be executive
officers of the Corporation, nor shall any such officer of a
subsidiary corporation, unless he or she is also a director or
executive officer of the Corporation, be entitled to have access
to any files, records or other information relating or pertaining
to the Corporation, its business and finances, or to attend or
receive the minutes of any meetings of the board of directors or
any committee of the Corporation, except as and to the extent
expressly authorized and permitted by the board of directors or
the Chief Executive Officer.
ARTICLE X
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the
name of the Corporation by, the Chairman of the Board, a Vice
Chairman of the Board, the President, an Executive Vice
President, a Senior Vice President, or a Vice President and the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares
owned by him or her in the Corporation. The certificate may, but
need not be, sealed with the seal of the Corporation, or a
facsimile thereof.
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Section 2. Facsimile Signatures. Where a certificate is
signed (a) by a transfer agent or an assistant transfer agent,
or (b) by a transfer clerk acting on behalf of the Corporation
and a registrar, the signatures of the Chairman of the Board,
Vice Chairman of the Board, President, Executive Vice President,
Senior Vice President, Vice President, Treasurer, Assistant
Treasurer, Secretary or Assistant Secretary may be facsimiles.
In case any officer(s) or any holder(s) of a titled position who
has signed, or whose facsimile signature(s) has been used on, any
certificate shall cease to be such officer(s) or holder(s) before
such certificate has been delivered by the Corporation, such
certificate may nevertheless be issued and delivered as though
the person(s) who signed such certificate or whose facsimile
signature(s) appears thereon continued to be such officer(s) or
holder(s) of such titled position.
Section 3. Lost Certificates. The officers may direct a new
certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or
destroyed upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or
certificates, the officers may, in their discretion and as a
condition precedent to the issuance thereof, require the owner of
such lost, stolen or destroyed certificate, or his or her legal
representative, to advertise the same in such manner as it shall
require and/or to give the Corporation a bond in such sum as they
may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 4. Registered Owner. The Corporation shall be
entitled to recognize the exclusive rights of a person registered
on its books as the owner of shares to receive dividends and to
vote as such owner, and to hold liable for calls and assessments
a person registered on its books as the owner of shares; the
Corporation shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Michigan.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Checks. Any signature on any check, demand or
note may be signed by the facsimile signature of any person
authorized by the board of directors to sign under this Section 1
of Article XI. If any officer who has signed or whose facsimile
signature has been used shall cease to be such officer, such
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document may nevertheless be signed by means of such facsimile
signature and delivered as though the person who signed such
document or whose facsimile signature has been used thereon had
not ceased to be such officer.
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the board of directors.
Section 3. Seal. The corporate seal shall have inscribed
thereon the name of the Corporation and the words "Corporate
Seal, Michigan." The seal may be used by causing it or a
facsimile thereof to be impressed, affixed, reproduced or
otherwise.
Section 4. Voting Securities. The Chief Executive Officer
or any executive officer designated by the board of directors
shall have full power and authority on behalf of the Corporation
to attend and to act and to vote, or to execute in the name or on
behalf of the Corporation a proxy authorizing an agent or
attorney-in-fact for the Corporation to attend and to act and to
vote, at any meetings of security holders of corporations in
which the Corporation may hold securities, and at such meetings
he or she and his or her duly authorized agent or attorney-in-
fact shall possess and may exercise any and all rights and powers
incident to the ownership of such securities and which, as the
owner thereof, the Corporation might have possessed and exercised
if present.
Section 5. Dividends. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Articles of
Incorporation, if any, may be declared by the board of directors
at any regular or special meeting pursuant to law. Dividends may
be paid in cash, in property, or in shares of capital stock,
subject to the provisions of the Articles of Incorporation.
Section 6. Reserves. Before payment of any dividends, there
may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the directors from time to
time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to
the interests of the Corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
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ARTICLE XII
AMENDMENTS
These Bylaws may be amended, altered, changed, added to or
repealed by the shareholders at any regular or special meeting of
the shareholders if notice of such action be contained in the
notice of such meeting, or by the board of directors at any
regular or special meeting of the board of directors.
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EXHIBIT 99
OLD KENT THRIFT PLAN
PERFORMANCE TABLE
March 25, 1994
The following table illustrates the comparative investment
performance of the four investment options offered under the Old Kent
Thrift Plan. The performance of some or all of these options also serves
as a measure for determining benefits under the Executive Thrift Plan and
the Deferred Compensation Plan. The table shows the value of a
hypothetical initial investment of $1,000 invested on December 31, 1990
and its value as of December 31 of each subsequent year shown below:
<TABLE>
<CAPTION>
Initial
Invest-
ment on 12/31/91 12/31/92 12/31/93
Fund 12/31/90 Value Value Value
<S> <C> <C> <C> <C>
Savings Fund $1,000 $1,063 $1,103 $1,139
Diversified
Equity Fund $1,000 $1,302 $1,396 $1,579
Short Term
Bond Fund $1,000 $1,100 $1,156 $1,208
Old Kent
Stock Fund $1,000 $1,559 $2,359 $2,149
</TABLE>
This document constitutes part of a prospectus covering securities that
have been registered under the Securities Act of 1933.
