1
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, 1996 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
================================================================================
(Exact name of Registrant as specified in its charter)
MICHIGAN 38-2032782
- ---------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation) (I.R.S. employer identification no.)
230 W. Main St., P.O. Box 491, Ionia, Michigan 48846
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Title of class)
9.25% Cumulative Trust Preferred Securities, $25.00 Liquidation Amount
- --------------------------------------------------------------------------------
(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. .
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant. (For this purpose only, the affiliates of the Registrant have
been assumed to be the executive officers and directors of the Registrant and
their associates.)
Common Stock, $1.00 Par Value - $94,226,210
- --------------------------------------------------------------------------------
(Based on $36.50 per common share, the last reported sales price on the
National Market Tier of the Nasdaq Stock Market on March 18, 1997. Reference
is made to Part II, Item 5 for further information).
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
Common stock, $1.00 par value - 2,889,209 shares at March 18, 1997
Documents incorporated by reference
Portions of the Registrant's definitive proxy statement, and appendix thereto
dated March 14, 1997, relating to its April 15, 1997 Annual Meeting of
Shareholders are incorporated by reference into Part II and Part III of this
form.
The Exhibit Index appears on Page 22
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Included or incorporated by reference in this Form 10-K are certain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Such forward-looking statements are based upon the beliefs
of the Registrant's management as well as on assumptions made by and
information currently available to the Registrant at the time such statements
were made. Actual results could differ materially from those included in such
forward-looking statements as a result of, among other things, the factors
included in or incorporated by reference in this Report generally and certain
economic and business factors, some of which may be beyond the control of the
Registrant. Investors are cautioned that all forward-looking statements
involve risks and uncertainty.
PART I
ITEM 1. BUSINESS
Independent Bank Corporation (the "Registrant") was incorporated under the laws
of the State of Michigan on September 17, 1973, for the purpose of becoming a
bank holding company. The Registrant is registered under the Bank Holding
Company Act of 1956, as amended, and owns 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 the Banks, the Registrant has no other substantial
assets. The Registrant conducts no business except for the provision of
certain management and operational services to the Banks, the collection of
fees and dividends from the Banks and the payment of dividends to the
Registrant's shareholders. Certain employee retirement plans (including an
employee stock ownership plan and a deferred compensation plan) as well as
health and other insurance programs have been established by the Registrant.
The proportional costs of these plans are borne by each of the Banks.
The Registrant and the Banks have no material patents, trademarks, licenses or
franchises except the corporate franchises of the Banks which permit them to
engage in commercial banking pursuant to Michigan law.
The following table shows each of the Banks and their total loans and deposits
as of December 31, 1996:
Main
Office Total Total
Bank Location Deposits Loans
- ---- -------- ------------ ------------
Independent Bank Ionia $247,909,000 $223,058,000
Independent Bank
West Michigan Rockford 120,671,000 168,414,000
Independent Bank
South Michigan Leslie 98,554,000 103,554,000
Independent Bank
East Michigan Caro 208,262,000 126,261,000
Independent Bank (formerly First Security Bank) affiliated with the Registrant
on June 1, 1974. Independent Bank consolidated with North Bank, the sole
banking subsidiary of North Bank Corporation ("NBC") acquired by the Registrant
effective May 31, 1996. On that date NBC had total assets of $152,000,000.
Independent Bank West Michigan is the result of a merger in 1985 of the First
State Bank of Newaygo (acquired December 16, 1974), the Western State Bank,
Howard City (acquired February 7, 1977), and the Bank of Rockford (organized by
the Registrant as a new bank on August 18, 1975).
Independent Bank South Michigan is the result of a merger in 1985 of the
Peoples Bank of Leslie (acquired February 16, 1981) and the Olivet State Bank
(acquired on October 16, 1979).
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ITEM 1. BUSINESS (Continued)
Independent Bank East Michigan is the result of the consolidation of the former
American Home Bank (acquired October 8, 1993), Pioneer Bank (acquired October
15, 1993) and The Kingston State Bank (acquired March 7, 1994). On December
13, 1996 Independent Bank East Michigan purchased eight offices from First of
America Bank--Michigan N.A. with deposits and loans of $121,900,000 and
$22,100,000, respectively.
Effective November 7, 1996, the Registrant formed IBC Capital Finance, a
Delaware statutory business trust ("IBC Capital"). IBC Capital'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 the Registrant. IBC Capital exists for the sole purposes of
issuing and selling its preferred securities and common securities, using the
proceeds from the sale of those securities to acquire subordinated debentures
issued by the Registrant and certain related services. As a result, the sole
assets of IBC Capital are the subordinated debentures of the Registrant.
The Banks transact business in the single industry segment of commercial
banking. Most of the Banks' offices provide full service lobby and drive-in
services in the communities which they serve. Automatic teller machines are
also provided at most locations.
The Banks' activities cover all phases of commercial banking, including
checking and savings accounts, commercial and agricultural lending, direct and
indirect consumer financing, mortgage lending and deposit box services. The
Banks do not offer trust services. The principal markets are the rural and
suburban communities across lower Michigan that are served by the banks' branch
networks. The local economies of the communities served by the Banks are
relatively stable and reasonably diversified. The Banks serve their markets
through their four main offices and a total of 55 branch and 7 loan production
offices.
Banking is highly competitive. The 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 the
Registrant and the Banks and offer certain services that the Registrant and
Banks do not currently provide. Such competitors may also have greater lending
limits than the Banks. The number of competitors may increase as a result of
the easing of restrictions on interstate banking effected under the Riegle-Neal
Interstate Banking and Efficiency Act of 1994. In addition, non-bank
competitors are generally not subject to the extensive regulations applicable
to the Registrant and the Banks.
Price (the interest charged on loans and/or paid on deposits) remains a
principal means of competition within the financial services industry. The
Banks also compete on the basis of service and convenience, utilizing the
strengths and benefits of the Registrant's decentralized structure to 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
income for the three most recent years are as follows:
1996 1995 1994
---- ---- ----
Interest and fees on loans 76.5% 76.1% 71.1%
Other interest income 15.0 16.3 21.3
Non-interest income 8.5 7.6 7.6
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
As of December 31, 1996, the Registrant and the Banks had 459 full-time
employees and 152 part-time employees.
Supervision and Regulation
The following is a summary of certain statutes and regulations affecting
the Registrant and the Banks. 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 the Registrant, the Banks and
the businesses of the Registrant and the Banks.
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ITEM 1. BUSINESS (Continued)
General
Financial institutions and their holding companies are extensively
regulated under federal and state law. Consequently, the growth and earnings
performance of the Registrant and the Banks 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. The effect of such statutes, regulations
and policies and any changes thereto can be significant and cannot be
predicted.
The system of supervision and regulation applicable to the Registrant and
the Banks establishes a comprehensive framework for their respective operations
and is intended primarily for the protection of the Federal Deposit Insurance
Corporation's (the "FDIC") deposit insurance funds, the depositors of the
Banks, and the public, rather than the shareholders of the Registrant. Federal
law and regulations, including provisions added by the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA") and regulations
promulgated thereunder, establish supervisory standards applicable to the
lending activities of the Banks, including internal controls, credit
underwriting, loan documentation, and loan-to value ratios for loans secured by
real property.
The Registrant
General. The Registrant is a bank holding company and, as such, is
registered with, and subject to regulation by, the Board of Governors of the
Federal Reserve System (the "Federal Reserve") under the Bank Holding Company
Act, as amended (the "BHCA"). Under the BHCA, the Registrant is subject to
periodic examination by the Federal Reserve, and is required to file periodic
reports of its operations and such additional information as the Federal
Reserve may require.
In accordance with Federal Reserve policy, the Registrant is expected to act as
a source of financial strength to the Banks and to commit resources to support
the Banks in circumstances where the Registrant might not do so absent such
policy. In addition, in certain circumstances a Michigan state bank having
impaired capital may be required by the Commissioner of the Michigan Financial
Institution's Bureau (the "Commissioner") either to restore the bank's capital
by a special assessment upon its shareholders, or to initiate the liquidation
of the bank.
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. Under the BHCA, bank holding companies are
prohibited, with certain limited exceptions, from engaging in activities other
than those of banking or of managing or controlling banks and from acquiring or
retaining direct or indirect ownership or control of voting shares or assets of
any company which is not a bank or bank holding company, other than subsidiary
companies furnishing services to or performing services for its subsidiaries,
and other subsidiaries engaged in activities which, by the Federal Reserve's
determination, are closely related to banking or managing or controlling banks.
In general, any direct or indirect acquisition by the Registrant of any
voting shares of any bank which would result in the Registrant'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 Registrant 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. Among others, such statutory factors
include 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 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
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ITEM 1. BUSINESS (Continued)
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 same.
The merger or consolidation of an existing bank subsidiary of the Registrant
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 Commissioner under Michigan banking laws, may be
required.
With certain limited exceptions, the BHCA prohibits bank holding companies
from acquiring direct or indirect ownership or control of voting shares or
assets of any company other than a bank, unless the company involved is engaged
solely in one or more activities which the Federal Reserve has determined to be
closely related to banking or managing or controlling banks. The recent
enactment of the Economic Growth and Regulatory Paperwork Reduction Act of 1996
("EGRPRA") streamlines the nonbanking activities application process for well
capitalized and well managed bank holding companies.
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 capital
leverage requirement expressed as a percentage of total assets, (ii) a
risk-based requirement expressed as a percentage of total risk-weighted assets,
and (iii) a Tier 1 leverage requirement expressed as a percentage of total
assets. The capital leverage requirement consists of a minimum ratio of total
capital to total assets of 6%, with an expressed expectation that banking
organizations generally should operate above such minimum level. 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
(which consists principally of shareholders' equity). The Tier 1 leverage
requirement consists of a minimum ratio of Tier 1 capital to total assets, less
goodwill, of 3% for the most highly rated companies, with minimum requirements
of 4% to 5% for all others.
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.
FDICIA requires the federal bank regulatory agencies 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. In 1995, the Federal bank regulatory agencies have also adopted
regulations requiring as part of the assessment of an institution's capital
adequacy the consideration of identified concentrations of credit risks and the
exposure of the institution to a decline in the value of its capital due to
changes in interest rates.
Dividends. The Banks are subject to statutory restrictions on their ability to
pay dividends to the Registrant. In its policy statement, the Federal Reserve
expressed its view that a bank holding company experiencing earnings weaknesses
should not pay cash dividends exceeding its net income or which could only be
funded in ways that weakened the bank holding company's financial health.
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
the Banks are possessed by the FDIC. The "prompt corrective action" provisions
of FDICIA impose further restrictions on the payment of dividends by insured
banks which fail to meeting specified capital levels and, in some cases, impose
similar restrictions on their parent bank holding companies.
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ITEM 1. BUSINESS (Continued)
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, such as
the Registrant, 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.
The Banks
General. The Banks are Michigan banking corporations and their deposit
accounts are principally insured by the Bank Insurance Fund ("BIF") of the
FDIC. As BIF-insured Michigan chartered banks, the Banks are subject to the
examination, supervision, reporting and enforcement requirements of the
Commissioner, as the chartering authority for Michigan banks, and the FDIC, as
administrator of the BIF.
Deposit Insurance. As FDIC-insured institutions, the Banks are required
to pay deposit insurance premium assessments to the FDIC. Pursuant to FDICIA,
the FDIC 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. The FDIC has established the schedule of BIF-insurance assessments,
ranging from 0% of deposits for institutions in the highest category to .27% of
deposits for institutions in the lowest category.
Capital Requirements. FDICIA establishes five capital categories, and the
federal depository institution regulators, as directed by FDICIA, have adopted,
subject to certain exceptions, the following minimum requirements for each of
such categories:
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, 1996 each of the Banks' ratios exceeded minimum
requirements for the well-capitalized category.
FDICIA requires the federal depository institution regulators to take
prompt corrective action in respect of depository institutions that do not meet
minimum capital requirements. The scope and degree of regulatory intervention
is linked to the capital category to which a depository institution is
assigned. A depository institution may be reclassified to a lower category than
is indicted by its capital position 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.
Dividends. Under Michigan law, the Banks are restricted as to the maximum
amount of dividends they may pay on their common stock. 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.
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ITEM 1. BUSINESS (Continued)
FDICIA generally prohibits a depository institution from making any
capital distribution or paying any management fee to its holding company if the
depository institution would thereafter be undercapitalized. The FDIC may also
prevent an insured bank from paying dividends if the bank is in default of
payment of any assessment due to the FDIC. Payment of dividends by a bank may
be prevented by the applicable federal regulatory authority if such payment is
determined, by reason of the financial condition of such bank, to be an unsafe
and unsound banking practice.
Insider Transactions. The Banks are subject to certain restrictions
imposed by the Federal Reserve Act on "covered transactions" with the
Registrant or its subsidiaries. Certain limitations and reporting requirements
are also placed on extensions of credit by the Banks to their directors and
officers, to directors and officers of the Registrant and its subsidiaries, to
principal shareholders of the Registrant, and to "related interests" of such
directors, officers and principal shareholders.
Safety and Soundness Standards. On July 10, 1995, the FDIC published
final guidelines implementing the FDICIA requirement that the federal banking
agencies 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, and compensation, fees and benefits. The guidelines prescribe the
goals to be achieved in each area, and each institution is responsible for
establishing its own procedures to achieve those goals. If an institution
fails to comply with any of the standards set forth in the guidelines, the
institution's primary federal regulator may require the institution to submit a
plan for achieving and maintaining compliance.
State Bank Activities. Under FDICIA, as implemented by final regulations
adopted by the FDIC, 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.
Consumer Banking. The Banks' business includes making a variety of types
of loans to individuals. In making these loans, the Banks are subject to State
usury and regulatory laws and to various Federal statutes, such as 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. In receiving deposits, the 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 the Banks and their respective directors and
officers.
Other. In 1994, the Congress enacted two major pieces of banking legislation,
the Riegle Act and the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Riegle-Neal Act"). The Riegle-Neal Act substantially changed
the geographic constraints applicable to the banking industry. Effective
September 29, 1995, the Riegle-Neal Act allows bank holding companies to
acquire banks located in any state in the United States without regard to
geographic restrictions or reciprocity requirements imposed by state law, but
subject to certain conditions, including limitations on the aggregate amount of
deposits that may be held by the acquiring holding company and all of its
insured depository institution affiliates. Effective June 1, 1997 (or earlier
if expressly authorized by applicable state law), the Riegle-Neal Act allows
banks to establish interstate branch networks through acquisitions of other
banks, subject to certain conditions that include limitations on the aggregate
amount of deposits that may be held by the surviving bank and all of its
insured depository institution affiliates. 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 by the Riegle-Neal Act only if specifically authorized by
state law. The legislation allows individual states to "opt-out" of certain
provisions of the Riegle-Neal Act by enacting appropriate legislation prior to
June 1, 1997.
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ITEM 1. BUSINESS (Continued)
In November, 1995, Michigan exercised its right to opt-in early to the
Riegle-Neal Act, and permitted non-U.S. banks to establish branch offices in
Michigan. Effective November 29, 1995, the Michigan Banking Code was amended
to permit, in appropriate circumstances and with the approval of the
Commissioner, (i) the acquisition of Michigan-chartered banks by FDIC-insured
banks, savings banks, or savings and loan associations located in other states,
(ii) the sale by a Michigan-chartered bank of one or more of its branches (not
comprising all or substantially all of its assets) to an FDIC insured bank,
savings bank or savings and loan association located in a state in which a
Michigan-chartered bank could purchase one or more branches of the purchasing
entity, (iii) the acquisition by a Michigan-chartered bank of an FDIC-insured
bank, savings bank or savings and loan association located in another state,
(iv) the acquisition by a Michigan-chartered bank of one or more branches (not
comprising of all or substantially all of the assets) of an FDIC-insured bank,
savings bank or savings and loan association located in another state, (v) the
consolidation of one or more Michigan-chartered banks and FDIC-insured banks,
savings banks or savings and loan associations located in other states having
laws permitting such consolidation, with the resulting organization chartered
either by Michigan or one of such other states, (vi) the establishment by
Michigan-chartered banks of branches located in other states, the District of
Columbia, or U.S. territories or protectorates with the consent of the
appropriate state or territorial regulatory authority, and (vii) the
establishment by foreign banks of branches located in Michigan. The amending
legislation also expanded the regulatory authority of the Commissioner and made
certain other changes.
In addition to the authorization of interstate banking discussed above,
Michigan law permits Banks to consolidate on a state-wide basis and to operate
the offices of merged banks as branches of a surviving bank. Also, with the
written approval of the Commissioner, the Banks may relocate their main office
to any location in the state, establish and operate branch banks anywhere in
the state and contract with other banks to act as branches thereof. To better
serve their customers, the Banks have entered into an interbank branching
agreements, whereby each of the Banks may act as a branch of the other three
banks.
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ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE
I. (A) DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY;
(B) INTEREST RATES AND INTEREST DIFFERENTIAL
The following table sets forth average balances for major categories of
interest earning assets and interest bearing liabilities, the interest earned
(on a tax equivalent basis) or paid on such amounts, and the average interest
rates earned or paid thereon.
1996 1995 1994
-------------------------- -------------------------- ---------------------------
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
-------- -------- ------ -------- -------- ------ -------- -------- ------
(dollars in thousands)
ASSETS
- ------
Loans--all
domestic (1,2) $510,434 $49,478 9.69% $382,644 $37,654 9.84% $294,968 $28,936 9.81%
Taxable securities 100,945 6,710 6.65 93,064 5,919 6.36 108,905 6,537 6.00
Tax-exempt
securities (2) 39,393 3,433 8.72 31,516 2,914 9.25 29,763 2,857 9.60
Other investments 13,946 971 6.96 6,153 421 6.84 12,335 460 3.73
-------- -------- -------- -------- -------- --------
Interest
earning assets 664,718 60,592 9.12 513,377 46,908 9.14 445,971 38,790 8.70
-------- -------- --------
Cash and due
from banks 21,573 16,091 14,359
Other assets, net 21,038 14,115 21,491
-------- -------- --------
Total assets $707,329 $543,583 $481,821
======== ======== ========
LIABILITIES
- -----------
Savings and NOW $250,977 6,116 2.44 $217,721 5,515 2.53 $213,590 4,819 2.26
Time deposits 187,117 10,022 5.36 141,292 6,955 4.92 150,036 6,273 4.18
Long-term debt 4,875 335 6.87 2,195 120 5.47
Other borrowings 144,703 8,340 5.76 89,048 5,430 6.10 28,481 1,373 4.82
-------- -------- -------- -------- -------- --------
Interest
bearing liabilities 587,672 24,813 4.22 448,061 17,900 4.00 394,302 12,585 3.19
-------- -------- --------
Demand deposits 61,161 46,539 41,910
Other liabilities 8,597 5,296 5,989
Shareholders' equity 49,899 43,687 39,620
-------- -------- --------
Total liabilities and
shareholders'
equity $707,329 $543,583 $481,821
======== ======== ========
Net interest income $35,779 $29,008 $26,205
======== ======== ========
Net interest income
as a percent of
earning assets 5.38% 5.65% 5.88%
====== ===== =====
(1) Average loans outstanding includes the daily average balance of
non-performing loans. Interest on loans does not include additional
interest of approximately $183,000, $199,000 and $157,000 for 1996, 1995
and 1994, respectively, which would have been accrued based on the
original terms of such non-performing loans compared with the interest
that was actually recorded. Interest income on loans includes net
origination fees of $3,331,000 in 1996, $2,702,000 in 1995 and $2,590,000
in 1994.
(2) Interest on tax-exempt securities has been adjusted to reflect
preferential taxation. The adjustment assumes a marginal tax rate of 34%.
For purposes of this analysis, tax-exempt loans are included in
tax-exempt securities.
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ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
I. (C) INTEREST RATES AND DIFFERENTIAL
The following table summarizes the changes in interest income (on a tax
equivalent basis) and interest expense resulting from changes in volume and
changes in rates:
1996 Compared to 1995 1995 Compared to 1994
----------------------------------- ------------------------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
(in thousands)
Increase (decrease) in interest income (1)
- ------------------------------------------
Loans--all domestic $12,395 $(571) $11,824 $8,627 $ 91 $8,718
Taxable securities 516 275 791 (991) 373 (618)
Tax-exempt securities (2) 695 (176) 519 165 (108) 57
Other investments 542 8 550 (303) 264 (39)
------- ----- ------- ------- ------- ------
Total interest income 14,148 (464) 13,684 7,498 620 8,118
------- ----- ------- ------ ------- ------
Increase (decrease) in interest expense (1)
- -------------------------------------------
Savings and NOW 817 (216) 601 95 601 696
Time deposits 2,412 655 3,067 (382) 1,064 682
Long-term debt 335 335 (120) (120)
Other borrowings 3,223 (313) 2,910 3,594 463 4,057
------- ----- ------- ------ ------- ------
Total interest expense 6,787 126 6,913 3,187 2,128 5,315
------- ----- ------- ------ ------- ------
Net interest income $ 7,361 $(590) $ 6,771 $4,311 $(1,508) $2,803
======= ===== ======= ====== ======= ======
(1) The change in interest due to both volume and rate has been allocated to
volume or rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
(2) Interest on tax-exempt securities has been adjusted to reflect
preferential taxation. The adjustment assumes a marginal tax rate of 34%.
II. INVESTMENT PORTFOLIO
(A) The following table sets forth the book value of securities at
December 31:
1996 1995 1994
---- ---- ----
(in thousands)
Held to maturity
- ----------------
U.S. Treasury $ 5,738
U.S. Government agencies $ 1,484 $ 2,559 11,004
States and political subdivisions 21,192 20,142 27,240
Mortgage-backed securities 3,688 4,487 26,545
Other securities 390 718 7,194
--------- -------- --------
Total $ 26,754 $27,906 $77,721
========= ======== ========
Available for sale
- ------------------
U.S. Treasury $ 27,722 $23,272 $34,724
U.S. Government agencies 21,159 6,623
States and political subdivisions 21,854 9,290
Mortgage-backed securities 57,528 37,722 11,684
Other securities 8,589 10,646 6,348
--------- -------- --------
Total $136,852 $87,553 $52,756
========= ======== ========
9
11
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
II. INVESTMENT PORTFOLIO (Continued)
(B) The following table sets forth contractual maturities of securities
at December 31, 1996 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)
Held to maturity
- -----------------
U.S. Government agencies $ 1,484 7.85%
States and political subdivisions $ 1,772 7.05% $12,238 9.26% $ 5,945 9.56% 1,237 8.83
Mortgage-backed securities
Guaranteed or issued by
U.S. Government agencies 195 9.29 3,248 7.43 245 8.96
Other securities 200 5.45 190 6.50
-------- ------- ------- -------
Total $ 2,167 7.11% $15,676 8.84% $ 6,190 9.53% $ 2,721 8.30%
======== ======= ======= =======
Tax equivalent adjustment
for calculations of yield $ 22 $ 385 $ 193 $ 37
======== ======= ======= =======
Available for sale
- ------------------
U.S. Treasury $ 6,565 6.46% $20,517 6.07% $ 640 6.45%
U.S. Government agencies 509 5.01 5,889 5.93 14,761 6.61
States and political subdivisions 951 8.30 5,173 8.94 8,780 9.21 $ 6,950 8.14%
Mortgage backed securities:
Guaranteed or issued by U.S.
Government agencies 1,680 6.86 39,563 7.19 6,483 6.49 7,881 6.70
Other mortgage-backed
securities 1,921 7.29
Other securities 501 6.00 7,586 6.14 502 3.58
-------- ------- ------- -------
Total $10,206 6.61% $80,649 6.83% $30,664 7.33% $15,333 7.24%
======== ======= ======= =======
Tax equivalent adjustment
for calculations of yield $ 27 $ 157 $ 275 $ 192
======== ======= ======= =======
The rates set forth in the tables above for obligations of state and political
subdivisions have been restated on a fully tax equivalent basis assuming a 34%
marginal tax rate. The amount of the adjustment is as follows:
Tax-Exempt Rate on Tax
Held to maturity Rate Adjustment Equivalent Basis
- ---------------- ---------- ---------- ----------------
Under 1 year 5.82% 1.23% 7.05%
1-5 years 6.11 3.15 9.26
5-10 years 6.31 3.25 9.56
After 10 years 5.83 3.00 8.83
Available for sale
- ------------------
Under 1 year 5.48 2.82 8.30
1-5 years 5.90 3.04 8.94
5-10 years 6.08 3.13 9.21
After 10 years 5.37 2.77 8.14
10
12
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
III. LOAN PORTFOLIO
(A) The following table sets forth loans outstanding at December 31:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in thousands)
Loans held for sale $ 11,583 $ 16,047 $ 5,933 $ 6,376 $ 6,400
Real estate mortgage 331,150 225,900 166,794 136,579 133,486
Commercial and agricultural 164,304 108,879 103,984 91,655 70,360
Installment 114,250 83,265 65,947 54,033 51,388
--------- --------- ---------- ---------- ----------
Total Loans $621,287 $434,091 $342,658 $288,643 $261,634
========= ========= ========== ========== ==========
Agricultural loans included
in commercial and agricultural
and in real estate mortgage
loans above $ 21,804 $ 12,394 $ 15,855 $ 17,096 $ 8,179
========= ========= ========== ========== ==========
The loan portfolio is periodically and systematically reviewed and the
results of these reviews are reported to the Boards of Directors of the
Registrant and the Banks. The purpose of these reviews is to assist in
assuring proper loan documentation, 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, 1996:
Due
Due After One Due
Within But Within After
One Year Five Years Five Years Total
--------- ---------- ---------- -----
(in thousands)
Real estate mortgage $ 12,970 $15,986 $26,857 $55,813
Commercial and agricultural 85,266 70,050 8,988 164,304
--------- ------- ------- ------------
Total $101,436 $86,036 $35,845 $223,317
========= ======= ======= ============
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, 1996:
Fixed Variable
Rate Rate Total
--------- -------- ---------
(in thousands)
Due after one but within five years $ 74,765 $11,271 $ 86,036
Due after five years 29,208 6,637 35,845
--------- -------- ---------
Total $103,973 $17,908 $121,881
========= ======== =========
11
13
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
III. LOAN PORTFOLIO (Continued)
(C) The following table sets forth non-performing loans at December 31:
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(in thousands)
(a) Loans accounted for on a
non-accrual basis (1, 2) $1,711 $1,886 $2,052 $1,707 $1,581
(b) Aggregate amount of loans
ninety days or more past due
(excludes loans in (a) above) 1,994 427 254 408 380
(c) Loans not included above which
are "troubled debt restruc-
turings" as defined in State-
ment of Financial Accounting
Standards No. 15 (2) 197 247 528 1,098 1,213
------ ------ ------ ------ ------
Total non-performing loans $3,902 $2,560 $2,834 $3,213 $3,174
====== ====== ====== ====== ======
(1) The accrual of interest income is discontinued when a loan becomes 90
days past due and/or 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 $288,000 would have been earned in 1996 had
loans in categories (a) and (c) remained at their original terms, however,
only $105,000 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 $2,100,000 at December 31,
1996. 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 the Banks.
At December 31, 1996, 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, 1996, 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, 1996.
12
14
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:
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(dollars in thousands)
Loans outstanding at the end of
the year (net of unearned fees) $621,287 $434,091 $342,658 $288,643 $261,634
======== ======== ======== ======== ========
Average loans outstanding for
the year (net of unearned fees) $510,434 $382,644 $294,968 $259,334 $267,801
======== ======== ======== ======== ========
Balance of allowances for loan losses
at beginning of year $ 5,243 $ 5,054 $ 5,053 $ 4,023 $ 3,784
-------- -------- -------- -------- --------
Loans charged-off
Real estate 24 24 14 38 69
Commercial and agricultural 66 113 311 306 566
Installment 1,046 575 546 370 581
-------- -------- -------- -------- --------
Total loans charged-off 1,136 712 871 714 1,216
-------- -------- -------- -------- --------
Recoveries of loans previously
charged-off
Real estate 8 28 6 11 26
Commercial and agricultural 138 115 151 156 91
Installment 294 122 242 164 113
-------- -------- -------- -------- --------
Total recoveries 440 265 399 331 230
-------- -------- -------- -------- --------
Net loans charged-off 696 447 472 383 986
Additions to allowance charged to
operating expense 1,233 636 473 657 1,225
Allowance on loans acquired 1,180 756
-------- -------- -------- -------- --------
Balance at end of year $ 6,960 $ 5,243 $ 5,054 $ 5,053 $ 4,023
======== ======== ======== ======== ========
Net loans charged-off as a percent of
average loans outstanding for the year 0.14% 0.12% 0.16% 0.15% 0.37%
Allowance for loan losses as a
percent of loans outstanding at
the end of the year 1.12 1.21 1.48 1.75 1.54
The allowance for loan losses reflected above is a valuation allowance in
its entirety and the only allowance available to absorb future loan losses.
Further discussion of the provision and allowance for loan losses 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
in Item 7, Part II of this report.
13
15
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
IV. SUMMARY OF LOAN LOSS EXPERIENCE (Continued)
(B) The 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:
1996 1995 1994
---------------------- ------------------------------- ----------------------
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 and
agricultural $2,176 26.4% $1,612 25.8% $1,655 30.3%
Real estate
mortgage 257 55.2 162 55.0 177 50.4
Installment 834 18.4 597 19.2 474 19.3
Unallocated 3,693 2,872 2,748
------ ----- ------ ----- ----- -----
Total $6,960 100.0% $5,243 100.0% $5,054 100.0%
====== ===== ====== ===== ====== =====
1993 1992
---------------------- ------------------------------
Percent Percent
Allowance of Loans to Allowance of Loans to
Amount Total Loans Amount Total Loans
--------- ----------- --------- -----------
(dollars in thousands)
Commercial and
agricultural $2,222 31.8% $1,971 26.9%
Real estate
mortgage 270 49.5 255 53.5
Installment 464 18.7 434 19.6
Unallocated 2,097 1,363
------ ----- ------ -----
Total $5,053 100.0% $4,023 100.0%
====== ===== ====== =====
V. DEPOSITS
The following table sets forth average deposit balances and the
weighted-average rates paid thereon for the years ended December 31:
1996 1995 1994
---------------- ---------------- ----------------
Average Average Average
Balance Rate Balance Rate Balance Rate
--------- ----- --------- ----- --------- -----
(dollars in thousands)
Non-interest bearing demand $ 61,161 $ 46,539 $ 41,910
Savings and NOW 250,977 2.44% 217,721 2.53% 213,590 2.26%
Time deposits 187,117 5.36 141,292 4.92 150,036 4.18
-------- -------- --------
Total $499,255 3.23% $405,552 3.08% $405,536 2.74%
======== ======== ========
The following table summarizes time deposits in amounts of $100,000 or
more by time remaining until maturity as of December 31, 1996:
(in thousands)
Three month or less $14,467
Over three through six months 4,003
Over six months through one year 3,061
Over one year 9,522
-------
Total $31,053
=======
14
16
ITEM 1. BUSINESS -- STATISTICAL DISCLOSURE (Continued)
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:
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Net income as a percent of
Average common equity 15.74% 15.59% 15.22% 15.21% 15.88%
Average total assets 1.11 1.25 1.25 1.33 1.26
Dividends declared per common share as a
percent of net income per share 36.76 37.20 34.78 25.58 24.37
Average shareholders' equity as a percent
of average total assets 7.06 8.04 8.22 8.72 7.94
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 8 to the consolidated
financial statements incorporated herein by reference in Item 8, Part II of
this report.
15
17
ITEM 2. PROPERTIES
The Registrant and the Banks operate a total of 64 facilities in Michigan. The
individual properties are not materially significant to the Registrants' or the
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 their business, the 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, no material legal procedures are pending which involve the
Registrant or the Banks.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
16
18
ADDITIONAL ITEM - EXECUTIVE OFFICERS
Executive officers of the Registrant are appointed annually by the Board of
Directors at the meeting of Directors following the Annual Meeting of
Shareholders. There are no family relationships among these officers and/or
the Directors of the Registrant 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 the Registrant's
executive officers and certain key officers of its subsidiaries (included for
information purposes only) as of December 31, 1996.
First elected
as an officer of
Name (Age) Position with Registrant the registrant
- ---------- ------------------------ ----------------
Charles C. Van Loan (49) President, Chief Executive December, 1984
Officer and Director
William R. Kohls (39) Executive Vice President and
Chief Financial Officer May, 1985
Jeffrey A. Bratsburg (53) President and Chief Executive
Officer - Independent Bank
West Michigan
Edward B. Swanson (43) President and Chief Executive
Officer - Independent Bank
South Michigan
Michael M. Magee, Jr. (41) President and Chief Executive
Officer - Independent Bank
Ronald L. Long (37) President and Chief Executive
Officer - Independent Bank
East Michigan
Prior to being named President and Chief Executive Officer in 1993, Mr. Magee
was Executive Vice President of Independent Bank.
Prior to being named President and Chief Executive Officer in 1993, Mr. Long
was Vice President and Controller of the Registrant.
The President and Chief Executive Officers of the Registrant's subsidiary banks
serve as members of various committees of the Registrant.
17
19
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information set forth under the caption "Quarterly Summary " on Page A-31
of the Appendix to the Registrant's definitive proxy statement, dated March 14,
1997, relating to the April 15, 1997 Annual Meeting of Shareholders (as filed
with the commission and 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" on Page A-11 of the Appendix to the Registrant's definitive proxy
statement, dated March 14, 1997, relating to the April 15, 1997 Annual Meeting
of Shareholders (as filed with the commission and 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" on pages A-2 through
A-10 of the Appendix to the Registrant's definitive proxy statement, dated
March 14, 1997, relating to the April 15, 1997 Annual Meeting of Shareholders
(as filed with the commission and 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 of the Registrant and the
auditors' report are set forth on pages A-12 through A-30 of the Appendix to
the Registrant's definitive proxy statement, dated March 14, 1997, relating to
the April 15, 1997 Annual Meeting of Shareholders (as filed with the commission
and as filed as exhibit 13 to this report on Form 10-K) is incorporated herein
by reference.
Consolidated Statements of Financial Condition at December 31, 1996 and
1995
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Independent Auditors Report
The supplementary data required by this item set forth under the caption
"Quarterly Financial Data" on page A-31 of the Appendix to the Registrant's
definitive proxy statement, dated March 14, 1997, relating to the April 15,
1997 Annual Meeting of Shareholders (as filed with the commission and as filed
as exhibit 13 to this report on Form 10-K) is incorporated herein by reference.
18
20
PART II.
ITEM 8. (Continued)
The portions of the Appendix to the Registrant's definitive proxy statement,
dated March 14, 1997, relating to the April 15, 1997 Annual Meeting of
Shareholders (as filed with the commission and 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
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS - The information with respect to Directors of the Registrant, set
forth under the caption "Election of Directors" on pages 2 through 4 of the
Registrant's definitive proxy statement, dated March 14, 1997, relating to the
April 15, 1997 Annual Meeting of Shareholders, (as filed with the commission)
is incorporated herein by reference.
EXECUTIVE OFFICERS - Reference is made to additional item under Part I of this
report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the captions "Summary Compensation Table",
"Option Grants in 1996" and "Aggregated Stock Option Exercises in 1996 and Year
End Option Values" on pages 11 through 12 of the Registrant's definitive proxy
statement, dated March 14, 1997, relating to the April 15, 1997 Annual Meeting
of Shareholders, (as filed with the commission) is incorporated herein by
reference. Information under the caption "Committee Report on Executive
Compensation" on pages 9 through 10 of the definitive proxy statement is not
incorporated by reference herein and is not deemed to be filed with the
Securities and Exchange Commission.
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" on
pages 1, 2 and 11, respectively, of the Registrant's definitive proxy
statement, dated March 14, 1997, relating to the April 15, 1997 Annual Meeting
of Shareholders, (as filed with the commission) is incorporated herein by
reference. Information under the captions "Shareholder Return Performance
Graph" and "Committee Report on Executive Compensation" on pages 8 through 10
of the definitive proxy statement is not incorporated by reference herein and
is not deemed to be filed with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Transactions Involving Management"
on page 13 of the Registrant's definitive proxy statement, dated March 14,
1997, relating to the April 15, 1997 Annual Meeting of Shareholders, (as filed
with the commission) is incorporated herein by reference.
19
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
All financial statements of the Registrant are incorporated herein
by reference as set forth in the Appendix to the Registrant's
definitive proxy statement, dated March 14, 1997, relating to the
April 15, 1997 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 December 24, 1996, to report the
acquisition of eight branch banking facilities from First of America
Bank--Michigan, N.A.
20
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, dated March 18, 1997.
INDEPENDENT BANK CORPORATION
/s/Charles C. Van Loan Charles C. Van Loan, President and Chief
- ------------------------------- Executive Officer (Principal Executive Officer)
/s/William R. Kohls William R. Kohls, Executive Vice President and
- ------------------------------- Chief Financial Officer (Principal Financial
Officer)
/s/James J. Twarozynski James J. Twarozynski, 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 behalf of the
Registrant and in the capacities and on the dates indicated. Each director of
the Registrant, who's signature appears below hereby appoints Charles C. Van
Loan and William R. Kohls and each of them severally, as his attorney-in-fact,
to sign in his name and on his behalf, as a director of the Registrant, and to
file with the Commission any and all Amendments to this Report on Form 10-K.
Keith E. Bazaire, Director /s/Keith E. Bazaire
----------------------
Terry L. Haske, Director /s/Terry L. Haske
----------------------
Thomas F. Kohn, Director /s/Thomas F. Kohn
----------------------
Robert J. Leppink, Director /s/Robert J. Leppink
----------------------
Charles A. Palmer, Director /s/Charles A. Palmer
----------------------
Charles C. Van Loan, Director /s/Charles C. Van Loan
----------------------
Arch V. Wright, Jr., Director /s/Arch V. Wright, Jr.
----------------------
21
23
EXHIBIT INDEX
Exhibit number and description
EXHIBITS FILED HEREWITH
13 Appendix to the Registrant's definitive proxy statement, dated March
14, 1997, relating to the April 15, 1997 Annual Meeting of
Shareholders. This appendix was filed with the Commission as part of
the Company's proxy statement and was delivered to the Company's
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 21).
27 Financial Data Schedule
EXHIBITS INCORPORATED BY REFERENCE
3(A) Restated Articles of Incorporation (incorporated herein by reference to
Exhibit 3(i) to the Registrant's report on Form 10-Q for the quarter
ended June 30, 1994).
3(B) Amended and Restated Bylaws (incorporated herein by reference to Exhibit
3(ii) to the Registrant's 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 the Registrant's Form S-3
Registration Statement dated June 13, 1994, filed under Registration No.
33-80088).
4.1 Form of Indenture, dated as of December 17, 1996 (incorporated herein by
reference to the Registrant's Form S-2 Registration Statement dated
December 6, 1996, filed under Registration No. 33-14507).
4.2 Form of Subordinated Debenture (included as an exhibit to Exhibit 4.1),
(incorporated herein by reference to the Registrant's Form S-2
Registration Statement dated December 6, 1996, filed under Registration
No. 33-14507).
4.3 Certificate of Trust of IBC Capital Finance (incorporated herein by
reference to the Registrant's Form S-2 Registration Statement dated
December 6, 1996, filed under Registration No. 33-14507).
4.4 Trust Agreement of IBC Capital Finance dated as of November 7, 1996
(incorporated herein by reference to the Registrant's Form S-2
Registration Statement dated December 6, 1996, filed under Registration
No. 33-14507).
4.5 Form of Amended and Restated Trust Agreement of IBC Capital Finance
dated as of December 17, 1996 (incorporated herein by reference to the
Registrant's Form S-2 Registration Statement dated December 6, 1996,
filed under Registration No. 33-14507).
4.6 Form of Preferred Security Certificate of IBC Capital Finance (included
as an exhibit to Exhibit 4.5), (incorporated herein by reference to the
Registrant's Form S-2 Registration Statement dated December 6, 1996,
filed under Registration No. 33-14507).
4.7 Form of Preferred Securities Guarantee Agreement for IBC Capital Finance
(incorporated herein by reference to the Registrant's Form S-2
Registration Statement dated December 6, 1996, filed under Registration
No. 33-14507).
4.8 Form of Agreement as to Expenses and Liabilities (included as an exhibit
to Exhibit 4.5), (incorporated herein by reference to the Registrant's
Form S-2 Registration Statement dated December 6, 1996, filed under
Registration No. 33-14507).
22
24
EXHIBIT INDEX (Continued)
10(A) Deferred Benefit Plan for Directors (incorporated herein by reference to
Exhibit 10(C) to the Registrant's report on Form 10-K for the year ended
December 31, 1984).
10(B) The form of Indemnity Agreement approved by the Registrant's
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 the Registrant's report on Form 10-K for the year ended
December 31, 1988).
10(C) Incentive Share Grant Plan, as amended, approved by the Registrant's
shareholders at its April 21, 1992 Annual Meeting (incorporated herein
by reference to Exhibit 10 to the Registrant's report on Form 10-K for
the year ended December 31, 1992).
10(D) Non-Employee Director Stock Option Plan, approved by the Registrant's
shareholders at its April 21, 1992 Annual Meeting (incorporated herein
by reference to Exhibit 28 to the Registrant's Form S-8 Registration
Statement dated April 23, 1993, filed under registration No. 33-62086).
10(E) Employee Stock Option Plan, approved by the Registrant's shareholders at
its April 21, 1992 Annual Meeting (incorporated herein by reference to
Exhibit 28 to the Registrant's Form S-8 Registration Statement dated
April 30, 1993, filed under registration No. 33-62090).
10(F) Agreement and Plan of Reorganization among the Registrant, IBC Interim
Co., and North Bank Corporation, dated February 2, 1996 (incorporated by
reference to Exhibit 2.1 to the Company's Current Report on 8-K filed
June 16, 1996).
10(G) Agreement to Purchase Assets and Assume Liabilities By and Between the
Registrant and First of America Bank -- Michigan, National Association,
dated September 18, 1996 (incorporated herein by reference to
the Registrant's Form S-2 Registration Statement dated December 6,
1996, filed under Registration No. 33-14507).
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