<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993 File No. 0-15828
FIRST NATIONAL BANK CORP.
(Exact name of registrant as specified in its charter)
Delaware 38-2711692
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
18800 Hall Road, Clinton Township, Michigan 48038-1340
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 465-2400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, $3.125 par value
Indicate by check 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 XX 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 the registrant's knowledge, in definitive proxy or information
amendment to this Form 10-K. [ ]
As of March 11, 1994, 2,315,672 shares of Common Stock of the Registrant
were outstanding (exclusive of treasury shares). The aggregate market value of
the shares of Common Stock as of such date (based on the last trading price of
$23.25 per share on the NASDAQ Stock Market) held by non-affiliates was
approximately $53.8 million.
Documents Incorporated by Reference
The following documents are incorporated by reference into this Form 10-K:
Part I: Item 1 Part of Annual Report of the Registrant for the year
ended December 31, 1993.
Part II: Items 5-8 Part of Annual Report of the Registrant for the year
ended December 31, 1993.
Part III: Items 10-13 Part of definitive Proxy statement of the Registrant
dated March 23, 1994, filed pursuant to
Regulation 14A.
<PAGE> 2
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
PART 1
ITEM 1. BUSINESS
THE CORPORATION
First National Bank Corp. (the "Corporation") is a bank holding
company under the Bank Holding Company Act of 1956, as amended (the
"Bank Holding Company Act"). As a bank holding company, the Corporation
is subject to regulation by the Federal Reserve Board. The Corporation
was organized on December 17, 1986, under the laws of the State of Dela-
ware, and acquired First National Bank in Macomb County (formerly named
First National Bank in Mount Clemens) (the "Bank"), effective April 30,
1987. The Corporation organized Bankers Fund Life Insurance Company
(the "Insurance Company"), effective January 9, 1987. The Corporation
exists primarily for the purpose of holding all the stock of its
subsidiaries, the Bank and the Insurance Company, and of such other
subsidiaries as it may acquire or establish.
The Corporation's principal source of operating funds is expected
to be dividends from the Bank. The expenses of the Corporation are
generally paid using funds derived from dividends paid to the Corporation
by the Bank.
THE BANK
The Bank is a national banking association which has been in operation
since 1926 under the laws of the United States of America, pursuant to a
charter issued by the Office of the Comptroller of the Currency. The Bank
is a member of the Federal Reserve System, and its deposits are insured to
the maximum extent provided by the Federal Deposit Insurance
Corporation.
The Bank, through its main office at 49 Macomb Place, Mount Clemens,
Michigan and through its branch offices provides a wide variety of
commercial banking services to individuals, businesses, governmental units,
financial institutions, and other institutions. Its services include accepting
time, demand and savings deposits, including regular checking accounts, NOW
accounts, money market certificates, and fixed rate certificates of deposit.
In addition, the Bank makes secured and unsecured commercial, construction,
mortgage and consumer loans; finances commercial transactions, and provides
safe deposit facilities. Each location has an automated teller machine ("ATM")
which participates in the Network 1 system, a regional shared network; the
Cashstream system, an eastern United States regional network; the Cash
Station system, a midwest regional network; and the Cirrus system, a
nationwide network. In addition to the foregoing services, the Bank provides
its customers with extended banking hours, and a system to perform certain
transactions by telephone or personal computer. The Bank does not have
trust powers, but it provides trust services via a correspondent bank
relationship.
THE INSURANCE COMPANY
The Insurance Company is incorporated under the laws of the State
of Arizona. It is subject to regulation by the Arizona Corporation
Commission and the Arizona Department of Insurance. Since substantially
all of its business is conducted in the State of Michigan, it is re-
quired to qualify as a foreign corporation, doing business in the State
of Michigan.
EFFECT OF GOVERNMENT MONETARY POLICIES
The earnings of the Corporation are affected by domestic economic
conditions and the monetary and fiscal policies of the United States
government and its agencies. The Federal Reserve Board's monetary poli-
cies have had, and will likely continue to have, an important impact on
the operating results of commercial banks through its power to implement
national monetary policy in order to, among other things, curb inflation
or combat a recession. The policies of the Federal Reserve Board have a
major effect
2
<PAGE> 3
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
upon the levels of bank loans, investments and deposits through its
open market operations in United States government securities, and through its
regulation of, among other things, the discount rate on borrowings of member
banks and the reserve requirements against member bank deposits. It is not
possible to predict the nature and impact of future changes in monetary and
fiscal policies.
REGULATION AND SUPERVISION
The Corporation, as a bank holding company under the Bank Holding
Company Act, is required to file with the Federal Reserve Board an annual
report and such additional information as the Federal Reserve Board may require
pursuant to the Bank Holding Company Act, and is subject to examination by the
Federal Reserve Board.
The Bank Holding Company Act limits the activities which may be engaged
in by the Corporation and its subsidiaries to those of banking and the
management of banking organizations, and to certain non-banking activities,
including those activities which the Federal Reserve Board may find, by order
or regulation, to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. The Federal Reserve Board is
empowered to differentiate between activities by a bank holding company, or a
subsidiary thereof, and activities commenced by acquisition of a going concern.
With respect to non-banking activities, the Federal Reserve Board has,
by regulation, determined that certain non-banking activities are closely
related to banking within the meaning of the Bank Holding Company Act. These
activities include, among other things, operating a mortgage company, finance
company, credit card company or factoring company; performing certain data
processing operations; providing certain investment and financial advice;
acting as an insurance agent for certain types of credit related insurance;
leasing property on a full-payout, nonoperating basis; and, subject to certain
limitations, providing discount securities brokerage services for customers.
The Corporation has organized the Insurance Company for the purpose of engaging
in the credit life, accident, and health reinsurance business. The Corporation
has no current plans to engage in other non-banking activities.
The Bank is subject to certain restrictions imposed by federal law on
any extension of credit to the Corporation, or any of its subsidiaries, on
investments in stock or other securities thereof, and on the taking of such
stock or securities as collateral for loans to any borrower. Federal law
prevents the Corporation from borrowing from the Bank unless the loans are
secured in designated amounts.
With respect to the acquisition of banking organizations, the
Corporation is required to obtain the prior approval of the Federal Reserve
Board before it can acquire all or substantially all of the assets of any bank,
or acquire ownership or control of any voting shares of any bank, if, after
such acquisition, it will own or control more than 5% of the voting shares of
such bank. The Bank Holding Company Act does not permit the Federal Reserve
Board to approve the acquisition by the Corporation, or any subsidiary, of any
voting shares of, or interest in, or all or substantially all of the assets of
any bank located outside the State of Michigan, unless such acquisition is
specifically authorized by the laws of the state in which such bank is located.
Certain states within the same geographic region have enacted reciprocal
legislation, allowing interstate acquisitions of and by banking organizations.
The Bank is required to maintain a noninterest bearing deposit (reserve
balance) with the Federal Reserve Bank, based on a percentage of the Bank's
deposits. During 1993 and 1992, the average reserve balances were
approximately $2,717,000 and $2,069,000, respectively.
EMPLOYEES
As of December 31, 1993, the Corporation and the Bank employed 244
persons (full-time equivalent).
3
<PAGE> 4
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
COMPETITION
All phases of the business of the Bank are highly competitive. The Bank
competes with numerous financial institutions, including other commercial
banks, in the Macomb County and Greater Detroit area. The Bank, along with
other commercial banks, competes with respect to its lending activities, and
competes in attracting demand deposits, with savings banks, savings and loan
associations, insurance companies, small loan companies, credit unions and with
the issuers of commercial paper and other securities, such as shares in various
mutual funds. Many of these institutions are substantially larger and have
greater financial resources than the Bank. Interstate banking legislation has
further increased competition within the financial services industry.
The competitive factors among financial institutions can be classified
into two categories; competitive rates and competitive services. With the
advent of deregulation, rates have become more competitive, especially in the
area of time deposits. From a service standpoint, financial institutions
compete against each other in types of services. The Bank is generally
competitive with other financial institutions in its primary service area with
respect to interest rates paid on time and savings deposits, charges on deposit
accounts and interest rates charged on loans. With respect to services, the
Bank offers extended banking hours, personal checking services, a network of
automated teller machines, and telephone banking services.
Pursuant to federal regulations, the Bank is limited in the amount that
it may lend to a single borrower. As of December 31, 1993, and December 31,
1992, the legal lending limits were approximately $5,568,000 and $4,918,000,
respectively.
ADDITIONAL STATISTICAL INFORMATION
The majority of the consolidated statistical information for the
Corporation is shown under the captions "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Selected Quarterly
Financial Information," on pages 29 through 34 and page 35, respectively, of
the Annual Report of the Corporation for the year ended December 31, 1993, and
is incorporated by reference herein. The following discussion contains
additional statistical information for the Corporation.
4
<PAGE> 5
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
SECURITY PORTFOLIO
The following table shows the composition of the security portfolio
as of the dates indicated:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1993 1992 1991
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Investment securities:
U.S. Treasury $ 9,229 $ 9,424 $ 7,073
U.S. Government agencies 37,118 31,437 35,760
Municipal obligations 33,162 36,525 48,694
Other securities 557 559 863
-------- -------- --------
Total investment securities 80,066 77,945 92,390
Securities available for sale:
U.S. Treasury 5,047 3,046 ------
U.S. Government agencies 2,459 2,015 ------
-------- -------- --------
Securities available for sale 7,506 5,061 ------
-------- -------- --------
Total securities $87,572 $83,006 $92,390
-------- -------- --------
-------- -------- --------
</TABLE>
Loan and Lease Portfolio
The following table details the composition of the loan and lease
portfolio as of the dates indicated:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Types of loans:
Residential real estate $60,362 $65,438 $63,506 $65,758 $62,877
Commercial 212,035 195,133 162,105 148,722 123,799
Installment 55,629 56,496 60,907 71,062 61,956
Lease financing ------ 149 378 471 586
------- ------- ------- ------- -------
Total loans 328,026 317,216 286,896 286,013 249,218
Less:
Allowance for loan and lease
losses 4,598 4,585 4,038 3,545 3,143
------- ------- ------- ------- -------
Net loans $323,428 $312,631 $282,858 $282,468 $246,075
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
5
<PAGE> 6
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
Residential real estate loans are generally for owner occupied,
one to four family homes, which are secured by mortgages. The majority
of these loans have a fixed interest rate.
The increase in commercial loans during the 1989 to 1993 period
came mostly from variable rate loans secured by commercial mortgages.
In 1990, a large portion of the increase also came from fixed rate loans
secured by commercial mortgages; and, in 1993, variable rate lines of
credit contributed significantly to the increase. A large portion of
the Bank's commercial mortgages are working capital loans, in which the
Bank takes real estate as security on the loan.
The decrease in installment loans in 1992 and 1993 was due primar-
ily to the changing nature of the economy, as automobile and boat pur-
chases (and therefore lending) have slowed, and consumers have tended to
reduce their levels of debt. 1991's decrease was due to the Bank's
sale of its credit card portfolio. The increase in installment loans in
1990 was primarily from "equity" lines of credit.
The Bank has no material foreign or agricultural loans, and no
material loans to energy producing customers.
The following table shows the maturity distribution, classified
according to fixed or variable interest rates, for the Bank's commercial
loan portfolio at December 31, 1993.
<TABLE>
<CAPTION>
After
One But After
Within Within Five
One Year Five Years Years Total
-------- ---------- ----- -----
(in thousands)
<S> <C> <C> <C> <C>
Amount of loans and leases with:
Predetermined interest rates $7,902 $29,120 $7,465 $44,487
Floating or adjustable interest rates 52,744 91,908 22,896 167,548
-------- -------- ------- --------
Total commercial loans $60,646 $121,028 $30,361 $212,035
------- -------- ------- --------
------- -------- ------- --------
</TABLE>
ANALYSIS OF NONPERFORMING LOANS
The following table details the aggregate amount of nonaccrual
loans and loans past due 90 days or more (but still accruing) as of the
dates indicated:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $961 $2,394 $1,099 $2,419 $752
Past due 90 days or more 2,626 2,271 3,152 2,337 2,725
------- ------- ------- ------- -------
Totals $3,587 $4,665 $4,251 $4,756 $3,477
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
6
<PAGE> 7
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
Loans are placed on a nonaccrual basis when, in the opinion of
management, uncertainty exists as to the ultimate collection of princi-
pal and interest. For the year ended December 31, 1993, $77,000 would
have been recorded in interest income for loans in nonaccrual status at
December 31, 1993, assuming they had been current in accordance with the
original terms of the loan agreements. Interest received on such loans
is credited directly to income. Interest income of $5,000 was collected
and included in net income for the year ended December 31, 1993, for
loans in nonaccrual status at December 31, 1993.
Included in the nonaccrual category at December 31 were loans
totaling $622,000 to a commercial borrower that was experiencing cash
flow problems. The loans matured in 1992, and no principal or interest
payments had been received since early 1993. Unpaid interest was $55,-
000 as of December 31, 1993. The loans were secured by a commercial
property of the borrower. The Bank foreclosed on the collateral, and
the property was sold in January, 1994. The entire principal amount was
recovered in the sale; however, no interest was received. Another fore-
closed property of the same borrower is being carried in other real
estate at its estimated net realizable value of $300,000 at December 31,
1993. The Corporation charged off a total of $635,000 in 1993 related
to this borrower's loans and ORE properties. Further losses, if any,
are not expected to have a material effect on the Corporation's operat-
ing results, liquidity, or capital resources.
At December 31, 1993, there were no significant loans which are
not disclosed above, where known information about possible credit prob-
lems of borrowers causes management to have serious doubts as to the
ability of the borrower to comply with present loan repayment terms and
which, in management's judgment, may result in disclosure of such loans
in the discussion above. Furthermore, management is not aware of any
potential problem loans, except for those described above, which could
have a material effect on the Corporation's operating results, liquidi-
ty, or capital resources.
Management is not aware of any other factors that would cause
future net loan charge-offs, in total and by loan category, to signifi-
cantly differ from those experienced in the past.
At December 31, 1993, the Corporation's leverage ratio (Tier I
capital to total assets) was 7.68%. Regulatory agencies require a con-
solidated bank holding company to maintain a minimum leverage ratio of
3.00%.
7
<PAGE> 8
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
ALLOWANCE FOR LOAN AND LEASE LOSSES
The following table summarizes loan balances at the end of each
period and daily averages; changes in the allowance for loan and lease
losses arising from loans charged off and recoveries on loans previously
charged off, by loan category; additions to the allowance which have
been charged to expense; and selected ratios.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Average loans and leases
outstanding $327,137 $295,492 $287,388 $265,989 $229,522
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total loans and leases at
period end $328,026 $317,216 $286,896 $286,013 $249,218
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Allowance for loan and lease
losses at beginning of period $4,585 $4,038 $3,545 $3,143 $2,598
Charged off:
Commercial 909 451 909 234 38
Installment 252 473 673 790 243
Lease financing -- 45 -- -- --
------ ------- ------- ------- -------
Total 1,161 969 1,582 1,024 281
Recoveries on loans previously
charged off:
Residential real estate 10 ------ ------ ------ ------
Commercial 183 92 29 50 79
Installment 156 149 171 101 67
------- ------- ------- ------- -------
Total 349 241 200 151 146
------- ------- ------- ------- -------
Net loans charged off 812 728 1,382 873 135
Provision charged to expense 825 1,275 1,875 1,275 680
------- ------- ------- ------- -------
Allowance for loan and lease
losses at end of period $4,598 $4,585 $4,038 $3,545 $3,143
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Ratio of net charge-offs during
the period to average loans
outstanding 0.25% 0.25% 0.48% 0.33% 0.06%
Allowance for loan and lease losses
as a percentage of loans and
leases at period end 1.40% 1.45% 1.41% 1.24% 1.26%
</TABLE>
8
<PAGE> 9
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
In each accounting period, the allowance for loan and lease losses
is adjusted by management to the amount necessary to maintain the allow-
ance at adequate levels. Through its internal loan review department,
management has attempted to allocate specific portions of the allowance
for loan losses based on specifically identifiable problem loans. Mana-
gement's evaluation of the allowance is further based on consideration
of actual loss experience, the present and prospective financial condi-
tion of borrowers, industry concentrations within the portfolio and
general economic conditions. Management believes that the present al-
lowance is adequate, based on the broad range of considerations listed
above.
The primary risk element considered by management with respect to
each installment and residential real estate loan is lack of timely
payment. Management has a reporting system that monitors past due loans
and has adopted policies to pursue its creditor's rights in order to
preserve the Bank's position. The primary risk elements with respect to
commercial loans are the financial condition of the borrower, the suffi-
ciency of collateral, and lack of timely payment. Management has a
policy of requesting and reviewing annual financial statements from its
commercial loan customers and periodically reviews existence of collat-
eral and its value. As evidenced by the table above, in 1993, the pro-
vision for loan and lease losses decreased by $450,000, to $825,000,
compared with a decrease of $600,000, to $1,275,000 in 1992. The prima-
ry reason for the decrease was the continued improvement in the local
economy, and lower levels of nonperforming loans throughout the year.
Although management of the Bank believes that the allowance for
loan and lease losses is adequate to absorb losses as they arise, there
can be no assurance that the Bank will not sustain losses in any given
period which could be substantial in relation to the size of the allow-
ance for loan and lease losses.
RETURN ON EQUITY AND ASSETS
The following table contains selected ratios for the years indi-
cated:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Return on average total assets 0.74% 0.76% 0.71%
Return on average equity 10.11 11.65 11.25
Dividend payout ratio 46.88 37.33 33.44
Average equity to average assets 7.28 6.56 6.34
</TABLE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
The components of fully tax-equivalent net interest income, along
with the average daily balances of the earning assets and interest bear-
ing liabilities, and the average rates earned and paid thereon, for each
of the three years in the period ended December 31, 1993, are presented
on page 31 of the Annual Report of the Corporation, for the year ended
December 31, 1993, and are incorporated by reference herein.
9
<PAGE> 10
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
ITEM 2. PROPERTIES
The Bank leases its main office in the downtown business district
of Mount Clemens. The executive offices of the Corporation are located
in the Corporation - owned Financial Center, in Clinton Township. The
Bank operates 16 branches located in Macomb County, 12 of which are owned
and 4 of which are leased.
ITEM 3. LEGAL PROCEEDINGS
As a depository of funds, the Bank is occasionally named as a
defendant in lawsuits (such as garnishment proceedings) involving claims
to the ownership of funds in particular accounts. All such litigation
is incidental to the Bank's business.
The Corporation's management believes that no litigation is threa-
tened or pending in which the Corporation, or any of its subsidiaries,
is likely to experience loss or exposure which would materially affect
the Corporation's equity, financial position, or liquidity as presented
herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE CORPORATION'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information shown under the caption "Consolidated Financial
Highlights" on page 1 and "Stockholder Information" on page 36 of the
Annual Report of the Corporation, for the year ended December 31, 1993,
is incorporated by reference herein.
ITEM 6. SELECTED FINANCIAL DATA
The information detailed under the captions "Selected Financial
Data" and "Selected Quarterly Financial Information" on pages 28 and 35,
respectively, of the Annual Report of the Corporation, for the year
ended December 31, 1993, is incorporated by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information shown under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on pages
29 through 34 of the Annual Report of the Corporation, for the year
ended December 31, 1993, is incorporated by reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information presented under the captions "Consolidated Balance
Sheets," "Consolidated Statements of Income," "Consolidated Statements
of Changes in Stockholders' Equity," "Consolidated Statements of Cash
Flow," "Notes to Consolidated Financial Statements," "Independent Audi-
tors' Report," and "Selected Quarterly Financial Information" on pages
10 through 27 and page 35 of the Annual Report of the Corporation, for
the year ended December 31, 1993, is incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
10
<PAGE> 11
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information listed under the captions "Election of Directors" on
pages 1 and 2, "Information about Directors and Nominees as Directors" on
pages 3 and 4, and "Compliance with Section 16(a) of the Securities Exchange Act
of 1934" on page 8 of the definitive Proxy Statement of the Corporation dated
March 23, 1994, filed with the Securities and Exchange Commission pursuant to
Regulation 14A, is incorporated by reference herein.
EXECUTIVE OFFICERS
The following is a list of the executive officers of the Corpora-
tion, together with their ages, their present positions, and the posi-
tions that they have held with the Corporation and the Bank during the
past five years. Each of the executive officers of the Corporation has
been employed as an officer or employee of the Corporation or the Bank
for more than the past five years. Executive officers of the Corpora-
tion are elected annually by the Corporation's Board of Directors to
serve for the ensuing year and until their successors are elected and
qualified.
<TABLE>
<CAPTION>
Name and Position Position Held Since Age
----------------- ------------------- ---
<S> <C> <C>
Harold W. Allmacher 54
Vice Chairman, President and Chief Executive Officer
of the Corporation 1987 - present
Chief Executive Officer of the Bank 1986 - present
President of the Bank 1983 - present
Brian P. Kimball 37
Vice President of the Corporation 1990 - present
Executive Officer of the Corporation 1989 - present
Senior Vice President and Senior Loan
Officer of the Bank 1989 - present
Vice President and Senior Loan Officer
of the Bank 1987 - 1989
Paul G. Irwin 30
Vice President of the Corporation 1993 - present
Vice President and Loan Review Officer
of the Bank 1990 - present
Commercial Loan Officer of the Bank 1989 - 1990
Management Trainee of the Bank 1988 - 1989
Richard J. Miller 35
Vice President of the Corporation 1993 - present
Vice President and Controller of the Bank 1991 - present
Treasurer of the Corporation 1989 - present
Acting Controller of the Bank 1989 - 1991
</TABLE>
11
<PAGE> 12
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
ITEM 11. EXECUTIVE COMPENSATION
The information detailed under the captions "Board of Directors
Meetings and Committees" on pages 4 and 5, "Compensation Committee Interlocks
and Insider Participation" on page 5, "Report of the Compensation and Executive
Compensation Committee," on pages 5 and 6, "Summary Compensation
Table" on page 6, "Options granted in 1993", Aggregated Stock Option Exercises
in 1993 and Year End Option Values", and "Supplemental Executive Retirement
Plan" on page 7 of the definitive Proxy Statement of the Corporation dated
March 23, 1994, filed with the Securities and Exchange Commission pursuant to
Regulation 14A, is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information summarized under the caption "Certain transactions" on
page 7 of the definitive proxy statement of the Corporation dated March 23,
1994, filed with the Securities and Exchange Commission pursuant to Regulation
14A, is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information listed under the caption "Certain Transactions" on page 7
of the definitive proxy statement of the Corporation dated March 23, 1994,
filed with the Securities and Exchange Commission pursuant to Regulation 14A,
is incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
1.Financial Statements: (*)
Consolidated Statements of Income - Three Years Ended
December 31, 1993 12
Consolidated Balance Sheets - December 31, 1993 and 1992 10-11
Consolidated Statements of Changes in Stockholders' Equity
Three Years Ended December 31, 1993 13
Consolidated Statements of Cash Flow - Three Years Ended
December 31, 1993 14
Notes to Consolidated Financial Statements 15-26
Independent Auditors' Report 27
</TABLE>
(*) Refers to page number(s) of Annual Report of the Corporation for
the year ended December 31, 1993 at which the named item is
located, and from which it is incorporated by reference into this
Report.
12
<PAGE> 13
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
2.Schedules:
All schedules are omitted because they are inapplicable, not required,
or the information is included in the financial statements or notes
thereto.
3.Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
(3)(a) Certificate of Incorporation of the
Corporation is incorporated by reference
to exhibit (3)(a) to the Corporation's
Annual Report on Form 10-K for its fiscal
year ended December 31, 1987
(3)(b) By-Laws of the Corporation are incorporated
by reference to exhibit (4)(d) to the
Corporation's registration statement on
Form S-2 (registration number 33-29570)
as filed with the Securities and Exchange
Commission on June 28, 1989, regarding
its 9% Convertible Subordinated Debentures
due July 15, 2004.
(10)(a) 1988 Incentive Stock Option Plan is
incorporated by reference to exhibit (10)
to the Corporation's Annual Report on
Form 10-K for its fiscal year ended
December 31, 1988.
(10)(b) Sale and leaseback agreement dated
March 27, 1990 is incorporated by
reference to exhibit (10)(a) to the
Corporation's Form 10-K for its fiscal
year ended December 31, 1989
(10)(c) First National Bank in Macomb County
Supplemental Executive Retirement Plan
dated March 28, 1990, and amendment to
Plan dated August 28, 1991, are
incorporated by reference to exhibit (10)
(c) to the Corporation's Form 10-K for
its fiscal year ended December 31, 1991
(10)(d) First National Bank Corp. 1992 Stock Option
Plan for Nonemployee Directors, dated
February 26, 1992, is incorporated by
reference to exhibit (10)(d) to the
Corporation's Form 10-K for its fiscal
year ended December 31, 1992
(11) Statement of Computation of Per Share
Earnings
(13) Annual Report of the Registrant to its
Stockholders for the year ended December
31, 1993
(21) Subsidiaries of the Registrant
</TABLE>
13
<PAGE> 14
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
<TABLE>
<S> <C>
(23) Consent of Independent Auditors regarding
material incorporated by reference in a
previously filed registration statement
under the Securities Act of 1933
(99) Proxy Statement of the Corporation dated
March 23, 1994
</TABLE>
(b) Reports on Form 8-K
The Corporation has not filed any reports on Form 8-K during the
last quarter of the period covered by this Report.
14
<PAGE> 15
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securi-
ties Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized in
the Charter Township of Clinton, State of Michigan, on the 23rd day
of March, 1994.
FIRST NATIONAL BANK CORP.
S/ ARIE GULDEMOND
------------------------
Arie Guldemond, Chairman
S/ HAROLD W. ALLMACHER
--------------------------------------
Harold W. Allmacher, Vice Chairman,
President and Chief Executive Officer
(Principle Executive Officer)
S/ RICHARD J. MILLER
------------------------------------------
Richard J. Miller, Treasurer
(Principle Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following Directors, in the
capacities indicated on March 23, 1994.
S/ RAYMOND M. CONTESTI S/ DAVID A. MCKINNON
- ----------------------------- ---------------------------
Raymond M. Contesti, Director David A. McKinnon, Director
S/ JAMES T. CRESSWELL
- ----------------------------- ---------------------------
James T. Cresswell, Director Robert D. Morrison, Director
S/ CELESTINA GILES S/ JOHN J. MULSO
- ----------------------------- ---------------------------
Celestina Giles, Director John J. Mulso, Director
S/ FRANK E. JEANNETTE S/ GLEN D. SCHMIDT
- ----------------------------- ---------------------------
Frank E. Jeannette, Director Glen D. Schmidt, Director
15
<PAGE> 16
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
EXHIBIT INDEX
The following constitute the exhibits to the Annual Report on Form
10-K of the Corporation for the fiscal year ended December 31, 1993:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------ -------
<S> <C>
(3)(a) Certificate of Incorporation of the Corporation
is incorporated by reference to exhibit (3)(a)
of the Corporation's Annual Report on Form
10-K for its fiscal year ended December 31, 1987
(3)(b) By-Laws of the Corporation are incorporated by
reference to exhibit (4)(d) to the Corporation's
registration statement on Form S-2 (registration
number 33-29570) as filed with the Securities and
Exchange Commission on June 28, 1989, regarding
its 9% Convertible Subordinated Debentures due
July 15, 2004
(10)(a) 1988 Incentive Stock Option Plan is incorporated by
reference to exhibit (10) to the Corporation's Annual
Report on Form 10-K for its fiscal year ended
December 31, 1988
(10)(b) Sale and leaseback agreement dated March 27, 1990, is
incorporated by reference to exhibit (10)(a) to the
Corporation's Form 10-K for its fiscal year ended
December 31, 1989
(10)(c) First National Bank in Macomb County Supplemental
Executive Retirement Plan dated March 28, 1990, and
amendment to Plan dated August 28, 1991, are
incorporated by reference to exhibit 10(c) to the
Corporation's Form 10-K for its fiscal year ended
December 31, 1991
(10)(d) First National Bank Corp. 1992 Stock Option Plan for
Nonemployee Directors, dated February 26, 1992, is
incorporated by reference to exhibit 10(d) to the
Corporation's Form 10-K for its fiscal year ended
December 31, 1992
(11) Statement of Computation of Per Share Earnings
(13) Annual Report of the Registrant to its Stockholders
for the year ended December 31, 1993
(21) Subsidiaries of the Registrant
</TABLE>
16
<PAGE> 17
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
<TABLE>
<S> <C>
(23) Consent of Independent Auditors regarding material
incorporated by reference in a previously filed
registration statement under the Securities Act of 1933
(99) Proxy Statement of the Corporation dated March 23, 1994
</TABLE>
17
<PAGE> 1
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
EXHIBIT 11
Statement of Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- --------------------
PRIMARY EARNINGS PER SHARE: 1993 1992 1993 1992
- -------------------------- ----------- -------- -------- --------
<S> <C> <C> <C> <C>
INCOME BEFORE CUMULATIVE EFFECTS
OF ACCOUNTING CHANGES 1,234,362 951,872 4,604,845 3,123,162
/WEIGHTED AVERAGE SHARES 2,349,161 1,843,337 2,137,304 1,816,711
- ----------------------------------- --------- --------- --------- ---------
PER SHARE $0.53 $0.52 $2.15 $1.72
- ----------------------------------- --------- --------- --------- ---------
CUMULATIVE EFFECTS OF
ACCOUNTING CHANGES -------- -------- (1,183,000) 231,000
/WEIGHTED AVERAGE SHARES 2,349,161 1,843,337 2,137,304 1,816,711
- ----------------------------------- --------- --------- --------- ---------
PER SHARE $0.00 $0.00 ($0.55) $0.13
- --------------------------------- ----- ----- ------ -----
PRIMARY NET INCOME PER SHARE $0.53 $0.52 $1.60 $1.85
----- ----- ------ -----
----- ----- ------ -----
FULLY DILUTED EARNINGS PER SHARE:
- ---------------------------------
INCOME BEFORE CUMULATIVE EFFECTS
OF ACCOUNTING CHANGES 1,234,362 1,037,003 4,757,133 3,483,484
/WEIGHTED AVERAGE SHARES 2,349,264 2,266,016 2,335,328 2,275,106
- ----------------------------------- --------- --------- --------- ---------
PER SHARE $0.53 $0.46 $2.04 $1.53
CUMULATIVE EFFECTS OF
ACCOUNTING CHANGES -------- -------- (1,183,000) 231,000
/WEIGHTED AVERAGE SHARES 2,349,264 2,266,016 2,335,328 2,275,106
- ----------------------------------- --------- --------- --------- ---------
PER SHARE $0.00 $0.00 ($0.51) $0.10
- --------------------------------- ----- ----- ------ -----
FULLY DILUTED NET INCOME PER SHARE $0.53 $0.46 $1.53 $1.63
----- ----- ------ -----
----- ----- ------ -----
</TABLE>
Notes:
- Primary and fully diluted shares are adjusted for the potential dilutive
effects of equity contracts and stock options, where applicable.
- Fully diluted earnings per share are adjusted for the potential dilutive
effects of convertible debt, where applicable, which includes elimination
of any related after-tax interest expense.
- Numbers of shares in each category are adjusted to give effect to the 1993
5% stock dividend, and the 1993 4-for-3 stock split.
18
<PAGE> 1
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
EXHIBIT 13
Annual Report of the Registrant to its Stockholders
for the year ended December 31, 1993
19
<PAGE> 2
ANNUAL
1993 ANNUAL REPORT
FNBC
FIRST NATIONAL BANK CORP.
<PAGE> 3
FIRST NATIONAL BANK CORP.
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------
1993 1992 Change
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net interest income (including loan fees) $21,121,882 $18,213,617 16.0%
Provision for loan and lease losses 825,000 1,275,000 (35.3)
Noninterest income 3,798,922 3,834,022 (0.9)
Noninterest expense 18,167,959 17,347,477 4.7
Cumulative effects of changes in accounting principles (1,183,000) 231,000 N.M.
Net income 3,421,845 3,354,162 2.0
- ------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE (1)
Primary income before cumulative effects of changes
in accounting principles $2.15 $1.72 25.0%
Primary net income 1.60 1.85 (13.5)
Fully diluted income before cumulative effects of
changes in accounting principles 2.04 1.53 33.3
Fully diluted net income 1.53 1.63 (6.1)
Cash dividends 0.74 0.71 4.2
Book value, end of period 16.10 16.43 (2.0)
Market value (2) 22.75 18.75 21.3
- ------------------------------------------------------------------------------------------------------------------
AT YEAR END
Total assets $484,332,777 $453,621,626 6.8%
Total securities 87,572,300 83,005,869 5.5
Total loans and lease financing 328,025,619 317,215,680 3.4
Deposits 440,051,495 410,936,118 7.1
Stockholders' equity 37,272,367 29,409,199 26.7
Shares outstanding (1) 2,315,671 1,790,488 29.3
- ------------------------------------------------------------------------------------------------------------------
AVERAGE BALANCES
Total assets $465,241,735 $438,937,127 6.0%
Total securities 84,587,447 94,558,513 (10.5)
Total loans and lease financing 327,137,063 295,491,975 10.7
Deposits 420,994,293 395,229,723 6.5
Stockholders' equity 33,855,196 28,794,095 17.6
Weighted average shares outstanding (1) 2,102,602 1,769,337 18.8
- ------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Return on average total assets 0.74% 0.76% (2.6%)
Return on average equity 10.11 11.65 (13.2)
Tier I capital to risk-based assets 10.55 8.63 22.2
Total capital to risk-based assets 11.80 12.35 (4.5)
Average equity to average assets 7.28 6.56 11.0
Dividend payout ratio 46.88 37.33 25.6
- ------------------------------------------------------------------------------------------------------------------
OTHER
Number of employees (full time equivalent) 244 247 (1.2%)
Number of stockholders 1,284 1,232 4.2
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Restated for 5% stock dividend and 4-for-3 stock split during 1993
(2) Source: The Nasdaq Stock Market
N.M. Not meaningful
[GRAPH] [GRAPH] [GRAPH] [GRAPH]
1
<PAGE> 4
FIRST NATIONAL BANK CORP.
DEAR SHAREHOLDERS:
1993 WAS AN OUTSTANDING YEAR for First National Bank Corp. We posted record
earnings, improved key ratios, increased the dividend payout, strengthened our
balance sheet, increased stockholders' equity and raised core deposits.
Additionally, we developed noticeably as a cohesive team with renewed purpose
and ability to serve our customers.
OUR EARNINGS HIT A RECORD HIGH -- reaching $3,422,000, or $1.53 per share on a
fully diluted basis, compared with $3,354,000, or $1.63 per share in 1992. This
was accomplished despite a one-time charge of $1,183,000 for the cumulative
effect of a change in accounting principle related to postretirement health
benefit expenses. The 1992 results benefited from a one-time credit of $231,000
for an accounting change related to income taxes.
Based on the strong performance and positive outlook, the Board of Directors
increased the dividend payout to $.74 per share, and authorized the payment of
our sixth consecutive 5% stock dividend. Our stock price aptly reflected this
strong performance, rising 21%, to $22.75 at the close of the year, from an
opening price of $18.75, adjusted for November's four-for-three stock split.
OUR KEY RATIOS moved in a positive direction as a result of concerted efforts
by management. Noninterest expense increased by less than 5%. Return on
average assets rose to 0.99%, from 0.71%, when accounting changes are
discounted. Our net interest margin increased by 32 basis points to 5.29%.
We saw noteworthy accomplishments over and above the excellent operating
results.
First, we opened a full service branch in Romeo, Michigan. At 2,700 square
feet, the branch is among our largest and most efficient.
We completed expansion and renovations of two branches. Our Harper branch --
one of our busiest -- underwent a complete transformation. The Clemens Center
branch, likewise, was expanded and totally remodeled.
On the subject of marketing, we formally adopted "Making Your Life Easier" as
our marketing themeline. The themeline appears in ads, and on brochures,
mailers, signs and specialty items.
We customarily launch one or two new products each year. In 1993 we began
marketing a new commercial lease product for the public sector and businesses
of all sizes. The new commercial lease program is designed for manufacturing
equipment, large computer systems or to aid a municipality in acquiring a
capital item such as a fire truck.
A LOOK AT 1994 We fully expect the Macomb County economy to continue its
robust growth with strong loan demand. We should be aided by substantially
flat interest rates, enabling us to maintain, or improve, net interest margins.
NEW BRANCH RENOVATIONS. In response to customer demand, we are planning to
expand the Chesterfield branch by adding two additional drive-up lanes. The
Chesterfield branch is extremely popular among customers. Volume there has
nearly overwhelmed our service capabilities in the short time that the branch
has been open. Subsequent to year-end, we completed floor-to-ceiling remodeling
of the North Avenue branch, which serves downtown Mount Clemens.
NEW PRODUCTS. 1994 is off to a successful start. We have introduced a new
Increasing Rate CD which guarantees holders four interest rate increases over a
two-year term. The CD was introduced to respond to depositors' concerns about
lower-interest rate payouts on long-term CDs. 1994 will see our first offering
of mutual funds and annuities for customers who seek investment alternatives to
CDs. These products will enable us to generate fees from funds which otherwise
would be lost to brokerage firms. A third marketing push for 1994 will be a
Loan-By-Phone campaign, aimed at boosting consumer loan volume.
1994 ANOTHER PROFITABLE YEAR We feel we have positioned our assets --
financial, facilities and people -- to take full advantage of the positive
trends. Our focus will be on building core deposits, continuing to improve
asset quality, ongoing monitoring and management of costs -- particularly
noninterest expense and the aggressive fostering of a customer oriented sales
culture. We fully expect our marketshare to improve and 1994 earnings growth to
equal -- or to exceed -- 1993's performance.
On behalf of the Board of Directors, we extend our sincere thanks to our
employees for their dedication and extraordinary efforts during the past year
and commitment to the coming year. We also extend our thanks to you, our
shareholders, for your continued support, confidence and trust.
/s/ ARIE GULDEMOND /s/ HAROLD W. ALLMACHER
Arie Guldemond Harold W. Allmacher
Chairman of the Board Vice Chairman,
President & CEO
2
<PAGE> 5
FIRST NATIONAL BANK CORP.
Full page - First National Bank provides construction and mortgage loans for a
new subdivision in Clinton Township. Marcello Iannucci, President and owner of
Suncrest Homes, Inc. and David Girodat, FNB's Vice President and Regional
Commerical Loan Officer, inspect a home under construction.
Right - Mitchell Buick Honda will relocate its dealership to a new showroom next
to FNB's Hall Road Financial Center. Talking about the move are Jerry Tsudis,
Co-owner of Mitchell Buick Honda; FNB Vice President & Commercial Loan Division
Manager Andrew Tassopoulos; and Gordon (Ky) Voog, Co-owner of Mitchell Buick
Honda.
Left - Boating is big business in Macomb County. Michael Lambert, President and
owner of Land's End Marina in Harrison Township, talks about the busy boating
season with FNB Assistant Vice President - Consumer Lending Sam Millard.
[Photos]
3
<PAGE> 6
FIRST NATIONAL BANK CORP.
MACOMB COUNTY -- GOLDEN ERA OF GROWTH
THE LIST OF COMPANIES moving to -- or expanding in -- Macomb County reads like
a who's who of corporate America: Chrysler Corporation, Ford Motor Company,
Home Depot, Target, Fretter, Inc., F & M Discount Stores, DuPont Corporation,
TRW, Bendix, Kmart and AMP Industries, to name a few. American companies
invested more than $2.2 billion in Macomb County between 1990 and 1992.
Growth isn't limited to U.S. firms either. Seven major Canadian firms opened
plants in Macomb County during last year alone. Canadian firms are discovering
what their U.S. counterparts have known for years: Macomb County is one of the
midwest's best places to do business.
THE HEARTY NATURE of Macomb's business economy translates directly into jobs,
high employment and a financially-sound consumer segment among the county's
717,000 residents. Median household income is about $39,000, and median family
income exceeds $44,000. "That means strong, growing loan demand for homes,
cars, boats and other consumer items," notes FNB President and CEO, Harold W.
Allmacher.
FIRST NATIONAL BANK is an integral part of the county's continuous growth and
success. In fact, FNB plays a leadership role in Macomb's planned growth. Mr.
Allmacher is the chairman of the Macomb County Community Growth Alliance -- a
quasipublic organization which plans, nurtures and oversees Macomb's growth.
Numerous FNB board members, officers, and managers are members of similar
organizations.
Commercial banking for small and medium-sized companies is one of FNB's
principal market niches, and accounts for close to 50% of our deposit and
lending activities. Among the bank's better-known local customers in this
category are: Bavarian Village Ski Shops, Bill Lee Oldsmobile, Mitchell Buick,
Concord Tool Co., Clover Tool Co. Inc., Greystone Golf Course, C.J. Barrymores,
Mirage Banquet Hall and Trinity Land Development. Further, FNB counts most of
the county's municipalities among its clients.
A unique facet of Macomb County's extraordinary growth is that progress seems
to be everywhere -- not just pockets of building and economic activity. Look
out any window of FNB's Financial Center at Romeo Plank and Hall Road to see
the future coming. Hall Road is undergoing a massive transformation, as some
$200 million is being invested to widen the road to six to eight lanes over a
12-mile section, running nearly the width of the county.
Hall Road aptly has been designated the "Golden Corridor," because of the
tremendous growth it has spawned along its route. In addition to hundreds of
stores at the upscale, always-busy Lakeside Mall, current or planned Hall Road
retailers include Kmart, Builders' Square, Meijer's, Target, Sports Authority,
Office Max, PetCare Superstore, Best Buy and Home Quarters.
WHY MACOMB COUNTY? "Planning is the key," says Mr. Allmacher. "The foundation
for today's growth was set more than a decade ago, by far-sighted
organizations like the Macomb County Board of Commissioners and Community
Growth Alliance, in concert with the local Chambers and other business and
community groups.
"FNB participated actively in this planning over the past 15 to 20
years. The success of our Branch network relates directly to the data and
business forecast models generated by these groups. FNB and a lot of other
companies were able to see exactly where commercial and consumer development
would take place.
"WE STRATEGICALLY positioned our branches to serve those growing needs. A lot
of companies -- us included-- who believed in long-range planning and kept
their eyes to the horizon are years ahead of competition because of the
farsightedness," Mr. Allmacher concludes.
4
<PAGE> 7
FIRST NATIONAL BANK CORP.
Full page - Harold W. Allmacher, Vice Chairman, President & CEO; Arie Guldemond,
Chairman of the Board
Left - the new Romeo Branch is one of FNB's largest and most efficient. The
new Branch team includes Gabe Makhlouf, Assistant Vice President & Romeo
Regional Loan Officer; Nancy Christian, Vice President - Branch Administration &
Bank Operations; and Mary Berckley, Branch Manager.
Right - The busy Harper Branch was expanded and completely renovated in 1993.
Seated is Genie Watters, FNB Teller and Pete Batistoni, Harper Branch Officer.
[Photos]
5
<PAGE> 8
FIRST NATIONAL BANK CORP.
FNB: COMMUNITY INVOLVEMENT
COMMUNITY COMMITMENT
WHY IS FNB SO INVOLVED in community activities? FNB President and CEO Harold W.
Allmacher: "Community banking only works when employees, directors, and bank
officers play a leadership role in the community. Involvement is the foundation
to building a solid reputation for integrity, competence, commitment and
personal service."
First National Bank is REALLY involved in the communities it serves with
hands-on active participation on boards or advisory committees of about 60
community groups and financial support for another 50 organizations. The
interests cover the gamut: Chambers of Commerce, The Art Center, Friends of the
Clinton River, Macomb YMCA, Cancer Society, educational institutions, sports
organizations, Operation Headstart, Boy Scouts of America, AMVETS, and Macomb
County Historical Society.
FNB IS BEST KNOWN for its sponsorship of six key community events and programs:
FOURTH OF JULY FIREWORKS DISPLAY -- The annual July 4th fireworks is Macomb
County's biggest, brightest, noisiest fun event. Enjoyed by an estimated
100,000 people each year, the fireworks spectacular is second only to the
International Fireworks Display held about 25 miles south in downtown Detroit.
SANTA CLAUS PARADE -- The Mount Clemens Santa Claus Parade attracts kids young
and old from across Macomb and adjoining counties. FNB rescued the
financially-troubled parade by assuming sponsorship in 1989 and has kept things
going and growing ever since. This year, FNB was joined by co-sponsor Mount
Clemens General Hospital to create the largest parade to date. Scores of
officials and dignitaries -- including Santa himself -- and 120 parade groups
dance, prance, walk and roll through downtown Mount Clemens. The parade is
broadcast on area cable television as well. Last year's parade marked the first
appearance of papier mache characters.
MACOMB YMCA CORPORATE OLYMPICS -- FNB serves on the board of the Macomb YMCA
and has been a major co-sponsor of the Y's annual community-wide Health and
Fitness contest.
CLASSICS & KEEPSAKES is a popular Mount Clemens summer event. The city-wide
weekend of activities attended by thousands includes more than a dozen
different events: Classic Car Exhibit, Antique Boat Show, History Fair, Antique
Fashion Show, Historic Home Tour, Restoration Workshops and more.
THE MOUNT CLEMENS ART CENTER -- FNB is actively involved with the Art Center as
a member of its Board of Trustees and Chair of Corporate Development. FNB
sponsors and supports exhibits and several key events each year on behalf of
the Art Center. These include the Michigan Annual Holiday Fair and Have A Heart
annual fund raising extravaganza.
MEALS ON WHEELS -- Several teams of FNB employees have been involved with
Holiday Home Delivery of Meals on Wheels since 1990. This important program
provides a hot meal and snack for hundreds of home-bound senior citizens on
Easter, the Fourth of July, Thanksgiving and Christmas.
FNB'S COMMUNITY INVOLVEMENT also extends to other important arenas: During
1993, the bank sponsored nine seminars and workshops for low- and
moderate-income home buyers and aspiring business entrepreneurs.
[photo]
FNB's close ties to the community have resulted in many valuable
relationships with prominent citizens. During 1993, the Bank received the
second of two gifts from the Estate of James E. Neely, a former stockholder and
director. Mr. Neely's generosity epitomizes the respect that our bank
generates among the community. He provided all of us with a reminder that our
community involvement is an inseparable part of our existence. Mr. Neely was
President of the Armada State Bank, which merged with FNB in 1970, and served
on our Board of Directors from 1975 until his retirement in 1983. Mr. Neely is
fondly remembered for his service and dedication to FNB and to the community.
6
<PAGE> 9
FIRST NATIONAL BANK CORP.
Full page - FNB is the principal sponsor of the annual Santa Claus Parade.
Santa's helpers are:
Ralph LaGro, Mount Clemens General Hospital President & CEO; Mark "Doc" Andrews
of WKQI Q95-FM, the Parade's M.C.; John Torre, FNB Marketing Director, as
Pinnochio; Harold W. Allmacher, FNB President & CEO.; and Michelle Semple,
Mount Clemens General Hospital Media and Community Relations Coordinator,
as Santa's elf.
Left - The Art Center in downtown Mt. Clemens is one of more than 100 community
organizations supported by FNB. Andrew Tassopoulos, FNB Vice President &
Commercial Loan Division Manager is a member of The Art Center Board. Shown
with him getting ready for a new exhibit is The Art Center's Executive
Director Jo-Anne Wilke.
Right - Commitment and investment are making downtown Mt. Clemens a showcase for
urban revitalization. Principals of Mt. Clemens success include Harold W.
Allmacher, FNB President and CEO; Gebran S. Anton, Mt. Clemens-based real esate
developer; and Ralph Leach, President and owner of the Art-O-Craft store.
[Photos]
7
<PAGE> 10
FIRST NATIONAL BANK CORP.
BOARD OF DIRECTORS
[Photos]
8
<PAGE> 11
[Photos]
Robert D. Morrison
Retired Dentist
Frank E. Jeannette
Attorney
John J. Mulso
Retired Undersheriff
Macomb County
Sheriff's Dept.
Celestina Giles
Bank Officer
Executive Department
Raymond M. Contesti
Superintendent, Clintondale
Community Schools
David A. McKinnon
Attorney
Glen D. Schmidt
President
International Star Corporation
James T. Cresswell
President
Oakland General Underwriters
9
<PAGE> 12
FIRST NATIONAL BANK CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------------------------
Assets 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and due from banks (Note 2) $25,382,444 $24,389,706
Federal funds sold 22,900,000 9,700,000
- -----------------------------------------------------------------------------------------------
Cash and Cash Equivalents 48,282,444 34,089,706
- -----------------------------------------------------------------------------------------------
Securities available for sale (Note 3) 7,506,395 5,061,088
Investment securities - at amortized cost (market value of
$82,355,000 in 1993 and $80,230,000 in 1992)(Note 3)
United States Treasury 9,229,318 9,424,009
United States Government agencies 37,117,468 31,437,433
Municipal obligations 33,161,969 36,524,589
Other securities 557,150 558,750
- -----------------------------------------------------------------------------------------------
Total Investment Securities 80,065,905 77,944,781
- -----------------------------------------------------------------------------------------------
Loans and Leases (Note 5)
Residential real estate 60,361,529 65,437,839
Commercial 212,035,383 195,133,213
Installment 55,628,707 56,495,469
Lease financing ---- 149,159
- -----------------------------------------------------------------------------------------------
Total Loans and Leases 328,025,619 317,215,680
Allowance for loan and lease losses (Note 6) (4,597,547) (4,585,032)
- -----------------------------------------------------------------------------------------------
Net Loans and Leases 323,428,072 312,630,648
- -----------------------------------------------------------------------------------------------
Property and equipment (net of depreciation)(Note 7) 15,595,828 14,709,269
Accrued interest receivable 2,600,192 2,640,537
Other real estate 3,289,714 3,440,562
Other assets 3,564,227 3,105,035
- -----------------------------------------------------------------------------------------------
Total Assets $484,332,777 $453,621,626
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
FIRST NATIONAL BANK CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
- ----------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Deposits
Demand
Noninterest bearing $76,343,088 $68,279,153
Interest bearing 121,543,868 126,151,330
Savings 88,466,900 82,859,540
Time 153,697,639 133,646,095
- ----------------------------------------------------------------------------------------------
Total Deposits 440,051,495 410,936,118
- ----------------------------------------------------------------------------------------------
Short term borrowings 1,100,000 944,360
Other liabilities 5,908,915 3,983,949
Long term debt (Note 8) ---- 8,348,000
- ----------------------------------------------------------------------------------------------
Total Liabilities 447,060,410 424,212,427
- ----------------------------------------------------------------------------------------------
Stockholders' Equity (Note 9)
Common stock - $3.125 par value; 8,000,000 shares authorized;
2,315,671 shares issued and outstanding in 1993;
1,303,520 shares issued and 1,278,920 shares
outstanding in 1992 7,236,472 4,073,500
Additional paid-in capital 15,658,658 11,034,426
Retained earnings 14,377,237 14,899,574
Treasury stock - 24,600 shares in 1992 ---- (598,301)
- ----------------------------------------------------------------------------------------------
Total Stockholders' Equity 37,272,367 29,409,199
- ----------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $484,332,777 $453,621,626
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 14
FIRST NATIONAL BANK CORP.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------
1993 1992 1991
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest Income
Loans and leases (including fees) $27,160,470 $26,089,028 $29,691,092
Securities
Securities available for sale (Note 3) 370,646 -------- --------
United States Treasury 545,310 741,367 460,184
United States Government agencies 1,934,201 2,573,888 3,315,943
Municipal obligations 2,114,586 2,731,931 2,869,966
Other securities 33,279 38,100 71,998
Federal funds sold 244,347 98,133 183,952
- -----------------------------------------------------------------------------------------------
Total Interest Income 32,402,839 32,272,447 36,593,135
- -----------------------------------------------------------------------------------------------
Interest Expense
Deposits 10,973,681 13,172,775 18,664,898
Federal funds purchased 13,789 33,849 79,306
Short term borrowings 42,651 51,734 84,656
Long term debt 250,836 800,472 888,021
- -----------------------------------------------------------------------------------------------
Total Interest Expense 11,280,957 14,058,830 19,716,881
- -----------------------------------------------------------------------------------------------
Net Interest Income 21,121,882 18,213,617 16,876,254
Provision for loan and lease losses (Note 6) 825,000 1,275,000 1,875,000
- -----------------------------------------------------------------------------------------------
Net Interest Income after Provision
for Loan and Lease Losses 20,296,882 16,938,617 15,001,254
- -----------------------------------------------------------------------------------------------
Noninterest Income
Service charges on deposit accounts 2,790,213 2,429,838 2,182,376
Net security gains (losses) (Notes 3, 11) (1,259) 638,621 262,363
Other income (Note 4) 1,009,968 765,563 2,124,127
- -----------------------------------------------------------------------------------------------
Total Noninterest Income 3,798,922 3,834,022 4,568,866
- -----------------------------------------------------------------------------------------------
Noninterest Expense
Salaries, benefits, and payroll taxes (Note 13) 7,758,181 7,299,948 6,737,661
Occupancy 1,716,431 1,766,465 1,511,227
Equipment 1,557,941 1,678,850 1,527,346
Other operating expense (Note 10) 7,135,406 6,602,214 6,451,625
- -----------------------------------------------------------------------------------------------
Total Noninterest Expense 18,167,959 17,347,477 16,227,859
- -----------------------------------------------------------------------------------------------
Income Before Taxes and Cumulative Effects
of Changes in Accounting Principles 5,927,845 3,425,162 3,342,261
Income tax expense (Note 11) 1,323,000 302,000 335,000
- -----------------------------------------------------------------------------------------------
Income Before Cumulative Effects of Changes
in Accounting Principles 4,604,845 3,123,162 3,007,261
Cumulative effects of changes in accounting
principles (Notes 11, 13) (1,183,000) 231,000 ----
- ----------------------------------------------------------------------------------------------
Net Income $3,421,845 $3,354,162 $3,007,261
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Per share data (Note 9):
Primary Income Before Cumulative
Effects of Changes in Accounting Principles $2.15 $1.72 $1.70
Cumulative effects of changes in
accounting principles (0.55) 0.13 ----
Primary Net Income $1.60 $1.85 $1.70
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Fully Diluted Income Before Cumulative
Effects of Changes in Accounting Principles $2.04 $1.53 $1.50
Cumulative effects of changes
in accounting principles (0.51) 0.10 ----
Fully Diluted Net Income $1.53 $1.63 $1.50
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Cash Dividends $0.74 $0.71 $0.57
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 15
FIRST NATIONAL BANK CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Retained Treasury Stockholders'
Stock Capital Earnings Stock Equity
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1991 $3,777,456 $9,159,123 $13,598,403 ($1,016,411) $25,518,571
Net income for 1991 -------- -------- 3,007,261 -------- 3,007,261
Cash dividends paid - $0.57 per share -------- -------- (1,005,680) -------- (1,005,680)
Stock dividend (44) (229) (971,625) 960,228 (11,670)
Employee Stock Ownership Plan
loan guarantee (Note 13) -------- -------- 148,803 -------- 148,803
Repurchase of 24,849 common shares -------- -------- -------- (527,066) (527,066)
Conversion of debentures (Note 8) 17,606 97,384 -------- -------- 114,990
Exercise of equity contracts (Note 9) 7,447 42,548 -------- -------- 49,995
Exercise of stock options (Note 13) 8,663 50,242 (58,889) -------- 16
Bequest from Estate (Note 9) -------- 211,684 -------- -------- 211,684
- --------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1991 3,811,128 9,560,752 14,718,273 (583,249) 27,506,904
Net income for 1992 -------- -------- 3,354,162 -------- 3,354,162
Cash dividends paid - $0.71 per share -------- -------- (1,251,943) -------- (1,251,943)
Stock dividend 45,447 281,771 (1,310,236) 974,264 (8,754)
Employee Stock Ownership Plan
loan guarantee (Note 13) -------- -------- (510,586) -------- (510,586)
Repurchase of 41,600 common shares -------- -------- -------- (989,316) (989,316)
Conversion of debentures (Note 8) 154,184 826,586 -------- -------- 980,770
Exercise of equity contracts (Note 9) 50,100 277,844 -------- -------- 327,944
Exercise of stock options (Note 13) 12,641 87,473 (100,096) -------- 18
- --------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1992 4,073,500 11,034,426 14,899,574 (598,301) 29,409,199
Net income for 1993 -------- -------- 3,421,845 -------- 3,421,845
Cash dividends paid - $0.74 per share -------- -------- (1,604,221) -------- (1,604,221)
Stock dividend 84,575 646,152 (1,810,117) 1,068,517 (10,873)
Stock split 1,704,862 (2,609,092) -------- 894,153 (10,077)
Employee Stock Ownership Plan
loan guarantee (Note 13) -------- -------- (432,161) -------- (432,161)
Repurchase of 50,044 common shares -------- -------- -------- (1,364,369) (1,364,369)
Conversion of debentures (Note 8) 928,683 4,216,113 -------- -------- 5,144,796
Exercise of equity contracts (Note 9) 424,636 2,146,527 -------- -------- 2,571,163
Exercise of stock options (Note 13) 20,216 110,817 (97,683) -------- 33,350
Bequest from Estate (Note 9) -------- 113,715 -------- -------- 113,715
- --------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 1993 $7,236,472 $15,658,658 $14,377,237 -------- $37,272,367
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 16
FIRST NATIONAL BANK CORP.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,421,845 $ 3,354,162 $ 3,007,261
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan and lease losses 825,000 1,275,000 1,875,000
Depreciation expense 1,202,834 1,205,500 1,054,374
Gain on sale of property and equipment (34,583) (62,500) (205,894)
Decrease (increase) in net deferred income taxes 103,000 (505,000) (398,000)
Net amortization of security premiums 1,201,026 910,572 565,682
Net security losses (gains) 1,259 (638,621) (262,363)
Decrease in interest receivable 40,345 301,419 126,300
Decrease in interest payable (265,990) (586,618) (440,040)
Decrease (increase) in other assets (914,956) 794,506 (1,621,444)
Increase (decrease) in other liabilities 1,758,795 (176,393) (165,289)
- -----------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 7,338,575 5,872,027 3,535,587
- -----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sales of securities -- 26,682,211 17,971,855
Proceeds from maturities and calls of securities 22,565,078 25,830,267 19,064,330
Purchases of securities (28,799,450) (43,400,686) (41,645,623)
Net decrease (increase) in residential real
estate loans 5,086,310 (1,931,764) 2,251,910
Net increase in commercial loans (17,162,552) (33,387,660) (14,262,532)
Net decrease in installment loans 770,315 4,087,764 9,653,049
Net decrease in lease financing 149,159 183,485 93,655
Purchases of property and equipment (2,089,393) (2,344,535) (4,735,385)
Proceeds from sales of property and equipment 34,583 141,400 708,090
- -----------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (19,445,950) (24,139,518) (10,900,651)
- -----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net increase (decrease) in noninterest
bearing demand deposits 8,063,935 8,261,254 (9,193,986)
Net increase (decrease) in interest bearing
demand deposits (4,607,462) 26,667,030 16,092,188
Net increase in savings deposits 5,607,360 14,132,927 4,173,026
Net increase (decrease) in time deposits 20,051,544 (20,198,261) 1,216,319
Net increase (decrease) in short term borrowings 155,640 (155,640) (1,053,625)
Cash dividends (1,604,221) (1,251,943) (1,005,680)
Repurchase of common stock (1,364,369) (989,316) (527,066)
Payments for fractional shares (22,353) (9,022) (11,670)
Proceeds from exercise of equity
contracts and stock options 183,324 60,000 --
Cash paid for debt and equity
contract redemption (277,000) -- --
Repurchase of debentures -- -- (138,000)
Bequest from estate (Note 9) 113,715 -- 211,684
- -----------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 26,300,113 26,517,029 9,763,190
- -----------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 14,192,738 8,249,538 2,398,126
Cash and Cash Equivalents at the Beginning
of the Year 34,089,706 25,840,168 23,442,042
- -----------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at the End of
the Year $ 48,282,444 $ 34,089,706 $ 25,840,168
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Total interest paid $ 11,546,947 $ 14,645,448 $ 20,156,921
- -----------------------------------------------------------------------------------------------------
Total income taxes paid $ 1,269,000 $ 880,000 $ 365,000
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE> 17
FIRST NATIONAL BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of First National Bank Corp. (the
Corporation) are in conformity with generally accepted accounting principles.
The following summarizes the more significant policies.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements of the
Corporation include the accounts of First National Bank Corp. (separately, the
Parent) and its wholly owned subsidiaries, First National Bank in Macomb County
(the Bank) and Bankers Fund Life Insurance Co.
All material intercompany accounts and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flow, cash and cash
equivalents include cash on hand, amounts due from banks, and federal funds
sold. Generally, federal funds are purchased or sold for one day periods.
SECURITIES: Investment securities for which management has the intent and the
Corporation has the ability to hold to maturity are stated at cost, adjusted
for amortization of premium and accretion of discount. If such securities are
subsequently sold, gains or losses are determined on the specific
identification method using the amortized cost of the security sold.
Securities that will be held for indefinite periods of time are classified as
available for sale, and reported at the lower of amortized cost or market.
INTEREST AND FEE INCOME ON LOANS: Interest on loans is accrued and credited to
operations based on the principal amount outstanding. Loan fees and loan
origination costs are recognized on a constant yield method over the life of
the loan. The general policy of the Corporation is to discontinue accrual of
interest income on loans where reasonable doubt exists with respect to the
timely collectibility of such interest, and any accrued but unpaid interest on
such loans previously accrued is reversed against interest income of the
current period. Loans are returned to an accrual status when factors
indicating doubtful collectibility no longer exist.
ALLOWANCE FOR LOAN AND LEASE LOSSES: Management determines the adequacy of the
allowance based upon a continuing review of individual loans and leases, recent
loss experience, current economic conditions, the risk characteristics of the
various categories of loans and leases, and other pertinent factors.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost less
accumulated depreciation. Buildings and improvements are depreciated over
periods ranging from 10 to 45 years, and furniture and equipment are
depreciated over periods ranging from 5 to 7 years, using the straight-line
method.
OTHER REAL ESTATE: Other real estate, which represents either properties
acquired through legal foreclosure or properties accounted for as "in
substance" foreclosures, is recorded at the lower of the amount of the loan
outstanding or net realizable value. Declines in net realizable value
subsequent to acquisition are expensed. Costs related to improving the
property are capitalized when the total cost of the property, including
improvements, does not exceed net realizable value.
INCOME TAXES: During 1992, the Corporation adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109).
Net income for 1992 includes a credit for the cumulative effect of the
adoption. Prior years' financial statements have not been restated to reflect
the effects of SFAS No. 109. Deferred tax assets and liabilities reflect the
impact of "temporary" differences between the recognition of income and expense
for tax and financial reporting purposes.
RECLASSIFICATIONS: Certain reclassifications have been made to the 1992 and
1991 financial statements, to conform with the classifications used in 1993.
____________________________________________________________________________
(2) CASH AND DUE FROM BANKS
The Bank is required to maintain noninterest bearing deposits with the Federal
Reserve Bank based on a percentage of the Bank's deposits. At December 31,
1993 and 1992, the deposit balances were $3,024,000 and $2,526,000,
respectively.
15
<PAGE> 18
FIRST NATIONAL BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) SECURITIES
The carrying value and estimated market value of investment securities as of
December 31, 1993 and 1992 are shown below:
<TABLE>
<CAPTION>
December 31, 1993
---------------------------------------------------------------
Gross Unrealized
Carrying Estimated -------------------------
Value Market Value Gains Losses
---------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury $ 9,229,318 $ 9,376,000 $ 146,682 --
United States Government agencies 37,117,468 37,324,000 375,774 $169,242
Municipal obligations 33,161,969 35,095,000 1,954,576 21,545
Other securities 557,150 560,000 2,850 --
---------------------------------------------------------------
Investment securities $80,065,905 $82,355,000 $2,479,882 $190,787
---------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
--------------------------------------------------------------
Gross Unrealized
Carrying Estimated -------------------------
Value Market Value Gains Losses
--------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury $ 9,424,009 $ 9,626,000 $ 201,991 --
United States Government agencies 31,437,433 31,940,000 604,479 $101,912
Municipal obligations 36,524,589 38,103,000 1,614,228 35,817
Other securities 558,750 561,000 2,350 100
--------------------------------------------------------------
Investment securities $77,944,781 $80,230,000 $2,423,048 $137,829
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
The carrying value and estimated market value of securities available for sale
as of December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
December 31, 1993
------------------------------------------------------------
Gross Unrealized
Carrying Estimated ------------------------
Value Market Value Gains Losses
------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury $5,047,282 $5,048,000 $718 --
United States Government agencies 2,459,113 2,460,000 887 --
-------------------------------------------------------------
Total securities available for sale $7,506,395 $7,508,000 $1,605 --
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1992
--------------------------------------------------------------
Gross Unrealized
Carrying Estimated -------------------------
Value Market Value Gains Losses
--------------------------------------------------------------
<S> <C> <C> <C> <C>
United States Treasury $3,045,601 $3,164,000 $118,399 --
United States Government agencies 2,015,487 2,051,000 35,513 --
--------------------------------------------------------------
Total securities available for sale $5,061,088 $5,215,000 $153,912 --
--------------------------------------------------------------
--------------------------------------------------------------
</TABLE>
At December 31, 1993, investment securities of $3,910,000 were pledged to
secure public funds on deposit and for other purposes required by law.
Proceeds from calls of securities during 1993 were $1,296,000. Gross gains of
$5,000 and gross losses of $6,000 were realized on those calls. No securities
were sold during 1993.
Interest income on securities available for sale in 1993 was comprised of
$274,000 from U.S. Treasury securities, and $97,000 from U.S. Government
agency securities.
The amortized cost and estimated market value of the security portfolio at
December 31, generally by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers may have
the right to call or repay obligations with or without call or prepayment
penalties. Securities which are not due at a single maturity date, such as
mortgage-backed securities, have been allocated to maturity groupings based on
average expected life. Average expected life is based on the best available
prepayment estimates as of year end.
<TABLE>
<CAPTION>
December 31, 1993
-------------------------------
Investment securities: Estimated
Carrying Market
Value Value
-------------------------------
<S> <C> <C>
Due in one year or less $19,707,611 $19,872,000
Due after one year through five years 45,697,237 46,900,000
Due after five years through ten years 11,860,180 12,756,000
Due after ten years 2,800,877 2,827,000
-------------------------------
Total investment securities $80,065,905 $82,355,000
-------------------------------
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1993
------------------------------
Securities available for sale: Estimated
Carrying Market
Value Value
------------------------------
<S> <C> <C>
Due in one year or less $3,942,381 $3,943,000
Due after one year through five years 3,564,014 3,565,000
Due after five years through ten years -- --
Due after ten years -- --
------------------------------
Total securities available for sale $7,506,395 $7,508,000
------------------------------
------------------------------
</TABLE>
16
<PAGE> 19
FIRST NATIONAL BANK CORP.
NOTES TO CONSILIDATED FINANCIAL STATEMENTS
(4) SALE OF CREDIT CARD PORTFOLIO
In 1991, the Corporation sold its credit card portfolio without recourse. The
sale included all accounts contractually less than 60 days past due. The cost
basis of the portfolio was $7,732,000, and the net gain on the transaction,
included in other income for 1991, was approximately $950,000.
_______________________________________________________________________________
(5) CONCENTRATIONS OF CREDIT RISK
The Corporation grants loans to customers who reside primarily in Macomb County
and metropolitan Detroit. Although the Corporation has a diversified loan
portfolio, a substantial portion of its debtors' ability to honor their
contracts is dependent upon the automotive industry. Additionally, at December
31, 1993, the Corporation had $60,362,000 in residential real estate loans
which were for one to four family homes secured by mortgages, and $128,649,000
in commercial loans which were secured by real estate mortgages.
_______________________________________________________________________________
(6) ALLOWANCE FOR LOAN AND LEASE LOSSES
Changes in the allowance for loan and lease losses for 1993, 1992 and 1991 are
summarized below:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------
<S> <C> <C> <C>
Balance, beginning of the year $ 4,585,032 $4,038,314 $3,544,845
Provision 825,000 1,275,000 1,875,000
Charge-offs (1,160,550) (969,529) (1,582,056)
Recoveries 348,065 241,247 200,525
----------------------------------------------
Balance, end of year $ 4,597,547 $4,585,032 $4,038,314
----------------------------------------------
----------------------------------------------
</TABLE>
_______________________________________________________________________________
(7) PROPERTY AND EQUIPMENT
A summary of property and equipment as of December 31 is as follows:
<TABLE>
<CAPTION>
1993 1992
----------------------------
<S> <C> <C>
Land $ 3,844,677 $3,377,463
Buildings and improvements 9,917,017 8,972,768
Furniture and equipment 9,213,523 8,417,069
Construction in progress 318,986 458,320
----------------------------
23,294,203 21,225,620
Less accumulated depreciation 7,698,375 6,516,351
----------------------------
Net property and equipment $15,595,828 $14,709,269
----------------------------
----------------------------
</TABLE>
Operating expenses include lease rentals covering buildings and land used as
bank premises and certain equipment in the amount of $616,000, $707,000, and
$677,000 for the years ended December 31, 1993, 1992 and 1991, respectively.
Following is a schedule of future minimum rental payments required under
operating leases that have remaining lease terms in excess of one year as of
December 31, 1993:
Year ending December 31:
<TABLE>
<S> <C>
1994 $ 584,000
1995 549,000
1996 521,000
1997 448,000
1998 434,000
Subsequent years 1,738,000
-----------
Total minimum rental payments $4,274,000
-----------
-----------
</TABLE>
_______________________________________________________________________________
(8) LONG TERM DEBT
The following is a summary of long term debt at December 31, 1992:
<TABLE>
<S> <C>
9.5% Subordinated Notes, formerly
due June 1, 1997 $2,682,000
9.0% Convertible Subordinated
Notes, formerly due July 15, 2004 5,666,000
------------
$8,348,000
------------
------------
</TABLE>
The 9.5% Subordinated Notes were redeemed by the Corporation as of March 31,
1993. The redemption premium was 3% of the principal amount outstanding. The
majority of the holders of these notes also held equity contracts, which are
discussed in Note 9. During 1993 and 1992, holders of $2,558,000 and $268,000
of these notes, respectively, exercised equity contracts which they held, and
tendered the notes as payment for common stock of the Corporation. On the
redemption date, the remaining $124,000 of this issue was redeemed for cash.
The 9.0% Convertible Subordinated Notes were redeemed by the Corporation as of
July 15, 1993, at a redemption premium of 5% of outstanding principal. Prior
to the redemption date, a large volume of this issue was converted into common
stock of the Corporation by its holders. The amounts converted were $5,513,000
in 1993, and $981,000 in 1992. On the redemption date, the remaining $153,000
in principal amount was redeemed for cash.
17
<PAGE> 20
FIRST NATIONAL BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) STOCKHOLDERS' EQUITY
In 1987, the Corporation issued Cancellable Mandatory Stock Purchase Contracts
(equity contracts) requiring the purchase of $3,150,000 in common stock not
later than June 1, 1996. As of December 31, 1992, $2,772,000 in face amount of
contracts had remained outstanding. In conjunction with the 9.5% debt
redemption, the equity contracts were canceled as of March 31, 1993. The
cancellation premium was 1% of the face amount outstanding. As discussed in
Note 8, the majority of equity contract holders also held 9.5% debt. A large
volume of equity contracts were exercised prior to the cancellation date, with
most holders tendering debt as payment. $64,000 in face amount of equity
contracts was canceled for cash, while $150,000 was received during 1993 for
cash exercises of contracts.
The Corporation repurchased 50,044 shares of its common stock in 1993, and
41,600 shares in 1992. At December 31, 1993, the Corporation has been
authorized by its Board of Directors to purchase up to an additional 100,000
shares of its common stock.
In 1990, the Board of Directors of the Corporation declared a dividend
distribution of one Right for each outstanding share of common stock, to
stockholders of record at the close of business on December 18, 1990. The
Rights entitle the registered holder to purchase from the Corporation shares of
Common Stock, $3.125 par value per share. The exercise price of each Right is
$38.87, subject to adjustment in certain circumstances. The description and
terms of the Rights are set forth in a Rights Agreement between the Corporation
and State Street Bank and Trust Company, as Rights Agent. The Rights will
expire on December 18, 1998.
During 1991, and again in 1993, the Corporation received a bequest from the
estate of a former director and stockholder. The amounts received were
$211,684 in 1991, and $113,715 in 1993. The amount was not included in income,
but rather was credited directly to additional paid-in capital.
The articles of incorporation authorize 2,000,000 shares of preferred stock, of
which none are issued.
Earnings per share amounts have been adjusted for the 5% stock dividends on
common stock in 1993, 1992, and 1991, and the 4-for-3 stock split in 1993. The
calculations are based on the weighted average number of shares outstanding
throughout the year. Primary and fully diluted per share amounts assume
conversion of the appropriate dilutive securities and common stock equivalents
of the Corporation, and the elimination of related after tax interest expense.
The Corporation is subject to capital adequacy requirements issued by the
Federal Reserve Board. These rules require the Corporation to maintain a ratio
of total capital to risk-based assets of 8%. Of this amount, 4% must be
comprised of Tier I capital. Tier I capital is defined to include
stockholders' equity, retained earnings, perpetual preferred stock, and
minority interest. Total capital is defined to include all of the components
of Tier I capital plus mandatory convertible securities, subordinated debt, and
the allowance for loan losses, up to certain limits. The loan loss reserve is
limited to 1.25% of risk-based assets. Under the risk-based capital
guidelines, the Corporation's on-balance sheet and off-balance sheet assets are
placed into one of four risk categories, based primarily on credit risk. As of
December 31, 1993, the Corporation's Tier I capital to risk-based assets was
10.55%, and total capital to risk-based assets was 11.80%.
_______________________________________________________________________________
(10) OTHER OPERATING EXPENSE
The following is a summary of significant components of other operating
expense, for each of the years indicated:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Data processing $1,049,082 $ 986,491 $ 882,155
Deposit insurance 928,600 878,251 788,791
Advertising, marketing, and public relations 727,000 571,936 430,536
Printing and supplies 564,586 680,050 634,772
State taxes 394,358 407,795 200,810
Other 3,471,780 3,077,691 3,514,561
-----------------------------------------------
Total noninterest expense $7,135,406 $6,602,214 $6,451,625
-----------------------------------------------
-----------------------------------------------
</TABLE>
18
<PAGE> 21
FIRST NATIONAL BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) TAXES ON INCOME
As discussed in Note 1, the Corporation adopted SFAS No. 109 as of January 1,
1992. The cumulative effect of the change is shown in the consolidated
statements of income. Except for the cumulative effect in 1992, the adoption
had no significant impact on the results of operations of the Corporation.
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------------------
<S> <C> <C> <C>
Current $1,220,000 $807,000 $733,000
Deferred 103,000 (505,000) (398,000)
--------------------------------------------
Income Tax Expense $1,323,000 $302,000 $335,000
--------------------------------------------
--------------------------------------------
</TABLE>
Deferred tax assets were also increased by $609,000 during 1993 for the tax
effect of adopting SFAS No. 106 (see Note 13). This amount did not affect 1993
tax expense since it is related to the cumulative effect of a change in
accounting principle. The temporary differences and carryforwards which
comprise deferred tax assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1993 1992
---------------------------
<S> <C> <C>
Deferred tax assets:
Provision for loan and lease losses $1,040,000 $1,036,000
Postretirement benefits 672,000 --
Alternative minimum tax credit carryforward 269,000 436,000
Gain on sale/leaseback 387,000 419,000
Deferred loan fees 171,000 200,000
Accrued expenses 28,000 --
---------------------------
Deferred tax assets $2,567,000 $2,091,000
---------------------------
---------------------------
Deferred tax liabilities:
Depreciation $ (111,000) ($71,000)
Leases -- (56,000)
Other (16,000) (30,000)
---------------------------
Deferred tax liabilities $ (127,000) ($157,000)
---------------------------
---------------------------
</TABLE>
A reconciliation of the provision for income taxes, and the amount that would
be expected using statutory federal income tax rates applied to income before
taxes, is shown below:
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------------------
<S> <C> <C> <C>
Expected tax expense $2,015,000 $1,165,000 $1,136,000
Tax-exempt interest (708,000) (862,000) (838,000)
Other 16,000 (1,000) 37,000
--------------------------------------------
$1,323,000 $ 302,000 $ 335,000
--------------------------------------------
--------------------------------------------
</TABLE>
Included in income tax expense is the tax effect of securities sales, which was
zero in 1993, $217,000 in 1992, and $89,000 in 1991.
_______________________________________________________________________________
(12) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Estimates of fair value of financial instruments have been determined using
available market information and appropriate valuation methods, as outlined
below. Considerable judgment is inherently required to interpret market data
to develop the estimates of fair value. Accordingly, the estimates presented
below do not necessarily represent amounts that the Corporation could realize
in a current market exchange. The following methods and assumptions were
used to estimate the fair value of financial instruments:
CASH AND CASH EQUIVALENTS: For these short term instruments, the carrying
amount is a reasonable estimate of fair value.
SECURITIES: For marketable debt securities held for investment or available
for sale, estimated fair values are based on quoted market prices or dealer
quotes.
LOANS: For variable rate loans with no significant change in credit risk since
loan origination, the carrying amount is a reasonable estimate of fair value.
For all other loans, including fixed rate loans, the fair value is estimated
using a discounted cash flow analysis, using interest rates currently offered
on similar loans to borrowers with similar credit ratings and for the same
remaining maturities. The resulting value is reduced by an estimate of losses
inherent in the portfolio.
DEPOSITS: The estimated fair value of demand deposits, certain money market
deposits, and savings deposits is the amount payable on demand at the reporting
date. The fair value of fixed maturity time deposits is estimated using the
rates currently offered for deposits of similar remaining maturities.
SHORT TERM BORROWINGS: For these short term instruments, the carrying amount
is a reasonable estimate of fair value.
LONG TERM DEBT: For these instruments, estimated fair value is based on quoted
market prices or dealer quotes.
COMMITMENTS: Commitments to extend credit and standby letters of credit are
not recorded on the balance sheet. The
19
<PAGE> 22
FIRST NATIONAL BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
fair value of commitments is estimated using the fees currently charged
to enter into similar arrangements, taking into account the remaining terms of
the agreements and the present creditworthiness of the counterparties. The fair
value of letters of credit is based on fees currently charged for similar
agreements, or on the estimated cost to terminate them or otherwise settle the
obligations with the counterparties at the reporting date.
The use of different market assumptions and/or estimation methods may have a
material effect on the estimated fair value amounts. The recorded carrying
amounts and estimated fair values of the Corporation's financial instruments at
December 31 are as follows:
<TABLE>
<CAPTION>
1993 1992
---------------------------------------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 48,282,000 $ 48,282,000 $ 34,090,000 $ 34,090,000
Securities 87,572,000 89,863,000 83,006,000 85,445,000
Loans, net of allowance 323,428,000 328,156,000 312,481,000 316,176,000
Financial liabilities:
Demand and savings deposits 286,354,000 286,354,000 277,290,000 277,290,000
Time deposits 153,698,000 153,755,000 133,646,000 133,690,000
Short term borrowings 1,100,000 1,100,000 944,000 944,000
Long term debt -- -- 8,348,000 10,216,000
Unrecognized financial instruments:
Commitments to extend credit N.A. 348,000 N.A. 320,000
Standby letters of credit N.A. 34,000 N.A. 36,000
</TABLE>
The fair value estimates presented above are based on pertinent information
available to the Corporation as of December 31, 1993 and 1992. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, these amounts have not been comprehensively
revalued for financial statement purposes since those dates. Current estimates
of fair value may therefore differ significantly from the amounts presented
above.
_______________________________________________________________________________
(13) EMPLOYEE BENEFIT PLANS
A summary of the Corporation's employee benefit plans is as follows:
DEFERRED COMPENSATION PLAN: In 1983, the Bank established an Employee Salary
Reduction (401(k)) Plan. All employees who have completed six months of
service and 1,000 hours of work with the Bank are eligible to participate. The
1993, 1992, and 1991 expense related to the plan was $168,000, $162,000, and
$138,000, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN: In 1986, the Bank established an Employee Stock
Ownership Plan (ESOP). All salaried employees, after completing one year of
service (and 1,000 hours) with the Bank, and who have attained the age of 21,
are eligible to participate in the plan. During 1993, the ESOP had $646,000 in
additional borrowings under its $1,500,000 revolving line of credit from an
unrelated financial institution, while repayments were $214,000 during the
year. As of December 31, 1993, the ESOP owes $1,436,000 on the note, and owns
approximately 157,000 shares of the Corporation's stock. The revolving note,
which bears interest at 1/4% over prime, is to be paid on or before April 30,
1994. The Corporation has guaranteed repayment of the loan and is obligated to
contribute sufficient funds to the ESOP, which will enable the ESOP to repay
the loan principal and interest. Contributions by the Corporation totaled
$200,000 in 1993, $150,000 in 1992, and $180,000 in 1991. The loan guarantee
is recorded as a liability of the Corporation, with a corresponding reduction
in retained earnings.
INCENTIVE STOCK OPTION PLAN: In 1988, the Corporation established an Incentive
Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan provides
for options to be granted to senior management and other key employees of the
Bank at a price per share that is not less than the fair market value of the
Common Stock of the Corporation on the date of grant. The determination of the
persons to receive options and the number of shares to be covered by an option
are based upon the present and potential contributions of each person to the
success of the Corporation and its affiliates, and such other factors as may be
deemed relevant. The duration of each option may not exceed seven years from
the date of grant. The aggregate fair market value, determined at the time
that the option is granted, of the Corporation's Common Stock with respect to
which options are exercisable for the first time by any employee during any
calendar year may not exceed $100,000.
20
<PAGE> 23
FIRST NATIONAL BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of transactions involving the Stock Option Plan:
<TABLE>
<CAPTION>
1993 1992 1991
-------------------------------------------------
<S> <C> <C> <C>
Option Shares:
Outstanding January 1 56,480 46,526 53,633
Granted 35,000 29,400 14,700
Exercised (10,520) (19,446) (21,807)
----------------------------------------------
Exercisable Dec. 31 80,960 56,480 46,526
----------------------------------------------
----------------------------------------------
Option Price $11.75-$18.57 $11.75-$16.07 $11.75-$13.28
</TABLE>
At December 31, 1993, 37,000 shares were available for future grants under this
plan.
NONEMPLOYEE DIRECTOR STOCK OPTION PLAN: In 1992, the Corporation established
the Stock Option Plan for Nonemployee Directors (the "Director Option Plan").
The Director Option Plan, a nonqualified plan, provides for options to be
granted to outside directors of the Corporation. Options under the Director
Option Plan are granted at the fair market value of the Corporation's common
stock as of the grant date. Only a portion of options granted are immediately
exercisable, with the remainder becoming exercisable on the dates of successive
annual meetings of the Corporation. Unexercised options expire seven years
after the date of grant, or when grantee ceases to be a nonemployee director.
The following is a summary of transactions involving the Director Option Plan:
<TABLE>
<CAPTION>
1993 1992
--------------------------
<S> <C> <C>
Option Shares:
Outstanding January 1 23,800 --
Became exercisable 23,800 23,800
Exercised (7,000) --
---------------------------
Exercisable Dec. 31 40,600 23,800
---------------------------
---------------------------
</TABLE>
All options have an exercise price of $16.07. As of December 31, 1993, there
are 71,400 options granted but not yet exercisable, and no options are
available for future grants.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: Effective January 1, 1993, the
Corporation adopted Statement of Financial Accounting Standards No. 106,
"Employer's Accounting for Postretirement Benefits Other Than Pensions" (SFAS
No. 106). The statement requires the accrual of expected costs for certain
postretirement benefits (such as health benefits) during the years an employee
provides services. The previous practice was to expense these costs as they
were paid.
The Corporation and its subsidiaries provide medical, dental, and
vision insurance for employees who retire after age 55, with a combined age and
years of experience of at least 75 years. This insurance, which can also
cover eligible dependents, is contributory with retiree contributions adjusted
periodically for increases in costs related to the coverage.
The Corporation elected to immediately recognize the prior years' accumulated
benefit obligation as of January 1, 1993, as a one-time charge against
earnings. This resulted in a reduction in 1993 earnings of $1,183,000, net of
a tax credit of $609,000. In addition, expense for 1993 related to
postretirement health benefits was $185,000 higher than it would have been
under the previous accounting method.
Net periodic postretirement health benefit costs for the
year ended December 31, 1993, were as follows:
<TABLE>
<S> <C>
Service cost $ 103,000
Interest cost 141,000
---------
Net periodic postretirement health benefit cost $ 244,000
---------
---------
</TABLE>
The following table details the accumulated postretirement benefit obligation,
reconciled with the amount shown in the Corporation's balance sheet at
December 31, 1993:
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees $ 848,000
Fully eligible active plan participants 257,000
Other active plan participants 1,251,000
----------
Accrued postretirement benefit liability 2,356,000
Unrecognized net loss from past experience
different from that assumed, and from
changes in assumptions (379,000)
----------
Accrued postretirement benefit cost $1,977,000
----------
----------
Actual cash cost for 1993 $ 59,000
----------
----------
</TABLE>
There are no "plan assets" specifically set aside to cover this obligation.
Postretirement benefit cost is determined using assumptions applicable at the
beginning of the year. The APBO is determined using the assumptions at the end
of the year. The Corporation used a weighted average discount rate of 7% to
determine the present value of the APBO as of December 31, 1993,
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and a weighted average discount rate of 8% as of January 1, 1993. The
Corporation assumed a 12-13 percent annual rate of increase for 1993 in
the per person costs of covered health care benefits, with the rate trending
downward and remaining at 6% by 2017. This trend rate assumption has a
significant impact on the recorded liability. Increasing the assumed trend
rate by one percentage point in each year would have increased the APBO as of
December 31, 1993 by $497,000, and would have increased total 1993 net periodic
postretirement benefit cost by $58,000.
(14) LOANS TO RELATED PARTIES
Certain directors and executive officers of the Corporation, including families
and companies in which they are principal owners, were customers of the
Corporation during 1993 and 1992. Such transactions were made in the ordinary
course of business at normal terms and interest rates and did not represent
more than the normal risks. Total loans to these persons at December 31, 1993
and 1992 amounted to $2,093,000 and $2,111,000, respectively. During 1993, new
and renewed loans to related parties totaled $1,479,000, and repayments totaled
$1,497,000.
(15) RESTRICTIONS ON CASH FLOWS TO THE PARENT COMPANY
National and state banking laws and regulations place certain restrictions on
loans and advances made by the banking subsidiary to members of its affiliated
group, including the Parent, and also place restrictions on dividends paid by
the subsidiary Bank. At December 31, 1993, assets of the Bank not available
for dividends or loans to the Parent amounted to approximately $471,865,000.
In 1994, the Bank could distribute to the Parent (in addition to its 1994 net
income) approximately $4,448,000 in dividends without approval from regulatory
agencies.
(16) COMMITMENT AND CONTINGENCIES
A commitment to extend credit obligates the Corporation to advance funds to a
customer providing there is compliance with terms of the commitment.
Commitments generally have fixed expiration dates or other termination clauses,
permit the customer to borrow at a market rate of interest, and require payment
of a fee. These include commitments for new loans, existing commitments under
line of credit agreements, and standby letters of credit. Unused commitments
totaled $54,529,000 at December 31, 1993. Since many commitments typically
expire without being funded, the total does not necessarily represent future
cash requirements. A standby letter of credit is a conditional commitment
issued to guarantee contractual performance by a customer to a third party.
They are typically issued to back commercial paper, bond financing, and similar
transactions of public and private borrowers. Total standby letters of credit
outstanding at December 31, 1993, were $3,421,000. The Corporation does not
expect, in the normal course of business, to be required to fund these
commitments.
The Corporation uses the same credit policies in making the above commitments
and conditional obligations as it does for on-balance sheet instruments.
The Bank is a defendant in legal actions arising from normal business
activities. Management believes that those actions are without merit or that
the ultimate liability, if any, resulting from them will not materially affect
the Corporation's financial position, liquidity, or results of operations.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(17) FUTURE ACCOUNTING CHANGES
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan." This statement will require that the value of certain impaired
loans be measured based on the present value of expected future cash flows,
discounted at the loan's effective interest rate. The statement is effective
for fiscal years beginning after December 15, 1994. The Corporation does not
expect the statement to have a material impact on its future earnings or
financial position.
The FASB has also issued Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS No.
115). This statement will require the classification of debt and certain
equity securities into three categories as follows:
Debt securities that the Corporation has the positive intent
and ability to hold to maturity will be classified as "held to
maturity," and reported at amortized cost.
Debt and equity securities that are bought and held
principally to sell them in the near term would be classified
as "trading" securities, and reported at fair value.
Unrealized gains and losses would be included in earnings.
Debt and equity securities that are not classified as either
"held to maturity" or "trading" are classified as "available
for sale," and are reported at fair value. Unrealized gains
and losses will be excluded from earnings, but reported as a
separate component of stockholders' equity.
SFAS No. 115 is effective for fiscal years beginning after December 15, 1993,
and the Corporation will adopt it in the first quarter of 1994. Since the
Corporation does not engage in short term buying and resale of securities,
management does not expect to place any securities in the "trading" category.
Adoption of the statement is not expected to have a material impact on earnings
or financial position.
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(18) PARENT-ONLY FINANCIAL STATEMENTS
Balance sheets as of December 31, 1993 and 1992, and statements of income and
cash flows for the years ended December 31, 1993, 1992 and 1991 for First
National Bank Corp. (the Parent only) are as follows:
<TABLE>
<CAPTION>
BALANCE SHEETS
- ---------------------------------------------------------------------------------------------
ASSETS 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Cash $ 3,384,932 $ 6,543,214
Investment in bank subsidiary 32,524,794 30,497,077
Investment in non-bank subsidiary 199,726 223,518
Municipal securities 1,375,000 --
Land 1,169,462 1,169,462
Other assets 64,639 582,908
- ---------------------------------------------------------------------------------------------
Total Assets $38,718,553 $39,016,179
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------
Long term debt -- $ 8,348,000
Other liabilities $ 1,446,186 1,258,980
- ---------------------------------------------------------------------------------------------
Total Liabilities 1,446,186 9,606,980
- ---------------------------------------------------------------------------------------------
Stockholders' equity
Common stock 7,236,472 4,073,500
Additional paid-in capital 15,658,658 11,034,426
Retained earnings 14,377,237 14,899,574
Treasury stock -- (598,301)
- ---------------------------------------------------------------------------------------------
Total Stockholders' Equity 37,272,367 29,409,199
- ---------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $38,718,553 $39,016,179
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(18) PARENT-ONLY FINANCIAL STATEMENTS (continued)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------------------------------------------------
1993 1992 1991
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING INCOME
Dividends from bank subsidiary $ 1,727,107 $ 1,343,305 $ 1,151,405
Interest income on deposits 111,960 229,735 437,538
Interest income on securities 85,078 -- --
Other income 34,883 62,500 227,419
- ----------------------------------------------------------------------------------------------
Total Operating Income 1,959,028 1,635,540 1,816,362
- ----------------------------------------------------------------------------------------------
OPERATING EXPENSE
Interest on long term debt 250,836 800,472 888,021
Other expenses 321,557 308,347 346,920
- ----------------------------------------------------------------------------------------------
Total Operating Expense 572,393 1,108,819 1,234,941
- ----------------------------------------------------------------------------------------------
Income Before Taxes and Equity
in Undistributed Earnings of Subsidiaries 1,386,635 526,721 581,421
Income tax benefit 145,000 278,000 194,000
- ----------------------------------------------------------------------------------------------
Income Before Equity in Undistributed
Earnings of Subsidiaries 1,531,635 804,721 775,421
Equity in undistributed earnings of
subsidiaries 1,890,210 2,549,441 2,231,840
- ----------------------------------------------------------------------------------------------
Net Income $ 3,421,845 $ 3,354,162 $ 3,007,261
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(18) PARENT-ONLY FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOW
Year Ended December 31,
- -------------------------------------------------------------------------------------------------
1993 1992 1991
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,421,845 $ 3,354,162 $ 3,007,261
Adjustments to reconcile net income to net cash
provided by operating activities:
Undistributed equity in subsidiaries (1,890,210) (2,549,441) (2,231,840)
Gain on sale of land (34,583) (62,500) (205,894)
Decrease in interest payable (254,955) (42,588) (12,557)
Decrease (increase) in other assets 14,657 559,761 (333,755)
Increase (decrease) in other liabilities 10,000 (23,782) 5,450
- -------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,266,754 1,235,612 228,665
- -------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchases of securities (1,375,000) -- --
Purchases of land -- (58,869) (538,256)
Proceeds from land sales 34,583 141,400 708,090
- -------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Investing
Activities (1,340,417) 82,531 169,834
- -------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Cash dividends (1,604,221) (1,251,943) (1,005,680)
Repurchase of common stock (1,364,369) (989,316) (527,066)
Payments for fractional shares (22,353) (9,022) (11,670)
Proceeds from exercise of equity
contracts and stock options 183,324 60,000 --
Cash paid for debt and equity
contract redemption (277,000) -- --
Repurchase of debentures -- -- (138,000)
- -------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (3,084,619) (2,190,281) (1,682,416)
- -------------------------------------------------------------------------------------------------
Decrease in Cash (3,158,282) (872,138) (1,283,917)
Cash at the Beginning of the Year 6,543,214 7,415,352 8,699,269
- -------------------------------------------------------------------------------------------------
Cash at the End of the Year $ 3,384,932 $ 6,543,214 $ 7,415,352
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Total interest paid $ 505,791 $ 843,060 $ 900,578
- -------------------------------------------------------------------------------------------------
Total income taxes paid (refunded) $ (145,000) $ (751,000) $ 276,600
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 29
INDEPENDENT AUDITORS' REPORT
DELOITTE & TOUCHE
Board of Directors and Stockholders
First National Bank Corp.
Clinton Township, Michigan
We have audited the accompanying consolidated balance sheets of First National
Bank Corp. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of income, changes in stockholders' equity, and cash
flow, 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, such financial statements present fairly, in all material
respects, the consolidated financial position of First National Bank Corp. and
subsidiaries at December 31, 1993 and 1992, and the results of their operations
and their cash flow for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 12 to the consolidated financial statements, the
Corporation changed its accounting method for postretirement benefits other
than pensions in 1993, and as discussed in Note 1, the Corporation changed its
method of accounting for income taxes in 1992.
/s/ DELOITTE & TOUCHE
------------------
Deloitte & Touche
January 25, 1994
Detroit, Michigan
27
<PAGE> 30
SELECTED FINANCIAL DATA
Certain financial data for the last five years is presented below. This
information should be read in conjunction with the financial statements and
related notes included elsewhere in this annual report. A more detailed
discussion and analysis of factors affecting the Corporation's financial
position and operating results is presented in the following pages of this
report.
<TABLE>
<CAPTION>
Year Ended December 31,
- --------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest income (including fees) $32,402,839 $32,272,447 $36,593,135 $36,984,513 $33,565,098
Interest expense 11,280,957 14,058,830 19,716,881 21,723,829 20,095,209
- --------------------------------------------------------------------------------------------------------------
Net Interest Income 21,121,882 18,213,617 16,876,254 15,260,684 13,469,889
Provision for loan and
lease losses 825,000 1,275,000 1,875,000 1,275,000 680,000
- --------------------------------------------------------------------------------------------------------------
Net Interest Income after
Provision for Loan and Lease
Losses 20,296,882 16,938,617 15,001,254 13,985,684 12,789,889
Noninterest income 3,798,922 3,834,022 4,568,866 3,025,319 2,400,769
Noninterest expense 18,167,959 17,347,477 16,227,859 13,827,850 12,022,527
- --------------------------------------------------------------------------------------------------------------
Income Before Taxes and
Cumulative Effects of
Changes in Accounting
Principles 5,927,845 3,425,162 3,342,261 3,183,153 3,168,131
Income tax expense 1,323,000 302,000 335,000 427,000 461,000
- --------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effects
of Changes in Accounting
Principles 4,604,845 3,123,162 3,007,261 2,756,153 2,707,131
Cumulative effects of changes
in accounting principles (1,183,000) 231,000 -- -- --
- --------------------------------------------------------------------------------------------------------------
Net Income $ 3,421,845 $ 3,354,162 $ 3,007,261 $ 2,756,153 $ 2,707,131
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
PER SHARE DATA:*
Average outstanding shares 2,102,602 1,769,337 1,760,316 1,847,863 1,866,614
- --------------------------------------------------------------------------------------------------------------
Primary Income Before Cumulative
Effects of Changes in Accounting
Principles $ 2.15 $ 1.72 $ 1.70 $ 1.49 $ 1.45
Cumulative effects of changes in
accounting principles (0.55) 0.13 -- -- --
Primary Net Income $ 1.60 $ 1.85 $ 1.70 $ 1.49 $ 1.45
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Fully Diluted Income Before Cumulative
Effects of Changes in Accounting
Principles $ 2.04 $ 1.53 $ 1.50 $ 1.35 $ 1.39
Cumulative effects of changes in
accounting principles (0.51) 0.10 -- -- --
Fully Diluted Net Income $ 1.53 $ 1.63 $ 1.50 $ 1.35 $ 1.39
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Cash Dividends $ 0.74 $ 0.71 $ 0.57 $ 0.51 $ 0.49
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Where applicable, per share data has been adjusted to give retroactive
effect to the 5% stock dividends in 1993, 1992, 1991, and 1990, and the
4-for-3 stock split in 1993.
Balance sheet data:
<TABLE>
<CAPTION>
As of December 31,
- --------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total loans $328,025,619 $317,215,680 $286,895,787 $286,013,400 $249,217,650
Total assets 484,332,777 453,621,626 424,513,446 412,348,324 373,216,180
Deposits 440,051,495 410,936,118 382,073,168 369,785,621 332,128,514
Long term debt -- 8,348,000 9,597,000 9,900,000 9,900,000
Stockholders' equity 37,272,367 29,409,199 27,506,904 25,518,571 24,602,158
</TABLE>
28
<PAGE> 31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the Corporation's operating results and financial
condition for the years ended December 31, 1993, 1992, and 1991 should be read
in conjunction with the financial statements and statistical data presented
elsewhere.
NET INCOME
1993 net income was $3,422,000, a 2% increase over the prior year. Net
interest income increased over 1992 by 16%, to $21.1 million. Interest income
showed a modest increase, while interest expense declined by nearly 20% from
the previous year. The primary reason for this was a $27.1 million increase in
the average volume of interest earning assets. This volume effect was
augmented by a decrease in the average rates on interest bearing liabilities
which was proportionately faster than the decrease in rates on earning assets.
The provision for loan losses was decreased by 35% from the prior year, to
$825,000 in 1993, as the local economy continued to pick up steam. Noninterest
income fell by $35,000 from 1992, as increased service charge income was offset
by lower security gains. Noninterest expense rose by nearly 5%, to $18.2
million in 1993. Income before the cumulative effect of an accounting change
came in at an all-time high of $4.6 million. The record operating results in
1993 were hampered by a one-time charge of $1.2 million for postretirement
benefits, mandated by a new accounting standard.
Net income for 1992 was $3,354,000, an increase of $347,000, or nearly 12%,
over 1991. Net interest income increased by $1.3 million, to $18.2 million in
1992. As in the current year, this increase was the result of increased
volumes of earning assets, along with liability rates falling faster than asset
rates. The provision for loan losses was decreased by $600,000, to $1.3
million in 1992. Noninterest income decreased by $735,000 from 1991, while
noninterest expense increased by $1.1 million. Income for 1992 also included a
$231,000 gain from the cumulative effect of a change in an accounting
principle, as the Corporation changed its method of accounting for income
taxes.
NET INTEREST INCOME
Net interest income, which constitutes the principal source of income for the
Corporation, is the amount by which interest earned on assets exceeds the
interest paid on liabilities. The following table shows changes in the
Corporation's net interest income, and is presented on a fully tax-equivalent
(FTE) basis, whereby tax-exempt income is adjusted upward by an amount
equivalent to the federal income taxes that would have been paid if the income
had been fully taxable (assuming a 34% tax rate). The calculation is adjusted
for any interest expense deduction that is disallowed, according to current tax
law. All references to net interest income in the following discussion, unless
otherwise indicated, are presented on a FTE basis.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1993 1992 1991
-------------------------------------------
(in thousands)
<S> <C> <C> <C>
Interest income $ 33,476 $33,577 $37,813
Interest expense 11,281 14,059 19,717
------------------------------------------
Net interest income $ 22,195 $19,518 $18,096
------------------------------------------
------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Increase (Decrease) from Prior Year,
------------------------------------------------------
1993 1992
------------------------------------------------------
Amount % Amount %
--------------------- ---------------------
<S> <C> <C> <C> <C>
Interest income $ (101) (0.30%) $ (4,236) (11.20%)
Interest expense (2,778) (19.76) (5,658) (28.70)
------------------------------------------------------
Net interest income $ 2,677 13.72% $ 1,422 7.86%
------------------------------------------------------
------------------------------------------------------
</TABLE>
Changes in net interest income from period to period result from increases or
decreases in the average balances of interest earning assets and interest
bearing liabilities, and increases or decreases in the average rates earned and
paid on those assets and liabilities. These volume and rate changes result
from the Corporation's management of its earning asset portfolio, and the
availability and cost of particular sources of funds.
29
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table, also presented on a FTE basis, details the dollar amount
of changes in net interest income for each major category of interest earning
asset and interest bearing liability, and the amount of change attributable to
changes in average balances (volume) or average rates. The variances that are
attributable to BOTH volume and rate changes have been allocated to the volume
component.
<TABLE>
<CAPTION>
1993 vs. 1992 1992 vs. 1991
------------------------ ------------------------
Increase (Decrease) Increase (Decrease)
Due to Changes In Due to Changes In
------------------------ ------------------------
Total Volume Rate Total Volume Rate
------------------------ ------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Earning Assets-Interest Income:
Federal funds sold $ 146 $ 161 $ (15) $ (86) $ (16) $ (70)
Securities
Securities available for sale 371 371 -- -- -- --
United States Treasury (196) (124) (72) 281 373 (92)
United States Government agencies (640) (184) (456) (742) (50) (692)
Municipal obligations (869) (935) 66 (89) (155) 66
Other securities (5) (5) -- (34) (28) (6)
Loans and leases 1,092 2,636 (1,544) (3,566) 717 (4,283)
------------------------- ----------------------------
Total (101) 1,920 (2,021) (4,236) 841 (5,077)
------------------------- ----------------------------
Deposits and Borrowed Funds-
Interest Expense:
Deposits
Demand-interest bearing (591) 117 (708) (823) 752 (1,575)
Savings (398) 232 (630) (764) 338 (1,102)
Time (1,210) 189 (1,399) (3,905) (1,157) (2,748)
Federal funds purchased (20) (18) (2) (45) (12) (33)
Short term borrowings (9) (2) (7) (33) 2 (35)
Long term debt (550) (426) (124) (88) (75) (13)
------------------------- ----------------------------
Total (2,778) 92 (2,870) (5,658) (152) (5,506)
------------------------- ----------------------------
Tax-Equivalent Net Interest Margin:
Interest income on earning assets
less interest cost of deposits
and borrowed funds $ 2,677 $1,828 $ 849 $ 1,422 $ 993 $ 429
------------------------- ----------------------------
------------------------- ----------------------------
</TABLE>
Tax equivalent net interest income increased to $22.2 million in 1993, an
increase of $2.7 million over the previous year. Just as in the previous year,
a significant rise in the volume of earning assets ($27.1 million) combined
with a wider net interest margin to fuel the increase. The overall net
interest margin increased to 5.29% in 1993, from 4.97% in the previous year.
The largest contributor to the increased asset volume was loans and leases,
which were, on average, higher than 1992 levels by $31.6 million.
In 1992, FTE net interest income was $19.5 million, an increase of almost 8%,
or $1.4 million, over 1991. The main reason for this increase was a $10.5
million increase in the average volume of interest earning assets, led by an
$8.1 million increase in average loans and leases. Also contributing to the
higher level of net interest income was the effect of decreasing rates.
Average rates paid on interest bearing liabilities dropped by 184 basis points
from 1991, while average rates on earning assets fell by only 134 basis points.
30
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
AVERAGE BALANCE SHEETS
The following table shows the Corporation's consolidated average
balances of assets, liabilities, and stockholders' equity; the amount of
interest income or interest expense and the average yield or rate for each
category of interest earning asset and interest bearing liability; the
Corporation's net interest spread, and the Corporation's net interest margin.
Nonperforming loans are included in average loans. Interest on loans includes
loan fees. Tax-exempt income from securities and loans is presented on a
tax-equivalent basis, assuming a 34% federal tax rate.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
1993 1992 1991
---------------------------------- -------------------------------- -----------------------------
Average Average Average
Interest Rate Interest Rate Interest Rate
Average Income/ Earned/ Average Income/ Earned/ Average Income/ Earned/
Balance Expense Paid Balance Expense Paid Balance Expense Paid
---------------------------------- -------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Federal funds sold $ 8,156,164 $ 244,347 3.00% $ 2,767,486 $ 98,133 3.55% $ 3,227,945 $ 183,952 5.70%
Securities
Securities available
for sale 5,677,208 370,646 6.53 -- -- -- -- -- --
United States Treasury 9,334,284 545,310 5.84 11,451,971 741,367 6.47 5,691,855 460,184 8.08
United States
Government agencies 35,771,647 1,934,201 5.41 39,166,249 2,573,888 6.57 39,919,251 3,315,943 8.31
Municipal obligations 33,249,152 3,094,663 9.31 43,300,908 3,963,370 9.15 44,993,478 4,052,740 9.01
Other securities 555,16 33,279 5.99 639,385 38,100 5.96 1,113,767 71,998 6.46
Loans and leases 327,137,063 27,253,342 8.33 295,491,975 26,161,566 8.85 287,388,090 29,728,112 10.34
-------------------------------- ---------------------------------- ------------------------------
Total Earning Assets/
Total Interest Income 419,880,674 33,475,788 7.97% 392,817,974 33,576,424 8.55% 382,334,386 37,812,929 9.89%
---------- ---- ---------- ---- ---------- ----
Cash and due from banks 25,201,286 25,663,739 21,902,088
All other assets 20,159,775 20,455,414 17,434,015
------------ ------------ ------------
Total Assets $465,241,735 $438,937,127 $421,670,489
------------ ------------ ------------
------------ ------------ ------------
Liabilities and
Stockholders' Equity:
Deposits
Demand-interest bearing $115,214,683 2,969,291 2.58% $110,689,986 3,560,599 3.22% $ 87,306,035 4,383,871 5.02%
Savings 87,442,395 2,057,548 2.35 77,566,163 2,455,249 3.17 66,881,011 3,219,600 4.81
Time 145,819,256 5,946,842 4.08 141,190,369 7,156,927 5.07 164,018,165 11,061,427 6.74
Federal funds purchased 439,726 13,789 3.14 1,006,011 33,849 3.36 1,367,123 79,306 5.80
Short term borrowings 1,054,371 42,651 4.05 1,107,942 51,734 4.67 1,068,947 84,656 7.92
Long term debt 3,301,942 250,836 7.60 8,901,044 800,472 8.99 9,729,005 888,021 9.13
-------------------------------- ---------------------------------- ------------------------------
Total Interest Bearing
Liabilities/
Total
Interest Expense 353,272,373 11,280,957 3.19% 340,461,515 14,058,830 4.13% 330,370,286 19,716,881 5.97%
---------- ---- ---------- ---- ---------- ----
Noninterest bearing
demand deposits 72,517,959 65,783,205 59,951,911
All other liabilities 5,596,207 3,898,312 4,622,268
Stockholders' equity 33,855,196 28,794,095 26,726,024
------------ ------------ ------------
Total Liabilities and
Stockholders' Equity $465,241,735 $438,937,127 $421,670,489
------------ ------------ ------------
------------ ------------ ------------
FTE Interest Spread
(Average Rate Earned
Minus Average Rate Paid) 4.78% 4.42% 3.92%
---- ---- ----
---- ---- ----
FTE Net Interest Income $22,194,831 $19,517,594 $18,096,048
----------- ----------- -----------
----------- ----------- -----------
FTE Net Interest Margin
(Net Interest Income/Total
Earning Assets) 5.29% 4.97% 4.73%
---- ---- ----
---- ---- ----
</TABLE>
31
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ALLOWANCE AND PROVISION FOR LOAN LOSSES
It is the Corporation's practice to maintain the allowance for loan losses at a
level adequate to provide for reasonably foreseeable losses. Management's
evaluation is based on a continuing review of the loan portfolio and includes,
but is not limited to, consideration of actual loss experience, the present and
prospective financial condition of borrowers, adequacy of collateral, industry
concentrations within the portfolio, and general economic conditions. As of
December 31, 1993 the Corporation's allowance for possible loan losses was
1.40% of outstanding loans.
In 1993, the provision for loan losses decreased by $450,000, to $825,000,
compared with a decrease of $600,000 in 1992. The primary reason for the
continuing decrease was the strength of the local economy and lower levels of
nonperforming loans throughout the year.
NONINTEREST INCOME
Noninterest income was $3.8 million in 1993, a decrease of less than 1% from
the prior year. Deposit account service charges increased by almost 15%, or
$360,000, while other customer service fees rose by more than 31%. These
increases were due to a new fee structure implemented early in the year. These
improvements were offset by a $640,000 decrease in security gains. The prior
year security gains had been unusually high, due to circumstances discussed
below.
In 1992, noninterest income was $3.8 million, a decrease of $735,000, or 16%,
from 1991. The primary reason for the decrease was 1991's $950,000 gain on
the sale of the Corporation's credit card portfolio. The sale also led to a
reduction in credit card fee income. Partially offsetting these decreases were
increases of $247,000 in service charge income, and $376,000 in net investment
securities gains. The increase in securities gains was primarily due to the
unprecedented decline in general interest rates, which pushed up the market
value of securities which were sold. The total volume of securities sales also
increased over the prior year; proceeds from sales were $26.7 million in 1992,
compared with $18.0 million in 1991. There were two main reasons for the
increased level of sales. First, the Corporation repositioned the security
portfolio for tax purposes, selling approximately $9.9 million of tax-exempt
municipal obligations, and reinvesting the proceeds in taxable instruments.
This was done to minimize the impact of the federal alternative minimum tax,
due to circumstances which were not foreseen when the municipal securities were
purchased. Second, the Corporation sold six large securities (proceeds of
approximately $11.1 million) during 1992. Four of these securities were to
mature within four months, and were sold to take advantage of reinvestment
opportunities. Management believes that these securities were held
substantially to maturity. The remaining two securities had call provisions.
At the time they were sold, the call appeared inevitable. The Corporation sold
them to avoid the possibility of a decline in value. The securities were, in
fact, called a short time after the sale.
NONINTEREST EXPENSE
Noninterest expense was $18.2 million in 1993, an increase of $820,000, or just
under 5%, over prior year levels. Salaries, benefits, and payroll taxes rose
by 6%, to $7.8 million in 1993. This reflects normal wage increases common in
a service intensive industry, even while staffing levels have remained fairly
constant. Occupancy decreased by nearly 3%, due to lower rent expense, and
equipment expenses fell by more than 7%, mostly due to lower repair and
maintenance costs. Other operating expenses were up by 8%, with the largest
increase coming in advertising and related costs. This was the result of the
Bank's successful "Making Your Life Easier" ad campaign, and promotional
expenses for the opening of the Bank's new branch in Romeo, Michigan.
For 1992, noninterest expense was $17.3 million, an increase of $1.1 million,
or 7%, over 1991. This increase was related to the growth of the Corporation
and expansion of the Bank's branch system. Payroll costs increased by $562,000
over 1991, while occupancy and equipment expenses rose by a combined $407,000.
Other operating expenses increased by $151,000, or 2%, over 1991.
INCOME TAXES
The provision for federal income taxes increased by $1.0 million, to $1.3
million in 1993. This was due to the record level of operating income,
combined with reduced tax-exempt municipal income. The Corporation also
recorded a tax credit of $609,000 for the postretirement benefit charge. This
credit does not reduce tax expense; rather, it is netted against the "before
tax" amount of the 1993 accounting change. In the previous year, federal tax
expense decreased by $33,000 to $302,000, compared with $335,000 in 1991.
32
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
The liquidity of a bank allows it to provide funds to meet loan requests, to
accommodate possible outflows in deposits, and to take advantage of other
investment opportunities. Funding of loan requests, providing for liability
outflows, and managing interest rate margins require continuous analysis in
order to match the maturities of specific categories of loans and investments,
with specific types of deposits and borrowings. Bank liquidity is thus
normally considered in terms of the nature and mix of the banking institution's
sources and uses of funds. For the Corporation, the major sources of liquidity
have been federal funds sold, and loans (including demand loans) and
securities maturing within one year. At December 31, 1993 and 1992, federal
funds sold amounted to $22.9 million and $9.7 million, respectively. Loans
(including demand loans) and securities maturing within one year amounted to
$113.1 million at December 31, 1993, and $99.9 million at December 31, 1992.
Additional liquidity is provided by two repurchase agreement lines of credit,
totaling $20.0 million, which could be drawn upon for short term liquidity
needs, if necessary. The Corporation has also identified certain securities as
"available for sale". These are securities that may be sold for liquidity or
other purposes. Management determined the adequacy of items so classified by
considering normal deposit fluctuations, expected loan demand, and the other
liquidity sources and needs discussed above. The Corporation's dependence on
large deposits which experience volatile rate changes is closely monitored.
These deposits consist mainly of time certificates of $100,000 and over, of
which the balance was $66.4 million and $57.7 million at December 31, 1993 and
1992, respectively.
Managing rates on earning assets and interest bearing liabilities focuses on
maintaining stability in the net interest spread, an important factor in
earnings growth and stability. Emphasis is placed on maintaining a controlled
rate sensitivity position, to avoid wide swings in spreads and to minimize risk
due to changes in interest rates.
The following table shows the maturity and repricing distribution of the
Corporation's interest earning assets and interest bearing liabilities as of
December 31, 1993, the interest rate sensitivity gap (i.e., interest rate
sensitive assets less interest rate sensitive liabilities), cumulative interest
rate sensitivity gap, the interest rate sensitivity gap ratio (i.e., interest
rate sensitive assets divided by interest rate sensitive liabilities), and the
cumulative interest rate sensitivity gap ratio. For the purposes of the
following table, an asset or liability is considered rate sensitive within a
period when it matures or could be repriced within such period, generally in
accordance with its contractual terms.
<TABLE>
<CAPTION>
After Three After Six After One
Within Months But Months But Year But After
Three Within Within Within Five
Months Six Months One Year Five Years Years Total
-----------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Federal funds sold $22,900 -- -- -- -- $ 22,900
Securities 5,672 $ 9,983 $ 4,211 $ 35,202 $ 32,504 87,572
Loans 211,911 5,320 7,833 61,664 41,298 328,026
-----------------------------------------------------------------------------------------
Total 240,483 15,303 12,044 96,866 73,802 438,498
Interest bearing liabilities:
Interest bearing demand deposits (1) 70,629 -- -- 50,915 -- 121,544
Savings (1) ------ -- -- 88,467 -- 88,467
Time > $100,000 54,444 6,072 1,504 4,276 100 66,396
Time < $100,000 22,236 15,376 7,046 39,360 3,284 87,302
Borrowed funds 1,100 -- -- -- -- 1,100
-----------------------------------------------------------------------------------------
Total 148,409 21,448 8,550 183,018 3,384 364,809
-----------------------------------------------------------------------------------------
Interest rate sensitivity gap 92,074 (6,145) 3,494 (86,152) 70,418 73,689
Cumulative interest rate
sensitivity gap $92,074 $85,929 $ 89,423 $ 3,271 $ 73,689 $ 73,689
Interest rate sensitivity gap ratio 1.62 0.71 1.41 0.53 21.81 1.20
Cumulative interest rate
sensitivity gap ratio 1.62 1.51 1.50 1.01 1.20 1.20
</TABLE>
(1) NOW account deposits of $50,915,000, and savings deposits of $88,467,000
are included in the "one to five year" category, due to the
Corporation's experience that the interest rates on (and balances
of) these accounts are relatively insensitive to interest rate
changes.
33
<PAGE> 36
FIRST NATIONAL BANK CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The table above indicates the time periods in which interest earning assets and
interest bearing liabilities will mature or may be repriced, generally in
accordance with their contractual terms. However, this table does not
necessarily indicate the impact of general interest rate movements on the
Corporation's net interest yield because the repricing of various categories of
assets and liabilities is discretionary and is subject to competitive and other
pressures. As a result, various assets and liabilities indicated as repricing
within the same period may in fact reprice at different times and at different
rate levels.
Based on the table above, the Corporation is considered to be asset sensitive
in the one-year maturity range at December 31, 1993. In a rising rate
environment, the Corporation might be able to increase prices on interest
earning assets faster than the increase in rates on interest bearing
liabilities.
The Corporation also uses a computer model to simulate the effects of possible
interest rate changes. As a general rule, estimated negative exposure to
changing interest rates is limited to 5% of net interest income. The exposure
estimate is based on a variety of assumptions built into the model, and assumed
interest rate changes of plus or minus 200 basis points. The results of this
analysis are reported to the Asset/Liability and Funds Management Committee, to
assist in the interest rate risk management process.
________________________________________________________________________________
SECURITY YIELDS AND MATURITIES
The following table is a summary of maturities and weighted average FTE yields
of the Corporation's security portfolio on December 31, 1993 and 1992. With
the exception of the U.S. Government and its agencies, no securities of a
single issuer exceed 10% of stockholders' equity at December 31, 1993.
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
------------------------------------------------------------------------------
U.S. Government Municipal and U.S. Government Municipal and
and agency (1) other (2) and agency (1) other (2)
------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maturities:
Within 1 year $19,237 6.20% $ 4,413 9.46% $ 4,518 7 .84% $ 5,373 9.31%
After 1 to 5 years 34,329 5.55 14,932 9.21 41,069 6 .28 16,225 9.39
After 5 to 10 years 287 5.10 11,573 8.58 336 4 .56 11,776 9.04
10 years and over -- -- 2,801 9.11 -- -- 3,709 9.16
------------------------------------------------------------------------------
Total $53,853 5.78% $ 33,719 9.02% $ 45,923 6 .43% $ 37,083 9.24%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Average maturity 1 yr. 5 mos. 4 yrs. 11 mos. 1 yr. 11 mos. 4 yrs. 11 mos.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
(1) Agency securities consist primarily of mortgage backed securities. The
maturity distribution of such securities is based on average expected life,
using available prepayment estimates.
(2) Fully taxable equivalent yield for municipal obligations is based on a 34
percent federal tax rate, and is adjusted for any interest expense
disallowance.
34
<PAGE> 37
FIRST NATIONAL BANK CORP.
SELECTED QUARTERLY FINANCIAL INFORMATION *
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1993 First Second Third Fourth
Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $8,173,906 $8,113,553 $8,057,747 $8,057,633
Net interest income 5,179,501 5,240,026 5,376,419 5,325,936
Provision for loan and lease losses 225,000 225,000 225,000 150,000
Income before taxes and cumulative
effect of change in accounting principle 1,264,081 1,391,992 1,642,410 1,629,362
Income before cumulative effect of
change in accounting principle 1,019,081 1,092,992 1,258,410 1,234,362
Net income (loss) (163,919) 1,092,992 1,258,410 1,234,362
Primary earnings (loss) per share (1) (0.09) 0.54 0.55 0.53
Fully diluted earnings (loss) per share (1) (0.04) 0.49 0.55 0.53
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
1992 First Second Third Fourth
Quarter Quarter Quarter Quarter
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $8,243,406 $8,053,767 $8,048,124 $7,927,150
Net interest income 4,255,125 4,325,255 4,709,210 4,924,027
Provision for loan and lease losses 400,000 225,000 225,000 425,000
Income before taxes and cumulative
effect of change in accounting principle 418,508 863,793 992,989 1,149,872
Income before cumulative effect of
change in accounting principle 512,508 787,793 870,989 951,872
Net income 743,508 787,793 870,989 951,872
Primary earnings per share (1) 0.42 0.43 0.48 0.52
Fully diluted earnings per share (1) 0.37 0.39 0.42 0.46
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1991 First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $9,227,274 $9,163,109 $9,460,723 $8,742,029
Net interest income 3,928,181 4,153,827 4,567,982 4,226,264
Provision for loan and lease losses 325,000 350,000 575,000 625,000
Income before taxes 796,142 869,641 892,565 783,913
Net income 723,142 780,641 784,565 718,913
Primary earnings per share 0.41 0.44 0.44 0.41
Fully diluted earnings per share 0.36 0.39 0.39 0.36
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the first quarter of 1993, the cumulative effect of the change in
accounting principle was ($0.63) per share primary, and ($0.52) per share
fully diluted. For the first quarter of 1992, the cumulative effect of the
change in accounting principle was $0.13 per share primary, and $0.10 per
share fully diluted.
* Where applicable, per share data has been restated to give retroactive effect
to the 5% stock dividends in 1993 and 1992, and the 4-for-3 stock split in
1993.
35
<PAGE> 38
FIRST NATIONAL BANK CORP.
STOCKHOLDER INFORMATION
S.E.C. FORM 10-K
Copies of the Corporation's annual report on Form 10-K, as filed with the
Securities and Exchange Commission, including financial statements and
schedules, are available to stockholders without charge, upon written request.
Please mail requests to Richard J. Miller, Treasurer, First National Bank
Corp., 18800 Hall Road, P. O. Box 248, Mount Clemens, MI 48046-0248.
STOCK INFORMATION
The common stock of First National Bank Corp. is traded on The Nasdaq Stock
Market (NASDAQ) under the ticker symbol "MTCL", and is represented in the Wall
Street Journal as "FstNtlBkMI." At December 31, 1993, there were 1,284 holders
of the Corporation's common stock.
The following table shows the high and low market prices by quarter during the
last two years. The quotations reflect actual transactions as reported by
NASDAQ, and may or may not include retail mark-up, mark-down or dealer
commission. The table also shows the quarterly cash dividends declared and
paid during these two years. The market prices and dividends declared have
been adjusted for the 5% stock dividends in 1993 and 1992, and the 4-for-3
stock split in 1993.
<TABLE>
<CAPTION>
1993 Market Prices
------------------
Cash
Dividends
Quarter High Low Declared
-----------------------------------------------------------
<S> <C> <C> <C>
Fourth $23.50 $20.63 $0.19
Third 21.56 19.88 0.19
Second 22.13 18.75 0.19
First 20.00 17.50 0.18
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1992 Market Prices
--------------------
Cash
Dividends
Quarter High Low Declared
-----------------------------------------------------------
<S> <C> <C> <C>
Fourth $18.75 $17.14 $0.18
Third 18.21 16.07 0.18
Second 17.50 14.97 0.18
First 15.99 14.63 0.17
-----------------------------------------------------------
Source: NASDAQ
</TABLE>
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Corporation offers its stockholders a Dividend Reinvestment and Stock
Purchase Plan, which enables them to reinvest their dividends in First National
Bank Corp. common stock, and make optional cash payments without service
charges or brokerage commissions. At December 31, 1993, 31% of the
Corporation's stockholders had elected to participate.
Stockholders not yet enrolled in the Plan may receive a Plan Prospectus and
enrollment card by contacting Celestina Giles at (810) 307-8101, or by writing
her at 18800 Hall Road, P.O. Box 248, Mount Clemens, MI 48046-0248.
MARKET MAKERS
At December 31, 1993, the following firms were registered with NASDAQ as market
makers in First National Bank Corp. common stock:
Ryan, Beck & Co. The Chicago Corporation
80 Main Street 208 South LaSalle Street
West Orange, New Jersey 07052 Chicago, Illinois 60604
(800) 342-2325 (312) 855-7600
First of Michigan Corporation Roney and Co.
100 Renaissance Center, 26th Floor One Griswold
Detroit, Michigan 48243 Detroit, Michigan 48226
(313) 259-2600 (313) 963-6700
M.A. Schapiro & Co., Inc. Herzog, Heine, Geduld, Inc.
One Chase Manhattan Plaza, 58th floor 26 Broadway
New York, New York 10005 New York, New York 10004
(212) 425-6600 (212) 962-0300
STOCK REGISTRAR AND TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02101
INDEPENDENT AUDITORS
Deloitte & Touche
600 Renaissance Center, Suite 900
Detroit, Michigan 48243-1704
INFORMATION
News media representatives and those seeking additional information about the
Corporation should contact Richard J. Miller, Treasurer, at (810) 307-8140, or
by writing him at 18800 Hall Road, P. O. Box 248, Mount Clemens, MI
48046-0248.
ANNUAL MEETING
This year's Annual Meeting will be held at 8:30 A.M., EST, on Wednesday, April
27, 1994, at the FNB Financial Center, 18800 Hall Road, Clinton Township,
Michigan.
36
<PAGE> 1
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
EXHIBIT 21
Subsidiaries of the Registrant
<TABLE>
<CAPTION>
Name of State or Jurisdiction of
Subsidiary (1) Incorporation or Organization Description
- -------------- ----------------------------- -----------
<S> <C> <C>
First National Bank in Macomb County U.S.A. A National Bank
Bankers Fund Life Insurance Co. Arizona A reinsurer of credit
life and accident and
health insurance
</TABLE>
(1) Each of the subsidiaries does business solely under the name listed.
<PAGE> 1
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
EXHIBIT 23
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statement
No. 33-52411 of First National Bank Corp. on Form S-8, and in Registra-
tion Statement No. 33-24059 of First National Bank Corp. on Form S-3, of
our report dated January 25, 1994, incorporated by reference in the
Annual Report on Form 10-K of First National Bank Corp. for the year
ended December 31, 1993.
/s/ DELOITTE & TOUCHE
Deloitte & Touche
Detroit, Michigan
March 25, 1994
<PAGE> 1
FIRST NATIONAL BANK CORP.
FORM 10-K (continued)
EXHIBIT 99
Proxy Statement of the Corporation dated March 23, 1994
[LOGO]
FIRST NATIONAL BANK CORP.
18800 Hall Road
P.O. Box 248
Mount Clemens, Michigan 48046-0248
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 1994
TO THE HOLDERS OF SHARES OF COMMON STOCK OF FIRST NATIONAL BANK CORP.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of FIRST
NATIONAL BANK CORP. will be held at the First National Bank Corp. Headquarters,
18800 Hall Road, Clinton Township, Michigan, on Wednesday, April 27, 1994, at
8:30 A.M., local time, for the purpose of considering and voting upon the
following matters:
1. ELECTION OF DIRECTORS. To elect three Class I directors for a three-year
term, as set forth in the accompanying Proxy Statement.
2. OTHER BUSINESS. To transact such other business as may properly be
brought before the meeting or any adjournment or adjournments thereof.
Only those shareholders of record at the close of business on March 16,
1994 shall be entitled to notice of and to vote at the meeting. A list of the
shareholders entitled to notice of, and to vote at, the meeting will be
available for examination by shareholders at the office of First National Bank
Corp. during the ten-day period prior to the meeting.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the meeting in person. We would appreciate
receiving your proxy by Friday, April 22, 1994.
By Order of the Board of Directors,
Arie Guldemond
Chairman of the Board
Harold W. Allmacher
President & CEO
Dated: March 23, 1994
<PAGE> 2
FIRST NATIONAL BANK CORP.
18800 HALL ROAD
P.O. BOX 248
MOUNT CLEMENS, MICHIGAN 48046-0248
March 23, 1994
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished to shareholders of First National Bank
Corp. (the "Corporation") in connection with the solicitation of proxies by the
Board of Directors of the Corporation for use at the Annual Meeting of
shareholders of the Corporation to be held on Wednesday, April 27, 1994, at 8:30
A.M., local time, at the First National Bank Corp. Headquarters, 18800 Hall
Road, Clinton Township, Michigan, and at any and all adjournments thereof. It is
expected that the proxy materials will be mailed to shareholders on or about
March 23, 1994.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its exercise. Unless the proxy is revoked, the
shares represented thereby will be voted at the Annual Meeting or any
adjournment thereof.
The entire cost of soliciting proxies will be borne by the Corporation.
Proxies may be solicited by mail or telegraph, or by directors, officers, or
regular employees of the Corporation or its subsidiaries, in person or by
telephone. The Corporation will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their out-of-pocket expenses for
forwarding soliciting material to the beneficial owners of Common Stock of the
Corporation.
The Board of Directors, in accordance with the By-Laws of the Corporation,
has fixed the close of business on March 16, 1994 as the record date for
determining the shareholders entitled to notice of and to vote at the Annual
Meeting and at any and all adjournments thereof.
At the close of business on such record date, the outstanding number of
voting securities (exclusive of treasury shares) of the Corporation was
2,315,672 shares of $3.125 par value Common Stock, each of which is entitled to
one vote.
ELECTION OF DIRECTORS
The Corporation's Certificate of Incorporation and By-Laws provide that the
number of directors, as determined from time to time by the Board of Directors,
shall be no less than ten and no more than fifteen. The Board of Directors has
presently fixed the number of directors at ten. The Certificate of Incorporation
and By-Laws further provide that the directors shall be divided into three
classes, Class I, Class II and Class III, with each class serving a staggered
three-year term and with the number of directors in each class being as nearly
equal as possible.
The Board of Directors has nominated Harold W. Allmacher, Arie Guldemond
and Glen D. Schmidt for election as Class I directors for three-year terms
expiring at the 1997 Annual Meeting and upon election and qualification of their
successors. Each of the nominees is presently a Class I director of the
Corporation whose term expires at the April 27, 1994 Annual Meeting of the
shareholders. The other members of the Board, who are Class II and Class III
directors, will continue in office in accordance with their previous elections
until the expiration of their terms at the 1995 or 1996 Annual Meeting, as the
case may be.
It is the intention of the persons named in the enclosed proxy to vote such
proxy for the election of the three nominees listed herein. The proposed
nominees for election as directors are willing to be elected and serve; but in
the event that any nominee at the time of election is unable to serve or is
1
<PAGE> 3
otherwise unavailable for election, the Board of Directors may select a
substitute nominee, and in that event the persons named in the enclosed proxy
intend to vote such proxy for the person so selected. If a substitute nominee is
not so selected, such proxy will be voted for the election of the remaining
nominees.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Corporation's Common Stock as of February 1, 1994, by the
nominees for election as directors of the Corporation, the directors of the
Corporation whose terms of office will continue after the Annual Meeting, the
executive officer named in the Summary Compensation Table, and all directors and
executive officers of the Corporation as a group.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF CLASS
NAME OF BENEFICIAL OWNER OWNED(1) BENEFICIALLY OWNED
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Harold W. Allmacher............................................................. 44,346(2) 1.91%
Raymond M. Contesti............................................................. 11,900(8) 0.51%
James T. Cresswell.............................................................. 19,261(3)(8) 0.83%
Celestina Giles................................................................. 2,600(4) 0.11%
Arie Guldemond.................................................................. 63,568(5) 2.74%
Frank E. Jeannette.............................................................. 32,428(8) 1.40%
David A. McKinnon............................................................... 9,325(8) 0.40%
Robert D. Morrison.............................................................. 9,129(9) 0.39%
John J. Mulso................................................................... 39,736(8) 1.71%
Glen D. Schmidt................................................................. 105,929(6)(8) 4.56%
All directors and executive officers of the Corporation as a group (13
persons)...................................................................... 388,961(7) 16.17%
</TABLE>
- --------------------------------------------------------------------------------
(1) Except as otherwise indicated in the following notes, each person or member
of the group has sole voting power and investment power with respect to all
of the shares of Common Stock shown as beneficially owned, or shares such
power with a joint owner who is a member of his family. The information
provided is based on data furnished by the named persons.
(2) Includes 564 shares held in the First National Bank in Macomb County (the
"Bank") Employee Stock Ownership Plan ("ESOP") which Mr. Allmacher has the
power to vote, and 6,222 shares which Mr. Allmacher has the right to acquire
within 60 days following February 1, 1994 upon exercise of stock options
granted to him pursuant to the Corporation's 1988 Incentive Stock Option
Plan.
(3) Includes 1,617 shares owned by Mr. Cresswell's wife and son.
(4) Includes 564 shares held in the ESOP which Mrs. Giles has the power to vote
and 926 shares owned by Mrs. Giles' spouse.
(5) Includes 10,007 shares owned by Mr. Guldemond's spouse and includes 4,200
shares which Mr. Guldemond, as Chairman, has the right to acquire within 60
days following February 1, 1994 upon exercise of a stock option granted to
him pursuant to the Corporation's 1992 Stock Option Plan for Nonemployee
Directors.
(6) Includes 94,886 shares owned by Mr. Schmidt's father, E. Russell Schmidt,
dba R.C. Schmidt & Sons.
(7) Includes 1,327 shares held in the ESOP which three officers of the
Corporation as ESOP participants have the power to vote and 43,604 shares
which these officers have the right to acquire upon exercise of stock
options granted to them pursuant to the Corporation's 1988 Incentive Stock
Option Plan. Does not include 85,962 unallocated shares held in the ESOP
which the Board of Directors of the Bank (consisting of the same persons who
are directors of the Corporation) has the power to vote and shares the power
of disposition, and 71,129 allocated shares held in the ESOP over which the
Board of Directors of the Bank shares the power of disposition. If these
shares were included in the table above, the percentage beneficially owned
for all directors and executive officers as a group would be 22.58%.
(8) Includes 5,600 shares which the director has the right to acquire within 60
days following February 1, 1994 upon exercise of a stock option granted to
him pursuant to the Corporation's 1992 Stock Option Plan for Nonemployee
Directors.
(9) Includes 2,800 shares which the director has the right to acquire within 60
days following February 1, 1994 upon exercise of a stock option granted to
him pursuant to the Corporation's 1992 Stock Option Plan for Nonemployee
Directors.
2
<PAGE> 4
The table below shows the beneficial ownership of the Corporation's Common
Stock by each person who was known by the Corporation to own beneficially more
than 5% of the Corporation's Common Stock as of February 1, 1994. The
information is based on filings that have been made by such persons with the
Securities and Exchange Commission and other information that has been provided
to the Corporation by such persons. To the best of the Corporation's knowledge,
no other person owns more than 5% of the Corporation's outstanding Common Stock.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
SHARES OF
NAME AND ADDRESS BENEFICIALLY COMMON
OF BENEFICIAL OWNER OWNED STOCK
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
The Midwest Bank Fund L.P. and The Midwest Bank Fund II, Limited Partnership........ 119,635(1) 5.2%
208 S. LaSalle Street, Chicago, Illinois 60604
First National Bank in Macomb County Employees' Stock Ownership Plan................ 157,091(2) 6.8%
49 Macomb Place, Mount Clemens, Michigan 48043
</TABLE>
- ------------------------
(1) Such persons (as a group) have sole voting and dispositive power with
respect to these shares.
(2) The Employees' Stock Ownership Plan has sole voting power with respect to
85,962 of such shares and shared dispositive power with respect to 157,091
of such shares.
INFORMATION ABOUT DIRECTORS AND NOMINEES AS DIRECTORS
The following information is furnished with respect to each person who is
presently a director of the Corporation whose term of office will continue after
the Annual Meeting of shareholders, as well as those persons who have been
nominated for election as a director, each of whom is presently a director of
the Corporation as well as a director of First National Bank in Macomb County
(the "Bank"), which is the Corporation's principal subsidiary.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION
(AND PREVIOUS PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS, IF DIFFERENT) HAS SERVED YEAR WHEN TERM
AND ANY DIRECTORSHIPS OF OTHER AS DIRECTOR OR PROPOSED TERM
PUBLICLY OWNED COMPANIES SINCE (1) OF OFFICE EXPIRES
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Harold W. Allmacher, 54.......................................................... 1983 1997(2)
President and Chief Executive Officer, First National Bank Corp. and First
National Bank in Macomb County
Raymond M. Contesti, 59.......................................................... 1987 1995
Superintendent, Clintondale Community Schools
James T. Cresswell, 50........................................................... 1988 1995
President, Oakland General Underwriters (Insurance agency) (President,
Cresswell Insurance Agency, 1981-1988)
Celestina Giles, 46.............................................................. 1992 1995
Bank Officer - Executive Department, First National Bank in Macomb County
(Executive Secretary, First National Bank in Macomb County, 1984-1989)
Arie Guldemond, 76............................................................... 1981 1997(2)
President, United Bulb Co., Inc. (Wholesaler of flowers and flower bulbs)
Frank E. Jeannette, 83........................................................... 1972 1996
Attorney (Circuit Court Judge, Macomb County Circuit Court, 1967-1984)
David A. McKinnon, 45............................................................ 1990 1996
Attorney, Hardy, Lewis, Pollard & Page, P.C. (Attorney, McKinnon and
Associates, P.C., 1987-1991)
Robert D. Morrison, 67........................................................... 1983 1996
Retired (Dentist)
John J. Mulso, 72................................................................ 1970 1995
Retired (Undersheriff, Macomb County Sheriff's Department, 1955-1985)
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
NAME, AGE, PRINCIPAL OCCUPATION
(AND PREVIOUS PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS, IF DIFFERENT) HAS SERVED YEAR WHEN TERM
AND ANY DIRECTORSHIPS OF OTHER AS DIRECTOR OR PROPOSED TERM
PUBLICLY OWNED COMPANIES SINCE (1) OF OFFICE EXPIRES
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Glen D. Schmidt, 46.............................................................. 1985 1997(2)
Vice President-Operations, R.C. Schmidt and Sons (Real estate developer),
President, International Star Corporation (Formerly Star Gasket Corporation)
(Manufacturer of gaskets & seals)
</TABLE>
- ------------------------
(1) Service as a director prior to 1987, when the Corporation commenced
business, was as a director of the Bank. The Bank became a wholly-owned
subsidiary of the Corporation on April 30, 1987 when the Bank was merged
into a wholly-owned subsidiary of the Corporation (that had been formed for
purposes of the merger), and shareholders of the Bank received one share of
Common Stock of the Corporation in exchange for each share of stock of the
Bank that they held.
(2) Nominated for re-election.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Corporation has standing Audit, Nominating, and Executive Compensation
Committees of the Board of Directors.
The members of the Audit Committee consist of Frank E. Jeannette, Chairman;
Raymond M. Contesti, James T. Cresswell and John J. Mulso. The Audit Committee's
responsibilities include recommending to the Board of Directors the selection of
independent accountants, approving the scope of audit and non-audit services
performed by the independent accountants, reviewing the results of their audit,
reviewing the Corporation's internal auditing activities and financial
statements, and reviewing the Corporation's system of accounting controls and
recordkeeping.
The members of the Nominating Committee consist of Arie Guldemond,
Chairman; Harold W. Allmacher, David A. McKinnon and Celestina Giles. This
Committee's responsibilities include reviewing and making recommendations as to
the size and composition of the Board of Directors, and recommending to the
Board nominees for election as directors at the annual meetings and to fill any
vacancies that may occur between annual meetings. The Committee will consider as
potential nominees persons recommended by shareholders. Recommendations should
be submitted to the Nominating Committee in care of Harold W. Allmacher,
President and Chief Executive Officer of the Corporation. Each recommendation
should include a personal biography of the suggested nominee, an indication of
the background or experience that qualifies such person for consideration by the
Committee, and a statement that such person has agreed to serve if nominated and
elected. Shareholders who themselves wish to effectively nominate a person for
election to the Board of Directors, as contrasted with recommending a potential
nominee to the Nominating Committee for its consideration, are required to
comply with the advance notice and other requirements set forth in Article
Twelfth of the Corporation's Certificate of Incorporation.
The Executive Compensation Committee consists of Arie Guldemond, Chairman,
Robert D. Morrison, and John J. Mulso. The Executive Compensation Committee's
responsibilities include considering and recommending to the Board of Directors
any changes in compensation and benefits for officers of the Corporation. At
present, all officers of the Corporation are also officers of the Bank, and
although they receive compensation from the Bank in their capacity as officers
of the Bank, they presently receive no separate cash compensation from the
Corporation. The Executive Compensation Committee is responsible for awarding
incentive stock options to executive management of the Corporation and the Bank.
In 1993 there were a total of thirteen meetings of the Board of Directors
of the Corporation. Each director attended at least 75% of the total number of
meetings of the Board of Directors held during the period that the director
served on the Board. There were three meetings of the Audit Committee, one
meeting of the Nominating Committee and two meetings of the Executive
Compensation Committee, during 1993. Each member of the Corporation's Board of
Directors attended at least 75% of the aggregate number of meetings held by all
standing committees of the Board of Directors of the Corporation on which they
served during the periods that they served.
4
<PAGE> 6
Each director of the Bank, including Arie Guldemond, the Chairman of the
Board of the Corporation, receives compensation in his capacity as a director of
the Bank. In such capacity, each director of the Bank receives the following
compensation for meetings of the Bank's Board of Directors and its committees
that he or she attends: $1,750 for each regular meeting of the Board of
Directors, and no compensation for meetings of a committee. In 1993 there were
12 regular meetings of the Board of Directors of the Bank. Members of the Board
of Directors of the Corporation receive no additional cash compensation for
serving on the Corporation's Board or any of its committees, except for Mr.
Guldemond who receives a Chairman's fee of $2,500 per month.
In addition, members of the Corporation's Board of Directors who are not
employees of the Corporation or any of its affiliates ("Nonemployee Directors"),
each receive one option to purchase shares of Common Stock of the Corporation
pursuant to the Corporation's 1992 Stock Option Plan for Nonemployee Directors
("Nonemployee Director Option Plan"), which was approved by the Corporation's
shareholders at the 1992 Annual Meeting. Pursuant to the Nonemployee Director
Option Plan, each Nonemployee Director as of the date of the 1992 Annual
Meeting, automatically received an option to acquire 14,000 shares of the
Corporation's Common Stock, except for the Chairman of the Board, who received
an option to acquire 21,000 shares (the "Chairman Option"). Nonemployee
Directors who are first elected after the 1992 Annual Meeting and on or before
the 1996 Annual Meeting, will receive an option for fewer shares, as specified
in the Nonemployee Director Option Plan. The exercise price under each option is
the fair market value per share on the date of grant. Each option, other than
the Chairman Option, is immediately exercisable for 2,800 shares when granted.
The Chairman Option is exercisable for 4,200 shares when granted. Thereafter, as
of the date of each Annual Meeting, each option is exercisable for an additional
2,800 shares, or in the case of the Chairman Option, 4,200 shares, until it is
exercisable in full. Each option expires not later than seven years after its
date of grant. The number of shares shown above have been adjusted for the 5%
stock dividend and the four-for-three stock split in 1993.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1993 the Bank's Compensation Committee was comprised of three outside
directors (Dr. Morrison, Mr. Guldemond, and Mr. McKinnon), and President and
Chief Executive Officer, Harold W. Allmacher. Mr. Allmacher was not present
during committee meetings involving the discussion of his compensation.
REPORT OF THE COMPENSATION
AND EXECUTIVE COMPENSATION COMMITTEE
The Securities and Exchange Commission ("S.E.C.") has promulgated rules
regarding the presentation of certain statistical information in regards to
salaries and certain benefits paid to each corporation's CEO and the four most
highly compensated individuals earning over $100,000. This information along
with the Report of the Compensation and Executive Compensation Committees and
the Corporation's stock performance graph are presented below. The Corporation's
and the Board's policies and practices pertaining to executive officer
compensation have been in practice for a number of years.
All employees of the Corporation are also employees of the Corporation's
principal subsidiary, First National Bank in Macomb County (the "Bank"). All
employee salaries as such are paid by the Bank.
The Bank's Compensation Committee is responsible for setting the salary
levels of all officers of the Bank including its executive officers. Following
review and approval by the Compensation Committee, all issues pertaining to
officer and executive salaries are submitted to the full Board of Directors of
the Bank for approval.
5
<PAGE> 7
SALARIES AND BONUSES
In setting the salary level of and awarding bonuses to the named executive
in the Summary Compensation Table and other executive officers, the compensation
amounts are set based upon the Compensation Committee's perception of the
performance of such persons. The Compensation Committee looks at many factors
including, but not limited to:
- Overall performance of the Bank and Corporation as compared to strategic
goals
- Performance of the Bank and Corporation as compared to peers
- Length of service to the Bank and Corporation
- Comparisons of salary levels to similar executives within the industry
- The performance of the Corporation's common stock
- Leadership of the Bank and its employees
- The executive's stature in the community and his value as a
representative of the Bank and Corporation
INCENTIVE STOCK OPTION PROGRAM
Under the Corporation's 1988 Incentive Stock Option Plan which was approved
by shareholders, stock options are granted to the Bank's senior management and
other key employees. The Executive Compensation Committee of the Corporation is
responsible for awarding the stock options. These awards are based on the
Committee's perception of the performance of such persons. These options are
also awarded to give senior management and key employees an additional interest
in the Corporation from the shareholders' perspective.
Compensation and Executive Compensation Committees
<TABLE>
<S> <C>
Harold W. Allmacher Arie Guldemond
David A. McKinnon John J. Mulso
Robert D. Morrison
</TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation received by the named
executives for each of the three years ended December 31.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
- ----------------------------------------------------------------------- COMPENSATION
NAME AND ------------ ALL OTHER
PRINCIPAL OPTIONS COMPENSATION
POSITION YEAR SALARY BONUS (1) (2)
- -------------------------------------- ----- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Harold W. Allmacher,
President & CEO..................... 1993 $ 175,752 $ 67,600 14,000 $7,541
1992 $157,308 $52,250 14,000 $6,637
1991 $152,615 $38,594 7,350 $6,438
</TABLE>
- -------------------------
(1) Adjusted for 5% stock dividends in 1992 and 1993, and the 4-for-3 stock
split in 1993.
(2) The amounts shown represent contributions by the Bank under the Bank's
401(k) Employee Salary Reduction Plan and the Bank's Employee Stock
Ownership Plan, pursuant to which substantially all salaried employees of
the Bank participate.
6
<PAGE> 8
OPTIONS GRANTED IN 1993
The following table provides information on options granted to the named
executive during the year ended December 31, 1993.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- --------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SHARES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES BASE PRICE EXPIRATION -----------------------
NAME GRANTED IN 1993 PER SHARE(1) DATE 5% 10%
- ---------------------------------- ---------- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harold W. Allmacher,
President & CEO................. 14,000 40.0% $18.57 03/10/2000 $ 105,838 $ 246,647
</TABLE>
- -------------------------
(1) The exercise price equals the prevailing market price on the date of the
grant. The exercise price may be paid in cash, by the delivery of previously
owned shares, or a combination thereof.
AGGREGATED STOCK OPTION EXERCISES IN 1993
AND YEAR END OPTION VALUES
The following table provides information on the exercise of stock options
during the year ended December 31, 1993 by the named executive and the value of
unexercised options at December 31, 1993.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE 12/31/93 12/31/93
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------ ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Harold W. Allmacher,
President & CEO....... 7,753 $62,832 6,222/21,467 $ 43,118/$113,767
</TABLE>
- -------------------------
(1) Aggregate market value of shares acquired at exercise, less the aggregate
exercise price paid by the employee to the Corporation.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As of March 28, 1990, the Bank established a Supplemental Executive
Retirement Plan (the "Supplemental Plan"). The Supplemental Plan is intended to
provide supplemental retirement benefits for management or highly compensated
employees of the Bank who, from time to time, are specifically designated by the
Board of Directors of the Bank as eligible to receive benefits under the
Supplemental Plan ("Designated Executives").
Under the Supplemental Plan, a Designated Executive whose employment with
the Bank terminates at or after attaining age 55, other than for cause
("Retirement"), will be entitled to an annual supplemental retirement benefit
for the five years following his or her Retirement. The annual supplemental
retirement benefit will be an amount equal to 50% of the Designated Executive's
base salary as of the date of his or her Retirement. Payment of the annual
supplemental retirement benefit will be made in monthly installments.
During 1993, Mr. Allmacher's base salary for purposes of the Supplemental
Plan was $175,752.
CERTAIN TRANSACTIONS
The Bank has had, and expects in the future to have, loan and other
financial transactions in the ordinary course of business with the Corporation's
directors, executive officers, and principal shareholders (and their associates)
on substantially the same terms as those prevailing for comparable transactions
with others. All such transactions (i) were made in the ordinary course of
business, (ii) were made on substantially the same terms, including interest
rates and collateral on loans, as those prevailing at the time for comparable
transactions with other persons, and (iii) in the opinion of management did not
involve more than the normal risk of collectibility or present other unfavorable
features.
7
<PAGE> 9
SHAREHOLDER RETURN PERFORMANCE GRAPH
Shown below is a line graph comparing the yearly percentage change in the
cumulative total shareholder return on the Corporation's Common Stock with that
of the cumulative total return of the NASDAQ U.S. Stock Index and the NASDAQ
Bank Stock Index for the five year period ending December 31, 1993. The
following information is based on an investment of $100.00, on December 31,
1988, in the Corporation's Common Stock, the NASDAQ U.S. Stock Index and the
NASDAQ Bank Stock Index, with dividends reinvested.
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL RETURN FOR
THE YEARS ENDING DECEMBER 31,
<TABLE>
<CAPTION>
FIRST NA-
MEASUREMENT PERIOD TIONAL BANK NASDAQ BANK
(FISCAL YEAR COVERED) CORP. NASDAQ U.S. STOCKS
<S> <C> <C> <C>
1988 100.000 100.000 100.000
1989 105.283 121.244 111.154
1990 100.096 102.958 81.400
1991 139.828 165.206 133.571
1992 174.399 192.104 194.187
1993 219.195 219.214 221.319
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and directors, and persons who own more than ten percent
of a registered class of the Corporation's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Pursuant to regulations adopted by the Securities and Exchange Commission,
officers, directors and greater than ten-percent shareholders are required to
furnish the Corporation with copies of all Section 16(a) forms that they file.
Based solely on a review of the copies of such forms furnished to the
Corporation, or written representations that no Forms 5 were required, the
Corporation believes that during 1993 all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with, except that one report showing receipt of a stock
option pursuant to the Nonemployee Director Option Plan was filed late by each
of Raymond M. Contesti, James T. Cresswell, Arie Guldemond, Frank E. Jeannette,
David A. McKinnon, Robert D. Morrison, John J. Mulso, and Glen D. Schmidt, and
one report showing an indirect purchase was filed late by Glen D. Schmidt.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche as the Corporation's
principal independent auditors for the year ending December 31, 1994.
Representatives of Deloitte & Touche plan to attend the
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Annual Meeting of Shareholders, will have the opportunity to make a statement if
they desire to do so, and will respond to appropriate questions by shareholders.
SHAREHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Pursuant to the General Rules under the Securities Exchange Act of 1934, a
proposal submitted by a shareholder for the 1995 Annual Meeting of shareholders
must be received by the Secretary of the Corporation, 18800 Hall Road, P.O. Box
248, Mount Clemens, Michigan 48046-0248, by November 26, 1994 in order to be
eligible to be included in the Corporation's Proxy Statement for that meeting.
OTHER MATTERS
The Board of Directors does not know of any other matters to be brought
before the Annual Meeting. If other matters are presented upon which a vote may
properly be taken, it is the intention of the persons named in the proxy to vote
the proxies in accordance with their best judgment.
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