<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
- - - THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1998
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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes__X__ No____
Indicate the number of shares outstanding of each of the issuer'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
September 30, 1998.
<PAGE> 2
Part I - Financial Information
Item I - Financial Statements
Introduction to Financial Statements
The consolidated financial statements of County Bank Corp and subsidiary, Lapeer
County Bank & Trust Co., have been prepared, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading when
read in conjunction with financial statements and the notes thereto included in
County Bank Corp's Form 10-K as filed with the Securities and Exchange
Commission for the year ended December 31, 1997.
The financial information presented reflects all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair statement of the results for the interim periods presented. The
results for interim periods are not necessarily indicative of the results to be
expected for the year.
<PAGE> 3
COUNTY BANK CORP
FORM 10-Q
For the Quarter Ended September 30, 1998
INDEX
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements 2
. Introduction-
. Balance Sheets - 3
At September 30, 1998 and December 31, 1997
. Statements of Income - 4
For the three months and nine months ended September 30, 1998 and 1997
. Statement of Cash Flows - 5
For the three months and nine months ended September 30, 1998 and 1997
Item 2. Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
All items except those set forth above are inapplicable and have been omitted.
SIGNATURES 8
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
BALANCE SHEETS (in thousands) SEPTEMBER 30 DECEMBER 31
1998 1997
<S> <C> <C>
ASSETS
Cash and due from banks ..................................... 9,998 9,010
Investment securities available for sale .................... 18,989 18,223
Investment securities held to maturity ...................... 29,349 29,064
------- -------
Total investment securities ............................. 48,338 47,287
Federal funds sold .......................................... 9,100 3,550
Loans ....................................................... 121,043 123,604
Less: Reserve for possible loan losses ................... 2,030 1,957
------- -------
Net loans ............................................. 119,013 121,647
Bank premises & equipment ................................... 3,303 3,206
Interest receivable and other assets ........................ 2,518 2,141
------- -------
TOTAL ASSETS ............................................. 192,270 186,841
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Demand ................................................... 77,246 74,100
Savings .................................................. 42,098 40,576
Time ..................................................... 49,859 48,243
------- -------
Total deposits ......................................... 169,203 162,919
Interest payable and other liabilities ...................... 1,528 1,640
------- -------
TOTAL LIABILITIES ........................................ 170,731 164,559
STOCKHOLDERS' EQUITY
Common stock-$5.00 par value, 1,200,000 shares authorized and
593,236 shares outstanding ................................. 2,966 2,966
Surplus ..................................................... 8,634 8,634
Undivided profits ........................................... 9,406 10,035
Unrealized gains on securities available for sale ........... 533 647
------- -------
TOTAL STOCKHOLDERS' EQUITY ............................... 21,539 22,282
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... 192,270 186,841
======= =======
</TABLE>
<PAGE> 5
CONSOLIDATED INCOME STATEMENTS
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS FOR THE NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans......................... 2,654 2,658 8,042 7,795
Interest on investment securities: 692 693 2,075 2,106
Interest on Federal funds sold..................... 137 67 257 214
----------------- ---------------- ---------------- ----------------
TOTAL INTEREST INCOME........................ 3,483 3,418 10,374 10,115
INTEREST EXPENSE
Demand deposits................................. 409 354 1,189 1,034
Savings deposits................................ 314 305 898 968
Time deposits................................... 652 632 1,933 1,851
Borrowed funds.................................. 0 0 2 2
----------------- ---------------- ---------------- ----------------
TOTAL INTEREST EXPENSE....................... 1,375 1,291 4,022 3,855
----------------- ---------------- ---------------- ----------------
NET INTEREST INCOME................................ 2,108 2,127 6,352 6,260
Provision for possible loan losses................. 30 30 90 90
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES....................... 2,078 2,097 6,262 6,170
OTHER INCOME
Service fees on loan and deposit accounts.......... 281 276 827 819
Other.............................................. 274 257 769 716
----------------- ---------------- ---------------- ----------------
TOTAL OTHER INCOME........................... 555 533 1,596 1,535
OTHER EXPENSES
Salaries and employee benefits..................... 957 901 2,764 2,642
Net occupancy expense.............................. 257 245 752 677
Other.............................................. 397 425 1,197 1,202
----------------- ---------------- ---------------- ----------------
TOTAL OTHER EXPENSE.......................... 1,611 1,571 4,713 4,521
----------------- ---------------- ---------------- ----------------
INCOME BEFORE PROVISION FOR
FEDERAL INCOME TAX.............................. 1,022 1,059 3,145 3,184
Provision for Federal income tax................... 273 295 848 881
----------------- ---------------- ---------------- ----------------
NET INCOME......................................... 749 764 2,297 2,303
================= ================ ================ ================
EARNINGS PER SHARE
Net Income......................................... $1.26 $1.29 $3.87 $3.88
Cash Dividend Declared............................. $0.31 $0.28 $4.93 $0.84
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS THREE MONTHS ENDED NINE MONTHS ENDED
(in thousands) SEPTEMBER 30 SEPTEMBER 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income................................................... 749 764 2,297 2,303
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization................................ 283 61 475 326
Provision for loan losses.................................... 30 30 90 90
Net amortization and accretion of securities................. (40) (138) (120) (42)
Deferred income taxes........................................ 0 0 0 0
Net gain on sale of investment securities.................... 0 0 0 0
(Gain) loss on other real estate owned....................... 0 (24) 0 (37)
Net change in accrued interest receivable.................... (699) (207) (377) (355)
Net change in accrued interest payable and other............. 0 469 (112) 344
--------------- ------------ -------------- --------------
Net cash provided by operating activities.................... 323 955 2,253 2,629
--------------- ------------ -------------- --------------
Cash flows from investing activities
Proceeds from sale of investment securities: AFS............. 0 0 0 0
Proceeds from maturities of investment securities: AFS....... 2,553 1,526 5,469 4,538
Proceeds from maturities of investment securities: HTM....... 2,559 196 3,090 2,101
Purchase of investment securities: AFS....................... (4,252) (1,267) (6,288) (1,592)
Purchase of investment securities: HTM....................... (2,706) (1,388) (3,375) (3,755)
Net (increase) decrease in loans............................. 49 (263) 2,532 (2,081)
Proceeds from the sale of Other Real Estate.................. 0 93 0 180
Premises and equipment expenditures.......................... (40) (250) (501) (334)
--------------- ------------ -------------- --------------
Net Cash provided from (used in) investing activities (1,837) (1,353) 927 (943)
--------------- ------------ -------------- --------------
Cash flows from financing activities
Net increase (decrease) in interest bearing
and non-interest bearing demand accounts................... 2,720 19 3,146 1,032
Net increase (decrease) in savings and time deposits......... 1,936 718 3,137 750
Cash dividends paid.......................................... (184) (166) (2,925) (498)
--------------- ------------ -------------- --------------
Net Cash provided from (used in) financing activities........ 4,472 571 3,358 1,284
--------------- ------------ -------------- --------------
Net increase (decrease) in cash and equivalents.............. 2,958 173 6,538 2,970
Cash and equivalents at beginning of year 16,140 12,623 12,560 9,826
--------------- ------------ -------------- --------------
Cash and equivalents at end of period 19,098 12,796 19,098 12,796
=============== ============ ============== ==============
Cash paid for:
Interest..................................................... 1,375 1,291 4,022 3,855
Income taxes................................................. 327 334 889 914
</TABLE>
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and the
Results of Operations.
Financial Condition
Cash dividends paid totaled $2,925,000 through the third quarter. A one time
dividend of $4.00 per share was paid on April 24, 1998. This dividend was in
addition to a regular quarterly dividends of $184,000 paid in March, June and
September. Net loans decreased $2,532,000 during the year. Net increases in
deposits totaled $6,283,000. Net activity in the investment portfolio resulted
in a use of cash of $1,104,000 through nine months. Premises and equipment
expenditures totaled $501,000 for three quarters. Net cash provided by operating
activities resulted in cash contributions of $2,253,000.
Commercial and consumer loan demand is moderate. Mortgage activity remains
strong in response to low rates. Management determined to sell current
production with an original maturity greater than fifteen years due to the low
rates. Deposit growth was strong during the third quarter. Customers choose the
Bank to escape the instability of the equity markets.
Results of Operations
Net income for the quarter declined $15,000 compared to the third quarter of
1997. The Bank received gains from the sale of other real estate of $93,000
during the third quarter of 1997. Net income increased 7% when 1997 is adjusted
for this unusual gain. Earnings per share reached $1.26 for the third quarter.
Management expects deposit growth and limited loan demand to put pressure on the
interest margin. Noninterest income and expense categories remained at levels
consistent with the Corporation's recent performance.
Risk Factors
Loan quality remains high. The reserve for loan losses to gross loans ratio is
1.68%. The non performing loans to total loans ratios is 1.17%. This ratio
compares loans past due 90 days or more and loans in non-accrual status to total
loans. This is an historically low ratio and indicates a high quality portfolio.
The Corporation remains liability sensitive in relation to the risk of changes
in interest rates. The demand for residential mortgages remains strong in the
market area. Customers consistently choose liquid, low priced deposits. The
volume of these low priced deposits challenges management to find appropriate
earning assets to relieve pressure on the interest margin. Options to maintain
both repricing opportunities for assets and market tendencies for deposits are
under constant review.
The Bank's management team formed a year 2000 committee to identify, correct and
prepare for problems associated with the computer systems that may not recognize
the 2000 date in the
<PAGE> 8
programming. This process is well under way and mission critical functions have
been identified and testing has begun. Due to the recent conversion of the main
data processing systems in 1997 for growth and competitive reasons to systems
that are already year 2000 compliant, the costs of testing and correcting these
systems and smaller support systems is expected to be in the area of $50,000.
Capital
Strong net income performance and conservative dividend payments result in
increased capital. The moderate growth results in improving capital ratios. The
Board of Directors of the Corporation declared a one time $4.00 per share
dividend payable April 24, 1998 to shareholders of record on April 10, 1998 at
the March 18, 1998 meeting. This action recognized the high levels of capital,
acknowledges the support of the shareholder and maintains adequate protection
for the depositors.
<PAGE> 9
Part II.
Item 6. Exhibits and Reports on Form 8-K.
A) Not Applicable
B) A Form 8-K has not been filed during the nine months ended September
30, 1998.
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COUNTY BANK CORP
Date November 11, 1998
/s/ Joseph H. Black
-------------------------------------
Joseph H. Black, Treasurer
<PAGE> 11
Index to Exhibits
EX-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 9,998
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,100
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,989
<INVESTMENTS-CARRYING> 48,338
<INVESTMENTS-MARKET> 0
<LOANS> 121,043
<ALLOWANCE> 2,030
<TOTAL-ASSETS> 192,270
<DEPOSITS> 169,203
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,528
<LONG-TERM> 0
0
0
<COMMON> 2,966
<OTHER-SE> 18,573
<TOTAL-LIABILITIES-AND-EQUITY> 192,270
<INTEREST-LOAN> 8,042
<INTEREST-INVEST> 2,075
<INTEREST-OTHER> 257
<INTEREST-TOTAL> 10,374
<INTEREST-DEPOSIT> 4,022
<INTEREST-EXPENSE> 4,022
<INTEREST-INCOME-NET> 6,352
<LOAN-LOSSES> 90
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,713
<INCOME-PRETAX> 3,145
<INCOME-PRE-EXTRAORDINARY> 3,145
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,297
<EPS-PRIMARY> 5.16
<EPS-DILUTED> 5.16
<YIELD-ACTUAL> 7.93
<LOANS-NON> 1,200
<LOANS-PAST> 731
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 52
<RECOVERIES> 35
<ALLOWANCE-CLOSE> 2,030
<ALLOWANCE-DOMESTIC> 50
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,980
</TABLE>
