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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 2003 or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from_________________ to__________________
Commission file number 0-7818
INDEPENDENT BANK CORPORATION
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(Exact name of Registrant as specified in its charter)
MICHIGAN 38-2032782
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation)
230 W. Main St., P.O. Box 491, Ionia, Michigan 48846
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (616) 527-9450
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 Par Value
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(Title of class)
8.25% Cumulative Trust Preferred Securities, $25.00 Liquidation Amount
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.____.
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b2) Yes /X/ No / /
The aggregate market value of common stock held by non-affiliates of the
Registrant as of June 30, 2003, was $419,580,604.
The number of shares outstanding of the Registrant's common stock as of March 4,
2004 was 19,622,403.
Documents incorporated by reference
Portions of our definitive proxy statement, and appendix thereto, to be
delivered to shareholders in connection with the April 23, 2004 Annual Meeting
of Shareholders are incorporated by reference into Part I, Part II and Part III
of this annual report.
The Exhibit Index appears on Page 23
Any statements in this document that are not historical facts are
forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. Words such as "expect," "believe," "intend," "estimate,"
"project," "may" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements are predicated on
management's beliefs and assumptions based on information known to Independent
Bank Corporation's management as of the date of this document and do not purport
to speak as of any other date. Forward-looking statements may include
descriptions of plans and objectives of Independent Bank Corporation's
management for future or past operations, products or services, and forecasts of
the Company's revenue, earnings or other measures of economic performance,
including statements of profitability, business segments and subsidiaries, and
estimates of credit quality trends. Such statements reflect the view of
Independent Bank Corporation's management as of this date with respect to future
events and are not guarantees of future performance; involve assumptions and are
subject to substantial risks and uncertainties, such as the changes in
Independent Bank Corporation's plans, objectives, expectations and intentions.
Should one or more of these risks materialize or should underlying beliefs or
assumptions prove incorrect, the Company's actual results could differ
materially from those discussed. Factors that could cause or contribute to such
differences are changes in interest rates, changes in the accounting treatment
of any particular item, the results of regulatory examinations, changes in
industries where the Company has a concentration of loans, changes in the level
of fee income, changes in general economic conditions and related credit and
market conditions, and the impact of regulatory responses to any of the
foregoing. Forward-looking statements speak only as of the date they are made.
Independent Bank Corporation does not undertake to update forward-looking
statements to reflect facts; circumstances, assumptions or events that occur
after the date the forward-looking statements are made. For any forward-looking
statements made in this document, Independent Bank Corporation claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995.
PART I
ITEM 1. BUSINESS
Independent Bank Corporation was incorporated under the laws of the State of
Michigan on September 17, 1973, for the purpose of becoming a bank holding
company. We are registered under the Bank Holding Company Act of 1956, as
amended, and own the outstanding stock of four banks (the "Banks") which are all
organized under the laws of the State of Michigan.
Aside from the stock of our Banks, we have no other substantial assets. We
conduct no business except for the provision of certain management and
operational services to our Banks, the collection of fees and dividends from our
Banks and the payment of dividends to our shareholders. Certain employee
retirement plans (including employee stock ownership and deferred compensation
plans) as well as health and other insurance programs have been established by
us. The proportional costs of these plans are borne by each of our Banks and
their respective subsidiaries.
We have no material patents, trademarks, licenses or franchises except the
corporate franchises of our Banks which permit them to engage in commercial
banking pursuant to Michigan law.
The following table shows each of our Banks and their total deposits and loans
as of December 31, 2003:
Main
Office Total Total
Bank Location Deposits Loans
- ---- -------- ------------ ------------
Independent Bank Bay City $810,966,000 $868,460,000
Independent Bank
West Michigan Rockford 353,448,000 364,133,000
Independent Bank
South Michigan Leslie 278,932,000 235,773,000
Independent Bank
East Michigan Caro 273,286,000 231,669,000
1
ITEM 1. BUSINESS (Continued)
On April 15, 2003 we completed the acquisition of Mepco Insurance Premium
Financing, Inc. Mepco is a 40-year old Chicago-based company that specializes in
financing insurance premiums for businesses and extended automobile warranties
for consumers. Mepco is operated as a wholly owned subsidiary of Independent
Bank.
During the first quarter of 2003, we formed IBC Capital Finance II, a Delaware
statutory business trust ("IBC Capital II"). IBC Capital II's business and
affairs are conducted by its property trustee, a Delaware trustee, and three
individual administrative trustees who are employees or officers of or
affiliated with us. IBC Capital II exists for the sole purposes of selling and
issuing its preferred and common securities, using the proceeds from the sale of
those securities to acquire subordinated debentures issued by us and certain
related services. As a result, the sole assets of IBC Capital II are our
subordinated debentures.
Our Banks transact business in the single industry of commercial banking. Most
of our Banks' offices provide full-service lobby and drive-thru services in the
communities which they serve. Automatic teller machines are also provided at
most locations.
Our Banks' activities cover all phases of commercial banking, including checking
and savings accounts, commercial lending, direct and indirect consumer
financing, mortgage lending, insurance premium and automobile warranty financing
and safe deposit box services. Our Banks' mortgage lending activities are
primarily conducted through separate mortgage bank subsidiaries formed during
1998. Insurance premium and automobile warranty financing activity is conducted
through a separate subsidiary owned by one of our Banks. Our Banks also offer
title insurance services through a separate subsidiary and provide investment
and insurance services through a third party agreement with PrimeVest Financial
Services, Inc. Our Banks do not offer trust services. Our principal markets are
the rural and suburban communities across lower Michigan that are served by our
Banks' branch networks. The local economies of the communities served by our
Banks are relatively stable and reasonably diversified. Our Banks serve their
markets through their four main offices and a total of 77 branches, 4 drive-thru
facilities and 12 loan production offices.
Our Banks compete with other commercial banks, savings and loan associations,
credit unions, mortgage banking companies, securities brokerage companies,
insurance companies, and money market mutual funds. Many of these competitors
have substantially greater resources than we do and offer certain services that
we do not currently provide. Such competitors may also have greater lending
limits than our Banks. Competition may increase as a result of the
Gramm-Leach-Bliley Act of 1999 (the "GLB Act"), and the easing of restrictions
on interstate banking effected under the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (the "Riegle-Neal Act"). In addition, non-bank
competitors are generally not subject to the extensive regulations applicable to
us.
Price (the interest charged on loans and/or paid on deposits) remains a
principal means of competition within the financial services industry. Our Banks
also compete on the basis of service and convenience, utilizing the strengths
and benefits of our decentralized structure in providing financial services.
The principal sources of revenue, on a consolidated basis, are interest and fees
on loans, other interest income and non-interest income. The sources of revenue
for the three most recent years are as follows:
2003 2002 2001
----- ----- -----
Interest and fees on loans 65.3% 68.0% 72.9%
Other interest income 11.3 12.8 10.4
Non-interest income 23.4 19.2 16.7
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
As of December 31, 2003, we had 960 full-time employees and 259 part-time
employees.
Supervision and Regulation
The following is a summary of certain statutes and regulations affecting us.
This summary is qualified in its entirety by reference to the particular
statutes and regulations. A change in applicable laws or regulations may have a
material effect on us and our Banks.
2
ITEM 1. BUSINESS (Continued)
General
Financial institutions and their holding companies are extensively regulated
under Federal and state law. Consequently, our growth and earnings performance
can be affected not only by management decisions and general and local economic
conditions, but also by the statutes administered by, and the regulations and
policies of, various governmental regulatory authorities. Those authorities
include, but are not limited to, the Board of Governors of the Federal Reserve
System (the "Federal Reserve"), the Federal Deposit Insurance Corporation (the
"FDIC"), the Michigan Office of Financial and Insurance Services, Division of
Financial Institutions (the "OFIS"), the Internal Revenue Service, and state
taxing authorities. The effect of such statutes, regulations and policies and
any changes thereto can be significant and cannot be predicted.
Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments, reserves against deposits, capital levels, lending
activities and practices, the nature and amount of collateral for loans, the
establishment of branches, mergers, consolidations and dividends. The system of
supervision and regulation applicable to us establishes a comprehensive
framework for our operations and is intended primarily for the protection of the
FDIC's deposit insurance funds, the depositors of our Banks, and the public,
rather than our shareholders.
Federal law and regulations establish supervisory standards applicable to the
lending activities of our Banks, including internal controls, credit
underwriting, loan documentation and loan-to-value ratios for loans secured by
real property.
Independent Bank Corporation
General. We are a bank holding company and, as such, are registered with, and
subject to regulation by, the Federal Reserve under the Bank Holding Company
Act, as amended (the "BHCA"). Under the BHCA, we are subject to periodic
examination by the Federal Reserve, and are required to file periodic reports of
operations and such additional information as the Federal Reserve may require.
In accordance with Federal Reserve policy, a bank holding company is expected to
act as a source of financial strength to its subsidiary banks and to commit
resources to support the subsidiary banks in circumstances where the bank
holding company might not do so absent such policy.
In addition, if the OFIS deems a bank's capital to be impaired, the OFIS may
require a bank to restore its capital by special assessment upon a bank holding
company, as the bank's sole shareholder. If the bank holding company were to
fail to pay such assessment, the directors of that bank would be required, under
Michigan law, to sell the shares of that bank stock owned by the bank holding
company to the highest bidder at either public or private auction and use the
proceeds of the sale to restore the bank's capital.
Any capital loans by a bank holding company to a subsidiary bank are subordinate
in right of payment to deposits and to certain other indebtedness of such
subsidiary bank. In the event of a bank holding company's bankruptcy, any
commitment by the bank holding company to a federal bank regulatory agency to
maintain the capital of a subsidiary bank will be assumed by the bankruptcy
trustee and entitled to a priority of payment.
Investments and Activities. In general, any direct or indirect acquisition by a
bank holding company of any voting shares of any bank which would result in the
bank holding company's direct or indirect ownership or control of more than 5%
of any class of voting shares of such bank, and any merger or consolidation of
the bank holding company with another bank holding company, will require the
prior written approval of the Federal Reserve under the BHCA. In acting on such
applications, the Federal Reserve must consider various statutory factors
including the effect of the proposed transaction on competition in relevant
geographic and product markets, and each party's financial condition, managerial
resources, and record of performance under the Community Reinvestment Act.
In addition and subject to certain exceptions, the Change in the Bank Control
Act ("Control Act") and regulations promulgated thereunder by the Federal
Reserve, require any person acting directly or indirectly, or through or in
concert with one or more persons, to give the Federal Reserve 60 days' written
notice before acquiring control of a bank holding company. Transactions which
are presumed to constitute the acquisition of control include the
3
ITEM 1. BUSINESS (Continued)
acquisition of any voting securities of a bank holding company having securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
if, after the transaction, the acquiring person (or persons acting in concert)
owns, controls or holds with power to vote 25% or more of any class of voting
securities of the institution. The acquisition may not be consummated subsequent
to such notice if the Federal Reserve issues a notice within 60 days, or within
certain extensions of such period, disapproving the acquisition.
The merger or consolidation of an existing bank subsidiary of a bank holding
company with another bank, or the acquisition by such a subsidiary of the assets
of another bank, or the assumption of the deposit and other liabilities by such
a subsidiary requires the prior written approval of the responsible Federal
depository institution regulatory agency under the Bank Merger Act, based upon a
consideration of statutory factors similar to those outlined above with respect
to the BHCA. In addition, in certain cases an application to, and the prior
approval of, the Federal Reserve under the BHCA and/or OFIS under Michigan
banking laws, may be required.
With certain limited exceptions, the BHCA prohibits any bank holding company
from engaging, either directly or indirectly through a subsidiary, in any
activity other than managing or controlling banks unless the proposed
non-banking activity is one that the Federal Reserve has determined to be so
closely related to banking as to be a proper incident thereto. Under current
Federal Reserve regulations, such permissible non-banking activities include
such things as mortgage banking, equipment leasing, securities brokerage, and
consumer and commercial finance company operations. Well-capitalized and
well-managed bank holding companies may, however, engage de novo in certain
types of non-banking activities without prior notice to, or approval of, the
Federal Reserve, provided that written notice of the new activity is given to
the Federal Reserve within 10 business days after the activity is commenced. If
a bank holding company wishes to engage in a non-banking activity by acquiring a
going concern, prior notice and/or prior approval will be required, depending
upon the activities in which the company to be acquired is engaged, the size of
the company to be acquired and the financial and managerial condition of the
acquiring bank company.
Eligible bank holding companies that elect to operate as financial holding
companies may engage in, or own shares in companies engaged in, a wider range of
nonbanking activities, including securities and insurance activities and any
other activity that the Federal Reserve Board, in consultation with the
Secretary of the Treasury, determines by regulation or order is financial in
nature, incidental to any such financial activity or complementary to any such
financial activity and does not pose a substantial risk to the safety or
soundness of depository institutions or the financial system generally. The Bank
Holding Company Act generally does not place territorial restrictions on the
domestic activities of non-bank subsidiaries of bank or financial holding
companies. While we believe we are eligible to elect to operate as a financial
holding company, as of the date of this filing, we have not applied for approval
to operate as a financial holding company.
Capital Requirements. The Federal Reserve uses capital adequacy guidelines in
its examination and regulation of bank holding companies. If capital falls below
minimum guidelines, a bank holding company may, among other things, be denied
approval to acquire or establish additional banks or non-bank businesses.
The Federal Reserve's capital guidelines establish the following minimum
regulatory capital requirements for bank holding companies: (i) a leverage
capital requirement expressed as a percentage of total assets, and (ii) a
risk-based requirement expressed as a percentage of total risk-weighted assets.
The leverage capital requirement consists of a minimum ratio of Tier 1 capital
(which consists principally of shareholders' equity) to total assets of 3% for
the most highly rated companies with minimum requirements of 4% to 5% for all
others. The risk-based requirement consists of a minimum ratio of total capital
to total risk-weighted assets of 8%, of which at least one-half must be Tier 1
capital.
The risk-based and leverage standards presently used by the Federal Reserve are
minimum requirements, and higher capital levels will be required if warranted by
the particular circumstances or risk profiles of individual banking
organizations. The Federal Reserve has not advised us of any specific minimum
Tier 1 Capital leverage ratio applicable to us.
Included in our Tier 1 capital is $50.6 million of trust preferred securities
(classified on our balance sheet as "Guaranteed preferred beneficial interests
in Company's subordinated debentures"). In July 2003, the Federal Reserve issued
a supervisory letter instructing bank holding companies to continue to include
trust preferred securities in Tier 1 capital until notice is given to the
contrary. The Federal Reserve intends to review the regulatory
4
ITEM 1. BUSINESS (Continued)
implications of any accounting treatment changes and, if warranted, provide
further appropriate guidance. There can be no assurance that the Federal Reserve
will continue to allow us to include trust preferred securities in Tier 1
capital.
The Federal bank regulatory agencies are required biennially to review
risk-based capital standards to ensure that they adequately address interest
rate risk, concentration of credit risk and risks from non-traditional
activities.
Dividends. Most of our revenues will be received in the form of dividends, if
any, paid by our Banks. Thus, our ability to pay dividends to our shareholders
will indirectly be limited by statutory restrictions on the ability of our Banks
to pay dividends. Further, in a policy statement, the Federal Reserve has
expressed its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends exceeding its net income or which can only be
funded in ways that weaken the bank holding company's financial health, such as
by borrowing. Additionally, the Federal Reserve possesses enforcement powers
over bank holding companies and their non-bank subsidiaries to prevent or remedy
actions that represent unsafe or unsound practices or violations of applicable
statutes and regulations. Among these powers is the ability to proscribe the
payment of dividends by banks and bank holding companies. Similar enforcement
powers over subsidiary banks are possessed by the FDIC. The "prompt corrective
action" provisions of federal law and regulation authorizes the Federal Reserve
to restrict the amount of dividends we can pay by an insured bank which fails to
meet specified capital levels.
In addition to the restrictions on dividends imposed by the Federal Reserve, the
Michigan Business Corporation Act provides that dividends may be legally
declared or paid only if after the distribution, a corporation can pay its debts
as they come due in the usual course of business and its total assets equal or
exceed the sum of its liabilities plus the amount that would be needed to
satisfy the preferential rights upon dissolution of any holders of preferred
stock whose preferential rights are superior to those receiving the
distribution. We do not have any holders of preferred stock.
Federal Securities Regulation. Our common stock is registered with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We are therefore subject to the information, proxy solicitation, insider
trading and other restrictions and requirements of the SEC under the Exchange
Act. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act provides for numerous changes to the reporting,
accounting, corporate governance and business practices of companies as well as
financial and other professionals who have involvement with the U.S. public
markets. The SEC continues to issue new and proposed rules implementing various
provisions of the Sarbanes-Oxley Act.
Our Banks
General. Our Banks are Michigan banking corporations and their deposit accounts
are insured by the Bank Insurance Fund ("BIF") of the FDIC. As BIF-insured
Michigan chartered banks, our Banks are subject to the examination, supervision,
reporting and enforcement requirements of the OFIS, as the chartering authority
for Michigan banks, and the FDIC, as administrator of the BIF. These agencies
and the federal and state laws applicable to our Banks and their operations,
extensively regulate various aspects of the banking business including, among
other things, permissible types and amounts of loans, investments and other
activities, capital adequacy, branching, interest rates on loans and on
deposits, the maintenance of non-interest bearing reserves on deposit accounts,
and the safety and soundness of banking practices.
Deposit Insurance. As FDIC-insured institutions, banks are required to pay
deposit insurance premium assessments to the FDIC. The FDIC has adopted a
risk-based assessment system under which all insured depository institutions are
placed into one of nine categories and assessed insurance premiums, based upon
their level of capital and supervisory evaluation. Institutions classified as
well-capitalized and considered healthy pay the lowest premium while
institutions that are less than adequately capitalized and considered of
substantial supervisory concern pay the highest premium. Risk classification of
all insured institutions is made by the FDIC for each semi-annual assessment
period.
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA") requires
the FDIC to establish assessment rates at levels which will maintain the Deposit
Insurance Fund at a mandated reserve ratio of not less than 1.25% of estimated
insured deposits. Accordingly, the FDIC established the schedule of BIF
insurance assessments, ranging
5
ITEM 1. BUSINESS (Continued)
from 0% of deposits for institutions in the lowest risk category to .27% of
deposits for institutions in the highest risk category. If the actual reserve
drops below the current mandated reserve of 1.25% then our BIF insurance
assessments may increase.
FICO Assessments. Our Banks, as members of BIF, are subject to assessments to
cover the payments on outstanding obligations of the financing corporation
("FICO"). FICO was created to finance the recapitalization of the Federal
Savings and Loan Insurance Corporation, the predecessor to the FDIC's Savings
Association Insurance Fund (the "SAIF"), which insures the deposits of thrift
institutions. From now until the maturity of the outstanding FICO obligations in
2019, BIF members and SAIF members will share the cost of the interest on the
FICO bonds on a pro rata basis. It is estimated that FICO assessments during
this period will be less than 0.025% of deposits.
OFIS Assessments. Michigan banks are required to pay supervisory fees to the
OFIS to fund the OFIS's operations. The amount of supervisory fees paid by a
bank is based upon the bank's total assets.
Capital Requirements. The FDIC has established the following minimum capital
standards for state-chartered, FDIC-insured non-member banks, such as our Banks:
a leverage requirement consisting of a minimum ratio of Tier 1 capital to total
assets of 3% for the most highly-rated banks with minimum requirements of 4% to
5% for all others, and a risk-based capital requirement consisting of a minimum
ratio of total capital to total risk-weighted assets of 8%, at least one-half of
which must be Tier 1 capital. Tier 1 capital consists principally of
shareholders' equity. These capital requirements are minimum requirements.
Higher capital levels will be required if warranted by the particular
circumstances or risk profiles of individual institutions. For example, FDIC
regulations provide that higher capital may be required to take adequate account
of, among other things, interest rate risk and the risks posed by concentrations
of credit, nontraditional activities or securities trading activities.
Federal law provides the federal banking regulators with broad power to take
prompt corrective action to resolve the problems of undercapitalized
institutions. The extent of the regulators' powers depends on whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," or "critically
undercapitalized." Federal regulations define these capital categories as
follows:
TOTAL TIER 1
RISK-BASED RISK-BASED
CAPITAL RATIO CAPITAL RATIO LEVERAGE RATIO
------------- ------------- ---------------------------
Well capitalized 10% or above 6% or above 5% or above
Adequately capitalized 8% or above 4% or above 4% or above
Undercapitalized Less than 8% Less than 4% Less than 4%
Significantly undercapitalized Less than 6% Less than 3% Less than 3%
Critically undercapitalized -- -- A ratio of tangible equity
to total assets of 2% or less
At December 31, 2003, each of our Bank's ratios exceeded minimum requirements
for the well-capitalized category.
Depending upon the capital category to which an institution is assigned, the
regulators' corrective powers include: requiring the submission of a capital
restoration plan; placing limits on asset growth and restrictions on activities;
requiring the institution to issue additional capital stock (including
additional voting stock) or to be acquired; restricting transactions with
affiliates; restricting the interest rate the institution may pay on deposits;
ordering a new election of directors of the institution; requiring that senior
executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to divest
certain subsidiaries; prohibiting the payment of principal or interest on
subordinated debt; and ultimately, appointing a receiver for the institution.
In general, a depository institution may be reclassified to a lower category
than is indicated by its capital levels if the appropriate federal depository
institution regulatory agency determines the institution to be otherwise in an
unsafe or unsound condition or to be engaged in an unsafe or unsound practice.
This could include a failure by the institution, following receipt of a
less-than-satisfactory rating on its most recent examination report, to correct
the deficiency.
6
ITEM 1. BUSINESS (Continued)
Dividends. Under Michigan law, banks are restricted as to the maximum amount of
dividends they may pay on their common stock.
Our Banks may not pay dividends except out of their net income after deducting
their losses and bad debts. A Michigan state bank may not declare or pay a
dividend unless the bank will have a surplus amounting to at least 20% of its
capital after the payment of the dividend.
Federal law generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. The FDIC may prevent an insured bank from paying dividends if
the bank is in default of payment of any assessment due to the FDIC. In
addition, the FDIC may prohibit the payment of dividends by the bank, if such
payment is determined, by reason of the financial condition of the bank, to be
an unsafe and unsound banking practice.
Insider Transactions. Our Banks are subject to certain restrictions imposed by
the Federal Reserve Act on "covered transactions" with us or our subsidiaries on
investments in our stock or other securities issued by us or our subsidiaries
and the acceptance of our stock or other securities issued by us or our
subsidiaries as collateral for loans. Certain limitations and reporting
requirements are also placed on extensions of credit by our Banks to their
directors and officers, to our directors and officers and those of our
subsidiaries, to our principal shareholders, and to "related interests" of such
directors, officers and principal shareholders. In addition, federal law and
regulations may affect the terms upon which any person becoming one of our
directors or officers or a principal shareholder may obtain credit from banks
with which our Banks maintain a correspondent relationship.
Safety and Soundness Standards. Pursuant to FDICIA, the FDIC adopted guidelines
to establish operational and managerial standards to promote the safety and
soundness of federally insured depository institutions. The guidelines establish
standards for internal controls, information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth,
compensation, fees and benefits, asset quality and earnings.
Investment and Other Activities. Under federal law and FDIC regulations,
FDIC-insured state banks are prohibited, subject to certain exceptions, from
making or retaining equity investments of a type, or in an amount, that are not
permissible for a national bank. FDICIA, as implemented by FDIC regulations,
also prohibits FDIC-insured state banks and their subsidiaries, subject to
certain exceptions, from engaging as a principal in any activity that is not
permitted for a national bank or its subsidiary, respectively, unless the bank
meets, and continues to meet, its minimum regulatory capital requirements and
the FDIC determines the activity would not pose a significant risk to the
deposit insurance fund of which the bank is a member. Impermissible investments
and activities must be otherwise divested or discontinued within certain time
frames set by the FDIC in accordance with FDICIA. These restrictions are not
currently expected to have a material impact on the operations of our Banks.
Consumer Banking. Our Banks' business includes making a variety of types of
loans to individuals. In making these loans, our Banks are subject to State
usury and regulatory laws and to various Federal statutes, including the privacy
of consumer financial information provisions of the Gramm Leach-Bliley Act and
regulations promulgated thereunder, the Equal Credit Opportunity Act, Fair
Credit Reporting Act, Truth in Lending Act, Real Estate Settlement Procedures
Act, and Home Mortgage Disclosure Act, and the regulations promulgated
thereunder, which prohibit discrimination, specify disclosures to be made to
borrowers regarding credit and settlement costs, and regulate the mortgage loan
servicing activities of our Banks, including the maintenance and operation of
escrow accounts and the transfer of mortgage loan servicing. In receiving
deposits, our Banks are subject to extensive regulation under state and Federal
law and regulations, including the Truth in Savings Act, the Expedited Funds
Availability Act, the Bank Secrecy Act, the Electronic Funds Transfer Act, and
the Federal Deposit Insurance Act. Violation of these laws could result in the
imposition of significant damages and fines upon our Banks and their respective
directors and officers.
Branching Authority. Michigan banks, such as our Banks, have the authority under
Michigan law to establish branches anywhere in the State of Michigan, subject to
receipt of all required regulatory approvals.
Banks may establish interstate branch networks through acquisitions of other
banks. The establishment of de novo interstate branches or the acquisition of
individual branches of a bank in another state (rather than the acquisition of
an out-of-state bank in its entirety) is allowed only if specifically authorized
by state law.
7
ITEM 1. BUSINESS (Continued)
Michigan permits both U.S. and non-U.S. banks to establish branch offices in
Michigan. The Michigan Banking Code permits, in appropriate circumstances and
with the approval of the OFIS (1) acquisition of Michigan banks by FDIC-insured
banks, savings banks or savings and loan associations located in other states,
(2) sale by a Michigan bank of branches to an FDIC-insured bank, savings bank or
savings and loan association located in a state in which a Michigan bank could
purchase branches of the purchasing entity, (3) consolidation of Michigan banks
and FDIC-insured banks, savings banks or savings and loan associations located
in other states having laws permitting such consolidation, (4) establishment of
branches in Michigan by FDIC-insured banks located in other states, the District
of Columbia or U.S. territories or protectorates having laws permitting a
Michigan bank to establish a branch in such jurisdiction, and (5) establishment
by foreign banks of branches located in Michigan.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, and all amendments to those reports are available free of charge
through our website at www.ibcp.com as soon as reasonably practicable after
filing with the SEC.
8
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE
I. (A) DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY;
(B) INTEREST RATES AND INTEREST DIFFERENTIAL
(C) INTEREST RATES AND DIFFERENTIAL
The information set forth in the tables captioned "Average Balances and Tax
Equivalent Rates" and "Change in Tax Equivalent Net Interest Income" of the
Appendix to our definitive proxy statement, to be delivered to shareholders in
connection with the April 23, 2004 Annual Meeting of Shareholders (filed as
exhibit 13 to this report on Form 10-K) is incorporated herein by reference.
II. INVESTMENT PORTFOLIO
(A) The following table sets forth the book value of securities at December 31:
2003 2002 2001
-------- -------- --------
(in thousands)
Available for sale
U.S. Treasury $ 301 $ 306 $ 10,282
States and political subdivisions 197,791 162,917 131,794
Mortgage-backed 138,986 84,923 75,806
Other asset-backed 33,130 42,138 3,200
Trust preferred 31,078 33,211 31,807
Preferred stock 30,263 26,297 19,636
Corporate 21,909 20,817 17,082
Other 538 637 696
-------- -------- --------
Total $453,996 $371,246 $290,303
======== ======== ========
9
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
II. INVESTMENT PORTFOLIO (Continued)
(B) The following table sets forth contractual maturities of securities
at December 31, 2003 and the weighted average yield of such securities:
Maturing Maturing
Maturing After One After Five Maturing
Within But Within But Within After
One Year Five Years Ten Years Ten Years
------------- --------------- -------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
------- ----- -------- ----- ------- ----- ------ -----
(dollars in thousands)
Available for sale
U.S. Treasury $ 301 3.03%
States and political
subdivisions 3,714 7.74 $ 25,479 7.72% $50,375 7.48% $118,223 7.08%
Mortgage-backed 8,809 4.93 129,918 4.39 90 7.22 169 5.47
Other asset-backed 29,873 6.29 3,257 6.96
Trust preferred 31,078 7.32
Preferred stock 1,225 8.22 2,064 7.86 26,974 5.13
Corporate 7,147 7.28 14,762 5.38
Other securities 538 6.16
------- -------- ------- --------
Total $21,196 6.03% $200,032 5.17% $55,786 7.47% $176,982 6.82%
======= ======== ======= ========
Tax equivalent adjustment
for calculations of yield $128 $688 $1,363 $3,296
======= ======== ======= ========
The rates set forth in the tables above for obligations of state and political
subdivisions and preferred stock have been restated on a tax equivalent basis
assuming a marginal tax rate of 35%. The amount of the adjustment is as follows:
Tax-Exempt Rate on Tax
Available for sale Rate Adjustment Equivalent Basis
- ------------------ ---------- ---------- ----------------
Under 1 year 5.27% 2.59% 7.86%
1-5 years 5.02 2.70 7.72
5-10 years 4.90 2.60 7.50
After 10 years 4.43 2.27 6.70
10
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
III. LOAN PORTFOLIO
(A) The following table sets forth total loans outstanding at
December 31:
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
(in thousands)
Loans held for sale $ 32,642 $ 129,577 $ 77,220 $ 20,817 $ 12,950
Real estate mortgage 681,602 601,799 661,462 772,223 757,019
Commercial 603,558 536,715 482,046 381,066 334,212
Installment 234,562 242,928 241,176 226,375 199,410
Finance receivables 147,671
---------- ---------- ---------- ---------- ----------
Total Loans $1,700,035 $1,511,019 $1,461,904 $1,400,481 $1,303,591
========== ========== ========== ========== ==========
The loan portfolio is periodically and systematically reviewed and the
results of these reviews are reported to our Boards of Directors. The purpose of
these reviews is to assist in assuring proper loan documentation, to facilitate
compliance with consumer protection laws and regulations, to provide for the
early identification of potential problem loans (which enhances collection
prospects) and to evaluate the adequacy of the allowance for loan losses.
(B) The following table sets forth scheduled loan repayments (excluding
1-4 family residential mortgages and installment loans) at December 31, 2003:
Due
Due After One Due
Within But Within After
One Year Five Years Five Years Total
-------- ---------- ---------- --------
(in thousands)
Real estate mortgage $ 62,453 $ 44,244 $ 5,397 $112,094
Commercial 194,647 346,179 62,732 603,558
Finance receivables 130,163 17,508 147,671
-------- -------- -------- --------
Total $387,263 $407,931 $ 68,129 $863,323
======== ======== ======== ========
The following table sets forth loans due after one year which have predetermined
(fixed) interest rates and/or adjustable (variable) interest rates at December
31, 2003:
Fixed Variable
Rate Rate Total
-------- -------- --------
(in thousands)
Due after one but within five years $361,732 $ 46,199 $407,931
Due after five years 67,188 941 68,129
-------- -------- --------
Total $428,920 $ 47,140 $476,060
======== ======== ========
11
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
III. LOAN PORTFOLIO (Continued)
(C) The following table sets forth non-performing loans at December 31:
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
(in thousands)
(a) Loans accounted for on a
non-accrual basis (1, 2) $ 9,122 $5,738 $5,990 $5,200 $2,980
(b) Aggregate amount of loans
ninety days or more past due
(excludes loans in (a) above) 3,284 3,961 2,771 1,571 2,029
(c) Loans not included above which
are "troubled debt restruc-
turings" as defined in State-
ment of Financial Accounting
Standards No. 15 (2) 335 270 285 260 270
------- ------ ------ ------ ------
Total non-performing loans $12,741 $9,969 $9,046 $7,031 $5,279
======= ====== ====== ====== ======
(1) The accrual of interest income is discontinued when a loan becomes 90
days past due and the borrower's capacity to repay the loan and
collateral values appear insufficient. Non-accrual loans may be
restored to accrual status when interest and principal payments are
current and the loan appears otherwise collectible.
(2) Interest in the amount of $665,000 would have been earned in 2003 had
loans in categories (a) and (c) remained at their original terms,
however, only $316,000 was included in interest income for the year
with respect to these loans.
Other loans of concern identified by the loan review department which
are not included as non-performing totaled approximately $7,300,000 at December
31, 2003. These loans involve circumstances which have caused management to
place increased scrutiny on the credits and may, in some instances, represent an
increased risk of loss to our Banks.
At December 31, 2003, there was no concentration of loans exceeding 10%
of total loans which is not already disclosed as a category of loans in this
section "Loan Portfolio" (Item III(A)).
There were no other interest-bearing assets at December 31, 2003, that
would be required to be disclosed above (Item III(C)), if such assets were
loans.
There were no foreign loans outstanding at December 31, 2003.
12
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
IV. SUMMARY OF LOAN LOSS EXPERIENCE
(A) The following table sets forth loan balances and summarizes the
changes in the allowance for loan losses for each of the years ended December
31:
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
(dollars in thousands)
Total loans outstanding at the end of
the year (net of unearned fees) $1,700,035 $1,511,019 $1,461,904 $1,400,481 $1,303,591
========== ========== ========== ========== ==========
Average total loans outstanding for
the year (net of unearned fees) $1,623,565 $1,437,925 $1,428,194 $1,352,356 $1,231,357
========== ========== ========== ========== ==========
Balance of allowance for loan losses
at beginning of year $ 16,705 $ 16,167 $ 13,982 $ 12,985 $ 11,557
---------- ---------- ---------- ---------- ----------
Loans charged-off
Real estate mortgage 413 626 125 176 100
Commercial 1,628 1,002 514 1,205 176
Installment 2,412 2,129 1,557 1,587 1,704
Finance receivables 160
---------- ---------- ---------- ---------- ----------
Total loans charged-off 4,613 3,757 2,196 2,968 1,980
---------- ---------- ---------- ---------- ----------
Recoveries of loans previously
charged-off
Real estate mortgage 115 46 5 5 7
Commercial 216 73 65 109 299
Installment 756 614 574 564 441
---------- ---------- ---------- ---------- ----------
Total recoveries 1,087 733 644 678 747
---------- ---------- ---------- ---------- ----------
Net loans charged-off 3,526 3,024 1,552 2,290 1,233
Additions to allowance charged to
operating expense 4,032 3,562 3,737 3,287 2,661
Allowance on loans from business acquired 517
---------- ---------- ---------- ---------- ----------
Balance at end of year $ 17,728 $ 16,705 $ 16,167 $ 13,982 $ 12,985
========== ========== ========== ========== ==========
Net loans charged-off as a percent of
average loans outstanding (includes loans
held for sale) for the year .22% .21% .11% .17% .10%
Allowance for loan losses as a
percent of loans outstanding (includes
loans held for sale) at the end of the year 1.04 1.11 1.11 1.00 1.00
The allowance for loan losses reflected above is a valuation allowance
in its entirety and the only allowance available to absorb probable loan losses.
Further discussion of the provision and allowance for loan losses (a
critical accounting policy) as well as non-performing loans, is presented in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, incorporated herein by reference to Item 7, Part II of this report.
13
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
IV. SUMMARY OF LOAN LOSS EXPERIENCE (Continued)
(B) Our Banks have allocated the allowance for loan losses to provide
for the possibility of losses being incurred within the categories of loans set
forth in the table below. The amount of the allowance that is allocated and the
ratio of loans within each category to total loans at December 31 follows:
2003 2002 2001
---- ---- ----
Percent Percent Percent
Allowance of Loans to Allowance of Loans to Allowance of Loans to
Amount Total Loans Amount Total Loans Amount Total Loans
--------- ----------- --------- ----------- --------- -----------
(dollars in thousands)
Commercial $ 8,654 35.5% $ 8,115 35.5% $ 8,823 33.0%
Real estate mortgage 467 42.0 507 48.4 299 50.5
Installment 1,600 13.8 1,571 16.1 1,499 16.5
Finance receivables 699 8.7
Unallocated 6,308 6,512 5,546
------- ----- ------- ----- ------- -----
Total $17,728 100.0% $16,705 100.0% $16,167 100.0%
======= ===== ======= ===== ======= =====
2000 1999
---- ----
Percent Percent
Allowance of Loans to Allowance of Loans to
Amount Total Loans Amount Total Loans
--------- ----------- --------- -----------
(dollars in thousands)
Commercial $ 4,683 27.4% $ 4,210 25.9%
Real estate mortgage 1,243 56.4 1,208 58.8
Installment 2,057 16.2 1,783 15.3
Unallocated 5,999 5,784
------- ----- ------- -----
Total $13,982 100.0% $12,985 100.0%
======= ===== ======= =====
14
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
V. DEPOSITS
The following table sets forth average deposit balances and the
weighted-average rates paid thereon for the years ended December 31:
2003 2002 2001
---- ---- ----
Average Average Average
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
(dollars in thousands)
Non-interest bearing demand $ 183,032 $ 156,294 $ 138,200
Savings and NOW 688,697 0.71% 634,357 1.17% 583,817 1.97%
Time deposits 741,731 3.09 688,297 4.02 623,657 5.31
---------- ---------- ----------
Total $1,613,460 1.72% $1,478,948 2.38% $1,345,674 3.32%
========== ========== ==========
The following table summarizes time deposits in amounts of $100,000 or
more by time remaining until maturity at December 31, 2003:
(in thousands)
Three months or less $117,561
Over three through six months 69,678
Over six months through one year 53,855
Over one year 255,135
--------
Total $496,229
========
VI. RETURN ON EQUITY AND ASSETS
The ratio of net income to average shareholders' equity and to average
total assets, and certain other ratios, for the years ended December 31 follow:
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Net income as a percent of
Average common equity 24.89% 21.34% 18.52% 16.59% 7.26%
Average total assets 1.69 1.52 1.35 1.15 0.52
Dividends declared per share as a
percent of diluted net income per share 31.6 30.38 32.28 34.31 60.47
Average shareholders' equity as a percent
of average total assets 6.80 7.14 7.28 6.92 7.16
Additional performance ratios are set forth in Selected Consolidated
Financial Data, incorporated herein by reference in Item 6, Part II of this
report. Any significant changes in the current trend of the above ratios are
reviewed in Management's Discussion and Analysis of Financial Condition and
Results of Operations, incorporated herein by reference in Item 7, Part II of
this report.
VII. SHORT-TERM BORROWINGS
Short-term borrowings are discussed in note 9 to the consolidated
financial statements incorporated herein by reference in Item 8, Part II of this
report.
15
ITEM 2. PROPERTIES
We and our Banks operate a total of 99 facilities in Michigan and 1 facility in
Chicago, Illinois. The individual properties are not materially significant to
us or our Banks' business or to the consolidated financial statements.
With the exception of the potential remodeling of certain facilities to provide
for the efficient use of work space or to maintain an appropriate appearance,
each property is considered reasonably adequate for current and anticipated
needs.
ITEM 3. LEGAL PROCEEDINGS
Due to the nature of our business, our Banks are often subject to numerous legal
actions. These legal actions, whether pending or threatened, arise through the
normal course of business and are not considered unusual or material.
Currently, we are not involved in any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
16
ADDITIONAL ITEM - EXECUTIVE OFFICERS
Our executive officers are appointed annually by our Board of Directors at the
meeting of Directors following the Annual Meeting of Shareholders. There are no
family relationships among these officers and/or our Directors nor any
arrangement or understanding between any officer and any other person pursuant
to which the officer was elected.
The following sets forth certain information with respect to our executive
officers and certain key officers of our subsidiaries (included for information
purposes only) at December 31, 2003.
First elected
as an executive
Name (Age) Position officer
- ---------- -------- -------
Charles C. Van Loan (56) President, Chief Executive Officer and Director 1984
Robert N. Shuster (46) Executive Vice President and Chief Financial Officer 1999
Edward B. Swanson (50) President and Chief Executive Officer - Independent 1989
Bank South Michigan
Michael M. Magee, Jr. (48) President and Chief Executive Officer - Independent 1993
Bank
Ronald L. Long (44) President and Chief Executive Officer - Independent 1993
Bank East Michigan
David C. Reglin (44) President and Chief Executive Officer - Independent 1998
Bank West Michigan
Peter R. Graves (46) Senior Vice President, Commercial Loans 1999
Independent Bank Corporation
Richard E. Butler (52) Senior Vice President, Operations - Independent 1998
Bank Corporation
James J. Twarozynski (38) Senior Vice President, Controller - Independent 2002
Bank Corporation
Prior to being named Executive Vice President and Chief Financial Officer in
2001, Mr. Shuster was President and Chief Executive Officer of Independent Bank
MSB since 1999 and President and CEO of Mutual Savings Bank, f.s.b since 1994.
Prior to being named President and Chief Executive Officer in 1998, Mr. Reglin
was Senior Vice President of Independent Bank West Michigan since 1991.
Prior to being named Senior Vice President in 1999, Mr. Graves was Vice
President of our Commercial Loan Services Department.
Mr. Butler joined us in 1998 as Senior Vice President. Prior to that time Mr.
Butler was Vice President, Mortgage Servicing Operations at the former First of
America Bank - Michigan, N.A.
Prior to being named Senior Vice President in 2002, Mr. Twarozynski was Vice
President and Controller.
17
PART II.
ITEM 5. MARKET FOR OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information set forth under the caption "Quarterly Summary " in the Appendix
to our definitive proxy statement, to be delivered to shareholders in connection
with the April 23, 2004 Annual Meeting of Shareholders (as filed as exhibit 13
to this report on Form 10-K) is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Selected Consolidated Financial
Data" in the Appendix to our definitive proxy statement, to be delivered to
shareholders in connection with the April 23, 2004 Annual Meeting of
Shareholders (as filed as exhibit 13 to this report on Form 10-K) is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Appendix to
our definitive proxy statement, to be delivered to shareholders in connection
with the April 23, 2004 Annual Meeting of Shareholders (as filed as exhibit 13
to this report on Form 10-K) is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth in the caption "Asset/liability management" in the
Appendix to our definitive proxy statement, to be delivered to shareholders in
connection with the April 23, 2004 Annual Meeting of Shareholders (as filed as
exhibit 13 to this report on Form 10-K) is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and the independent auditor's
report are set forth in the Appendix to our definitive proxy statement, to be
delivered to shareholders in connection with the April 23, 2004 Annual Meeting
of Shareholders (as filed as exhibit 13 to this report on Form 10-K) is
incorporated herein by reference.
Independent Auditor's Report
Consolidated Statements of Financial Condition at
December 31, 2003 and 2002
Consolidated Statements of Operations for the years ended
December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 2003, 2002 and 2001
Consolidated Statements of Comprehensive Income
for the years ended December 31, 2003, 2002 and 2001
Notes to Consolidated Financial Statements
18
PART II.
The supplementary data required by this item set forth under the caption
"Quarterly Financial Data" in the Appendix to our definitive proxy statement, to
be delivered to shareholders in connection with the April 23, 2004 Annual
Meeting of Shareholders (as filed as exhibit 13 to this report on Form 10-K) is
incorporated herein by reference.
The portions of the Appendix to our definitive proxy statement, to be delivered
to shareholders in connection with the April 23, 2004 Annual Meeting of
Shareholders (as filed as exhibit 13 to this report on Form 10-K) which are not
specifically incorporated by reference as part of this Form 10-K are not deemed
to be a part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
With the participation of management, our chief executive officer and chief
financial officer, after evaluating the effectiveness of our disclosure controls
and procedures (as defined in Exchange Act Rules 13a - 15(e) and 15d - 15(e)) as
of the end of the period covered by this annual report, have concluded that, as
of such date, our disclosure controls and procedures were adequate and effective
to ensure that material information relating to us and our consolidated
subsidiaries would be made known to them by others within those entities in
connection with the filing of our annual report on Form 10-K for the annual
period ended December 31, 2003.
There were no significant changes in our internal controls over financial
reporting during the quarter ended December 31, 2003, that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS - The information with respect to our Directors, set forth under the
captions "Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in our definitive proxy statement, to be delivered to
shareholders in connection with the April 23, 2004 Annual Meeting of
Shareholders is incorporated herein by reference.
EXECUTIVE OFFICERS - Reference is made to additional item under Part I of this
report on Form 10-K.
We have adopted a Code of Ethics for our Chief Executive Officer and Senior
Financial Officers. A copy of our Code of Ethics is available upon request by
writing to our Chief Financial Officer, Independent Bank Corporation, P.O. Box
491, Ionia, Michigan 48846.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Summary Compensation Table",
"Option Grants in 2003" and "Aggregated Stock Option Exercises in 2003 and Year
End Option Values" in our definitive proxy statement, to be delivered to
shareholders in connection with the April 23, 2004 Annual Meeting of
Shareholders is incorporated herein by reference. Information under the caption
"Committee Report on Executive Compensation" in our definitive proxy statement
is not incorporated by reference herein and is not deemed to be filed with the
Securities and Exchange Commission.
19
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Voting Securities and Record
Date", "Election of Directors" and "Securities Ownership of Management" in our
definitive proxy statement, to be delivered to shareholders in connection with
the April 23, 2004 Annual Meeting of Shareholders is incorporated herein by
reference. Information under the captions "Shareholder Return Performance Graph"
and "Committee Report on Executive Compensation" in our definitive proxy
statement is not incorporated by reference herein and is not deemed to be filed
with the Securities and Exchange Commission.
We maintain certain equity compensation plans under which common stock is
authorized for issuance to employees and directors, including our Incentive
Share Grant Plan, Non-employee Director Stock Option Plan, Employee Stock Option
Plan and Long-Term Incentive Plan.
PART III.
The following sets forth certain information regarding our equity compensation
plans as of December 31, 2003.
(c)
Number of securities
(a) remaining available for
Number of securities (b) future issuance under
to be issued upon Weighted-average equity compensation
exercise of outstanding exercise price of plans (excluding
options, warrants outstanding options, securities reflected
Plan Category and rights (1) warrants and rights in column (a))
- ------------- -------------- ------------------- --------------
Equity compensation plans
approved by security holders 1,121,000 $14.30 496,000
========= ===== =======
Equity compensation plan
not approved by security holders None None
(1) We have not granted warrants or rights applicable to this chart.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Transactions Involving Management"
in our definitive proxy statement, to be delivered to shareholders in connection
with the April 23, 2004 Annual Meeting of Shareholders is incorporated herein by
reference.
20
PART IV.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information set forth under the caption "Audit Matters and Our Relationship
With Our Independent Public Accountants" in our definitive proxy statement, to
be delivered to shareholders in connection with the April 23, 2004 Annual
Meeting of Shareholders is incorporated herein by reference.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
All of our financial statements are incorporated herein by
reference as set forth in the Appendix to our definitive proxy
statement, to be delivered to shareholders in connection with the
April 23, 2004 Annual Meeting of Shareholders (filed as exhibit 13
to this report on Form 10-K.)
2. Financial Statement Schedules
Not applicable
3. Exhibits (Numbered in accordance with Item 601 of Regulation S-K)
The Exhibit Index is located on the final page of this report on
Form 10-K.
(b) Reports on Form 8-K
A report on Form 8-K was filed on October 23, 2003, under item 12.
The report included our press release dated October 23, 2003,
regarding our earnings during the quarter ended September 30,
2003. An additional report on Form 8-K was filed on October 23,
2003, under item 12. The report included supplemental data to the
Registrant's press release dated October 23, 2003, regarding its
earnings during the quarter ended September 30, 2003.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, we have duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, dated March 4, 2004.
INDEPENDENT BANK CORPORATION
s/Charles C. Van Loan Charles C. Van Loan, President and Chief
- ---------------------------------Executive Officer
(Principal Executive Officer)
s/Robert N. Shuster Robert N. Shuster, Executive Vice President
- --------------------------------- and Chief Financial Officer
(Principal Financial Officer)
s/James J. Twarozynski James J. Twarozynski, Senior Vice President
- --------------------------------- and Controller
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on our behalf and in the
capacities and on the dates indicated. Each director whose signature appears
below hereby appoints Charles C. Van Loan and Robert N. Shuster and each of them
severally, as his attorney-in-fact, to sign in his name and on his behalf, as a
director, and to file with the Commission any and all amendments to this Report
on Form 10-K.
Terry L. Haske, Director s/Terry L. Haske
----------------------------------------
Robert L. Hetzler, Director s/Robert L. Hetzler
----------------------------------------
James E. McCarty, Director s/James E. McCarty
----------------------------------------
Charles A. Palmer, Director s/Charles A. Palmer
----------------------------------------
Charles C. Van Loan, Director s/Charles C. Van Loan
----------------------------------------
Jeffrey A. Bratsburg, Director s/Jeffrey A. Bratsburg
----------------------------------------
22
EXHIBIT INDEX
Exhibit number and description
EXHIBITS FILED HEREWITH
13 Appendix to our definitive proxy statement, relating to the April 23,
2004 Annual Meeting of Shareholders. This appendix will be filed with
the Commission as part of our proxy statement and will be delivered to
our shareholders in compliance with Rule 14(a)-3 of the Securities
Exchange Act of 1934, as amended.
21 List of Subsidiaries.
23 Consent of Independent Accountants
24 Power of Attorney (Included on page 22).
31.1 Certificate of the Chief Executive Officer of Independent Bank
Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350).
31.2 Certificate of the Chief Financial Officer of Independent Bank
Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350).
32.1 Certificate of the Chief Executive Officer of Independent Bank
Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350).
32.2 Certificate of the Chief Financial Officer of Independent Bank
Corporation pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. 1350).
EXHIBITS INCORPORATED BY REFERENCE
2 Agreement and plan of reorganization between Independent Bank
Corporation and Mutual Savings Bank, f.s.b., dated March 24, 1999
(incorporated herein by reference to Exhibit 2.1 to our Form S-4
Registration Statement dated May 28, 1999, filed under Registration No.
333-79679).
3.1 Restated Articles of Incorporation (incorporated herein by reference to
Exhibit 3(i) to our report on Form 10-Q for the quarter ended June 30,
1994).
3.1(a) Amendments to Article III and Article VI of the Articles of
Incorporation (incorporated herein by reference to Exhibit 3.1(a) to
our report on Form 10-K for the year ended December 31, 2000).
3.2 Amended and Restated Bylaws (incorporated herein by reference to
Exhibit 3(ii) to our report on Form 10-Q for the quarter ended June 30,
1994).
4 Automatic Dividend Reinvestment and Stock Purchase Plan, as amended
(incorporated herein by reference to our Form S-3 Registration
Statement dated September 17, 1998, filed under Registration No.
3380088).
4.1 Certificate of Trust of IBC Capital Finance II dated February 26, 2003
(incorporated herein by reference to Exhibit 4.1 to our report on Form
10-Q for the quarter ended March 31, 2003).
4.2 Amended and Restated Trust Agreement of IBC Capital Finance II dated
March 19, 2003 (incorporated herein by reference to Exhibit 4.2 to our
report on Form 10-Q for the quarter ended March 31, 2003).
4.3 Preferred Securities Certificate of IBC Capital Finance II dated March
19, 2003 (incorporated herein by reference to Exhibit 4.3 to our report
on Form 10-Q for the quarter ended March 31, 2003).
4.4 Preferred Securities Guarantee Agreement dated March 19, 2003
(incorporated herein by reference to Exhibit 4.4 to our report on Form
10-Q for the quarter ended March 31, 2003).
23
EXHIBIT INDEX (Continued)
4.5 Agreement as to Expenses and Liabilities dated March 19, 2003
(incorporated herein by reference to Exhibit 4.5 to our report on Form
10-Q for the quarter ended March 31, 2003).
4.6 Indenture dated March 19, 2003 (incorporated herein by reference to
Exhibit 4.6 to our report on Form 10-Q for the quarter ended March 31,
2003).
4.7 8.25% Junior Subordinated Debenture of Independent Bank Corporation
dated March 19, 2003 (incorporated herein by reference to Exhibit 4.6
to our report on Form 10-Q for the quarter ended March 31, 2003).
10.1* Deferred Benefit Plan for Directors (incorporated herein by reference
to Exhibit 10(C) to our report on Form 10-K for the year ended December
31, 1984).
10.2 The form of Indemnity Agreement approved by our shareholders at its
April 19, 1988 Annual Meeting, as executed with all of the Directors of
the Registrant (incorporated herein by reference to Exhibit 10(F) to
our report on Form 10-K for the year ended December 31, 1988).
10.3* Incentive Share Grant Plan, as amended, approved by our shareholders at
its April 21, 1992 Annual Meeting (incorporated herein by reference to
Exhibit 10 to our report on Form 10-K for the year ended December 31,
1992).
10.4* Non-Employee Director Stock Option Plan, as amended, approved by our
shareholders at its April 15, 1997 Annual Meeting (incorporated herein
by reference to Exhibit 4 to our Form S-8 Registration Statement dated
July 28, 1997, filed under registration No. 333-32269).
10.5* Employee Stock Option Plan, as amended, approved by our shareholders at
its April 17, 2000 Annual Meeting (incorporated herein by reference to
Exhibit 4 to our Form S-8 Registration Statement dated October 8, 2000,
filed under registration No. 333-47352).
10.6 The form of Management Continuity Agreement as executed with executive
officers and certain senior managers (incorporated herein by reference
to Exhibit 10 to our report on Form 10-K for the year ended December
31, 1998).
10.7* Independent Bank Corporation Long-term Incentive Plan, approved by our
shareholders at its April 16, 2002 Annual Meeting (incorporated herein
by reference to Exhibit 4 to our Form S-8 Registration Statement dated
May 24, 2002, filed under registration No. 333-89072).
10.8 Agreement and Plan of Merger by and among Independent Bank Corporation,
IBC Merger Co., Mepco Insurance Premium Financing, Inc., and the
shareholders of Mepco Insurance Premium Financing, Inc., dated February
24, 2003 (incorporated herein by reference to Exhibit 99.2 to our Form
8-K dated February 24, 2003).
* Represents a compensation plan.
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