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CHOICEONE
FINANCIAL SERVICES, INC.
THE RIGHT CHOICE FOR YOU
[PICTURE OF SPARTA STATE BANK WITH VINTAGE AUTOMOBILE IN FRONT]
1997 REPORT TO THE SHAREHOLDERS
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CHOICEONE
[PICTURE WITH WORDS IN IT]
"...THE FINANCIAL INSTITUTION OF CHOICE FOR MANY GENERATIONS..."
Dear Shareholders,
We are excited to be celebrating our 100th Anniversary as the financial
institution of choice for many generations of families in our markets. Our
business is truly based on serving other people's needs. We try never to forget
that, and we are very proud of our century-long heritage of service. Even
though we often talk in terms of numbers, we continue to be true to our original
mission of meeting the expectations of shareholders, clients, employees, and
the communities we serve.
The year of 1997 proved to be challenging but successful for ChoiceOne.
Net income for the year was $1,737,000 or $3.23 per share, compared to
$1,695,000 or $3.14 per share in 1996. The annualized return on average
shareholders' equity was 11.58% compared to 12.00% for 1996. We continued to
grow as total assets increased to $156,329,000 from $141,731,000 during the
period.
During the year, the defined benefit pension plan was eliminated and
replaced by a 401(k) and Employee Stock Ownership Plan (ESOP) to improve the
Company's ability to manage future liability. The new plan allows the Company
much more flexibility in managing this expense and better aligns employee
benefits with Company performance. This change required a one-time, non-cash
accounting adjustment that lowered net income by approximately $185,000.
The Bank is now well established in north Kent County with facilities that
are modern and efficient. Today we can provide clients with a multitude of
services, including travel (through the acquisition of Alpine Travel, Inc., last
year). The challenge now is to further establish ChoiceOne as a premier
provider of consumer and commercial financial services while building our
recognition in the newer markets. Sales effectiveness and cost efficiencies
should be enhanced by adding points of access, modifying our existing
facilities, and upgrading equipment.
We look forward to the opportunities the changing financial services
industry will bring our way during 1998. We appreciate your loyalty as
shareholders during these first 100 years and will maintain our focus on
increasing the value of your investment in ChoiceOne Financial Services, Inc.,
during the next 100 years.
Sincerely,
/s/Jae M. Maxfield /s/L. Edmond Eary, Jr., M.D.
Jae M. Maxfield L. Edmond Eary, Jr., M.D.
President and Chief Executive Officer Chairman
[PICTURE OF JAE M. MAXFIELD AND L. EDMOND EARY, JR., M.D.]
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<TABLE>
<CAPTION>
1997 1996 % CHANGE
<S> <C> <C> <C>
For the year (dollars in thousands):
Net interest income $ 6,315 $ 5,574 9.7%
Provision for loan losses 539 523 3.1%
Noninterest income 1,769 1,555 13.8%
Noninterest expense 5,176 4,436 16.7%
Income before income taxes 2,369 2,350 .8%
Income tax expense 632 655 (3.5)%
Net income 1,737 1,695 2.5%
Cash dividends declared 783 663 18.1%
Per share<F*>:
Net income $ 3.23 $ 3.14 2.9%
Cash dividends 1.46 1.23 18.7%
Shareholders' equity 28.93 27.06 6.9%
At year end (dollars in thousands):
Securities $ 19,942 $ 23,006 (13.3)%
Gross loans 127,776 110,099 16.1%
Deposits 107,492 95,606 12.4%
Shareholders' equity 15,537 14,537 6.9%
Assets 156,329 141,731 10.3%
Ratios:
Return on average assets 1.17% 1.38%
Return on average shareholders' equity 11.58% 12.00%
Dividend payout
Cash (based on net income) 45.08% 39.12%
Stock (based on shares outstanding) 6.00% none
Shareholders' equity to assets (at year end) 9.94% 10.26%
<FN>
<F*>Per share amounts are retroactively adjusted for the effect of stock
dividends.
</FN>
</TABLE>
FINANCIAL HIGHLIGHTS
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100 YEARS
CHOICEONE: THEN AND NOW
100 YEARS
In August of 1898, when Sparta was just a small village, Sparta State
Bank incorporated with capital investment of $15,000--a goodly sum at the time.
A century later, Sparta has grown to almost 4,000 people. The Bank, now known
as ChoiceOne, has grown to be a well-established financial institution with
assets of $156.3 million, now serving Cedar Springs and Grand Rapids, as well.
YESTERDAY AND TODAY
Looking back on over a century of service, we see many changes have
taken place; yet one thing remains the same: a firm commitment to serve the
financial needs of our communities.
In 1912 our first female employee, Della Rice, joined our Bank at a
salary of $9 a week. Today, ChoiceOne has almost 100 men and women who work at
our banking, insurance, and travel offices. They're the same kind of people
we've always had: friendly, loyal, and reliable--people who know our customers
by name and treat them as friends and neighbors.
In 1915 the city's first electric chime clock was installed.
Choice24, a 24-hour banking line, was installed 80 years later, allowing
customers to call for information about their accounts, any time.
MOVING AHEAD
In 1935 we became members of the FDIC and installment loans were
first made available to consumers. Today, 8,749 area families, individuals, and
businesses take advantage of our lending to purchase everything from new
equipment to new homes.
In 1950 we moved from recording savings records by hand to using
proofing machines. As we enter our secured 100 years of service, we now use
computers to track the details of our business--but still retain a personal
involvement in the financial well-being of our customers.
"I THOROUGHLY ENJOYED HELPING PEOPLE AND I STRONGLY BELIEVE IN TREATING THEM
LIKE A PERSON AND NOT AS A NUMBER. I HOPE THAT I HAVE MAINTAINED THAT TYPE OF
RELATIONSHIP WITH OUR CUSTOMERS."
--Gordon VanDenHout
on his retirement as director in 1991
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CONVENIENCE IS KEY
The 1960s saw the installation of our first walk-up window and the
remodeling of our main office. The 1970s and 1980s were also a period of
growth, with another expansion of the main office and the installation of our
first Automatic Teller Machine (ATM), then a major innovation in the banking
industry. An ATM offspring, our ChoiceCheck debit card, was introduced a decade
later. Our very first branch office opened in 1990 at the corner of Ida Red
Drive and Division, with a new drive-through ATM and three drive-up lanes for
quick, convenient service.
Convenience remains one of our top priorities as we look at the
future for our customers. Plans include more branches and services, such as
on-line banking to meet the needs of a computer-based society.
GROWING FAMILY OF SERVICES
The 1990s have also been a period of significant change for
ChoiceOne, with the addition of Travel and Insurance Agencies to give
customers easy services "all under one roof." In 1997 we served a growing
list of customers through three unique offerings.
TODAY
COMMITMENT TO THE COMMUNITIES
Many of our customers have grown up along with us--fourth and fifth
generations of families--and they wouldn't go anywhere else. Because they know
us--and we know them.
In 1898 we pledged to help build the local area by supporting
business growth, assisting in agricultural development and providing a variety
of banking services to the public.
This pledge still holds true in 1998. In an age where small local
banks are being swallowed up by large, impersonal institutions. ChoiceOne is
still a true community bank where the important decisions are still made by
members of the community.
We offer broad and diversified services comparable to those of a
large financial institution. So our customers really do get the best of both
worlds: a bank with a solid history of personal attention to community
involvement, and on which is moving into the future with products today's
customers need.
The next century is sure to bring with it more changes. However, one
thing will always remain the same: the commitment of ChoiceOne to meet the
expectations of the community we've grown up with...just like we've been doing
for our first 100 years.
CHOICEONE BANK AND
INSURANCE,
PLAINFIELD AVENUE BRANCH,
GRAND RAPIDS
[PICTURE OF BRANCH BANK ON PLAINFIELD AVENUE]
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BOARD OF DIRECTORS
[PICTURE OF BOARD OF DIRECTORS FOR 1998]
BOARD OF DIRECTORS, 1998.
Front row, left to right
William F. Cutler, Jr.
Former Vice President,
H.H. Cutler Company
Linda R. Pitsch
Secretary,
ChoiceOne Financial Services, Inc.
Senior Vice-President-Cashier,
ChoiceOne Bank
Jae M. Maxfield
President & Chief Executive Officer,
ChoiceOne Bank,
ChoiceOne Financial Services, Inc.
L. Edmond Eary, Jr. M.D.
Chairman of the Board,
ChoiceOne Bank,
ChoiceOne Financial Services, Inc.
Retired, Private Medical Practice
Andrew W. Zamiara, R.Ph.
President & Manager,
Momber Pharmacy & Gift Shop
Back row, left to right
Lawrence D. Bradford
President,
ChoiceOne Insurance Agencies, Inc.
Lewis G. Emmons
Special Projects Manager,
Great Day Foods, Inc.
Frank G. Berris
Owner,
American Gas & Oil Co., Inc.
Jon E. Pike, C.P.A.
Managing Partner,
Beene Gartner L.L.P
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Stuart Goodfellow
Owner,
Goodfellow Vending Services &
Goodfellow Blueberry Farms
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[PICTURE OF ONE DOLLAR BILLS, GENERAL LEDGER BOOKS, PEN, WATCH, SPARTA STATE
BANK STOCK CERTIFICATE AND DIRECTOR'S OATH]
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[PICTURE OF OLD CASH VAULT]
<COPYRIGHT>1998 CHOICEONE FINANCIAL SERVICES, INC.
