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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, 1997
Commission file number: 0-17482
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from______ to______
County Bank Corp
Michigan EIN 38-0746239
83 W. Nepessing St., Lapeer, MI 48446
(810) 664-2977
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
1,200,000 shares, Common Stock, $5.00 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was 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 stock held by nonaffiliates of the
registrant was $28,111,359.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of latest practicable date.
There are 593,236 shares of common stock ($5.00 par value) outstanding as of
December 31, 1997.
The following documents are incorporated into the 10-K by reference:
The Annual Report to Shareholders, December 31, 1997, Part I, Part II.
Proxy Statement dated March 25, 1998, Part III.
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FORM 10K
ITEM 1. BUSINESS
County Bank Corp, a one bank holding company, was formed on January 3, 1989 by
converting and exchanging, except for the shares of dissenting shareholders,
each share of Lapeer County Bank & Trust Co. (the Bank) into one share of
County Bank Corp (the Corporation). As a result, the Corporation became the
sole shareholder and parent of the Bank.
The Bank was chartered in 1902, is headquartered in Lapeer, MI., and serves all
of Lapeer County (the County) and portions of surrounding counties. Lapeer has
an approximate population of 6,500 people, while the County has in excess of
75,000 people. Lapeer is located 60 miles north of metropolitan Detroit, the
largest city in Michigan, 30 miles north of Pontiac, MI., and 20 miles east of
Flint, MI.
The Corporation serves the County through the subsidiary Bank at seven
locations. The main office is located at 83 W. Nepessing St., in downtown
Lapeer. A drive-in location is located at the corner of Pine St. and Clay St.,
across from the main office. A full service office is located in the south end
of Lapeer at 637 south M-24. Attica Township is served by a full service
Attica Office located at 4515 Imlay City Rd. Full service offices are located
in Elba Township at 5508 Davison Road and in Metamora Township on M-24, south
of Lapeer. One Automated Teller Machines located Lapeer Regional Hospital,
1375 N. Main St., Lapeer. The Bank opened a full service branch located in a
grocery store at Bryan's Market, 6002 N. Lapeer Rd., North Branch, MI.
The Corporation offers commercial banking services through the Bank at the main
office and the six branches throughout the County. The customer base extends
to all sections of the County and includes all segments of the population,
including individuals, retail businesses, farming operations, and industrial
plants. This locally-owned full service bank offers all traditional deposit
and loan services. The Trust department, with full trust powers, is in its
third decade of providing customers with employee benefit plans, estate
planning services, and complete trust services.
The Corporation faces substantial competition for financial services. Our
chief competitor is First of America Bank-Southeast, which has six branches
throughout the County. Independent Bank Corp. of Ionia, MI. acquired Pioneer
Bank and Kingston Bank which operate three locations in the Bank's market area.
In 1997 Independent Bank Corp opened a loan production office in a Lapeer
shopping center. First Chicago-NBD Bank, NA has a branch office north of the
city limits of Lapeer. Citizens Commercial and Savings Bank of Flint also has
a branch in the County. Tri-County Bank has offices in Imlay City and Almont.
CSB Bank of Capac has an office in Imlay City and Oxford Bank opened an in
Dryden. There are two offices of Citizen's Federal Savings and Loan. The
County is served by two credit unions, Lapeer County School Employees Credit
Union and the Lapeer County Community Credit Union. There are three securities
brokers, First of Michigan Corp., Paine Webber & Co., and Edward D. Jones & Co.
A number of other securities brokers serve the County through Flint offices.
Comerica Bank operates a Comerimart branch in a local grocery store.
The Corporation is regulated as a bank holding company by the Board of
Governors of the Federal Reserve System pursuant to the terms of the Bank
Holding Company Act of 1956. This act requires the approval of the Federal
Reserve Board before the Corporation may acquire or merge with any other
banking institution, limits the activities that the Corporation may engage in
to activities so closely related to banking or managing or controlling banks as
to be a proper incident thereto, and
County Bank Corp 1997 10-K Page 1
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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 which
also have laws that permit interstate banking. The Corporation is obligated to
comply with the regulations of the Securities and Exchange Commission. As a
state member institution, the Bank is obligated to comply with the regulations
of the Federal Reserve Board and the regulations of the Financial Institutions
Bureau (FIB) of the State of Michigan. The Financial Institutions Bureau of
the State of Michigan has the authority to examine and regulate the Bank and
works closely with the Federal Reserve Bank of Chicago coordinating alternate
examinations of the Bank. The FIB has the authority to issue cease and desist
orders against unsafe and unsound banking practices, and the authority to close
a bank in the event it should become insolvent. In addition, the Bank's
business is directly affected by the monetary policies of the Board of
Governors of the Federal Reserve System. The Bank's deposits are insured by
the Federal Deposit Insurance Corporation.
The Federal Deposit Insurance Corporation Improvement Act of 1991 creates a new
statutory framework that applies to every insured depository institution a
system of supervisory actions indexed to the capital level of the individual
institution. The purpose of the statutory provision is to resolve the problems
of insured depository institutions at the least possible long term loss to the
deposit insurance fund. Five capital categories have been established from
well capitalized to critically undercapitalized. Each category below well
capitalized brings an increasing number of supervisory actions intended to
strengthen the institution. These actions range from limitations on the
acceptance of brokered deposits to requiring dismissal of management,
divestiture of institutions by the parent, approval of capital distributions,
and more. In addition, regulatory authority is expanded by the development of
operating and management standards, review of executive compensation, increased
accounting principles, and increased independence of Audit committees. The
number of full time equivalent employees totaled 120 and 117 on December 31,
1997 and 1996 respectively.
County Bank Corp 1997 10-K Page 2
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Table I. Average Assets (000's) Income (000's) Yield (%)
Interest margin analysis as a %
of average earning 1997 1996 1995 1997 1996 1995 1997 1996 1995
Assets
Securities:
US Gov't & agencies................... 29,482 31,543 35,477 1,956 1,994 2,110 6.63% 6.32% 5.95%
State and political subdivisions*..... 15,594 14,167 14,886 1,246 1,159 1,255 7.99% 8.18% 8.43%
Corporate securities.................. 22 64 140 1 4 8 4.55% 6.25% 5.71%
Other securites....................... 1,206 854 579 38 35 32 3.15% 4.10% 5.53%
Total investment securities........... 46,304 46,628 51,082 3,241 3,192 3,405 7.00% 6.85% 6.67%
Bank time deposits.................... 0 0 0 0 0 0 0.00% 0.00% 0.00%
Federal funds sold.................... 5,209 4,657 3,053 286 248 179 5.49% 5.33% 5.86%
Loans:
Commercial loans*..................... 54,210 51,247 48,219 4,937 4,660 4,531 9.11% 9.09% 9.40%
Real estate mortgages................. 37,258 30,784 23,729 3,144 2,564 2,064 8.44% 8.33% 8.70%
Consumer loans........................ 28,192 28,403 29,047 2,428 2,451 2,400 8.61% 8.63% 8.26%
Total loans........................... 119,660 110,434 100,995 10,509 9,675 8,995 8.78% 8.76% 8.91%
Total average earning assets.......... 171,173 161,719 155,130 14,036 13,115 12,579 8.20% 8.11% 8.11%
Total average assets.................. 181,270 172,312 165,081
Interest bearing liabilities:
Deposits:
NOW account deposits.................. 41,132 37,176 29383 1,397 1,206 866 3.40% 3.24% 2.95%
Savings deposits...................... 42,416 41,595 44,813 1,262 1,223 1,309 2.98% 2.94% 2.92%
Time deposits over $100,000........... 4,994 4,507 5,342 263 239 306 5.27% 5.30% 5.73%
Other time deposits................... 42,245 41,683 42,835 2,153 2,153 2,165 5.10% 5.17% 5.05%
Total deposits........................ 130,787 124,961 122,373 5,075 4,821 4,646 3.88% 3.86% 3.80%
Federal funds purchased............... 34 16 129 2 1 8 5.88% 6.25% 6.20%
Long-term debt........................ 0 0 0 0 0.00% 0.00% 0.00%
Total interest bearing liabilities.... 130,821 124,977 122,502 5,077 4,822 4,654 3.88% 3.86% 3.80%
Demand deposits....................... 28,648 27,121 24,908
Other liabilities..................... 1,465 1,355 1,079
Stockholders' equity.................. 21,143 18,859 16,592
Total liabilities and stockholders'
equity.............................. 182,077 172,312 165,081
Interest expense as a % of average earning assets 2.97% 2.98% 3.00%
Net interest margin/net interest yield as a %
of average earning assets 8,959 8,293 7,925 5.23% 5.13% 5.11%
Net interest yield as a % of average assets 4.92% 4.81% 4.80%
* A tax adjustment of $473, $449, and $465 has been added to 1997, 1996 and
1995 income respectively to reflect the impact of a 34% Federal income tax rate
in each year. Non accruing loans are reported in their related categories and
reduce the related yields.
5
Rate/volume variance analysis 1996 vs 1995 1995 vs 1994
Change in Change in Change in Total Change in Change in Change in Total
Volume Rate Rate/volume Volume Rate Rate/volume
Assets
Securities:
US Gov't & agencies (130) 99 (7) (38) (234) 133 (15) (116)
State and political subdivisions* 117 (27) (3) 87 (61) (38) 2 (97)
Corporate securities (3) (1) 1 (3) (4) 1 (1) (4)
Other securites 14 (8) (3) 3 15 (8) (4) 3
Total investment securities (2) 63 (12) 49 (284) 88 (18) (214)
Bank time deposits 0 0 0 0 0 0 0 0
Federal funds sold 29 8 1 38 94 (16) (9) 69
Loans:
Commercial loans* 270 7 0 277 285 (146) (9) 130
Real estate mortgages 539 34 7 580 614 (88) (26) 500
Consumer loans (18) (5) 0 (23) (53) 107 (3) 51
Total loans 791 36 7 834 846 (127) (38) 681
Total average earning assets 818 107 (4) 921 656 (55) (65) 536
Interest bearing liabilities:
NOW account deposits 128 57 6 191 230 87 23 340
Savings deposits 24 15 0 39 (94) 9 (1) (86)
Time deposits over $100,000 26 (2) 0 24 (48) (23) 4 (67)
Other time deposits 29 (29) 0 0 (58) 48 (2) (12)
Total deposits 207 41 6 254 30 121 24 175
Federal funds purchased 1 0 0 1 (7) 0 0 (7)
Long-term debt 0 0 0 0 0 0 0 0
Total interest bearing liabilities 208 41 6 255 23 121 24 168
Net Interest Income 610 66 (10) 666 633 (176) (89) 368
6
Guide 3. Statistical Disclosures:
I. Distribution of Assets, Liabilities and Stockholder's Equity; Interest
Rates and Interest Differential.
Refer to Table I and Table II for a presentation of the information required by
this item.
II. Investment Portfolio
Refer to Footnote 3 of the accompanying financial statements on page 9 of the
Annual Report to shareholders for the information required by this item, except
for:
Weighted average yields on a tax equivalent basis:
Book Yield (%)
Value (000's)
US Government securities
Maturity distribution:
One year or less: $2,042 6.77
Over one year through five years: 5,025 6.13
Over five years through ten years: 3,980 7.65
Over ten years: --
State and political subdivisions
Maturity distribution:
One year or less: 1,438 5.37
Over one year through five years: 4,180 5.24
Over five years through ten years: 6,776 5.33
Over ten years: 6,633 5.21
Mortgage-backed securities 15,731 6.66
Other securities 1,482 2.91
County Bank Corp 1997 10-K Page 3
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III. Loan Portfolio
A. Types of Loans
Refer to Footnote 4 of the accompanying financial statements on page 10
of the Annual Report to shareholders for the information required by this
item.
B. Maturities and Sensitivities of Loans to Changes in Interest Rates as of
December 31, 1997. (000's)
Commercial Loans
Fixed rate loans with a maturity of:
Three months or less $ 2,961
Over three months through twelve months 4,996
One year through five years 21,102
Over five years 709
-------
Total fixed rate loans 29,768
Floating rate loans
with a repricing frequency of:
Quarterly or more frequently 24,301
-------
Total Commercial loans $54,069
=======
Real-estate construction loans:
Fixed rate loans with a maturity of
over three months through twelve months: 235
=======
C. Risk Elements.
1. Nonaccrual, Past Due and Restructured Loans. (000's)
12/31/97 12/31/96
Loans 90 days past due and still accruing
Commercial loans 111 12
Real estate loans 124 0
Installment loans 31 30
------ ------
Total loans 90 days past due 266 42
====== ======
Non-accruing loans
Commercial loans 642 302
Real estate loans 170 0
Installment loans 82 23
------ ------
Total non accruing loans 894 325
====== ======
There were no restructured loans.
For the year ended 1997, if the loans reported as nonaccrual loans had earned
at the contracted interest rate, $87,000 of interest income would have been
recorded. No interest income was recorded on these loans in 1997.
County Bank Corp 1997 10-K Page 4
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It is the policy of the Corporation to place loans on a nonaccruing status
when management feels that a significant risk of non-repayment exists.
Criteria for evaluating repayment risk will include the borrowers payment
history, past due status, and financial condition. Loans on which the
required payment of principal or interest has not been received within 90
days of the due date are placed on nonaccrual status.
2. Potential Problem Loans.
As of December 31, 1997 management identified seven potential problem loans
in the commercial loan portfolio. The seven loans totaled $655,000 and
management allocated $70,000 of the allowance for loan losses for these
credits.
3. Foreign Outstandings
Not Applicable
4. Loan Concentrations
As of December 31, 1997 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, 1997, there was no other interest bearing assets that
would have been classified 90 days past due and still accruing if it were a
loan.
IV. Summary of Loan Loss Experience
Analysis of Allowance for Loan Losses (000's)
12/31/97 12/31/96
Balance at beginning of period $1,805 $1,687
Charge offs:
Commercial 0 62
Real-estate 0 0
Installment 59 48
Construction 0 0
------ ------
Total charge offs 59 110
Recoveries:
Commercial 63 72
Real-estate 0 0
Installment 28 36
Construction 0 0
------ ------
Total Recoveries 91 108
Net Charge offs (32) 2
------ ------
Provision charged to operations 120 120
Balance at end of period $1,957 $1,805
====== ======
Ratio of net charge offs during the period
to average loans during the period -0.03% 0.03%
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
earnings to maintain a strong loan to deposit ratio of 1.58%
County Bank Corp 1997 10-K Page 5
9
Net charged 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.
B. Allocation of the Allowance for Loan Losses (000's)
1997 1996
Balance at December 31, Applicable to:
Amount % of loans Amount % of loans
in category in category
to total to total
loans loans
Commercial 179 43.75% 181 43.40%
Real-estate mortgage 0 31.82% 0 27.83%
Installment 48 21.96% 35 26.36%
Construction --- 2.47% --- 2.41%
Unallocated 1,730 N/A 1,589 N/A
------ ------
$1,957 100.00% $1,805 100.00%
====== ======
V. Deposits
A. Refer to Item I of the Guide 3 statistical disclosures for a presentation
of the information required by this item.
B. Not applicable
C. Not applicable
D. Maturities of time certificates of deposits of $100,000 or more. (000's)
Three months or less $2,698
Over three months through six months 549
Over six months through twelve months 916
Over twelve months 1,706
------
$5,869
======
E. Not applicable
County Bank Corp 1997 10-K Page 6
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VI. Return on Equity and Assets. 1997 1996
Return on assets (%) 1.74 1.73
Return on equity (%) 15.00 15.80
Dividend payout ratio (%) 31.90 30.46
Equity to assets ratio (%) 11.61 10.94
VII. Short-Term Borrowings
Not applicable
ITEM 2. PROPERTY
The following is a tabulation of facilities owned by the Bank.
App. Building Date
Description/Location Square Feet Occupied
Main Office 34,948 09/15/02
83 W. Nepessing St.
Lapeer, MI
Elba Office 3,744 10/22/85
5508 Davison Rd
Lapeer, MI
Pine-Clay Office 528 01/05/68
305 Pine St.
Lapeer, MI
Southgate Office 1,700 11/02/70
637 S. Main St.
Lapeer, MI
Attica Office 4,158 06/27/79
4515 Imlay City Rd.
Attica, MI
Land directly east of 01/01/79
the Southgate office.
Metamora Office 2,668 09/18/89
3414 S. Lapeer Rd
Metamora, MI
County Bank Corp 1997 10-K Page 7
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ITEM 3. LEGAL PROCEEDINGS
No material legal proceeding is pending to which the Corporation or the Bank is
party, or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
The information called for by the items within this part is included in the
Corporation's Annual Report to shareholders for the year ended December 31,
1997, and is incorporated herein by reference, as follows:
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
Page 16
ITEM 6. SELECTED FINANCIAL DATA.
Page 15, except for: (000's)
1997 1996 1995 1994 1993
Total Assets $186,841 $177,786 $169,877 $166,666 $157,664
Long Term Debt $0 $0 $0 $0 $0
County Bank Corp 1997 10-K Page 8
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
EARNINGS
Major components of the operating results of the Corporation for 1997, 1996,
and 1995 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
1997 1996 1995 1994 1993
Interest income 13,556 12,666 12,114 10,768 10,492
Interest expense 5,162 4,823 4,654 3,858 4,023
------ ------ ------ ------ ------
Net interest income 8,394 7,843 7,460 6,910 6,469
Provision for possible loan losses 120 120 240 120 275
Net interest income after provision ------ ------ ------ ------ ------
for possible loan losses 8,274 7,723 7,220 6,790 6,194
Other income 2,166 2,216 1,971 1,800 1,666
Other expenses 6,064 5,739 5,669 5,624 5,507
------ ------ ------ ------ ------
Income before provision for
Federal income tax 4,376 4,200 3,522 2,966 2,353
Provision for Federal income taxes 1,215 1,220 948 848 596
------ ------ ------ ------ ------
Net income 3,161 2,980 2,574 2,118 1,757
Per Share ====== ====== ====== ====== ======
Net income 5.33 5.02 4.34 3.57 2.96
====== ====== ====== ====== ======
Dividends declared 1.70 1.53 1.27 1.04 0.87
====== ====== ====== ====== ======
Net Interest Income
The Bank experinced strong loan demand on 1997. Total growth in loans was
5.2%. This is less than the11.7% growth the Bank experienced in 1996. The Bank
sold $1,671,000 of mortgages and $1,729,000 if student loans to the seconcday
markets. Total loan grwoth adjusted for these sales was 8.1%. Deposit growth
was 4.1%. Most growth took place in demand deposit and interestbearing demand
deposit categories. Both categories increased 8% over 1996 year end balances.
The Bank's loan to deposit ratio increased to 75.9%. Net interest yield on a
Federal tax equivalent (FTE) basis as a percent of average assets was 4.9%,
4.8% and 4.8% for 1997, 1996 and 1995, respectively. The FTE adjustment is
derived by deviding tax exempt interest interest income by .66 to reflect the
Corporation's 34% tax rate.
County Bank Corp 1997 10-K Page 9
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Rate sensitivity analysis (000's), December 31, 1996
Repricing period in days 0-30 31-90 91-180 181-365 0-365 Over 365
Rate sensitive assets (RSA)
Federal funds sold 3,550 0 0 0 3,550 0
Investment securities 8,918 310 1,903 2,972 14,103 33,184
Loans 29,679 2,487 4,350 8,758 45,274 78,330
------- ------ ------ ------- ------- -------
Total rate sensitive assets 42,147 2,797 6,253 11,730 62,927 111,514
Rate sensitive liabilities (RSL)
Demand deposits 44,359 0 0 0 44,359 29,741
Savings deposits 20,326 0 0 0 20,326 20,250
Time deposits 14,630 3,258 3,630 9,033 30,551 17,693
------- ------ ------ ------- ------- -------
Total rate sensitive liab. 79,315 3,258 3,630 9,033 95,236 67,684
Repricing gap (RSA-RSL) (37,168) (461) 2,623 2,697 (32,309) 43,830
As a percent of capital -166.8% -2.1% 11.8% 12.1% -145.0% 196.7%
As a percent of total assets -19.9% -0.2% 1.4% 1.4% -17.3% 23.5%
In the above table, scheduled payments on loans and securities are included at
the earlier of their next scheduled principal reduction or repricing
opportunity.
Provision for Possible Loan Losses
Management realizes that loan losses cannot be predicted with absolute
certainty. The Corporation adheres to a loan review procedure that identifies
loans that may develop into problem credits. The adequacy of the reserve for
possible loan losses is evaluated against the listings that result from the
review procedure, historical net loan loss experience, current and projected
loan volumes, the level and composition of non-accrual, past due and
renegotiated or reduced rate loans, current and anticipated economic
conditions, and an evaluation of each borrower's credit worthiness. Based on
these factors, management determines the amount of the provision for possible
loan losses needed to maintain an adequate reserve for possible loan losses.
The amount of the provision for possible loan losses is recorded as current
expense and may be greater or less than the actual net charged off loans.
Activity related to the reserve for possible loan losses resutled in net
recoveries of $32,000 in 1997. Net charged off loans were $2,000 in 1996, and
$177,000 in 1995. Provisions for possible loan losses were $120,000, $120,000
and $240,000 for the respective periods. The ratio of reserve for possible
loan lossed to gross loans was 1.6%, 1.5% and 1.6% on December 31, 1997, 1996
and 1995, respectively.
Non-interest Income
Non-interest income is composed of trust department income, service charges on
deposit accounts, fees for providing other services to customers, gains on
securities sales and other income. Service charges on deposit accounts declined
5.1% in 1997 following a 3.5% increase in 1996. Nonsufficient funds and
overdraft fee income declined although demand accounts and balances increased.
Service charges on demand accounts decreased as customers chose accounts where
fees are offset by deposit balances. Other income declined 7.5% in 1997
primarily due to the high volume of other income posted in 1996. The Bank
posted a recovery of previously accrued expenses of $70,000 provided to cover
environmental costs of a property in other real estate that carried no book
value. The property was sold in 1997 for $20,000 with
County Bank Corp 1997 10-K Page 10
14
limited environmental costs. Other income in 1996 increased 28.1% as a result
of the repayment of two loans that were previously carried as nonaccrual loans.
The customers were on the way to working out their problems and the loans were
renewed on an accrual basis. The interest that was earned during the period of
nonaccrual was capitalized in the renewed loan. This interest was carried
in the general ledger as deferred credits until the customers fully established
their improved repayment capability. The deferred credits were recorded as
income on an interest basis as the new loans were repaid. Both properties were
sold, and the Bank recovered all of its investment. The deferred credits were
booked directly to other income rather than interest income so that comparative
yield calculations would not be distorted. The total amount of deferred credits
posted to other income total $242,000.
Non-interest expense
Major components of non-interest expense are salaries and employee benefits,
occupancy and equipment expenses, and other operating expenses. Salaries and
employee benefits, the largest component of non-interest expense, increased
4.2% in 1997 after a 4.0% increase in 1996. Full time equivalent employees
increased to 120 at year end 1997 from 117 at year end 1996. Occupancy
expenses increased 26.3% after a 4.8% increase in 1996. This was primarily the
result of increased depreciation expenses as a result of remodeling older areas
of the Bank's main office building and expenses of conversion to a new
computer system in late 1997. Other expenses decreased by 1.3%.
The Corporation recognizes potential risk if data processing systems important
to its operations and the operations of key suppliers fail to properly
recognize the year 2000. Consequently, the Corporation is analyzing the risks
and measuring the costs of mitigating the risks. The Corporation does not
believe further costs to avoid the risks will be significant.
FINANCIAL CONDITION
Average assets for the Corporation totaled $181,270,000, $172,312,000 and
$165,081,000 for 1997, 1996, and 1995, respectively. This 5.1% growth in
average assets improved from 4.4% in 1996. The increase was supported by 4.8%
growth in average deposits. Average loans grew 8.3% in 1997. The Corporation
continues to increase the loans to deposits ratio resulting in increased
interest margins and net income.
Liquidity
The anticipated liquidity requirements of the Corporation can be met by
upstreaming dividends from the subsidiary Bank. Refer to footnote 11 of the
accompanying financial statements for a discussion of the restrictions on
undivided profits of the subsidiary. The anticipated cash needs of the
Corporation are for the payment of dividends to current stockholders.
Dividends upstreamed to the Corporation were $1,009,000 in 1997 and $908,000 in
1996.
The estimated value of U.S. Government and U.S. Government Agency securities
totaled 17.1% of total deposits on December 31, 1997. This percentage for 1996
was 20.4. The Corporation is able to meet normal demands for liquidity through
loan repayments, securities payments and deposit growth.
CAPITAL
The Corporation's return on equity reached 15.0% in 1997, a slight decline from
the 15.8% return achieved in 1996 and the 15.5% return earned in 1995.
Effective December 31, 1992 the Bank is required to maintain capital in excess
of 8.0% of risk-based assets as defined by the Federal reserve Board. Refer to
footnote 13 of the accompanying financial statements for a tabular presentation
of the Corporations capital adequacy.
The Corporation's Board of Directors declared a $4.00 per share cash dividend
to shareholders of record on April 10, 1998 to be paid on April 24, 1998 at its
March 18, 1998 Board meeting. This one time cash dividend recognizes the
support of the Corporations' shareholders, acknowledges the Corporations high
levels of capital and still maintains protection for our depositors.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Pages 3-13
County Bank Corp 1997 10-K Page 11
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ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
The information called for by the items within this part is included in County
Bank Corp's 1997 Proxy Statement and is incorporated herein by reference, as
follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pages 3-4 except for:
Executive Officers Ages Office Service
Curt Carter 53 Employee 32 Years
Officer President 9 Years
Present Term 9 Years
Patrick F. Brown 50 Employee 11 Years
Officer Vice President 9 Years
Present Term 9 Years
Laird A. Kellie 52 Employee 15 Years
Officer Secretary 9 Years
Present Term 9 Years
Joseph H. Black 48 Employee 8 Years
Officer Treasurer 8 Years
Present Term 8 Years
11. EXECUTIVE COMPENSATION.
Page 6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Page 2.
Number of Percentage of
Director Shares Outstanding Stock
Dr. David H. Bush 22,028 3.71
Micheal H. Blazo 10,006 1.69
Curt Carter 3,404 0.38
Thomas K. Butterfield 14,700 2.48
A. Edward LaClair 6,054 1.03
Tim Oesch 1,416 0.24
Charles G. Scheidegger 4,343 0.74
Patrick A. Cronin 732 0.13
Ernest W. LeFever 200 0.04
Executive Officers and Directors, as a group, own 63,413 shares or 10.69% of
the 593,236 total outstanding shares of common stock of the Corporation as of
December 31, 1997.
County Bank Corp 1997 10-K Page 12
16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Page 6
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) The following financial statements of the Corporation and the Bank are
included in the Annual Report to its shareholders for the year ended 1997 and
are incorporated herein by reference in Item 8:
Balance sheets--December 31, 1997 and 1996 Page 3
Statements of income--years ended
December 31, 1997, 1996, and 1995 Page 5
Statements of changes in shareholder's equity
years ended December 31, 1997, 1996 and 1995 Page 4
Statements of cash flows
years ended December 31, 1997, 1996 and 1995 Page 6
Notes to financial statements Pages 7-13
Report of Independent Public Accountants,
dated January 30, 1998 Page 14
(a)(2) Not applicable.
(a)(3) The following exhibits are required to be filed with this report by item
14(c):
(3) Articles of Incorporation and By-laws (previously filed as Exhibits to
the Corporation's registration statement on form 8-A, filed January 24, 1989
and incorporated herein by reference).
(13) Annual Report to Shareholders for the year ended December 31, 1997
(filed herewith)
(22) Subsidiary of Registrant: Lapeer County Bank & Trust Co., a Michigan
corporation.
(23) Consent of Experts and Counsel: Letter of consent from Plante & Moran,
LLP Dated March 25, 1998
(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 1997 10-K Page 13
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
Thomas K. Butterfield Timothy Lee Oesch
--------------------------- ----------------------------
David H. Bush, O.D. Ernest W. Lefever, DPM
--------------------------- ----------------------------
Michael H. Blazo Patrick A. Cronin
--------------------------- ----------------------------
County Bank Corp 1997 10-K Page 14
18
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
13 Annual Report to Shareholders
23 Consent of Independent Auditors
27 Financial Data Schedule