<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 10 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission files 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 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
required 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 shares of stock held by nonaffiliates
of the registrant was $42,122,336.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
There are 1,186,472 shares of common stock ($5.00 par value) outstanding as of
December 31, 1999.
The following documents are incorporated into the 10-K by reference:
The Annual Report to Shareholders, December 31, 1999, Part I, Part II.
Proxy statement dated March 24, 2000, Part III.
<PAGE> 2
FORM 10-K
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 stockholders,
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
stockholder 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 eight
locations. The main office is located at 83 W. Nepessing St., in downtown
Lapeer. A drive through location is located at the corner of Pine St. and Clay
St. across form the main office. A full service office is located in the sough
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. A full service office opened in August 1999 in the City of Imlay City at
1875 S. Cedar St., Imlay City, MI. One Automated Teller Machine is located in
Lapeer Regional Hospital, 1375 N. Main St., Lapeer. One cash dispensing machine
is located the lobby of Lapeer Cinemas at 1650 Demille Rd., Lapeer, MI. A full
service branch is located in Bryan's Market, a grocery store, at 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 National City Bank of Michigan/Illinois. National City operates
branches throughout the County. Independent Bank Corp. of Ionia, MI operates
three branch locations in the Bank's market area and a loan production office in
a Lapeer shopping center. NBD Bank operates an office north of the city limits
of Lapeer. Tri-County Bank has offices in Imlay City and Almont. CSB Bank of
Capac has an office in Imlay City and Almont. Oxford Bank operates a branch in
Dryden. There are two offices of Citizen's Federal Savings and Loan in the
County. Two credit unions, Lapeer County School Employees Credit Union and The
Lapeer County Community Credit Union, which operates offices in Lapeer and Imlay
City, serve the County. 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 local telephone book lists ten
financial planners, six investment brokers, and thirty-three mortgage brokers.
The Corporation is regulated 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 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 that 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)
County Bank Corp 1999 10-k 2
<PAGE> 3
of the State of Michigan. The Financial Institutions Bureau of the State of
Michigan has the authority to examine and regulated 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 Federal Deposit Insurance Corporation insures the Bank's
deposits.
The Federal Deposit Insurance Corporation 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 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 under capitalized. 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 operation and management standards, review of
executive compensation, increased accounting principles, and increased
dependence on audit committees.
The number of full time equivalent employees totaled 124 and 116 on December 31,
1999 and 1998, respectively.
County Bank Corp 1999 10-k 3
<PAGE> 4
Guide 3. Statistical disclosures:
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest
Rates and Interest (000's)
<TABLE>
<CAPTION>
Table I. Average Assets (000's) Income (000's) Yield (%)
1999 1998 1997 1999 1998 1997 1999 1998 1997
Assets
Securities:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
US Gov't & agencies................... 29,819 27,786 29,482 1,788 1,792 1,956 6.00% 6.45% 6.63%
State and political subdivisions*..... 20,672 17,898 15,594 1,598 1,392 1,246 7.73% 7.78% 7.99%
Corporate securities.................. - - 22 - - 1 0.00% 0.00% 4.55%
Other securities....................... 1,605 1,516 1,206 49 47 38 3.05% 3.10% 3.15%
Total investment securities........... 52,096 47,200 46,304 3,435 3,231 3,241 6.59% 6.85% 7.00%
Bank time deposits.................... - - - - - - 0.00% 0.00% 0.00%
Federal funds sold.................... 8,512 8,160 5,209 419 429 286 4.92% 5.26% 5.49%
Loans:
Commercial loans*..................... 65,578 55,943 54,210 5,668 5,071 4,937 8.64% 9.06% 9.11%
Real estate mortgages................. 32,994 35,845 37,258 2,435 2,972 3,144 7.38% 8.29% 8.44%
Consumer loans........................ 28,843 29,969 28,192 2,703 2,653 2,428 9.37% 8.85% 8.61%
Total loans........................... 127,415 121,757 119,660 10,806 10,696 10,509 8.48%. 8.78% 8.78%
Total average earning assets.......... 187,645 177,117 171,173 14,660 14,356 14,036 7.81% 8.11% 8.20%
Total average assets.................. 202,995 189,729 181,207
Interest bearing liabilities:
Deposits:
NOW account deposits.................. 50,200 46,084 41,132 1,642 1,550 1,397 3.27% 3.36% 3.40%
Savings deposits...................... 42,891 41,210 42,416 1,150 1,202 1,262 2.68% 2.92% 2.98%
Time deposits over $100,000........... 8,515 6,326 4,994 439 352 263 5.16% 5.56% 5.27%
Other time deposits................... 42,330 42,249 42,245 2,142 2,251 2,153 5.06% 5.33% 5.10%
Total deposits........................ 143,936 135,869 130,787 5,373 5,355 5,075 3.73% 3.94% 3.88%
Federal funds purchased............... - 35 34 - 2 2 0.00% 5.71% 5.88%
Long-term debt........................ - - - - - - 0.00% 0.00% 0.00%
Total interest bearing liabilities.... 143,936 135,904 130,821 5,373 5,357 5,077 3.73% 3.94% 3.88%
Demand deposits....................... 34,014 30,238 28,148
Other liabilities..................... 1,805 1,888 1,095
Stockholders' equity.................. 23,240 21,699 21,143
Total liabilities and stockholders'
equity.............................. 202,995 189,729 181,207
Interest expense as a % of average earning assets 2.86% 3.02% 2.97%
Net interest margin/net interest yield as a % 9,287 8,999 8,959 4.95% 5.08% 5.23%
of average earning assets
Net interest yield as a % of average assets 4.57% 4.74% 4.94%
</TABLE>
* A tax adjustment of $653, $514 and $473 has been added to 1999, 1998 and 1997
income respectively to reflect the impact of a 34% Federal income tax rate
rate in each year. Non accruing loans are reported in their related categories
and reduce the related yields.
County Bank Corp 1999 10-k 4
<PAGE> 5
Table II. The dollar amounts of changes in interest income and interest expense
are presented in the accompanying table. The change in volume is calculated by
multiplying the change in volume by the old rate. The change in rate is
calculated by multiplying the change in rate by the old volume. The change in
rate volume is calculated by multiplying the change in rate by the change in
volume.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
1999 vs 1998 1998 vs 1997
Change Change in Change in Total
in
Volume Rate Rate/volume Volume Rate Rate/volume
Assets
Securities:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US Gov't & agencies 131 (126) (9) (4) (113) (55) 4 (164)
State and political subdivisions 216 (9) (1) 206 184 (33) (5) 146
Corporate securities - - - - (1) - - (1)
Other securites 3 (1) - 2 10 (1) - 9
Total investment securities 350 (136) (10) 204 80 (89) (1) (10)
Bank time deposits - - - - - - - -
Federal funds sold 19 (27) (2) (10) 162 (12) (7) 143
Loans:
Commercial loans 873 (235) (41) 597 158 (23) (1) 134
Real estate mortgages (236) (327) 26 (537) (119) (55) 2 (172)
Consumer loans (100) 156 (6) 50 153 68 4 225
Total loans 537 (406) (21) 110 192 (10) 5 187
Total average earning assets 906 (569) (33) 304 434 (111) (3) 320
Interest bearing liabilities:
NOW account deposits 138 (43) (3) 92 168 (14) (1) 153
Savings deposits 49 (97) (4) (52) (36) (25) 1 (60)
Time deposits over $100,000 122 (26) (9) 87 70 15 4 89
Other time deposits 4 (113) - (109) - 98 - 98
Total deposits 313 (279) (16) 18 202 74 4 280
Federal funds purchased (2) (2) 2 (2) - - - -
Long-term debt - - - - - - - -
Total interest bearing liabilities 311 (281) (14) 16 202 74 4 280
Net Interest Income 595 (288) (19) 288 232 (185) (7) 40
---------------------------------------------------------------------------
</TABLE>
County Bank Corp 1999 10-k 5
<PAGE> 6
II. Investment Portfolio
A. Book values of the investment portfolio (000's)
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
U.S. Treasury securities and
U.S. government agencies $ 12,547 $ 11,042 $ 13,110
Obligations of states and political subdivisions 21,600 19,392 16,964
Corporate securties 1,290 1,695 1,482
Mortgage backed securities 14,317 18,487 15,731
---------------------------------------
Total securities $ 49,754 $ 50,616 $ 47,287
=======================================
</TABLE>
B. Maturity distribution of the Investment portfolio.
<TABLE>
<CAPTION>
Book Value (000's) Yield (%)
<S> <C> <C>
US Government securities
Maturity distribution:
One year or less $ 4,014 4.97
Over one year through five years 2,995 5.92
Over five years through ten years 5,538 6.41
Over ten years - -
State and political subdivisions*
Maturity distribution:
One year or less 1,762 7.52
Over one year through five years 7,061 7.78
Over five years through ten years 7,867 7.21
Over ten years 4,910 7.33
Mortgage-backed securities 14,317 5.96
Other securities 1,290 3.33
</TABLE>
III. Loan Portfolio
A. Types of loans
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Commercial $ 64,547 $ 50,658 $ 52,072 $ 50,975 $ 46,711
Real estate mortgage 31,502 35,457 39,332 32,696 24,546
Installment 27,625 28,322 27,141 30,968 30,592
Construction 10,977 5,738 3,062 2,835 3,500
---------- ---------- ---------- ---------- ----------
Total loans $ 134,651 $ 120,175 $ 121,607 $ 117,474 $ 105,349
========== ========== ========== =========== ===========
</TABLE>
County Bank Corp 10-k 6
<PAGE> 7
B. Maturities and Sensitivities of Loans to Changes in Interest Rates as of
December 31, 1999 (000's).
<TABLE>
<CAPTION>
<S> <C>
Commercial loans
Fixed rate loans with a maturity of:
Three months or less $ 4,997
Over three months through twelve months 5,595
One year through five years 26,664
Over five years 898
-------
Total fixed rate loans 38,154
Floating rate loans with a repricing frequency of:
Quarterly or more frequently 26,393
-------
Total commercial loans $64,547
=======
Real estate construction loans
Fixed rate loans with a maturity of:
Three months or less $ 2,275
Over three months through twelve months 388
One year through five years 466
-------
Total fixed rate loans 3,129
Floating rate loans with a repricing frequency of:
Quarterly or more frequently 7,848
Total real estate construction loans $10,977
=======
</TABLE>
C. Risk Elements
1. Nonaccrual, Past Due, and Restructured Loans (000's)
<TABLE>
<CAPTION>
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Loans 90 days past due and still accruing
Commercial loans $ 125 $ 174 $ 111 $ 12 $ 37
Real estate loans 0 0 124 0 0
Installment loans 21 98 31 30 32
-------- -------- ------- ------ ------
Total loans 90 days past due 146 272 266 42 69
======== ======== ======= ====== ======
Non accruing loans
Commercial loans 802 910 642 302 381
Real estate loans 87 45 170 0 0
Installment loans 128 197 82 23 2
-------- -------- ------- ------ ------
Total non accruing loans $ 1,017 $ 1,152 $ 894 $ 325 $ 383
======== ======== ======= ====== ======
</TABLE>
There were no restructured loans
For the year ended 1999, if the loans reported as nonaccrual had earned at the
contracted interest rate, $67,500 of interest income would have been recorded.
No interest income was recorded on these loans in 1999.
County Bamk Corp 1999 10-k 7
<PAGE> 8
The Corporation places loans on a nonaccruing status when management feels that
a significant risk of non-repayment exists. Criteria for evaluating risk 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, 1999, management identified seven potential problem loans in
the commercial loan portfolio. The seven loans totaled $773,000. Management
allocated $196,000 of the allowance for loan losses for these credits.
3. Foreign Outstandings
Not applicable
4. Loan concentrations
As of December 31, 1999, 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, 1999, there was no other interest bearing asset that would
have been classified 90 days past due and still accruing if it were a loan.
IV. Summary of Loan Loss Experience
A. Analysis of Allowance for Loan Losses (000's)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Balance at beginning of the period $ 1,881 $ 1,957 $ 1,805 $ 1,687 $ 1,624
Charge offs:
Commercial 240 157 - 62 186
Real estate - - - - -
Installment 137 69 59 48 19
Construction - - - - -
-----------------------------------------------------------
Total charge offs 377 226 59 110 205
Recoveries:
Commercial 68 10 63 72 9
Real estate - - - - -
Installment 21 20 28 36 19
Construction - - - - -
-----------------------------------------------------------
Total recoveries 89 30 91 108 28
-----------------------------------------------------------
Net charge offs 288 196 (32) 2 177
Provision charged to earnings 320 120 120 120 240
-----------------------------------------------------------
Balance at the end of the period $ 1,913 $ 1,881 $ 1,957 $ 1,805 $ 1,687
===========================================================
Ratio of net charge offs during the period to 0.23% 0.16% -0.03% 0.03% 0.18%
average loans during the period
</TABLE>
Net charged off loans totaled $288,000 for 1999. Charged off loans as a result
of consumer loan activity increased. Most losses resulted from deficiency
balances from repossessed collateral. One commercial loan resulted in a loss of
$150,000. The Bank expects to recover sum of this loss. The Bank allocated
County Bank Corp 1999 10-k 8
<PAGE> 9
$320,000 to the reserve for loan losses to replenish the reserve and maintain
the ratio of the reserve for loan losses to total loans in the face of strong
loan growth.
Net charged off loans totaled $196,000 in 1998. One borrower accounted for
$150,000 of the total charged off loans. Management allocated $120,000 from
earnings to maintain a strong reserve for loan losses to total loans ratio of
1.57%
Net charged off loans resulted in net recoveries of $32,000 in 1997. Loan growth
continued to be strong in 1997. Management allocated $120,000 from earning to
maintain a strong loan to deposit ratio of 1.58%
Net charge off loans totaled $2,000 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>
Real estate
Balances: Commercial Mortgage Installment Construction Unallocated Total
<S> <C> <C> <C> <C> <C> <C>
December 31, 1999 $ 492 $ 5 $ 135 $ - $ 1,281 $ 1,913
% of loans in category 47.9% 23.4% 20.5% 8.2% 100.0%
December 31, 1998 $ 276 $ - $ 73 $ - $ 1,532 $ 1,881
% of loans in category 42.1% 29.5% 23.6% 4.8% 100.0%
December 31, 1997 $ 179 $ - $ 48 $ - $ 1,730 $ 1,957
% of loans in category 43.7% 31.8% 22.0% 2.5% 100.0%
December 31, 1996 $ 181 $ - $ 35 $ - $ 1,589 $ 1,805
% of loans in category 43.4% 27.8% 26.4% 2.4% 100.0%
December 31, 1995 $ 124 $ 10 $ 14 $ - $ 1,539 $ 1,687
% of loans in category 44.3% 23.3% 29.1% 3.3% 100.0%
</TABLE>
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
D. Maturities of time certificates of deposits of $100,000 or more. (000's)
<TABLE>
<S> <C>
Three months or less $ 4,275
Over three through six months 1,485
Over six months through twelve months 1,723
Over twelve months 1,668
---------
$ 9,151
=========
</TABLE>
E. Not applicable
County Bank Corp 1999 10-k 9
<PAGE> 10
V. Return on Equity and Assets
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Return on assets (%) 1.61 1.70 1.74
Return on equity (%) 14.10 14.80 15.00
Dividend payout ratio (%) 33.84 106.63 31.90
Equity to assets ratio (%) 11.45 11.44 11.61
VI.
</TABLE>
County Bank Corp 1999 10-k 10
<PAGE> 11
VII. Short-term Borrowings
Not applicable
ITEM 2. PROPERTY
The following is a tabulation of facilities owned by the Bank
<TABLE>
<CAPTION>
App. Building Date
Description/location Square footage Occupied
<S> <C> <C>
Main office 34,948 9/15/02
83 W. Nepessing St.
Lapeer, MI
Elba Office 3,744 10/22/85
5508 Davison Rd.
Lapeer, MI
Pine-Clay office 528 1/5/68
305 Pine St.
Lapeer, MI
Southgate Office 1,700 11/2/70
637 S. Main St.
Lapeer, MI
Attica Office 4,158 6/27/79
4515 Imlay City Rd.
Attica, MI
Metamora Office 2,668 9/18/89
3414 S Lapeer Rd.
Metamora, MI
Imlay City Office 2,668 8/11/99
1875 S Cedar St.
Imlay City, MI
</TABLE>
County Bank Corp 1999 10-k 11
<PAGE> 12
ITEM 3. LEGAL PROCEEDINGS
No material legal proceeding is pending to which the Corporation or the Bank is
the party, or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Refer to Page 16 of the accompanying Annual Report to Shareholders
ITEM 6. SELECTED FINANCIAL DATA
Refer to Page 15 of the accompanying Annual Report to Shareholders, except for:
(000's)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Total Assets $ 207,397 $ 197,486 $ 186,841 $ 177,786 $ 169,877
Long Term Debt - - - - -
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE
RESULTS OF OPERATIONS.
EARNINGS
Major components of the operating result of the Corporation for 1999, 1998 and
1997 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
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Interest income $ 14,027 $ 13,826 $ 13,556 $ 12,666 $ 12,114
Interest expense 5,373 5,355 5,162 4,823 4,654
-------------------------------------------------------------------
Net interest income 8,654 8,471 8,394 7,843 7,460
Provision for possible loan losses 320 120 120 120 240
-------------------------------------------------------------------
Net interest income after provision
for possible loan losses 8,334 8,351 8,274 7,723 7,220
Other income 2,597 2,283 2,166 2,216 1,971
Other expense 6,487 6,175 6,064 5,739 5,669
-------------------------------------------------------------------
Income before provision for Federal 4,444 4,459 4,376 4,200 3,522
income tax
Provision for Federal income tax 1,166 1,239 1,215 1,220 948
-------------------------------------------------------------------
Net income $ 3,278 $ 3,220 $ 3,161 $ 2,980 $ 2,574
===================================================================
Per share:
Net income $ 2.76 $ 2.71 $ 2.66 $ 2.51 $ 2.17
===================================================================
Dividends declared $ 0.94 $ 2.90 $ 0.85 $ 0.77 $ 0.64
===================================================================
</TABLE>
County Bank Corp 1999 10-k 12
<PAGE> 13
Net interest income
The Bank experienced strong loan demand during 1999. Loans increased $14,764,000
while net deposits increased $8,725,000. The net cash investment in the
securities portfolio was $32,000, but this was offset by net decreases in the
value of the available for sale portfolio and net amortization of historical
premiums. Loan balances increased primarily during the last quarter of 1999.
During the last quarter of 1998 the Bank sold $9,922,000 of mortgage loans to
the secondary market. The resulting reduced ratio of loans to deposits during
the first three-quarters of 1998 resulted in a decline in the net interest
margin on a Federal tax equivalent basis (FTE) to 4.6% from 4.7% in 1998. The
FTE adjustment is derived by dividing tax exempt interest income by .66 to
reflect the Corporation's 34% tax rate. The Corporation continues to match rate
sensitive assets and rate sensitive liabilities to maintain margins in different
rate environments.
Rate sensitivity analysis (000's), December 31, 1999
<TABLE>
<CAPTION>
Repricing period in days 0-30 31-90 91-180 181-365 0-365 0ver 365
<S> <C> <C> <C> <C> <C> <C>
Rate sensitive assets (RSA):
Federal fund sold 4,900 - - - 4,900 0
Investment securities 12,394 366 2,112 3,184 18,056 31,698
Loans 39,174 2,043 2,252 7,799 51,268 81,383
-------------------------------------------------------------------------------------
Total rate sensitive assets 56,468 2,409 4,364 10,983 74,224 115,081
Rate sensitive liabilities (RSL):
Demand deposits 30,737 - 30,737 58,558
Savings deposits 20,818 - 20,818 20,346
Time deposits 7,742 7,257 9,965 9,590 34,554 17,169
-------------------------------------------------------------------------------------
Total rate sensitive liabilities 59,297 7,257 9,965 9,590 86,109 96,073
Repricing gap (RSA-RSL) 19,008
(2,829) (4,848) (5,601) 1,393 (11,885)
As a percent of capital -11.9% -20.3% -23.5% 5.8% -49.9% 79.8%
As a percent of total assets -1.4% -2.3% -2.7% 0.7% -5.7% 9.2%
</TABLE>
The preceding table represents management's analysis of repricing probabilities
for 1999. The Asset/liability management committee meets monthly to review the
impact of changes in rates and market pricing on the Corporation's interest
earning assets and interest paying liabilities. Customers' responses to interest
rates and deposit products are reviewed. Loan demand is discussed and methods to
answer customers needs are reviewed. The rate sensitivity of current production
of both loans and deposits are reviewed. Management's goal is to achieve a
balance between rate sensitive assets and rate sensitive liabilities in order to
maintain a reasonable interest margin in changing rate environments.
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 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 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 loan losses resulted in net charged off
loans of $288,000 in 1999. Net charged off loans recorded in 1998 were $196,000.
Provisions for possible loan losses were $320,000 in
County Bank Corp 1999 10-k 13
<PAGE> 14
1999 and 120,000 for 1998. The ratio of reserve for possible loan losses to
gross loans equaled 1.4%, 1.6% and 1.6% in 1999, 1998 and 1997, 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. Non-interest income increased 13.8% during
1999. Trust income increased 7.6%. Fees for use of the Bank's ATM's by
non-customers increased $99,000 as a result of a full year of collecting the
fees. Gains on the sale of Other Real Estate totaled $80,000. The Bank realized
a Gain on the Sale of Available for Sale Securities of $259,000.
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 increased 7.7% during 1999. FTE employees increased to 124
employees as a result of the opening a full service branch office in the City of
Imlay City. Occupancy and equipment expenses declined 1.7% as a result of
declines in depreciation expenses on the data processing equipment and
remodeling investment made in 1997. The new Imlay City branch office opened in
August of 1999. Other expenses increased 3.1%.
FINANCIAL CONDITION
Average assets for the Corporation totaled $202,995,000, 189,729,000 and
181,270,000 in 1999, 1998, and 1997, respectively. The 7.0% growth in average
assets follows a 4.71% growth in 1998 and a 5.1% average growth in 1997. Average
loans grew 4.6% while average interest bearing deposits grew 5.9%. Average
earning assets grew 6.1% compared to total deposit growth of 7.1%.
Liquidity
The anticipated requirements of the Corporation can be met by upstreaming
dividends from the subsidiary Bank. Refer to footnote 10 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 annual dividends to current stockholders. Dividends upstreamed to the
Corporation were $1,109,000 in 1999 and $3,434,000 in 1998.
The estimated market value of U.S. Government securities and U.S. Agency
securities totaled 13.2% of total deposits on December 31, 1999. The percentage
for 1998 was 19.0%. The Corporation is able to meet normal demands for liquidity
through loan repayments, securities payments and deposit growth.
CAPITAL
The Corporation's return on average equity totaled 14.1% in 1999 and 14.8% in
1998. Effective December 31, 1992, the Corporation is required to maintain
capital in excess of 8% of risk-weighted assets as defined by the Federal
Reserve Board. The Corporation's capital to risk-weighted asset ratio was 19.7%
on December 31, 1999 and was 20.7% on December 31, 1998. Refer to footnote 12 of
the accompanying financial statements for a tabular presentation of the
Corporation's capital adequacy. At its March 17, 1999 meeting, the Board of
Directors declared a 100% stock dividend to stockholders of record March 28,
1999, payable April 20, 1999.
RISK FACTORS
The Corporation is evaluated by the Federal Reserve Bank on its management of
risk factors effecting the organization. These risks include credit, liquidity,
market, operational, fiduciary, legal and reputational. Credit, liquidity, and
market risk were discussed in earlier sections of this narrative. Legal matters
are
County Bank Corp 1999 10-k 14
<PAGE> 15
discussed in ITEM 13. The Board of Directors discusses matters relating to
its reputation and performance in the community at its regular meetings and two
planning meetings held during the year
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to Pages 3-13 of the accompanying Annual Report to Shareholders.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
The information called for the items within this part is included in County Bank
Corp's 2000 Proxy Statement and is incorporated herein by reference, as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
PAGE 3 EXCEPT FOR:
<TABLE>
<CAPTION>
Executive Officers Ages Office Service
<S> <C> <C> <C>
Curt Carter 55 Employee 33 years
Officer President 11 years
Present term 11 years
Bruce J. Cady 47 Employee 0 years
Officer Vice President 0 years
Present term 0 years
Laird A. Kellie 55 Employee 17 years
Officer Secretary 11 years
Present term 11 years
Joseph H. Black 50 Employee 10 years
Officer Treasurer 10 years
Present term 10 years
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
Pages 5 & 6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Page 2
<TABLE>
<CAPTION>
Director Number Percentage of
of shares outstanding
stock
<S> <C> <C>
Dr. David H. Bush 45,656 3.85
Michael H. Blazo 20,012 1.69
Curt Carter 7,465 0.63
Patrick A. Cronin 2,228 0.19
Thomas K. Butterfield 29,400 2.48
James A. Harrington 8,676 0.73
Ernest W. Lefever 400 0.03
Tim Oesch 3,382 0.29
Charles Scheidegger 10,426 0.88
</TABLE>
County Bank Corp 1999 10-k 15
<PAGE> 16
Executive Officers and Directors, as a group, own 128,045 shares or 10.79% of
1,186,472 total outstanding shares of common stock of Corporation as of December
31, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Page 6
PART IV
Item 14. EXHIBITS FINANCIAL STATEMENT SCHEDULES, AND REPORTS OF FORM 8-K.
(a)(1) The following financial statement schedules of the Corporation and Bank
are included in the Annual Report to its stockholders for the year ended 1999
and are incorporated herein by reference in Item 8:
<TABLE>
<S> <C>
Balance Sheets--December 31, 1999 and 1998 Page 3
Statements of Income--years ended December 31, 1999, 1998 and 1997 Page 5
Statements of Changes in Stockholders equity--years ended December 31, 1999, 1998 and 1997 Page 4
Statements of Cash Flows--years ended December 31, 1999, 1998 and 1997 Page 6
Notes to Financial Statements Pages 7-13
Report of Independent Public Accountants dated January 19, 2000 Page 14
</TABLE>
(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 Stockholders for the year ended December 31, 1999 (filed
herewith)
(22) Subsidiary of the Registrant: Lapeer County Bank & Trust Co., a Michigan
Corporation
(23) Consent of Experts and Counsel: Letter of consent form Plante & Moran, LLP
dated March 29, 2000
(27) Financial Data Schedule
(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 1999 10-k 16
<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
Curt Carter
-----------------------------
President
Joseph H. Black
-----------------------------
Treasurer
James F. Harrington Charles Schiedegger
- ------------------- -------------------
Timothy Oesch David H. Bush
- ------------- --------------
Michael H. Blazo Patrick A. Cronin
- ----------------- -----------------
County Bank Corp 1999 10-k 17
<PAGE> 18
EXHIBIT INDEX
(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 Stockholders for the year ended December 31, 1999 (filed
herewith)
(22) Subsidiary of the Registrant; Lapeer County Bank & Trust Co., a Michigan
Corporation
(23) Consent of Experts and Counsel; Letter of consent form Plante & Moran, LLP
dated March 29, 2000
(27) Financial Data Schedule
<PAGE> 1
EXHIBIT 13
[CBC LOGO]
COUNTY BANK CORP
---------
1999 ANNUAL REPORT
<PAGE> 2
COUNTY BANK CORP
PRESIDENT'S MESSAGE
TO OUR STOCKHOLDERS AND FRIENDS
It was another record year for County Bank Corp. We became a $200 million Bank
in 1999 and earned nearly $3.3 million. The market for our stock remained strong
and we doubled our outstanding shares with the second 100% stock dividend in the
'90's. As anticipated by our preparation, the entry into the year 2000 was
"business as usual".
Total assets reached $207.4 million, a $10 million gain over 1998. Deposits grew
$8.7 million to $182.2 million, with the "Choice" account remaining the most
popular with $31 million invested at year end. Investment securities declined
slightly as those funds were replaced by loans. Net income set a new record for
the eighth consecutive year at $3,278,000, a return on average assets of 1.61%.
Return on average equity was 14.1%, down slightly from last year's 14.8%.
Outstanding loans grew $14.5 million to a new record of $134.6 million, with all
the growth in commercial loans. That growth is in addition to the $6.6 million
of residential mortgages that were sold in the secondary market. With the
exception of one large commercial loan charged off during the year, the quality
of the loan portfolio remains strong. In addition, non-performing loans as a
percent of total loans declined from the prior year. The provision for loan
losses was increased by an additional $200,000 over 1998 due to the above
referenced loss and the growth in outstanding loans. At year end the reserve for
loan losses was 1.42% of total loans, down from 1.57% in the prior years.
Stockholders' equity rose to $23.8 million, further strengthening our capital
position. Our risk based capital ratio is well in excess of the regulatory
requirement. During April a 100% stock dividend was issued, reducing the market
price from $72 to $36 per share. The market value was approximately $40 per
share at year end, a nice increase from April and nearly double the book value.
This further reflects the growing value of our stockholders' investment and the
continuing demand for stock from both new and existing stockholders. Earnings
per share, after restatement for the stock dividend, were $2.76 versus $2.71
last year. The regular cash dividends for the year were 93.5 cents per share, up
from 89.5 cents in 1998.
The year was exciting for other reasons including the August opening of our
Imlay City office, the first new freestanding branch constructed in ten years.
Branch Officer, Mike Burke is pleased with the deposit growth to $2 million at
year end. We expect that office to become a key part of our organization's
future. In addition we were fortunate to hire Bruce Cady as Senior Vice
President and head of our lending function. Bruce brings 24 years of experience
to the Bank, including 8 years as Vice President and Commercial Loan Group
Manager for a major regional bank. His leadership and expertise add even more to
an already solid group of lenders. Further in this report you will see 18 of our
staff recognized for years of service totaling 235 years. That is another great
reason your Bank is doing so well! One of those recipients decided to retire in
1999, thus the 15 year career of Marketing Director Carol-Lynn VanNorman came to
a close. She was a key part of our success in the 90's, including her role as
the Prestige Club coordinator. She will be missed.
CBC 1
<PAGE> 3
COUNTY BANK CORP
PRESIDENT'S MESSAGE and FINANCIAL HIGHLIGHTS
The year 2000 stands to be another good one for your Bank, regardless of the
anticipated increases in interest rates. We are looking forward with an even
higher level of enthusiasm and excitement than we did a year ago. As we move
into the new year, please plan to attend our Annual Meeting of Stockholders at
3:30 p.m. on Friday, April 21, 2000. The meeting will be held at the recently
renovated Pix Theatre, 1/2 block west of the Main Office. Please feel free to
contact me with any comments, questions or concerns and I hope to see you at the
Annual Meeting.
/s/ Curt Carter
---------------
Curt Carter
President
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
AT YEAR END 1999 1998 1997 1996
(000's OMITTED)
<S> <C> <C> <C> <C>
Assets $ 207,397 $ 197,486 $ 186,841 $ 177,786
Deposits 182,182 173,457 162,920 156,518
Loans 134,651 120,175 123,604 117,474
Securities 49,754 50,616 47,287 47,409
Stockholders' equity 23,825 22,321 22,281 19,862
FOR THE YEAR
(000's OMITTED)
Net income $ 3,278 $ 3,220 $ 3,161 $ 2,980
Cash dividend declared 1,109 3,434 1,009 908
Return on average assets (%) 1.61 1.70 1.74 1.73
Return on average stockholders' equity (%) 14.1 14.8 15.0 15.8
PER SHARE
Book value $ 20.08 $ 18.82 $ 18.78 $ 16.74
Net income 2.76 2.71 2.66 2.51
Cash dividend declared .94 2.90 .85 .77
</TABLE>
RETURN ON AVERAGE ASSETS
(PERCENT)
[BAR GRAPH]
<TABLE>
<S> <C>
1996 1.73
1997 1.74
1998 1.70
1999 1.61
</TABLE>
NET INCOME PER SHARE
(IN DOLLARS)
[BAR GRAPH]
<TABLE>
<S> <C>
1996 2.51
1997 2.66
1998 2.71
1999 2.76
</TABLE>
2 CBC
<PAGE> 4
COUNTY BANK CORP
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(000'S OMITTED) AS OF
DECEMBER 31
ASSETS
1999 1998
<S> <C> <C>
Cash and due from banks (Note 10) $ 12,883 $ 9,372
Federal funds sold 4,900 13,700
- ------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS 17,783 23,072
Securities held to maturity (Note 3) 28,189 28,137
Securities available for sale (Note 3) 21,565 22,479
Loans (Note 4) 134,651 120,175
Less reserve for possible loan losses 1,913 1,881
- ------------------------------------------------------------------------------------------------------------------
NET LOANS 132,738 118,294
Premises and equipment (Note 5) 4,227 3,201
Interest receivable and other assets 2,895 2,303
- ------------------------------------------------------------------------------------------------------------------
Total Assets $207,397 $197,486
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 6):
Noninterest-bearing demand deposits $ 34,977 $ 32,324
Interest-bearing demand deposits 54,318 47,684
Savings deposits 41,164 43,731
Time deposits 51,723 49,718
- ------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS 182,182 173,457
Interest payable and other liabilities 1,390 1,708
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 183,572 175,165
Stockholders' equity:
Common stock, $5 par value:
Authorized - 1,200,000 shares
Issued and outstanding - 1,186,472 shares in 1999 and 593,236 shares in 1998 (Note 11) 5,932 2,966
Surplus 8,634 8,634
Undivided profits (Note 10) 9,023 9,820
Accumulated other comprehensive income (Note 1) 236 901
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 23,825 22,321
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $207,397 $197,486
==================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
CBC 3
<PAGE> 5
COUNTY BANK CORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(000'S OMITTED, EXCEPT PER SHARE DATA)
ACCUMULATED
OTHER TOTAL
COMMON UNDIVIDED COMPREHENSIVE STOCKHOLDERS'
STOCK SURPLUS PROFITS INCOME EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 2,966 $ 8,634 $ 7,882 $ 380 $ 19,862
Comprehensive income:
Net income -- -- 3,161 -- 3,161
Change in unrealized gain on securities
available for sale, net of tax of $137 -- -- -- 267 267
- --------------------------------------------------------------------------------------------------------------
Total comprehensive income 3,428
Cash dividends ($.85 per share) -- -- (1,009) -- (1,009)
- --------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 2,966 8,634 10,034 647 22,281
Comprehensive income:
Net income -- -- 3,220 -- 3,220
Change in unrealized gain on securities
available for sale, net of tax of $130 -- -- -- 254 254
- --------------------------------------------------------------------------------------------------------------
Total comprehensive income 3,474
Cash dividends ($2.895 per share) -- -- (3,434) -- (3,434)
- --------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 2,966 8,634 9,820 901 22,321
Stock split effected in form of a
stock dividend (Note 11) 2,966 -- (2,966) -- --
Comprehensive income:
Net income -- -- 3,278 -- 3,278
Change in unrealized gain on securities
available for sale, net of tax of ($342)
and reclassification adjustment of $259 -- -- -- (665) (665)
- --------------------------------------------------------------------------------------------------------------
Total comprehensive income 2,613
Cash dividends ($ .935 per share) -- -- (1,109) -- (1,109)
- --------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1999 $ 5,932 $ 8,634 $ 9,023 $ 236 $ 23,825
==============================================================================================================
</TABLE>
STOCKHOLDERS' EQUITY
(IN MILLIONS)
[BAR GRAPH]
<TABLE>
<S> <C>
1996 19.9
1997 22.3
1998 22.3
1999 23.8
</TABLE>
RETURN ON AVERAGE STOCKHOLDERS' EQUITY
(PERCENT)
[BAR GRAPH]
<TABLE>
<S> <C>
1996 15.8
1997 15.0
1998 14.8
1999 14.1
</TABLE>
SEE ACCOMPANYING NOTES.
4 CBC
<PAGE> 6
COUNTY BANK CORP
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(000'S OMITTED, EXCEPT PER SHARE DATA)
YEARS ENDED DECEMBER 31
1999 1998 1997
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 10,753 $10,630 $10,454
Interest on investment securities:
U.S. Government 263 340 413
U.S. Government Agencies' mortgage-backed securities 1,525 1,452 1,544
State and political subdivisions 1,023 928 820
Other 49 47 39
Interest on Federal funds sold 414 429 286
- ----------------------------------------------------------------------------------------------------------
TOTAL INTEREST INCOME 14,027 13,826 13,556
Interest expense:
Interest on demand deposits 1,641 1,547 1,399
Interest on savings deposits 1,151 1,204 1,260
Interest on time deposits (Note 6) 2,581 2,602 2,501
Interest on borrowed funds - 2 2
- ----------------------------------------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 5,373 5,355 5,162
- ----------------------------------------------------------------------------------------------------------
Net interest income 8,654 8,471 8,394
Provision for possible loan losses (Note 4) 320 120 120
- ----------------------------------------------------------------------------------------------------------
Net interest income after provision for possible loan losses 8,334 8,351 8,274
Other income:
Service fees on loan and deposit accounts 1,264 1,135 1,076
Trust income 508 472 418
Gain on sale of securities 259 - -
Other 566 676 672
- ----------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 2,597 2,283 2,166
Other expenses:
Salaries and employee benefits 3,943 3,662 3,593
Occupancy expense 1,023 1,091 961
Other (Note 9) 1,521 1,422 1,510
- ----------------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSES 6,487 6,175 6,064
- ----------------------------------------------------------------------------------------------------------
Income before Federal income tax 4,444 4,459 4,376
Provision for Federal income tax (Note 7) 1,166 1,239 1,215
- ----------------------------------------------------------------------------------------------------------
NET INCOME $ 3,278 $ 3,220 $ 3,161
==========================================================================================================
EARNINGS PER SHARE (NOTE 11) $ 2.76 $ 2.71 $ 2.66
</TABLE>
SEE ACCOMPANYING NOTES.
CBC 5
<PAGE> 7
COUNTY BANK CORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(000'S OMITTED)
YEARS ENDED DECEMBER 31
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,278 $ 3,220 $ 3,161
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 486 520 436
Provision for loan losses 320 120 120
Net amortization and accretion of securities 145 160 181
Deferred income taxes (10) 29 (76)
Gain on other real estate owned -- -- (69)
Gain on sale of securities (259) -- --
Increase in accrued interest receivable (582) (191) (147)
Increase in accrued interest payable and other 25 114 173
- -------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,403 3,972 3,779
Cash flows from investing activities:
Proceeds from maturities of securities held to maturity 4,332 4,687 4,089
Proceeds from maturities of securities available for sale 11,601 6,539 4,690
Proceeds from sales of available-for-sale securities 260 -- --
Purchase of securities held to maturity (4,172) (3,840) (5,316)
Purchase of securities available for sale (12,053) (10,667) (3,118)
Proceeds from sale of other real estate -- -- 242
Net (increase) decrease in loans (14,764) 3,233 (6,098)
Premises and equipment expenditures (1,512) (515) (927)
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (16,308) (563) (6,438)
Cash flows from financing activities:
Net increase in interest-bearing and noninterest-
bearing demand accounts 9,287 5,908 5,486
Net increase (decrease) in savings and time deposits (562) 4,629 916
Cash dividends paid (1,109) (3,434) (1,009)
- -------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,616 7,103 $ 5,393
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents (5,289) 10,512 2,734
Cash and equivalents at beginning of year 23,072 12,560 9,826
- -------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF YEAR $ 17,783 $ 23,072 12,560
===================================================================================================================
Supplemental information:
Cash paid for:
Interest $ 5,395 $ 5,351 $ 5,137
Income tax $ 1,148 $ 1,154 $ 1,224
</TABLE>
SEE ACCOMPANYING NOTES.
6 CBC
<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
commercial, real estate and consumer loans to small and medium sized businesses
and, to a lesser extent, individuals.
USE OF ESTIMATES - 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, as a component of comprehensive income in stockholders'
equity.
INTEREST INCOME ON LOANS - Interest on loans is accrued and credited to income
based on 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 - The Corporation recognizes 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.
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 amounts of
$510,000 and $326,000 at December 31, 1999 and 1998, respectively, carried at
the lower of cost or estimated net realizable value.
EARNINGS PER SHARE - Earnings per share is based on the weighted average number
of common shares outstanding, retroactively adjusted for the impact of stock
splits.
CBC 7
<PAGE> 9
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES - The Corporation files a consolidated Federal income tax return.
The Corporation uses the asset and liability 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.
OTHER COMPREHENSIVE INCOME - Accounting principles generally require that
recognized revenue, expenses, gains and losses be included in net income.
Certain changes in assets and liabilities, however, such as unrealized gains and
losses on available for sale securities, are reported as a direct adjustment of
the equity section of the balance sheet. Such items, along with net income, are
components of comprehensive income under the new standard. The only item
included in accumulated other comprehensive income at December 31, 1999 and 1998
is the net unrealized gains and losses on available for sale securities.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 1998, Statement of Financial
Standards No.133, Accounting for Derivative Instruments and Hedging Activities
(SFAS 133), was issued. SFAS 133 requires all derivative instruments to be
recorded on the balance sheet at estimated fair value. Changes in the fair value
of derivative instruments are to be recorded each period either in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if it is, on the type of hedge
transaction. SFAS 133 is effective for the year 2000. The Corporation does not
currently enter into hedge transactions or invest in derivative instruments as
defined in the standard and does not believe the implementation of SFAS 133 will
have a material effect on its consolidated financial position or results of
operation.
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
1999 1998
<S> <C> <C>
ASSETS
Cash and due from banks $ 2 $ 2
Investment in subsidiary 23,823 22,319
Other assets -- --
- ------------------------------------------------------------------
Total assets $23,825 $22,321
==================================================================
LIABILITIES $ -- $ --
STOCKHOLDERS' EQUITY
Common stock, $5 par value 5,932 2,966
Surplus 8,634 8,634
Undivided profits 9,023 9,820
Accumulated other comprehensive net
income- Net of tax and reclassification
adjustments 236 901
- ------------------------------------------------------------------
Total stockholders' equity 23,825 22,321
- ------------------------------------------------------------------
Total liabilities and stockholders' equity $23,825 $22,321
==================================================================
</TABLE>
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31
1999 1998 1997
<S> <C> <C> <C>
Dividends from subsidiary Bank $ 1,109 $ 3,434 $ 1,009
Other expense -- (29) --
- --------------------------------------------------------------------------
Income before equity in undistributed
earnings of subsidiary Bank and
Federal income tax 1,109 3,405 1,009
- --------------------------------------------------------------------------
Income before equity in undistributed
earnings of subsidiary Bank 1,109 3,405 1,009
Equity in undistributed earnings of
subsidiary Bank 2,169 (185) 2,152
- --------------------------------------------------------------------------
Net income $ 3,278 $ 3,220 $ 3,161
==========================================================================
</TABLE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 3,278 $ 3,220 $ 3,161
Adjustments to reconcile net
income to net cash from
operating activities:
Undistributed earnings
of subsidiary (2,169) 185 (2,152)
Other -- 29 --
- ---------------------------------------------------------------------------
Net cash provided by operating
activities 1,109 3,434 1,009
Cash flows from financing activities:
Dividends paid (1,109) (3,434) (1,009)
- ---------------------------------------------------------------------------
Net change 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 CBC
<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, 1999
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 $ 1,000 $ -- $ 34 $ 966
Obligations of states and
political subdivisions 20,549 174 421 20,302
Mortgage-backed securities 6,640 29 108 6,561
- --------------------------------------------------------------------------
Total $28,189 $ 203 $ 563 $27,829
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
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 $ 1,000 $ 23 $ -- $ 1,023
Obligations of states and
political subdivisions 18,381 729 1 19,109
Mortgage-backed securities 8,756 35 1 8,790
- --------------------------------------------------------------------------
Total $28,137 $ 787 $ 2 $28,922
==========================================================================
</TABLE>
The amortized cost and estimated market value of securities held to maturity at
December 31, 1999, 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 $ 1,686 $ 1,690
Due after one year through five years 5,241 5,337
Due after five years through ten years 9,240 8,999
Due after ten years 5,382 5,242
- --------------------------------------------------------------
21,549 21,268
Mortgage-backed securities 6,640 6,561
- --------------------------------------------------------------
Total $28,189 $27,829
==============================================================
</TABLE>
The amortized cost and estimated market value of securities available for sale
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
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 $11,980 $ -- $ 433 $11,547
Obligations of states and
political subdivisions 1,040 11 -- 1,051
Corporate securities 426 864 -- 1,290
Mortgage-backed securities 7,762 1 86 7,677
- --------------------------------------------------------------------------
Total $21,208 $ 876 $ 519 $21,565
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
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 $ 9,985 $ 57 $ -- $10,042
Obligations of states and
political subdivisions 971 40 -- 1,011
Corporate securities 426 1,269 -- 1,695
Mortgage-backed securities 9,733 13 15 9,731
- --------------------------------------------------------------------------
Total $21,115 $ 1,379 $ 15 $22,479
==========================================================================
</TABLE>
The amortized cost and estimated market value of securities available for sale
at December 31, 1999, 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 $ 4,090 $ 4,074
Due after one year through five years 3,959 3,884
Due after five years through ten years 4,970 4,637
Due after ten years 427 1,293
- --------------------------------------------------------------
13,446 13,888
Mortgage-backed securities 7,762 7,677
- --------------------------------------------------------------
Total $21,208 $21,565
==============================================================
</TABLE>
CBC 9
<PAGE> 11
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1999 and 1998, U.S. Government securities and securities of
state and political subdivisions carried at $9,481,000 and $3,518,000,
respectively, with a market value of $9,040,000 and $3,549,000, 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, 1999.
4. LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Commercial $ 64,547 $ 50,658
Real estate mortgage 31,502 35,457
Installment 27,625 28,322
Construction 10,977 5,738
- ------------------------------------------------------------
Total loans 134,651 120,175
Less reserve for possible loan losses 1,913 1,881
- ------------------------------------------------------------
Net loans $132,738 $118,294
============================================================
</TABLE>
At December 31, 1999 and 1998, approximately $3,873,000 and $4,075,000,
respectively, of loans were outstanding to officers, directors, principal
stockholders and their associated companies. In 1999, additions and reductions,
including loan renewals, were $2,099,000 and $2,301,000, 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>
1999 1998 1997
<S> <C> <C> <C>
Balance at beginning of year $1,881 $1,957 $1,805
Provision charged to operations 320 120 120
Loans charged off (377) (226) (59)
Recoveries 89 30 91
- --------------------------------------------------------------------------------
Balance at end of year $1,913 $1,881 $1,957
================================================================================
Reserve as a percent of
total loans 1.42% 1.57% 1.58%
================================================================================
</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 $16,190,000 and $11,030,000 at December
31, 1999 and 1998, 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 $111,000 and
$9,900 at December 31, 1999 and 1998, respectively.
The Corporation has capitalized $68,000 and $102,000 in mortgage service rights
in 1999 and 1998, respectively. Amortization of those rights of $19,000 and
$7,000 was charged to expense during 1999 and 1998, respectively. The net
carrying amount of $144,000 and $95,000 for the years 1999 and 1998,
respectively, is included in other assets and approximates market value.
5. PREMISES AND EQUIPMENT
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Land and improvements $ 1,236 $ 661
Buildings and improvements 4,009 3,629
Furniture and equipment 4,312 3,879
- -------------------------------------------------
Total premises and equipment 9,557 8,169
Less accumulated depreciation 5,330 4,968
- -------------------------------------------------
Net carrying amount $ 4,227 $3,201
=================================================
</TABLE>
Depreciation expense for the years ended December 31, 1999, 1998 and 1997 was
$486,000, $520,000 and $436,000, respectively.
6. CERTIFICATES OF DEPOSIT
The aggregate amount of certificates of deposit in denominations in excess of
$100,000 totaled approximately $9,151,000, $6,846,000 and $5,869,000 at December
31, 1999, 1998 and 1997, respectively. The interest expense related to such
deposits throughout the year was approximately $439,000 in 1999, $330,000 in
1998 and $263,000 in 1997, which is included in interest on time deposits in the
accompanying consolidated statements of income.
7. INCOME TAXES
The items comprising the provision for Federal income taxes are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Taxes currently payable $1,176 $1,210 $1,291
Provision (credit) for
deferred taxes on:
Discount accretion (2) 3 (2)
Reserve for loan losses 10 (26) 51
Other (18) 52 (125)
- --------------------------------------------------------------------------------
Total deferred expense
(recovery) (10) 29 (76)
- --------------------------------------------------------------------------------
Provision for Federal
income tax $1,166 $1,239 $1,215
================================================================================
</TABLE>
10 CBC
<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>
1999 1998 1997
<S> <C> <C> <C>
Income taxes at statutory rates $ 1,511 $ 1,516 $ 1,488
Tax-exempt interest (392) (336) (309)
Other 47 59 36
- --------------------------------------------------------------------------------
Provision for federal income tax $ 1,166 $ 1,239 $ 1,215
================================================================================
</TABLE>
The details of the net deferred tax asset (liability) at December 31 are as
follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax assets:
Reserve for loan loss $ 439 $ 429
Depreciation 23 13
Other 111 98
- --------------------------------------------------------------------------------
Total deferred tax assets 573 540
Deferred tax liabilities:
Deferred loan fees 87 53
Accrued liabilities 58 70
Other 53 32
Unrealized gain on securities
available for sale 121 463
- --------------------------------------------------------------------------------
Total deferred tax liabilities 319 618
Valuation allowance - -
- --------------------------------------------------------------------------------
Net deferred tax asset (liability) $ 254 $ (78)
================================================================================
</TABLE>
8. 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 $328,000, $322,000 and $316,000 for 1999, 1998 and
1997, respectively.
9. OTHER EXPENSES
Included in other expenses for the years ended December 31, 1999, 1998 and 1997
are the following amounts:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Michigan single business tax $ 192 $ 97 $ 189
</TABLE>
10. 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 $5,227,000 and $4,324,000 at December 31, 1999 and 1998,
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, less any required transfers
to surplus. The amount available for the payment of dividends at December 31,
1999 was $4,117,000.
11. COMMON STOCK
On March 17, 1999, the Board of Directors declared a 100 percent stock dividend
to holders of record of common stock of the Corporation on March 28, 1999,
payable April 20, 1999, which was accounted for as if it were a stock split. The
accompanying consolidated financial statements reflect this transaction and all
per share amounts have been restated for the stock dividend.
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
1999 1998
ESTIMATED Estimated
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
<S> <C> <C> <C> <C>
Assets:
Cash and cash
equivalents $ 17,783 $ 17,783 $ 23,072 $ 23,072
Securities 49,754 49,394 50,616 51,401
Loans:
Commercial 74,003 74,055 54,625 54,965
Real estate mortgage 31,871 31,228 35,447 37,093
Installment 26,864 27,114 28,222 28,753
Accrued interest
receivable 1,558 1,558 1,296 1,296
Liabilities:
Deposits:
Interest-bearing 147,205 147,162 141,133 141,216
Noninterest-
bearing 34,977 34,977 32,324 32,324
Accrued interest
payable 431 431 453 453
</TABLE>
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.
CBC 11
<PAGE> 13
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 amounts. 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 notional contract amount of those items. The
Corporation generally requires collateral to support such financial instruments
in excess of the notional contract amount of those instruments.
The Corporation had outstanding loan origination commitments aggregating
$39,439,000 and $31,012,000 at December 31, 1999 and 1998, respectively, of
which $23,240,000 and $16,856,000 of loans 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, 1999, the most recent notification from the Financial Institutions Bureau
categorized the Bank as well capitalized. There are no conditions or events
since that notification that management believes have changed the institution's
capital category.
12 CBC
<PAGE> 14
COUNTY BANK CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, 1999
TO BE
CURRENT ADEQUATELY TO BE WELL
CAPITAL CAPITALIZED CAPITALIZED
<S> <C> <C> <C>
Total capital (to risk-
weighted assets):
Amount $ 25,875 $ 10,284 $ 12,855
Ratio 19.7% 8.0% 10.0%
Tier I capital (to risk-
weighted assets):
Amount 23,574 5,142 7,713
Ratio 18.1% 4.0% 6.0%
Tier I capital (to
average assets):
Amount 23,574 8,352 18,440
Ratio 11.3% 4.0% 5.0%
<CAPTION>
DECEMBER 31, 1998
To Be
Current Adequately To Be Well
Capital Capitalized Capitalized
<S> <C> <C> <C>
Total capital (to risk-
weighted assets):
Amount $ 22,686 $ 8,750 $ 10,938
Ratio 20.7% 8.0% 10.0%
Tier I capital (to risk-
weighted assets):
Amount 21,326 4,375 6,563
Ratio 19.5% 4.0% 6.0%
Tier I capital (to
average assets):
Amount 21,326 4,375 6,563
Ratio 11.3% 4.0% 5.0%
</TABLE>
CBC 13
<PAGE> 15
COUNTY BANK CORP
INDEPENDENT AUDITOR'S REPORT
Certified Public Accountants
Suite 2000 Management Consultants
505 N. Woodward Ave. 810-644-0300
Bloomfield Hills, Michigan 48304-2979 FAX 810-644-0373
[PLANTE & MORAN, LLP LOGO]
The Board of Directors
County Bank Corp
We have audited the consolidated balance sheet of County Bank Corp and
subsidiary as of December 31, 1999 and 1998 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, 1999. 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 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 and subsidiary at December 31, 1999 and 1998, and the consolidated
results of its operations and cash flows for each year in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
/s/ PLANTE & MORAN, LLP
Bloomfield Hills, Michigan
January 19, 2000
A MEMBER OF
[MRI LOGO]
A WORLDWIDE ASSOCIATION OF INDEPENDENT ACCOUNTING FIRMS
14 CBC
<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 subsidiary Bank. The Bank serves Lapeer County through three offices
in the City of Lapeer, a branch office in the City of Imlay City and branch
offices in each of the Townships of Attica, Deerfield, Elba and Metamora.
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 Federal Deposit Insurance Corporation insures
the Bank's deposits.
EARNINGS
Major components of the operating results of the Corporation for 1999, 1998 and
1997 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>
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Interest income $ 14,027 $ 13,826 $ 13,556 $ 12,666 $ 12,114
Interest expense 5,373 5,355 5,162 4,823 4,654
- ---------------------------------------------------------------------------------------------------------
Net interest income 8,654 8,471 8,394 7,843 7,460
Provision for possible loan losses 320 120 120 120 240
- ---------------------------------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 8,334 8,351 8,274 7,723 7,220
Other income 2,597 2,283 2,166 2,216 1,971
Other expenses 6,487 6,175 6,064 5,739 5,669
- ---------------------------------------------------------------------------------------------------------
Income before provision for
Federal income tax 4,444 4,459 4,376 4,200 3,522
Provision for Federal income tax 1,166 1,239 1,215 1,220 948
- ---------------------------------------------------------------------------------------------------------
Net income $ 3,278 $ 3,220 $ 3,161 $ 2,980 $ 2,574
=========================================================================================================
PER SHARE
Net income $ 2.76 $ 2.71 $ 2.66 $ 2.51 $ 2.17
Dividends declared $ .94 $ 2.90 $ .85 $ .77 $ .64
</TABLE>
NET INTEREST INCOME
The Bank experienced strong loan demand during 1999. Loans increased $14,764,000
while net deposits increased $8,725,000. The net cash investment in the
securities portfolio was $32,000, but this was offset by net decreases in the
value of the available for sale portfolio and net amortization of historical
premiums. Loan balances increased primarily during the last quarter of 1999.
During the last quarter of 1998 the Bank sold $9,922,000 of mortgage loans to
the secondary market. The resulting reduced ratio of loans to deposits during
the first three quarters of 1999 resulted in a decline in the net interest
margin on a Federal tax equivalent basis (FTE) to 4.6% from 4.7% in 1998. The
FTE adjustment is derived by dividing tax exempt interest income by .66 to
reflect the Corporation's 34% tax rate. The Corporation continues to match rate
sensitive assets and rate sensitive liabilities to maintain margins in different
rate environments.
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
CBC 15
<PAGE> 17
COUNTY BANK CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 loan losses resulted in net charged off
loans of $288,000 in 1999. Net charged off loans recorded in 1998 were $196,000.
Provisions for possible loan losses were $320,000 in 1999 and 120,000 for 1998.
The ratio of reserve for possible loan losses to gross loans equaled 1.4%, 1.6%
and 1.6% in 1999, 1998 and 1997, 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. Non-interest income increased 13.8% during
1999. Trust income increased 7.6%. Fees for use of Bank's ATM's by non-customers
increased $99,000 as a result of a full year of collecting the fees. Gains on
the sale of Other Real Estate totaled $80,000. The Bank realized a Gain on the
Sale of Available for Sale Securities of $259,000.
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 increased 8.2% during 1999. FTE employees increased to 124
employees as a result of the opening of a full service branch office in the City
of Imlay City. Occupancy and equipment expenses declined 1.7% as a result of
reductions in depreciation expenses on the data processing equipment and
remodeling investment made in 1997. The new Imlay City branch office opened in
August of 1999. Other expenses increased 3.1%.
FINANCIAL CONDITION
Average assets for the Corporation totaled $202,995,000, $189,729,000 and
$181,270,000 in 1999, 1998 and 1997 respectively. The 7.0% growth in average
assets follows a 4.71% growth in 1998 and a 5.1% growth in 1997.
Average loans grew 4.6% while average interest bearing deposits grew 5.9%.
Average earning assets grew 6.1% compared to average total deposit growth of
7.1%.
CAPITAL
The Corporation currently has 486 stockholders representing 1,186,472 shares of
common stock. The stock is not listed on any exchange. Local brokerage firms
handle sales. The following schedule compares bid and asked prices for the stock
of the Corporation, as known to management, by calendar quarter for 1999 to bid
and asked prices for 1998.
<TABLE>
<CAPTION>
1999
BID ASKED
<S> <C> <C>
First Quarter $35.67 $36.17
Second Quarter 36.00 37.00
Third Quarter 39.34 40.34
Fourth Quarter 39.83 40.67
<CAPTION>
1998
BID ASKED
<S> <C> <C>
First Quarter $30.00 $30.50
Second Quarter 33.25 34.00
Third Quarter 37.50 38.50
Fourth Quarter 37.50 38.00
</TABLE>
The Corporation paid quarterly cash dividends and paid a special dividend in
December of 1999. On March 17th, 1999, the Board of Directors declared a 100
percent stock dividend to holders of record of common stock on March 28, 1999,
payable April 20, 1999. All per share data in this narrative have been restated
to reflect the new number of shares. The Corporation paid dividends totaling
$1,109,000 in 1999 and $3,434,000 in 1998. On April 24, 1998, the Corporation
paid $4.00 per share to stockholders of record on April 10, 1998. This onetime
only dividend recognized the high level of capital, acknowledged support of the
stockholders, yet maintained adequate protection for the Bank's depositors. The
dividends per share totaled $.935 per share in 1999 and $2.895 per share in 1998
after restatement for the stock split. There are currently 1,200,000 authorized
shares. The Corporation did not issue any authorized shares other than those
necessary to achieve the stock dividend in 1999. The Corporation did not issue
any authorized shares in 1998.
16 CBC
<PAGE> 18
COUNTY BANK CORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Corporation's return on average equity totaled 14.1% in 1999 and 14.8% in
1998. Effective December 31, 1992, the Corporation is required to maintain
capital in excess of 8% of risk-weighted assets as defined by the Federal
Reserve Board. The Corporation's capital to risk-weighted asset ratio was 19.7%
on December 31, 1999 and was 20.7% on December 31, 1998.
LIQUIDITY
The anticipated liquidity requirements of the Corporation can be met by
upstreaming dividends from the Bank. Refer to Note 10 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 $1,109,000 in 1999 and $3,434,000 in 1998.
The estimated market value of U.S. Government securities and U.S. Agency
securities totaled 13.2% of total deposits on December 31, 1999. The percentage
for 1998 was 19.0%. The Corporation is able to meet normal demands for liquidity
through loan repayments, securities payments and deposit growth.
SPECIAL RECOGNITION
[PHOTO] BRUCE CADY
Bruce was appointed Senior Vice President and head of the loan department in
September. He comes with 24 years of commercial lending experience. Bruce is
well known and regarded in the Lapeer County area having actively served the
community as past treasurer, and currently as director, of the Lapeer
Development Corporation, past director of the City of Lapeer EDC and TIFA and
Chairperson of the Lapeer Development Corporation Revolving Loan Fund Committee.
He was instrumental in the establishment of the enhanced 911 system for Lapeer
County, serving as Chairperson. Bruce and his wife Debbie have two children and
have lived in Lapeer over ten years.
[PHOTO] MICHAEL BURKE
Mike was appointed the Imlay City Branch Officer in August. He has 11 years of
experience with a regional bank in the Flint area. Most recently he was an
operations project manager specializing in technology projects. Prior to that,
he was a consumer lending manager and spent a year and a half as a branch
manager. Mike is very active in his church, serving as one of their youth group
leaders. A graduate of Lapeer West High School, Mike is currently working toward
a bachelor's degree in finance at the University of Michigan-Flint. He and his
wife Laura are both native to Lapeer and have three children.
CBC 17
<PAGE> 19
COUNTY BANK CORP
SPECIAL RECOGNITION
SPECIAL RECOGNITION AND AWARDS WERE PRESENTED
TO THESE EMPLOYEES IN HONOR OF THEIR DEDICATED SERVICE
[PHOTO]
from left: 30 YEARS: Debbie Durance; 25 YEARS: Sue Tippie;
20 YEARS: Beth Henderson, Faye Forrest, Dean Goodrich; 15 YEARS:
Sharon Arnold, Cathy Lestage, Carol-Lynn VanNorman and Carol Wangler
[PHOTO]
from left: 10 YEARS: Lucille Macksoud, Laura See;
5 YEARS: Amy Moore, Kathleen Sutherland, Debbie McCoon, Jamie Bugg and
Dennise Main. absent from photo: 10 YEARS: Joe Black; 5 YEARS: Judy Moore
18 CBC
<PAGE> 20
COUNTY BANK CORP
BOARD OF DIRECTORS
COUNTY BANK CORP
BOARD OF DIRECTORS
[PHOTO]
LEFT, FROM FRONT TO BACK: Tim Oesch, Tom Butterfield,
Jim Harrington, Curt Carter and Dave Bush.
RIGHT, FROM FRONT TO BACK: Ernie Lefever,
Mike Blazo, Chuck Schiedegger and Pat Cronin.
CBC 19
<PAGE> 21
COUNTY BANK CORP
LAPEER COUNTY BANK & TRUST CO.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
COUNTY BANK CORP
BOARD OF DIRECTORS
<S> <C>
MICHAEL H. BLAZO PATRICK A. CRONIN
President, Kirk Construction Co. Agent, State Farm Insurance
DAVID H. BUSH, O.D. JAMES F. HARRINGTON
Doctor of Optometry President, H & H Tool, Inc.
THOMAS K. BUTTERFIELD ERNEST W. LEFEVER, DPM
Attorney at Law with Taylor, Butterfield, Doctor of Podiatry
Riseman, Clark, Howell & Churchill, P.C. TIM OESCH
CURT CARTER President, Nolin, Oesch, Sieting & Macksoud, P.C.
President, County Bank Corp CHARLES SCHIEDEGGER
President & COO, Metamora Products Corp.
<CAPTION>
WHOLLY OWNED SUBSIDIARY
LAPEER COUNTY BANK & TRUST CO.
<S> <C>
CURT CARTER KATHLEEN M. SUTHERLAND
President Director of Mortgage Lending
BRUCE J. CADY BETH A. HENDERSON
Senior Vice President Mortgage Loan Officer
LAIRD A. KELLIE DEAN A. GOODRICH
Vice President Auditor
V. KENNETH EWING SHELLY M. CHILDERS
Vice President & Trust Officer Data Processing Officer
JOSEPH H. BLACK SUSANNE R. DICKEY
Financial Officer Assistant Financial Officer
AMY L. MOORE TERRI L. CRANICK
Human Resources Director Assistant Trust Officer
CAROL-LYNN VANNORMAN CAROL J. WANGLER
Marketing Director Operations Officer
JIM COPPINS BERNADETTE F. TALASKI
Business Development Director Branch Administrator
ALAN J. CURTIS DOROTHY A. FLEMING
Senior Commercial Loan Officer Attica Branch Officer
DAVID M. HENDRY MICHAEL J. BURKE
Commercial Loan Officer Imlay City Branch Officer
WILLIAM E. O'CONNOR CHERRI A. WEIR
Commercial Loan Officer Metamora Branch Officer
BARBARA L. SMALLIDGE MARSHA A. KALAKAY
Director of Consumer Lending Southgate Branch Officer
NANCY F. SOMMERVILLE
Consumer Loan Officer
</TABLE>
LAPEER COUNTY BANK & TRUST CO.
83 WEST NEPESSING STREET, LAPEER, MICHIGAN
PHONE: 810-664-2977 FAX: 810-667-1742
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, PO BOX 250, LAPEER, MI 48446-0250.
20 CBC
<PAGE> 22
[PHOTO OF BANK]
A LAPEER COUNTY TRADITION...
MEMBER FDIC
<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 the year ended December 31, 1999, of our report dated
January 19, 2000 included in the 1999 Annual Report to the Shareholders of
County Bank Corp.
PLANTE & MORAN, LLP
Bloomfield Hills, Michigan
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 12,883
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,900
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 49,397
<INVESTMENTS-MARKET> 49,394
<LOANS> 134,651
<ALLOWANCE> 1,913
<TOTAL-ASSETS> 207,397
<DEPOSITS> 182,182
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,390
<LONG-TERM> 0
0
0
<COMMON> 5,932
<OTHER-SE> 17,893
<TOTAL-LIABILITIES-AND-EQUITY> 207,397
<INTEREST-LOAN> 10,753
<INTEREST-INVEST> 2,860
<INTEREST-OTHER> 414
<INTEREST-TOTAL> 14,027
<INTEREST-DEPOSIT> 5,373
<INTEREST-EXPENSE> 0
<INTEREST-INCOME-NET> 8,654
<LOAN-LOSSES> 320
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 6,487
<INCOME-PRETAX> 4,444
<INCOME-PRE-EXTRAORDINARY> 4,444
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,278
<EPS-BASIC> 2.76
<EPS-DILUTED> 2.76
<YIELD-ACTUAL> 7.78
<LOANS-NON> 1,017
<LOANS-PAST> 2,420
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 377
<RECOVERIES> 89
<ALLOWANCE-CLOSE> 1,913
<ALLOWANCE-DOMESTIC> 50
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,863
</TABLE>
