<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
---
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number: 0-17482
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
---
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------- ------
County Bank Corp
Michigan EIN 38-0746239
83 W. Nepessing St., Lapeer, MI 48446
(810) 664-2977
' Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
1,200,000 shares, Common Stock, $5.00 par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was re- quired to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
----- -----
The aggregate market value of the voting stock held by nonaffiliates
of the registrant was $22,706,623.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of latest practicable date.
There are 593,236 shares of common stock ($5.00 par value) outstanding
as of December 31, 1996.
The following documents are incorporated into the 10-K by reference:
The Annual Report to Shareholders, December 31, 1996, Part I, Part II.
Proxy Statement dated March 19, 1997, Part III.
<PAGE> 2
FORM 10K
ITEM 1. BUSINESS
County Bank Corp, a one bank holding company, was formed on January 3, 1989 by
converting and exchanging, except for the shares of dissenting shareholders,
each share of Lapeer County Bank & Trust Co. (the Bank) into one share of
County Bank Corp (the Corporation). As a result, the Corporation became the
sole shareholder and parent of the Bank.
The Bank was chartered in 1902, is headquartered in Lapeer, MI., and serves all
of Lapeer County (the County) and portions of surrounding counties. Lapeer has
an approximate population of 6,500 people, while the County has in excess of
75,000 people. Lapeer is located 60 miles north of metropolitan Detroit, the
largest city in Michigan, 30 miles north of Pontiac, MI., and 20 miles east of
Flint, MI.
The Corporation serves the County through the subsidiary Bank at seven
locations. The main office is located at 83 W. Nepessing St., in downtown
Lapeer. A drive-in location is located at the corner of Pine St. and Clay St.,
across from the main office. A full service office is located in the south end
of Lapeer at 637 south M-24. Attica Township is served by a full service Attica
Office located at 4515 Imlay City Rd. Full service offices are located in Elba
Township at 5508 Davison Road and in Metamora Township on M-24, south of Lapeer.
Two Automated Teller Machines are installed at offsite locations. One is
located inside Lapeer Regional Hospital, 1375 N. Main St., Lapeer, and the other
is located inside Lapeer Food Center, 873 S. Main St., Lapeer. The Bank opened
a full service branch located in a grocery store at Bryan's Market, 6002 N.
Lapeer Rd., North Branch, MI.
The Corporation offers commercial banking services through the Bank at the main
office and the six branches throughout the County. The customer base extends to
all sections of the County and includes all segments of the population,
including individuals, retail businesses, farming operations, and industrial
plants. This locally-owned full service bank offers all traditional deposit and
loan services. The Trust department, with full trust powers, is in its third
decade of providing customers with employee benefit plans, estate planning
services, and complete trust services.
The Corporation faces substantial competition for financial services. Our chief
competitor is First of America Bank-Southeast, which has six branches throughout
the County. During 1993, Independent Bank Corp of Ionia, MI. acquired Pioneer
Bank and Kingston Bank which operate three locations in the Bank's market area.
NBD Bank, NA has a branch office north of the city limits of Lapeer. Citizens
Commercial and Savings Bank of Flint also has a branch in the County. Tri-County
Bank has offices in Imlay City and Almont. There are two offices of Citizen's
Federal Savings and Loan. The County is served by two credit unions, Lapeer
County School Employees Credit Union and the Lapeer County Community Credit
Union. There are three securities brokers, First of Michigan Corp., Paine
Webber & Co., and Edward D. Jones & Co. A number of other securities brokers
serve the County through Flint offices. Comerica Bank operates a Comerimart
branch in a local grocery store.
The Corporation is regulated as a bank holding company by the Board of Governors
of the Federal Reserve System pursuant to the terms of the Bank Holding Company
Act of 1956. This act requires the approval of the Federal Reserve Board before
the Corporation may acquire or merge with any other banking institution, limits
the activities that the Corporation may engage in to activities so closely
related to banking or managing or controlling banks as to be a proper incident
thereto, and prohibits the Corporation from acquiring an interest in a bank
located outside the state in which
County Bank Corp 1996 10-K Page 1
<PAGE> 3
the operations of its subsidiaries are principally conducted, unless such
acquisition is specifically authorized by the state in which the acquired bank
is located. In November 1985, the State of Michigan passed legislation to allow
interstate banking with neighboring states which also have laws that permit
interstate banking. The Corporation is obligated to comply with the regulations
of the Securities and Exchange Commission. As a state member institution, the
Bank is obligated to comply with the regulations of the Federal Reserve Board
and the regulations of the Financial Institutions Bureau (FIB) of the State of
Michigan. The Financial Institutions Bureau of the State of Michigan has the
authority to examine and regulate the Bank and works closely with the Federal
Reserve Bank of Chicago coordinating alternate examinations of the Bank. The
FIB has the authority to issue cease and desist orders against unsafe and
unsound banking practices, and the authority to close a bank in the event it
should become insolvent. In addition, the Bank's business is directly affected
by the monetary policies of the Board of Governors of the Federal Reserve
System. The Bank's deposits are insured by the Federal Deposit Insurance
Corporation.
The Federal Deposit Insurance Corporation Improvement Act of 1991 creates a new
statutory framework that applies to every insured depository institution a
system of supervisory actions indexed to the capital level of the individual
institution. The purpose of the statutory provision is to resolve the problems
of insured depository institutions at the least possible long term loss to the
deposit insurance fund. Five capital categories have been established from well
capitalized to critically undercapitalized. Each category below well
capitalized brings an increasing number of supervisory actions intended to
strengthen the institution. These actions range from limitations on the
acceptance of brokered deposits to requiring dismissal of management,
divestiture of institutions by the parent, approval of capital distributions,
and more. In addition, regulatory authority is expanded by the development of
operating and management standards, review of executive compensation, increased
accounting principles, and increased independence of Audit committees. The
number of full time equivalent employees totaled 117 and 119 on December 31,
1996 and 1995 respectively.
County Bank Corp 1996 10-K Page 2
<PAGE> 4
Guide 3. Statistical Disclosures:
I. Distribution of Assets, Liabilities and Stockholder's Equity; Interest Rates
and Interest Differential.
Refer to Table I and Table II for a presentation of the information required by
this item.
II. Investment Portfolio
Refer to Footnote 3 of the accompanying financial statements on page 9 of the
Annual Report to shareholders for the information required by this item, except
for:
Weighted average yields on a tax equivalent basis:
<TABLE>
<CAPTION>
Book Yield (%)
Value (000's)
<S> <C> <C>
US Government securities
Maturity distribution:
One year or less: $6,002 6.44
Over one year through five years: 7,110 6.99
Over five years through ten years: --
Over ten years: --
State and political subdivisions
Maturity distribution:
One year or less: 1,652 8.79
Over one year through five years: 5,937 6.46
Over five years through ten years: 5,650 8.01
Over ten years: 1,141 8.07
Corporate securities
Maturity distribution:
One year or less: 40 6.049
Over one year through five years: --
Over five years through ten years: --
Over ten years: --
Mortgage-backed securities 18,830 6.95
Other securities 1,046 4.14
</TABLE>
County Bank Corp 1996 10-K Page 3
<PAGE> 5
<TABLE>
<CAPTION>
TABLE I. AVERAGE ASSETS (000'S) INCOME (000'S) YIELD (%)
Interest margin analysis as a
% of average earning assets 1996 1995 1994 1996 1995 1994 1996 1995 1994
Assets
Securities:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
US Gov't & agencies..................... 31,543 35,477 37,661 1,994 2,110 1,934 6.32% 5.95% 5.14%
State and political subdivisions*....... 14,167 14,886 11,913 1,159 1,255 1,027 8.18% 8.43% 8.62%
Corporate securities.................... 64 140 248 4 8 16 6.25% 5.71% 6.45%
Other securites......................... 854 579 477 35 32 28 4.10% 5.53% 5.87%
Total investment securities............. 46,628 51,082 50,299 3,192 3,405 3,005 6.85% 6.67% 5.97%
Bank time deposits...................... 0 0 0 0 0 0 0.00% 0.00% 0.00%
Federal funds sold...................... 4,657 3,053 4,828 248 179 195 5.33% 5.86% 4.04%
Loans:
Commercial loans*....................... 51,247 48,219 45,474 4,660 4,531 3,942 9.09% 9.40% 8.67%
Real estate mortgages................... 30,784 23,729 22,510 2,564 2,064 1,885 8.33% 8.70% 8.37%
Consumer loans.......................... 28,403 29,047 27,201 2,451 2,400 2,114 8.63% 8.26% 7.77%
Total loans............................. 110,434 100,995 95,185 9,675 8,995 7,941 8.76% 8.91% 8.34%
Total average earning assets............ 161,719 155,130 150,312 13,115 12,579 11,141 8.11% 8.11% 7.41%
Total average assets.................... 172,312 165,081 159,748
Interest bearing liabilities:
Deposits:
NOW account deposits.................... 37,176 29,383 22,369 1,206 866 496 3.24% 2.95% 2.22%
Savings deposits........................ 41,595 44,813 49,492 1,223 1,309 1,251 2.94% 2.92% 2.53%
Time deposits over $100,000............. 4,507 5,342 4,632 239 306 231 5.30% 5.73% 4.99%
Other time deposits..................... 41,683 42,835 43,931 2,153 2,165 1,880 5.17% 5.05% 4.28%
Total deposits.......................... 124,961 122,373 120,424 4,821 4,646 3,858 12.97% 3.80% 3.20%
Federal funds purchased................. 16 129 0 1 8 0 0.02% 6.20% 0.00%
Long-term debt.......................... 0 0 0 0 0 0.00% 0.00% 0.00%
Total interest bearing liabilities...... 124,977 122,502 120,424 4,822 4,654 3,858 3.86% 3.80% 3.20%
Demand deposits......................... 27,121 24,908 23,531
Other liabilities....................... 1,355 1,079 986
Stockholders' equity.................... 18,859 16,592 14,807
Total liabilities and
stockholders' equity.................... 172,312 165,081 159,748
Interest expense as a % of
average earning assets.................. 2.98% 3.00% 2.57%
Net interest margin/net interest
yield as a % of
average earning assets.................. 8,293 7,925 7,283 5.13% 5.11% 4.85%
Net interest yield as a % of
average assets.......................... 4.81% 4.80% 4.56%
</TABLE>
* A tax adjustment of $449, $465, and $373 has been added to 1996, 1995 and 1994
income respectively to reflect the impact of a 34% Federal income tax rate in
each year.
Non accruing loans are reported in their related categories and reduce the
related yields.
<PAGE> 6
<TABLE>
<CAPTION>
Rate/volume variance analysis 1996 vs 1995 1995 vs 1994
Change in Change in Change in Total Change in Change in Change in Total
Volume Rate Rate/volume Volume Rate Rate/volume
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Securities:
US Gov't & agencies (234) 133 (15) (116) (112) 306 (18) 176
State and political subdivisions* (61) (38) 2 (97) 256 (22) (6) 228
Corporate securities (4) 1 (1) (4) (7) (2) 1 (8)
Other securites 15 (8) (4) 3 6 (2) 0 4
Total investment securities (284) 88 (18) (214) 143 280 (23) 400
Bank time deposits 0 0 0 0 0 0 0 0
Federal funds sold 94 (16) (9) 69 (72) 88 (32) (16)
Loans:
Commercial loans* 285 (146) (9) 130 238 331 20 589
Real estate mortgages 614 (88) (26) 500 102 73 4 179
Consumer loans (53) 107 (3) 51 143 133 10 286
Total loans 846 (127) (38) 681 483 537 34 1,054
Total average earning assets 656 (55) (65) 536 554 905 (21) 1,438
Interest bearing liabilities:
NOW account deposits 230 87 23 340 156 163 51 370
Savings deposits (94) 9 (1) (86) (118) 195 (19) 58
Time deposits over $100,000 (48) (23) 4 (67) 35 34 6 75
Other time deposits (58) 48 (2) (12) (47) 340 (8) 285
Total deposits (3,235) 11,223 (7,814) 175 26 732 30 788
Federal funds purchased 272 (8) (271) (7) 0 0 8 8
Long-term debt 0 0 0 0 0 0 0 0
Total interest bearing liabilities (2,963) 11,215 (8,085) 168 26 732 38 796
Net Interest Income 3,619 (11,270) 8,020 368 528 173 (59) 642
------ ------- ------ ---- ---- ---- --- ----
</TABLE>
<PAGE> 7
III. Loan Portfolio
A. Types of Loans
Refer to Footnote 4 of the accompanying financial statements on page 10 of
the Annual Report to shareholders for the information required by this item.
B. Maturities and Sensitivities of Loans to Changes in Interest Rates as of
December 31, 1996.
(000's)
<TABLE>
<CAPTION>
Commercial Loans
<S> <C>
Fixed rate loans with a maturity of:
Three months or less $ 3,328
Over three months through twelve months 6,813
One year through five years 19,107
Over five years 435
-------
Total fixed rate loans 29,683
Floating rate loans
with a repricing frequency of:
Quarterly or more frequently 20,989
-------
Total Commercial loans $50,672
=======
Real-estate construction loans:
Fixed rate loans with a maturity of
over three months through twelve months: 2,835
</TABLE>
<TABLE>
<CAPTION>
C. Risk Elements.
1. Nonaccrual, Past Due and Restructured Loans. (000's)
12/31/96 12/31/95
<S> <C> <C>
Loans 90 days past due and still accruing
Commercial loans 12 37
Real estate loans 0 0
Installment loans 30 32
---- ----
Total loans 90 days past due 42 69
==== ====
Non-accruing loans
Commercial loans 302 381
Real estate loans 0 0
Installment loans 23 2
---- ----
Total non accruing loans 325 383
==== ====
</TABLE>
There were no restructured loans.
For the year ended 1996, if the loans reported as nonaccrual loans had earned at
the contracted interest rate, $41,000 of interest income would have been
recorded. No interest income was recorded on these loans in 1996.
County BankCorp 1996 10-K Page 4
<PAGE> 8
It is the policy of the Corporation to place loans on a nonaccruing status when
management feels that a significant risk of non-repayment exists. Criteria for
evaluating repayment risk will include the borrowers payment history, past due
status, and financial condition. Loans on which the required payment of
principal or interest has not been received within 90 days of the due date are
placed on nonaccrual status.
2. Potential Problem Loans.
As of December 31, 1996 management identified eleven potential problem loans in
the commercial loan portfolio. The eleven loans totaled $513,000 and management
allocated $30,000 of the allowance for loan losses for these credits.
3. Foreign Outstandings
Not Applicable
4. Loan Concentrations
As of December 31, 1996 there were no loan concentrations other than those
categories already reported that exceed 10% of total loans.
D. Other Interest Bearing Assets
As of December 31, 1996, there was no other interest bearing assets that would
have been classified 90 days past due and still accruing if it were a loan.
IV. Summary of Loan Loss Experience
<TABLE>
<CAPTION>
Analysis of Allowance for Loan Losses (000's)
12/31/96 12/31/95
<S> <C> <C>
Balance at beginning of period $1,687 $1,624
Charge offs:
Commercial 62 186
Real-estate 0 0
Installment 48 19
Construction 0 0
------ ------
Total charge offs 110 205
Recoveries:
Commercial 72 9
Real-estate 0 0
Installment 36 19
Construction 0 0
------ ------
Total Recoveries 108 28
Net Charge offs 2 177
------ ------
Provision charged to operations 120 240
Balance at end of period $1,805 $1,687
====== ======
Ratio of net charge offs during the period
to average loans during the period 0.03% 0.18%
</TABLE>
County BankCorp 1996 10-K Page 5
<PAGE> 9
Net charged off loans totaled $3,000 in 1996. The Reserve for loan losses
totaled 1.53% of total loans on December 31, 1996. Management provided $120,000
from earnings to the reserve in order to maintain the high level of protection.
Loans have been growing aggressively, and management intends to maintain a high
quality portfolio with solid protection for the future.
Net charged off loans were $177,000 in 1995. The loan portfolio is growing as
demand stays high. Management allocated $240,000 of earnings to the reserve to
maintain a high level of protection.
B. Allocation of the Allowance for Loan Losses (000's)
<TABLE>
<CAPTION>
1996 1995
Balance at December 31, Applicable to:
Amount % of loans Amount % of loans
in category in category
to total to total
loans loans
<S> <C> <C> <C> <C>
Commercial 181 43.40% 124 44.30%
Real-estate mortgage 0 27.83% 10 23.30%
Installment 35 26.36% 14 29.10%
Construction -- 2.41% -- 3.30%
Unallocated 1,589 N/A 1,539 N/A
------ ------
$1,805 100.00% $1,687 100.00%
====== ======
</TABLE>
V. Deposits
A. Refer to Item I of the Guide 3 statistical disclosures for a presentation of
the information required by this item.
B. Not applicable
C. Not applicable
Maturities of time certificates of deposits of $100,000 or more. (000's)
Three months or less $2,331
Over three months through six months 976
Over six months through twelve months 551
Over twelve months 1,072
------
$4,930
======
E. Not applicable
County Bank Corp 1996 10-K Page 6
<PAGE> 10
VI. Return on Equity and Assets. 1996 1995
Return on assets (%) 1.73 1.56
Return on equity (%) 15.80 15.51
Dividend payout ratio (%) 30.46 29.45
Equity to assets ratio (%) 10.94 10.05
VII. Short-Term Borrowings
Not applicable
ITEM 2. PROPERTY
The following is a tabulation of facilities owned by the Bank.
App. Building Date
Description/Location Square Feet Occupied
Main Office 34,948 09/15/02
83 W. Nepessing St.
Lapeer, MI
Elba Office 3,744 10/22/85
5508 Davison Rd
Lapeer, MI
Pine-Clay Office 528 01/05/68
305 Pine St.
Lapeer, MI
Southgate Office 1,700 11/02/70
637 S. Main St.
Lapeer, MI
Attica Office 4,158 6/27/79
4515 Imlay City Rd.
Attica, MI
Land directly east of 01/01/79
the Southgate office.
Metamora Office 2,668 09/18/89
3414 S. Lapeer Rd
Metamora, MI
County Bank Corp 1996 10-K Page 7
<PAGE> 11
ITEM 3. LEGAL PROCEEDINGS
No material legal proceeding is pending to which the Corporation or the Bank is
party, or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
The information called for by the items within this part is included in the
Corporation's Annual Report to shareholders for the year ended December 31,
1996, and is incorporated herein by reference, as follows:
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Page 16
ITEM 6. SELECTED FINANCIAL DATA.
Page 15, except for: (000's)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total Assets $177,786 $169,877 $166,666 $157,664 $154,159
Long Term Debt $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
County Bank Corp 1996 10-K Page 8
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
EARNINGS
Major components of the operating results of the Corporation for 1996, 1995, and
1994 are presented in the accompanying table, Summary of Operations. A
discussion of these results is presented in greater detail in subsequent pages.
Summary of Operations
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Interest income 12,666 12,114 10,768 10,492 11,329
Interest expense 4,823 4,654 3,858 4,023 5,081
------ ------ ------ ------ ------
Net interest income 7,843 7,460 6,910 6,469 6,248
Provision for possible loan losses 120 240 120 275 378
Net interest income after provision
------ ------ ------ ------ ------
for possible loan losses 7,723 7,220 6,790 6,194 5,870
Other income 2,216 1,971 1,800 1,666 1,450
Other expenses 5,739 5,669 5,624 5,507 5,602
------ ------ ------ ------ ------
Income before provision for
Federal income tax 4,199 3,522 2,966 2,353 1,718
Provision for Federal income taxes 1,220 948 848 596 388
------ ------ ------ ------ ------
Net income 2,980 2,574 2,118 1,757 1,330
====== ====== ====== ====== ======
Per Share
Net income 5.02 4.34 3.57 2.96 2.24
====== ====== ====== ====== ======
Dividends declared 1.53 1.27 1.04 0.87 0.72
====== ====== ====== ====== ======
</TABLE>
Net Interest Income
The Bank experinced strong loan demand through the entire year in all categories
of loans. Total growth in loans was 11.7%, led by mortgage growth of 32.9%.
Deposit growth was a moderate 3.7%. Customers chose to utilize liquid accounts
tied to market rates. The Bank's Choice account that offers benefits
experienced growth of 60%. This growth was offset by declining balances in
regular savings, money market deposit accounts and time certificates of deposit.
The strong loan growth coupled with moderate deposit growth increased the Bank's
loan to deposit ratio to 75.1%. Net interest yield on a Federal tax equivalent
(FTE) basis as a percent of average assets was 4.8%, 4.8% and 4.6% for 1996,
1995 and 1994, respectively. The FTE adjustment is derived by deviding tax
exempt interest income by .66 to reflect the Corporation's 34% tax rate. The
Corporation continues working to match rate sensitive assets and rate sensitive
liabilities to maintain margins in differing rate environments.
County Bank Corp 1996 10-K Page 9
<PAGE> 13
Rate sensitivity analysis (000's), December 31, 1996
<TABLE>
<CAPTION>
Repricing period in days 0-30 31-90 91-180 181-365 0-365 Over 365
<S> <C> <C> <C> <C> <C> <C>
Rate sensitive assets (RSA)
Federal funds sold 1,200 0 0 0 1,200 0
Investment securities 10,173 1,000 2,049 1,730 14,952 32,457
Loans 33,487 2,858 7,215 10,078 53,638 63,836
------- ------ ------ ------ ------- -------
Total rate sensitive assets 44,860 3,858 9,264 11,808 69,790 96,293
Rate sensitive liabilities (RSL)
Demand deposits 31,666 0 0 0 31,666 9,514
Savings deposits 20,491 0 0 0 20,491 20,801
Time deposits 5,802 5,444 7,748 7,278 26,272 20,340
------- ------ ------ ------ ------- -------
Total rate sensitive liab. 57,959 5,444 7,748 7,278 78,429 50,655
Repricing gap (RSA-RSL) (13,099) (1,586) 1,516 4,530 (8,639) 45,638
As a percent of capital -66.0% -8.0% 7.6% 22.8% -43.5% 229.8%
As a percent of total assets -7.4% -0.9% 0.9% 2.5% -4.9% 25.7%
</TABLE>
In the above table, scheduled payments on loans and securities are included at
the earlier of their next scheduled principal reduction or repricing
opportunity.
Provision for Possible Loan Losses
Management realizes that loan losses cannot be predicted with absolute
certainty. The Corporation adheres to a loan review procedure that identifies
loans that may develop into problem credits. The adequacy of the reserve for
possible loan losses is evaluated against the listings that result from the
review procedure, historical net loan loss experience, current and projected
loan volumes, the level and composition of non-accrual, past due and
renegotiated or reduced rate loans, current and anticipated economic conditions,
and an evaluation of each borrower's credit worthiness. Based on these factors,
management determines the amount of the provision for possible loan losses
needed to maintain an adequate reserve for possible loan losses. The amount of
the provision for possible loan losses is recorded as current expense and may be
greater or less than the actual net charged off loans.
Activity related to the reserve for possible loan losses resutled in net charged
off loans of $2,000 in 1996. Net charged off loans were $177,000 in 1995, and
recoveries of $32,000 were posted in 1994. Consequently, provisions for possible
loan losses were $120,000, $240,000, and $120,000 for the respective periods.
Management intends to maintain high levels of protection in the reserve through
this period of aggressive growth. The ratio of reserve for possible loan lossed
to gross loans was 1.5%, 1.6% and 1.7% on December 31, 1996, 1995 and 1994,
respectively.
Non-interest Income
Non-interest income is composed of trust department income, service charges on
deposit accounts, fees for providing other services to customers, gains on
securities sales and other income. Service charges on deposit accounts grew 3.5%
in 1996 following a 4.2% increase in 1995. Other income increased 28.1% as a
resut of the repayment of two loans that were previously carried as nonaccrual
loans. The customers were on the way to working out their problems and the
loans were renewed on an accrual basis. Interest that was earned but not
reported as income during the period of nonaccrual
County Bank Corp 1996 10-K Page 10
<PAGE> 14
was capitalized in the renewed loan. This interest was carried in the general
ledger as deferred credits until the customers fully established their improved
repayment capability. The deferred credits were recorded as income on an
interest basis as the new loans were repaid. Both properties were sold, and the
Bank recovered all of its investment. The deferred credits were booked directly
to other income rather than interest income so that comparative yield
calculations would not be distorted. The total amount of deferred credits posted
to other income total $242,000.
Non-interest expense
Major components of non-interest expense are salaries and employee benefits,
occupancy and equipment expenses, and other operating expenses. Salaries and
employee benefits, the largest component of non-interest expense, increased 4%
in 1996 after a 10.3% increase in 1995. The Bank's Board of Directors
instituted a bonus plan in 1995 based on the Bank's earnings. Full time
equivalent employees decreased from 119 at year end 1995 to 117 at year end
1996. Occupancy expenses increased 4.9% after a 7.9% decrease in 1995.
Depreciation expenses increased as a result of remodeling older areas of the
Bank's main office building and continued investment in current technology.
Other expenses decline 6% primarily due to the payment of the statutory minimum
FDIC premium in 1996. In addition, the intangibles tax for the State of
Michigan is being phased out over a period of years, and the Bank received a
refund of taxes paid in previous years.
FINANCIAL CONDITION
Average assets for the Corporation totaled $172,312,000, $165,081,000 and
$159,748,000, for 1996, 1995, and 1994, respectively. This 4.4% growth in
average assets improved from 3.3% in 1995. The increase was supported by 3.3%
growth in average deposits. Average loans grew 9.3% in 1996. The Corporation
continues to increas the loans to deposits ratio resulting in increased interest
margins and net income.
Liquidity
The anticipated liquidity requirements of the Corporation can be met by
upstreaming dividends from the subsidiary Bank. Refer to footnote 11 of the
accompanying financial statements for a discussion of the restrictions on
undivided profits of the subsidiary. The anticipated cash needs of the
Corporation are for the payment of dividends to current stockholders. Dividends
upstreamed to the Coproration were $908,000 in 1996 and $750,000 in 1995.
The estimated value of U.S. Government and U.S. Government Agency securities
totaled 20.4% of total deposits on December 31, 1996. This percentage for 1995
was 22.1. The Corporation is able to meet normal demands for liquidity through
loan repayments, securities payments and deposit growth.
CAPITAL
The Corporation's return on equity reached 15.8% in 1996, an improvement on the
15.5% return achieved in 1995 and the 14.3% return earned in 1994. Effective
December 31, 1992 the Bank is required to maintain capital in excess of 8.0% of
risk-based assets as defined by the Federal reserve Board. Refer to footnote 13
of the accompanying financial statements for a tabular presentation of the
Coporations capital adequacy.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Pages 3-13
County Bank Corp 1996 10-K Page 11
<PAGE> 15
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
The information called for by the items within this part is included in County
Bank Corp's 1996 Proxy Statement and is incorporated herein by reference, as
follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pages 3-4 except for:
Executive Officers Ages Office Service
Curt Carter 53 Employee 31 Years
Officer President 8 Years
Present Term 8 Years
Patrick F. Brown 49 Employee 10 Years
Officer Vice President 8 Years
Present Term 8 Years
Laird A. Kellie 51 Employee 14 Years
Officer Secretary 8 Years
Present Term 8 Years
Joseph H. Black 47 Employee 7 Years
Officer Treasurer 7 Years
Present Term 7 Years
11. EXECUTIVE COMPENSATION.
Page 6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Page 2.
Number of Percentage of
Director Shares Outstanding Stock
Dr. David H. Bush 22,028 3.61
Micheal H. Blazo 10,006 1.69
Curt Carter 3,224 0.54
Thomas K. Butterfield 14,700 2.48
A. Edward LaClair 5,854 0.99
Tim Oesch 1,216 0.21
Charles G. Scheidegger 3,893 0.66
Patrick A. Cronin 432 0.07
Ernest W. LeFever 100
Executive Officers and Directors, as a group, own 62,003 shares or 10.33% of the
593,236 total outstanding shares of common stock of the Corporation as of
December 31, 1996.
County Bank Corp 1996 10-K Page 12
<PAGE> 16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Page 6
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)
(1) The following financial statements of the Corporation and the Bank are
included in the Annual Report to its shareholders for the year ended 1996 and
are incorporated herein by reference in Item 8:
Balance sheets--December 31, 1996 and 1995 Page 3
Statements of income--years ended
December 31, 1996, 1995, and 1994 Page 5
Statements of changes in shareholder's equity
years ended December 31, 1996, 1995 and 1994 Page 4
Statements of cash flows
years ended December 31, 1996, 1995 and 1994 Page 6
Notes to financial statements Pages 7-13
Report of Independent Public Accountants,
dated January 22, 1997 Page 14
(a)(2) Not applicable.
(a)(3) The following exhibits are required to be filed with this report by item
14(c):
(3) Articles of Incorporation and By-laws (previously filed as Exhibits to
the Corporation's registration statement on form 8-A, filed January 24, 1989 and
incorporated herein by reference).
(13) Annual Report to Shareholders for the year ended December 31, 1996
(filed herewith)
(21) Subsidiary of Registrant: Lapeer County Bank & Trust Co., a Michigan
corporation.
(23) Consent
(b) No reports on form 8-K were filed during the last quarter of the year
covered by this report.
(c) See (a)(3)
(d) Not applicable.
County Bank Corp 1996 10-K Page 13
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned thereunto
duly authorized.
County Bank Corp
/s/ Curt Carter
---------------------
President
/s/ Joseph H. Black
---------------------------
Treasurer
/s/ Thomas K. Butterfield /s/ Timothy Lee Oesch
- ----------------------------- ---------------------------
/s/ David H. Bush, O.D /s/ Ernest W. Lefever, DPM
- ----------------------------- ---------------------------
/s/ Michael H. Blazo /s/ Patarick A. Cronin
- ----------------------------- ---------------------------
<PAGE> 18
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
13 Annual Report
21 Subsidiary
23 Consent
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 13
[COUNTY BANK CORP LOGO]
COUNTY BANK CORP
---------------
1996 ANNUAL REPORT
<PAGE> 2
COUNTY BANK CORP
PRESIDENT'S MESSAGE
TO OUR STOCKHOLDERS AND FRIENDS
County Bank Corp had an outstanding year in 1996. Net income led the way at a
record $2,980,000, an increase of 15.8% over 1995. Return on average assets
rose to a new level of 1.73%, up from the substantial 1.56% in the prior year.
A solid interest margin again formed the basis for another strong earnings
performance. The continuing healthy economy also played its part in our
increased loan demand. Outstanding loans grew to a record $117,500,000, a
$12,000,000 increase over last year. That growth brought our loan to deposit
ratio up to 75%, enabling the conversion of investment securities to higher
yielding loans. The increase was driven by an $8,000,000 growth in residential
mortgages. The loan portfolio retains its high quality as nonperforming loans
and nonaccruing loans declined to .31% and .28%, respectively, of gross loans.
The reserve for loan losses was a very sound 1.53% of gross loans and net loan
losses for the year were only $2,400. Delinquent loans remain at historically
low levels. Coupled with the strength of the loan department, nonrecurring
gains relative to the payoff of two former problem loans netted an increase in
after tax income of $160,000. We've also been the benefactor of another
decline in FDIC premiums due to the good health of the Bank and the industry as
a whole.
Total assets of the Corporation exceeded $177,800,000, an increase of nearly
$8,000,000 over 1995. Deposits grew over $5,600,000 to a new high of
$156,500,000. Stockholder value continued to rise as cash dividends were $1.53
per share, up 20% from last year. Return on equity was 15.8% on a record high
capital level of nearly $20,000,000, and earnings per share set another record
at $5.02. Capital reached 19.5% of risk-weighted assets, well above the 8%
required regulatory level. In addition to all of this good news, the book value
of your stock was $33.48 per share at year end. The most recent sales have been
at the $43.00 mark. Clearly, management and the Board of Directors are pleased
with the improvement of the stock value.
We were all saddened by the death of Director, Tom Caley. His passing ended a
long history of the Caley family's relationship with the Bank. Beginning with
the Bank's founding by his grandfather, Mathias, through his father Glenn's
chairmanship, to Tom's nearly 34 years as a director, the Caley family helped
mold Lapeer County Bank & Trust Co. His contribution and dedication to the
Bank will not soon be forgotten.
In December, Dr. Ernest Lefever, a podiatrist in the area for 15 years, was
appointed to the Board of Directors. During the year, Alan Curtis was named
Senior Commercial Loan Officer, Beth Henderson was promoted to Consumer Loan
Officer and Marsha Kalakay was appointed Southgate Branch Officer. Judy
Franzel, Metamora Branch Officer, retired in December and Kathy Steffanuski,
Assistant Trust Officer, will be retiring in March of 1997. Other staff
recognized during the year are pictured further in this report. Those 16
people represent 195 years of service to the Bank.
In 1997, we anticipate more of the same, including a favorable economy. Our
staff is capable of leading the Bank to new highs and we expect that to occur.
A new drive-up ATM was installed at our Pine-Clay office in November and we
are planning similar changes at both the Attica and Elba offices.
Please plan to attend our Annual Meeting of Stockholders on Friday, April 25,
1997. If you have any comments, suggestions or concerns, feel free to contact
me. Your support is appreciated and I look forward to seeing you at the Annual
Meeting.
Curt Carter
Curt Carter
President
1
<PAGE> 3
COUNTY BANK CORP
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
AT YEAR END 1996 1995 1994 1993
(000'S omitted)
<S> <C> <C> <C> <C>
Assets $ 177,786 $ 169,877 $ 166,666 $ 157,664
Deposits 156,518 150,888 150,511 142,523
Loans 117,474 105,349 97,677 94,280
Securities 47,409 48,164 53,627 45,814
Stockholders' equity 19,862 17,720 15,254 14,085
FOR THE YEAR
(000's omitted)
Net income $ 2,980 $ 2,574 $ 2,118 $ 1,757
Cash dividend declared 908 750 617 514
Return on average assets (%) 1.73 1.56 1.33 1.15
Return on average stockholders' equity (%) 15.80 15.51 14.30 13.06
PER SHARE
Book value $ 33.48 $ 29.87 $ 25.71 $ 23.74
Net income 5.02 4.34 3.57 2.96
Cash dividend declared 1.53 1.27 1.04 .87
</TABLE>
[BAR CHART] [BAR CHART]
RETURN ON AVERAGE ASSETS NET INCOME PER SHARE
(PERCENT) (IN DOLLARS)
1993 1.15% 1993 $2.96
1994 1.33 1994 3.57
1995 1.56 1995 4.34
1996 1.73 1996 5.02
2
<PAGE> 4
COUNTY BANK CORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(000'S OMITTED) AS OF
DECEMBER 31
ASSETS
1996 1995
<S> <C> <C>
Cash and due from banks (Note 11) $ 8,626 $ 8,027
Federal funds sold 1,200 5,050
-------- --------
CASH AND CASH EQUIVALENTS 9,826 13,077
Securities held to maturity (Note 3) 27,776 33,793
Securities available for sale (Note 3) 19,633 14,371
Loans (Note 4) 117,474 105,349
Less reserve for possible loan losses 1,805 1,687
-------- --------
NET LOANS 115,669 103,662
Premises and equipment (Note 5) 2,715 2,655
Interest receivable and other assets 2,167 2,319
-------- --------
TOTAL ASSETS $177,786 $169,877
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 6):
Non-interest bearing demand deposits $ 27,434 $ 27,829
Interest bearing demand deposits 41,180 33,702
Savings deposits 41,292 42,621
Time deposits 46,612 46,736
-------- --------
TOTAL DEPOSITS 156,518 150,888
Interest payable and other liabilities 1,406 1,269
-------- --------
TOTAL LIABILITIES 157,924 152,157
Stockholders' equity:
Common stock, $5 par value (Note 8):
Authorized - 1,200,000 shares and 600,000 shares
in 1996 and 1995, respectively
Issued and outstanding - 593,236 shares 2,966 2,966
Surplus 8,634 8,634
Undivided profits (Note 11) 7,882 5,810
Unrealized gain on securities available for sale,
net of tax effect of $196 and $159,
respectively (Note 3) 380 310
-------- --------
Total stockholders' equity 19,862 17,720
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $177,786 $169,877
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 5
COUNTY BANK CORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(000'S OMITTED, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
UNREALIZED
GAIN (LOSS)
ON SECURITIES TOTAL
COMMON UNDIVIDED AVAILABLE FOR STOCKHOLDERS'
STOCK SURPLUS PROFITS SALE EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 $ 1,483 $ 8,634 $ 3,968 $ - $ 14,085
Net income - - 2,118 - 2,118
Cash dividends ($1.04 per share) (Note 8) - - (617) - (617)
Change in unrealized loss on securities
available for sale, net of tax of $171 - - - (332) (332)
- --------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 1,483 8,634 5,469 (332) 15,254
Net income - - 2,574 - 2,574
Stock dividend (Note 8) 1,483 - (1,483) - -
Cash dividends ($1.27 per share) (Note 8) - - (750) - (750)
Change in unrealized gain on securities
available for sale, net of tax of $331 - - - 642 642
- --------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 2,966 8,634 5,810 310 17,720
Net income - - 2,980 - 2,980
Cash dividends ($1.53 per share) (Note 8) - - (908) - (908)
Change in unrealized gain on securities
available for sale, net of tax of $37 - - - 70 70
- --------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $ 2,966 $ 8,634 $ 7,882 $ 380 $ 19,862
========================================================================================================
</TABLE>
[bar chart] [bar chart]
STOCKHOLDERS' EQUITY RETURN ON AVERAGE STOCKHOLDERS' EQUITY
(IN MILLIONS) (percent)
1993 $14.1 1993 13.1%
1994 15.3 1994 14.3
1995 17.7 1995 15.5
1996 19.9 1996 15.8
See accompanying notes.
4
<PAGE> 6
COUNTY BANK CORP
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(000'S OMITTED, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31 1996 1995 1994
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 9,620 $ 8,951 $ 7,901
Interest on investment securities:
U.S. Government 509 701 580
U.S. Government Agencies
mortgage-backed securities 1,485 1,408 1,354
State and political subdivisions 765 834 694
Other 40 41 45
Interest on Federal funds sold 247 179 194
- ---------------------------------------------------------------------------------
TOTAL INTEREST INCOME 12,666 12,114 10,768
Interest expense:
Interest on demand deposits 455 454 496
Interest on savings deposits 1,975 1,721 1,251
Interest on time deposits (Note 6) 2,392 2,471 2,111
Interest on borrowed funds 1 8 -
- ---------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 4,823 4,654 3,858
- ---------------------------------------------------------------------------------
Net interest income 7,843 7,460 6,910
Provision for possible loan losses (Note 4) 120 240 120
- ---------------------------------------------------------------------------------
Net interest income after provision for
possible loan losses 7,723 7,220 6,790
Other income:
Service fees on loan and deposit accounts 1,133 1,095 1,047
Trust income 355 311 312
Other (Note 3) 728 565 441
- ---------------------------------------------------------------------------------
TOTAL OTHER INCOME 2,216 1,971 1,800
Other expenses:
Salaries and employee benefits (Note 9) 3,448 3,315 3,004
Occupancy expense 761 726 789
Other (Note 10) 1,530 1,628 1,831
- ---------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 5,739 5,669 5,624
- ---------------------------------------------------------------------------------
Income before Federal income tax 4,200 3,522 2,966
Provision for Federal income tax (Note 7) 1,220 948 848
- ---------------------------------------------------------------------------------
NET INCOME $ 2,980 $ 2,574 $ 2,118
=================================================================================
EARNINGS PER SHARE (NOTE 8) $ 5.02 $ 4.34 $ 3.57
</TABLE>
See accompanying notes.
5
<PAGE> 7
COUNTY BANK CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(000'S OMITTED)
YEARS ENDED DECEMBER 31
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,980 $ 2,574 $ 2,118
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 389 324 298
Provision for loan losses 120 240 120
Net amortization and accretion of securities 239 306 411
Deferred income taxes 67 55 62
Net loss on sale of securities - - 8
(Gain) loss on other real estate owned (13) 84 (32)
Net change in accrued interest receivable (31) (72) (132)
Net change in accrued interest payable and other 70 (17) 93
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,821 3,494 2,946
Cash flows from investing activities:
Proceeds from sales of securities available for sale - - 2,928
Proceeds from maturities of securities held to maturity 8,611 4,937 5,925
Proceeds from maturities of securities available for sale 2,077 4,538 5,376
Purchase of securities held to maturity (2,833) (2,507) (6,225)
Purchase of securities available for sale (7,233) (1,000) (16,731)
Proceeds from sale of other real estate 282 186 1,067
Net increase in loans (12,299) (8,101) (3,951)
Premises and equipment expenditures (399) (519) (270)
- ---------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (11,794) (2,466) (11,881)
Cash flows from financing activities:
Net increase in interest bearing
and non-interest bearing demand accounts 7,083 7,909 9,471
Net decrease in savings and time deposits (1,453) (7,532) (1,483)
Cash dividends paid (908) (750) (617)
- ---------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,722 (373) 7,371
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents (3,251) 655 (1,564)
Cash and equivalents at beginning of year 13,077 12,422 13,986
- ---------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF YEAR $ 9,826 $ 13,077 $ 12,422
===================================================================================================
Cash paid for:
Interest $ 4,823 $ 4,654 $ 3,856
Income tax $ 1,209 $ 908 $ 820
</TABLE>
See accompanying notes.
6
<PAGE> 8
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of County Bank Corp (the "Corporation") and its wholly owned subsidiary
Lapeer County Bank & Trust Co. (the "Bank"). The tabular presentations omit
000's.
NATURE OF OPERATIONS - The Corporation's subsidiary, Lapeer County Bank & Trust
Co., operates in rural and suburban communities in the county of Lapeer in the
state of Michigan. The Bank's primary source of revenue results from providing
real estate, commercial loans and consumer loans to small and medium sized
businesses and, to a lesser extent, individuals.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
SECURITIES - Securities for which the Corporation has both the positive intent
and ability to hold to maturity, are classified as held to maturity. Those
securities are recorded at cost, adjusted for accumulated amortization of
premium and accretion of discount. Realized gains and losses on sales of held
to maturity securities, while rare, will be included in net securities gains
based on the adjusted cost of the specific item sold.
When securities are purchased and the Corporation intends to hold the securities
for an indefinite period of time but not necessarily to maturity, they are
classified as available for sale and recorded at market value. Any decision to
sell a security available for sale will be based on various factors, including
significant movements in interest rates, changes in the maturity mix of the
Corporation's assets and liabilities, liquidity demands, regulatory capital
considerations and other similar factors. Cost is adjusted for amortization of
premiums and accretion of discounts to maturity or, for mortgage-backed
securities, over the estimated life of the security. Unrealized gains and
losses for available for sale securities will be excluded from earnings and
recorded as an amount, net of tax, in a separate component of stockholders'
equity.
INTEREST INCOME ON LOANS - Interest on loans is accrued and credited to income
based upon the principal amount outstanding. The accrual of interest on loans
is discontinued when, in the opinion of management, there is an indication that
the borrower may be unable to meet payments as they become due. Upon such
discontinuance, all unpaid interest accrued during the current year is
reversed. Interest accruals are generally resumed when all delinquent
principal and/or interest has been brought current and, in the opinion of
management, the borrower has demonstrated the ability to meet the terms and
conditions of the agreement.
MORTGAGE SERVICING RIGHTS - On January 1, 1996, Financial Accounting Standards
Board Statement No. 122, "Accounting for Mortgage Servicing Rights," became
effective. That statement requires the recognition of separate assets for the
rights to service mortgage loans for others, however those rights are acquired.
The fair value of mortgage servicing rights (MSRs) is determined using the
present value of estimated expected future cash flows assuming a market discount
rate and certain forecasted prepayment rates based on industry experience. The
MSRs are amortized in proportion to and over the estimated net servicing income.
Any subsequent impairments in value will be recognized through a valuation
allowance. Adoption of the new standard had no impact on the 1996 financial
statements.
LOANS AND RESERVE FOR POSSIBLE LOAN LOSSES - The reserve for possible loan
losses is established through a provision for possible loan losses charged to
expense. Loans are charged against the reserve for possible loan losses when
management believes collection of the principal is unlikely. The reserve for
possible loan losses is an amount management believes will be adequate to
absorb losses inherent in existing loans based on evaluations of the
anticipated repayment and prior loss experience. The evaluations take into
consideration such factors as changes in the nature, volume and quality of the
portfolio, loan concentrations, specific problem loans and current and
anticipated economic conditions that may affect the borrowers' ability to pay.
PREMISES AND EQUIPMENT - Premises and equipment are stated at cost, less
accumulated depreciation. The provision for depreciation is computed using
primarily the straight-line method. Building improvements and furniture and
equipment are amortized over their estimated useful lives.
OTHER ASSETS - Other assets include other real estate owned in the amount of
$430,000 and $615,000 at December 31, 1996 and 1995, respectively, carried at
the lower of cost or estimated net realizable value.
INCOME TAXES - The Corporation files a consolidated Federal income tax return.
The Corporation uses the asset and liability
7
<PAGE> 9
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
method of accounting for income taxes. Current taxes are measured by applying
the provisions of enacted tax laws to taxable income to determine the amount of
taxes receivable or payable. Deferred tax assets and liabilities are recorded
based on the difference between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes.
2. COUNTY BANK CORP (PARENT CORPORATION ONLY)
The condensed financial information that follows presents the financial
condition of the Parent Corporation only, along with the results of its
operations and its cash flows. The Parent Corporation has recorded its
investment in the subsidiary at cost plus its share of the undistributed
earnings of the subsidiary since it was acquired. The Parent Corporation
recognizes dividends from the subsidiary as revenue and undistributed earnings
of the subsidiary as other income. The Parent Corporation financial
information should be read in conjunction with the Corporation's consolidated
financial statements.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
<S> <C> <C>
ASSETS
Cash and due from banks $ 2 $ 2
Investment in subsidiary 19,779 17,637
Refundable income tax 81 81
- ---------------------------------------------------------------------
Total assets $19,862 $17,720
=====================================================================
LIABILITIES $ - $ -
STOCKHOLDERS' EQUITY
Common stock, $5 par value (Note 8):
Authorized - 1,200,000 shares
and 600,000 shares in 1996
and 1995, respectively
Issued and outstanding - 593,236
shares 2,966 2,966
Surplus 8,634 8,634
Undivided profits 8,262 6,120
- ---------------------------------------------------------------------
Total stockholders' equity 19,862 17,720
- ---------------------------------------------------------------------
Total liabilities and stockholders' equity $19,862 $17,720
=====================================================================
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31
1996 1995 1994
<S> <C> <C> <C>
Dividends from
subsidiary Bank $ 908 $ 750 $ 617
- ---------------------------------------------------------------
Income before undistributed
earnings of subsidiary Bank
and Federal income tax 908 750 617
Federal income tax - - -
- ---------------------------------------------------------------
Income before undistributed
earnings of subsidiary Bank 908 750 617
Equity in undistributed
earnings of subsidiary Bank 2,072 1,824 1,501
- ---------------------------------------------------------------
Net income $2,980 $2,574 $2,118
===============================================================
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income $ 2,980 $ 2,574 $ 2,118
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Undistributed earnings of
subsidiary (2,072) (1,824) (1,501)
- --------------------------------------------------------------------
Net cash provided by
operating activities 908 750 617
Cash flows from financing
activities:
Dividends paid (908) (750) (617)
- --------------------------------------------------------------------
Net increase in cash and
cash equivalents - - -
Cash and cash equivalents
at beginning of year 2 2 2
- --------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 2 $ 2 $ 2
====================================================================
</TABLE>
8
<PAGE> 10
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SECURITIES
The carrying amount and approximate market value of securities held to maturity
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
Gross Estimated
Amortized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government securities
and obligations of U.S.
Government corporations
and agencies $ 1,021 $ 1 $ - $ 1,022
Obligations of states and
political subdivisions 13,277 329 30 13,576
Corporate securities 40 - 40
Mortgage-backed securities 13,438 126 102 13,462
--------------------------------------------------------------------
Totals $27,776 $456 $132 $28,100
====================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
Gross Estimated
Amortized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government securities
and obligations of U.S.
Government corporations
and agencies $ 5,005 $ - $ 8 $ 4,997
Obligations of states and
political subdivisions 12,886 434 23 13,297
Corporate securities 50 - - 50
Mortgage-backed securities 15,852 229 39 16,042
-------------------------------------------------------------------
Totals $ 33,793 $ 663 $ 70 $ 34,386
===================================================================
</TABLE>
The amortized cost and estimated market value of securities held to maturity at
December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
<S> <C> <C>
Due in one year or less $ 1,692 $ 1,698
Due after one year through five years 6,870 6,970
Due after five years through ten years 4,636 4,806
Due after ten years 1,140 1,164
- ------------------------------------------------------------
14,338 14,638
Mortgage-backed securities 13,438 13,462
- ------------------------------------------------------------
Totals $27,776 $ 28,100
============================================================
</TABLE>
The amortized cost and estimated market value of securities available for sale
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
Gross Estimated
Amortized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government securities
and obligations of U.S.
Government corporations
and agencies $ 12,042 $ 107 $ 57 $ 12,092
Obligations of states and
political subdivisions 1,081 23 1 1,103
Mortgage-backed securities 5,448 21 77 5,392
Other securities 485 740 179 1,046
------------------------------------------------------------------------
Totals $ 19,056 $ 891 $314 $ 19,633
========================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
Gross Estimated
Amortized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Government securities
and obligations of U.S.
Government corporations
and agencies $ 7,052 $ 129 $ 10 $ 7,171
Obligations of states and
political subdivisions 1,094 32 - 1,126
Mortgage-backed securities 5,269 32 30 5,271
Other securities 487 316 - 803
------------------------------------------------------------------------
Totals $ 13,902 $ 509 $ 40 $ 14,371
========================================================================
</TABLE>
The amortized cost and estimated market value of securities available for sale
at December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
<S> <C> <C>
Due in one year or less $ 4,002 $ 4,012
Due after one year through five years 3,119 3,154
Due after five years through ten years 6,002 6,030
Due after ten years 485 1,046
- --------------------------------------------------------------
13,608 14,242
Mortgage-backed securities 5,448 5,391
- --------------------------------------------------------------
Totals $19,056 $19,633
==============================================================
</TABLE>
9
<PAGE> 11
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1996 and 1995, U.S. Government securities and securities of
state and political subdivisions carried at $3,556,000 and $4,547,000,
respectively, with a market value of $3,594,000 and $4,553,000, respectively,
were pledged to secure public deposits and for other purposes required by law.
Other than securities of the U.S. Government and its agencies and corporations,
there were no securities of any one issuer aggregating ten percent of
consolidated stockholders' equity at December 31, 1996.
Proceeds from the sale of securities were $0, $0 and $2,928,000 in 1996, 1995
and 1994, respectively. There were no sales of securities classified as held
to maturity in 1996 and 1995. Gross gains on sales of securities were $0, $0
and $18,000 for 1996, 1995 and 1994, respectively. Gross losses on sales of
securities were $0, $0 and $26,000 in 1996, 1995 and 1994, respectively. These
amounts are included in other income for financial statement purposes.
4. LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Commercial $ 50,975 $ 46,711
Real estate mortgage 32,696 24,546
Installment 30,968 30,592
Construction 2,835 3,500
- ---------------------------------------------------------
Total loans 117,474 105,349
Less reserve for possible loan losses 1,805 1,687
- ---------------------------------------------------------
Net loans $115,669 $103,662
=========================================================
</TABLE>
At December 31, 1996 and 1995, approximately $2,905,000 and $2,436,000,
respectively, of loans were outstanding to officers, directors, principal
stockholders and their associated companies. In 1996, additions and
reductions, including loan renewals, were $2,157,000 and $1,688,000,
respectively. In the opinion of management, such loans were made on the same
terms and conditions as those to other borrowers and did not involve more than
the normal risk of collectibility.
Transactions in the reserve for possible loan losses were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $ 1,687 $ 1,624 $ 1,472
Provision charged to operations 120 240 120
Loans charged-off (110) (205) (82)
Recoveries 108 28 114
- ----------------------------------------------------------------
Balance at end of year $ 1,805 $ 1,687 $ 1,624
================================================================
Reserve as a percent of
total loans 1.53% 1.60% 1.66%
================================================================
</TABLE>
Mortgage loans serviced for others are not included in the accompanying
consolidated statements of financial condition. The unpaid principal balances
of mortgage loans serviced for others was $847,000 and $998,000 at December 31,
1996 and 1995, respectively. The Corporation has not purchased mortgage
servicing rights from others.
Custodial escrow balances maintained in connection with the foregoing loan
servicing, and included in demand deposits, were approximately $5,500 and
$8,000 at December 31, 1996 and 1995, respectively.
5. PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land and improvements $ 661 $ 661
Buildings and improvements 2,259 2,171
Furniture and equipment 3,705 3,435
- --------------------------------------------------
Total premises and equipment 6,625 6,267
Less accumulated depreciation 3,910 3,612
- --------------------------------------------------
Net carrying amount $2,715 $ 2,655
==================================================
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995 and 1994 was
$389,000, $324,000 and $373,000, respectively.
6. CERTIFICATES OF DEPOSIT
The aggregate amount of certificates of deposit in denominations in excess of
$100,000 totaled approximately $4,930,000, $4,926,000 and $5,594,000 at
December 31, 1996, 1995 and 1994, respectively. The interest expense related
to such deposits throughout the year was approximately $239,000 in 1996,
$306,000 in 1995 and $231,000 in 1994, which is included in interest on time
deposits in the accompanying statements of income.
7. INCOME TAXES
The items comprising the provision for Federal income taxes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Taxes currently payable $1,153 $893 $786
Provision (credit) for
deferred taxes on:
Discount accretion (5) (3) (8)
Reserve for loan losses 40 22 51
Other 32 36 19
- -------------------------------------------------------
Provision for Federal
income tax $1,220 $948 $848
=======================================================
</TABLE>
10
<PAGE> 12
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Corporation uses the accrual method of accounting for both financial
reporting and income tax purposes. The provision for income taxes differs from
the amount computed by applying the Federal income tax rate of 34 percent due
principally to the following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Income taxes at statutory rates $ 1,428 $ 1,197 $ 1,008
Tax exempt interest (268) (277) (246)
Other 60 28 86
- ------------------------------------------------------------
Provision for Federal
income tax $ 1,220 $ 948 $ 848
============================================================
</TABLE>
The details of the net deferred tax asset (liability) at
December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Reserve for loan loss $ 403 $ 363
Other real estate 21 35
- ----------------------------------------------------------
Total deferred tax assets 424 398
Deferred tax liabilities:
Accelerated depreciation 42 42
Deferred loan fees 65 40
Accrued liabilities 88 53
Other 48 83
Unrealized gain on securities
available for sale 196 159
- ----------------------------------------------------------
Total deferred tax liabilities 439 377
Valuation allowance - -
- ----------------------------------------------------------
Net deferred tax asset (liability) $ (15) $ 21
==========================================================
</TABLE>
8. STOCK DIVIDEND
On November 13, 1995, the Corporation declared a 100 percent stock dividend to
stockholders of record as of November 30, 1995, payable December 14, 1995,
which was accounted for as if it were a stock split. The accompanying
financial statements reflect this transaction and all per share amounts have
been restated for this stock dividend.
9. EMPLOYEE BENEFITS
The Corporation maintains a profit sharing plan in which all qualified
employees participate. Contributions to the plan are at the discretion of the
Board of Directors and amounted to $298,000, $257,000 and $200,000 for 1996,
1995 and 1994, respectively.
10. OTHER EXPENSES
Included in other expenses for the years ended December 31, 1996, 1995 and 1994
are the following amounts:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Repairs and maintenance $177 $176 $180
FDIC insurance 2 169 314
Other real estate 112 94 183
Michigan single business tax 181 162 143
</TABLE>
11. RESTRICTIONS ON CASH BALANCES AND
UNDIVIDED PROFITS
The Bank is required to maintain legal reserve requirements based on the level
of balances in deposit categories. Cash balances restricted from usage due to
these requirements were $2,629,000 and $1,643,000 at December 31, 1996 and
1995, respectively.
Unless prior regulatory approval is obtained, banking regulations limit the
amount of dividends that the Bank could declare to the current year's net profit
and retained new profits for the previous two years as defined in the Federal
Reserve Act, less any transfers to surplus. The amount available for the
payment of dividends at December 31, 1996, was $2,315,000.
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
1996 1995
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Assets:
Cash and cash
equivalents $ 9,826 $ 9,826 $13,077 $13,077
Securities 47,409 47,734 48,164 48,757
Loans:
Commercial 52,115 51,593 48,635 48,283
Real estate mortgage 32,686 31,517 24,536 25,355
Installment 30,868 33,703 30,491 29,908
Accrued interest
receivable 1,326 1,326 1,334 1,334
Liabilities:
Deposits:
Interest bearing 129,084 127,138 123,059 123,044
Non-interest
bearing 27,434 27,434 27,829 27,829
Accrued interest
payable 427 427 417 417
</TABLE>
11
<PAGE> 13
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following methods and assumptions were used in estimating the fair value of
financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance sheet
for cash and short-term instruments approximate those assets' fair values.
Securities (including mortgage-backed securities): Fair values for investment
securities are based on quoted market prices, where available. If quoted
market prices are not available, fair values are based on quoted market prices
of comparable instruments.
Loans: For variable-rate loans that reprice frequently and with no significant
change in credit risk, fair values are based on carrying values. The fair
values for other loans are estimated using discounted cash flow analysis, using
interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. The carrying amount of accrued interest
receivable approximates its fair value.
Off-balance-sheet instruments: The fair value of loan commitments and standby
letters of credit, valued on the basis of fees currently charged for
commitments for similar loan terms to new borrowers with similar credit
profiles, is not considered material.
Deposit liabilities: The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at the reporting date. The
carrying amounts for variable-rate, fixed term money market accounts and
certificates of deposit approximate their fair values at the reporting date.
Fair values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on similar certificates. The carrying amount of accrued interest
payable approximates its fair value.
Short-term borrowings: The carrying amounts of Federal funds purchased,
borrowings under repurchase agreements and other short-term borrowings
approximate their fair values.
Limitations: Fair value estimates are made at a specific point in time, based
on relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the
financial instruments, fair value estimates are based on judgments regarding
future expected loss experience, current economic conditions, risk
characteristics and other factors. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment and therefore
cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
Off-balance-sheet risk: The Corporation is party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the financing
needs of its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to extend credit
and financial guarantees. These instruments involve, to varying degrees,
elements of credit and interest rate risk that are not recognized in the
statement of financial condition.
Commitments to extend credit are agreements to lend to a customer as long as
there are no violations of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Fees from issuing these commitments to extend
credit are recognized over the period to maturity. Since a portion of the
commitments is expected to expire without being drawn upon, the total
commitments do not necessarily represent future cash requirements. The
Corporation evaluates each customer's credit worthiness on a case-by-case basis.
The amount of collateral obtained upon extension of credit is based on
management's credit evaluation of the customer.
Exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to extend credit and financial
guarantees written is represented by the contractual notional amount of those
items. The Corporation generally requires collateral to support such financial
instruments in excess of the contractual notional amount of those instruments.
The Corporation had outstanding loan origination commitments aggregating
$24,959,000 and $24,818,000 at December 31, 1996 and 1995, respectively, of
which $14,827,000 and $14,958,000 was outstanding at year end and included in
the Corporation's balance sheet.
13. REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
Federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and discretionary actions by regulators that could
have a direct material effect on the Bank's financial statements. As of
December 31, 1996, the most recent notification from the Financial Institutions
Bureau categorized the Bank as well capitalized. There are no conditions or
events since that
12
<PAGE> 14
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
notification that management believes have changed the institution's capital
category.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios, which are shown in the
table below:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
ACTUAL FOR CAPITAL TO BE WELL
ADEQUACY CAPITALIZED
PURPOSES
<S> <C> <C> <C>
Total capital (to risk-
weighted assets):
Amount $20,836 $8,581 $10,726
Ratio 19.42% 8.0% 10.0%
Tier I capital (to risk-
weighted assets):
Amount 19,482 4,290 6,436
Ratio 18.16% 4.0% 6.0%
Tier I capital (to
average assets):
Amount 19,482 6,863 8,579
Ratio 11.35% 4.0% 5.0%
<CAPTION>
DECEMBER 31, 1995
Actual For Capital To Be Well
Adequacy Capitalized
Purposes
<S> <C> <C> <C>
Total capital (to risk-
weighted assets):
Amount $18,571 $7,389 $9,236
Ratio 20.11% 8.0% 10.0%
Tier I capital (to risk-
weighted assets):
Amount 17,410 3,694 5,542
Ratio 18.85% 4.0% 6.0%
Tier I capital (to
average assets):
Amount 17,410 6,748 8,435
Ratio 10.32% 4.0% 5.0%
</TABLE>
13
<PAGE> 15
COUNTY BANK CORP
INDEPENDENT AUDITOR'S REPORT
[PLANT & MORAN, LLP LETTERHEAD]
The Board of Directors
County Bank Corp
We have audited the consolidated balance sheet of County Bank Corp and
subsidiary at December 31, 1996 and 1995, and the related consolidated
statements of changes in stockholders' equity, income and cash flows for each
year in the three-year period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these consolidated 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 audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of County
Bank Corp at December 31, 1996 and 1995 and the consolidated results of its
operations and cash flows for each year in the three-year period ended December
31, 1996, in conformity with generally accepted accounting principles.
PLANTE & MORAN, LLP
January 22, 1997
14
<PAGE> 16
COUNTY BANK CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
County Bank Corp (the Corporation), a one bank holding company, was formed on
January 3, 1989, and is the sole owner and parent of Lapeer County Bank & Trust
Co. (the Bank). The Corporation offers a full line of banking and trust
services through the Bank. The Bank serves Lapeer County through three offices
in the City of Lapeer and offices in Attica, Deerfield, Elba and Metamora
Townships.
The Corporation is obligated to comply with the regulations of the Federal
Reserve Board and the Securities and Exchange Commission. As a state chartered
member institution, the Bank is obligated to comply with the regulations of the
Financial Institutions Bureau of the State of Michigan in addition to the
regulations of the Federal Reserve Board. The Corporation's and the Bank's
business is directly affected by the monetary policies of the Board of
Governors of the Federal Reserve System. The Bank's deposits are insured by
the Federal Deposit Insurance Corporation.
EARNINGS
Major components of the operating results of the Corporation for 1996, 1995 and
1994 are presented in the accompanying table, Summary of Operations. A
discussion of these results is presented in greater detail in subsequent pages.
<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Interest income $ 12,666 $ 12,114 $ 10,768 $ 10,492 $ 11,329
Interest expense 4,823 4,654 3,858 4,023 5,081
- ----------------------------------------------------------------------------------------------------------
Net interest income 7,843 7,460 6,910 6,469 6,248
Provision for possible loan losses 120 240 120 275 378
- ----------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 7,723 7,220 6,790 6,194 5,870
Other income 2,216 1,971 1,800 1,666 1,450
Other expenses 5,739 5,669 5,624 5,507 5,602
- ----------------------------------------------------------------------------------------------------------
Income before provision for
Federal income tax 4,200 3,522 2,966 2,353 1,718
Provision for Federal income tax 1,220 948 848 596 388
- ----------------------------------------------------------------------------------------------------------
Net income $ 2,980 $ 2,574 $ 2,118 $ 1,757 $ 1,330
==========================================================================================================
PER SHARE
Net income $ 5.02 $ 4.34 $ 3.57 $ 2.96 $ 2.24
Dividends declared $ 1.53 $ 1.27 $ 1.04 $ .87 $ .72
</TABLE>
NET INTEREST INCOME
The Bank experienced strong loan demand through the entire year in all loan
categories. Total growth in loans was 11.7%, led by mortgage loan growth of
32.9%. Deposit growth was a moderate 3.7%. Customers chose to utilize liquid
accounts tied to market rates. The Bank's Choice account, that offers these
benefits, experienced growth of 60%. This growth was offset by declining
balances in regular savings, money market deposit accounts and time certificates
of deposits. The strong loan growth coupled with moderate deposit growth
increased the Bank's loan to deposit ratio to 75.1%. Net interest yield on a
Federal tax equivalent (FTE) basis as a percent of average assets was 4.8%, 4.8%
and 4.6% for 1996, 1995 and 1994, respectively. The FTE adjustment is derived
by dividing tax exempt interest income by .66 to reflect the Corporation's 34%
tax rate. The Corporation continues working to match rate sensitive assets and
rate sensitive liabilities to maintain margins in differing rate environments.
15
<PAGE> 17
COUNTY BANK CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PROVISION FOR POSSIBLE LOAN LOSSES
The Corporation adheres to a loan review procedure that identifies loans that
may develop into problem credits. The adequacy of the reserve for possible
loan losses is evaluated against the listings that result from the review
procedure, historical net loan loss experience, current and projected loan
volumes, the level and composition of nonaccrual, past due and renegotiated or
reduced rate loans, current and anticipated economic conditions, and an
evaluation of each borrower's credit worthiness. Based on these factors,
management determines the amount of the provision for possible loan losses
needed to maintain an adequate reserve for possible loan losses. The amount of
the provision for possible loan losses is recorded as current expense and may
be greater or less than the actual net charged off loans.
Activity related to the reserve for possible loan losses resulted in net
charged off loans of $2,000 in 1996. Net charged off loans were $177,000 in
1995, and recoveries of $32,000 were posted in 1994. Consequently, provisions
for possible loan losses were $120,000, $240,000 and $120,000 for the
respective periods. The ratio of reserve for loan losses to gross loans was
1.5%, 1.6% and 1.7% on December 31, 1996, 1995 and 1994, respectively.
NON-INTEREST INCOME
Non-interest income is composed of trust department income, service charges on
deposit accounts, fees for providing other services to customers, gains on
securities sales and other income. Service charges on deposit accounts grew
3.5% in 1996 following a 4.2% increase in 1995. Other income increased 28.1% as
a result of the repayment of two loans that were previously carried as
nonaccrual loans. The customers were on the way to working out their problems
and the loans were renewed on an accrual basis. Interest that was earned but
not reported as income during the period of nonaccrual was capitalized in the
renewed loan. This interest was carried in the general ledger as deferred
credits until the customers fully established their improved repayment
capability. The deferred credits were recorded as income on an interest basis
as the new loans were repaid. Both properties were sold, and the Bank recovered
all of its investment. The deferred credits were booked directly to other
income rather than interest income so that comparative yield calculations would
not be distorted. The total amount of the deferred credits posted to other
income totaled $242,000.
NON-INTEREST EXPENSE
Major components of non-interest expense are salaries and employee benefits,
occupancy and equipment expenses and other operating expenses. Salaries and
employee benefits, the largest component of non-interest expense, increased 4%
in 1996 after a 10.3% increase in 1995. The Bank's Board of Directors
instituted a bonus plan in 1995 based on the Bank's earnings. Full time
equivalent employees decreased from 119 at year end 1995 to 117 at year end
1996. Occupancy expenses increased 4.9% after a 7.9% decrease in 1995.
Depreciation expenses increased as a result of remodeling older areas of the
Bank building and continued investment in current technology. Other expenses
declined 6% primarily due to the payment of the statutory minimum FDIC premium
in 1996. In addition, the intangibles tax for the State of Michigan is being
phased out over a period of years, and the Bank received a refund of taxes paid
in previous years.
FINANCIAL CONDITION
Average assets for the Corporation totaled $172,312,000, $165,081,000 and
$159,748,000 in 1996, 1995 and 1994, respectively. This 4.4% growth in average
assets improved from 3.3% in 1995. The increase was supported by a 3.3% growth
in average deposits. Average loans grew 9.3% in 1996. The Corporation
continues to increase the loans to deposits ratio resulting in increased
interest margins and net income.
CAPITAL
The Corporation currently has 419 stockholders representing 593,236 shares of
common capital stock with a par value of $5.00 per share. The stock is not
listed on any exchange. Sales are handled by local brokerage firms. The
following schedule lists bid and asked prices for the stock of the Corporation,
as known to management.
<TABLE>
<CAPTION>
1996
BID ASKED
<S> <C> <C>
First Quarter $34.00 $35.00
Second Quarter 38.00 39.00
Third Quarter 39.00 40.00
Fourth Quarter 41.00 42.00
<CAPTION>
1995
BID ASKED
<S> <C> <C>
First Quarter $22.75 $23.25
Second Quarter 24.00 24.50
Third Quarter 26.00 26.50
Fourth Quarter 29.50 31.00
</TABLE>
16
<PAGE> 18
COUNTY BANK CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Corporation paid quarterly dividends and paid a special dividend in
December in 1996 and 1995. Total cash paid in dividends totaled $907,651 and
$750,444 in 1996 and 1995, respectively. The Corporation paid a 100% stock
dividend on December 14, 1995, increasing the number of outstanding shares to
593,236 from 296,618. All per share disclosures in this narrative have been
restated to reflect the new number of shares. The dividends per share totaled
$1.53 and $1.27 in 1996 and 1995, respectively. At the Annual Meeting of
Stockholders on April 18, 1996, the stockholders approved an increase in the
authorized number of shares from 600,000 to 1,200,000. The Corporation did not
issue any of the newly authorized shares.
The Corporation's return on equity reached 15.8% in 1996, an improvement on the
15.5% return achieved in 1995, and the 14.3% return earned in 1994. Effective
December 31, 1992, the Bank is required to maintain capital in excess of 8% of
risk-weighted assets as defined by the Federal Reserve Board. The Bank's
capital to risk-weighted assets ratio was 19.5% on December 31, 1996 and 18.2%
on December 31, 1995.
LIQUIDITY
The anticipated liquidity requirements of the Corporation can be met by
upstreaming dividends from the Bank. Refer to Note 11 of the accompanying
financial statements for a discussion of the restrictions on undivided profits
of the Bank. The anticipated cash needs of the Corporation are for the payment
of dividends to current stockholders. Dividends upstreamed to the Corporation
were $908,000 in 1996 and $750,000 in 1995.
The estimated market value of U.S. Government and U.S. Government Agency
securities totaled 20.4% of total deposits on December 31, 1996. This
percentage for 1995 was 22.1%. The Corporation is able to meet normal demands
for liquidity through loan repayments, securities payments and deposit growth.
IN MEMORIAM
[PHOTO]
THOMAS CALEY
1928-1996
Mr. Caley was a Director of the Bank and Corporation since 1962. He was a
member of the State Bar of Michigan, and President of Locustlawn Associates, an
oil exploration company. Mr. Caley became an active member of numerous
Michigan, National and Canadian oil and gas, petroleum engineering,
archeological and geological associations. As a life-long resident of Lapeer
County he was very interested in its history. He served on the Lapeer County
Historical Society for several years and was a member of the Metamora Township
Zoning and Planning Commission for thirty years. He further served the
community through the American Legion and Disabled American Veterans. Mr.
Caley was as dedicated to us as he was to the community.
17
<PAGE> 19
COUNTY BANK CORP
SPECIAL RECOGNITION
[PHOTO]
From left:
BETH HENDERSON
Beth was promoted to the position of Consumer Loan Officer in April. She
gained experience through several departments within the Bank during her 17
years of service. Beth attended numerous continuing education programs earning
a certificate through the American Institute of Banking.
ALAN CURTIS
Alan was appointed Senior Commercial Loan Officer in April. He began his
career with the Bank in 1977 as an Agricultural Representative. In 1978 he was
appointed Assistant Cashier and the Bank Compliance and Security Officer. He
graduated from the Central Michigan University School of Banking and the
National Commercial Lending School.
MARSHA KALAKAY
Marsha was promoted to Southgate Branch Officer in December after working in
various departments and the branch system since employment with the Bank in
1986. She attended several continuing education programs and is presently
enrolled in the School of Banking at Central Michigan University.
SPECIAL RECOGNITION AND AWARDS WERE PRESENTED
TO THESE EMPLOYEES IN HONOR OF THEIR DEDICATED SERVICE
[PHOTO]
From left: 5 years: Mary Schroeder, Margaret Hodgson, Colleen Sutton, Julie
Karpovich, Lori Avery, Michele Deitering and Sue Hill
[PHOTO]
From left - 30 years: Curt Carter; 25 years: Bernadette Talaski and Laurie
Verbeke; 20 years: Virginia Starking and Cheri Green; 10 years: Kim Scott,
Denise Schlaud, Marsha Kalakay and Patrick Brown
18
<PAGE> 20
COUNTY BANK CORP
BOARD OF DIRECTORS
[PHOTO]
From left:
Ed LaClair,
Curt Carter and
Tom Butterfield
[PHOTO]
Seated, from left:
Mike Blazo
Tim Oesch
and Pat Cronin;
Standing:
Dave Bush and
Chuck Schiedegger;
[PHOTO]
ERNEST W. LEFEVER, DPM
Dr. Lefever was appointed to the Board of Directors in December. He began
practicing as a medical surgical podiatrist in Lapeer in 1981. He is certified
in foot surgery and is a staff member of several area hospitals including
Lapeer Regional Hospital. Dr. Lefever is active as a member and past president
of the Lapeer Optimist Club and serves on several boards of state and national
medical associations. He and his wife Vicky have two grown children and two
grandchildren.
19
<PAGE> 21
COUNTY BANK CORP
BOARD OF DIRECTORS AND OFFICERS
COUNTY BANK CORP
BOARD OF DIRECTORS
MICHAEL H. BLAZO
Vice President, Kirk Construction Co.
DAVID H. BUSH, O.D.
Doctor of Optometry
THOMAS K. BUTTERFIELD
Attorney at Law, Taylor, Butterfield,
Riseman, Clark, Howell and Churchill
CURT CARTER
President, County Bank Corp
PATRICK A. CRONIN
Agent, State Farm Insurance
A. EDWARD LACLAIR
President, Ross Automotive Supply, Inc.
ERNEST W. LEFEVER, DPM
Doctor of Podiatry
TIM OESCH
President, Nolin, Oesch, Sieting & Macksoud
CHARLES SCHIEDEGGER
President & COO, Metamora Products Corp.
WHOLLY OWNED SUBSIDIARY
LAPEER COUNTY BANK & TRUST CO.
OFFICERS
CURT CARTER
President
PATRICK F. BROWN
Senior Vice President
LAIRD A. KELLIE
Vice President & Cashier
V. KENNETH EWING
Vice President & Trust Officer
JOSEPH BLACK
Financial Officer
AMY L. BURWELL
Human Resources Director
CAROL-LYNN VANNORMAN
Marketing Director
JIM COPPINS
Business Development Officer
ALAN J. CURTIS
Senior Commercial Loan Officer
DAVID M. HENDRY
Commercial Loan Officer
W. ROBERT LIEBKNECHT
Commercial Loan Officer
KATHLEEN M. SUTHERLAND
Director of Mortgage Lending
BARBARA L. SCHLUND
Director of Consumer Lending
BETH A. HENDERSON
Consumer Loan Officer
NANCY F. SOMMERVILLE
Consumer Loan Officer
RICHARD L. JUNE
Consumer Loan Officer
TIMOTHY C. WOLVERTON
Special Loan Officer
SHELLY M. CHILDERS
Data Processing Officer
SUSANNE R. DICKEY
Assistant Financial Officer
DEAN A. GOODRICH
Auditor
KATHLEEN T. STEFFANUSKI
Assistant Trust Officer
CAROL J. WANGLER
Operations Officer
BERNADETTE F. TALASKI
Branch Administrator & Branch Officer
DOROTHY A. FLEMING
Attica Branch Officer
JUDITH G. FRANZEL
Metamora Branch Officer
MARSHA A. KALAKAY
Southgate Branch Officer
A copy of the Corporation's 10K Annual Report to the Securities and Exchange
Commission is available upon written request to Joseph Black, Treasurer, County
Bank Corp, P.O. Box 250, Lapeer, MI 48446.
20
<PAGE> 22
[GRAPHIC]
A Lapeer County Tradition...
Member F.D.I.C.
<PAGE> 1
EXHIBIT 21
Subsidiary of Registrant
1.) Lapeer County Bank & Trust Co.,
a Michigan Corporation.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form 10-K
of County Bank Corp for year ended December 31, 1996, of our report dated
January 22, 1997 included in the 1996 Annual Report to the Shareholders of
County Bank Corp.
/s/ PLANTE & MORAN, LLP
- ------------------------
PLANTE & MORAN, LLP
Bloomfield Hills, Michigan
March 26, 1997
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