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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 10 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended
December 31, 1998
Commission files number 0-17482
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from _____ to ______
County Bank Corp
Michigan EIN 38-0746239
83 W. Nepessing St. Lapeer, MI 48446
(810) 664-2977
Securities registered pursuant to section 12(b) of the act: none
Securities registered pursuant to 12(g) of the Act:
1,200,000 shares, common stock, $5.00 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
The aggregate market value of the voting shares of stock held by nonaffiliates
of the registrant was $40,020,868.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
There are 593,236 shares of common stock ($5.00 par value) outstanding as of
December 31, 1998.
The following documents are incorporated into the 10-K by reference:
The Annual Report to Shareholders, December 31, 1998, Part I, Part II.
Proxy statement dated March 25, 1998, Part III.
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FORM 10-K
ITEM 1. BUSINESS
County Bank Corp, a one bank holding company, was formed on January 3, 1989 by
converting and exchanging, except for the shares of dissenting stockholders,
each share of Lapeer County Bank & Trust Co. (the Bank) into one share of County
Bank Corp (the Corporation). As a result, the Corporation became the sole
stockholder and parent of the Bank.
The Bank was chartered in 1902, is headquartered in Lapeer, MI, and serves all
of Lapeer County (the County) and portions of surrounding counties. Lapeer has
an approximate population of 6,500 people while the County has in excess of
75,000 people. Lapeer is located 60 miles north of metropolitan Detroit, the
largest city in Michigan, 30 miles north of Pontiac, MI, and 20 miles east of
Flint, MI.
The Corporation serves the County through the subsidiary Bank at seven
locations. The main office is located at 83 W. Nepessing St., in downtown
Lapeer. A drive through location is located at the corner of Pine St. and Clay
St. across form the main office. A full service office is located in the 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 Machine is located in Lapeer Regional Hospital,
1375 N. Main St., Lapeer. One cash dispensing machine is located the lobby of
Lapeer Cinemas at 1650 Demille Rd., Lapeer, MI. 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 National City Bank of Michigan/Illinois. National City operates
branches throughout the County. Independent Bank Corp. of Ionia, MI operates
three branch locations in the Bank's market area and a loan production office in
a Lapeer shopping center. NBD Bank operates an office north of the city limits
of Lapeer. Citizens Bank of Flint operates a branch in Columbiaville, MI.
Tri-County Bank has offices in Imlay City and Almont. CSB Bank of Capac has an
office in Imlay City and Almont. Oxford Bank operates a branch in Dryden. There
are two offices of Citizen's Federal Savings and Loan in the County. Two credit
unions, Lapeer County School Employees Credit Union and The Lapeer County
Community Credit Union, which operates offices in Lapeer and Imlay City, serve
the County. There are three securities brokers, First of Michigan Corp., Paine
Webber & Co. and Edward D. Jones & Co. A number of other securities brokers
serve the County through Flint offices. Comerica Bank operates a Comerimart
branch in a local grocery store. The local telephone book lists ten financial
planners, six investment brokers, and thirty-three mortgage brokers.
The Corporation is regulated by the Board of Governors of the Federal Reserve
System pursuant to the terms of the Bank Holding Company Act of 1956. This act
requires the approval of the Federal Reserve Board before the Corporation may
acquire or merge with any other banking institution, limits the activities that
the Corporation may engage in to activities so closely related to banking or
managing or controlling banks as to be a proper incident thereto, and prohibits
the Corporation from acquiring an interest in a bank located outside the state
in which the operations of its subsidiaries are principally conducted, unless
such acquisition is specifically authorized by the state in which the acquired
bank is located. In November 1985, the State of Michigan passed legislation to
allow interstate banking with neighboring states that also have laws that permit
interstate banking. The Corporation is obligated to comply with the regulations
of the Securities and Exchange Commission. As a state member institution, the
Bank is obligated to comply with the regulations of the Federal Reserve Board
and the regulations of the Financial Institutions Bureau (FIB) of the State of
Michigan. The Financial Institutions Bureau of the State of Michigan has the
authority to
County Bank Corp 1998 10-k 2
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examine and regulated the Bank and works closely with the Federal Reserve Bank
of Chicago coordinating alternate examinations of the Bank. The FIB has the
authority to issue cease and desist orders against unsafe and unsound banking
practices, and the authority to close a bank in the event it should become
insolvent. In addition, the Bank's business is directly affected by the monetary
policies of the Board of Governors of the Federal Reserve System. The Federal
Deposit Insurance Corporation insures the Bank's deposits.
The Federal Deposit Insurance Corporation Act of 1991 creates a new statutory
framework that applies to every insured depository institution a system of
supervisory actions indexed to the capital level of the individual institution.
The purpose of the provision is to resolve the problems of insured depository
institutions at the least possible long term loss to the deposit insurance fund.
Five capital categories have been established from well capitalized to
critically under capitalized. Each category below well capitalized brings an
increasing number of supervisory actions intended to strengthen the institution.
These actions range from limitations on the acceptance of brokered deposits to
requiring dismissal of management, divestiture of institutions by the parent,
approval of capital distributions, and more. In addition, regulatory authority
is expanded by the development of operation and management standards, review of
executive compensation, increased accounting principles, and increased
dependence on audit committees.
The number of full time equivalent employees totaled 116 and 120 on December 31,
1998 and 1997, respectively.
County Bank Corp 1998 10-k 3
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Guide 3. Statistical disclosures:
I. Distribution of Assets, Liabilities and Stockholders' Equity; Interest
Rates and Interest
Table I. Average Assets (000's) Income (000's) Yield (%)
1998 1997 1996 1998 1997 1996 1998 1997 1996
Assets
Securities:
US Gov't & agencies ............................ 27,786 29,482 31,543 1,792 1,956 1,994 6.4% 6.6% 6.3%
State and political subdivisions* .............. 17,898 15,594 14,167 1,392 1,246 1,159 7.8% 8.0% 8.2%
Corporate securities ........................... -- 22 64 -- 1 4 0.0% 4.5% 6.3%
Other securites ................................ 1,516 1,206 854 47 38 35 3.1% 3.2% 4.1%
Total investment securities .................... 47,200 46,304 46,628 3,231 3,241 3,192 6.8% 7.0% 6.8%
Bank time deposits ............................. -- -- -- -- -- -- 0.0% 0.0% 0.0%
Federal funds sold ............................. 8,160 5,209 4,657 429 286 248 5.3% 5.5% 5.3%
Loans:
Commercial loans* .............................. 55,943 54,210 51,247 5,071 4,937 4,660 9.1% 9.1% 9.1%
Real estate mortgages .......................... 35,845 37,258 30,784 2,972 3,144 2,564 8.3% 8.4% 8.3%
Consumer loans ................................. 29,969 28,192 28,403 2,653 2,428 2,451 8.9% 8.6% 8.6%
Total loans .................................... 121,757 119,660 110,434 10,696 10,509 9,675 8.8% 8.8% 8.8%
Total average earning assets ................... 177,117 171,173 161,719 14,356 14,036 13,115 8.1% 8.2% 8.1%
Total average assets ........................... 189,729 182,077 172,312
Interest bearing liabilities:
Deposits:
NOW account deposits ........................... 46,084 41,132 37,176 1,550 1,397 1,206 3.4% 3.4% 3.2%
Savings deposits ............................... 41,210 42,416 41,595 1,202 1,262 1,223 2.9% 3.0% 2.9%
Time deposits over $100,000 .................... 6,326 4,994 4,507 352 263 239 5.6% 5.3% 5.3%
Other time deposits ............................ 42,249 42,245 41,683 2,251 2,153 2,153 5.3% 5.1% 5.2%
Total deposits ................................. 135,869 130,787 124,961 5,355 5,075 4,821 3.9% 3.9% 3.9%
Federal funds purchased ........................ 35 34 16 2 2 1 5.7% 5.9% 6.3%
Long-term debt ................................. -- -- -- 0.0% 0.0% 0.0%
Total interest bearing liabilities ............. 135,904 130,821 124,977 5,357 5,077 4,822 3.9% 3.9% 3.9%
Demand deposits ................................ 30,238 28,648 27,121
Other liabilities .............................. 1,888 1,465 1,355
Stockholders' equity ........................... 21,699 21,143 18,859
Total liabilities and stockholders' equity ..... 189,729 182,077 172,312
Interest expense as a % of average earning
assets ....................................... 3.0% 3.0% 3.0%
Net interest margin/net interest yield as a % .. 8,999 8,959 8,293 5.1% 5.2% 5.1%
of average earning assets
Net interest yield as a % of average assets .... 4.7% 4.9% 4.8%
* A tax adjustment of $514, $473, and $449 has been added to 1998, 1997 and 1996
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.
County Bank Corp 1998 10-k 4
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Rate/volume variance analysis 1998 vs 1997 1997 vs 1996
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 -113 -55 4 -164 -130 99 -7 -38
State and political subdivisions* 184 -33 -5 146 117 -27 -3 87
Corporate securities -1 -1 1 -1 -3 -1 1 -3
Other securites 10 -1 0 9 14 -8 -3 3
Total investment securities 80 -90 0 -10 -2 63 -12 49
Bank time deposits 0 0 0 0 0 0 0 0
Federal funds sold 162 -12 -7 143 29 8 1 38
Loans:
Commercial loans* 158 -23 -1 134 269 7 1 277
Real estate mortgages -119 -55 2 -172 539 34 7 580
Consumer loans 153 68 4 225 -18 -5 0 -23
Total loans 192 -10 5 187 790 36 8 834
Total average earning assets 434 -112 -2 320 817 107 -3 921
Interest bearing liabilities:
NOW account deposits 168 -14 -1 153 128 57 6 191
Savings deposits -36 -25 1 -60 24 15 0 39
Time deposits over $100,000 70 15 4 89 26 -2 0 24
Other time deposits 0 98 0 98 29 -29 0 0
Total deposits 202 74 4 280 207 41 6 254
Federal funds purchased 0 0 0 0 1 0 0 1
Long-term debt 0 0 0 0 0 0 0 0
Total interest bearing liabilities 202 74 4 280 208 41 6 255
Net Interest Income 232 -186 -6 40 609 66 -9 666
II. Investment Portfolio
Refer to Footnote 3 of the accompanying financial statements on page 9 to the
Annual Report to stockholders for the information required by this item, except
for:
Weighted average yield on a tax equivalent basis:
Book Value (000's) Yield (%)
US Government securities Maturity distribution:
One year or less $ 4,009 5.51
Over one year through five years 1,001 5.31
Over five years through ten years 5,975 7.20
Over ten years -- --
State and political subdivisions Maturity distribution:
One year or less $ 1,824 8.82
Over one year through five years 6,940 7.56
Over five years through ten years 6,343 8.06
Over ten years 4,245 7.31
Mortgage-backed securities 18,489 6.16
Other securities 426 11.03
County Bank Corp 1998 10-k 5
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III. Loan Portfolio
A. Types of loans
Refer to Footnote 4 of the accompanying financial statements on page 10 of
Annual Report to stockholders for the information required by this item.
B. Maturities and Sensitivities of Loans to Changes in Interest Rates as of
December 31, 1998.
Commercial Loans
Fixed rate loans with a maturity of:
Three months or less $ 2,591
Over three months through twelve months 7,071
One year through five years 19,097
Over five years 402
-------
Total fixed rate loans $29,161
Floating rate loans with a repricing frequency of:
Quarterly or more frequently $21,497
-------
Total Commercial loans $50,658
-------
Real-estate Construction Loans
Fixed rate loans with a maturity of:
Three months or less $ 174
Over three months through twelve months 1,118
One year through five years 411
-------
Total fixed rate loans 1,703
Floating rate loans with a repricing frequency of:
Quarterly or more frequently 4,035
-------
Total Real-estate Construction loans $ 5,738
-------
C. Risk Elements
1. Nonaccrual, Past Due, and Restructured Loans (000's)
12/31/98 12/31/97
Loans 90 days past due and still accruing
Commercial loans $ 174 $111
Real estate loans 0 124
Installment loans 98 31
------ ----
Total loans 90 days pas due 272 266
====== ====
Nonaccruing loans
Commercial loans 910 642
Real estate loans 45 170
Installment loans 197 82
------ ----
Total nonaccruing loans $1,152 $894
====== ====
There were no restructured loans
County Bank Corp 1998 10-k 6
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For the year ended 1998, if the loans reported as nonaccrual had earned at the
contracted interest rate, $51,100 of interest income would have been recorded.
No interest income was recorded on these loans in 1998.
The Corporation places loans on a nonaccruing status when management feels that
a significant rise of non-repayment exists. Criteria for evaluating risk include
the borrowers payment history, past due status, and financial condition. Loans
on which the required payment of principal or interest has not been received
within 90 days of the due date are placed on nonaccrual status.
2. Potential Problem Loans
As of December 31, 1998, management identified eight potential problem loans
in the commercial loan portfolio. The seven loans totaled $862,768. Management
allocated $66,000 of the allowance for loan losses for these credits.
3. Foreign Outstandings
Not applicable
4. Loan concentrations
As of December 31, 1998, 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, 1998, there was no other interest bearing asset that would
have been classified 90 days past due and still accruing if it were a loan.
IV. Summary of Loan Loss Experience
A. Analysis of Allowance for Loan Losses (000's)
Balance at beginning of the period $1,957 $1,805
Charge offs:
Commercial 157 --
Real estate -- --
Installment 69 59
Construction -- --
Total charge offs 226 59
Recoveries:
Commercial 10 63
Real estate -- --
Installment 20 28
Construction -- --
Total recoveries 30 91
Net charge offs 196 (32)
Provision charged to earnings 120 120
Balance at the end of the period $1,881 $1,957
Ratio of net charge offs during the
period to average loans during
the period 0.16% -0.03%
Net charged off loans totaled $196,000 in 1998. One borrower accounted for
$150,000 of the total charged off loans. Management allocated $120,000 from
earnings to maintain a strong reserve for loan losses to total loans ratio of
1.57%
Net charged off loans resulted in net recoveries of $32,000 in 1997. Loan
growth continued to be strong in 1997. Management allocated $120,000 from
earnings to maintain a strong reserve for loan losses to total loans ratio
of 1.58%
B. Allocation of the Allowance for Loan Losses (000's)
1998 1997
Amount % of loans Amount % of loans
Balance at December 31, applicable to: in category in category
Commercial $ 276 42.1% $ 179 43.7%
Real estate mortgage -- 29.5% -- 31.8%
Installment 73 23.6% 48 22.0%
Construction -- 4.8% -- 2.5%
unallocated 1,532 n/a 1,730 n/a
------ ------
$1,881 100.0% $1,957 100.0%
====== ======
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 $3,218
Over three through six months 1,107
Over six months through twelve months 1,562
Over twelve months ,959
------
$6,846
======
E. Not applicable
VI. Return on Equity and Assets
1998 1997
Return on assets (%) 1.70 1.74
Return on equity (%) 14.80 15.00
Dividend payout ratio (%) 106.63 31.90
Equity to assets ratio (%) 11.44 11.61
VII. Short-term Borrowings
Not applicable
County Bank Corp 1998 10-k 7
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ITEM 2. PROPERTY
The following is a tabulation of facilities owned by the Bank
App. Building Date
Description/location Square footage Occupied
Main office 34,948 9/15/02
83 W. Nepessing St.
Lapeer, MI
Elba Office 3,744 10/22/85
5508 Davison Rd.
Lapeer, MI
Pine-Clay office 528 1/5/68
305 Pine St.
Lapeer, MI
Southgate Office 1,700 11/2/70
637 S. Main St.
Lapeer, MI
Attica Office 4,158 6/27/79
4515 Imlay City Rd.
Attica, MI
Metamora Office 2,668 9/18/89
3414 S Lapeer Rd.
Metamora , MI
ITEM 3. LEGAL PROCEEDINGS
No material legal proceeding is pending to which the Corporation or the Bank is
the party, or of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Page 16
ITEM 6. SELECTED FINANCIAL DATA
Page 15, except for: (000's)
1998 1997 1996 1995 1994
Total Assets $197,486 $186,841 $177,786 $169,877 $166,666
Long Term Debt -- -- -- -- --
County Bank Corp 1998 10-k 8
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND THE
RESULTS OF OPERATIONS.
EARNINGS
Major components of the operating result of the Corporation for 1998, 1997 and
1996 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
1998 1997 1996 1995 1994
Interest income $13,826 $13,556 $12,666 $12,114 $ 10,768
Interest expense
5,355 5,162 4,823 4,654 3,858
--------------------------------------------------------------
Net interest income
8,471 8,394 7,843 7,460 6,910
Provision for possible loan losses
120 120 120 240 120
--------------------------------------------------------------
Net interest income after provision for
Possible loan losses
8,351 8,274 7,723 7,220 6,790
Other income
2,283 2,166 2,216 1,971 1,800
Other expense
6,175 6,064 5,739 5,669 5,624
--------------------------------------------------------------
Income before provision for Federal income tax
4,459 4,376 4,200 3,522 2,966
Provision for Federal income tax
1,239 1,215 1,220 948 848
--------------------------------------------------------------
Net income $ 3,220 $ 3,161 $ 2,980 $ 2,574 $ 2,118
==============================================================
Per share:
Net income $ 5.43 $ 5.33 $ 5.02 $ 4.34 $ 3.57
==============================================================
Dividends declared $ 5.79 $ 1.70 $ 1.53 $ 1.27 $ 1.04
==============================================================
Net interest income
The Bank continued to experience strong loan demand during 1998. However, loans
decreased $3,233,000 during the year as a result of the sale of $9,922,000 of
mortgage loans to the secondary market. These loans were sold due to the low
interest rate environment. In addition, tow large commercial credits paid off
unexpectedly during the year. Deposits increased $10,537,000 during 1998. The
Bank increased the securities portfolio by $3,281.000 and paid $3,434,000 in
dividends. Net interest margin on a Federal tax equivalent (FTE) basis declined
from 4.9% in 1997 to 4.7% in 1998 as a result of these changes in the mix of
assets and liabilities. The FTE adjustment is derived by dividing tax exempt
interest income by .66 to reflect the Corporations 34% tax rate.
Rate sensitivity analysis (000's), December 31, 1998
Repricing period in days 0-30 31-90 91-180 181-365 0-365 0ver 365
Rate sensitive assets (RSA):
Federal fund sold 13,700 - - - 13,700 0
Investment securities 14,896 627 2,573 3,837 21,933 28683
Loans 27,097 3,153 4,775 8,251 43,276 76899
------------------------------------------------------------------------
Total rate sensitive assets 55,693 3,780 7,348 12,088 78,909 105582
Rate sensitive liabilities (RSL):
Demand deposits 24,522 - 24,522 55463
Savings deposits 21,380 - 21,380 22377
Time deposits 6,636 8,287 6,561 10,923 32,407 17311
------------------------------------------------------------------------
Total rate sensitive liabilities 52,538 8,287 6,561 10,923 78,309 95151
Repricing gap (RSA-RSL) 3,155 (4,507) 787 1,165 600 10431
As a percent of capital 14.1% -20.2% 3.5% 5.2% 2.7% 46.7%
As a percent of total assets 1.6% -2.3% 0.4% 0.6% 0.3% 5.3%
County Bank Corp 1998 10-k 9
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The preceding table represents management's analysis of repricing probabilities
for 1998. The Asset/liability management committee meets monthly to review the
impact of changes in rates and market pricing on the Corporation's interest
earning assets and interest paying liabilities. Customers' responses to interest
rates and deposit products are reviewed. Loan demand is discussed and methods to
answer customers needs are reviewed. The rate sensitivity of current production
of both loans and deposits are reviewed. Management's goal is to achieve a
balance between rate sensitive assets and rate sensitive liabilities in order to
maintain a reasonable interest margin in changing rate environments.
Provision for Possible Loan Losses
Management realizes that loan losses cannot be predicted with absolute
certainty. The Corporation adheres to a loan review procedure that identifies
loans that may develop into problem credits. The adequacy of the reserve for
possible loan losses is evaluated against the listings that result from the
review procedure, historical net loan loss experience, current and projected
loan volumes, the level and composition of nonaccrual, past due and renegotiated
or reduced rate loans, current and anticipated economic conditions and an
evaluation of each borrower's credit worthiness. Based on these factors,
management determines the amount of the provision for possible loan losses
needed to maintain an adequate reserve for possible loan losses. The amount of
the provision for possible loan losses needed to maintain an adequate reserve
for possible loan losses. The amount of the provision for possible loan losses
is recorded as current expense and may be greater or less than the actual net
charged off loans.
Activity related to the reserve for possible loan losses resulted in net charged
off loans of $196,000 in 1998. Net recoveries of $32,000 were recorded in 1997.
Provisions for possible loan losses were $120,000 and $120,000 for the
respective periods. The ratio of reserve for possible loan losses to gross loans
was 1.6%, 16% and 1.5% on December 31, 1998, 1997 and 1996, 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 3.4%
during 1998. The Bank recorded increases in automated teller machine (ATM) fees
as a result of installing ATM machines at the Elba and Attica branch offices.
Mortgage servicing fees increased $9,600 as a result of the increases in sold
mortgages. Mortgage servicing rights were recorded and amortized, resulting in
an increase in other income of $94,000. Gains on mortgage sales totaled $80,000.
These gains were offset by lower credit insurance income due to a decline in
volume of new direct consumer loans and a decline in other real estate rental
income. Gains on the sale of other real estate of $90,000 recorded in 1997 were
not repeated. Total non-interest income increased 5.4% in 1998.
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 1.9%
in 1998 after a 4.2% increase in 1997. Full time equivalent employees decreased
from 120 on December 31, 1998, to 116 on December 31, 1997. Occupancy expenses
increased 13.5% after a 26.3% increase in 1997. The increase resulted from
depreciation expenses from a full year's depreciation of a new computer system
purchased in 1997 and depreciation of remodeling expenses that continue in older
buildings owned by the Bank. Other expensed declined 5.8%.
FINANCIAL CONDITION
Average assets for the Corporation totaled $189,729,000, $181,270,000 and
$172,312,000 in 1998, 1997 and 1996, respectively. The 4.2% growth in average
assets declines slightly from the 5.1% average growth achieved in 1997. The
growth was supported by 3.8% growth in average deposits for 1998. Average loans
grew 4.7% in 1998 compared 8.3% growth in 1997. The Corporation sold over
$9,000,000 in mortgages in the secondary market during 1998.
County Bank Corp 1998 10-k 10
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Liquidity
The anticipated requirements of the Corporation can be met by upstreaming
dividends from the subsidiary Bank. Refer to footnote 10 of the accompanying
financial statements for a discussion of the restrictions on undivided profits
of the subsidiary. The anticipated cash needs of the Corporation are for the
payment of annual dividends to current stockholders. Dividends upstreamed to the
Corporation were $3,434,000 in 1998 and $1,009,000 in 1997.
The estimated market value of U.S. Government securities and U.S. Agency
securities totaled 19.0% of total deposits on December 31, 1998. The percentage
for 1997 17.7%. The Corporation is able to meet normal demands for liquidity
through loan repayments, securities payments and deposit growth.
CAPITAL
The Corporation's return on average equity totaled 14.8% in 1998 and 15.0% in
1997. Increases in the market value of securities available for sale were higher
than the net reduction in capital due to the payment of dividends that exceeded
net income for 1998. Consequently, the return on average equity declined during
the year. Effective December 31, 1992, the Corporation is required to maintain
capital in excess of 8% of risk-weighted assets as defined by the Federal
Reserve Board. The Corporation's capital to risk-weighted asset ratio was 20.7%
on December 31, 1998 and was 21.3% on December 31, 1997. Refer to footnote 12 of
the accompanying financial statements for a tabular presentation of the
Corporation's capital adequacy. At its March 17, 1999 meeting, the Board of
Directors declared a 100% stock dividend to stockholders of record March 28,
1999, payable April 20, 1999.
RISK FACTORS
The Corporation is evaluated by the Federal Reserve Bank on its management of
risk factors effecting the organization. These risks include credit,
liquidity, market, operational, fiduciary, legal and reputational. Credit,
liquidity, and market risk were discussed in earlier sections of this
narrative. Legal matters are discussed in ITEM 13. The Board of Directors
discusses matters relating to its reputation and performance in
the community at its regular meetings and two planning meetings held during the
year. The primary risk facing the Corporation's operations relate to the
problem associated with a failure of computer systems to recognize the year
2000 in its calculations. The Bank recently invested in new technology for the
future and is currently completing its testing and remediation of the various
data processing systems it has identified that may be subject to this problem.
Contingency planning is also under way relative to the possibility that
failures in systems over which the Corporation has no control will effect the
Corporation's operations. The Corporation's effort is scheduled to be completed
by June 30, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 3-13
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
The information called for the items within this part is included in County Bank
Corp's 1998 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 54 Employee 32 years
Officer President 10 years
Present term 10 years
Patrick F. Brown 51 Employee 12 years
Officer Vice President 10 years
Present term 10 years
Laird A. Kellie 53 Employee 16 years
Officer Secretary 10 years
Present term 10 years
Joseph H. Black 49 Employee 9 years
Officer Treasurer 9 years
Present term 9 years
ITEM 11. EXECUTIVE COMPENSATION
Page 6
County Bank Corp 1998 10-k 11
12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Page 2
Director Number Percentage of
of shares outstanding
stock
Dr. David H. Bush 22,028 3.71
Michael H. Blazo 10,006 1.69
Curt Carter 3,554 0.60
Patrick A. Cronin 1,039 0.18
Thomas K. Butterfield 14,700 2.48
James A. Harrington 3,038 0.51
A. Edward LaClair 5,714 0.96
Ernest W. Lefever 200 0.04
Tim Oesch 1,516 0.26
Charles Scheidegger 4,468 0.75
Executive Officers and Directors, as a group, own 66,593 shares or 11.23% of
593,236 total outstanding shares of common stock of Corporation as of December
31, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Page 6
County Bank Corp 1998 10-k 12
13
PART IV
Item 14. EXHIBITS FINANCIAL STATEMENT SCHEDULES, AND REPORTS OF FORM 8-K.
(a)(1) The following financial statement schedules of the Corporation and Bank
are included in the Annual Report to its stockholders for the year ended 1998
and are incorporated herein by reference in Item 8:
Balance Sheets--December 31, 1998 and 1997 Page 3
Statements of Income--years ended December 31, 1998, 1997 and 1996 Page 5
Statements of Changes in Stockholders Equity--years ended
December 31, 1998, 1997 and 1996 Page 4
Statements of Cash Flows--years ended December 31, 1998, 1997 and 1996 Page 6
Notes to Financial Statements Pages 7-13
Report of Independent Public Accountants dated January 22, 1999 Page 14
(a)(2) Not applicable
(a)(3) The following exhibits are required to be filed with this report by item
14(c):
(3) Articles of Incorporation and By-laws (previously filed as Exhibits to the
Corporation's registration statement on form 8-A, filed January 24, 1989 and
incorporated herein by reference).
(13) Annual Report to Stockholders for the year ended December 31, 1998 (filed
herewith)
(21) Subsidiary of the Registrant:
(23) Consent of Experts and Counsel: Letter of consent form Plante & Moran, LLP
dated March 29, 1999
(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 1998 10-k 13
14
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
/s/ Curt Carter
-----------------------------
Curt Carter
President
/s/ Joseph II. Black
-----------------------------
Joseph II. Black
Treasurer
/s/ Thomas K. Butterfield /s/ Timothy Lee Oesch
- -------------------------------- -----------------------------
Thomas K. Butterfield Timothy Lee Oesch
/s/ David H. Bush, O.D /s/ Michael H. Blazo
- -------------------------------- -----------------------------
David H. Bush, O.D Michael H. Blazo
/s/ Patrick A. Cronin /s/ James F. Harrington
- -------------------------------- -----------------------------
Patrick A. Cronin James F. Harrington
15
15
EXHIBIT INDEX
Exhibit 13 Annual Report
Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Experts and Counsel
Exhibit 27 Financial Data Schedule