Firstbank
Corporation (the “Corporation”) is a financial holding company. We own all of
the outstanding stock of Firstbank – Alma, Firstbank (Mt. Pleasant), Firstbank –
West Branch, Firstbank – Lakeview, Firstbank – St. Johns, Keystone Community
Bank, Firstbank – West Michigan, and FBMI Risk Management Services, Inc. (a captive
insurance company).
Our
business is concentrated in a single industry segment – commercial banking. Each
subsidiary bank is a full-service community bank. Our subsidiary banks offer all customary
banking services, including the acceptance of checking, savings, and time deposits and the
making of commercial, mortgage (principally single family), home improvement, automobile,
and other consumer loans. Trust services are offered to customers through Citizens Bank
Wealth Management in the Firstbank – Alma main office.
Our
principal sources of revenues are interest and fees on loans and non-interest revenue
resulting from banking and non-bank subsidiary activity. On a consolidated basis, interest
and fees on loans accounted for approximately 83% of total revenue in 2007, 83% in 2006,
and 80% in 2005. Non-interest revenue accounted for approximately 11% of total revenue in
2007, 13% in 2006, and 15% in 2005. Interest on securities accounted for approximately 6%
of total revenue 2007 and 4% in 2006, and 5% in 2005. We have no foreign assets and no
income from foreign sources. The business of our subsidiary banks is not seasonal to any
material extent. Beginning in 2001, each of our subsidiary banks established mortgage
company subsidiaries. Each of our subsidiary banks also offers securities brokerage
services at their main offices through arrangements with third party brokerage firms.
Firstbank
– Alma is a Michigan state chartered bank. It and its predecessors have operated
continuously in Alma, Michigan since 1880. Its main office and one branch are located in
Alma. Firstbank – Alma also has one full service branch located in each of the
following communities near Alma: Ashley, Auburn, Ithaca, Merrill, Pine River Township, St.
Charles, St. Louis and Vestaburg. Firstbank – Alma Mortgage Company, a subsidiary of
the bank, was established in 2001.
-1-
Firstbank
(Mount Pleasant) is a Michigan state chartered bank which was incorporated in 1894. Its
main office and one branch are located in Mount Pleasant, Michigan. Firstbank (Mount
Pleasant) also has two full service branches in Union Township and one full service branch
located in each of the following communities near Mount Pleasant: Clare, Shepherd,
Cadillac and Winn. Firstbank (Mount Pleasant) Mortgage Company, a subsidiary of the bank,
was established in 2001.
Firstbank
– West Branch is a Michigan state chartered bank which was incorporated in 1980. Its
main office and two branches are located in West Branch, Michigan. Firstbank – West
Branch also has one full service branch located in each of the following communities near
West Branch: Fairview, Hale, Higgins Lake, Prescott, Rose City, St. Helen and West Branch
Township. Firstbank – West Branch owns 1
st
Armored, Incorporated (an
armored car service provider), 1
st
Title, Incorporated (a title insurance
company), and Firstbank — West Branch Mortgage Company (a subsidiary of the bank,
established in 2001).
1st
Title, Incorporated owns a 52% interest in
1
st
Investors Title, LLC (a title insurance company).
Firstbank
– Lakeview is a Michigan state chartered bank which was established in 1904. Its main
office and one branch are located in Lakeview, Michigan. Firstbank – Lakeview also
has one full service branch located in each of the following communities; Howard City,
Morley, Remus and Canadian Lakes (Morton Township). Firstbank – Lakeview Mortgage
Company, a subsidiary of the bank, was established in 2001.
Firstbank
– St. Johns is a Michigan state chartered bank which was established in 2000. Its
main office and one branch are located in St. Johns, Michigan. Firstbank – St. Johns
also owns one branch in Dewitt. Firstbank – St. Johns Mortgage Company, a subsidiary
of the bank, was established in 2001.
Keystone
Community Bank is a Michigan state chartered bank which was established in 1997 and
acquired by us on October 1, 2005. Its main office and two branches are located in
Kalamazoo with two additional branches in Portage and one branch in Paw Paw. Keystone
Mortgage Services, LLC, is a 99% owned subsidiary of the bank. Keystone Premium Finance,
LLC, is a 90% owned subsidiary of the bank. Keystone T.I. Sub, LLC is wholly owned by the
bank, and KCB Title Insurance Agency, LLC is a 50% owned subsidiary of Keystone T.I. Sub,
LLC.
Firstbank
– West Michigan (formerly Ionia County National Bank of Ionia) is a Michigan state
chartered bank which was established in 1934 and acquired by us on July 1, 2007. Its main
office and two branches are located in Ionia, with two additional branches in each of
Belding and Hastings, and one branch each in Lowell, Sunfield, and Woodland.
The
following table shows comparative information concerning our subsidiary banks at December
31, 2007:
|
|
Firstbank -
Alma
|
|
Firstbank
(Mt.
Pleasant)
|
|
Firstbank -
West Branch
|
|
Firstbank -
Lakeview
|
|
Firstbank -
St. Johns
|
|
Keystone
|
|
Firstbank -
West Michigan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
$
|
256,433
|
|
$
|
222,255
|
|
$
|
241,800
|
|
$
|
117,850
|
|
$
|
70,448
|
|
$
|
210,846
|
|
$
|
237,723
|
|
|
Deposits
|
|
|
|
193,278
|
|
|
171,615
|
|
|
174,668
|
|
|
86,184
|
|
|
60,945
|
|
|
150,195
|
|
|
166,209
|
|
|
Loans
|
|
|
|
185,146
|
|
|
201,036
|
|
|
210,101
|
|
|
105,705
|
|
|
64,045
|
|
|
184,218
|
|
|
174,892
|
|
As
of December 31, 2007 we employed 492 persons on a full-time equivalent basis.
Banking
in our market areas and in the State of Michigan is highly competitive. In addition to
competition from other commercial banks, we face significant competition from non-bank
financial institutions. Savings and loan associations are able to compete aggressively
with commercial banks for deposits and loans. Credit unions and finance companies are also
significant factors in the consumer loan market. Insurance companies, investment firms and
retailers are significant competitors for investment products. Banks compete for deposits
with a broad spectrum of other types of investments such as mutual funds, debt securities
of corporations and debt securities of the federal government, state governments and their
respective agencies. The principal methods of competition for financial services are price
(interest rates paid on deposits, interest rates charged on loans and fees charged for
services) and service (the convenience and quality of services rendered to customers).
-2-
Our
subsidiary banks compete directly with other banks, thrift institutions, credit unions and
other non-depository financial institutions in seven geographic banking markets where
their offices are located. Firstbank – Alma primarily competes in Gratiot, Bay,
Montcalm, and Saginaw counties; Firstbank (Mount Pleasant) primarily in Isabella, Clare
and Wexford counties; Firstbank – West Branch primarily in Iosco, Oscoda, Ogemaw, and
Roscommon counties; Firstbank – Lakeview primarily in Mecosta and Montcalm counties;
Firstbank – St. Johns primarily in Clinton County; Keystone Community Bank primarily
in Kalamazoo and Van Buren counties, and Firstbank – West Michigan primarily competes
in Ionia, Kent, Montcalm, Barry, and Eaton counties.
Banks
and bank holding companies are extensively regulated. We are a financial holding company
that is regulated by the Federal Reserve System. Firstbank – Alma, Firstbank (Mount
Pleasant), Firstbank – West Branch, Firstbank – Lakeview, Firstbank – St.
Johns, Keystone Community Bank and Firstbank – West Michigan are chartered under
state law and are supervised, examined, and regulated by the Federal Deposit Insurance
Corporation and the Division of Financial Institutions of the Michigan Office of Financial
and Insurance Services.
Laws
that govern banks significantly limit their business activities in a number of respects.
Prior approval of the Federal Reserve Board, and in some cases various other governing
agencies, is required for us to acquire control of any additional banks or branches. Our
business activities are limited to banking and to other activities which are determined,
by the Federal Reserve Board, to be closely related to banking. Transactions among the
Corporation and its subsidiary banks are significantly restricted. In addition, bank
regulations govern the ability of our subsidiary banks to pay dividends or make other
distributions to the Corporation.
In
addition to laws that affect businesses in general, banks are subject to a number of
federal and state laws and regulations which have a material impact on their business.
These include, among others, state usury laws, state laws relating to the Expedited Funds
Availability Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the
Real Estate Settlement Procedures Act, the Bank Secrecy Act, the Community Development and
Regulatory Improvement Act, the Financial Institutions Reform, the Recovery and
Enforcement Act, the FDIC Improvement Act of 1991 (the “FDIC Improvement Act”),
the U.S.A. Patriot Act, electronic funds transfer laws, redlining laws, antitrust laws,
environmental laws and privacy laws.
Our
common stock is registered under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). It is therefore, subject to the information, proxy
solicitation, insider trading and other restrictions and requirements of the SEC under the
Exchange Act. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act provides for numerous changes to the reporting, accounting,
corporate governance and business practices of companies as well as financial and other
professionals who have involvement with the U.S. public markets. In 2004 section 404 of
the Sarbanes-Oxley Act were implemented, which require us to report on the
Corporation’s system of internal controls. Extensive testing and monitoring of our
internal control environment was performed by both our management and our external audit
firm.
The
enactment of the Gramm-Leach-Bliley Act of 1999 (the “GLB Act”) represents a
pivotal point in the history of the financial services industry. The GLB Act sweeps away
large parts of a regulatory framework that had its origins in the Depression Era of the
1930‘s. Effective March 11, 2000, new opportunities became available for banks, other
depository institutions, insurance companies and securities firms to enter into
combinations that permit a single financial service organization to offer customers a more
complete array of financial products and services. The GLB Act provided 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. We are also subject
to certain state laws that deal with the use and distribution of non-public personal
information.
We
believe that the GLB Act could significantly increase competition in our business. We
applied for and were granted financial holding company status in the third quarter of
2006.
-3-
The
instruments of government monetary policy, as determined by the Federal Reserve Board, may
influence the growth and distribution of bank loans, investments, and deposits and may
also affect interest rates on loans and deposits. These policies have a significant effect
on the operating results of banks.
Under
applicable laws, regulations and policies, we are expected to act as a source of financial
strength to each subsidiary bank and to commit resources to support each subsidiary bank.
Any insured depository institution owned by us may be assessed for losses incurred by the
Federal Deposit Insurance Corporation (the “FDIC”) in connection with assistance
provided to, or the failure of, any other insured depository institution owned by us.
On
March 31, 2006, the Federal Deposit Insurance Corporation (FDIC) merged the Bank Insurance
Fund (BIF) and Savings Association Insurance Fund (SAIF) to form the Deposit Insurance
Fund (DIF) in accordance with the Federal Deposit Insurance Reform Act of 2005 (Reform
Act). The FDIC will maintain the insurance reserves of the DIF by assessing depository
institutions an insurance premium.
On
November 2, 2006, the FDIC adopted final regulations that implemented the Reform Act of
2005. The final regulations enable the FDIC to tie each depository institution’s DIF
insurance premiums both to the balance of insured deposits, as well as to the degree of
risk the institution poses to the DIF. In addition, the FDIC has new flexibility to manage
the DIF’s reserve ratio within a range, which in turn will help prevent sharp swings
in assessment rates that were possible under the design of the former system. Under the
new risk-based assessment system, the FDIC will evaluate each depository
institution’s risk based on three primary sources of information: supervisory ratings
for all insured institutions, financial ratios for most institutions, and long-term debt
issuer ratings for large institutions that have them.
Federal
law allows financial 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 and to establish interstate branch networks through acquisitions of other banks.
Michigan and federal law permits both U.S. and non U.S. banks to establish branch offices
in Michigan. The Michigan Banking Code permits, in appropriated circumstances and with the
approval of the Commissioner: (i) acquisition of Michigan banks by FDIC insured banks,
savings banks, or savings and loan associations located in other states (ii) sale by a
Michigan bank of branches to an FDIC insured bank, savings bank or savings and loan
association located in a state in which a Michigan bank could purchase branches of the
purchasing entity; (iii) consolidation of Michigan banks and FDIC insured banks, savings
banks or savings and loan associations located in other states having laws permitting such
consolidation; (iv) establishment of branches in Michigan by FDIC insured banks located in
other states, the District of Columbia or U.S. territories or protectorates having laws
permitting a Michigan bank to establish a branch in such jurisdiction; and (v)
establishment by foreign banks of branches located in Michigan.
Risk-based
capital and leverage standards apply to all banks under federal regulations. The
risk-based capital ratio standards establish a systematic analytical framework that is
intended to make regulatory capital requirements sensitive to differences in risk profiles
among banking organizations, take off-balance sheet liability exposures into explicit
account in assessing capital adequacy and minimize disincentives to hold liquid, low risk
assets. Risk-based capital ratios are determined by allocating assets and specified
off-balance sheet commitments into risk-weighting categories. Higher levels of capital are
required for categories perceived as representing greater risk.
Failure
to meet minimum capital ratio standards could subject a bank to a variety of enforcement
remedies available to the federal regulatory authorities including restrictions on certain
kinds of activities, restrictions on asset growth, limitations on the ability to pay
dividends, the issuance of a directive to increase capital and the termination of deposit
insurance premiums at the lowest available rate.
Each
of our subsidiary banks, and the Corporation itself on a consolidated basis, maintains
capital at levels which exceed both the minimum and well capitalized levels under
currently applicable regulatory requirements.
-4-
The
following table summarizes compliance with regulatory capital ratios by us and each of our
subsidiary banks at December 31, 2007:
|
|
Tier 1
Leverage
Ratio
|
|
Tier 1
Risk-Based
Capital Ratio
|
|
Total
Risk-Based
Capital Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum regulatory requirement
|
|
|
|
4
|
%
|
|
4
|
%
|
|
8
|
%
|
|
Well capitalized regulatory level
|
|
|
|
5
|
%
|
|
6
|
%
|
|
10
|
%
|
|
|
|
|
|
Firstbank Corporation - Consolidated
|
|
|
|
8.51
|
%
|
|
10.25
|
%
|
|
11.28
|
%
|
|
Firstbank - Alma
|
|
|
|
6.49
|
%
|
|
8.99
|
%
|
|
10.22
|
%
|
|
Firstbank (Mount Pleasant)
|
|
|
|
8.86
|
%
|
|
9.28
|
%
|
|
10.19
|
%
|
|
Firstbank - West Branch
|
|
|
|
7.30
|
%
|
|
9.21
|
%
|
|
10.17
|
%
|
|
Firstbank - Lakeview
|
|
|
|
7.64
|
%
|
|
9.23
|
%
|
|
10.06
|
%
|
|
Firstbank - St. Johns
|
|
|
|
8.21
|
%
|
|
9.29
|
%
|
|
10.37
|
%
|
|
Keystone Community Bank
|
|
|
|
9.11
|
%
|
|
9.29
|
%
|
|
10.24
|
%
|
|
Firstbank - West Michigan
|
|
|
|
6.77
|
%
|
|
9.11
|
%
|
|
10.36
|
%
|
The
following table shows the amounts by which our capital (on a consolidated basis) exceeds
current regulatory requirements on a dollar amount basis:
|
|
Tier 1
Leverage
|
|
Tier 1
Risk-Based
Capital
|
|
Total
Risk-Based
Capital
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Balances at December 31, 2007
|
|
|
$
|
113,146
|
|
$
|
113,146
|
|
$
|
124,448
|
|
|
Required Regulatory Capital
|
|
|
|
53,161
|
|
|
44,134
|
|
|
88,268
|
|
|
|
|
|
|
|
|
|
|
Capital in Excess of Regulatory Minimums
|
|
|
$
|
59,985
|
|
$
|
69,012
|
|
$
|
36,180
|
|
|
|
|
|
|
|
|
|
The
nature of the business of our subsidiaries is such that they hold title, on a temporary or
permanent basis, to a number of parcels of real property. These include property owned for
branch offices and other business purposes as well as properties taken in, or in lieu of,
foreclosures to satisfy loans in default. Under current state and federal laws, present
and past owners of real property may be exposed to liability for the cost of remediation
of contamination on or originating from such properties, even though they are wholly
innocent of the actions which caused the contamination. Such liabilities can be material
and can exceed the value of the contaminated property.
Investment Portfolio
The
carrying values of investment securities as of the date indicated are summarized as
follows:
|
(In Thousands of Dollars)
|
December 31
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
|
US Government Agencies
|
|
|
$
|
45,304
|
|
$
|
33,584
|
|
$
|
36,851
|
|
|
States and Political Subdivisions
|
|
|
|
2,232
|
|
|
1,629
|
|
|
3,655
|
|
|
Mortgage Backed Securities
|
|
|
|
12,726
|
|
|
4,143
|
|
|
3,544
|
|
|
Corporate and Other
|
|
|
|
10,127
|
|
|
3,210
|
|
|
2,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Taxable
|
|
|
|
70,389
|
|
|
42,566
|
|
|
46,929
|
|
|
|
|
|
|
Tax-Exempt
|
|
|
|
States and Political Subdivisions
|
|
|
|
34,066
|
|
|
26,559
|
|
|
26,882
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
104,455
|
|
$
|
69,125
|
|
$
|
73,811
|
|
|
|
|
|
|
|
|
|
-5-
Analysis of Investment
Securities Portfolio
The
following table shows, by class of maturities at December 31, 2007, the amounts and
weighted average yields of such investment securities
(1)
:
|
|
Carrying
Value
|
|
Average
Yield
(2)
|
|
|
|
|
|
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Agencies:
|
|
|
|
One Year or Less
|
|
|
$
|
13,911
|
|
|
3.41
|
%
|
|
Over One Through Five Years
|
|
|
|
31,393
|
|
|
4.99
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
|
45,304
|
|
|
4.50
|
%
|
|
|
|
|
|
State and Political Subdivisions:
|
|
|
|
One Year or Less
|
|
|
|
5,177
|
|
|
4.62
|
%
|
|
Over One Through Five Years
|
|
|
|
16,757
|
|
|
4.21
|
%
|
|
Over Five Through Ten Years
|
|
|
|
9,717
|
|
|
4.80
|
%
|
|
Over Ten Years
|
|
|
|
4,647
|
|
|
4.73
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
|
36,298
|
|
|
4.49
|
%
|
|
|
|
|
|
Mortgage Backed Securities
|
|
|
|
One Year or Less
|
|
|
|
884
|
|
|
4.03
|
%
|
|
Over One Through Five Years
|
|
|
|
4,643
|
|
|
4.75
|
%
|
|
Over Five Through Ten Years
|
|
|
|
5,457
|
|
|
5.26
|
%
|
|
Over Ten Years
|
|
|
|
1,742
|
|
|
5.19
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
|
12,726
|
|
|
4.98
|
%
|
|
|
|
|
|
Corporate and Other:
|
|
|
|
One Year or Less
|
|
|
|
10,127
|
|
|
6.64
|
%
|
|
|
|
|
|
|
|
Total
|
|
|
|
10,127
|
|
|
6.64
|
%
|
|
|
|
|
|
TOTAL
|
|
|
$
|
104,455
|
|
|
4.76
|
%
|
|
|
|
|
|
|
|
(1)
|
Calculated
on the basis of the carrying value and effective yields weighted for
the scheduled maturity of each security.
|
|
(2)
|
Weighted
average yield has been computed on a fully taxable equivalent basis.
The rates shown on securities issued by states and political
subdivisions have been presented assuming a 35% tax rate.
|
Loan Portfolio
The
following table presents the loans outstanding at December 31st for the years ended:
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Categories:
|
|
|
|
Commercial and Agricultural
|
|
|
$
|
219,080
|
|
$
|
194,810
|
|
$
|
183,473
|
|
$
|
110,261
|
|
$
|
112,384
|
|
|
Commercial Real Estate
|
|
|
|
311,494
|
|
|
286,249
|
|
|
302,471
|
|
|
225,372
|
|
|
203,080
|
|
|
Real Estate Mortgages
|
|
|
|
387,222
|
|
|
284,137
|
|
|
272,402
|
|
|
231,213
|
|
|
204,844
|
|
|
Real Estate Construction
|
|
|
|
126,027
|
|
|
81,218
|
|
|
61,067
|
|
|
47,920
|
|
|
55,160
|
|
|
Consumer
|
|
|
|
78,107
|
|
|
63,106
|
|
|
59,211
|
|
|
56,321
|
|
|
60,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
1,121,930
|
|
$
|
909,520
|
|
$
|
878,624
|
|
$
|
671,887
|
|
$
|
635,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-6-
The following
table shows the maturity of commercial and agricultural and real estate construction loans
outstanding at December 31, 2007. Also provided are the amounts due after one year,
classified according to their sensitivity to changes in interest rates.
|
|
One Year
or Less
|
|
One Year to
Five Years
|
|
After
Five Years
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and Agricultural
|
|
|
$
|
112,233
|
|
$
|
87,987
|
|
$
|
18,860
|
|
$
|
219,080
|
|
|
Real Estate Construction
|
|
|
|
59,635
|
|
|
55,598
|
|
|
10,794
|
|
|
126,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
171,867
|
|
$
|
143,585
|
|
$
|
29,655
|
|
$
|
345,107
|
|
|
|
|
|
|
Loans Due after One Year:
|
|
|
|
With Pre-determined Rate
|
|
|
|
|
|
$
|
118,508
|
|
$
|
22,024
|
|
$
|
140,532
|
|
|
With Adjustable Rates
|
|
|
|
|
|
|
25,077
|
|
|
7,631
|
|
|
32,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
143,585
|
|
$
|
29,655
|
|
$
|
173,240
|
|
Nonperforming Loans and
Assets
The
following table summarizes nonaccrual, troubled debt restructurings and past-due loans at
December 31st for the years ended:
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming Loans:
|
|
|
|
Nonaccrual Loans:
|
|
|
|
Commercial and Agricultural
|
|
|
$
|
7,339
|
|
$
|
813
|
|
$
|
534
|
|
$
|
806
|
|
$
|
529
|
|
|
Real Estate Mortgages
|
|
|
|
3,032
|
|
|
847
|
|
|
4,079
|
|
|
633
|
|
|
269
|
|
|
Consumer
|
|
|
|
83
|
|
|
108
|
|
|
158
|
|
|
17
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
10,454
|
|
|
1,768
|
|
|
4,771
|
|
|
1,456
|
|
|
834
|
|
|
|
|
|
|
Accruing Loans 90 Days or More Past Due:
|
|
|
|
Commercial and Agricultural
|
|
|
|
732
|
|
|
767
|
|
|
199
|
|
|
158
|
|
|
21
|
|
|
Real Estate Mortgages
|
|
|
|
2,170
|
|
|
1,597
|
|
|
2,054
|
|
|
186
|
|
|
543
|
|
|
Consumer
|
|
|
|
259
|
|
|
121
|
|
|
188
|
|
|
64
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
3,161
|
|
|
2,485
|
|
|
2,441
|
|
|
408
|
|
|
581
|
|
|
|
|
|
|
Renegotiated Loans:
|
|
|
|
Consumer
|
|
|
|
4
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Commercial and Agricultural
|
|
|
|
374
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
Real Estate Mortgages
|
|
|
|
165
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
543
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
Total Nonperforming Loans
|
|
|
|
14,158
|
|
|
4,253
|
|
|
7,212
|
|
|
1,864
|
|
|
1,415
|
|
|
|
|
|
|
Property from Defaulted Loans
|
|
|
|
3,153
|
|
|
1,700
|
|
|
1,020
|
|
|
950
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Nonperforming Assets
|
|
|
$
|
17,311
|
|
$
|
5,953
|
|
$
|
7,352
|
|
$
|
2,814
|
|
$
|
1,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming
assets are defined as nonaccrual loans, loans 90 days or more past due, property from
defaulted loans and renegotiated loans.
The
amount of interest income on the above loans that was included in net income for the
period ended December 31, 2007, was $493,891. If the nonaccrual and renegotiated loans had
performed in accordance with their original terms and had been outstanding throughout the
period, or since origination if held for part of the period, an additional $771,144 in
gross interest income would have been recorded.
-7-
Loan
performance is reviewed regularly by external loan review specialists, loan officers and
senior management. When reasonable doubt exists concerning collectability of interest or
principal, the loan is placed in nonaccrual status. Any interest previously accrued but
not collected at that time is reversed and charged against current earnings.
At
December 31, 2007 we had $52,993,120 in commercial and mortgage loans for which payments
are presently current although the borrowers are experiencing financial difficulties.
Those loans are subject to special attention and their status is reviewed on a monthly
basis.
At
December 31, 2007, there were no concentrations of loans exceeding 10 percent of total
loans, which are not otherwise disclosed as a category of loans, in our consolidated
balance sheets contained in our Annual Report to shareholders for the year ended December
31, 2007.
Analysis of the
Allowance for Loan Losses
The
following table summarizes changes in the allowance for loan losses arising from loans
charged off and recoveries on loans previously charged off by loan category and additions
to the allowance which were charged to expense at December 31st for the years ended:
|
|
(In Thousands of Dollars)
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
|
$
|
9,966
|
|
$
|
11,559
|
|
$
|
10,581
|
|
$
|
11,627
|
|
$
|
11,536
|
|
|
Allowance of acquired banks
|
|
|
|
2,346
|
|
|
0
|
|
|
1,949
|
|
|
0
|
|
|
0
|
|
|
Charge-Offs:
|
|
|
|
Commercial and Agricultural
|
|
|
|
2,231
|
|
|
1,910
|
|
|
1,146
|
|
|
224
|
|
|
219
|
|
|
Real Estate Mortgages
|
|
|
|
510
|
|
|
157
|
|
|
84
|
|
|
221
|
|
|
50
|
|
|
Consumer
|
|
|
|
682
|
|
|
627
|
|
|
509
|
|
|
485
|
|
|
509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Charge-Offs
|
|
|
|
3,423
|
|
|
2,694
|
|
|
1,739
|
|
|
930
|
|
|
778
|
|
|
Recoveries:
|
|
|
|
Commercial and Agricultural
|
|
|
|
157
|
|
|
86
|
|
|
173
|
|
|
65
|
|
|
104
|
|
|
Real Estate Mortgages
|
|
|
|
25
|
|
|
21
|
|
|
57
|
|
|
77
|
|
|
32
|
|
|
Consumer
|
|
|
|
393
|
|
|
227
|
|
|
243
|
|
|
167
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Recoveries
|
|
|
|
575
|
|
|
334
|
|
|
473
|
|
|
309
|
|
|
319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Charge-Offs
|
|
|
|
2,848
|
|
|
2,360
|
|
|
1,265
|
|
|
621
|
|
|
459
|
|
|
Provision for Loan Losses
|
|
|
|
2,013
|
|
|
767
|
|
|
295
|
|
|
(425
|
)
|
|
550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period
|
|
|
$
|
11,477
|
|
$
|
9,966
|
|
$
|
11,559
|
|
$
|
10,581
|
|
$
|
11,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Charge-Offs as a Percent of Average Loans
|
|
|
|
.28
|
%
|
|
.26
|
%
|
|
.17
|
%
|
|
.09
|
%
|
|
.08
|
%
|
The
allowance for loan losses is based on management’s evaluation of the portfolio, past
loan loss experience, current economic conditions, volume, growth, composition of the loan
portfolio and other relevant factors. The allowance is increased by provisions for loan
losses that have been charged to expense and reduced by net charge-offs.
-8-
Allocation of the
Allowance for Loan Losses
The
allowance for loan losses was allocated to provide for inherent losses within the
following loan categories as of December 31st for the years ended:
|
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for
loan losses
|
|
% of
loans to
total
loans
|
|
Allowance
for
loan losses
|
|
% of
loans to
total
loans
|
|
Allowance
for
loan losses
|
|
% of
loans to
total
loans
|
|
Allowance
for
loan losses
|
|
% of
loans to
total
loans
|
|
Allowance
for
loan losses
|
|
% of
loans to
total
loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and
|
|
|
|
Agricultural
|
|
|
$
|
8,696
|
|
|
20
|
%
|
$
|
7,944
|
|
|
21
|
%
|
$
|
10,379
|
|
|
21
|
%
|
$
|
9,012
|
|
|
16
|
%
|
$
|
9,130
|
|
|
18
|
%
|
|
Real Estate
|
|
|
|
Mortgages
|
|
|
|
833
|
|
|
73
|
%
|
|
627
|
|
|
72
|
%
|
|
620
|
|
|
72
|
%
|
|
419
|
|
|
75
|
%
|
|
1,250
|
|
|
73
|
%
|
|
Consumer
|
|
|
|
1,272
|
|
|
7
|
%
|
|
811
|
|
|
7
|
%
|
|
479
|
|
|
7
|
%
|
|
1,058
|
|
|
9
|
%
|
|
1,154
|
|
|
9
|
%
|
|
Unallocated*
|
|
|
|
676
|
|
|
|
|
|
584
|
|
|
|
|
|
81
|
|
|
|
|
|
92
|
|
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
11,477
|
|
|
100
|
%
|
$
|
9,966
|
|
|
100
|
%
|
$
|
11,559
|
|
|
100
|
%
|
$
|
10,581
|
|
|
100
|
%
|
$
|
11,627
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have developed and implemented a
comprehensive quantitative and qualitative methodology for analyzing factors which impact
the allowance for loan losses. This methodology is applied consistently across our six
banking subsidiaries and considers exposures to industries potentially most affected by
current risks in the economic and political environment and the review of potential risks
in certain credits.
Average Deposits
The
daily average deposits and rates paid on such deposits for the years ending December 31st
are as follows:
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
Amount
|
|
Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands of Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Balance:
|
|
|
|
Non-interest-bearing Demand Deposits
|
|
|
$
|
135,956
|
|
|
|
|
$
|
124,740
|
|
|
|
|
$
|
112,088
|
|
|
|
|
|
Interest-bearing Demand Deposits
|
|
|
|
189,989
|
|
|
2.26
|
%
|
|
169,507
|
|
|
2.06
|
%
|
|
170,211
|
|
|
1.36
|
%
|
|
Other Savings Deposits
|
|
|
|
142,996
|
|
|
1.85
|
%
|
|
131,226
|
|
|
1.74
|
%
|
|
124,671
|
|
|
1.21
|
%
|
|
Other Time Deposits
|
|
|
|
446,136
|
|
|
4.87
|
%
|
|
383,424
|
|
|
4.47
|
%
|
|
257,626
|
|
|
3.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Average Deposits
|
|
|
$
|
915,077
|
|
|
3.68
|
%
|
$
|
808,897
|
|
|
3.35
|
%
|
$
|
664,596
|
|
|
2.24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
time remaining until maturity of time certificates of deposit and other time deposits of
$100,000 or more at December 31, 2007, was as follows (In Thousands of Dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months or Less
|
|
|
$
|
60,327
|
|
|
Over Three Through Six Months
|
|
|
|
41,090
|
|
|
Over Six Through Twelve Months
|
|
|
|
52,321
|
|
|
Over Twelve Months
|
|
|
|
39,448
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
193,186
|
|
|
|
|
|
Return on Equity and
Assets
The
following table sets forth certain financial ratios for the years ended:
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Ratios:
|
|
|
|
Return on Average Total Assets
|
|
|
|
0.69
|
%
|
|
0.95
|
%
|
|
1.15
|
%
|
|
Return on Average Equity
|
|
|
|
7.80
|
%
|
|
10.72
|
%
|
|
12.77
|
%
|
|
Average Equity to Average Total Assets
|
|
|
|
8.79
|
%
|
|
8.89
|
%
|
|
9.02
|
%
|
|
Dividend Payout Ratio
|
|
|
|
74.49
|
%
|
|
54.72
|
%
|
|
47.35
|
%
|
-9-
Short Term Borrowed Funds
Included
in short term borrowed funds are repurchase agreements as described in Note 11 to the
consolidated financial statements in our Annual Report to Shareholders for the year ended
December 31, 2007, which consist of the following:
|
|
2007
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Outstanding at the End of the Year
|
|
|
$
|
35,891
|
|
$
|
32,079
|
|
$
|
31,011
|
|
|
|
|
|
|
Weighted Average Interest Rate at the End of the Year
|
|
|
|
3.25
|
%
|
|
4.17
|
%
|
|
2.88
|
%
|
|
|
|
|
|
Longest Maturity
|
|
|
|
1/1/08
|
|
|
1/01/07
|
|
|
1/01/06
|
|
|
|
|
|
|
Maximum Amount Outstanding at any Month End During Year
|
|
|
$
|
40,689
|
|
$
|
37,459
|
|
$
|
31,920
|
|
|
|
|
|
|
Approximate Average Amounts Outstanding During the Year
|
|
|
$
|
36,170
|
|
$
|
31,108
|
|
$
|
28,065
|
|
|
|
|
|
|
Approximate Weighted Average Interest Rate for the Year
|
|
|
|
3.87
|
%
|
|
3.89
|
%
|
|
2.18
|
%
|
The weighted average interest
rates are derived by dividing the interest expense for the period by the daily average
balance during the period.
You should carefully consider the
following risk factors, together with the other information provided in this Annual Report
on Form 10-K.
Changes in economic conditions or
interest rates may negatively affect our earnings, capital and liquidity.
The
results of operations for financial institutions, including our banks, may be materially
and adversely affected by changes in prevailing local and national economic conditions,
including declines in real estate market values, rapid increases or decreases in interest
rates and changes in the monetary and fiscal policies of the federal government. Our
profitability is heavily influenced by the spread between the interest rates we earn on
investments and loans and the interest rates we pay on deposits and other interest-bearing
liabilities. Substantially all our loans are to businesses and individuals in Michigan and
any decline in the economy of this area could adversely affect us. Like most banking
institutions, our net interest spread and margin will be affected by general economic
conditions and other factors that influence market interest rates and our ability to
respond to changes in such rates. At any given time, our assets and liabilities may be
such that they are affected differently by a given change in interest rates.
Our credit losses could increase
and our allowance for loan losses may not be adequate to cover actual loan losses.
The
risk of nonpayment of loans is inherent in all lending activities and nonpayment, if it
occurs, may have a material adverse affect on our earnings and overall financial condition
as well as the value of our common stock. We make various assumptions and judgments about
the collectibility of our loan portfolio and provide an allowance for potential losses
based on a number of factors. If our assumptions are wrong, our allowance for loan and
lease losses may not be sufficient to cover our losses, thereby having an adverse affect
on our operating results, and may cause us to increase the allowance in the future. The
actual amount of future provisions for loan losses cannot now be determined and may exceed
the amounts of past provisions. Additionally, federal banking regulators, as an integral
part of their supervisory function, periodically review our allowance for credit losses.
These regulatory agencies may require us to increase our provision for credit losses or to
recognize further loan or lease charge-offs based upon their judgments, which may be
different from ours. Any increase in the allowance for credit losses could have a negative
effect on our net income, financial condition and results of operations.
-10-
Our business is subject to various
lending risks depending on the nature of the borrower’s business, its cash flow and
our collateral.
Repayment
of our commercial loans is often dependent on cash flow of the borrower, which may be
unpredictable, and collateral securing these loans may fluctuate in value. Our commercial
loans are primarily made based on the cash flow of the borrower and secondarily on the
underlying collateral provided by the borrower. Most often, this collateral is accounts
receivable, inventory, equipment or real estate. In the case of loans secured by accounts
receivable, the availability of funds for the repayment of these loans may be
substantially dependent on the ability of the borrower to collect amounts due from its
customers. Other collateral securing loans may depreciate over time, may be difficult to
appraise and may fluctuate in value based on the success of the business.
Our
commercial real estate loans involve higher principal amounts than other loans, and
repayment of these loans may be dependent on factors outside our control or the control of
our borrowers. Commercial real estate lending typically involves higher loan principal
amounts, and the repayment of these loans generally is dependent, in large part, on
sufficient income from the properties securing the loans to cover operating expenses and
debt service. Because payments on loans secured by commercial real estate often depend
upon the successful operating and management of the properties, repayment of such loans
may be affected by factors outside the borrower’s control, such as adverse conditions
in the real estate market or the economy or changes in government regulation. If the cash
flow from the project is reduced, the borrower’s ability to repay the loan and the
value of the security for the loan may be impaired.
Our
construction loans are based upon estimates of costs to construct and value associated
with the completed project. These estimates may be inaccurate. Because of the
uncertainties inherent in estimating construction costs, as well as the market value of
the completed project, it is relatively difficult to evaluate accurately the total funds
required to complete a project and the related loan-to-value ratio. As a result,
construction loans often involve the disbursement of substantial funds with repayment
dependent, in part, on the success of the ultimate project and the ability of the borrower
to sell or lease the property, rather than the ability of the borrower or guarantor to
repay principal and interest. Delays in completing the project may arise from labor
problems, material shortages and other unpredictable contingencies. If the estimate of the
cost of construction is inaccurate, we may be required to advance additional funds to
complete construction. If our appraisal of the value of the completed project proves to be
overstated, we may have inadequate security for the repayment of the loan upon completion
of the project.
Our
consumer loans generally have a higher risk of default than our other loans. Consumer
loans may involve greater risk than our other loans, particularly in the case of consumer
loans that are unsecured or secured by rapidly depreciating assets. In such cases, any
repossessed collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of damage, loss or depreciation. The
remaining deficiency often does not warrant further substantial collection efforts against
the borrower beyond obtaining a deficiency judgment. In addition, consumer loan
collections are dependent on the borrower’s continuing financial stability, and thus,
are more likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy, all of which increase when the economy is weak. Furthermore, the application
of various Federal and state laws, including Federal and state bankruptcy and insolvency
laws, may limit the amount that can be recovered on such loans.
We may experience
difficulties in managing our growth.
To
sustain our continued growth, we require additional capital to fund our expanding lending
activities and any bank or branch acquisitions. We may acquire banks and related
businesses that we believe provide a strategic fit with our business. To the extent that
we grow through acquisitions, we cannot assure you that we will be able to adequately or
profitably manage such growth. Acquiring other banks and businesses involves risks
commonly associated with acquisitions.
We rely heavily on our management
and other key personnel, and the loss of any of them may adversely affect our operations.
We
are and will continue to be dependent upon the services of our management team, including
our Chief Executive Officer, Chief Financial Officer, the Presidents of each of our banks,
and our other senior managers and commercial lenders. Losing one or more key members of
the management team could adversely affect our operations. We do not maintain key man life
insurance on any of our officers or directors.
-11-
Our future success is dependent on
our ability to compete effectively in the highly competitive banking industry.
We
face substantial competition in all phases of our operations from a variety of different
competitors. Our future growth and success will depend on our ability to compete
effectively in this highly competitive environment. We compete for deposits, loans and
other financial services with numerous Michigan-based and out-of-state banks, thrifts,
credit unions and other financial institutions as well as other entities which provide
financial services. Some of the financial institutions and financial services
organizations with which we compete are not subject to the same degree of regulation as we
are. Many of our competitors have been in business for many years, are larger and have
higher lending limits than we do. The financial services industry is also likely to become
more competitive as further technological advances enable more companies to provide
financial services. These technological advances may diminish the importance of depository
institutions and other financial intermediaries in the transfer of funds between parties.
We are subject to significant
government regulation, and any regulatory changes may adversely affect us.
The
banking industry is heavily regulated under both federal and state law. These regulations
are primarily intended to protect customers, not our creditors or shareholders. As a bank
holding company, we are also subject to extensive regulation by the Federal Reserve, in
addition to other regulatory and self-regulatory organizations. Our ability to establish
new facilities or make acquisitions is conditioned upon the receipt of the required
regulatory approvals from these organizations. Regulations affecting banks and financial
services companies undergo continuous change, and we cannot predict the ultimate effect of
such changes, which could have a material adverse effect on our profitability or financial
condition.
We continually encounter
technological change, and we may have fewer resources than our competitors to continue to
invest in technological improvements.
The
banking industry is undergoing rapid technological changes with frequent introductions of
new technology-driven products and services. In addition to better serving customers, the
effective use of technology increases efficiency and enables financial institutions to
reduce costs. Our future success will depend, in part, on our ability to address the needs
of our customers by using technology to provide products and services that will satisfy
customer demands for convenience as well as to create additional efficiencies in our
operations. Many of our competitors have substantially greater resources to invest in
technological improvements. There can be no assurance that we will be able to effectively
implement new technology-driven products and services or be successful in marketing such
products and services to our customers.
Our articles of incorporation and
by-laws and Michigan laws contain certain provisions that could make a takeover more
difficult.
Our
articles of incorporation and by-laws, and the laws of Michigan, include provisions which
are designed to provide our board of directors with time to consider whether a hostile
takeover offer is in our best interest and the best interests of our shareholders. These
provisions, however, could discourage potential acquisition proposals and could delay or
prevent a change in control. The provisions also could diminish the opportunities for a
holder of our common stock to participate in tender offers, including tender offers at a
price above the then-current price for our common stock. These provisions could also
prevent transactions in which our shareholders might otherwise receive a premium for their
shares over then current market prices, and may limit the ability of our shareholders to
approve transactions that they may deem to be in their best interests.
The
Michigan Business Corporation Act contains provisions intended to protect shareholders and
prohibit or discourage certain types of hostile takeover activities. In addition to these
provisions and the provisions of our articles of incorporation and by-laws, Federal law
requires the Federal Reserve Board’s approval prior to acquisition of
“control” of a bank holding company. All of these provisions may have the effect
of delaying or preventing a change in control at the company level without action by our
shareholders, and therefore, could adversely affect the price of our common stock.
-12-
Our ability to pay
dividends is limited by law and contract.
We
are a holding company and substantially all of our assets are held by our banks. Our
ability to continue to make dividend payments to our shareholders will depend primarily on
available cash resources at the holding company and dividends from our banks. Dividend
payments or extensions of credit from our banks are subject to regulatory limitations,
generally based on capital levels and current and retained earnings, imposed by regulatory
agencies with authority over our banks. The ability of our banks to pay dividends is also
subject to its profitability, financial condition, capital expenditures and other cash
flow requirements. We also are prohibited from paying dividends on our common stock if the
required payments on our subordinated debentures have not been made. We cannot assure you
that our banks will be able to pay dividends to us in the future.
Acquisitions may affect
or results.
Our
financial results may be adversely affected if we are unable to successfully manage any
financial institutions that we acquire.
The market price for our
common stock fluctuates.
The
market price for our common stock has fluctuated, and the overall market and the price of
our common stock may continue to fluctuate. There may be a significant impact on the
market price for our common stock due to, among other things:
|
•
|
Variations
in our anticipated or actual operating results or the results of our competitors;
|
|
•
|
Changes
in investors’ or analysts perceptions
of the risks and conditions of our business;
|
|
•
|
The
size of the public float of our common stock;
|
|
•
|
Regulatory
developments;
|
|
•
|
General
economic conditions.
|
Additionally,
the average daily trading volume for our common stock as reported on the Nasdaq National
Market is relatively low compared to larger companies whose shares trade on Nasdaq. There
can be no assurance that a more active or consistent trading market in our common stock
will develop. As a result, relatively small trades could have a significant impact on the
price of our common stock.