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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.
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
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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
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Guide 3. Statistical disclosures:
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest
Rates and Interest (000's)
Table I. Average Assets (000's) Income (000's) Yield (%)
1999 1998 1997 1999 1998 1997 1999 1998 1997
Assets
Securities:
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%
* 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
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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.
---------------------------------------------------------------------------
1999 vs 1998 1998 vs 1997
Change Change in Change in Total
in
Volume Rate Rate/volume Volume Rate Rate/volume
Assets
Securities:
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
---------------------------------------------------------------------------
County Bank Corp 1999 10-k 5
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II. Investment Portfolio
A. Book values of the investment portfolio (000's)
1999 1998 1997
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
=======================================
B. Maturity distribution of the Investment portfolio.
Book Value (000's) Yield (%)
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
III. Loan Portfolio
A. Types of loans
1999 1998 1997 1996 1995
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
========== ========== ========== =========== ===========
County Bank Corp 10-k 6
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B. Maturities and Sensitivities of Loans to Changes in Interest Rates as of
December 31, 1999 (000's).
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
=======
C. Risk Elements
1. Nonaccrual, Past Due, and Restructured Loans (000's)
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
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
======== ======== ======= ====== ======
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
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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)
1999 1998 1997 1996 1995
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
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
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$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)
Real estate
Balances: Commercial Mortgage Installment Construction Unallocated Total
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%
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)
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
=========
E. Not applicable
County Bank Corp 1999 10-k 9
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V. Return on Equity and Assets
1999 1998 1997
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.
County Bank Corp 1999 10-k 10
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VII. Short-term Borrowings
Not applicable
ITEM 2. PROPERTY
The following is a tabulation of facilities owned by the Bank
App. Building Date
Description/location Square footage Occupied
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
County Bank Corp 1999 10-k 11
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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)
1999 1998 1997 1996 1995
Total Assets $ 207,397 $ 197,486 $ 186,841 $ 177,786 $ 169,877
Long Term Debt - - - - -
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.
Summary of Operations
1999 1998 1997 1996 1995
Interest income $ 14,027 $ 13,826 $ 13,556 $ 12,666 $ 12,114
Interest expense 5,373 5,355 5,162 4,823 4,654
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Net interest income 8,654 8,471 8,394 7,843 7,460
Provision for possible loan losses 320 120 120 120 240
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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
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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
===================================================================
County Bank Corp 1999 10-k 12
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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
Repricing period in days 0-30 31-90 91-180 181-365 0-365 0ver 365
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%
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
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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
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:
Executive Officers Ages Office Service
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
ITEM 11. EXECUTIVE COMPENSATION
Pages 5 & 6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Page 2
Director Number Percentage of
of shares outstanding
stock
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
County Bank Corp 1999 10-k 15
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:
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
(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
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
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