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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
--------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 0-25752
FNBH BANCORP, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2869722
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 East Grand River, Howell, Michigan 48843
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517)546-3150
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(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 amendments to
this Form 10-K. _X_
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based on a per share price of $42 as of March 1, 2000, was
$65,738,526 (common stock, no par value). As of December 31, 1999 there were
outstanding 1,565,203 shares of the Company's Common Stock (no par value).
Documents Incorporated by Reference:
Portions of the Company's Proxy Statement and appendix dated March 17, 2000 for
the Annual Meeting of Shareholders to be held April 19, 2000 are incorporated by
reference into Parts I, II and III of this report.
PART I
Included in this Form 10-K are certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1993, as amended, and
Section 21 E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements are based on the beliefs of the Company's management
as well as on assumptions made by and information currently available to the
Company at the times such statements were made. Actual results could differ
materially from those included in such forward- looking statements as a result
of, among other things, factors set forth below in this Report generally, and
certain economic and business factors, some of which may be beyond the control
of the Company. Investors are cautioned that all forward-looking statements
involve risks and uncertainty.
Item 1 - Business
FNBH Bancorp, Inc. (the Company), a Michigan business corporation, is a one
bank holding company, which owns all of the outstanding capital stock of First
National Bank in Howell (the "Bank"). The Company was formed in 1988 for the
purpose of acquiring all of the stock of the Bank in a shareholder approved
reorganization, which became effective May, 1989.
The Bank was originally organized in 1934 as a national banking
association. As of March 1, 2000, the Bank had approximately 118 full-time and
part-time employees. None of the Bank's employees is subject to collective
bargaining agreements. The Company does not directly employ any personnel. The
Bank serves primarily four communities, Howell, Brighton, Hartland, and
Fowlerville, all of which are located in Livingston County. The county has
historically been rural in character but has a growing urban population
especially in the southeast quadrant of the county, primarily attributable to
growth around the City of Brighton.
On November 26, 1997 H.B. Realty Co., a subsidiary of the Company, was
established to purchase land for a future branch site of the Bank and to hold
title to other Bank real estate when it is considered prudent to do so.
Bank Services
The Bank is a full service bank offering a wide range of commercial and
personal banking services. These services include checking accounts, savings
accounts, certificates of deposit, commercial loans, real estate loans,
installment loans, trust and investment services, collections, traveler's
checks, night depository, safe deposit box and U.S. Savings Bonds. The Bank
maintains correspondent relationships with major banks in Detroit, pursuant to
which the Bank engages in federal funds sale and purchase transactions, the
clearance of checks and certain foreign currency transactions. The Bank also has
a relationship with the Federal Home Loan Bank of Indianapolis where it makes
short term investments and where it has a line of credit of $16,000,000
available. In addition, the Bank participates with other financial institutions
to fund certain large loans which would exceed the Bank's legal lending limit if
made solely by the Bank.
The Bank's deposits are generated in the normal course of business and the
loss of any one depositor would not have a materially adverse effect on the
business of the Bank. As of December 31, 1999, 43% of outstanding loans were for
either commercial or residential construction or development. As of December 31,
1999, the Bank's certificates of deposit of $100,000 or more constituted
approximately 8% of total deposit liabilities. The Bank's deposits are primarily
from its service area and the Bank does not seek or encourage large deposits
from outside the area.
The Company's cash revenues are derived primarily from dividends paid by
the Bank. The Bank's principal sources of revenue are interest and fees on loans
and interest on investment securities. Interest and fees on loans constituted
approximately 80% of total revenues for the periods ended December 31, 1999 and
December 31, 1998. Interest on investment securities, including short-term
investments and federal funds sold, constituted approximately 12% of total
revenues in 1999 and 1998. Revenues were also generated from deposit service
charges and other financial service fees.
The Bank provides real estate, consumer, and commercial loans to customers
in its market. Sixty percent of the Bank's loan portfolio is in fixed rate
loans. Most of these loans, approximately 92%, mature within five years of
issuance. Approximately $11,000,000 in loans (or about 5% of the Bank's total
loan portfolio) have fixed rates with maturities exceeding five years. Fifty-six
percent of the Bank's interest-bearing deposits are in savings, NOW, and MMDAs,
all of which are variable rate products. Of the approximately $96,700,000 in
certificates, $66,951,000 mature within a year, with the majority of the balance
maturing within a five year period.
Requests to the Bank for credit are considered on the basis of credit
worthiness of each applicant, without consideration to race, color, religion,
national origin, sex, marital status, physical handicap, age, or the receipt of
income from public assistance programs. Consideration is also given to the
applicant's capacity for repayment, collateral, capital and alternative sources
of repayment. Loan applications are accepted at all the Bank's offices and are
approved under each lending officer's authority. Loan requests in excess of
$400,000 are required to be presented to the Board of Directors or the Executive
Committee of the Board for its review and approval.
As described in more detail below, the Bank's cumulative one year gap ratio
of rate sensitive assets to rate sensitive liabilities for the period ended
December 31, 1999, was 6% liability sensitive, compared to 8% liability
sensitive at December 31, 1998. See discussion and table under "Quantitative and
Qualitative Disclosures about Market Risk" in Item 7 below.
The Bank sells participations in commercial loans to other financial
institutions approved by the Bank, for the purpose of meeting legal lending
limit requirements or loan concentration considerations. The Bank regularly
sells fixed rate residential mortgages to Freddie Mac while retaining servicing
on the sold loans. Those residential real estate mortgage loan requests that do
not meet Freddie Mac criteria are reviewed by the Bank for approval and, if
approved, are retained in the Bank's loan portfolio. The Bank also may purchase
loans which meet its normal credit standards.
The Bank's investment policy is considered to be generally conservative. It
provides for unlimited investment in U.S. government and agency bonds, with a
maximum maturity of five years. Municipal bonds may be purchased to provide
nontaxable income, with the maximum life of municipal bonds limited to
approximately ten years with a double A rating or better. A single A rated bond
may be purchased if it matures in four years or less. Non-rated bonds may be
purchased from local communities that are familiar to the Bank, with a maximum
block size of a single purchase limited to $300,000. Investments in states other
than Michigan may not exceed 20% of the municipal portfolio, and investments in
a single issuer may not exceed 10% of equity capital. Mortgage backed
securities, which are fully collateralized by securities issued by government
sponsored agencies, may be purchased in block sizes of up to $500,000, provided
the average life expectancy does not exceed seven years. In addition, certain
collateralized mortgage obligations may be purchased if their average life does
not exceed five years. In any case, investments in mortgage backed securities
may not exceed 10% of the investment portfolio.
The acquisition of "high-risk mortgage securities" is prohibited. In no
case may the Bank participate in such activities as gains trading, "when-issued"
trading, "pair offs", corporate settlement of government and agency securities,
repositioning repurchase agreements, and short sales. All securities dealers
effecting transactions in securities held or purchased by the Bank must be
approved by the Board of Directors.
Bank Competition
The Bank has seven offices within the four communities it serves, all of
which are located in Livingston County, Michigan. Three of the offices,
including the main office, are located in Howell. There are two facilities in
Brighton, and one each in Hartland, and Fowlerville. See "Properties" below for
more detail on these facilities. Within these communities, its principal
competitors are Old Kent Bank, National City Bank, D&N Bank, and Michigan
National Bank. Each of these financial institutions, which are headquartered in
larger metropolitan areas, have significantly greater assets and financial
resources than the Company. Among the principal competitors in the communities
in which the Bank operates, the Bank is the only locally based financial
institution. Based on deposit information as of June 30, 1999, the Bank holds
approximately 19.25% of local deposits, compared to approximately 18.80% held by
Old Kent Bank, approximately 13.45% held by D&N Bank, approximately 11.05% held
b National City Bank, and approximately 8.95% held by Michigan National Bank.
Information as to asset size of competitor financial institutions is derived
from publicly available reports
filed by and with regulatory agencies. Within the Bank's markets, Old Kent Bank
maintains four branch offices, National City Bank operates six branch offices,
D&N Bank has five branch offices, and Michigan National Bank has three branch
offices. The only competitor expansion of which management is aware is a new
branch of Old Kent Bank coming to Genoa Township.
The financial services industry continues to become increasingly
competitive. Principal methods of competition include loan and deposit pricing,
advertising and marketing programs, and the types and quality of services
provided. The deregulation of the financial services industry and the easing of
restrictions on bank and holding company activities have led to increased
competition among banks and other financial providers for funds, loans, and a
broad array of other financial services. Competition within the Bank's market
has been relatively stable within the past years. Management continues to
evaluate the opportunities for the expansion of products and services.
Growth of Bank
The following table sets forth certain information regarding the growth of
the Bank:
Balances as of December 31,
---------------------------
(in thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Total Assets $296,419 $264,894 $226,314 $202,009 $182,958
Loans, Net of Unearned Income 209,964 185,018 158,397 136,067 127,463
Securities 50,598 38,646 43,725 47,257 35,251
Noninterest-Bearing Deposits 47,980 47,402 41,631 35,048 30,815
Interest-Bearing Deposits 221,210 192,155 160,668 145,896 133,060
Total Deposits 269,190 239,557 202,299 180,944 163,875
Shareholders' Equity 25,312 23,497 21,732 19,597 17,530
Through 1998, the Bank operated six branch facilities: one in downtown
Howell, one at Lake Chemung (five miles east of downtown Howell), one on the
east side of Brighton, one in Hartland, one in the village of Fowlerville, and
the sixth is a grocery store branch, located west of downtown Howell. In August
of 1999, the Bank opened a new regional facility on the west side of Brighton.
As of December 31, 1999, this new branch had approximately $3,900,000 in
deposits. In the time period presented, all of the Bank's branches grew due to
general growth in the county.
Supervision and Regulation
The following is a summary of certain statutes and regulations affecting
the Company and the Bank. This summary is qualified in its entirety by reference
to the particular statutes and regulations. Changes in applicable laws and
regulations may have a material effect on the Company and the Bank and their
respective businesses.
General
Financial institutions and their holding companies are extensively
regulated under federal and state law. Consequently, the growth and earnings
performance of the Company and the Bank can be affected not only by management
decisions and general economic conditions, but also by the statutes administered
by, and the regulations and policies of, various governmental regulatory
authorities. Those authorities include the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), the FDIC, the Office of the
Comptroller of the Currency (the "OCC"), the Internal Revenue Service, and state
taxing authorities. The effect of such statutes, regulations and policies can be
significant and cannot be predicted with a high degree of certainty.
Federal and state laws and regulations generally applicable to financial
institutions and their holding companies regulate, among other things, the scope
of business, investments, reserves against deposits, capital levels relative to
operations, lending activities and practices, the nature and amount of
collateral for loans, the establishment of branches, mergers, consolidations and
dividends. The system of supervision and regulation applicable to the Company
and the Bank establishes a comprehensive framework for their respective
operations and is intended primarily for the protection of the FDIC's deposit
insurance funds, the depositors of the Bank, and the public, rather than
shareholders of the Company.
Federal law and regulations establish supervisory standards applicable to
the lending activities of the Bank, including internal controls, credit
underwriting, loan documentation and loan-to-value ratios for loans secured by
real property.
Recent Legislation
The Gramm-Leach-Bliley Act of 1999 (the "GLB Act") removed large parts of a
regulatory framework that had its origins in the Depression Era of the 1930s.
Effective March 11, 2000, new opportunities become available for banks, other
depository institutions, insurance companies and securities firms to enter into
combinations that permit a single financial services organization to offer
customers more financial products and services. The GLB Act provides for a new
regulatory framework for regulation through the "financial holding company,"
which will have as its umbrella regulator the Federal Reserve Board. Functional
regulation of the financial holding company's separately regulated subsidiaries
will be conducted by their primary functional regulator. In order to qualify as
a financial holding company, a bank holding company must file an election to
become a financial holding company and each of its banks must be "well
capitalized" and "well managed." In addition, the GLB Act makes satisfactory or
above Community Reinvestment Act compliance for insured depository institutions
and their financial holding companies necessary in order for them to engage in
new financial activities. The GLB Act provides a federal right to privacy of
non-public personal information of individual customers. The Company and the
Bank are also subject to certain state laws that deal with the use and
distribution of non-public personal information.
The Company believes that the GLB Act could significantly increase
competition in its business and is evaluating the desirability of electing to
become a financial holding company. The Company believes that it is qualified to
elect financial holding company status but has not yet decided to do so.
The Company
As a registered bank holding company under the Bank Holding Company Act of
1956, as amended (the "Act"), the Company is subject to supervision and
examination by the Board of Governors of the Federal Reserve System ("Federal
Reserve Board") and is required to file, with the Federal Reserve Board, annual
reports and information regarding its business operations and those of its
subsidiaries.
The Act requires a bank holding company to obtain the approval of the
Federal Reserve Board before it may acquire more than 5% of the voting stock or
substantially all of the assets of any bank or merge or consolidate with any
other bank holding company. If the effect of a proposed acquisition, merger or
consolidation may substantially lessen competition or tend to create a monopoly,
the Federal Reserve Board cannot approve the acquisition unless it finds that
the anticompetitive effects of the acquisition, merger, or consolidation are
clearly outweighed by the convenience and needs of the community to be served.
The Act also provides that the consummation of any acquisition, merger or
consolidation must be delayed at least 15 days following the approval of the
Federal Reserve Board and that any action brought under the antitrust laws of
the United States during the time will delay the effectiveness of its approval
during the pendency of the action unless otherwise ordered by the board.
The Riegle-Neal Interstate Banking and Branching Efficiency Act authorizes
adequately capitalized and adequately managed bank holding companies to acquire
banks located outside their respective home states, irrespective of state law.
This legislation also authorizes, effective June 1, 1997 (subject to individual
state's rights to accelerate this date or prohibit interstate branching within
their borders), banking organizations to branch nationwide by acquisition or
consolidation of existing bank in other states. Michigan law authorizes
out-of-state banks to acquire and establish branches in Michigan, provided the
laws of the state of the out-of-state institution permit Michigan banks to
acquire or establish branches in that state. Interstate acquisitions are subject
to the approval of various federal and state agencies and subject to other
conditions.
Subject to certain exceptions, a bank holding company is also prohibited
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company that is not a bank and from engaging directly or
indirectly in activities unrelated to banking or managing or controlling banks.
One of the exceptions to this prohibition permits activities by a bank holding
company or its subsidiaries which the Federal Reserve Board has determined to be
so closely related to banking o managing or controlling banks as to be a proper
incident thereto. In determining whether a particular activity is a proper
incident to banking or managing or controlling banks, the Federal
Reserve Board considers whether performance of the activity by an affiliate of a
bank holding company can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition or gains in
efficiency that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest or unsound
banking practices. The Federal Reserve Board has adopted regulations prescribing
those activities which it presently regards as permissible for bank holding
companies and their subsidiaries. Some of these activities include: performing
certain data processing services; certain personal and real property leasing;
making, acquiring, or servicing loans and other extensions of credit as would be
made by a mortgage, finance, credit card or other factoring company; bank
related courier services; and, under certain circumstances, acting as any or all
of the following: investment or financial advisor, insurance agent or broker,
and underwriter for credit life insurance and credit accident and health
insurance. The Act does not place geographic restrictions on the activities of
the nonbank subsidiaries of bank holding companies. The enactment of the
Economic Growth and Regulatory Paperwork Reduction Act of 1996 streamlines the
nonbanking activities application process for well capitalized and well managed
bank holding companies.
The Act, the Federal Reserve Act, and the Federal Deposit Insurance Act
also subject bank holding companies and their subsidiaries to certain
restrictions on any extensions of credit by subsidiary banks to the bank holding
company or any of its subsidiaries, or investments in the stock or other
securities thereof, and on the taking of such stock or securities as collateral
for loans to any borrower. Further, under the Act and regulations of the Federal
Reserve Board, a bank holding company and its subsidiaries are prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit, sale or lease of any property or furnishing of service.
The Federal Reserve Board provides guidelines for the measurement of
capital adequacy of bank holding companies. The Company's capital, as adjusted
under these guidelines, is referred to as risk-based capital. The Company's Tier
1 risk-based capital ratio, at December 31, 1999, was 11.36% and total
risk-based capital was 12.62%. At December 31, 1998, these ratios were 12.52%
and 13.79%, respectively. Minimum regulatory Tier 1 risk-based and total
risk-based capital ratios under the Federal Reserve Board guidelines are 4% and
8%, respectively. These same capital ratios are applied at the bank level by the
Federal Deposit Insurance Corporation, under which a well-capitalized bank is
defined as one with at least 10% risk-based capital. Capital guidelines also
provide for a standard to measure risk-based capital to total assets. This is
referred to as the leverage ratio. The Company's leverage ratio at December 31,
1999 was 9.13%, while at December 31, 1998 it was 9.14%. The minimum standard
leverage ratio is 3%. See also "Capital" discussion in Item 7 below.
As a Michigan business corporation, the Company may generally declare and
pay dividends, provided the Company is not insolvent and that the payment of the
dividend would not render it insolvent, and, after giving the effect of the
distribution, that the Company's total assets would equal or exceed its total
liabilities plus the dissolution
preference of any senior equity securities (of which there currently are none).
The payment of dividends to its shareholders is limited by the Company's ability
to obtain funds from the Bank and by the above-referenced regulatory capital
guidelines.
The Bank
The Bank is organized as a national banking association and is therefore
regulated and supervised by the OCC. The deposits of the Bank are insured by the
Federal Deposit Insurance Corporation ("FDIC"). Consequently, the Bank is also
subject to the provisions of the Federal Deposit Insurance Act. As a result of
such supervision and regulation, the Bank is subject to requirements to maintain
reserves against deposits, restrictions on the nature and amount of loans which
may be made and the interest which may be charged thereon, restrictions relating
to investments and other activities, limitations based on capital and surplus,
and limitations on the payment of dividends on its capital stock. The various
regulatory and legal requirements referenced above are primarily for the
protection of the Bank's depositors and customers rather than the shareholders
of the Company.
As a national bank, the Bank may not pay a dividend on its common stock if
the dividend would exceed the net undivided profits then on hand after deducting
losses and bad debts. Additionally, the prior approval of the Office of the
Comptroller of the Currency, or its designee, is required for any dividend to a
bank holding company by an affiliated national bank if the total of all
dividends, including any proposed dividend declared by such bank in any calendar
year, exceeds the total of its net profits for that year combined with its
retained net profits for the preceding two years, less any required transfers to
surplus.
The Federal Deposit Insurance Act was amended in 1991 by the FDIC
Improvement Act of 1991. The FDIC Improvement Act provides for regulatory
intervention should a bank's capital deteriorate, limits certain real estate
lending and increases audit requirements. The FDIC has been granted authority to
impose special assessments on banks to repay borrowings of the FDIC. The FDIC
Improvement Act defines a reserve ratio at which the Bank Insurance Fund ("BIF")
is to be maintained through FDIC semi- annual assessment rates on the BIF member
banks. The FDIC has also established a system of risk-based deposit insurance
premiums under the FDIC Improvement Act. This system established four levels of
premium rates based on the risk classification of the institution. As a national
bank, the Bank's premiums are paid to BIF. Given the designation as a well
managed, well capitalized institution, the Bank pays the lowest assessment rate
possible to BIF.
As required by the Deposit Insurance Funds Act of 1996, in 1997 the Bank
commenced making payments to the FDIC for the Financing Corporation (FICO) bonds
that were issued previously. The FICO rate for BIF member banks is 1.220 basis
points annually applied to assessable deposits. During 1999 the Bank paid
$28,000 to the FDIC.
In 1996 the Michigan Legislature adopted the Credit Reform Act. This
statute, together with amendments to other related laws, permits regulated
lenders, indirectly
including Michigan-chartered banks, to charge and collect higher rates of
interest and increased fees on certain types of loans to individuals and
businesses. The laws prohibit "excessive fees and charges," and authorize
governmental authorities and borrowers to bring actions for injunctive relief
and statutory and actual damages for violations by lenders. The statutes
specifically authorize class actions, and also civil money penalties, for
knowing and willful or persistent violations.
I SELECTED STATISTICAL INFORMATION
(A) Distribution of Assets, Liabilities, and Shareholders' Equity:
(B) Interest Rates and Interest Differential:
The table on the following page shows the daily average balances for major
categories of interest earning assets and interest bearing liabilities, interest
earned (on a taxable equivalent basis) or paid, and the effective rate or yield,
for the three years ended December 31, 1999, 1998, and 1997.
Net interest income is the difference between interest earned on loans,
securities and other earning assets and interest paid on deposits and borrowed
funds. In the following tables, the interest earned on investments and loans is
expressed on a fully taxable equivalent (FTE) basis. Tax exempt interest is
increased to an amount comparable to interest subject to federal income taxes in
order to properly evaluate the effective yields earned on earning assets. The
tax equivalent adjustment is based on a federal income tax rate of 34%. The
following Yield Analysis shows that the Bank's interest margin decreased 28
basis point in 1999 as a result of a decrease of 49 basis points in yield on
earning assets, partially offset by a decrease of 38 basis points in the
interest cost on deposits. In 1998 the interest margin increased 1 basis point
due to a 12 basis point increase in yield on earning assets partially offset by
an increase in interest cost of 10 basis points.
Yield Analysis of Consolidated Average Assets and Liabilities
(dollars in thousands)
1999 1998 1997
---- ---- ----
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
Assets:
Interest earning assets:
Short term investments $10,384 $507.5 5.79% $8,630 $449.1 5.20% $2,754 $148.8 5.40%
Securities:
Taxable 30,051 1,526.1 5.08% 23,019 1,386.9 6.02% 31,873 1,906.0 5.98%
Tax-exempt 16,896 1,165.6 6.90% 15,221 1,085.1 7.13% 13,262 975.8 7.36%
Loans(1)(2) 198,448 18,790.8 9.47% 175,873 17,317.6 9.85% 148,096 14,540.3 9.82%
------- --------- ------- --------- -------- ---------
Total earning assets and
total interest income 255,779 $21,990.0 8.60% 222,743 $20,238.7 9.09% 195,985 $15,570.9 8.97%
--------- --------- ---------
Cash & due from banks 11,680 9,836 7,620
All other assets 15,955 11,335 8,089
Allowance for loan loss (4,219) (3,777) (3,499)
------- ------ ------
Total assets $279,195 $240,137 $208,195
======== ======== ========
Liabilities and
Shareholders' Equity
Interest bearing deposits:
Savings, money market, NOW $111,141 $2,991.6 2.69% $91,552 $2,772.5 3.03% $79,104 $2,210.5 2.79%
Time 92,802 4,970.0 5.36% 81,119 4,617.2 5.69% 71,093 4,059.5 5.71%
Short term borrowings 98 5.3 5.40% 179 10.7 5.98% 610 35.3 5.77%
-------- --------- ------- -------- -------- ---------
Total interest bearing
liabilities and total
interest expense 204,041 $7,966.9 3.90% 172,850 $7,400.4 4.28% 150,807 $6,305.3 4.18%
--------- -------- --------
Non-interest bearing deposits 48,240 43,619 34,668
All other liabilities 2,232 1,751 1,792
Shareholders' Equity 24,682 21,917 20,928
------ ------ ------
Total liabilities and
shareholders' equity $279,195 $240,137 $208,195
======== ======== ========
Interest spread 4.70% 4.81% 4.79%
===== ===== ====
Net interest income-FTE $14,023.1 $12,838.3 $11,265.6
========= ========= =========
Net interest margin 5.48% 5.76% 5.75%
===== ===== =====
(1) Nonaccruing loans are not significant during the three year period and, for
purposes of the computations above, are included in average daily loan
balances.
(2) Interest on loans includes origination fees totaling $710,000 in 1999,
$600,000 in 1998, and $380,000 in 1997.
(C) The following table sets forth the effects of volume and rate changes on net
interest income on a taxable equivalent basis. All figures are stated in
thousands of dollars.
Year ended Year ended
December 31, 1999 compared to December 31, 1998 compared to
Year ended December 31, 1998 Year ended December 31, 1997
---------------------------- ----------------------------
Amount of Increase/(Decrease) Amount of Increase/(Decrease)
due to change in due to change in
---------------- ----------------
Total Total
Amount Amount
Of of
Average Increase/ Average Increase/
Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ----------
Interest Income:
Short term investments.......... $ 91 $ (33) $ 58 $ 317 $ (17) $ 300
Securities:
Taxable....................... 424 (284) 140 (529) 10 (519)
Tax Exempt.................... 119 (39) 80 144 (35) 109
Loans........................... 2,223 (750) 1,473 2,727 50 2,777
Total interest income......... $ 2,857 $ (1,106) $ 1,751 $ 2,659 $ 8 $ 2,667
Interest Expense:
Interest bearing deposits:
Savings/NOW accounts.......... $ 593 $ (374) $ 219 $ 348 $ 214 $ 562
Time.......................... 665 (312) 353 573 (15) 558
Short-term borrowings........... (5) 1 (6) (25) 1 (24)
Total interest expense....... $ 1,253 $ (687) $ 566 $ 896 $ 200 $ 1,096
Net interest income (FTE)....... $ 1,604 $ (419) $ 1,185 $ 1,763 $ (192) $ 1,571
The change in interest due to changes in both balance and rate has been
allocated to change due to balance and change due to rate in proportion to the
relationship of the absolute dollar amounts of change in each.
II SECURITIES PORTFOLIO
(A)The following table sets forth the book value of securities at December 31:
(in thousands)
1999 1998 1997
---- ---- ----
Held to maturity:
U.S. Treasury $ 0 $ 1,999 $ 15,993
States and political subdivisions 17,709 16,279 14,028
Mortgage-backed securities 335 602 633
--- --- ---
Total $ 18,044 $ 18,880 $ 30,654
Available for sale:
U.S. Treasury $ 22,860 $ 12,092 $ 13,026
U.S. Government agencies 8,861 6,982 0
Mortgage-backed securities 0 0 0
FRB Stock 44 44 44
FHLB Stock 789 648 0
--------- --------- ---
Total $ 32,554 $ 19,766 $ 13,070
(B)The following table sets forth contractual maturities of securities at
December 31, 1999 and the weighted average yield of such securities:
(dollars in thousands)
Maturing After Maturing After
Maturing Within One But Within Five But Within Maturing After
One Year Five Years Ten Years Ten Years
-------- ---------- --------- ---------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
Held to maturity
States and political
subdivisions $ 606 5.55% $6,350 5.23% $10,753 4.68% 0
Mortgage backed
Securities 184 5.32% 151 5.57% 0 0
--- --- - -
Total $ 790 5.50% $6,123 5.29% $11,131 4.68% $0
======== ====== ======= ==
Tax equivalent adjustment
for calculations of yield $11 $110 $206
=== ==== ====
Available for sale
U.S. Treasury $16,937 4.89% $ 5,922 5.39%
U.S. Agency $ 6,943 4.90% $ 1,919 5.15%
FRB Stock $ 44 6.00%
FHLB Stock 789 8.00%
---
Total $23,880 4.89% $ 7,841 5.33% $0 $ 833 7.89%
======= ======== == =====
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:
Rate on Tax
Tax-Exempt Rate Adjustment Equivalent Basis
--------------- ---------- ----------------
Under 1 year 5.55% 1.85% 7.40%
1-5 years 5.28% 1.84% 7.12%
5-10 years 4.68% 1.84% 6.52%
Additional statistical information concerning the Bank's securities
portfolio is incorporated by reference in Note 2 of the Company's Consolidated
Financial Statements for the year ended December 31, 1999 included in the
Appendix to the Company's definitive proxy statement, dated March 17, 2000,
relating to the April 17, 2000, Annual Meeting of Shareholders (as filed with
the Commission as exhibit 13 to the Report).
III LOAN PORTFOLIO
(A)The table below shows loans outstanding at December 31:
(in thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Secured by real estate:
Residential first mortgage $ 29,904 $ 38,051 $ 38,073 $ 36,148 $ 36,871
Residential home equity/other junior liens 7,822 9,106 13,665 12,883 10,566
Construction and land development 23,375 23,048 19,490 14,042 9,075
Other 89,809 68,960 53,743 43,006 42,454
Consumer 16,811 16,653 14,011 12,272 11,233
Commercial 38,891 26,058 18,299 15,830 14,546
Other 4,043 3,770 1,729 2,360 3,213
----- ----- ----- ----- -----
Total Loans (Gross) $210,655 $185,646 $159,010 $136,541 $127,958
The loan portfolio is periodically reviewed and the results of these
reviews are reported to the Company's Board of Directors. The purpose of these
reviews is to verify proper loan documentation, to provide for the early
identification of potential problem loans, and to evaluate the adequacy of the
allowance for loan losses.
(B)The following table shows the amount of commercial, financial, and
agricultural loans outstanding as of December 31, 1999 which, based on remaining
scheduled repayments of principal, are in the periods indicated.
Maturing
(in thousands)
After one
Within one but within After five
year five years years Total
--- ---------- ----- -----
Real estate construction & land development.... $12,536 $10,829 0 $ 23,375
Real estate other (secured by commercial &
multi-family)............................... 8,528 74,784 6,497 89,809
Commercial (secured by business assets or
Unsecured).................................. 11,970 26,132 789 38,891
Other (loans to farmers, political
Subdivisions, & overdrafts) ................ 297 1,799 1,947 4,043
Totals................................... $33,331 $113,554 $9,233 $156,118
Below is a schedule of amounts due after one year which are classified
according to their sensitivity to changes in interest rates.
Interest Sensitivity
(in thousands)
Fixed Rate Variable Rate
---------- -------------
Due after one but within five years............... $84,003 $29,551
Due after five years.............................. 6,352 2,881
(C) Nonperforming loans consist of loans accounted for on a nonaccrual
basis and loans contractually past due 90 days or more as to interest or
principal payments (but not included in nonaccrual loans). The aggregate amount
of non-performing loans, as of December 31, is presented in the table below:
(dollars in thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Nonperforming Loans:
Nonaccrual loans $ 173 $ 1,519 $ 809 $ 109 $ 926
Loans past due 90 days or more 4 25 249 448 66
- -- --- --- --
Total nonperforming loans $ 177 $ 1,544 $ 1,058 $ 557 $ 992
====== ======= ======= ====== ======
Percent of total loans .08% .83% .67% .41% .78%
Additional information concerning nonperforming loans, the Bank's
nonaccrual policy, loan impairment, and loan concentrations is incorporated by
reference to Note 3 of the Company's Consolidated Financial Statements for the
year ended December 31, 1999 included in the Appendix to the Company's
definitive proxy statement, dated March 17, 2000, relating to the April 17,
2000, Annual Meeting of Shareholders (as filed with the Commission as exhibit 13
to the Report).
There were no other interest bearing assets, at December 31, 1999, that
would be required to be disclosed under Item III(C), if such assets were loans.
There were no foreign loans outstanding at December 31, 1999.
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:
(dollars in thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Loans:
Average daily balance of loans for the year.... $198,448 $175,873 $148,096 $130,648 $122,500
Amount of loans (gross) outstanding at end
of the year................................ 210,655 185,646 159,011 136,541 127,958
Allowance for loan losses:
Balance at beginning of year.................. 3,958 3,424 3,335 3,097 2,672
Loans charged off:
Real estate................................ 0 110 0 70 0
Commercial................................. 322 63 375 129 118
Consumer................................... 164 129 124 88 91
--- --- --- -- --
Total charge-offs...................... 486 302 499 287 209
Recoveries of loans previously charged off:
Real estate............................... 35 96 32 1 0
Commercial................................ 98 51 43 31 95
Consumer.................................. 38 49 27 45 91
-- -- -- -- --
Total recoveries...................... 171 196 102 77 186
Net loans charged off............................ 315 106 397 210 23
Additions to allowance charged to operations..... 840 640 486 448 448
--- --- --- --- ---
Balance at end of year................ $ 4,483 $ 3,958 $ 3,424 $ 3,335 $ 3,097
Ratios:
Net loans charged off to average loans
outstanding .16% .06% .27% .16% .02%
Allowance for loan losses to loans
outstanding 2.13% 2.13% 2.15% 2.44% 2.42%
The allowance for loan losses reflected above is a valuation allowance in
its entirety and the only allowance available to absorb future loan losses.
(B)The following table presents the portion of the allowance for loan
losses applicable to each loan category and the percent of loans in each
category to total loans, as of December 31:
(dollars in thousands)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ ------- ------ ------- ------ -------
Commercial........ $3,803 77.6% $ 3,384 74.1% $2,785 69.2% $2,401 66.7% $2,204 64.7%
Consumer.......... 441 11.8% 355 12.5% 332 15.6% 465 16.2% 412 15.8%
Real Estate....... 239 10.6% 219 13.4% 307 15.2% 457 17.1% 481 19.5%
--- ---- --- --- ---
Total....... $4,483 100% $3,958 100% $3,424 100% $3,335 100% $3,097 100%
====== ==== ====== ==== ====== ==== ====== ==== ====== ====
V DEPOSITS
The following table sets forth average deposit balances and the weighted
average rates paid thereon for the years ended December 31:
(dollars in thousands)
1999 1998 1997
---- ---- ----
Average Average Average
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- -------
Non-interest bearing demand $ 48,240 $ 43,619 $ 34,668
Savings, money market and NOW 111,141 2.69% 91,552 3.03% 79,104 2.79%
Time deposits 92,802 5.36% 81,119 5.69% 71,093 5.71%
------ ------ ------
Total $252,857 3.90% $216,290 4.28% $184,865 4.18%
======== ======== ========
The table for maturities of negotiated rate time deposits of $100,000 or
more outstanding at December 31, 1999 is incorporated by reference to note 7 of
the Company's Consolidated Financial Statements for the year ended December 31,
1999 included in the Appendix to the Company's definitive proxy statement, dated
March 17, 2000, relating to the April 17, 2000, Annual Meeting of Shareholders
(as filed with the Commission as exhibit 13 to the Report).
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:
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net income as a percent of:
Average common equity 15.05% 17.83% 17.84% 19.12% 19.60%
Average total assets 1.33% 1.63% 1.79% 1.88% 1.88%
Additional performance ratios are set forth in Selected Financial Data, 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, set forth in Item 7, Part II of
this Report.
VII SHORT-TERM BORROWING
The information required in this item is not applicable for this Company.
Item 2 - Properties
The Bank operates from seven facilities, located in four communities, in
Livingston County, Michigan. The executive offices of the Company are located at
the Bank's main office, 101 East Grand River, Howell, Michigan. The Bank
maintains two branches in Howell at 5990 East Grand River and 2400 West Grand
River. The Bank also maintains branch offices at 9911 East Grand River,
Brighton, Michigan, 8080 Challis Road, Brighton Michigan, 760 South Grand
Avenue, Fowlerville, Michigan, and 10700 Highland Road, Hartland, Michigan. All
of the offices have ATM machines and all except the West Grand River branch,
which is in a grocery store, have drive up services. All of the properties are
owned by the Bank except for the West Grand River branch which is leased. The
lease is for fifteen years, expiring September 2007. The average lease payment
over the life of the lease is $3,167 monthly.
Item 3 - Legal Proceedings
The Company is not involved in any material legal proceedings. The Bank is
involved in ordinary routine litigation incident to its business; however, no
such proceedings are expected to result in any material adverse effect on the
operations or earnings of the Bank. Neither the Bank nor the Company is involved
in any proceedings to which any director, principal officer, affiliate thereof,
or person who owns of record or beneficially more than five percent (5%) of the
outstanding stock of either the Company or the Bank, or any associate of the
foregoing, is a party or has a material interest adverse to the Company or the
Bank.
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
Additional Item--Executive Officers
Executive officers of the Company are appointed annually by the Board of
Directors. There are no family relationships among these officers and/or the
directors of the Company, or any arrangement or understanding between any
officer and any other person pursuant to which the officer was elected.
The following table sets forth certain information with respect to the
Company's executive officers as of December 31, 1999:
First Selected as an Officer
Name (Age) Position with Company of the Company
--------- --------------------- --------------
Barbara D. Martin (53) President, Chief Executive Officer, and Director of the
Company and the Bank 1983
Barbara J. Nelson (52) Secretary/Treasurer of the Company and Senior Vice
President, Cashier, and Chief Financial Officer of the Bank 1985
Herbert W. Bursch (47) Senior Vice President, Retail Services, of the Bank 1999
John D. Logan (50) Senior Vice President, Trust and Investments, of the 1997
James Wibby (49) Senior Vice President, Senior Lender, of the Bank 1997
Nancy Morgan (49) Vice President, Human Resources of the Bank 1988
Jerry Armstong (40) Vice President, Operations, of the Bank 1997
PART II
Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters
There is no active market for the Company's Common Stock, and there is no
published information with respect to its market price. There are occasional
direct sales by shareholders of which the Company's management is generally
aware. It is the understanding of the management of the Company that over the
last two years, the Company's Common Stock has sold at a premium to book value.
From January 1, 1998, through December 31, 1999, there were, so far as the
Company's management knows, 369 sales of shares of the Company's Common Stock,
involving a total of 115,338 shares. The price was reported to management in
these transactions; however there may have been other transactions involving the
Company stock at prices not reported to management. During this period, the
highest price known to be paid was $42.00 per share during the last two quarters
of 1999, and the lowest price was $30.00 per share in the first quarter of 1998.
To the knowledge of management, the last sale of Common Stock occurred on
February 29, 2000.
As of March 1, 2000, there were approximately 850 holders of record of the
Company's Stock. The following table sets forth the range of high and low sales
prices of the Company's Common Stock during 1998 and 1999, based on information
made available to the Company, as well as per share cash dividends declared
during those periods. Although management is not aware of any transactions at
higher or lower prices, there may have been transactions at prices outside the
ranges listed in the table.
Sales price and dividend information for the years 1998 and 1999:
Sales Prices Cash Dividends Declared
------------ -----------------------
1998 High Low
---- ---- ---
First Quarter $30.00 $30.00 $0.18
Second Quarter $35.00 $35.00 $0.18
Third Quarter $35.00 $35.00 $0.20
Fourth Quarter $35.00 $35.00 $0.49(1)
1999 High Low
---- ---- ---
First Quarter $40.00 $40.00 $0.20
Second Quarter $40.00 $40.00 $0.20
Third Quarter $42.00 $40.00 $0.20
Fourth Quarter $42.00 $42.00 $0.50(2)
(1) Includes a special dividend of $0.29 per share. (2) Includes a special
dividend of $0.30 per share.
The holders of the Company's Common Stock are entitled to dividends when,
as, and if declared by the Board of Directors of the Company out of funds
legally available for that purpose. Dividends have been paid on a quarterly
basis. In determining dividends, the Board of Directors considers the earnings,
capital requirements and financial condition of the Company and the Bank, along
with other relevant factors. The Company's principal source of funds for cash
dividends is the dividends paid by the Bank. The ability of the Company and Bank
to pay dividends is subject to regulatory restrictions and requirements.
Item 6 - Selected Financial Data
SUMMARY FINANCIAL DATA
(in thousands, except per share data)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Income Statement Data:
Interest income $21,597 $19,910 $17,276 $15,717 $14,394
Interest expense 7,967 7,400 6,305 5,644 4,879
Net interest income 13,630 12,510 10,971 10,073 9,515
Provision for loan losses 840 640 486 448 448
Non-interest income 2,015 1,954 1,851 1,686 1,418
Non-interest expense 9,543 8,238 6,982 6,151 5,867
Income before tax 5,262 5,586 5,354 5,160 4,618
Net income 3,715 3,907 3,733 3,574 3,200
Basic Per Share Data(1):
Net income $2.38 $2.49 $2.37 $2.27 $2.03
Dividends paid 1.10 1.05 1.00 .93 .68
Weighted average shares
outstanding 1,563,996 1,570,537 1,575,000 1,575,000 1,575,000
Balance Sheet Data:
Total assets 296,419 264,894 226,314 202,009 182,958
Loans, net 209,952 185,018 158,397 136,067 127,463
Allowance for loan losses 4,483 3,958 3,424 3,335 3,097
Deposits 269,190 239,557 202,299 180,944 163,875
Shareholders' equity 25,312 23,497 21,732 19,597 17,530
Ratios:
Dividend payout ratio 46.31% 42.11% 42.19% 41.13% 33.46%
Equity to asset ratio 8.84% 9.13 % 10.05% 9.82% 9.61%
(1) Per share data for all years has been restated to give effect to the
three-for-one stock split, payable as a dividend paid in February 1997.
Item 7 Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion provides information about the consolidated financial
condition and results of operations of FNBH Bancorp, Inc. ("Company") and its
subsidiaries, First National Bank in Howell ("Bank") and HB Realty Co., and
should be read in conjunction with the Consolidated Financial Statements.
FINANCIAL CONDITION
During 1999 total assets increased 12% to $296,419,000. Investment
securities increased $12 million (31%) while gross loans increased $25 million
(13%). Deposits increased $29.6 million (12%) to $269,190,000. Stockholders'
equity increased $1.8 million (8%) to $25,312,000.
Securities
The securities portfolio is an important source of liquidity for the Bank
to meet unusual deposit fluctuations. Management of the Bank makes investment
decisions which will ensure the safety of funds entrusted to it by its
depositors and shareholders. Approximately $32,000,000 of the securities
portfolio is invested in US government and agency obligations. An additional
$18,000,000 of the portfolio consists of tax exempt obligations of states and
political subdivisions. The Company's current and projected tax position makes
these investments advantageous to the Bank. The Bank's investment policy
requires purchases of tax exempt issues to be of bonds with AA ratings or better
if the maturity exceeds 4 years unless the bond is a local, nonrated issue.
"Other" securities consist of equity holdings in the Federal Reserve Bank and
the Federal Home Loan Bank.
The following table shows the percentage makeup of the security portfolio
as of December 31:
1999 1998
---- ----
U.S. Treasury & agency securities.............................. 62.7% 54.5%
Agency mortgage backed securities.............................. .7% 1.6%
Tax exempt obligations of states and political subdivisions.... 35.0% 42.1%
Other 1.6% 1.8%
---- ----
Total securities......................................... 100.0% 100.0%
Loans
The loan personnel of the Bank are committed to making quality loans that
produce a good rate of return for the Bank and also serve the community by
providing funds for home purchases, business purposes, and consumer needs. The
overall loan portfolio grew $25,000,000 (13%) in 1999.
As a full service lender, the Bank offers a variety of home mortgage loan
products. The Bank makes fixed rate, long-term mortgages which conform to
secondary market standards which it sells. This practice allows the Bank to meet
the housing credit needs of its service area, while at the same time maintaining
loan to deposit ratios and interest sensitivity and liquidity positions within
Bank policy. The Bank retains servicing on sold mortgages thereby furthering the
customer relationship and adding to servicing income. During 1999 the Bank sold
$12,000,000 in residential mortgages.
The Bank has also been able to service customers with loan needs which do
not conform to secondary market requirements by offering variable rate products
which are retained in the mortgage portfolio. While not meeting secondary market
requirements, these nonconforming mortgages do meet bank loan guidelines and
have a good payment record. During 1999 the Bank made approximately $5,000,000
in variable rate mortgage loans which it retained in the mortgage portfolio.
During 1999, the Bank experienced a significant amount of loan demand.
Growth in the county resulted in a need for financing commercial projects, some
of which were for the construction of commercial buildings and some of which
were for the development of residential subdivisions. Commercial loans ended the
year at $163,469,000, a 19% increase for the year. Additionally, the Bank
originated $4,000,000 in commercial loans which it sold in part or total to
other banks due to legal lending limits Consumer loans increased $1,800,000,
about 8%.
The following table reflects the makeup of the commercial and consumer
loans in the Consolidated Financial Statements. Included in the residential
first mortgage totals below are the "real estate mortgage" loans listed in the
Consolidated Financial Statements and other loans to customers who pledge their
homes as collateral for their borrowings. In the majority of the loans to
commercial customers, the Bank is relying on the borrower's cash flow to service
the loans. However, these loans may b secured by personal or commercial real
estate. A portion of the loans listed in residential first mortgages represent
commercial loans where the borrower has pledged his/her residence as collateral.
"Other" real estate loans include $87,000,000 in loans secured by commercial
property with the remaining $3,000,000 secured by multi-family units. The most
significant loan growth was in commercial loans secured by business property
which increased $20,800,000, 30% over the prior year, and in commercial loans
not secured by real estate which increased $12,800,000, a 49% increase.
The following table shows the balance and percentage makeup of loans as of
December 31:
(dollars in thousands)
1999 1998
---- ----
Balances Percentage Balances Percentage
-------- ---------- -------- ----------
Secured by real estate:
Residential first mortgage $ 29,904 14.2% $ 38,051 20.5%
Residential home equity/other junior liens
7,822 3.7% 9,106 4.9%
Construction and land development 23,375 11.1% 23,048 12.4%
Other 89,809 42.6% 68,960 37.1%
Consumer 16,811 8.0% 16,653 9.0%
Commercial 38,891 18.5% 26,058 14.1%
Other 4,043 1.9% 3,770 2.0%
------ ------ -------- ------
Total Loans (Gross) $210,655 100.0% $185,646 100.0%
The Bank's loan personnel have endeavored to make high quality loans using
well established policies and procedures and a thorough loan review process.
Loans in excess of $400,000 are approved by a committee of the Board or the
Board. The Bank has hired an independent person to review the quality of the
loan portfolio on a regular basis. Loan quality is demonstrated by the ratios of
nonperforming loans and assets as a percentage of the loan portfolio as
illustrated in the table below for December 31:
(dollars in thousands)
1999 1998 1997
---- ---- ----
Nonperforming Loans:
Nonaccrual loans......................................... $ 173 $1,519 $ 809
Loans past due 90 days and still accruing................ 4 25 249
- - ---
Total nonperforming loans............................. 177 1,544 1,058
Other real estate........................................ 0 0 0
- - -
Total nonperforming assets............................. $ 177 $1,544 $1,058
======= ====== ======
Nonperforming loans as a percent of total loans.......... .08% .83% .67%
Nonperforming assets as a percent of total loans......... .08% .83% .67%
Nonperforming loans as a percent of the loan loss
reserve............................................... .4% 39% 31%
Nonperforming assets are comprised of loans for which the accrual of
interest has been discontinued, accruing loans 90 days or more past due in
payments, and other real estate which has been acquired primarily through
foreclosure and is waiting disposition. Loans are generally placed on a
nonaccrual basis when principal or interest is past due 90 days or more and
when, in the opinion of management, full collection of principal and interest is
unlikely.
The $1,400,000 decrease in nonperforming loans is primarily due to the
foreclosure and subsequent sale of property for an approximately $1,000,000 loan
that was nonperforming in 1998.
Impaired loans totaled $3,400,000 at December 31, 1999, compared to
$4,300,000 at the prior year end. Included in impaired loans are nonperforming
loans from the above table, except for homogenous residential mortgage and
consumer loans, and an additional $3,380,000 of commercial loans separately
identified as impaired. The decrease in impaired loans is primarily due to the
decline in nonaccrual loans mentioned above.
During 1999 the Bank charged off loans totaling $486,000 and recovered
$171,000 for a net charge off amount of $315,000. In the previous year, the Bank
had net charge offs totaling $106,000.
The allowance for loan losses totaled $4,483,000 at year end which was
2.13% of total loans, the same percentage it was in 1998. Management considers
this to be adequate to cover any anticipated losses. Management regularly
evaluates the allowance for loan losses based on the composition of the loan
portfolio, an evaluation of specific credits, historical loss experience, the
level of nonperforming loans and loans that have been identified as impaired.
Externally, the local economy and events or trends which might negatively impact
the loan portfolio are also considered.
The following table shows changes in the loan loss reserve for the years
ended December 31:
(dollars in thousands)
1999 1998 1997
---- ---- ----
Balance at beginning of the year...................... $3,958 $3,424 $3,335
Additions (deduction):
Loans charged off.................................. (486) (302) (499)
Recoveries of loans previously charged off.. 171 196 102
Provision charged to operations.................... 840 640 486
---- --- ---
Balance at end of the year............................ $4,483 $3,958 $3,424
Allowance for loan losses to loans outstanding........ 2.13% 2.13% 2.15%
Deposits
Deposit balances of $269,190,000 at December 31, 1999 were nearly $30
million (12.4%) higher than the previous year end. Because year end deposit
balances can fluctuate in unusual ways, it is more meaningful to analyze changes
in average balances. Average deposits increased $37 million (17%) during 1999.
Non-interest bearing demand deposits increased $5.3 million, about 12% on
average. Average savings and NOW balances increased $19.7 million (21.5%) while
average time deposits increased $11.7 million or about 14%.
The following table sets forth average deposit balances for the years ended
December 31:
(in thousands)
1999 1998 1997
---- ---- ----
,C>
Non-interest bearing demand $ 48,914 $ 43,619 $ 34,707
Savings, money market, and NOW 111,141 91,463 79,104
Time deposits 92,802 81,118 71,093
------ ------ ------
Total average deposits $252,857 $216,200 $184,904
The increase in savings deposits was primarily due to a $13.1 million
increase in money market accounts. The growth in certificates was the result of
maintaining competitive rates in the market and selectively offering special
rates on particular time products.
The majority of the Bank's deposits are from core customer sources-long
term relationships with local personal, business, and public customers. In some
financial institutions, the presence of interest bearing certificates greater
than $100,000 indicates a reliance upon purchased funds. However, large
certificates in the Bank's portfolio consist primarily of core deposits of local
customers. The Bank does not support growth through purchased funds or brokered
deposits. See Note 7 of the Consolidated Financial Statements for a maturity
schedule of over $100,000 certificates.
Capital
The Company's capital at year end totaled $25,312,000, a $1,800,000 (8%)
increase over the prior year. Banking regulators have set forth various ratios
of capital to assets to assess a financial institution's soundness. Tier 1
capital is equal to shareholders' equity while Tier 2 capital includes a portion
of the allowance for loan losses. The regulatory agencies have set capital
standards for "well capitalized" institutions. The leverage ratio, which divides
Tier 1 capital by three months average assets, must be 5% for a well capitalized
institution. The Bank's leverage ratio was 7.74% at year end 1999. Tier 1
risk-based capital, which includes some off balance sheet items in assets and
weights assets by risk, must be 6% for a well capitalized institution. The
Bank's was 9.90% at year end 1999. Total risk-based capital, which includes Tier
1 and Tier 2 capital, must be 10% for a well capitalized institution. The Bank's
total risk based capital ratio was 11.15% at year end. The Bank's strong capital
ratios put it in the best classification on which the FDIC bases its assessment
charge.
The following table lists various Bank capital ratios at December 31:
1999 1998 1997
---- ---- ----
Equity to asset ratio 7.02% 7.14% 9.19%
Tier 1 leverage ratio 7.74% 7.47% 9.50%
Tier 1 risk-based capital 9.90% 10.17% 14.12%
Total risk-based capital 11.15% 11.42% 15.37%
The 1998 decline in the Bank's capital ratio was the result of dividends
paid to the parent company to enable a subsidiary company to purchase land, some
of which was intended for a branch site, the remainder to be sold. In 1999 a
portion of the land was sold to the Bank for a branch site. The Bank's capital
account was credited for the proceeds of the sale. As the remaining land is
sold, the Bank's capital account will be recredited for the proceeds from the
sale.
The Company's ability to pay dividends is subject to various regulatory
requirements. Management believes, however, that earnings will continue to
generate adequate capital to continue the payment of dividends. In 1999 the
Company paid dividends totaling $1,721,000, or 46% of earnings. Book value of
the stock was $16.17 at year end.
The Company maintains a five year plan which was the result of a formal
strategic planning process. Management and the Board continue to monitor long
term goals which include expanded services to achieve growth and retaining
earnings to fund growth, while providing return to shareholders.
In 1999, the Bank opened a new branch in the northwest part of Brighton.
Adjoining the building site is vacant land, valued at approximately $2,800,000,
which the company intends to sell. In the coming year, the Bank plans to focus
on expanding service through technological delivery systems.
Liquidity and Funds Management
Liquidity is monitored by the Bank's Asset/Liability Management Committee
(ALCO) which meets at least monthly. ALCO developed, and the Board of Directors
approved, a liquidity policy which targets a minimum 15% liquidity ratio. The
Bank's liquidity ratio averaged 19.6% in 1999.
Deposits are the principal source of funds for the Bank. Management
monitors rates at other financial institutions in the area to ascertain that its
rates are competitive in the market. Management also attempts to offer a wide
variety of products to meet the needs of its customers. The Company does not
deal in brokered funds and the makeup of its over $100,000 certificates, which
amounted to $22,400,000 at December 31, 1999 compared to $18,100,000 the prior
year, consists of local depositors known to the Bank.
It is the intention of the Bank's management to handle unexpected liquidity
needs through its Federal Funds position. The goal is to maintain a daily Fed
Funds balance sufficient to cover required cash draws. In addition, the Bank has
a $16,000,000 line of credit available at the Federal Home Loan Bank of
Indianapolis. The Bank has pledged certain mortgage loans and investment
securities as collateral for the borrowing. In the event the Bank must borrow
for an extended period, management may look to "available for sale" securities
in the investment portfolio for liquidity.
Throughout the past year, Fed Funds Sold balances have averaged
approximately $10,400,000 compared to $8,600,000 the prior year. Management kept
larger than normal balances in Fed Funds in 1999 in order to be ready for
whatever demands there might be for Year 2000 issues. As it turned out, there
was no unusual demand for cash.
Periodically the Bank borrowed money through the Fed Funds market.
Quantitative and Qualitative Disclosures about Market Risk
The Bank's Asset/Liability Management committee (ALCO) meets monthly to
review the Bank's performance. The committee discusses the current economic
outlook and its impact on the Bank and current interest rate forecasts. Actual
results are compared to budget in terms of growth and income. A yield and cost
analysis is done to monitor interest margin. Various ratios are discussed
including capital ratios and liquidity. The quality of the loan portfolio is
reviewed in light of the current allowance. The Bank's exposure to market risk
is reviewed.
Interest rate risk is the potential for economic losses due to future rate
changes and can be reflected as a loss of future net interest income and/or a
loss of current market values. The objective is to measure the effect on net
interest income and to adjust the balance sheet to minimize the inherent risk
while at the same time maximizing income. Tools used by management include the
standard GAP report which lays out the repricing schedule for various asset and
liability categories and an interest rate shock simulation
report. The Bank has no market risk sensitive instruments held for trading
purposes. The Bank does not enter into futures, forwards, swaps, or options to
manage interest rate risk. However, the Bank is party to financial instruments
with off-balance sheet risk in the normal course of business to meet the
financing needs of its customers including commitments to extend credit and
letters of credit. A commitment or letter of credit is not recorded as an asset
until the instrument is exercised (see Note 12 of the Consolidated Financial
Statements).
The table below shows the scheduled maturity and repricing of the Bank's
assets and liabilities as of December 31, 1999:
0-3 Months 4-12 Months 1-5 5+
Years Years Total
Assets:
Loans.................................... $63,711 $30,472 $106,833 $9,639 $210,655
Securities............................... 5,828 19,674 14,343 10,753 50,598
Short term investments................... 12,301 12,301
Other assets............................. 22,865 22,865
------- ------- -------- ------- --------
Total assets....................... $81,840 $50,146 $121,176 $43,257 $296,419
Liabilities & Shareholders' Equity:
Demand, savings, money
market & NOW........................... $56,906 $16,717 $63,371 $35,495 $172,489
Time..................................... 20,423 46,528 29,741 9 96,701
Other liabilities and equity............. 27,229 27,229
------- ------- ------- ------- --------
Total liabilities and equity....... $77,329 $63,245 $93,112 $62,733 $296,419
Rate sensitivity gap and ratios:
Gap for period........................ $4,511 $(13,099) $28,064 $(19,476)
Cumulative gap........................ 4,511 (8,588) 19,476
Cumulative rate sensitive ratio.......... 1.06 .94 1.08 1.00
December 31, 1998 rate sensitive ratio... 1.28 .92 1.08 1.00
Total Average Interest Rate Estimated Fair Value
Assets: ----- --------------------- --------------------
Loans, net $205,468 9.47% $203,100
Securities 50,598 5.73% 50,534
Short term investments 12,301 4.89% 12,301
Liabilities:
Savings, MMDA, NOW $124,509 2.69% 124,500
Time 96,701 5.36% 97,000
Estimated fair value for securities are based on quoted market prices. For
variable rate loans that reprice frequently and with no significant change in
credit risk, fair values are generally based on carrying values. The fair value
of other loans is estimated by discounting future cash flows using the current
rates at which similar loans would be made to borrowers with similar credit
ratings and for the same remaining maturities. Because it has a one day
maturity, the carrying value is used a fair value for fed funds sold. The fair
value of deposits with no stated maturity, such as savings, NOW and money market
accounts is equal to the amount payable on demand. The fair value of
certificates of deposit is estimated using rates currently offered for deposits
with similar remaining maturities.
The entire balance of savings, NOW and MMDAs is not categorized as 0-3
months, although they are variable rate products. Some of these balances are
core deposits which are not considered rate sensitive based on the Bank's
historical experience.
Given the liability sensitive position of the Bank at December 31, 1999, if
interest rates increase 200 basis points and management did not respond,
management estimates that pretax net interest income would decrease
approximately $100,000 while a similar decrease in rates would cause pretax net
interest income to increase by a like amount. See discussion under "Net Interest
Income" below.
RESULTS OF OPERATIONS
The Company recorded net income of $3,715,000 in 1999 compared to
$3,907,000 in 1998. While net interest income climbed $1,120,000, costs
associated with conversion to a new computer system and preparations for Y2K
reduced net income. Also, dampening profits were the start-up costs of opening a
new branch and the effect of the excess land acquired with that branch site. The
Company's return on average assets (ROA) was 1.33% in 1999, a 30 basis point
decline from the prior year. The return on average stockholders' equity (ROE)
was 15.05%, down from the 17.83% reported in 1998.
The following table contains key performance ratios for years ended
December 31:
1999 1998 1997
---- ---- ----
Net income to:
Average stockholders' equity 15.05% 17.83% 17.84%
Average assets 1.33% 1.63% 1.79%
Basic earnings per common share: $2.38 $2.49 $2.37
Net Interest Income
Net interest income is the difference between interest earned on earning
assets and interest paid on deposits. It is the major component of earnings for
a financial institution. For analytical purposes, the interest earned on
investments and loans is expressed on a fully taxable equivalent (FTE) basis.
Tax-exempt interest is increased to an amount comparable to interest subject to
federal income taxes in order to properly evaluate the effective yields earned
on earning assets. The tax equivalent adjustment is based on a federal income
tax rate of 34%.
The following table shows the average balance and percentage earned or paid
on key components of earning assets and paying liabilities for the year ended
December 31:
(dollars in thousands)
1999 1998 1997
---- ---- ----
Average Yield/ Average Yield/ Average Yield/
Balance Rate Balance Rate Balance Rate
------- ---- ------- ---- ------- ----
Interest earning assets:
Short term investments $ 10,384 4.89% $ 8,630 5.20% $ 2,754 5.40%
Taxable securities 30,051 5.08% 23,019 6.02% 31,873 5.98%
Tax-exempt securities 16,896 6.90% 15,221 7.13% 13,262 7.36%
Loans 198,448 9.47% 175,873 9.85% 148,096 9.82%
------- ------- -------
Total earning assets $255,779 8.60% $222,743 9.09% $195,985 8.97%
Interest bearing funds:
Savings, MMDA, NOW $111,141 2.69% $ 91,552 3.03% $ 79,104 2.79%
Time deposits 92,802 5.36% 81,119 5.69% 71,093 5.71%
Federal funds purchased 98 5.40% 179 5.98% 610 5.77%
------ --------- ----------
Total interest bearing funds $204,041 3.90% $172,850 4.28% $150,807 4.18%
Interest spread 4.70% 4.81% 4.79%
Net interest margin 5.48% 5.76% 5.75%
Tax equivalent interest income in each of the three years includes loan
origination fees. A substantial portion of such fees is deferred for recognition
in future periods or is considered in determining the gain or loss on the sale
of real estate mortgage loans. Tax equivalent interest income includes net loan
origination fees totaling $710,000 in 1999, $600,000 in 1998, and $380,000 in
1997.
The following table sets forth the effects of volume and rate changes on
net interest income on a taxable equivalent basis. All figures are stated in
thousands of dollars.
Year ended Year ended
December 31, 1999 compared to December 31, 1998 compared to
ended December 31, 1998 ended December 31, 1997
----------------------- -----------------------
Amount of Increase/(Decrease) Amount of Increase/(Decrease)
due to change in Due to change in
---------------- ----------------
Total Total
Amount Amount
Of Of
Average Increase/ Average Increase/
Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ----------
Interest Income:
Federal funds sold............ $ 91 $ (33) $ 58 $ 317 $ (17) $ 300
Securities:
Taxable..................... 424 (284) 140 (529) 10 (519)
Tax Exempt.................. 119 (39) 80 144 (35) 109
Loans......................... 2,223 (750) 1,473 2,727 50 2,777
Total interest income....... $ 2,857 $(1,106) $ 1,751 $ 2,659 $ 8 $ 2,667
Interest Expense:
Interest bearing deposits:
Savings, MMDA, NOW.. $ 593 $(374) $ 219 $ 348 $ 214 $ 562
Time. ...................... 665 (312) 353 573 (15) 558
Short-term borrowings......... (5) (1) (6) (25) 1 (24)
Total interest expense..... $ 1,253 $(687) $ 566 $ 896 $ 200 $ 1,096
Net interest income (FTE)..... $ 1,604 $(419) $ 1,185 $1,763 $ (192) $ 1,571
The change in interest due to changes in both balance and rate has been
allocated to change due to balance and change due to rate in proportion to the
relationship of the absolute dollar amounts of change in each.
Tax equivalent net interest income increased $1,185,000 in 1999 over the
prior year due to a $1,751,000 increase in interest income partially offset by
approximately $566,000 increase in interest expense. The increase in income is
attributable to an increase in average earning assets of $33,000,000 as the
yield declined 49 basis points. Loan interest income was $1,473,000 higher in
1999 than the previous year. The increase was due to an increase of $22,600,000
in average balances partly offse by a 38 basis point decrease in rates. Loan
growth was fueled by general growth in Livingston County which created a demand
for consumer and commercial building projects. Income on taxable securities
increased in 1999 due to a $7,000,000 increase in average balances. Interest
rates decreased 94 basis points. Tax-exempt bonds earned $80,000 more in 1999
than the previous year. The average balance of these securities increased
$1,700,000 while the rate declined 23 basis points. Interest income on shor term
investments increased $58,000 due to an increase in average balances of
$1,754,000, partially offset by a decrease in rates of 42 basis points.
Interest expense increased $566,000 in 1999 because average balances
increased approximately $31,200,000 although interest rates decreased 38 basis
points. The interest cost for savings and NOW accounts increased $219,000
because average savings and NOW balances increased $19,600,000 while interest
rates declined 34 basis points. Interest on time deposits increased $353,000
because average time deposits increased $11,700,000 although interest rates
declined 33 basis points. Money market accounts once again enjoyed growth as
customers responded favorably to the tiered rate structure now being offered and
rising interest rates. Growth in time deposits was encouraged by competitive
pricing and periodically offering special rates on specific products.
In the previous year, net interest income had increased nearly $1,571,000.
The increase in net interest income was the result of an increase in interest
income of $2,667,000, partially offset by an increase in interest expense of
approximately $1,096,000. The increase in interest income in 1998 was the result
of a $26,800,000 increase in earning assets and an increase in yields on earning
assets of 12 basis points. The increase in interest expense was the result of
average balances increasing $22,000,000 and interest rates increasing 10 basis
points.
In the coming year, management expects growth to continue in both loans and
deposits. An economic decline could, however, adversely affect growth. The
interest spread and interest margin will likely continue to decline due, in
part, to the fact that the interest cost on deposits is expected to continue to
rise as competition for deposits intensifies among the bank and non-bank
players.
The following table shows the composition of average earning assets and
interest paying liabilities for the years ended December 31:
1999 1998 1997
---- ---- ----
As a percent of average earning assets:
Loans 77.59% 78.95% 75.56%
Securities 18.35% 17.18% 23.03%
Short term investments 4.06% 3.87% 1.41%
----- ------ ------
Average earning assets 100.00% 100.00% 100.00%
Savings, money market, and NOW 43.45% 41.10% 40.36%
Time deposits 36.28% 36.42% 36.27%
Short term borrowing .04% .08% .31%
----- ----- -----
Average interest bearing liabilities 79.77% 77.60% 76.94%
Earning asset ratio 91.61% 92.76% 94.14%
Free-funds ratio 20.23% 22.40% 23.06%
Provision for Loan Losses
The provision for loan losses increased to $840,000 in 1999 compared to
$640,000 in 1998. At year end the ratio of allowance for loan loss to loans was
2.13%, consistent with that of the 1998. Principally because of the 19%
commercial loan growth, management increased the loan loss provision by $200,000
in 1999. Management analyzes the adequacy of the allowance quarterly taking into
consideration the portfolio mix, historical loss experience, the level of
nonperforming loans and loans that hav been identified as impaired, as well as
economic conditions within the Bank's market.
Non-interest Income
Non-interest income, which includes service charges on deposit accounts,
loan fees, other operating income, and gain(loss) on sale of assets and
securities transactions, increased approximately $61,000 (3%) in 1999 compared
to the previous year. Contributing to this increase was a $225,000 increase in
charges for services and a $63,000 increase in trust fees collected. Both of
these items increased due to growth, of the Bank and of the Trust Department.
Partly offsetting the above mentioned increases, the gain on loan sales declined
$231,000. This decrease was principally the result of reduced loan volume and
rising mortgage rates. This reduced amount of gains is expected to continue into
the year 2000.
Non-interest Expense
Non-interest expense increased 16% in 1999. The most significant component
of non-interest expense is salaries and benefits expense. In 1999 salaries and
benefits expense increased 12% to $4,800,000, due to the combined effects of
salary increases and staffing of a new branch. Occupancy expense increased
$89,000 (15%) due to the new branch which was put in service in August. Other
expense increased $698,000 (21%).
The costs associated with conversion to a new computer system and preparations
for Year 2000 reduced net income. Also, dampening profits were the start-up
costs of opening the Challis Road branch and the effect of the excess land
acquired with that branch site. Year 2000 issues were a major concern of the
Bank's management in 1998 and 1999. A great deal of time and money was spent to
replace equipment and programs that were suspect and to conduct exhaustive
testing of systems. The Bank had no failure of equipment or programs at the turn
of the millennium.
Federal Income Tax Expense
Fluctuations in income taxes resulted primarily from changes in the level
of profitability and in variations in the amount of tax-exempt income. Income
tax expense decreased $133,000 to $1,547,000 (8%) in 1999. For further
information see Note 8 "Federal Income Taxes" in the Company's Consolidated
Financial Statements.
Prospective Accounting Changes
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS
133). SFAS 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires recognition of all derivatives
as either assets or liabilities in the statement of financial condition and
measurement of those instruments at fair value. The accounting for gains and
losses on derivatives depends on the intended use of the derivative. This
Statement is effective for all fiscal quarters of fiscal years beginning after
June 15, 1999, with earlier application encouraged. Retroactive application is
not permitted. SFAS 133 is not expected to have a significant impact on the
financial condition or operations of the Corporation.
In June 1999, the FASB issued SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB No.
133. Statement 137 extends the effective date of SFAS 133 to fiscal years
beginning after June 15, 2000.
Item 7a - Quantitative and Qualititative Disclosures about Market Risk
Included in Management's Discussion and Analysis
Item 8 - Financial Statements and Supplementary Data
The following consolidated financial statements and supplementary data of
the Company appear on pages 11 to 38 of Appendix I to the Company's definitive
Proxy Statement, dated March 17, 2000, relating to the April 19, 2000 Annual
Meeting of shareholders, as filed with the Commission. This Appendix is
incorporated herein by reference and included as Exhibit 13 to this report on
Form 10-K:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statement
Independent Auditors' Report
Quarterly financial data relating to results of operations for the
years ended December 31, 1999 and 1998 are reported on page 38 of Appendix I.
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 and Nominees of the Registrant,
set forth under the caption "Election of Directors" on pages 2 through 4 of the
Company's definitive proxy statement, as filed with the Commission and dated
March 17, 2000, relating to the April 19, 2000 Annual Meeting of Shareholders,
is incorporated herein by reference.
Executive Officers
The information called for by this item is contained in Part I of this Form
10-K Report.
Item 11 - Executive Compensation
The information set forth under the caption "Summary Compensation Table" on
pages 5 and 6 of the Company's definitive proxy statement, as filed with the
Commission and dated March 17, 2000, relating to the April 19, 2000 Annual
Meeting of Shareholders, is incorporated herein by reference. Information under
the caption "Committee Report on Executive Compensation" on pages 4 and 5 and
"Shareholder Return Performance Graph" on page 8 of the definitive proxy
statement is not incorporated by referenc 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 caption "Ownership of Common Stock" on
page 7 of the Company's definitive proxy statement, as filed with the Commission
and dated March 17, 2000, relating to the April 19, 2000 Annual Meeting of
Shareholders, is incorporated herein by reference.
Item 13 - Certain Relationships and Related Transactions
The information set forth under the caption "Certain Transactions with
Management" on page 6 of the Company's definitive proxy statement, as filed with
the Commission and dated March 17, 2000, relating to the April 19, 2000 Annual
Meeting of Shareholders, is incorporated herein by reference.
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Report on Form 8-K
(a) 1. Financial Statements
All financial statements of the Registrant are incorporated herein by
reference as set forth in Appendix I to the Registrant's Definitive Proxy
Statement, dated March 17, 2000, relating to the April 19, 2000 Annual Meeting
of Shareholders, a copy of which is 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
No reports on Form 8-K were filed during the fourth quarter of the
year ended December 31, 1999.
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 16, 2000.
FNBH BANCORP, INC.
/s/ Barbara D. Martin
Barbara D. Martin, President & Chief Executive
Officer (Principal Executive Officer)
/s/ Barbara J. Nelson
Barbara J. Nelson, Secretary/Treasurer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed 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 Barbara D. Martin and Barbara J.
Nelson, and each of them severally, as his or her attorney-in-fact, to sign in
his or her name and on his or her behalf, as a director of the Registrant, and
to file with the Commission any and al Amendments to this Report on Form 10-K.
W. Rickard Scofield, Chairman of the Board /s/ W. Rickard Scofield
Charles N. Holkins, Vice Chairman of the Board /s/ Charles N. Holkins
Gary R. Boss, Director /s/ Gary R. Boss
Donald K. Burkel, Director /s/ Donald K. Burkel
Harry E. Griffith, Director /s/ Harry E. Griffith
Dona Scott Laskey, Director /s/ Dona Scott Laskey
Barbara D. Martin, Director /s/ Barbara D. Martin
James R. McAuliffe, Director /s/ James R. McAuliffe
Randolph E. Rudisill, Director /s/ Randolph E. Rudisill
R. Michael Yost, Director /s/ R. Michael Yost
EXHIBIT INDEX
The following exhibits are filed herewith, indexed according to the
applicable assigned number:
Exhibit
Number Page
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