<PAGE>
Report to Shareholders 1997
+--------------------------------------------------------------------------
OLD KENT
FINANCIAL
CORPORATION
OLD
KENT
Old Kent continues to
deliver superior shareholder
value through a
commitment to outstanding
PERFORMANCE,
quality PEOPLE and
consistent PROFITS.
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<PAGE>
OLD KENT
PHILOSOPHY OF THE CORPORATION
Our corporate mission and culture statements reflect our long-
standing commitment to shareholders, customers, employees and the
communities we serve. Key tenets of the Corporation's business
philosophy are to maximize the value of shareholders' investments,
to meet the needs of customers with quality products and services,
to provide a meaningful and challenging work environment for our
employees, and to serve communities as a good citizen.
CORPORATE MISSION
Old Kent's mission is to increase shareholder value as a high
performing independent financial services company serving select
communities with quality products and services.
CORPORATE CULTURE
The management of Old Kent has the ultimate responsibility for
achieving industry-leading performance with profit levels which
assure the quality of the balance sheet and the continuation of
the Corporation, for the benefit of our shareholders, communities
we serve and our employees.
Old Kent's purpose is to ensure customer satisfaction by understanding
and fulfilling the needs of our customer groups resulting in long-term,
multiple-service client relationships. This customer-driven purpose
requires that Old Kent becomes the best provider of consumer and
business financial services by earning and retaining the respect,
confidence and loyalty of our customers and by serving them so that
they will benefit from their association with us.
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DESCRIPTION OF OLD KENT TABLE OF CONTENTS
Old Kent Financial Corporation PERFORMANCE
is a bank holding company with total Financial Highlights 1
assets of $13.8 billion as of Letter to Shareholders 2
December 31, 1997. PEOPLE
With headquarters in Grand Rapids, People Making a Difference 4
Michigan, Old Kent is in the business Old Kent Affiliates 8
of providing financial services PROFITS
<PAGE>
through its 17 regional offices and Five Year Summary of
seven non-banking subsidiaries. Old Selected Financial Data 10
Kent's principal markets for financial Condensed Financial Review 11
services are the communities within Consolidated Financial
Michigan and Illinois where its 228 Statements 16
full-service banking offices are Report of Independent
located. Public Accountants 17
As of December 31, 1997, Old Kent Board of directors and
had 6,328 employees (on a full-time Senior Management 18
equivalent basis). Old Kent is an Shareholder Information 20
equal opportunity employer, and its
affirmative action programs comply
with applicable federal laws and
executive orders.
<PAGE>
PERFORMANCE-People-Profits
FINANCIAL HIGHLIGHTS-------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996 CHANGE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $180.3 $158.7 13.6%
Per common share<F*>:
Basic earnings $1.90 $1.63 16.6
Diluted earnings 1.88 1.61 16.8
Cash dividends .674 .605 11.4
Book value at year-end 11.07 10.53 5.1
Market price at year-end 39.63 22.74 74.3
- -------------------------------------------------------------------------------
AT YEAR END:
Total assets $13,774 $12,647 8.9%
Loans 8,469 8,097 4.6
Interest-earning assets 12,650 11,618 8.9
Core deposits 9,553 9,178 4.1
Total deposits 10,228 10,080 1.5
Shareholders' equity 1,027 994 3.4
Shares outstanding (IN MILLIONS)<F*> 92.8 94.4 (1.7)
- -------------------------------------------------------------------------------
RATIOS:
Return on average assets 1.36% 1.30%
Return on average equity 17.55 15.86
Net interest margin 4.34 4.41
<PAGE>
Equity assets at year-end 7.46 7.86
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<FN>
<F*>SHARE DATA IS SHOWN ADJUSTED FOR STOCK DIVIDENDS AND A STOCK SPLIT.
</FN>
</TABLE>
[EARNINGS AND DIVIDENDS PER SHARE CHART]
(1958-1997)
"IT'S NO WONDER, THEN, THAT OLD KENT RANKS EIGHTH AMONG 16,000 PUBLICLY
TRADED COMPANIES IN THE UNITED STATES FOR DELIVERING SHAREHOLDERS WITH THE
MOST CONSECUTIVE YEARS OF INCREASED EARNINGS."
- - THE DETROIT NEWS
November 28, 1997
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<PAGE>
TO OUR SHAREHOLDERS--------------------------------------------------------
- -IN 1997, OLD KENT'S TOTAL RETURN TO SHAREHOLDERS WAS 78.3%. THIS MEANS
THAT $1,000 INVESTED IN OLD KENT COMMON STOCK ON DECEMBER 31, 1996, WAS
WORTH $1,783 ON DECEMBER 31, 1997 (INCLUDING REINVESTMENT OF QUARTERLY CASH
DIVIDENDS).
[ONE YEAR TOTAL RETURN GRAPH]
- -1997 WAS OLD KENT'S 39TH CONSECUTIVE YEAR OF INCREASED EARNINGS AND
DIVIDENDS.
- -DILUTED EARNINGS PER SHARE OF $1.88 FOR 1997 WAS 16.8% MORE THAN THAT OF
1996. RETURN ON AVERAGE EQUITY WAS 17.55% IN 1997, COMPARED TO 15.86% IN
1996.
The single most distinguishing characteristic of Old Kent over the
years has been consistently improving results that have led to superior
shareholder value. I am pleased to report that in 1997, Old Kent achieved
record earnings and increased dividends for the thirty-ninth consecutive
year. Earnings increased 16.8% over the prior year to $1.88 per share,
representing a 17.55% return on equity. Our shareholders also enjoyed a
78.3% total return on their investment, an exceptional year by any
standard.
This success supports our corporate mission to increase shareholder
value as a high-performing independent financial services company. It is
also consistent with our commitment to foster a performance-oriented
culture that is responsive to customer needs while maintaining effective
risk management throughout all economic cycles.
Consistent delivery of shareholder value has been the hallmark of Old
Kent. During 1997, we continued to make both the investments and changes
required to enhance shareholder value well into the future. In my letter to
you last year, I described how we were changing our organizational
structure to focus on five business lines - retail banking including small
business, corporate banking, community banking, investment and insurance
services, and mortgage banking - to better organize around customer
segments. On the following pages, you will see how the increased
accountability inherent in this organizational structure enables us to be
more responsive to customer needs, resulting in superior performance.
Management continually assesses the viability of business units and
makes decisions that are consistent with our mission to deliver shareholder
value. Accordingly, during 1997, we took several steps to improve
performance while offering better alternatives for customers. We sold our
underperforming credit card loan portfolio and partnered with First
National Bank of Omaha to bring a broader array of credit card options to
our customers. We also closed our Illinois bond trading operation, which
had inconsistent profitability. In a move designed to increase
effectiveness while potentially reducing costs, we outsourced our internal
<PAGE>
audit function to a nationally recognized accounting firm. In 1998, we will
continue to evaluate other specialty services that may be effectively and
efficiently outsourced.
At the same time, we are investing in our franchise and adding
profitable new services for our customers. During 1997, we completed the
acquisition of Seaway Financial Corporation, which further increased our
presence in the eastern Michigan market. Other moves designed to help us
meet our long-term strategic objectives included broadening the range of
insurance products offered to our customers. We welcomed the addition of
the Grand Rapids Holland Insurance Agency, Inc., which expands our
insurance services in west Michigan. Through a joint marketing partnership
with Foremost Corporation of America, a specialty property and casualty
insurer, we're offering additional personal insurance products and services
to consumers. These activities reflect management's commitment to pursue
every profit opportunity while improving our levels of service and
strengthening relationships with our customers.
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<PAGE>
PERFORMANCE-People-Profits
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We're reviewing our systems and programming all our computers for the
year 2000. This initiative includes a substantial investment in upgraded
technology across all business lines to enhance service delivery and make
it more convenient for our customers to conduct business. New technology
investments will help improve service for our corporate cash management and
trust customers, and will support new account reconciliation products and
on-line services in corporate banking. Improved technology will also
provide increased access for retail customers through additional automated
teller and telephone service options. This expanded service reduces our
reliance on traditional branches and their inherently high cost structure.
Our core markets are strong and economically diverse. We are committed
to building on those strengths by supporting improvements in the business
climate and quality of life in the communities we serve. Small Business
Administration (SBA) lending, for instance, allows us to reach additional
customer segments and strengthen the local business economy. During 1997,
Old Kent more than doubled its number of SBA loans. In addition, Old Kent
helped make home ownership a reality for many customers throughout our
communities through Veterans Administration (VA) and Federal Housing
Administration (FHA) loans and affordable housing projects.
Old Kent continues to be widely recognized within the industry for
outstanding performance and achievement. In November, we drew regional
attention when Old Kent was named to THE DETROIT NEWS list of "A+ Firms"
that "make the grade by putting investors first." On a national level,
MONEY magazine listed Old Kent as an All Star Stock, an honor awarded to
only five public companies among more than 6,000 listed on the major
exchanges. In recognition of our SBA lending activity, Old Kent was ranked
as the number two SBA lender in Michigan and was named SBA Lender of the
Year in Illinois.
Old Kent and its shareholders have been fortunate over the years to
have been well-served by a strong management team and Board of Directors.
Five of our long-serving directors announced their retirements effective in
early 1998. I would like to take this opportunity to thank John M. Bissell,
Robert L. Hooker, Patrick M. Quinn, Robert L. Sadler and B. P. (Budge)
Sherwood, III, for their leadership and loyalty. In addition to their
contributions as directors, Bob Sadler, Vice Chairman of the Corporation,
and Budge Sherwood, Vice Chairman and Treasurer of the Corporation, also
served as key members of the management team. We welcome to the Board of
Directors Kevin T. Kabat, Vice Chairman of the Corporation and President of
Old Kent Bank, and Robert H. Warrington, Vice Chairman of the Corporation.
On behalf of the Corporation, I wish to thank you for your continued
support. We look forward to seeing you at our annual shareholders meeting
to be held on April 20, 1998, at 10:00 a.m. in the Ambassador Ballroom at
<PAGE>
the Amway Grand Plaza Hotel, 187 Monroe NW, directly southwest of the Old
Kent Bank building in Grand Rapids, Michigan.
Sincerely,
/s/ David J. Wagner
David J. Wagner
Chairman
- -IN OCTOBER, THE BOARD OF DIRECTORS APPROVED A 2-FOR-1 (100%) STOCK SPLIT.
- -MONEY MAGAZINE LISTED OLD KENT AS AN ALL STAR STOCK.
[PICTURE OF DAVID J. WAGNER]
- --------------------------------------------------------------------------3
<PAGE>
PEOPLE MAKING A DIFFERENCE-------------------------------------------------
[PICTURE OF WOMAN AT AN OLD KENT ATM STATION IN A CONVENIENCE STORE]
IN 1997, OLD KENT KEPT PACE WITH CUSTOMER DEMAND FOR CONVENIENCE BY
INSTALLING OVER 100 NEW ATMS IN GAS STATIONS, CONVENIENCE STORES AND OTHER
LOCATIONS.
RETAIL AND BUSINESS BANKING PRODUCTS WERE SUPPORTED BY AGGRESSIVE
MEDIA CAMPAIGNS IN 1997. WE INTRODUCED ACTIONBANK ON LINE SERVICES, OUR PC
AND TOUCH TONE BANKING PRODUCTS, AND EXPANDED BUSINESS BANKING SERVICES
DURING THE YEAR.
[PICTURE OF MAN IN SPACE -- ACTIONBANK ON LINE -- BANK ANYWHERE, ANYTIME.]
[PICTURE OF A MAN AND WOMAN WORKING -- OLD KENT BUSINESS BANKING - "WE CAN
MEET ON SATURDAY IF THAT WORKS FOR YOU." -- ISN'T IT TIME WE TALK?]
The critical link between customer satisfaction and shareholder value
has always been the quality of our people. Customers drive our products
and services, and shareholders hold us accountable for bottom line
performance. Our people define our ability to deliver value every day in
the marketplace. Throughout 1997, Old Kent focused on providing greater
access, personalized service and a wider product line. This effort is
critical in retaining our customers, differentiating ourselves in the
marketplace, and effectively competing with a growing number of financial
service providers.
RETAIL BANKING
In 1997, Retail Banking continued to focus on enhanced customer
convenience. From streamlined application processes to alternative delivery
channels, Old Kent made significant strides in providing customers with
greater access to services anywhere, anytime.
To better serve our small business customers, we formed a Business
Banking unit to focus on their needs. As smaller businesses now represent
the most vibrant and expanding sector of the U.S. economy, our ability to
increase product offerings and sales effectiveness with this historically
strong franchise of Old Kent is critical. The growth of our Small Business
Administration (SBA) lending and the introduction of a new small business
checking account are some of the initiatives begun in 1997.
We are making Old Kent more convenient for both small businesses and
consumers by expanding locations and services. Three branches were opened
inside Farmer Jack supermarkets in the Detroit area to bring banking closer
to our customers. The installation of 118 new automated teller machines
gave customers greater and more convenient access to their accounts. We
also increased our Telephone Banking Center capabilities through in-house
switch technology and enhancements to our telephone banking software
system. This provides customers with improved service, including faster
<PAGE>
telephone response time. To better meet our customers' changing lifestyles,
new checking accounts were introduced that encourage electronic banking.
In 1997, we successfully installed a branch-based direct marketing
program that provides more complete customer information to our branch
staff. This provides us with a powerful sales tool designed to target
customers' individual needs while improving overall account profitability.
In 1998, we will increase our use of technology and market segmentation
tools to further enhance customer convenience and profitability. Our goal is
to expand information-based marketing programs that more effectively target
customer needs. We'll add new products and
4--------------------------------------------------------------------------
<PAGE>
PERFORMANCE-People-Profits
- ---------------------------------------------------------------------------
services specifically designed for our Business Banking customers. Expanded
distribution, including more automated teller machines, in-store branches,
and internet services will be added in 1998. Finally, we'll make borrowing
more convenient for products like home equity loans by expanding our
ability to take applications and provide quick responses over the
telephone.
COMMUNITY BANKING
In Community Banking, which serves smaller communities throughout
Michigan, we focused on improving service delivery and profitability. We
were also able to successfully complete the acquisition and consolidation
of Seaway Financial Corporation in St. Clair County.
We are continuing to refine our branch delivery system to maximize
efficiency and leverage technology. Furthermore, revenues were enhanced
throughout the line of business by changes in pricing, which resulted in a
25% improvement in fee income.
To help strengthen branch sales and service skills, a Community
Banking sales support function was established in 1997. In addition, we
standardized and improved training programs for both sales and management
skill development. This skill-building effort will help us better serve our
customers, resulting in improved revenue growth. As part of our strategic
plan to "raise the bar" on performance, we established "best practice"
programs and quality councils to expedite problem resolution.
As we move into 1998, we'll continue to focus on expanding products
and services, thus recognizing the full revenue potential of this line of
business.
INVESTMENT AND INSURANCE SERVICES
Throughout 1997, Investment and Insurance Services initiatives focused
on aggressive business development and customer retention. We made a series
of organizational changes which helped focus our efforts on the needs of
our customers. We believe these will result in greater cross-sell
opportunities and more efficient expense management. As part of this
re-organization, we have consolidated private banking and brokerage services
with trust and investment management services, and created a new group
focused on building our insurance services.
We also focused on client service and satisfaction by introducing a
number of new products, including MoneyWise[REGISTERED], an asset
allocation product for smaller investors. With an expanded emphasis on The
Kent Funds[REGISTERED] and asset management capabilities, we established
Lyon Street Asset Management Company as a registered investment advisor.
<PAGE>
We continue to improve our delivery of investment services through
Old Kent's retail branches. By placing more than 50 Financial Consultants
in branches in 1997, we are now more accessible to customers, and have
seen product sales and service awareness increase substantially. This
network
[PICTURE OF MAN AND WOMAN AT AN OLD KENT BANK IN A SUPERMARKET]
BY THE END OF 1997, OLD KENT HAD 12 BRANCHES IN SUPERMARKETS IN
MICHIGAN. IN ADDITION TO EXPANDING OUR DISTRIBUTION, SUPERMARKET BRANCHES
PROVIDE SIGNIFICANT COST SAVINGS.
OLD KENT EXPANDED INVESTMENT OPPORTUNITIES FOR CUSTOMERS WITH
INVESTABLE ASSETS OF LESS THAN $25,000 BY INTRODUCING
MONEYWISE[REGISTERED], AN ASSET ALLOCATION PRODUCT FEATURING AN ACTIVELY
MANAGED MUTUAL FUND PORTFOLIO.
[PICTURE OF THREE MEN IN A SHIP SAILING IN SPACE -- INVESTMENT STRATEGIES
- -- MONEYWISE A PERSONALIZED APPROACH TO INVESTMENT MANAGEMENT]
MoneyWise
- --------------------------------------------------------------------------5
<PAGE>
- ---------------------------------------------------------------------------
[PICTURE OF PARENTS WITH THEIR DAUGHTER AT GRADUATION]
OLD KENT
FINANCIAL ADVISORS
OUR 50 FINANCIAL CONSULTANTS HELPED PROVIDE INVESTMENT SOLUTIONS FOR
CUSTOMERS IN OVER 200 BRANCHES.
OLD KENT CONTINUED TO BE A PRIME RESOURCE FOR GROWING BUSINESSES. IN
1997, WE RANKED AS THE NUMBER TWO SMALL BUSINESS ADMINISTRATION (SBA)
LENDER IN MICHIGAN AND WERE NAMED SBA LENDER OF THE YEAR IN ILLINOIS.
[PICTURE OF TWO MEN SPEAKING IN A LARGE ROOM -- "MY BUSINESS IS ALWAYS
GROWING. GOOD THING OLD KENT CAN KEEP PACE."]
will make implementation of future initiatives more effective and
profitable.
In addition to providing investment management, we are expanding
insurance services to both corporations and consumers. With the acquisition
of Grand Rapids Holland Insurance Agency, Old Kent Insurance Group has now
become the largest independent agency in western Michigan and one of the
top 50 independent insurance agencies in the United States. It represents
over 60 insurance companies, and has begun offering commercial insurance to
Old Kent's Corporate Banking customers. In addition, through an innovative
joint marketing partnership with Foremost Corporation of America, we will
now be able to efficiently offer automobile, homeowners and related
insurance to consumers.
During 1997, we successfully implemented initiatives which set the
stage for improved products and services in the year ahead. In 1998, we
will continue to build our delivery infrastructure while tapping new market
opportunities. Customer service and capacity will be further improved
through an upgrade of our trust administration system.
CORPORATE BANKING
In 1997, Corporate Banking focused efforts on developing a more
effective relationship-driven sales approach. We invested in people,
products and processes to enhance our position as a top-tier service
provider to middle market businesses.
A loan production office was established in Elkhart, Indiana, to take
advantage of that substantial regional market. In Chicago, our largest
market for middle market customers, Old Kent recruited top local talent.
These high-quality people will be instrumental in helping us realize this
market's profit potential.
<PAGE>
To maximize shareholder value, we incorporate profitability and
customer service measurements as part of incentive compensation.
To monitor customer satisfaction, we regularly conduct surveys which
have confirmed the quality and depth of our relationships with customers,
and underscored the importance of a continuing focus on product development
and marketing.
While expanding our market reach, we also introduced several new
products, including International Connect[REGISTERED], an on-line
international letter of credit service. In 1997, Old Kent launched a new
automated reconciliation product that gives customers an on-line format to
control and reconcile their accounts, and more fully protect their funds.
Our progress in 1997 positions Old Kent's Corporate Banking line of
business to launch a series of new initiatives designed to increase
profitability and customer satisfaction. A new Customer
6--------------------------------------------------------------------------
<PAGE>
PERFORMANCE-People-Profits
- ---------------------------------------------------------------------------
Profitability Management System will enhance corporate relationships, and a
Sales Management System will allow us to significantly improve our sales
effectiveness with both existing and prospective customers.
MORTGAGE BANKING
Old Kent Mortgage Company (OKMC) continued its strong record of growth
and significantly exceeded 1997 goals. Today, Old Kent Mortgage Company is
involved in one of every 100 residential mortgage transactions nationally
and is ranked in the top 25 in lending volume nationwide. Old Kent Mortgage
Company closed $6.9 billion in loans in 1997, a 92% increase from 1996.
Leveraging high quality management in the regional offices and appointing
the four regional presidents to the Old Kent Mortgage Services, Inc. Board
of Directors facilitated this growth.
Following the successful expansion of the Mountain and Pacific regions
in 1996, we focused our efforts on building distribution in the Eastern
region. Twenty-one branches were added from New England to Florida and
volume increased from $720 million in 1996 to $1.9 billion in 1997.
To enhance the profitability of OKMC and serve a broader range of
customers in 1997, we focused on the development and marketing of specialty
lending programs. The origination of Government (FHA and VA) loans
accounted for 25% of our overall volume, nearly double the previous year.
In addition, Old Kent Finance was established to promote mortgage programs
designed to reach customers with unique credit needs through television
advertising and telemarketing. Our existing sales force is promoting these
programs with their clients as well.
COMMUNITY REINVESTMENT
An important measure of success each year is how well we have honored
our commitment to practice responsible citizenship. In 1997, we were able
to broaden the population we serve by developing more tools to meet diverse
needs.
We further strengthened our communities by investing $1,500,000 in ten
different affordable housing projects. These projects will produce 242
units of quality, affordable housing for individuals and families in Grand
Rapids, Muskegon Heights and Detroit.
We reached out to establish new markets and customer relationships
through community development programs. In 1997, nearly 1,000 families
benefited from Old Kent's participation in seminars and workshops on such
topics as credit and credit repair, home ownership and maintenance,
budgeting, small business management and individual money management.
This level of corporate citizenship is consistent with Old Kent's
overall goals, and benefits our customers, our communities and our
shareholders.
<PAGE>
[PICTURE OF MAN PAINTING -- EQUAL HOUSING LENDER 1-888-789-CASH]
TELEVISION ADS FOR MORTGAGE BANKING'S SPECIALTY LENDING PROGRAMS
REACHED CUSTOMERS WITH UNIQUE CREDIT NEEDS.
[PICTURE OF UNITED STATES -- OLD KENT MORTGAGE COMPANY REGIONS]
EXPANSION OF OUR EASTERN REGION COMPLEMENTED ALREADY STRONG MOUNTAIN,
PACIFIC AND CENTRAL REGIONS AND PUSHED OLD KENT MORTGAGE COMPANY INTO THE
TOP 25 MORTGAGE LENDERS IN THE COUNTRY.
OUR OPPORTUNITY LOANS PROGRAM HELPED MAKE DREAMS COME TRUE FOR
MODERATE INCOME CUSTOMERS WITH LITTLE OR NO CREDIT HISTORY. THOUSANDS MORE
BENEFITED FROM AFFORDABLE HOUSING PROGRAMS, SEMINARS, WORKSHOPS AND OTHER
COMMUNITY PROJECTS.
[PICTURE OF PAMPHLET -- OLD KENT -- OPPORTUNITY LOANS]
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<PAGE>
OLD KENT AFFILIATES--------------------------------------------------------
As of December 31, 1997, Old Kent Financial Corporation operated 204
full-service banking offices in Michigan, 24 in Illinois and one loan production
office in Elkhart, Indiana. Old Kent Mortgage Company originates mortgages
nationwide through over 100 lending offices in 25 states throughout the
country. To better serve customers in its broader role as a financial
services company, Old Kent also operated seven non-banking affiliates.
Working together, this financial service network has brought Old Kent
through another record-setting year for shareholders. A measure of this
success is our ability to grow profitably in new and existing markets.
[PICTURE OF OLD KENT BANKING AFFILIATES -- MICHIGAN AND PARTS OF ILLINOIS
AND INDIANA]
Cities listed are: Petoskey, Gaylord, Traverse City, Cadillac, Ludington,
Big Rapids, Grand Haven, Grand Rapids, Holland, Kalamazoo, Hillsdale, St.
Johns, Lansing, Grand Blanc, Owosso, St. Clair, Macomb County, Southfield,
Brighton, and Taylor in Michigan; Chicago and Elmhurst in Illinois; and
Elkhart in Indiana.
[PICTURE OF UNITED STATES -- OLD KENT MORTGAGE OFFICES]
Locations are: Oregon, Idaho, Nevada, California, Utah, Arizona, Texas,
Louisiana, Alabama, Georgia, Florida, Tennessee, North Carolina, Kentucky,
Missouri, Illinois, Virginia, Maryland, Ohio, Pennsylvania, Minnesota,
Michigan, Connecticut, Rhode Island, and Massachusetts.
8--------------------------------------------------------------------------
<PAGE>
PERFORMANCE-People-Profits
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<TABLE>
<CAPTION>
BANKING AFFILIATES NON-BANKING AFFILIATES
<S> <C>
OLD KENT BANK Lyon Street Asset Management Company
Kevin T. Kabat, President Joseph T. Keating, President
Headquartered in Grand Rapids, Michigan Grand Rapids, Michigan
MICHIGAN Old Kent Brokerage Services, Inc.
Old Kent Bank - BIG RAPIDS Mark S. Crouch, President
Jerry J. Fouts, President Grand Rapids, Michigan
Old Kent Bank - CADILLAC Old Kent Financial Life Insurance Company
John P. Buckley, Jr., President William C. Anderson, President
Grand Rapids, Michigan
Old Kent Bank - CENTRAL (Owosso)
Charles A. Robertson, President Old Kent Insurance Group, Inc.
William C. Anderson, President
Old Kent Bank - EAST (Southfield) Traverse City, Michigan
Daniel W. Terpsma, President
Old Kent Investment Corporation
Old Kent Bank - GAYLORD Patrick C. Dorn, President
Charles L. Berlin, President Las Vegas, Nevada
Old Kent Bank - GRAND TRAVERSE (Traverse City) Old Kent Mortgage Company
John E. Pelizzari, President Old Kent Mortgage Services, Inc.
Don Britton, President
Old Kent Bank - HOLLAND Grand Rapids, Michigan
C. William Whitlock, Jr., President
Vanguard Financial Service Corp.
Old Kent Bank, N.A. - JONESVILLE John P. Cortese, President
Charles W. Maurer, President Lombard, Illinois
Old Kent Bank - LANSING CORPORATE HEADQUARTERS
William H. Coultas, President Old Kent Financial Corporation
111 Lyon Street NW
Old Kent Bank - LUDINGTON Grand Rapids, Michigan 49503
Theresa W. Erickson, President
INTERNATIONAL OFFICE
Old Kent Bank - PETOSKEY Old Kent Bank
Randy B. Crim, President Grand Cayman Island, British West Indies
Old Kent Bank - ST. JOHNS
Thomas W. Schroeder, President
Old Kent Bank - SEAWAY (St. Clair)
James W. Giffin, President
<PAGE>
Old Kent Bank - SOUTHWEST (Kalamazoo)
John P. Paul, President
Old Kent Bank - WEST (Grand Haven)
Ted A. Poulton, President
ILLINOIS
Old Kent Bank - ILLINOIS (Chicago/Elmhurst)
James A. Hubbard, President
</TABLE>
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<PAGE>
<TABLE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<CAPTION>
December 31 (DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR
Net interest income $ 525,927 $ 494,288 $ 476,693 $ 455,635 $ 427,587
Provision for credit losses 45,677 35,236 21,666 22,465 34,822
Net income 180,304 158,701 141,814 137,084 131,324
Cash dividends 64,059 59,122 55,334 49,869 44,984
AVERAGE FOR THE YEAR
Assets $13,298,246 $12,251,860 $11,674,214 $10,761,022 $ 9,718,875
Deposits 10,268,402 9,762,694 9,317,428 8,805,055 8,064,628
Loans 8,419,267 7,795,771 7,230,657 6,060,822 5,216,229
Total interest-earning assets 12,274,791 11,352,830 10,875,345 10,029,250 9,046,820
Subordinated debt 100,000 100,000 12,603 - 5,028
Guaranteed preferred
beneficial interest in the
Corporation's junior
subordinated debentures 91,787 - - - -
Total shareholders' equity 1,027,100 1,000,841 960,858 884,415 802,016
AT YEAR-END
Assets $13,773,522 $12,646,828 $12,003,084 $11,477,723 $10,340,037
Deposits 10,228,290 10,080,147 9,357,366 9,429,337 8,411,203
Loans 8,469,477 8,097,056 7,430,552 6,854,849 5,344,712
Subordinated debt 100,000 100,000 100,000 - -
Guaranteed preferred beneficial
interest in the Corporation's
junior subordinated debentures 100,000 - - - -
Total shareholders' equity 1,027,453 993,757 1,015,936 895,997 850,040
PER COMMON SHARE<F*>
Basic earnings $ 1.90 $ 1.63 $ 1.42 $ 1.38 $ 1.33
Diluted earnings 1.88 1.61 1.41 1.37 1.32
Cash dividends .674 .605 .554 .509 .461
Book value at year-end 11.07 10.53 10.15 8.96 8.50
Dividend payout ratio 35.9 % 37.6 % 39.3 % 37.2 % 34.9 %
PERFORMANCE RATIOS
Return on average equity 17.55% 15.86% 14.76% 15.50% 16.37%
Return on average total assets 1.36 1.30 1.21 1.27 1.35
Average equity to average assets 7.72 8.17 8.23 8.22 8.25
Yield on average interest-earning
assets 8.37 8.40 8.44 7.66 7.75
<PAGE>
Cost of average interest-bearing
liabilities 4.71 4.71 4.71 3.57 3.44
Average net interest spread 3.66 3.69 3.73 4.09 4.31
Average net interest margin 4.34 4.41 4.46 4.63 4.82
CAPITAL RATIOS AT YEAR-END
Equity to assets 7.46% 7.86% 8.46% 7.81% 8.22%
Leverage ratio 7.37 7.31 7.88 7.30 7.78
Risk-based capital ratio -
Tier 1 9.52 9.45 10.59 10.84 12.61
Risk-based capital ratio -
Tiers 1 & 2 11.73 11.75 13.01 12.11 13.87
CREDIT QUALITY RATIOS
Allowance for credit losses to
total loans 1.86% 2.05% 2.35% 2.44% 2.72%
Impaired loans to total loans .65 .53 .58 .88 1.12
Nonperforming assets to total assets .45 .39 .45 .63 .70
Allowance to impaired loans 288 388 403 277 243
Net charge-offs to average loans .58 .54 .19 .16 .33
<FN>
<F*>SHARE DATA SHOWN ADJUSTED FOR STOCK DIVIDENDS AND A STOCK SPLIT.
</FN>
</TABLE>
10-------------------------------------------------------------------------
<PAGE>
PERFORMANCE-People-Profits
CONDENSED FINANCIAL REVIEW-------------------------------------------------
OVERVIEW
In 1997, Old Kent achieved its thirty-ninth consecutive year of
earnings and dividend growth. Diluted earnings per share was $1.88 for
1997, or 16.8% better than the $1.61 diluted per share earnings for 1996.
For the year ended December 31, 1997, net income was $180.3 million, 13.6%
more than net income of $158.7 million for 1996. The compound annual growth
rate over the last five years was 10.5% for diluted earnings per share and
11.6% for per share cash dividends.
The Corporation's return on average total equity was 17.55% in 1997,
up from 15.86% in 1996. Old Kent's return on equity has averaged 16.0% over
the past five years. Old Kent's return on average assets was 1.36% in 1997,
compared to 1.30% in 1996, and has averaged 1.30% for the last five years.
Old Kent's corporate culture emphasizes shareholder value. The
accompanying graph compares the performance of Old Kent Common Stock with
the broad-based S&P 500 index and the KBW 50, an index comprised of 50
large bank holding companies. The total return as shown on this graph is
measured using both stock price appreciation and the effect of continuous
reinvestment of dividends. The graph displays the December 31, 1997, value
of an initial $100 investment in Old Kent Common Stock made one, five and
ten years prior to the year-end 1997 date. The graph indicates that the
total return on an investment in Old Kent Common Stock surpassed that of
the S&P 500 in each of these three time periods, exceeded the KBW 50 in
1997, was similar to that of the KBW 50 in the five year measure, and was
41% better than the KBW 50 total return for the past ten year period.
NET INCOME ANALYSIS
Net interest income increased by $31.6 million, or 6.4%, to $525.9
million in 1997. This increase is primarily attributable to earning asset
growth. The net interest margin for 1997 was 4.34%, compared to 4.41% for
1996. The decrease in the net interest margin was mainly due to reduced
loan yields, primarily attributable to the mid-year sale of a $266 million
credit card loan portfolio.
The provision for credit losses was $45.7 million in 1997, up from a
provision of $35.2 million in 1996. The primary reasons for the increase
were growth in loans and an increase in consumer loan losses.
Non-interest income increased by $72.3 million, an increase of 34.1%
over 1996. Consistent with Old Kent's goals to diversify its revenue
streams, non-interest revenues were a greater portion of total revenues.
In 1997, non-interest revenues (excluding security transactions and
non-recurring gains)
[NET INCOME GRAPH]
<PAGE>
[ONE, FIVE AND TEN YEAR VALUE ON A $100 INVESTMENT GRAPH]
DECEMBER 31, 1997 VALUE ON A
$100 INVESTMENT ON DECEMBER
31, 1996, 1992 AND 1987.
- -------------------------------------------------------------------------11
<PAGE>
- ---------------------------------------------------------------------------
[NON-INTEREST INCOME GRAPH]
[NON-INTEREST EXPENSE GRAPH]
were 33.1% of total revenues as compared to 29.5% for 1996. These
improvements were largely related to the growth and expansion of Old Kent
Mortgage Company (OKMC) which operated over 100 lending offices in 25
states and produced approximately $6.9 billion of residential mortgages,
most sold to third parties, during 1997. Old Kent's Investment and
Insurance Services business also contributed to improved non-interest
income by producing a 16% annual increase in trust revenue. Operating
results for 1997 included a $16.7 million one-time gain on the sale of a
$266 million credit card loan portfolio in June 1997, when the Corporation
exited this business as an underwriter.
Non-interest expense for 1997 was $490.8 million, up 13.5% from 1996.
This increase is primarily attributable to the growth of OKMC, along with
business acquisitions. Effective January 1, 1997, Old Kent acquired Seaway
Financial Corporation (Seaway). Seaway was a bank holding company which
operated banks in St. Clair and Algonac, Michigan. When acquired, Seaway
had total assets of approximately $345 million. During 1997, Seaway's two
banking operations were fully assimilated into Old Kent Bank and are now
operated as a single community bank region headquartered in St. Clair,
Michigan. Also, effective September 1, 1997, Old Kent acquired Grand Rapids
Holland Insurance Agency, Inc., a provider of commercial and personal
insurance products through offices located in western Michigan.
BALANCE SHEET ANALYSIS
Total loans increased to nearly $8.5 billion at December 31, 1997, up
by 4.6% from 1996. Commercial loans and leases (including commercial real
estate loans) were $5.1 billion at the end of 1997, or 12% more than last
year. This growth includes particularly successful efforts in our eastern
Michigan and metropolitan Chicago, Illinois markets. Consumer loans
increased to $2.6 billion at December 31, 1997, representing an increase of
10% over the preceding year-end total. Loan sales, such as the June 1997
sale of $266 million of credit card loans and the November 1997 sale of $60
million of consumer marine loans, reduced overall loan growth and net
interest income. Management expects that these actions will enhance the
future profitability of the Corporation.
At December 31, 1997, loans represented 66.9% of total interest-
earning assets, down from 69.6% a year earlier, primarily a result of our
loan sales. Held-for-sale residential mortgage loans totaled nearly $1.3
billion, or 10.1% of total interest-earning assets at December 31, 1997,
double the total twelve months prior due to OKMC's growth. Securities,
which generally earn lower
12-------------------------------------------------------------------------
<PAGE>
PERFORMANCE-People-Profits
- ---------------------------------------------------------------------------
interest rates than loans, became a proportionally smaller component of
total interest-earning assets. At December 31, 1997, securities and other
(non-loan) interest-earning assets were 23.0% of the total, compared to
25.3% one year earlier.
Total interest-paying liabilities increased to $10.8 billion at
December 31, 1997. This represented a 10.2% increase since the prior year-
end date. Total core deposits, which consist of demand deposits, savings
and consumer time deposits, grew 4.1% to over $9.5 billion at December 31,
1997. Growth in consumer time deposits, one of the most durable sources of
funding, was sizable during 1997, totaling over $4.8 billion at year end.
At both December 31, 1997 and 1996, total shareholders' equity was $1
billion. The Corporation repurchased nearly $190 million of its common
stock in 1997. Old Kent completed the stock repurchase programs authorized
in June 1996 and initiated another such program pursuant to a June 1997
authorization. Shares repurchased under these programs are intended for
future reissuance for such purposes as stock dividends, dividend
reinvestment and employee stock plans, business acquisitions and other
permissible corporate purposes. The repurchase of these shares had a
beneficial impact on earnings per share and return on equity for 1997. At
December 31, 1997, Old Kent had remaining authorization to repurchase
approximately 3.1 million shares of its common stock over the ensuing seven
months.
During January 1997, Old Kent Capital Trust I, a Delaware business
trust controlled by the Corporation, issued $100 million of Floating Rate
Subordinated Capital Income Securities. While not treated as a component of
consolidated shareholders' equity, these securities qualify as, and serve
to enhance, Old Kent's regulatory capital. This capital not only surpassed
regulatory minimums, but also exceeded the levels considered to be "well
capitalized" by bank regulatory authorities. The equity to assets ratio was
7.46% at December 31, 1997. The aggregate market value of Old Kent's
outstanding common stock was $3.7 billion at December 31, 1997.
CREDIT RISK
One of Old Kent's strengths is its diversified loan portfolio.
Approximately 40% 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 automobile loans, home equity
loans, and other open and closed end consumer credits. Loans to commercial
borrowers represent approximately 60% of Old Kent's loan portfolio. These
loans are grouped as real estate or non-real estate related, and then by
type and industry.
<PAGE>
[RELATIVE CORE DEPOSIT MIX GRAPH]
[RISK-BASED CAPITAL RATIOS GRAPH]
- -------------------------------------------------------------------------13
<PAGE>
- ---------------------------------------------------------------------------
[DISTRIBUTION OF LOANS PIE CHART -- DECEMBER 31, 1997 TOTAL - $8.5 BILLION]
<TABLE>
<CAPTION>
<S> <C>
Commercial 30%
Real Estate - Commercial 21%
Real Estate - Construction 7%
Real Estate - Residential Mortgage 9%
Real Estate - Consumer Home Equity 11%
Consumer 20%
Lease Financing 2%
----
100%
====
</TABLE>
[COMMERCIAL LOANS PIE CHART -- (NON REAL ESTATE RELATED) DECEMBER 31, 1997
TOTAL - $2.7 BILLION]
<TABLE>
<CAPTION>
<S> <C>
Agriculture 2%
Manufacturing 23%
Transportation 4%
Wholesale 13%
Retail 15%
Finance 4%
Contractors & Property Managers 11%
Service 16%
Leasing 6%
Other 6%
----
100%
====
</TABLE>
At December 31, 1997, Old Kent's commercial loan and lease portfolio,
excluding real estate related loans, totaled over $2.7 billion, or 32% of
total loans. Loans to manufacturers represented the largest component at
23% 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, 1997, aggregated nearly $2.4 billion, or 28% of total loans.
These loans are classified as owner occupied (borrowers who occupy and
utilize the loan related property in their respective businesses) and as
<PAGE>
non-owner occupied (borrowers whose principal purpose of ownership lies in
the production of rental receipts from the related property). As indicated
by the accompanying graph, loans to the various categories of owner-
occupied properties were 47% of commercial real estate and construction
loans, and loans for non-owner occupied properties were 53% of that total.
Non-owner occupied loans totaled $1.2 billion, or 15% of total loans, and
are distributed over a diverse base of borrowers. The largest segment
within non-owner occupied loans was housing related loans totaling 17% of
total commercial real estate and construction loans.
At December 31, 1997, Old Kent's allowance for credit losses
represented 1.86% of total loans and was nearly three times greater than
total impaired loans at that date. Management believes that this allowance
is adequate to absorb probable credit losses inherent in the loan
portfolios.
INTEREST RATE RISK
Interest rate risk is managed and mitigated by Old Kent's treasury
group. Old Kent has adopted various policies, which have been approved by
its Board of Directors and executive management, intended to measure and
control the volatility of net interest income which may result from changes
in the interest rate environment. Based on modeling techniques and
assumptions regularly employed by management to monitor and measure
interest rate risk, Old Kent's management believes that the Corporation is
essentially neutral to directional changes in interest rates. This means
that net interest income would be similarly impacted by upward or downward
movements in prevailing interest rates within ranges and parameters
anticipated by management.
14-------------------------------------------------------------------------
<PAGE>
PERFORMANCE-People-Profits
- ---------------------------------------------------------------------------
YEAR 2000 ISSUE
This global issue faces nearly every public and private sector concern
which in some way is dependent on the operational viability of computerized
systems and data beyond December 31, 1999. Older computer systems may treat
the year 2000 date as if it were the year 1900, possibly causing errors or
system failure. Old Kent began its Year 2000 impact analysis early in 1995
and has completed the assessment phase for all mission critical
applications and processes. The company is now in active renovation, with
41% of those efforts completed as of fourth quarter 1997. The remainder are
on schedule for completion by December 31, 1998, allowing adequate time for
testing and system validation in 1999.
LOOKING AHEAD
As described in the preceding Letter to Shareholders, Old Kent is
progressing toward its goal of becoming a more diversified financial
services organization. During 1998, we will continue to implement actions
aimed at that goal. We are prepared to face the challenges brought on by
economic cycles. Though these cycles may test the ability of borrowers to
repay debt and may pressure interest margins, we are well-positioned to
accept these challenges by virtue of the talent and commitment of our
management and staff, the strength of our balance sheet, our technological
resources and a conservative philosophy that has resulted in 39 consecutive
years of uninterrupted earnings growth and increased dividends.
BASIS OF PRESENTATION AND FORWARD LOOKING STATEMENTS
CONDENSED FINANCIAL STATEMENTS INCLUDED IN THIS REPORT DO NOT CONFORM
TO FINANCIAL STATEMENT STANDARDS UNDER GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, PRIMARILY DUE TO THE HIGH DEGREE OF SUMMARIZATION EMPLOYED IN
THEIR PREPARATION. AUDITED FINANCIAL STATEMENTS, PREPARED IN CONFORMITY
WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, APPEAR IN THE 1997 ANNUAL
REPORT INCLUDED WITH OUR PROXY STATEMENT FOR OUR 1998 ANNUAL MEETING.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT ARE BASED ON
MANAGEMENT'S BELIEFS, ASSUMPTIONS, CURRENT EXPECTATIONS, ESTIMATES AND
PROJECTIONS ABOUT THE FINANCIAL SERVICES INDUSTRY, THE ECONOMY, AND OLD
KENT ITSELF. WORDS SUCH AS "ANTICIPATES," "BELIEVES," "ESTIMATES,"
"EXPECTS," "INTENDS," "IS LIKELY," "PLANS," AND SIMILAR EXPRESSIONS ARE
INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE
NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE CERTAIN UNCERTAINTIES AND
ASSUMPTIONS. ACTUAL RESULTS AND OUTCOMES MAY MATERIALLY DIFFER FROM WHAT
MAY BE EXPRESSED IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD
CAUSE A DIFFERENCE BETWEEN AN OUTCOME AND A FORWARD-LOOKING STATEMENT
INCLUDE CHANGES IN INTEREST RATES; DEMAND; THE DEGREE OF COMPETITION;
CHANGES IN LAWS, REGULATIONS OR POLICY; THE OUTCOME OF LITIGATION AND
CONTINGENCIES; TRENDS IN CUSTOMER BEHAVIOR AND CREDITWORTHINESS; AND THE
VICISSITUDES OF THE ECONOMY. OLD KENT UNDERTAKES NO OBLIGATION TO UPDATE
FORWARD-LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION.
<PAGE>
[COMMERCIAL REAL ESTATE AND CONSTRUCTION LOANS PIE CHART -- DECEMBER 31,
1997 TOTAL - $2.4 BILLION]
<TABLE>
<CAPTION>
<S> <C>
Owner Occupied
Manufacturing 12%
Office Facilities 9%
Retail Sites 8%
Other 18%
----
47%
Non-Owner Occupied
Housing 17%
Manufacturing 6%
Offices 10%
Retail Sites 9%
Hotels, Motels, etc. 5%
Other 6%
----
100%
====
</TABLE>
- -------------------------------------------------------------------------15
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS------------------------------------------
<TABLE>
Condensed Consolidated Balance Sheets
<CAPTION>
DECEMBER 31 (DOLLARS IN MILLIONS) 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Cash and due from banks $ 501.9 $ 530.4
Federal funds sold and other short term investments 50.5 108.2
Mortgages held-for-sale 1,271.8 589.2
Securities:
Trading account 1.0 19.0
Available-for-sale 2,036.9 1,895.2
Held-to-maturity 820.8 909.3
LOANS:
Commercial loans and leases 5,100.8 4,554.9
Consumer 2,600.9 2,365.3
Credit card 1.7 317.6
RESIDENTIAL REAL ESTATE MORTGAGES 766.0 859.3
- --------------------------------------------------------------------------------------
Total loans 8,469.4 8,097.1
LESS ALLOWANCE FOR CREDIT LOSSES (157.4) (165.9)
- --------------------------------------------------------------------------------------
Net loans 8,312.0 7,931.2
Premises and equipment, net 184.7 173.9
OTHER ASSETS 593.9 490.4
- --------------------------------------------------------------------------------------
TOTAL ASSETS $13,773.5 $12,646.8
======================================================================================
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Demand deposits (non-interest bearing) $ 1,669.0 $ 1,581.0
CONSUMER TIME AND SAVINGS DEPOSITS 7,883.7 7,597.2
- --------------------------------------------------------------------------------------
Total core deposits 9,552.7 9,178.2
NEGOTIABLE AND FOREIGN DEPOSITS 675.5 902.0
- --------------------------------------------------------------------------------------
Total deposits 10,228.2 10,080.2
Other borrowed funds 2,074.8 1,235.9
Subordinated debt 100.0 100.0
OTHER LIABILITIES 243.0 237.0
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES 12,646.0 11,653.1
Guaranteed preferred beneficial interest in the
Corporation's junior subordinated debentures 100.0 -
SHAREHOLDERS' EQUITY 1,027.5 993.7
- --------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,773.5 $12,646.8
======================================================================================
</TABLE>
16-------------------------------------------------------------------------
<PAGE>
PERFORMANCE-People-Profits
- ---------------------------------------------------------------------------
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
YEAR ENDED DECEMBER 31 (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $1,021.3 $947.3 $909.8
INTEREST EXPENSE (495.3) (453.0) (433.1)
- ----------------------------------------------------------------------------------------------------------
Net interest income 526.0 494.3 476.7
PROVISION FOR CREDIT LOSSES (45.7) (35.2) (21.7)
- ----------------------------------------------------------------------------------------------------------
Net interest income after provision for credit losses 480.3 459.1 455.0
Non-interest income 284.4 212.1 161.7
NON-INTEREST EXPENSE (490.8) (432.5) (402.1)
- ----------------------------------------------------------------------------------------------------------
Income before income taxes 273.9 238.7 214.6
INCOME TAXES (93.6) (80.0) (72.8)
- ----------------------------------------------------------------------------------------------------------
Net income $180.3 $158.7 $141.8
==========================================================================================================
Basic earnings per share $1.90 $1.63 $1.42
Diluted earnings per share 1.88 1.61 1.41
==========================================================================================================
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
MARKET VALUE TOTAL
COMMON CAPITAL RETAINED ADJUSTMENT ON SHAREHOLDERS'
(DOLLARS IN MILLIONS) STOCK SURPLUS EARNINGS SECURITIES EQUITY
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $44.9 $175.8 $782.8 ($9.8) $ 993.7
Net income for the year 180.3 180.3
Cash dividends (64.0) (64.0)
Issuances of stock:
Acquisition of bank holding company 1.9 69.9 71.8
Acquisition of insurance company 0.1 5.1 5.2
Dividend reinvestment and
employee stock plans 0.5 13.5 14.0
Five percent stock dividend
paid July 28, 1997 2.3 121.7 (124.3) (0.3)
<PAGE>
Two-for-one stock split paid
December 15, 1997 46.5 (46.5)
Common stock repurchased (3.4) (186.2) (189.6)
OTHER CHANGES 5.0 11.4 16.4
- --------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $92.8 $204.8 $728.3 $1.6 $1,027.5
========================================================================================================
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Old Kent Financial
Corporation (a Michigan corporation) and subsidiaries as of December 31,
1997 and 1996, and the related statements of income, cash flows and
shareholders' equity for each of the three years in the period ended
December 31, 1997, appearing in the 1997 Annual Report included with the
proxy statement for the annual meeting of the shareholders, not appearing
herein. In our report dated January 14, 1998, also appearing in the 1997
Annual Report, we expressed an unqualified opinion on those consolidated
statements.
In our opinion, the information set forth in the condensed
consolidated financial statements on pages 16 and 17 is fairly stated, in
all material respects, in relation to the consolidated financial statements
from which it has been derived.
Chicago, Illinois
January 14, 1998 /s/ Arthur Andersen LLP
- -------------------------------------------------------------------------17
<PAGE>
OLD KENT FINANCIAL CORPORATION---------------------------------------------
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
<S> <C>
RICHARD L. ANTONINI KEVIN T. KABAT
Chairman, President and Vice Chairman of the Corporation and
Chief Executive Officer, President of Old Kent Bank
Foremost Corporation of America
(A SPECIALTY PROPERTY AND CASUALTY INSURER) Fred P. Keller
Chairman and Chief Executive Officer,
JOHN M. BISSELL Cascade Engineering, Inc.
Chairman of the Board, (MANUFACTURER OF PLASTIC INJECTION MOLDED
BISSELL Inc. AUTOMOTIVE, SEATING AND CONTAINER PRODUCTS)
(MANUFACTURER OF HOMECARE, HEALTHCARE
AND GRAPHICS PRODUCTS) JOHN P. KELLER
President
JOHN D. BOYLES Keller Group, Inc.
Attorney-at-Law, (A DIVERSIFIED MANUFACTURER)
Verspoor, Waalkes, Lalley, Slotsema &
Talen, P.C. HENDRIK G. MEIJER
Co-Chairman,
WILLIAM P. CRAWFORD Meijer, Inc.
President and Chief Executive Officer, (FOOD AND GENERAL MERCHANDISE RETAILER)
Steelcase Design Partnership
(MANUFACTURER OF OFFICE SYSTEMS) PERCY A. PIERRE, PH.D.
Professor of Electrical Engineering,
DICK DEVOS Michigan State University
President,
Amway Corporation PATRICK M. QUINN
(MANUFACTURER OF HOME AND PERSONAL CARE Former Chief Executive Officer,
PRODUCTS) Spartan Stores, Inc.
(FOOD WHOLESALER)
WILLIAM G. GONZALEZ
Chief Health System Officer, MARILYN J. SCHLACK
Spectrum Health President
(INTEGRATED HEALTHCARE NETWORK) Kalamazoo Valley Community College
<PAGE>
JAMES P. HACKETT PETER F. SECCHIA
President and Chief Executive Officer, Chairman,
Steelcase Inc. Universal Forest Products, Inc.
(MANUFACTURER OF OFFICE SYSTEMS) (MANUFACTURER AND DISTRIBUTOR OF BUILDING
SUPPLIES)
ERINA HANKA
President, DAVID J. WAGNER
Suspa Inc. Chairman, President and
(MANUFACTURER OF GAS CYLINDERS FOR INDUSTRY) Chief Executive Officer of the Corporation
and Chairman and Chief Executive Officer
EARL D. HOLTON of Old Kent Bank
President,
Meijer, Inc. MARGARET SELLERS WALKER
(FOOD AND GENERAL MERCHANDISE RETAILER) Professor of Public Administration,
Grand Valley State University
ROBERT L. HOOKER
Vice Chairman and Chief Executive Officer, ROBERT H. WARRINGTON
Mazda Great Lakes Vice Chairman of the Corporation and
(WHOLESALE DISTRIBUTOR OF MAZDA VEHICLES AND Chairman and Chief Executive Officer of
PARTS) Old Kent Mortgage Company
MICHAEL J. JANDERNOA
Chairman and Chief Executive Officer,
Perrigo Company
(MANUFACTURER OF STORE-BRAND HEALTH AND
PERSONAL CARE PRODUCTS)
</TABLE>
18-------------------------------------------------------------------------
<PAGE>
PERFORMANCE-People-Profits
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORPORATE OFFICERS
<S> <C>
DAVID J. WAGNER DAVID L. KERSTEIN
Chairman, President and Executive Vice President,
Chief Executive Officer Retail Banking and Marketing
KEVIN T. KABAT STEVEN D. CRANDALL
Vice Chairman Senior Vice President,
Human Resources
ROBERT H. WARRINGTON
Vice Chairman GREGORY K. DANIELS
Senior Vice President,
JAMES A. HUBBARD Chief Information Officer
Senior Executive Vice President
RICHARD L. HAUG
WILLIAM L. SANDERS Senior Vice President,
Senior Executive Vice President, General Auditor
Chief Financial Officer and Treasurer
MARY E. TUUK
E. PHILIP FARLEY Senior Vice President and Secretary,
Executive Vice President, Legal Coordinator
Community Bank Administration
MICHAEL J. WHALEN
RALPH W. GARLICK Senior Vice President,
Executive Vice President Senior Credit Officer
MANAGEMENT COMMITTEE
DAVID J. WAGNER RALPH W. GARLICK
Chairman, President and Executive Vice President,
Chief Executive Officer, Old Kent Financial Corporation
Old Kent Financial Corporation;
Chairman and Chief Executive Officer, DAVID L. KERSTEIN
Old Kent Bank Executive Vice President,
Retail Banking and Marketing,
KEVIN T. KABAT Old Kent Financial Corporation
Vice Chairman,
Old Kent Financial Corporation; KENNETH C. KREI
President, Executive Vice President,
Old Kent Bank Investment Services,
Old Kent Bank
<PAGE>
ROBERT H. WARRINGTON
Vice Chairman, DANIEL W. TERPSMA
Old Kent Financial Corporation; Executive Vice President,
Chairman and Chief Executive Officer, Old Kent Bank;
Old Kent Mortgage Company President,
Old Kent Bank - EAST
JAMES A. HUBBARD
Senior Executive Vice President, STEVEN D. CRANDALL
Old Kent Financial Corporation; Senior Vice President,
President, Human Resources
Old Kent Bank - ILLINOIS Old Kent Financial Corporation
WILLIAM L. SANDERS GREGORY K. DANIELS
Senior Executive Vice President, Senior Vice President,
Chief Financial Officer and Treasurer, Chief Information Officer,
Old Kent Financial Corporation Old Kent Financial Corporation
DAVID A. DAMS LARRY S. MAGNESEN
Executive Vice President, Senior Vice President,
Corporate Banking, Retail Administration,
Old Kent Bank Old Kent Bank
E. PHILIP FARLEY MICHAEL J. WHALEN
Executive Vice President, Senior Vice President,
Community Bank Administration, Senior Credit Officer,
Old Kent Financial Corporation Old Kent Financial Corporation
</TABLE>
- -------------------------------------------------------------------------19
<PAGE>
SHAREHOLDER INFORMATION----------------------------------------------------
SHAREHOLDER INFORMATION
This report presents information concerning the business and financial
results of Old Kent Financial Corporation in a format that we believe
most of our shareholders will find useful and informative. The 1997
Annual Report included with our Proxy Statement for our annual meeting
contains audited financial statements, detailed financial review and
other information. The Corporation's Form 10-K Annual Report to the
Securities and Exchange Commission will be provided without cost to
shareholders upon request. Send requests to Shareholder Services at
the address shown below.
ANNUAL MEETING
The annual meeting of shareholders of Old Kent Financial Corporation
will be held on April 20, 1998, at 10:00 a.m. in the Ambassador Ball-
room at the Amway Grand Plaza Hotel, 187 Monroe NW, directly southwest
of the Old Kent Bank Building, in Grand Rapids, Michigan.
TRANSFER AGENT/SHAREHOLDER INQUIRIES
Old Kent Bank serves as the transfer agent for the Corporation.
Inquiries relating to shareholder records, stock transfers, changes of
ownership, lost or stolen stock certificates, changes of address and
dividend payments should be addressed to:
Old Kent Bank
Shareholder Services
4420 44th Street SE, Suite A
Grand Rapids, Michigan 49512-4011
Telephone (616) 771-5482, or (800) 652-2657 (Ext. 771-5482)
DIVIDEND REINVESTMENT PLAN
Old Kent offers a dividend reinvestment plan which permits participating
shareholders of record to reinvest dividends in Old Kent Common Stock
without paying brokerage commissions or service charges. Participating
shareholders may also invest up to $5,000 in additional funds each
quarter for the purchase of additional shares. A copy of the dividend
reinvestment plan prospectus and application may be requested from the
transfer agent at the address above.
DIVIDENDS
Anticipated dividend payable dates are the 15th of March, June,
September and December. Shareholders may have their dividends deposited
directly to their savings, checking or Money Market investment account.
A copy of the Automatic Dividend Deposit Service Plan and an
authorization form may be requested from Shareholder Services at the
address shown above.
<PAGE>
OLD KENT COMMON STOCK
Old Kent Common Stock is traded on the NASDAQ stock market and is
quoted under the symbol OKEN. The following table sets forth the range
of bid prices for Old Kent Common Stock for the periods indicated.
These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
1997 1996
HIGH LOW HIGH LOW
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<S> <C> <C> <C> <C> <C>
First Quarter $24.88 $22.44 $18.71 $17.00
Second Quarter 27.68 22.14 18.81 16.95
Third Quarter 34.25 26.81 20.30 17.38
Fourth Quarter 42.12 30.81 23.28 20.18
</TABLE>
AS OF JANUARY 31, 1998, THERE WERE 92,965,944 SHARES OF OLD KENT
FINANCIAL CORPORATION COMMON STOCK ISSUED AND OUTSTANDING, HELD BY
APPROXIMATELY 15,225 HOLDERS OF RECORD.
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OLD KENT
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Old Kent Financial Corporation - 111 Lyon Street NW - Grand Rapids,
Michigan 49503
