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COP't
FR Y-6
OMB Number7100-0297
Approval expires December 31,2015
Page 1 of2
Board of Gover1iors of the Federal Reserve System
Annual Report of Holding Companies-FR Y-6
Report at the close of business as of the end of fiscal year
This Report is required by law: Section 5(c)(1)(A) of the Bank
Holding Company Act (12 U.S.C. § 1844 (c)(1)(A)); Section 8(a)
of the International Banking Act (12 U.S.C. § 3106(a)); Sections
11(a)(1), 25 and 25A of the Federal Reserve Act (12 U.S.C.
§§ 248(a)(1), 602, and 611a); Section 211.13(c) of Regulation K
(12 C.F.R. § 211.13(c)); and Section 225.5(b) of Regulation Y (12
C.F.R. § 225.S(b)) and section 10(c)(2)(H) of the Home Owners'
Loan Act. Return to the appropriate Federal Reserve Bank the
original and the number of copies specified.
This report fonn is to be filed by all top-tier bank holding compa­
nies and top-tier savings and loan holding companies organized
under U.S. law, and by any foreign banking organization that
does not meet the requirements of and is not treated as a qualify­
ing foreign banking organization under Section 211.23 of
Regulation K (12 C.F.R. § 211.23). (See page one of the general
instructions for more detail of who must file.) The Federal
Reserve may not conduct or sponsor, and an organization (or a
person) is not required to respond to, an infonnation collection
unless it displays a currently valid OMB control number.
NOTE: The Annual Report 9f Holding Companies must be signed
by one director of the top-tier holding company. This individual
should also be a senior official of the top-tier holding company. In
the event that the top-tier holding company does not have an
individual who is a senior official and is also a director, the chair­
man of the board must sign the report.
Month I Day I Year
I, Timothy M Ward
Reporter's Name, Street, and Mailing Address
Name of the Holding Company Director and Official
President, Director
Trtle of the Holding Company Director and Official
attest that the Annual Report of Holding Companies (including
the supporting attachments) for this report date has been pre­
pared in confonnance with the instructions issued by the Federal
Reserve System and are true and correct to the best of my
knowledge and belief.
With respect to information regarding individuals contained in this
report, the Reporter certifies that it has the authority to provide this
information to the Federal Reserve. The Reporter a/so certifies
that it has the authority, on behalf of each individual, to consent or
object to public release of information regarding that individual.
The Federal Reserve may assume, in the absence of a request for
confidential treatment submitted in accordance with the Board's
"Rules Regarding Availability of Information,• 12 C.F.R. Part 261,
that the Reporter .fil1si individual consent lo public release of all
details in t
report concerning that individual.
��kJ�
Date of Report (top-tier holding company's fiscal year-end):
December 31, 2014
N/A
Reporter's Legal Entity Identifier (LEI) (20-Character LEI Code)
Eastern Michig a n Financial Corporation
Legal Tltle of Holding Company
65 N Howard Avenue, P.O. Box 139
(M ailing Address of the Holding Company) Street I P.O. Box
Croswell
Ml
Clly
48422
������-
-������
State
Zip Code
Physical LocaUon (n different from mailing addres s)
Person to whom questions about this report should be directed:
Karen Lord
SVP/CFO
�������-
Name
Tiiie
810-679-4330
Number I Extension
Area Code I Phone
810-679-3640
Area Code./ FAX Number
[email protected]
E-mail Address
N/A
Address (URL) for the Holding Company's
web page
Date of Signature
For holding companies fil2l. registered with the SECIndicate status of Annual Report to Shareholders:
1:81
0
D
ls Included with the FR Y-6 report
will be sent under separate cover
Does the reporter request confidential treatment for any portion of this
submission?
0 Yes
O In accordance with the Instructions on pages GEN-2
Is not prepared
and
For Federal Reserve Bank Use Only
RSSDID
C.I.
J.L:J� l/� 7
Please identify the report items to which this request applies:
3, a letter justifying the request Is being provided.
O The Information for which confidential treatment is sought
is being submitted separately labeled "Confidential."
� No
Public reporting burden for this information collection is estimated to vary from 1.3 to 101 hours per response, with an average of 5.25 hours per response, including time to galher and
maintain data in the required form and to review instructions and complelo tho Information collection. Send comments regarding this burden estimate or any other aspect of this collection of
Information, including suggestions for reducing this burden to: Secrl!tary, Board or Governors of the Federal Reserve System, 20th and C Streets. NW, Wsshington. DC 20551, and to the
Office of Management and Budge� Paperwork Reduction Project (7100-0297), Washington, DC20503.
1012014
ANNUAL REPORT
•••••••••••••••••••••••••••••••••••••••
11111!!1.•.••
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Mission Statement
To continue as a progressive and growing community
bank, serving our communities by offering a wide range
of competitive services for our customers, resulting in a
profitable organization, enabling us to build capital, pay
appropriate dividends to our stockholders and
competitive salaries to our employees.
m
Core Values
At Eastern Michigan Bank, we take great pride in being a
community bank. At the center of our value system is our core
commitment to provide value driven products and courteous
. service delivered by a caring and professional staff. After all,
we're not just in the "banking business", we're in the business
of financing people's lives and dreams - a responsibility
we don't take lightly.
mOur Promise
We promise our customers they can rely on us to listen to their
needs and try to provide solutions. We also promise to always
practice discretion and tact when it comes to personal or
professional financial issues and to treat our customers with
respect, dignity and integrity, all while doing our best to
help them reach their financial goals.
General Information
Corporate Headquarters
Eastern Michigan Financial Corporation is the holding
company for Eastern Michigan Bank, a full service
community bank with offices in Croswell, Deckerville,
Fort Gratiot, Lakeport, Lexington, Marysville, Minden City,
Port Huron and Sandusky.
Eastern Michigan Financial Corporation
Investor Relations Contact
Karen M. Lord, Senior Vice President, Chief Financial Officer
Eastern Michigan Financial Corporation
65 N. Howard Avenue, Croswell, Michigan 48422
810.398.5135
65 N. Howard Avenue
Croswell, Michigan 48422
Tr ansfer Agent and Registrar
Computershare Shareholder Services
P.O. Box 30170
College Station, Texas 77842-3170
800.368.5948
Stock Symbol
Over-The-Counter Bulletin Board: EFIN
�ne!-epeAde-A-t-Attel+i:er-s----l-\·HR-Y-a-l--M.@@ti+i9
----
-----
Rehmann Robson
5800 Gratiot, Suite 201
Saginaw, Michigan 48638
989.799.9580
The Eastern Michigan Financial Corporation annual
meeting ofcompany shareholders is scheduled
for Tuesday, April 28 at 5:30 p.m. and will be held
at Lakeview Hills Golf Resort, 6560 E. Peck Road,
Lexington, Michigan 48450 .
• •••••••••••••••
............!•••
2014 Annual Report
Mission Statement, Core Values, Promise
Board of Directors
Inside Front Cover
2
Officers 3
Branch and Administrative Staff
Milestones
4
5
Letter to Shareholders
6-7
2014 Highlights and Ten Year Profile
Consolidated Balance Sheets
8
9
Consolidated Statements of Income 10
Consolidated Statements of Comprehensive Income
11
Consolidated Statements of Changes in Shareholders' Equity 12
Consolidated Statements of Cash Flows
13
Notes to Consolidated Financial Statements 14- 23
Auditors' Report 24
New In 2014 Inside Back Cover
Administrative Offices
65 N. Howard Avenue
Croswell, Michigan 48422
810.679.2500
Fort Gratiot Branch
3061 Krafft Road
Fort Gratiot, Michigan 48059
810.966.2281
Croswell Branch
37 N. Howard Avenue
Croswell, Michigan 48422
810.679. 3620
Lakeport Branch··
7090 Lakeshore Road
Lakeport, Michigan 48059
810.385.3211
Deckerville Branch
3636 Main Street
Deckerville, Michigan 48427
810. 376.2015
Lexington Branch
5446 Main Street
Lexington, Michigan 48450
810.359.5353
·
·
··
-
- ----- - - - -- -- - -
·
Loan Center
66 N. Howard Avenue
Croswell, Michigan 48422
810.679.250b
- - ·Marysville Branch
2970 Gratiot Boulevard
Marysville, Michigan 48040
810.364.4854
Minden City Branch
1728 Main Street
Minden City, Michigan 48456
989.864.3393
- i=Acr-i:Rl\I M1r1-11�AN i::JNA1\lrlAI rnr.>Pnr.>ATJOl\I
Port Huron Branch
600 Water Street
Port Huron, Michigan 48060
810.987. 9777 .
Sa·ndusky Branch·
324 S. Sandusky Road
Sandusky, Michigan 48471
810.648. 3230
Bradley D. Apsey, Director
Earl E. DesJardins, Chairman
Timothy M. Ward, Vice Chairman
Civil Engineer
BMJEngineers & Surveyors, Inc., Port Huron
President and Chief Executive Officer
Eastern Michigan Bank, Croswell
Karen S. Flanagan, Director
George J. McNciughton, Director
Kathlene M. Partaka, Director
Patricia W. Ryan, Director
John C. Williams, Director
Farmer
Croswell
Farmer
Sandusky
Ann Randall Kendrick, Director
Owner
Pollock Randall Funeral Home, Port Huron
Marysville Funeral Home, Marysville
Partner
Frohm, Kelley, Butler & Ryan, P.C., Port Huron
President
Apsey Funeral Home Inc., Deckerville
Retired EVP, Operations
Eastern Michigan Bank, Croswell
Retired Superintendent
Electrical & Water Departments, Croswell
Director Announcements
We were deeply saddened this year by the deaths of former directors and chairmen of the board, Joseph Wilhelm and Arnold Kettlewell. Both
gentlemen will be greatly missed by family, friends and those here atEastem Michigan Bank who had the privilege of working with them.
Joseph A Wilhelm
Joseph A Wilhelm, age 97, passed away on
March 18, 2014. Mr. Wilhelm was first appointed
to the board of directors in 1970 when the bank
was still operating as State Bank of Croswell.
e
1
e was e ec e c airman o
and served in that position until his retirement
in 2002. He was the co-founder of Fraser
Reel and Specialty Co., later known as Fraser
Manufacturing Corporation, formerly
of Lexington, Michigan.
Arnold E. Kettlewell
Arnold E. Kettlewell, age 83, passed
away August28, 2014. Mr. Kettlewell
was first appointed to the board
of directors in 1980, then elected
f--di,n-in
,."tt<n>,.,,_;·
2002. 11e served in
that capacity until his retirement in
2005. Mr. Kettlewell was the owner
of Kettlewell's Market (now J & D) in
Croswell for nearly thirty years.
---------------·
Officers
Retirements
Eastern Michigan Financial Corporation Officers
Annette J. Kautz
Port Huron Branch Manager
Earl E. DesJardins, Chairman of the Board
Branch Manager Annette Kautz retired
in July after nineteen years of service
to· Eastern Michigan Bank. Ms. Kautz
joined the bank in 1995 as a part time
.. teller.before being promoted to loan
clerk, assistant branch manager and
then branch manager. While working
for Eastern Michigan Bank, she was also
actively involved with the Blue Water
Chamber of Commerce's Blue Water
Ambassadors Committee and the
Red Cross.
Timothy M. Ward, Vice Chairman of the Board and President
John A. Hart, Senior Vice President and Senior Lender
Karen M. Lord, Senior Vice President, Chief Financial Officer
Ann E. Matthews, Senior Vice President, Secretary
Eastern Michigan Bank Senior Management Officers
Timothy M. War d, President and Chief Executive Officer
John A. Hart, Senior Vice President, Loans
Karen M. Lord, Senior Vice President, Chief Financial Officer
Promotions
Ann E. Matthews, Senior Vice President, Operations
L. Micha el O'Vell
Eastern Michigan Bank Vice Presidents
Vice President, Consumer Loan Manager
William E. Cone, Vice President, Commercial Loan Manager
Jay A. Wofford, Vice President, Commercial Loan Officer
Christopher M. Fiann, Vice President, Commercial Loan Officer
Kathleen M. Wurmlinger, Vice President, Mortgage Manager
L ivlichael OVell, Vice President, Consumer Loan Manager and Security Officer
Eastern Michigan Bank Assistant Vice Presidents
Joseph L. Brown, Assistant Vice President, Appraiser
Kyle W. Jacobs, Assistant Vice President, Sandusky Branch Manager
Christi Agostino-Erd, Assistant Vice President, Mortgage Loan Officer
Clariece C. Creguer, Assistant Vice President, Deckerville and Minden City Branch Manager
Tammy J. Williford, Assistant Vice President, Marketing and Compliance Officer
Frederick A. Manuilow, Assistant Vice President, Commercial Loan Officer
Eastern Michigan Bank Consumer Loan
Manager L. Michael O'Vell was promoted
to vice president in September2014.
Mr. O'Vell was hired in 1999 as a loan
officer, promoted to consumer loan
managerin2001 , then assistant vice
president and now vice president. He
also serves as the bank's collections
manager and security officer. Mr. O'Vell
holds a bachelor of arts degree in
business administration from Marion
College and is a graduate of the Robert
Perry School of Banking. He is also a
member of the City of Croswell DDA,
Croswell TIFA Board, Croswell Zoning
and Planning Board, Croswell EDC,
Croswell Fire Department and
Croswell Ambulance service.
Stacie L. Bales
Bank Secrecy Act, Operations Officer
Eastern Michigan Bank Officers
Karen S. Biskey, Computer Manager and Information Security Officer
Cindy M. Mugridge, Lakeport Branch Manager
Catherine L. Fitz, Marysville Branch Manager
Nancy A. Kulman, Port Huron Branch Manager
Stefanie M. Abbott, Lexington Branch Manager
GeraTCJ b. Hepfer, tomrrierC:iaITaanofficer
-
Mary K. Hei den, Loan Processing Manager
Stacie L. Bales was promoted to
Bank Secrecy Act, Operations
Officer in September2014. Ms. Bales
joined the bank in2001 as a huinan
resources assistant1 was promoted
to administrative assistant, then
administrative specialist before being
'
named Bank Secrecy Act (BSA) officer in
2012. Her new responsibilities include a
\
. _. __t _____,. -�---·-----,---- ...§.4P.e rvjs ory.!Q.\.eju_tb.e _b_a.ul;.' s.Qp,�ratl oo s_
department. Jn addition to her duties
at the bank, Ms. Bales is involved with
Croswell-Lexington Little League.
Stacie L. Bales, Bank Secrecy Act Officer, Operations
Kathleen M. Saelens
Trishette L. Davis, Croswell Branch Manager
Fort Gratiot Branch Manager
Audra L. Levitte, Human Resources Director
Assistant Branch Manager Kathleen
M. Saelens was promoted to Branch
Manager of Eastern Michigan Bank's Fort
Gratiot location in October2014. Ms.
Saelens joined the bank's staff in April
2011, bringing with her over30 years of
banking experience.
Rachel L. Galbraith, Commercial Loan Officer
Kathleen M. Saelens, Fort Gratiot Branch Manager
I••••••••••••••••
EASTERN MICHIGAN FINANCIAL CORPORATION
Branch & Ad minis trative Staff
Croswell Branch
Minden City Branch
Chelsea Bowerman, Assistant Branch Manager
Megan Bowers, Head Teller
Shelby Cunningham, Teller
Renne Hastings, Teller
Christine Jones, Teller
Brett Nemeckay, Teller
Colleen Newberry, Teller
Crystal Sweet, Teller
Daniela Watkins, Teller
Port Huron Branch
Ashley McCormick, Assistant Branch Manager
Elizabeth McPhillips, HeadTeller
Chelsea Alexis, Teller
Stephanie Blake, Teller
Sara Rusch, Teller
Deckerville Branch
Ashley Grabitz, Assistant Branch Manager
Scott Cameron, Teller, CSR
Debbie Quick, VaultTeller
Nancy Vogel, Teller
Sandusky Branch
Rita Berberich, Assistant Branch Manager
Alicia Reinke, Head Teller
Mindy Fetting, Teller
Roxann Green, Teller
Brandi Stine, Teller
Fort Gratiot Branch
Catherine Mugridge, Assistant Branch Manager
Amber LePla, Head Teller
Tamira Alden, Teller
Kimberly Hurlburt, Teller
Paula Mullen, Teller
Loan Center (Croswell)
Jennifer Biskey, Commercial Loan Clerk/Analyst
Kathleen Breckner, Mortgage Loan Clerk
Amanda James, Consumer Loan Documentation Specialist
Amanda Mosher, Mortgage Specialist, Underwriter
Nicki Parker, Mortgage Loan Clerk
KaraTurcott, Credit Analyst
Tiffany Warczinski, Commercial Loan Clerk
Jasmine Williams, Consumer Loan Clerk/Courier
Lakeport Branch
Judy Smith, Assistant Branch Manager
Judy Bowers, Head.Teller
Donna Gentner, Teller
Heather Maskell, Teller
Lexington Branch
Administrative Staff
Krista Short, Assistant Branch Manager
Danielle Quesada, Head Teller
Diane Beedon, Teller
Deborah Dickinson, Teller
Suzanne Hedges, Teller
Amanda Matthews, Teller
Marysville Branch
Nikki Butler, Bookkeeping Supervisor
Julie DeGrande, Administrative Specialist
Chelsea DuPree, Human Resources Assistant
Melissa Gelinski, Accountant
Darlene Innes, Courier
Barb Krawczyk, Admin
. istrative Specialist
Heather Langolf, Accounting Clerk
Ashley Lindke, Bookkeeper
Dru Moran, Bookkeeper
Mechel Smith, Administrative Specialist
·
Angela Bassil, Assistant Branch Manager
Karen Hubble, Head Teller
Terri Herman, Teller
T herese Padgham, Teller
•••••••••••••••••
Eastern Michigan Bank offers non-bank investment services through Financial Advisor Nicholas
Dickinson representing Eastern Michigan Investment Services, located at:
Eastern
Michigan
Investment
Services
.._._,_.._____ k...._.......s....:
Eastern
Michigan
Bank
65 N. Howard Avenue
Croswell, Michigan 48422
800.397.2504
NO BANK GUARANTEE J NOT FDIC INSURED J MAY LOSE VALUE All Securities and Advisory Services offered through Investment Professionals, Inc.
(IPI), a Registered Broker/Dealer & Registered Investment Advisor and member FINRA & SIPC. The investment services offered by IPI under the name
Eastern Michigan Investment Services are in no way affiliated with or offered by Eastern Michigan Bank, nor is Eastern Michigan Bank a registered broker/
dealer. Customers working with Eastern Michigan Investment Services will be dealino- solely through IPI with respect to their investment, orokerage and
securities transactions. IPI does not offer or provide legal or tax advice. Please consult your attorney and/or tax advisor for such services. The products
offered by Investment Professionals, Inc. are not insured by the FDIC, the NCUA or any other agency of the government, are not deposits or other
obligations for the bank or guaranteed by the bank and involve investment risks, including possible Joss of principal amount invested .
•••••••••••• ••••
Miles tones
,
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-·
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.
· · ··--
·-
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-·· · · ··· .
I
I
i
25 Year Award
15 Year Award
� .
'
Roxann Green
Debbie Quick
Nancy Kulman
L. Mike OVell
Mindy Fetting
10 Year Award
Amanda Matthews
Mechel Smith
Kyle Jacobs
Renne Hastings
5 Year Award
Eastern Michigan Bank is proud to recognize employees
Who celebrated milestone anniversarie s with us in 2014.
Angela Bassil
In December, Eastern Michigan Bank.
received.a Five-Star/Superior rating
from BauerFinancial, Inc. (www.
bauerfinancial.com), an independent
research firm that evaluates American
financial institutions on a
quarterly basis.
This fall, Eastern Michigan Bank
was awarded Preferred Lender
Program (PLP) status by the Small
Business Administration (SBA).
To obtain PLP status, a lender
must demonstrate a particular
proficiency in processing and
servicing SBA-guaranteed loans.
• •• • • • • • •• • ••• • •
In January 2014, Eastern
Michigan Bank was voted Best
of the Best in the Sanilac County
News annual Readers' Choice
Awards. The bank won in two
categories- Financial Institution/
Bank and Local Mortgage Lender.
EASTERN MICHIGAN FINANCIAL CORPORATION
Eastern Michigan Financial Corporation continued on a steady path
of improvement in 2014, largely driven by further reduction in our
need to provide for future loan losses. This was the fifth consecutive
year in which we have reduced our provision over the previous year,
a reflection of the improved economy in our market area and a good
sign we have put most of the remnants of the "Great Recession"
behind us.
Net income for 2014 was $1,827,000, up very modestly from last year.
Dividends for2014 held steady with the prior two years at $0.55 per
share, including a bonus dividend of $0.07 per share in the fourth
quarter. The bonus dividend had been a long standing tradition
for us prior to 2009 when it was suspended due to the challenging
economic times.
Shareholder's equity increased to just over28 million, or $24.97 per
share at year end. This is up nicely from year end 2013 due to the
retention of earnings as well as a shift from what were unrealized
losses in our investment portfolio to a pretty much "break even"
investment portfolio from a mark to market standpoint at year end.
Our capital ratio at year end was 9.95%, a 20 basis point increase
over2013.
Loans outstanding increased by $538,000 at year end, marking a
reversal in a five year trend of a declining loan portfolio. Competition
has been increasingly fierce from both community and larger banks
and we did lose some deals to more aggressive lenders {I can't help
but think some have already forgotten the lessons learned during
the last economic down turn). To help combat this aggressiveness,
we applied for and were granted Preferred Lender status by the
Small Business Administration {SBA) late in the year. Participation in
the SSA's Preferred Lender Program gives us the ability to approve
loans we feel require an SBA guaranty via a streamlined process,
thus making our turnaround time faster than most of the local
competition.
Agricultural lending is a major piece of our loan portfolio, so the
health of our local agricultural economy is not without impact.
Despite declining commodity prices, many of our crop farming
customers were still able to sell their harvest at premium prices
thanks to contracts they entered into early in the year. Milk prices
also declined through much of the year, but some if not all of this
decline was offset by a reduction in feed costs. Lower producing
herds/farms were more negatively impacted by lower milk prices as
they have a higher percentage of fixed costs. Cattle raising farmers
seemed best positioned to take advantage of the lower feed costs as
beef prices remained relatively high. Farm land prices in our market
seemed to hold steady in 2014, having declined off of their highs in
the previous year.
Flat to rising mortgage interest rates coupled with brutal early winter
weather that deterred potential home buyers from venturing out
caused a sharp drop in refinance and home purchase loan demand
compared to 2013. In an effort to increase production and stem
the decline in fee income, we expanded our product offerings
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The investment portfolio continued to grow in 2014, ending the
ear at $1 1 8,05A,DillLl)11r invested assets ba)leJncreased steacfily.
since 2008, and though we would prefer these dollars be deployed
in higher earning loans, they do bring income to the bottom line.
We have continued to choose conservative shorter life investments
which should position us well when interest rates begin to move
CASH DIVIDENDS PER SHARE
•2010-2014
0.55
0.56
0.55 .
0.55
0.54
0.52
0.50
0.48
0.46
0.44
0.48
0.48
D-0-1._
2010
2011
2012
2014
2013
BOOK VALUE PER SHARE
•2010-2014
24.97
25.00
23.52
24.00
23.00
22.00
21.00
20.00
19.00
23.32
22.24
OJJl
2010
2011
2012
L_
L_
2013
2014
T OTAL LOANS
['�"·""'· � l.
�.
(in thousands)
•2005-2014
200,000
1so,ooo
:::::::
160,000
100,220 175,764
11"'"17o.533
f
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155858
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, 4871137.025
". .��580 1n
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• ••• • • • •• • • • •• • •
Letter To Sharehold ers (con't)
up as many industry experts believe they will later this year. One downside to the higher
proportion of investment assets to total assets is that it compresses interest rate margin,
which was just over 3% at year end.
Although our foreclosed property holdings are up from year end 2013, we are not seeing as
many properties work their way in and out of this category. We still have some challenging
properties to market and hope to clear these off our books in 2015, encouraged by the fact
that we are seeing more overall interest from buyers than in previous years.
Expense management continued to be a top priority. Other Real Estate (ORE) expense
declined from $163,8 8 1 in 2013 to $119, 272, a direct result of our previously mentioned
ability to quickly turn over what properties we took back as well as to market properties
"as is" due to an increase in demand for real estate. Thanks to judicious management
of key financial ratios, we were also able to reduce the rate used to compute our F D I C
insurance assessment and bring the assessment itself from $209,000 down t o $192,200.
Earl E. DesJardins
Chairman of the Board
2014 marked our second full year of providing non-deposit investment products via
Eastern Michigan Investment Services and our full time representative, Nick Dickinson.
Nick is a lifelong area resident and has used his market connections and energy to truly
raise the bar for us in terms of the investment products and services we are able to offer. If
you haven't met or talked to Nick, I encourage you to do so. We recognize that most of our
shareholders deal with a broker somewhere-why not make it us?
Technology has become an increasingly larger part of what we do as customer access
preferences continue to migrate to electronJc channels. In 2014, we enhanced our
electronic products, services and information detivery in a number ofvvays:
1) We upgraded our website to a responsive design format, mea ning the site now adjusts
automatically to the type of access device being used;
2) We added an online mortgage application to our website;
3) We enhanced our electronic statement (eStatement) service - customers can now view
cancelled checks with their eStatement and build up to 18 months of history in their
online banking account;
4) QuickBooks was added as a download option in online banking.
We also introduced mobile online banking at yearend, starting with employees. As of this
writing, mobile banking is now available as an app for iPhone, iPad and Android smart
phone users and in a mobile browser version for other devices.
The remodel of 65 N. Howard Avenue mentioned in the September 30, 2014 Letter to
Shareholders continues to move forward. We hope to get underway in first quarter2015
with completion in the spring, at which point we will be able to bring the staff from Peck
Road to the downtown Croswell location, thus enhancing our ability to work
more efficiently.
As always, we extend our sincere appreciation for the support of our shareholders,
directors, officers and employees and look forward to seeing you at this year's annual
shareholders' meeting to be held April 28 , 2015 at Lakeview Hills in Lexington, Michigan.
Please note that we will be starting at 5:30 p.m. this year instead of 7:30.
Sincerely,
1 • • •• • ••••• • •• • ••
EASTERN MICHIGAN FINANCIAL CORPORATION
Timothy M. Ward
Vice Chairman ofthe Board,
President and Chief Executive Officer
J'l!IJlllljWJ•Jllill!llll!ltlllll••llJ•'-!!lllllJtllllll!li•JWJ!IJ�lll!l'll�!IJ�l!i
2014 Highlights and Ten Year Financial Profile
2014 Highlights - Year In Brief
FOR THE YEAR (in thousands)
2014
$
2013
$
%
Change
8,175
i .2°/o
1,530
1,669
-8:3o/o
Non-Interest Expense
7,291
7,223
0.9o/o
Net Income
1,827
1,820
0.4o/o
Net Interest Income
Non-Interest Income
8,275
NET INCOME
(in thousands)
112010·2-014
YEAR END
(in thousands)
$
Total Assets
$
283,251
137,025
Loans, Net of Unearned Interest
Allowance for Loan Losses
Deposits
279,362
1.4%
136,487
0,4o/o
2,500
1,688
1,765
-4.4%
253,998
252,086
0.8o/o
28,394
26,489
7.2o/o
Shareholders' Equity
2,000
1,500
1,000
500
PER SHARE
$
Net Income
Book Value
Cash Dividends
Number
of Shares
$
1.60
0.6o/o
24.97
23.32
7.io/o
0.55
0.55
O.Oo/o
1.61
2011
2012
2013
2014
0.1 o/o
1,135,669
1,137,294
Outstanding
2010
Ten Year Financial Profile
Net Interest Income
s
8,275
69
Provision for Loan Losses
2012
2013
2014
FOR THE YEAR (in thousands)
$
8,175 s
2010
2011
8,500
283
406
$
$
2009
2008
$
2007
$
8,768 s
8,369
933
11066
2,294
991
476
8,674
8,671
9,209
2006
$
2005
8,933
s
8,659
296
364
1,243
1,245
Non�lnterest Income
1,530
1,669
1,571
1,278
1,531
11659
240
1,105
NonwJnterest Expense
7,291
7,223
7,395
7,132
7,170
7,068
7,050
7,058
6,620
6,821
870
2,780
3,260
2,719
Income Before Income Taxes
less: Income Taxes
Net Income
2,445
2,338
2,270
1,887
2,063
666
618
518
497
404
495
16
131
833
959
852
1,827
1,820
1,773
1,483
1,568
650
739
1,947
2,301
1,867
AT YEAR END (in thousands)
Total Investment Securities
$
Restricted Investments
Federal Funds Sold
118,054
$
113,141
1,022
916
0
0
$
85,452
916
$
0
139,580
136,487
72,389 s
64,855
$
38,149
$
17,891
$
27,234
$
18,303 s
28,063
905
952
982
922
922
922
965
0
0
1,631
4,523
4,401
20,227
9,200
170,633
174,926
168,443
175,764
180,226
155,858
144,116
Total Loans
Allowance for Loan Losses
137,025
1,688
1,765
2,758
2,796
3,155
3,716
2,233
1,901
1,905
2,210
Total Assets
283,251
279,362
270,472
259,757
259,966
250,424
226,950
223,366
233,098
231,589
Total Deposits
253,998
252,086
242,897
233,578
234,907
224,277
201,469
197,000
209,439
209,846
o,
0
0
0
0
2,000
2,000
2,000
0
0
28,394
26,489
26,616
25,103
23,983
23,056
22,373
23,484
22,555
21,161
Borrowed Funds
Shareholders1 Equity
PER SHARE
Net Income
Boak Value
Cash Dividends
Number of Shares Outstanding
s
1.61
24.97
$
1.60
23.32
$
1.57
23.52
$
1.31
22.24
$
1.39
21.25
$
0,58
$
0,64
20.43
19.82
$
1.69 s
1.99
20.36
19.54
$
1.62
18.36
0,55
0.55
0,55
0.48
0.48
0.48
0.96
0.96
0.92
0.88
1,137,294
1,135,669
1,131,649
1,128,737
1,128,737
1,128,737
1,128,737
1,153,667
1,154,256
1,152,356
0.33%
0,8/'%
I.OU?a
6,65%
6.83%
6,83%
5,94%
6.48%
2.83%
3.20%
8.29%
10.32%
9.95%
9.75%
9.76%
9.68%
8.98%
9.33%
9,85%.
10.22% *
9.62%
0.83?o
8.79%
*
9.01%
.. Prior to 2009 the capital ratio was not measured at the consol!dated level. Capital ratios reported in those earller years are based on Eastern Michigan Bank results.
• • • • • • •••• • • • • • •
Cons olid ated Balance Sheets
(Dollars in thousands except share data)
ASSETS
5,681
6,463
$
Cash and demand deposits due from banks
Interest bearing balances due from banks
Cash and cash equivalents
Certificates of deposit held in other banks
Investment securities
Available-for-sale
Restricted investments
Net loans
Accrued interest receivable
Premises and equipment, net
Foreclosed assets
Bank-owned life insurance
Other assets
Total assets
$
5,589
3,487
12, 144
9,076
1,229
5,517
118,054
1,022
113,141
916
135,337
946
5,842
1,556
6,009
1) 112
134,722
1,016
6,091
1,296
5,861
1,726
$
283,251
$
279,362
$
62,175
191,823
$
51) 945
200, 141
LIAB ILIT IES AND SHA REHOLDERS' EQUITY
Deposits
Noninterest-bearing
Interest-bearing
Total deposits
253, 998
252,086
859
787
254,857
252,873
Accrued interest payable and other liabilities
Total liabilities
Commitments and contingencies (Motes 11,
13, and 14)
Shareholders' equity
$5 par value; 3,000,000 shares
1,137,294 (1,135,669 in 2013)
Common stock,
authorized,
5,686
1,812
20,877
19
shares issue_d and _outstanding
Additional paid-in-capital
Retained earnings
Accumulated other comprehensive income (loss)
28,394
Total shareholders' equity
Total liabilities and shareholders' equity
$
283,251
The accompanying notes are an integral part of these consolidated financial statements.
I • • • • • • • • • • • • •• • •
5,678
1,802
19,675
(666)
EAffERN MICHIGAN FINANCIAL CORPORATION
26,489
$
279,362
Cons olid ated Statements of Income
(Dollars in thousands except per share data)
Interest and dividend income
Loans (including fees)
Securities
$
Taxable
6,763
$
7,097
1,587
1, 118
416
512
95
87
59
154
8,920
8, 968
645
793
8,275
8, 175
69
283
8,206
7,892
Service charges on de posit accounts
902
910
Other service charges and fees
202
200
Other
426
559
1,530
1,669
Nontaxable
Other
Federal-funds sold and deposits with banks
Total interest and dividend income
Interest ex pense
Net interest income
Provision for loan losses
Net interest income, after provision for loan losses
Noninterest income
Total noninterest income
Noninterest expenses
Com pensation and benefits
3,868
3,964
Occupancy and equi pment
1,082
1,072
Other
2,341
2,187
Total noninterest expenses
7,291
7,223
Income before federal income taxes
2,445
2,338
618
518
Federal income taxes
Net income
s
1 827
�
1,820
Net income per basic share of common stock
�
1.61
s
1.60
Net income per diluted share of common stock
s
1.60
s
1.60
The accompanying notes are an integral part of these consolidated financial statements.
••••••••• • • • • • ••
(Dollars in thousands except per share data)
Available-for-sale securities
Unrealized holding gains (losses) arising during the year
$
1,038
$
(2,045)
Reclassification adjustment for net realized gains
included in net income
(18)
Comprehensive income (loss) before income tax (expense)
benefit
1,038
(2,063)
Income tax (expense) benefit related to other comprehensive
income (loss)
(353)
Other comprehensive income (loss)
685
Net income
---
. (1,361)
1,827
Comprehensive income
-
702
- --
--
- ---- ----·-
s
2,512
The accompanying notes are an integral part of these consolidated financial statements .
• • • • • • • • • • •• • • • •
EASTERN MICHIGAN FINANCIAL CORPORATION
1,820
$
459
(Dollars in thousands except per share data)
,__.
'
-.'
<
>
•
..
.
•-r>
� ,
��·
e
Balances, January 1,
20 13
_..
.. � • '
-
.
.
'
.
1, 131,649
� - ..
dnttl .·.�. )
5,658
$
,_
'�
-t;;i '� .,.--:> • ..
1,773
·�:
_,,�'/';
$
18,490
-
'
' ... �·;'·
�-·
$
1,820
Comprehensive income
695
$
.
.
26,616
459
( 1, 361)
3
3
Common stock options recognized
,· :.·��
.,_
�
W4mo
$
\� r!'-
Issuance of shares upon exercise
of common stock options
Repurchase of common shares
5,04 1
25
( 1,02 1)
(5)
51
26
( 11)
(16)
(624)
(624)
Cash dividends paid
($0.55
per share)
Balances, December
3 1, 2013
1, 135,669
5,678
19,675
1,802
1,827
Comprehensive income
Common stock options recognized
(666)
26,489
685
2,5 12
2
2
8
16
Issuance of shares upon exercise
of common stock options
1,625
8
Cash dividends paid
($0.55
per share)
Balances, December
(625)
3 1, 2014
1 137 294
$
5 686
'
$
1 8 12
$
20 877
(625)
s
19
s
28 394
The accompanying notes are an integral part of these consolidated financial statements .
• • • ••• • • • • • • • • • •
•1••·······---1111••••llMlll•ll..i
Cons olid ated Statements
of Cas h Flows
(Dollars in thousands except per share data)
I .;,weafiEHaea D�'em�r.ml"!�'!j
f'.t'Df20� Dlf[OljJ�
·
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses
Depreciation
Provision for foreclosed assets
Net amortization of investment securities premiums
Share-based compensation
Net gain on sale of loans
Loss (gain) on sale of equipment
(Gain) loss on sale of foreclosed assets
Gain on sale of securities
Increase in cash value of bank-owned life insurance
Deferred income tax (benefit) expense
Origination of loans held for sale
Proceeds from loan sales
Changes in operating assets which provided (used) cash
Accrued interest receivable
Other assets
Accrued interest payable and other liabilities
$
1,827
$
(148)
(93)
(2,260)
2,343
283
504
119
730
3
(187)
(3)
59
(18)
(135)
493
(6,570)
6,757
70
354
72
23
(287)
(172)
69
519
115
673
2
(83)
2
(93)
Net cash provided by operating activities
1,820
3,369
3,419
Cash flows from investing activities
Net change in certificates of deposit held in other banks
Activity in available-for-sale securities
Purchases
Maturities, prepayments, calls and sales
Purchase of FHLB stock
Loan principal (originations) collections, net
Purchases of premises and equipment
Purchase of bank-owned life insurance
Proceeds from sale of foreclosed assets
Proceeds from sale of equipment
4,288
7,469
(28,342)
23,794
(106)
(1,846)
(275)
(59 ,854)
29,390
880
3
1,056
(522)
(2,000)
2,047
4
Net cash used in investing activities
(1,604)
(22,410)
1,912
16
9,189
51
(16)
(624)
Cash flows from financing activities
Acceptances and withdrawals of deposits, net
Proceeds from sale of common stock
Repurchase and retirement of stock
Cash dividends paid
(625)
Net cash provided by financing activities
1,303
8,600
Net increase (decrease) in cash and cash equivalents
3,068
(10,391)
Cash and cash equivalents, beginning of year
9,076
19,467
Cash and cash equivalents, end of year
�
12, 144
The accompanying notes are an integral part of these consolidated financial statements .
• II ••••·••••••••••
EASTERN MICHIGAN FINANCIAL CORPORATION
�
9,076
N otes To Consol idat e d Financial Statem ents
(Dollars in thousands except share data)
1.
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation and Nature of Business
The accompanying consolidated financial statements include the accounts of Eastern
Michigan Financial Corporation, a registered bank holding company (the "Corporation"), and
its wholly owned subsidiary, Eastern Michigan Bank (the "Bank"), and the Bank's wholly
owned subsidiaries Eastern Michigan Properties, LLC; Eastern Michigan Financial Services,
Inc.; and Eastern Mir.higon Real Estate, Inc. AU significant fntercompany accounts and
transactions have been eliminated In consolidation.
The Corporation is independently owned and operates a community bank engaged in the
business of retail and commercial banking services through its ten branches located ln Sanilac
and St. Clair counties In Niichigan. Active competition, principally from other commercial
banks, savings banks and credit unions, exists In all of the Bank's primary markets, The
Bank's results of operations can be significantly affected by changes in Interest rates or
changes in the automotive and agricultural industries whkh comprise a significant portion of
·
U1t:"-tu1..dl e1..u11u111!1.. euvhu1u11�11l.
Concentration Risks
The Bank's primary deposit products are interest- and noninterest·bearing checking accounts,
savings accounts and time deposits and Its primary lending products are real estate
mortgages, commercial and consumer loans. The Bank does not have significant
concentrations with respect to any one Industry, customer, or depositor.
The Bank is a state chartered bank and a member of the Federal Deposit Insurance
Corporation ("FDIC") Bank Insurance Fund. The Bank is subject to the regulations and
supervision of the FDIC and state regulators and undergoes periodic examinations by these
regulatory authorities. The Corporation ls also subject to regulations of the Federal Reserve
Board governing bank holding companies.
Use of Estimates
The preparation of consolidated financial statements In conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the consolidated balance
sheet and the reported amounts of income and expenses during the year. Actual results
could differ from those .:stlmatt:s. SiguifiL011L e:.thuall!!;; lndud� but are not Umlted to the
determination of the allowance for loan losses, the fair value of certain investment
securities, and the valuation of foreclosed real estate.
Summary of Significant Accounting Policies
Accounting potfcies used fn preparation of the accompanying consolldated financial
statements are In conformity 'Nith accounting principles generally accepted in the United
States. The principles which materially affect the determination of the financial position and
results of operations of the Corporation and its subsidiary are summarized below.
Cash and Cash Equivalents
For the purposes of the consolidated statements of cash flows, cash and cash equivalents
Include cash and balances due from banks, lnterest•bearing balances due from banks,
short-term money market Investments, and federal funds sold. Generally, federal funds
are sold for a one·day pertod. The Bank maintains deposit accounts In various financial
institutions which generally exceed the FDIC insured limits or are not Insured. Management
does not believe the Corporation ls exposed to any significant interest, credit or other
financial risk as a result of these deposits.
Certificates of deposit held in other banks
Certificates of deposit held in other banks mature within 5 years and are carried at cost.
Fair Value Measurements
Fair value refers to the price that would be received to sell an asset or paid to transfer a
liability (an exit price) in an orderly transaction between market participants in the market
in which the reporting entity transacts such sales or transfers based on the assumptions
Assumptions are
market participants would use when pricing an asset or liability.
devetoped based upon prioritizing information within a fair value hierarchy that gives the
highest priority to quoted prices In active markets (level 1) and the lowest priority to
unobservable data, such as the reporting entity's own data (Level 3).
A description of each category in the fair value hierarchy is as follows:
Level 1 : Valuation is based upon quoted prices for Identical fnstruments traded in
active markets.
Level 2: Valuation Is based upon quoted prices for similar Instruments In active
markets1 quoted prices for Identical or similar instruments in markets that are not
active, and model·based valuation techniques forwhich all significant assumptions are
observable in the market.
Level 3: Valuation Is generated from model-based techniques that use at least one
significant assumption not observable fn the market. These unobservable assumptions
reflect the estimates of assumptions that market participants would use In pricing the
asset or tlablllty.
For a further discussion of Fair Value Measurements, refer to Note 2 to the consolidated
financial statements.
Investment Securities
Securities are classified as avai!able·for-sale and are recorded at fair value, with
unrealized gains and tosses, net of the effect of deferred income taxes, recorded in other
comprehensive income. Purchase premiums and discoun� are recognized In interest
Income using the Interest method over the terms of the securities. Realized gains or losses
on the sate of securities are recorded In investment income on the trade date and are
detennined using the specific identification method.
Investment securities are reviewed at each reporting period for possible other-than­
temporary Impairment ("OlTJ"). In determining whether an other·than·temporary
impairment exists for debt securities, management must assert that: (a) ft does not have
the Intent to sell the security; and {b) it is more likely than not the Corporation will not
have to sell the security before recovery of Its cost basis. If these conditions are not met,
the Corporation must recognize an other·than•temporary impairment charge through
earnings for the difference between the debt security's amortized cost basis and its fair
value, and such amount is included In nonlnterest income. For these debt securities, the
Corporation separates the total Impairment Into the c1edit toss component and the amount
of the toss related to other factors. In order to determine the amount of the credit loss for
a debt security1 the Corporation calculates the recovery value by performing a discounted
cash flow analysis based on the current cash flows and future cash flows management
expects to recover. The amount of the total other·than•temporary impairment related to
the credit risk is recognized in earnings and ls included in noninterest income. The amount
of the total other-than-temporary impalnnent related to other risk factors is recognized as
a component of other comprehensive Income. For debt securities that have recognized an
_ o_ther·than-tempo!'lry}mpairfT!eflt thrn�gh.earrilngs1 lf ti/rough subsi::quent e.valuatlon there
is a 51gmtlcant increase in the cash flow expeded, the difference between the amortized
cost basis and the cash flows expected to be collected is accreted as Interest income.
Availabte·for·sale equity securities are reviewed for other-than-temporary impairment at
each reporting date. This evaluation considers a number of factors including, but not
limited to1 the length of time and extent to which the fair value has been less than cost,
the financial condition and near term prospects of the issuer, and management's ability
and intent to hold the securities until fair value recovers. If ft is determined that
management does not have the ability and Intent to hold the securities until recovery or
that there are conditions that Indicate that a security may not recover in value, then the
difference between the fair value and the cost of the security ls recognized In earnings and
is Included in nonfnterest income. No such tosses were recognized In 2014 or 2013.
Restricted Investments
The Bank is a member of the Federal Home Loan Bank System and Is required to Invest in
capital stock of the Federal Home loan Bank of Indianapolis {"FHLB''). The amount of the
required Investment is based upon the available balance of the Bank's outstanding home
mortgage loans or advances from the FHLB and is carried at cost plus the value assigned to
stock dividends,
The Bank is also a member of the Federal Reserve System and is required to invest in
capital stock of the Federal Reserve Bank ("FRB"). The amount of the required investment
is based upon the contributed capital of Eastern Michigan Bank and is carried at cost.
The Bank is a Fanner Mac I seller and is required to Invest in capital stock of farmer Mac,
The amount of required investment is based upon the consolidated assets at the time of
the initial stock purchase and is carried at cost.
Loans
Loans that management has the positive Intent and ability to hold for the foreseeable
future or until maturity or pay·off are generally reported at their outstanding unpaid
principal balances adjusted for charge·offs, the allowance for loan losses, and any deferred
fees or costs on originated loans. Interest income is accrued on the unpaid principal
balance. Loan origination fees, net of certain direct loan origination costs, are deferred
and recognized as an adjustment of the related loan yield uslng the interest method.
The accrual of interest on mortgage and commercial loans is discontinued at the time the
loan is 90 days past due unless the credit Is well-secured and in process of collection,
Consumer loans are typically charged off no later than 180 days past due. Past due status
Is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or
charged off at an earlier date If collection of principal and Interest is considered doubtful.
All interest accrued In the current year but not collected for loans that are placed on non­
accrual or are charged off, is reversed against interest income while Interest accrued but
not collected in prior years Is reversed against the allowance for loan tosses. The Interest
on these loans is accounted for on the cash-basis until qualifying for return to accrual.
Loans are returned to accrual status when all principal and interest amounts contractually
due are brought current and future payments are reasonably assured. For Impaired loans
not classified as nonaccruat, interest Income is recognized daily as it ls earned according to
the terms of the loan agreement.
Nonperforming loans of the loan portfolio are comprised of those loans accounted for on a
nonaccruat basis, accruing loans contractually past due 90 days or more as to Interest or
principal payments and loans modified under troubled debt restructurings (nonperforming
originated loans),
Allowance for Loan Losses
The allowance for loan tosses ("allowance") ls an estimate of loan tosses inherent in the
Bank's loan portfolio. The allowance is established through a provision for loan tosses
which Is charged to expense, Additions to the allowance are expected to maintain the
appropriateness of the total allowance after loan losses. Loan tos�es are charged off
against the allowance when the Bank determines the loan balance to be uncollectible.
Cash received on previously charged off amounts Is recorded as a recovery to the
allowance.
The allowance consists of two primary components, specific reserves related to Impaired
loans and general reserves. The general component covers non·impafred loans and is based
The historical loss experience is
on historical losses adjusted for current factors,
determined by portfolio segment and is based on the actual loss history experienced by the
Bank over the most recent four years. The Bank places more emphasis, or weight, on the
more current years In the loss history period. This actual loss experience Is adjusted for
economic factors based on the risks present for each portfolio segment. These economic
factors include consideration of the following: levels of and trends in delinquencies and
impaired loans; levels of and trends in charge-offs and recoveries; trends In volume and
terms of loans; effects of any changes in risk selection and underwriting standards; other
changes fn lending policies, procedures, and practices; experience, ability, and depth of
\endfng management and other relevant staff; national and local economic trends and
conditions; industry conditions; and effects of changes in credit concentrations. These
factors are inherently subjective and are driven by the repayment risk associated with each
portfolio segment.
A loan is considered impaired when, based on current information and events, it ls
probable that the Bank will be unable to collect the scheduled payments of principal or
interest when due according to the contractual terms of the loan agreement. factors
considered by management in determining impairment Include payment status, collateral
value, and the probability of co!tecting scheduled principal and interest payments when
due. loans that experience Insignificant payment delays and payment shortfalls generally
,)
. ����. .�
����������������������������������������������� G entin�e d �
• • • • • • • ••• • • • D • • t
-·-·····!•'�JIJlilJlilll�t·
Notes To Consol idated Fi nan cial Statem ents
(Dollars in thousands except share data)
are not classified a s impaired. Management determines the significance o f payment delays
and payment shortfalls on a case-by-case basis, taking into consideration all of the
o
e e ay,
Circumstances surroun mg .t e oan an t e orrower, me u mg
e eng
the reasons for the delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the principal and interest owed, Jmpafnnent Is measured on a loan·
by·loan basis by either the present value of expected future cash flows discounted at the
loan's effective interest fate, the loans obtained market price, or the fair value of the
co\lateral1 less costs to sell, if the loan Is collateral dependent. A loan is· collateral
dependent lf the repayment ls expected to be provided solely by the underlying co\later�l,
Large groups of smaller balance homogeneous loans are collectively evaluated for
Impairment. Accordingly, the Bank does not separately identify Individual consumer, home
equity, and resfdential real estate loans for impainnent disclosures, unless such loans are
the subject of a restructuring agreement or in the process of foreclosure.
The Bank evaluates the credit quality of loans In the consumer loan portfolio, based
primarily on the aging status of the loan and payment activity. Accordingly, nonaccruat
loans, loans past due as to principal or interest 90 days or more and loans modified under
troubled debt restructurings of the originated portfotlo and acquired loans past due in
accordance with the loans' original contractual terms are considered In a nonperforming
status for purposes of credit quality evaluation.
Under certain circumstances, the Bank will provide borrowers relief through loan
restructurlngs. A loan restructuring constitutes a troubled debt restructuring ("TDR") if for
economic or legal reasons related tO the borrower's financial difficulties the Bank grants a
concession to the borrower that It would not otherwise consider. Restructured loans
typically present an elevated level of credit risk as the borrowers are not able to perform
according to the original contractual terms. loans that are reported as TDRs are considered
Impaired and are measured for impairment as described above.
The Bank assigns a risk rating to all loans except pools of homogeneous loans and
periodically performs detailed internal reviews of all such loans over a certain ti)reshold to
Identify credit risks and to assess the overall collectabltlty of the portfolfo. These risk
ratings are also subject to e,xamination by the Bank's regulators. During the internal
reviews, management monitOrs and analyzes the financial conditi.on. of borrowers .and
guarantors, trends in the industries.in which the borrowers operate aod the falr values ·of
collateral securing the loans. These credit quality indicators are used to assign a risk rating
to each individual loan. The risk ratings can be grouped into five major categories, defined
as follows:
Pass: A pass loan is a credit with no existing or known potential weaknesses deserving
of management's dose attention.
Watch: loans classified as watch have most of the characteristics of a pass loan;
however, emerging weaknesses have been detected and warrant additional attention.
Special Mention: loans classffied as special mention have a potential weakness that
deserves management's dose attention. If left uncorrected, this potential weakness
may result In deterioration of the repayment prospects for the loan or of the Bank's
credit position at some future date. Special mention loans are not adversely classified
and do not expose the Bank to sufficient risk to warrant adverse classification.
Substandard: loans classffled as substandard are not adequately protected by the
current net worth and paying capacity of the borrower or of the collateral pledged, lf
any. loans classified as substandard have a well·deflned weakness or weaknesses that
jeopardize the repayment of the debt. Well defined weaknesses Include a borrower's
lack of marketability, inadequate cash flow or collateral support, failure to complete
construction on time, or the failure to fulfill economic expectations. They are
characterized by the dlstlnct possibility that the Bank will sustain some loss ff the
deficiencies are not corrected.
Doubtful: loans classified as doubtful have all the weaknesses Inherent in those
classified as substandard, with the added characteristic that the weaknesses make
collection or repayment in full, on the basis of currently existing facts, conditions, and
values, highly questionable and improbable.
loss:
loans classified as loss are considered uncotlectible and are charged off
immediately.
The majority of the Bank's consumer and residential loan portfolios are comprised of
secured loans that are evaluated at origination on a centralized basis against standardized
underwriting criteria. The ongoing measurement of credit qua!lty of the consumer, home
equity, and residential real estate loan portfol!os Is largely done on an exception basis. If
payments are made on schedule, as agreed, then no further monitoring is performed.
However, ff delinquency occurs, the delinquent loans are turned over to the Bank's
coltectlon department for resolution, which generally occurs fairly rapidly and often
through repossession and foreclosure. Credit qualfty for the entire consumer, home equity,
and residential real estate loan portfolio is measured by the periodic delinquency rate,
nonaccrual amounts and actual losses incurred.
The Bank maintains a separate general valuation allowance for each portfolio segment.
These portfolio segments include commercial and industrial, agricultural, real estate
related industries, other commercial loans, resfdentlat real estate, home equity and
consumer and other with risk characteristics described as follows:
Commercial and Industrial: Commercial and industrial loans generally possess a
lower Inherent risk of loss than real estate portfolio segments because these loans
are generally underwritten to existing cash flows of operating businesses. Debt
coverage is provided by business cash flows and economic trends influenced by
unemployment rates and other key economic indicators are closely correlated to the
credit quality of these \oans.
Agricultural: The risk associated with agricultural loans depends on current market
prices, weather conditions and other outside factors that are distinct to this
segment.
These loans as with commercial and Industrial loans are generally
underwritten to existing cash flows of operating businesses.
Debt coverage,
however, fs Influenced by different economic indicators than other commercial loans.
Real Estate Related Industries: These loans generally possess a higher inherent risk
of loss than other loan portfolio segments. Adverse economic developments or an
overbuilt market impact real estate projects and may result in troubled loans.
Trends in vacancy rates of commercial properties Impact the credit quality of these
I•••
• • • • ••••••••
loans. High vacancy rates reduce operating revenues and the ability for the
ro ertles to reduce sufficient cash flow to service debt obligations.
Other Commercial! Other commercial loans are cotlaterallzed by real estate and are
underwritten based upon existing cash flows of operating businesses. Because debt
coverage is provided by business cash flows, trends In real estate values have less
impact on this segment than other real estate segments and would be influenced
more by unemployment rates and other key economic indicators.
Residential Real Estate: The degree of risk ln residential mortgage lending depends
primarily on the loan amount in relation to collateral value, the Interest rate and the
borrower's ability to repay in an orderly fashion. These loans generally possess a
lower inherent risk of loss than other rea\ estate portfolio segments. Economic
trends determined by unemployment rates and other key economic Indicators are
closely correlated to the credit quality of these loans. Weak economic trends
indicate that the borrowers' capacity to repay their ob\igatlons may be deteriorating.
Home Equity: As with resfdential real estate, the degree of risk In home eqµity
lending depends on the loan amount ln relation to collateral value, the interest rate
and the borrower's ability to repay in an orderly fashion but in addition depends on
the value of any loan with a first lien interest. These loans generally possess a higher
Inherent risk of loss than residential real estate portfolio segments. Economic trends
determined by unemployment rates and other key economic indicators are closely
correlated to the credit quality of these loans. Weak economic trends Indicate that
the borrowers' capacity to repay their obtlgatlons may be deteriorating.
Consumer and other: The consumer and other loan portfolio is usually comprised of
a large number of smal\ loans, including automobile, personal loans, etc. Most loans
are made directly for consumer purchases.
Economic trends determined by
unemployment rates and other key economic indicators are closely correlated to the
credit quality of these loans. Weak economic trends indicate the borrowers' capacity
to repay their obligations may be deteriorating.
Although managenlent believes the aUowance to be appropriate, ultimate losses may vary
from its estimates. The Board of Directors reviews the appropriateness of the allowance
monthly, fndudln;i consifferation of the relevant risks ln the portfolio, current economic
conditions and other factors. If the Board of Directors and management determine thcit
changes are warranted based on those reviews, the allowance Is adjus.ted. In addition, the
Bank's primary regulators revfew the appropriateness of the allowance. The regulatory
agencies may require changes to the allowance based on their judgment about Information
available at the time of their examination.
Loans Held for Sale
Mortgage loans originated and intended for sale In the secondary market are carried at the
lower of cost or fair value In the aggregate and are Included ln loans on the accompanying
consolidated balance sheets. Net unrealized losses, if any, are recognized through a
valuation allowance of which the provision is accounted for ln the consolidated statements
of income.
Transfers of Financial Assets
Transfers af financial assets, Including mortgage loans held for sale, are accounted for as
sates when control over the assets has been surrendered. Centro\ over transfeired assets ls
deemed to be surrendered when 1) the assets have been legally isolated from the
Corporation, 2) the transferee obtains the right (free of conditions that constrain it from
taking advantage of that right) to pledge or exchange the transferred assets and 3) the
Corporation does not maintain effective control over the transferred assets through an
agreement to repurchase them before their maturity. Other than servicing, as disclosed in
Note 5, the Corporation has no substantive continuing involvement related to these loans.
The Corporation sold to an unrelated third party residential mortgage loans with proceeds
of $21343 and $6,757 during 2014 and 2013, respectively, which resulted in a net gain of
$83 and $187 for 2014 and 2013, respectively. Servicing fee Income earned on such loans
was $93 and $94 for 2014 and 2013, respectively, and ls included In other noninterest
Income on the consolidated statements of income.
Servicing
Servicing assets are recognized as separate assets when rights are acquired through the
purchase or sale of financial assets. Generally, purchased servicing rights are capitalized
at the cost to acquire the rights. For sales of mortgage loans, a portion of the cost of
originating the loan is allocated to the servicing right based on relative fair va\ue. Fair
value is based on market prices for comparable mortgage servicing contracts, when
available, or alternatively, is based on a valuation model that calculates the present value
of estimated future net servicing income. The valuation model incorporates assumptions
that market participants would use in estimating future net servicing income, such as the
cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary
income, prepayment speeds and default rates and losses.
Servicing assets or liabilities are amortized In proportion to and over the period of net
servicing income or net servicing loss and are assessed for impairment or increased
obligation based on the fair value of rights compared to amortized cost at each reporting
date. Impairment is determined by stratifying rights into tranches based on predominant
risk characteristics, such as Interest rate, loan type, and Investor type. Impairment ls
recognized through a valuation allowance for an individual tranche, to the extent that fair
value is less than the capitalized amount for the tranche. If the Bank later determines that
all or a portion of the Impairment no longer exists for a particular tranche, a reduction of
the allowance may be recorded as an increase to income.
Servicing fee income ls recorded for fees earned for servicing [cans for others. The fees
are based on a contractual percentage of the outstanding principal, or a fixed amount per
loan and are recognized as income when earned. The amortization of mortgage servicing
rights ls netted against loan servicing fee income, a component of noninterest income.
Foreclosed Assets
Assets acquired through, or Jn lieu of1 loan foreclosure are held for sale and are initially
recorded at fair value, less costs to sell, on the date of transfer, establishing a new cost
basis. Subsequent to foreclosure, valuations are periodically performed by management
and the assets are carried at the lower of the carrying amount or fair value less costs to
sell. Revenue and expenses from operations and changes In the valuation allowance are
included ln expenses from foreclosed assets, net, a component of other noninterest
expenses on the consolidated statements of income.
EASTERN MICHIGAN FINANCIAL CORPORATION
Continued ...
N otes To Consol id ated Fi n a nci a l Statem ents
(Dollars in thousands except share data)
Premises and Equipment
land Is carried at cost. Buildings and equipment are carried at cost, less accumulated
depredation which is computed principally by the stralght·lfne method based upon the
estimated useful lives of the related assets, which range from 3 to 40 years. Major
improvements are caplta!ized and appropriately amortized based upon the useful lives of
the related assets or the expected terms of the leases, ff shorter, using the straight·lfne
method. Maintenance, rep�lrs and minor alterations are charged to current operations as
expenditures occur. Management annually reviews these assets to determine whether
carrying values have been impaired,
entities, state and municipal bonds, corporate debt securities in active markets, and
auction rate money market preferred securities. Securities classified as level 3 include
securities In less liquid markets.
Share-Based Compensation Plans
Loans
For variabte---rate loans that reprice frequently and with no signfflcant change in credit risk,
fair values are based on carrying values. Fair values for fixed interest rate loans are
estimated using discounted cash flow analyses, using Interest rates currently being offered
for loans with similar tenns to borrowers of similar credit quality. The resulting amounts
ar� ailjuSlBU tu bti!lldlt! Uk t:ffl;!l.t uf t!t:i.Uue:., ·if duy; Tu l11� Lt et.Ill 4udllly ur Uurwwei�
since the loans were originated. Fair values for non·perfonning loans are estimated using
discounted cash flow analyses or underlying collateral values, where applicable.
'
Compensation cost relat1ng to share-based payment transactions are required to be
recognized In the consolidated financial statements. That cos17 is measured based on the
fair value of the equity or liability instruments issued on the grant dates and is recognized
over the service period, which is usually the vesting period.
Bank Owned Life Insurance
The Bank holds llfe Insurance polfcies purchased on the lives of key officers. In the event of
death of one of these fndivfduals1 the Bank, as beneflciaiy of the policies, would receive a
specified cash payment equal to the face value of the policy. Such policies are recorded at
their cash surrender vatue, or the amount that can be currently realized as of the balance
sheet date. The change in cash surrender value Is an adjustment of premiums paid in
determining the net expense or Income recognized under the contracts for the year and ls
included in other nonlnterest income.
Off�Balance Sheet Credit Related Financial Instruments
!n the ordfnaiy course of business, the Bank has entered into commitments to extend
credlt1 including commercial letters of credit and standby letters of credit. Such financial
instruments are considered to be guaranteesi however, as the amount of the liability
related to such guarantees on the commitment date ls considered insignificant, the
commitments are generally recorded only when they are funded,
Income Taxes
Deferred Income tax assets and liabilities are detennlned using the lfabllity (or balance
:;heet) method. Under this method, the net deferred income bX ruset or liability Is
determined based on the federal Income tax effects of the temporary differences between
the book and tax bases of the various balance sheet assets and liabilities and gives current
recognition to changes In federal income tax rates and laws. Valuation altowances are
established, where necessaiy, to reduce deferred tax assets to the amount expected more
likely than not to be realized, Income tax expense fs the tax payable or refundable for the
year plus or minus the change during the year in deferred tax assets and llabilltles.
Net Income Per Share
Basic earnings per share represent income available to common shareholders divided by the
weighted·average number of common shares outstanding during the period• .Diluted earnings
per share reflect additional common shares that would have been outstanding lf dilutive
potential common shares had been issued, as well as any adjustments to income that would
result from the assumed issuance. Potential common shares that may be issued by the
Corporation relate solely to outstanding stock options, and are determined using the treasury
stock method,
Rec!asslflcatlons
Certain amounts as reported lo the 2013 consolidated financial statements have been
redasslfled to conform with the 2014 presentation.
Subsequent Events
In preparing these consolidated financial statements, the Corporation has evaluated, for
potential recognition or disclosure, significant events or transactions that occurred during the
period subsequent to December31, 20141 the most recent balance sheet presented herein,
through Januaiy 30, 2015, the date these consolidated financial statements were available to
be issued, No such events or transactions were identified.
2.
FAIR VALUE MEASUREMENTS
The Corporation utilizes fair value measurements to record fair value adjustments to certain
assets and liabilities and to detennine fair value disclosures. Marketable securities available·
for·sale are recorded at fair value on a recurring basis. Additionally, from time to time, the
Corporation may be required to record at fair value other assets on a nonrecurring basis, such
as loans, loans held for sale, foreclosed assets, mortgage serilcing rights, and certain other
assets and liabilities. These nonrecurring fair value adjustments typicatty involve the
application of lower of cost or market accounting or write downs of fodividual assets.
Following is a description of the valuation methodologies and key inputs used to measure
financial assets and !lablllties recorded at fair value, as well as a description of the methods
and significant assumptions used to estimate fair value disclosures for financial instruments
not -recorded at fair value in their entirety on a recurring basis. For financial assets and
l!abllltles recorded at fair value, the description includes an Indication of the level of the fair
value hierarchy in which the assets or liabilities are classified.
Cash and Cash Equivatents
The carrying amounts of cash and short•term Instruments, including Interest bearing
balances due from banks, short-term money market investments, and Federal funds sold
approximate fair values.
Certificates of deposit held in other banks
The carrying amounts of certificates of deposit held in otherbanks approximate fair values.
Investment Securities
Investment securities dasslfled as avallable·for·sale are recorded at fair value on a
recurring, b�s. fair \'alue measurement is based upon quoted prices, ff available, If
quoted prices are not available, fair values are measured using Independent pricing models
or other modet·based valuation techniques such as the present value of future cash flows,
adjusted for the security's credit rating, prepayment assumptions and other factors such as
credit loss and liquidity assumptions. Level 1 securities include those traded on an active
exchange, such as the New York Stock Exchange, those that are traded by dealers or
brokers In active over·the---counter markets and money market funds. level 2 fair value
measurement is based upon quoted prices for slmllar securities, if available. lf quoted
prices are not available, fair values are measured using independent pricing models or
other model based valuation techniques such as the present value of future cash flows,
adjusted for the security's credit rating, prepayment assumptions and other factors such as
credit loss and liquidity assumptions. Level 2 securities include U.S. government and
federal agency securities, mortgage-backed securities issued by govemment·sponsored
Restricted Investments
The carl)'ing value of Federal Home Loan Bank Stock1 federal Reserve Bank Stock and
Farmer Mac Stock approximates fair value based on the redemption provisions of the
issuing entities.
The Corporation does not record loans at fair value on a recurring basis. Howev�r, from
time to time, a loan Is considered impaired and an allowance for loan losses is established.
Loans for which It Is probable that payment of interest and principal will not be made ln
accordance with the contractual terms of the loan agreement are considered Impaired,
Once a loan is identified as Individually impaired, management measures Impairment in
accordance with accounting standards for subsequent measurement of receivables. The fair
value of Impaired loans is estimated using one of several methods, including collateral
value, liquidation value and discounted cash flows. Those impaired loans not requiring an
allowance represent loans for which the fair value of the expected repayments or
collateral exceed the recorded investments in such loans. At December 31, 2014 and 20131
substantially all of the impaired loans were evaluated based on the fair value of the
collateral. Impaired loans where an allowance ls established based on the fair value of
collateral require classification in the falr value hierarchy. When the fair value of the
collateral is based on an observable market price or a currerit appraised value, the
Corporation records the impaired loan as nonrecurring Level 2. When a current appraised
value- is nut available or managE:mE:nt deLE:nllille!. l11t! fair Vdlu� uf tl1� Lulh1l�1al h further
impaired below the appraised value and there is no observable market price, the
Corporation records the impaired loan as nonrecurring Level 3,
Accrued Interest Receivable
The carrying amounts reported in the consolidated balance sheets for interest receivable
approximate their fair value.
Foreclosed Assets
Upon transfer from the loan portfolio, foreclosed assets are adjusted to and subsequently
carried at the lower of carrying value or fair value less costs to sell. Fair value Is based
upon independent market prices1 appraised values of the collateral or management's
estimation of the value of the collateral. When the fair value of the collateral Is based on
an observable market price or a current appraised value, the Corporation reports the
foreclosed asset as nonrecurring Level 2, When a current appraised value is not available or
management determines the fair value of the cotlateral is further impaired below the
appraised value and there is no observable market price, the Corporation reports the
foreclosed asset as nonrecurring Level 3.
Mortgage SerYlcing Rights
Mortgage seriicing rights are subject to impalnnent testing. A valuation model, which
utilizes a discounted cash flow analysis using interest rates and prepayment speed
assumptions currently quoted for comparable instruments and a discount rate determined
by management, is used for Impairment testing. Jf the valuation model reflects a value less
than the carl)'ing value, loan servicing rights are adjusted to fair value through a vatuatlon
allowance as determined by the model. As such, the Corporation classifies loan seriicfng
rights subjected to nonrecurring fair value adjustments as Level 3. At December 31, 2014
and 2013, there was no impairment recorded for mortgage servicing rights and, therefore,
no mortgage serilcing rights assets were recorded at fair value on a nonrecurring basis.
Interest- and Noninterest-Bear!ng Deposits
The fair values of demand deposit accounts, such as interest· and noninterest·bearing
checking, savings and money market accounts, are equal to the amounts payable on
demand. Fair \'alues for interest-bearing deposits (time deposits) with defined maturities
are based on the discounted value of contractual cash flows, using interest rates currently
being offered for deposits of similar maturities, The fair values for variable-interest rate
certificates of deposit approximate their carrying value,
Accrued Interest Payable
The carrying amounts reported lo the consolidated balance sheets for Interest payable
approximate their fair value,
Commitments to ExtenO Credit', Sta"ndby Letters of Credit, and Uridisbursed Loans
The Corporation's unused loan commltments1 standby letters of credit and undisbursed
loans have no carrying amount and have been estimated to have no realfzable fair value.
Historically, a majority of the unused loan commitments have not been drawn upon and,
generally, the Corporation does not receive fees in connection with these commitments.
The preceding methods described may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values. Furthermore, although
the Corporation believes its valuation methods are appropriate and consistent with other
market participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different fair value measurement at
the reporting date.
Continued ...
•••••••• ••••••••
•••••1llJllllJll!lil
lJl!ll
ll
li l!
l •
!ll ll
N otes To Conso l i d ated Financia l Statem ents
(Dollars in thousands except share data)
Assets Recorded a t Fair Value on a Recurring Basis
Ihe following tables set forth by level, within the fair value hierarchy, the recorded amount
of assets and liabititfes measured at fair value on a recurring basis as of December 31:
I
I'
·
Assets a� Fair Value
Jhe carrying amount and estimated fair value of hnanc1al mstruments not recorded atfair
value In their entirety on a recurring basis on the Corporation's consolidated balance sheets
are as follows at December 31:
I
j_
201 �
Level J' 'I�
e e
Leve1
,,'---___
_ji
l2
·v__
L�
1i�
1-"
..J c__���
L ___________...._;j
Investment securities available·for·sate:
U.S. government and federal agencies
Corporate bonds
Agency issued mortgage·backed
securities
States and municipals
Money market preferred securities
Total assets at fair value
1
i 201_"_
36,999
4,058
__filQ
___filQ
I
=ij
Assets at fair Value
$ 36,658
5,718
36,658
2,218
3,500
41,561
28,408
---
---12§.
---
�
�
-
41,561
28,408
�
M.W
2014
Level 1
Impaired loans (1)
Foreclosed assets (2)
1
2013
I
Impaired loans (1)
Level 1
Assets at Carrying Value
•J
Level 2
II
Level 3
1,949
476
Assets at Carr)ring Value
II
Level 2
II
Level 3
2,on
j�
1,949
476
Ii
Toto!
s
21on
I
J
(1) Certain impaired loans were remeasured and reported at fair value through a specific
valuation allowance based upon the estimated fair value of the underlying collateral.
Impaired loans of $1 1949 and $21072 as of December 31, 2014 and 2013, respectively,
were reduced by a specific valuation altowance totaling $702 and $640 as of
December 31, 2014 and 2013, respectlvety.
(2) Foreclosed assets as of December 31, 2014, which are carried at the lower of carrying
value or fair value less cost to sell, were written down from cost to $476 resulting in
charges of $76 to other nonlnterest income for the year then ended. There were no
foreclosed assets which were written down resulting fn a charge to earnings in 2013,
Quantitative information about level 3 fair value measurements Is as fotlows as of
December 31, 2014:
l
�ent
rn�ru
Impaired Loans
f'oredosed Assets
! --1
l��
Fair Value:
j
Valliatlon Tedinlq�
1,949
Discounted Appraisal
Value
Discount Applied to
Collateral Appraisal
-06
Olscouoted Appraisal
Value
D!scountAppl!ed to
Collateral Appraisal
1 4 . 75�
12,144
Liabilities:
Noninterest·bearlng
deposits
Interest-bearing deposits
Accrued interest payable
3.
Assets Recorded at Fair Value on a Nonrecurring Basis
The following tables set forth by level, within the fair value hierarchy, the recorded amount
of assets measured at fair value on a nonrecurring basis as of December 31:
j
Assets:
Cash and cash equivalents
Certificates of deposit
held in other banks
Restricted stock
Net loans
Mortgage se!Ylcing rights
Accrued interest receivable
,=
===
=
,=r
=
==
=
l=Le
U=
=
=
=
l[l'
1=z.
To , 1
1=
e:_
ve1
Le
=
1
ve
v=
e=
=
L
_____ _ _ _____
Total assets at fair value
36,999
4,058
53,768
22,419
53,768
22,419
----ii
]!�I
Investment securities available·for·sale:
U.S. government and federal agencies
Corporate bonds
Agency issued mortgage-backed
securities
States and municipals
Money market preferred securities
s
12,144
91076
9,076
1 ;n.9
1 ,022
135,337
257
946
1 ,229
1,022
136,481
257
946
51517
916
134,722
310
1,016
5,517
916
136,314
310
1,016
62,175
191 ,823
24
62,175
192,083
24
51 ,945
200,141
35
51 ,945
200,n2
35
INVESTMENT SECURITIES
The amortized cost and fair value of non·tradlng Investment securities, including gross
unrealized gains and losses, are summarized as follows as of December 31:
Available-for-Sate
Debt securities:
U,S. government and
federal agencies
Corporate bonds
Agency issued
mortgage·
backed securities
States and municipals
Total debt securities
Money market
preferred securities
100
6
53,621
___,
2�
2�
24
�
8
1 1 7,026
__
177
29
36,999
4,058
�
196
305
607
158
25
389
53,768
22 419
1 1 7,244
607
579
118 054
-
Total
190
le;]
.Gross
Unreallied
Losses
Available-for·Sa[e
Debt securities:
U.S. government and
federal agencies
Corporate bonds
Agency issued
mortgagebacked securities
States and municipals
Total debt securities
Money market
preferred securities
Total
37,141
5,751
42,195
0""'
28
64
---�
�
113,151
1 000
1 14 1 51
810
-
Value
50
9
533
42
36,658
5,718
121
418
�
�
598
755
74
1 ,404
41,561
28 408
1 1 2,345
6Q§
1 1 3 141
-
598
204
J
796
Investment securities with carrying values of $4,013 and $41004 at December 31, 2014 and
20131 respectively, were pledged to secure public deposits or for other purposes as permitted
or required by l�w.
Quantitative Information about Level 3 fair value measurements is as fotlows as of
December 31, 2013:
I
j Instrument
Impaired Loans
Weighted Average
andlor Range
Fa!r Value:
z,an
Ditt:ounted Appraisal
Vatue
Discount Applied to
C0Uate1<1t Appraisal
3 . 84:1:
Estimated Fair Values of Financial Instruments Not Recorded at Fair Value In their
Entirety on a Recurring Basis
Disclosure of the estimated fair values of financial instruments, which differ from carrying
values, often requires the use of estimates. In cases where quoted market values in an active
market are not available, the Corporation uses present value techniques and other valuation
methods to estimate the fair values of its financial instruments. These valuation methods
require considerable judgment and the resulting estfmates of fair value can be significantly
affected by the assumptions made and methods used. The methodologies for estimating fair
value of financial assets and llabitftles on a recurring and nonrecurring basis are discussed
above•
•••• •••
•• ••• ••••
EASTERN MICHIGAN FINANCIAL CORPORATION
Continued . . .
Notes To Consol i dated Fi nancial Statements
(Dollars in thousands except share data)
As of December 31, 20141 the Corporation's investment security portfolio consisted of 158
securities, 47 of which were fn an unrealized loss position. The unrealized losses are primarily
related to the Corporation's U.S. government and federal agencies, agency issued mortgage­
backed securities, and money market preferred securities as discussed be!ow.
The amortized cost and fair value of avaf\abte-for-sa\e securities grouped by contractual
maturity at December 31, 2014, are summarized as follows:
The Corporation has invested S1,000 In an auction rate money market preferred investment
security instrument, which is classified as avallable·for·sale and reflected at estimated fair
value. Due to credft market uncertainty, the trading for this security has been limited.
Because the decline ln the market value ls attributable to changes In interest rates and
limited trading, and not credit quality and because management does not fntend to sell the
security in an unrealized toss position, and it Is more likely than not that the Corporation will
not be required to sell the security before recovery of Its cost basls, the Corporation does not
conslder thfs security instrument to be other-than-temporarily impaired at December 3 1 1
2Q11�---°----- -·�------------- - ----·As of December 31, 2014 and 20131 management conducted an analysis to determine whether
Avallable·for·sa[e
U.S. goyemment
and federal
agencies
rporate bonds
Agency issued
mortgage·
backed
30,701
4,081
Co
8
securltles
States and
municipals
Money market
preferred
securities
Total availablefor-sale
(at cost)
fair value
all securities currently in_ ai:i unrea\lzed loss position, including auction rate money mafket
preferfed Security, shoti(d "be conifriered other·than-temporarlly impaired. Such analyses
considered, among other factors, the following criteria:
37,076
4,0 1
6,375
53,621
Has the value of the Investment declined more than what is deemed reasonable based
on a risk and maturity adjusted discount rate?
53,621
Is the investment credit rating below investment grade?
22,248
7,276
12,555
2,327
90
---
----
---
---
�
� '-'=
� � �
�
� �
� � �
___1,_QQQ
ls ft probable that the issuer will be unable to pay the amount when due?
____hQQQ
Is ft more likely than not that the Corporation will not have to sell the security before
recovery of its cost basis?
Has the duration of the investment been extended for an unreasonable period of time?
tlased on the Corporat10n's analysts using the above criteria, the fact that management has
asserted that it does not have the Intent to sell these securities In an unrealized loss position,
and that it is more likely than not the Corporation will not be required to sell the securities
before recovery of their cost basis, management does not believe that the values of any
securities are other•than•temporarily Impaired as of December 3 1 , 2014 or 2013.
Expected maturities may differ from contractual maturities because Issuers may have the
right to call or prepay obligations.
Money market preferred securities have no maturity and are not reported by a specific
maturity group. Because of their Variable monthly payments, mortgage·backed securities are
also not reported by a specific maturity group.
During 2013, proceeds from sales of available for sale securities amounted to approximately
$5,774. Gross realized gains amounted to $32 and gross realized losses amounted to $14
during 2013. There were no sales of avallable·for-sa\e securities during 2014. There were no
gross realized gains or losses during 2014.
Information pertaining to securities with unrealized losses aggregated by investment category
and the length of time that lndfvfdual securities have been In a continuous loss position at
December 31 Is as follows:
Avallable-for·sa[e
U.S. government
and federal
agencies
Corporate bonds
Agency issued
5,995
16,576
1,935
172
29
22,571
1,935
177
14
3
17,784
158
4,536
25
mortgage·backed
securities
States and
municipals
Money market
preferred
securities
6,306
15
1 1,478
4,045
17
491
29
4.
LOANS AND ALLOWANCE FOR LOAN LOSSES
The Bank grants commercial, consumer and residential mortgage loans to customers situated
primarily in Sanilac and St. Clair counties In Michigan. The ability of the Bank's debtors to
honor their contracts Is dependent upon the real estate and general economic conditions Jn
this area. Substantfa!!y alt of the consumer and residential loans are secured by various items
of property, while commercial loans are secured primarily by business assets and personal
guarantees; a portion of loans are unsecured.
loans are summarized as follows at Oecember 31:
Commercial and industrial
Agricultural
Real estate related industries
Other commercial
Residential real estate
Consumer and other
Home equity
Total loans
Allowance for loan losses
23,507
40,634
23,873
19,806
20,819
3,618
4 768
20,465
40,220
23,901
20,926
22,028
3,307
5 640
137,025
{1,688)
136,487
{1 765)
jJ:i 33Z s
Loans, net
--- ---- _filQ
19
_ _filQ
_
_0
_
190
111111
Total securities
aval!able-for·sa[e
Avallable-for·sa!e
U.S. government
and federal
agencies
Corporate bonds
Agency Issued
mortgage-backed
securities
States and
municipals
Mo"ney market
preferred
securities
Total securities
available-for-sale
134 722
The allowance for loan losses and loans are as follows for the year ended December 3 1 1 2014:
26,670
2,014
26,670
2,014
533
42
533
42
36,044
755
53
3,333
74
--- ---- -----..:lli. __2Q.:t
-----122
204
� � � � �
1 6.a.a
36,044
755
789
21
2,544
A!!owance for
!oari losses:
Sala.nee at
beginn!ng
of year
Provision for
loan losses
Loans charged
off
Recoveries of
loans
prev!owly
charged off
Balance at end
ofyear
Allowance for
Joan losses
attributable to
loans:
lndMd11aUy
evaluated for
Impairment
Collectively
evaluated for
lmpafnnent
Tota\ allowance
forloan \OS!les
175 s
241
25
(6)
566
182
20
106
110
(1 39}
"
13
(23}
(52}
{65}
{49)
{15)
{30)
475 $
___
, ___
10
_
,,
12
_
_
__
2
___
t,76S
69
{222}
-"
� � � � � � � LI.JM
105
s
1
_
16
___
_
_
103 s
213 s
67 -----.llQ
16
230
s
63
1_
___...lQi
_
_
s
•
19
__
s
JS
S
702
20 ____ill.
_
_
_
i......ll8 i.......JZ.!! � L....:lJl � i......Ji � �
• • • • • • • • • • • • • • ••
••••11!11llJlll!.._••••.t•••
Notes To Conso l idated Financial Statem ents
(Dollars in thousands except share data)
loans:
lnd!vldually
eY'll\uated for
Impairment
Collectively
evaluated for
Impairment
TotallDa11$
729
$
2,451
1,598 s
"'
1,031
s
s
•
s
145
6,2Jl
Risk rating
____ll.,Zli � � ----1Ll12 � --1..ill. -----1&ll -1l2.I2l
�
� i......llJZl �
� i..J.W. � WZ,W
The allowance for loan losses and loans are as follows for the yearended December 31, 2013:
21,878
576
18,245
1,021
163
25
36,484
1,243
386
1,212
895
1,355
92
1,295
365
�Q :ii�
4Q ��Q
·� 201
19,891
386
p,,,
Watch
Special mention
Substandard
Doubtful
Total
96,498
3,226
386
4,025
-----1...lll.
,i;i 2•a �
The following table shows the homogeneous loans allocated by payment activity as of
December 31, 2013:
1·---i1
Allowance for
loan [cues:
Salance at
beflnnlns
of�ar
Provision for
loan losses
Loam charged
off
Recoveries of
loans
prevlo�y
diafied of(
203
1\6
1,142 s
797
328
41
198
56
(58)
(ll)
"'
{36)
""''
C295}
(16)
(678)
(167)
____:i. --' ---"-
s
___
,,
--·
2,758
131
283
(4)
(26)
(1,401)
5 _.ill
___
L
11
;j
�
-
Payment activity
Performing
Non·perfonnlng
Total
.
Comomec Credit Risk Profile by Risk Rating
Resldentlal
Real Estate
11
J
Consumer
and Other
3,307
21,306
---111
jl---il
111
j Home Eg!!!_ty-J!
5,405
_ill
Total
s 29,908
--1.QQZ
�
The following table shows an aging analysis of the loan portfolio by time past due as of
December 31, 2014:
)J\owance for
loan losses
attl1butable to
!t>arm
lndlvidually
ewiluated far
Impairment
7
167 s
105
5
279
s
"
5
•
5
70
s
640
Collecttvely
evaluated for
lmpalrrneot
Total atlawance
fw loo.n \ones
Loans:
!nd!vldually
evaluated for
Impairment
Cotlectfvely
evaluated for
Impairment
63
s
2,493
t,791 s
t,732
7ll s
s 7,146
J.45
Commercial and
Industrial
Agricultural
Real estate related
Industries
Other commercial
Residential real estate
Consumer and other
Home equity
23,442
39,nJ
23,252
19,426
20, 139
3,613
�
401
5
_
_
_
_
13
65
861
23,507
40,634
621
380
279
23,873
1 9,806
20,819
3,618
�
9
____
Total
---12.dQ2
---1L71J.. -2lJ.1Q --..ri.lli � _hl2Z. ----2.fil _lli.lli
Tctal loam
The following table shows an aging analysis of the loan portfo\lo by time past due as of
December31, 2013:
The following table shows the loans allocated by management's Internal risk. ratings at
December 31, 2014:
Risk. rating
Pm
Watch
Special mention
Substandard
Doubtful
Total
22,400
966
116
25
'� �QZ
37,717
466
354
2,097
22,044
568
1 , 169
92
:ii;i a�:i
·� §Z�
18,178
632
268
459
269
19
s
100,339
2,632
1,791
2,764
-----12:!
SQQ �
The following table shows the homogeneous loans allocated by payment activity as of
December 31, 2014:
Commercial and
Industrial
Agricultural
Real estate related
Industries
Other commercial
Residential real estate
Consumer and other
Home equity
Tota[
20,425
39,342
23,014
20,097
20,919
3,307
-----2.JM
15
25
878
20,465
40,220
387
m.
887
829
23,901
20,926
22,028
3,307
2
_
1 ----
� � '-----' � i...J.lM1lZ
The following table presents Information related to Impaired loans as of December 31, 2014:
J
Unpaid
'8',',','0�',' fj P8n00,,1:!�a0I
...
Payment activity
Performing
Non-performing
Total
20,540
3,618
----172..
----
4,759
9
____
�
�
�
28,917
�
�
Loans with no related
aUowance recorded
Commercial and
455
Industrial
Agricultural
2,032
Real estate related
1 , 109
Industries
466
other commercial
Residential real estate
213
Home equity
---'
Loans with an
allowance recorded
Commercial and
Industrial
274
419
Agricultural
Real estate related
489
Industries
Other commercial
555
66
Resldentlal real estate
_
_
_
13_
6
Home equity
I••••••••
•••••••
_____:m. ----2MQ
_
_
_
....
fl
I
!J
!\
Averas,e 1 lntere�tI
Related
Recorded
lni:ome !
Allowance i Investment ! Recognized j
I
!'
459
2,131
253
2,044
1 ,901
644
341
_
_
_
2
_
0 ----
23
61
17
1,156
15
714
455
_
_
_
5
_
7 ----
274
419
105
103
143
428
12
17
795
621
66
_
_
_
14
_
2
213
230
16
_
_
_
3_
5
538
667
46
22
27
EASTERN MICHIGAN FINANCIAL CORPORATION
--1M
(Dollars in thousands except share data)
The followfng table details the number of loans and the recorded investment In loans
considered to be troubled debt restructurfngs {"TDRs") by type of modiffcatlon during 2014:
Total impaired loans
Commercial and
Industrial
Agricultural
Real estate related
industries
other commercial
. Resjdentfal real.estate
Home equity
729
2,451
1,598
1,031
279
____ill
105
103
396
2,472
35
78
2,696
213
230
1 ,265
. 407
16
35
___
16
_
2 ____
1,694
1,381
:i01
39
42
733
2,550
· · Agrtcutturat
4
_ill
Other commercial
Resfdentfat
real estate
Home equity
____
Total
The following table presents information related to Impaired loans as of December 31, 2013:
Total
"
39
39
2
_
1_
158
___
7
_
5
-
....i-.
�
..l..
158
___7
_
5
:z�
�
A summary of loans that were modified in troubled debt restructurings during 2013 Is as
follows:
Loans with no related
allowance recorded
Commercial and
54
industrial
50
2,056
Agricultural
2,138
Real estate related
Industries
1 ,958
1,205
Other commercial
962
1,513
696
Rt:S.i<lt:ulidl 11:!..l �talt:
907
Home equity
12
_
1
----1Q.2. ____
Loans with an
allowance recorded
Commercial and
Industrial
13
437
Agricultural
Real estate related
586
industries
770
Other commercial
26
Residential real estate
Home equity
_-.MQ
Total impaired loans
Commercial and
industrial
Agricultural
Real estate related
industries
Other commercial
Residential real estate
Home equity
Total
�
2
86
1,110
1,119
343
____
62
16
15
10
4
____
45
218
2
26
167
1,654
279
1,128
12
380
19
_
9
___7
_
0 ___
30
41
7
105
13
437
882
815
28
54
2,232
63
2,493
67
2,575
1,791
1,732
722
2,840
2,328
935
_____,., ______ill.
7
105
�
TroUb!ed Debt estructti.rings
_
-, . ..•
.: ,,.. :.i.".,.� ·;�, 1
�
Agricultural
Rc;il cstntc relnted
Industries
rl . Pre'),1.0pifjcatfon:
·
ohtstandin§_"
..·.!. P�.s�;:
Modification
oi:itstaridlriB
' /'"Recor'detL"- · ···�ecorcrecr.:··
Investment
lrivesttTient
2
938
938
1
____�
1 1�
2
___
1_
12
__
1_0
_5_0 .L...l..222
_
_
_
The following table details the number of loans and the recorded Investment in loans
consfdered to be troubled debt restructurings ("TDRs'') by type of modification during 2013:
8
____
99
2,450
_.
Numbi?f .: •
. . . , i.:osns�:· ·�:·
4
112
46
2,764
1 67
56
279
2,247
728
10
12
26
_
1 ___1_
2
___
7
_
0 ___
Agricultural
Real estate
related
Industries
� � � � �
The Bank does not have material commitments to lend additional funds to borrowers with
loans whose terms have been modified in troubled debt restructurfngs or whose loans are on
nonaccrual.
Total
A summary of loans that were modified In troubled debt restructurfngs during 2014 ls as
follows:
2
_
,_
____
1 1_
2
-
...l...
�
.i.
938
938
___
1_
12
2�8
�
There were no TDRs for which there was a payment default whereby the borrower was past
due with respect to principal and/or interest for 90 days or more during the 12 months ended
December 311 2014 and 2013, that had been modlfled during the 12-month period prior to
default.
5.
SERVICING
The Bank services loans for others which generally consists of collecting mortgage payments,
maintaining escrow accounts, disbursing payments to Investors and taxing authorities, and
processing foreclosures, L.oans se(Vlced as of December 311 20H and 2013, wer:e $35,264 and
S37,n4, respectlvelyj such loans are not included on the accompanying consolidated balance
sheets,
Agricultural
Other commercial
Residential real estate
Home equity
_
1_
75
39
158
75
-2...
J�Z i..._JjZ
1
1
2
75
39
158
___7
_
5
The fair values of mort!Jage servicing rights were 5257 and $310 at December31, 2014 an<'"'
2013, respectively. The fair values of servicing rights was determined usfng discount r<.i.es
ranging from 8.5% to 10.0%, prepayment speeds ranging from 4.3% to 23.7%1 depending upon
the stratification of the specific right, and a weighted average default rate of 0%.
The following summarizes the carrying value and the changes therein of mortgage servicing
rights for the years ended December 31:
Mortgage servicing rights
Balance at beginning of year
Mortsage servicing rights capitalized
Mortgage servicing rights amortized
Balance at end of year
310 $
28
281
58
2sz .
s
�
11.
o
---�'�8-1) ----�'�2•�1
_
_
_
Continued
.••
•••••• • • • • •• • • • •
......
.
...
N ot es To Con so l idated Finan cial Statem ents
(Dollars in thousands except share data)
6,
FORECLOSED ASSETS
Foreclosed assets are presented net of a valuation allowance for Impairment losses. The
following Is a summary of the changes In the allowance for impairment losses during the years
ended December 3 1 :
608
Balance, beginning of year
328
Charge--offs
(39)
(399)
Provision for losses
115
119
404
328
Balance, end of year
s
Expenses applicable to foreclosed assets conslst of the following amounts for the years ended
December 31:
2014 .
7.
: II
2013
s
59
Net (gain) loss on sales of real estate
(93)
Provision for losses
Operating expenses, n e t o f rental income
115
78
119
2
Total expenses
109
j§Q
Bank premises and land
Furniture and equipment
Total
Less accumulated depredation
Premises and equipment, net
8,555
4 633
8,511
4 619
13,188
7 346
13,130
7 039
g Q2l
� §:ili
DEPOSITS
The following ls a summary of the distribution of deposits at December 31:
. ,
I
2013 �...: _:;
. .,..-j , "
"·
Interest-bearing
NOW accounts
Savings
Money market demand
Time, $100,000 and over
Other time
43,795
49,609
50,742
10,407
37 270
45,623
46,176
49,688
15,319
43 335
191 ,823
200,141
62 175
51 945
��d 22§
252 O§Q
Total Interest-bearing
Noninterest-bearlng demand
Total deposits
Total
9.
618
518
Deferred tax assets
Allowance for loan losses
Unrealized loss on availablefor-sale securities
Nonaccrual loan interest
Deferred !can fees/costs
Capital toss carryover
Other real estate
Other
�·:
JI
�
.·-A Ouiit'
.,.
Deferred tax Jlabilities
Depredation
Mortgage servicing tights
Unrealized gafn on avallab\efor-sale securities
Other
Total deferred tax lfab!lltles
Valuation allowance
Net deferred tax asset
281
298
35
45
40
96
188
344
37
43
83
62
179
685
1 046
170
87
233
105
8
so
36
315
374
(40)
��!2 s
{85)
�87
The Corporation concluded that there are no significant uncertain tax positions requiring
recognition ln the Corporation's consolidated financial statements based on the evaluation
performed for the years 2011 through 2014, the years which remain subject to examination by
major tax jurisdictions as of December 31, 2014. The Corporation does not expect the total
amount of unrecognized tax: benefits ("UTB") (e.g. tax: deductions, exclusions, or credits
claimed or expected to be claimed) to significantly change In the next 12 months. The
Corporation does not have any amounts accrued for Interest and penalties related to UTBs at
December 3 1 , 2014 or 2013, and It Is not aware of any claims for such amounts by federal or
state Income tax authorities.
Loans
�
ordinary course of business, the Bank grants loans to certain directors, executive
officers and their affiliates. Such loans aggregated to $2,781 and $2,846 at December 3 1 ,
2014 and 2013, respectively.
Scheduled maturities of time deposits for each of the five years succeeding December 31,
2014, are summarized as follows:
2015
2016
2017
2018
2019
Income taxes
Th e components o f the n e t deferred Income tax: asset Included within other assets I n the
accompanying consolidated balance sheets, resulted from the following temporary
differences between the carrying amounts of assets and llabllltles for federal Income tax and
financial reporting purposes as of December 3 1 :
1 0 . RELATED PARTY TRANSACTIONS
Interest expense on time deposits Issued fn denominations of $100 or more was $161 ln 2014
and $216 ln 2013.
Ye�r'
795
{185)
1921
A deferred tax asset valuation allowance has been recorded as of December 31, 2014 and
2013, to reduce deferred income tax: assets to the amount reasonably expected by the
Corporation to ultimately be realized.
Depredation expense was $519 and $504 for2014 and 2013, respectively.
j
831
(150)
C63)
Total deferred tax assets
PREMISES AND EQUIPMENT
Net premises and equipment consists of the following amounts at December 31:
8.
Income tax provision at statutory rate
Effect Of tax-exempt interest Income
Other, net
·I
Deposits
Deposits of Corporate directors, executive officers and their affiliates were $829 and $1 ,250
at December 31, 2014 and 2013, respectively.
1 1 . OFF-BALANCE SHEET ACTIVITIES
The Bank Is a party to credit related financial instruments with off�balance·sheet risk In the
normal course of business to meet the financing needs of Its customers. These financial
instruments Include commitments to extend credit, standby letters of credit and commercial
letters of credit. Such commitments Involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized In the consolidated balance sheets. The
Bank's exposure to credit loss ls represented by the contractual amount of these
commitments. The Bank fo!lows the same credit policy ln making commitments, Including
requirements for collateral, as It does for on-balance-sheet Instruments; no significant losses
are anticipated as a result of these commitments.
29,292
7,214
6,790
2,258
2 123
:!Z �zz
At December 31, 2014 and 2013, the following financial instruments were outstanding whose
contract amounts represent credit risk:
FEDERAL INCOME TAXES
The provision for federal Income taxes consists of the following components for the years
ended December 31:
2014
2013
Currently payable
Deferred (benefit) expense
713
1951
25
493
Income taxes
6 18
518
• • •••••• •• ••••••
Unfunded commitments under lines of
credit
Commitments to grant loans
Commercial and standby letters of credit
Continued ...
EASTERN MICHIGAN FINANCIAL CORPORATION
19,810
4,701
986
18,443
5,557
994
_ <'
(Dollars in thousands except share data)
Unfunded commitments under commercial lines of credit, revolving home equity lines of
credit and overdraft protection agreements are commitments for possible future extensions
of credit to existing customers. The commitments for equity lines of credit may expire
without being drawn upon. These lines of credit are uncollaterallzed and usually do not
contain a specified maturity date and may not be drawn upon to the total extent to which the
8ank Is committed. A majority of such commitments are at fixed rates of Interest; a portion
fs unsecured.
Commitments to extend credit are agreements to lend to a customer as long as there ls no
violation of any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee, The
commitments may expire 'Nlthout being drawn upon. Therefore, the total commitment
amounts do not necessarily represent future cash requirements. The amourit of collateral
obt;ifn'1d1 ·If-It ir d""m"d 0'1C'1iiary b<j the BanJ.:1 k ba&ed on managoment't: credit-evaluation··
of the customer.
Commercial and standby letters ct credit are conditional commitments issued by the Bank to
guarantee the performance of ci.' customer to a third party. These letters of credit are
primarily Issued to support public i:ind private borrowing arrangements. Essentially all letters
of credit Issued have expiration dates within one year. The credit risk Involved In Issuing
lette!'s of credit Is essentially the same as that Involved in extending loan fadlltles to
customers. The Bank generally holds collateral supporting those commitments, if deemed
necessary, Guarantees that are not derivative contracts have been recorded on the
Corporation's consolidated balance sheets at their fair value at Inception. The Bank considers
standby letters of credit to be guarantees; however, as the amount of the liability related to
such guarantees on the commitment date Is not significant, a tfablllty related to such
guar�ntees ls not recorded at December 31, 2014 or 2013.
12. COMMON STOCK ACTIVITY
During 20131 the Corporation repurchased 11021 shares of common stock {see note 16), The
repurchase price In excess of the amounts identified with the original Issuance of the common
stock was charged entirely to retained earnings, There were no repurchases of common stock
ln 2014.
Total Capital to Risk
Weighted Assets:
Consolidated
Bank
-S
�
7.B,890
28,701
1R.77�
18.65
Tfer 1 Capital to Risk
Weighted Assets:
Consolidated
Bank
27,125
26,936
17.63
17.50
6,156
6,156
4.0
4.0
NIA
9,234
NIA
6.0
Tier 1 Capital to
Average Assets:
Consolidated
Bank
27,125
26,936
9.75
9.69
11,123
1 1 ,123
4.0
4.0
NIA
13,904
NIA
s.o
.11,::i.1 1 .
12,311
R.0%
8.0
NIA
15,389
NIA
10.0%
Restrictions on Cash and Amounts Due from Banks
The Bank ls requlred by regulatory agencies to maintain legal cash reserves based on the level
of certain customer deposits, There was no required reserve balance at December 31, 2014
or 2013.
Restrictions on Dividends, Loans and Advances
F-ed.:.ral and state banh.ing regulalions pt<ic<: l.�llaiu l�lrh..trom• un
.
Ute d!HUUJIL ur (Ud.0� U!
advances that can be extended to the Corporation by the Bank and d!Vfdends that can be paid
to the Corporation by the Bank. The total amount of dlvldends which may be paid at any
date Is generally limited to the retained earnings of the Bank, and loans or advances are
limited to 10% of the Bank's capital stock and surplus nn a secured basis. In addition
dividends paid by the Bank to the Corporation would be prohibited ff the effect thereof woul
cause the Bank's capital to be reduced below applicable minimum capital requirements.
d
1 3 , REGULATORY REQUIREJ..\ENTS
Capital Requirements
The Corporation {on a consolidated basis) and the Bank are subject to various regulatory
capita\ requirements administered by the federal banking agencies. Failure to meet minimum
capita\ requirements can initiate certain mandatory and possibly additional discretionary
actions by regulators, that If undertaken, could have a direct material effect on the
Corporation's and Bank's ffnanda! statements. Under capital adequacy gulde\lnes and the
regulatory framework for prompt corrective action, the Corporation and the Bank must meet
specific capita\ guidelines that Involve quantitative measures of t�elr assets, liabl!lties,
capital and certain off-balance-sheet Items as defined In the regulations and calculated under
regulatory accounting practices. The capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and other factors,
Prompt corrective action provfslons are not applicable to bank holding companies.
Quantitative measurements established by regulation to ensure capital adequacy require the
Corporation and the Bank to maintain minimum amounts and ratios (set forth In the following
table) of total and Tier 1 capital (as defined In the regulations) to risk·welghted assets (as
defined) and Tier 1 capital to average assets (as defined). Management be\feves, as of
December 31, 2014 and 2013, that the Corporation and the Bank met all capital adequacy
requirements to which they are subject.
As of Oecember311 2014, the most recent notification from the Federal Deposit Insurance
Corporation categorized the Bank as welt capltallzed under the regulatory framework for
prompt corrective action. To be categorized as well capltatlzed, an Institution must maintain
minimum total risk-based, Tier 1 risk·based, and Tier 1 leverage ratios as set forth in the
fo\lowlng tables. There are no conditions or events since the notification that management
believes have changed the Bank's category. The Corporation's and the Bank's actual capital
amounts and ratios as of December 311 2014 and 2013 are also presented In the table.
14. CONTINGENCIES
Litigation
The Corporation Is party to litigation arising durfn!l the normal course of business. In the
opinion of management, based on consultation with legal counsel, the resolution of such
litigation Is not expected to have a material effect on the consolidated financial statements.
Environmental Issues
Af a result of acquiring real estate from foreclosure proceedings, the Corporation Is subject
to potential claims and possible legal proceedings Involving environmental matters. No such
claims have been asserted as of December 31, 2014.
15. EMPLOYEE BENEFIT PLAN
40Hkl Plan
The Bank maintains a deferred compensatlon plan qualified under Section 401 (k) of the
Internal Revenue Code. Under this plan, eligible employees are permitted to contribute up to
25% of gross compensation into the retirement plan up to a maximum determined by the
Internal Revenue Code; the Bank matches each employee contribution at a rate of up to 50%
of the first 6% contributed by the employee. Expenses associated with the plan amounted to
$68 and $66 In 2014 and 2013, respectively.
The 401{k) retirement plan also has a defined contribution profit sharing feature that covers
substantially all of Its employees, Contributions to the plan are based on an employee's
earnings, as defined In the plan document. Expenses assodated With the plan amounted to
$138 and $134 In 2014 and 2013, respectively.
Bank-Owned life Insurance
The Bank has Invested In single premium, bank owned, whole life insurance policies on
certain officers of the Bank. Bank owned life Insurance Is an a{ternatlve investment vehicle,
generally non·llquld, which may produce addltfonal earnings to offset, and later fund, various
employee supplemental benefit expenses. The earnings on the policies are not l3){ed unless ·
'Nlthdrawn or surrendered prior to the death of the Insured. The Increase In cash surrender
value of the policies, which was $148 and $135 fn 2014 and 2013, respectively, ls included fn
nonlnterest income In the accompanying consolidated statements of Income.
Total Capital to Risk
Weighted Assets:
Conso!fdated
Bank
30,038
29,854
19.30%
19.19
Tier 1 Capital to Risk
Weighted Assets:
Consoltdated
Bank
18,350
28,166
18.22
18.10
6,224
6,224
Tier 1 Capital to
Average Assets:
Consolidated
Bank
28,350
28,166
9.95
9.89
1 1,396
11,396
12,449
12,449
8.00%
s.oo
NIA
15,561
NIA
1 0.00%
4.00
4.00
NIA
9,337
NIA
6.00
4.00
4.00
NIA
14,245
NIA
5.00
The benefit promised by the Bank to the covered officers ls establfshed at 1 times the
officer's salary at date of death; such benefit expires If the officers' employment is
terminated for any reason other than death, including voluntary or involuntary termination or
retirement. Based primarily on the ages of the covered officers, the Bank believes that the
payment of.such benefits ls not probable; accordingly, the Bank has not recorded a liability
for such benefits.
16. COMMON STOCK COMPENSATION ?LAN
Share•based compensation cost related to employee stock optfons ls measured on the grant
date, based on the falr value of the award calculated at that date, and Is recognized Over the
employee's requisite service period, which generally is the options' vesting period, Fair value
is calculated using the Black·Scho\es option pricing model.
Continued
.•.
• ••••• • • • • ••••• •
..................
Notes To Conso l idated Financial Statem ents
(Dollars in thousands except share data)
The fair value of each option grant Is estimated on the date of the grant using the Black·
--<Sc"l"'1omtes�o t1011-plfch1g model wid1 Liie rnttowirrg-weighted avetage assumptions-forthe-y'""',_-----­
----p
ended December 31, 2014:
Rlsk·free Interest rate
Expected tenn
Expected stock price volatfllty
Dividend yield or expected dividend
2.71%
10 years
13.43%
3.44%
Under the Corporation's 2012 Employee Stock Option Plan, the Corporation may grant options
to Its directors, officers and employees for the purchase of up to 128,000 shares of common
stock, which can be Increased annually up to 3% of the shares outstanding at January 1, 2013,
{1,131,649) or 33,949 shares. The exercise of each option equals the market price of the
Corporation's stock on the date of grant and an option's maximum term Is ten years. The
options vest ratably over five years from date of grant. The Corporation also has options
outstanding under a Plan established In 2000 and tennlnated In 2009. The terms of the 2000
Plan are essentially the same as the 2012 Plan. For the years ended December 31, 2014 and
2013, the Corporation recognized $2 and $31 respectively in compensation expense for stock
options. There was an Impact of $0.01 to diluted earnings per share In 2014. As of
December 31, 2014, unrecognized compensation costs related to nonvested awards amounted
to $7 and wilt be recognized over a remaining weighted average period of approximately 5
years.
The expected volatlllty is based on historical volatility. The risk·free interest rates for
periods within the contractual life of the awards are based on the U.S. Treasury yield curve In
effect at the time of the grant. The expected life Is based on historical exercise experience.
The dividend yield assumption ls based on the Corporation's history and expectation of
dlvfdend payouts.
In general, the Corporation's policy is to issue new shares upon the exercise of a stock optfonj
however, the option holder has the option under the Plan to sell shares of stock owned by the
holder to the Corporation to facilitate the exercise of options {see Note 12). A summary of
the changes In the status of the Corporation's stock option plan Is presented below:
Outstanding at
January 1 1 2013
Granted
Exercised
Forfeited
Outstanding at
December 31, 2013
Granted
Exercised
Forfeited
Outstanding a t
December 3 1 , 2014
106,021
30,996
{5,041)
�
102,594
31,716
{1,625)
16.90
4.23
13.30
10.rn
__!MI
15.57
3.74
16.00
10.10
----1M2Q)
�
�
�
The fair value of options granted during 2014 and 2013 was $8 and $1, respectively.
As of December 3 1 , 2014, 44,881 optfons under the 2009 plan are outstanding at an average
exercise price of $20.48 {range of $10.10 - $24.75), all of which are exercisable. As of
December 31, 2014, 85,244 options under the 2012 plan were outstanding at an average
exercise prfce of $14.0Z (range of $12.75 - $16.00) of which 151675 are exercisable.
17. SUPPLEMENTAL CASH FLOWS INFORMATION
Other cash Flows Information
Cash paid for Interest and Income taxes amounted to the following during the years ended
December 3 1 :
2014
ii
2013
Interest
656 "----''"'0"'7
Income taxes
678 "-----"4""80
Non·Cash Investing Activities
Collateral repossessed on real estate loans having carrying values In the amount of $1, 162 and
$761 on the date of transfer was transferred to foreclosed assets in 2014 and 2013i
respectively.
During 2013, options for the purchase of 5,041 common shares were exercised. Jn accordance
with the Plan document, 1,021 outstanding shares of common stock were repurchased by the
Corporation to facilitate the exercise of 1 ,566 options. Total value assigned to the
repurchased shares was $16. Total consideration paid In connection with the exercise of 11566
options was $0 plus the value of the repurchased shares. The remaining 3,475 options were
exercised at $10.10 with total cash consideration of $35.
End of Notes
••••••••••••••••
EAS1ERN MICHIGAN FINANCIAL CORPORATION
r� �e h m a n n
Rehmann Robson
5800
Gratiot Rd.
Suite
201
Saginaw, MI
INDEPENDENT AUDITORS' REPORT
48638
Ph: 989.799.9580
Fx: 989.799.0227
rehmann.com
January 30, 2015.
Shareholders and Board of Directors
Eastern Michigan Financial Corporation
Croswell, Michigan
We have audited the accompanying consolidated financial statements of Eastern Michigan Financial
Corporation (the Corporation), which comprise t.he consolidated balance sheets as of December 3 1 ,
2014 and 2013, and the related consolidated statements o f income, comprehensive income,
shareholders' equity and cash flows for the years then ended, and the related notes to the
consolidated financial statements.
Management's Responsibility for the Consolidated Financial Sta tements
I
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted i n the United States of
America; this includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Independent Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on auditor judgment, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error. I n making those risk assessments, the auditor considers internal control relevant
to the Corporation's preparation and fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Corporation's internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
ln- our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Eastern M ichigan Financial Corporation as of December 3 1 , 2014
and 201 3 , and the results of their operations and their cash flows for the years then ended in
accordance with accounting principles generally accepted in the United States of America.
�-t� LLC
Rehmann is an independent member of Neria International.
CPAs &
Consultants
Wealth Advisors
Corporate Investigators
l�IU!ir!i
INTERNATIONAL
•• ••••••••• • • • • •
·J··�····· ­
N ew
in
2014
N ew Location
I n June, our Croswell branch a n d d rive thru
staff moved into their new home at 37 N.
Howard Aven u e, just a short distance away
from o u r 65 N. Howard admi nistration
building. The move was very exciting for
us! O u r lobby a n d drive thru services a re
now consolidated u nder one roof a n d the
new branch has a walk-up ATM, something
we've p reviously been una ble to provide in
downtown Croswell.
New Look For Our Website
(Responsive Design)
In December we re-launched o u r website, using a responsive
web design format. S i m p ly put, a responsive website
a u tomatically optimizes itself to match the d evice it is being
viewed on. Now, n o matter what kind of device our customers
use to visit us at www.easternmichiganban k.com, we're
confident o u r site will be just as easy to read and n avigate
from a s m a rt phone or tablet as it is from a PC.
· - - · · ·"='
,,,__
�
-
--
-
New Way To Bank
(Mobile Banking)
At the end of December, we also lau nched m o b i le banking.
An extension of our o n line b a n king service, now customers
ca n check account ba lances a n d transa ction histories,
transfer funds a n d pay b ills conveniently using their
mobile p h o n e or any web enabled d evice .
••••-••-•---•••
EASTERN MICHIGAN FINANCIAL CORPORATION
• • • • • • • • • • • • • • • • • • • • • • • • • • • • •••• • • • • • • •
We've Stood the Test of Ti me.
--------------------------------------·
_,
Form FR Y-6
Eastern M i c h i g a n F i n a n c i a l Corporation
C roswe l l , M l
. F i s c a l Year Ended Dec e m b e r 3 1 , 2 0 1 4
Item 1
The B H C does prepare a n annual report for its shareholders.
Item 2a
Organization C hart:
Enclosed is a cop
y of the annual report.
Eastern Michigan
Financial Corporation
Croswell, Ml
(Incorporated in Michigan)
1 00%
.
Eastern Michigan
Bank
Croswell, Ml
(Incorporated in Michigan)
1 1 00%
East�fn
Michiga n Real
Estate
Company
Croswell, Ml
(Incorporated in
Michigan)
(The above includes all holdings of the BHC which are all reportable on the FR
Y-10.)
1 00%
I
Eastern Michigan
Financial
·
Services, Inc.
Croswell, Ml
(Incorporated in
Michigan)
Ruulh: A lbt ol br1nche1 for your def>o1ltory ln1tltutlon: EASH RN MlCtltGAN BANK jlD_RSSD: 643340),
lhli depo1hory ln1t!tutlon h held by EASTERN MIClllGAN flNANCIALCORPORATION {ll294&7J of CROSWHL, Ml.
The dot• •fe as of 12/11/2014. D•ta 1efiect1 l11form1tlon th1t w11 recel-ttd •nd pr0<eued throu,h 01/07/2015,
Bzonc!!!1tloo 1nd yer!notlon Step•
1. In the 01\1 Ad Ion column ol e1ch bunch row, enter one or more or the 1ctlon1 spedfied below,
2, If required, enter the 1b1e In the Efkctfve Dile column.
""""
OK: II the br1nch lnfo1m•tlon Is tonect, enter '01\' In the D1t1 Action column,
01•n1e: If the bunchlnfotm•tlon h Incorrect orlncomplde, revile the d1ti, enter 'Ch1nge' ht the D•t• Actkni column •nd lhe d1te when this ln19fm•llon fin! bec1me v11ld In the Ufectlve D•l e column.
dose: lf • b1inch listed Wll 1old or closed, enter 'Oose' In the Oat• Action column 1od the ule or do1ure d1te In lhe Effecthoe D•le column.
Delete: If • btinch llued w11neverowned by thh de)l'01ltorylnstltutlo11, enler'Delete' In the O•h
Adlo11 columo.
Add: If • reporhb!e br1nch Is mluln1, ln1ert • row, add the br:o11ch d1t1, •nd enter'Add' ln the 0..t • Action column ind the ope11ln1 or acquisition d:ote In the Effective D1te column.
lf prlntln1 thh list, you miy need to •d/ust your p•1e setup In MS Ucel. Try uslnc J111d1ope orlent:ot!on, p•ce 1cillnc. ind/or lei•! dted piper.
SubmluJon procedurs
Whenyou •fe flnlshed, 1eod 1 uved copy to your FRB conhct See the det:olled lnstructlon1 on this s!te tor moie l11form1\lon,
![you •re e·m•Ulng thll to your FRB cont•ct. pUl'ft!urlnstltutlon n•me, city •nd 1hte In the �ubJect Une o[ the e-m•ll.
Note:
To
sJU1ly the FR Y·lO reportlnc requ!1ement,, you mu1t 1iso 1ubm!t fR Y·lO Dome1\k Br1nchSchedule1 for och buoch wlth • D•h Action of Ch1nge, do1e, Oelete, or Add,
The FR Y·lO report m•I' be 1ubmftted In 1 h1rdcopy fo1m1t or ...i1 the fR Y-10 OnUne 1pplk1Uon - https://ylOonllne.feder1!ie1erve.gov,
' fOICUNltlUM, Office Number, ind JO_RSSD columns ue forreference 011ly. Verlfic:otlon ol theie valuu Is not required.
D•tii.Mlon
Etf�fvi: P.ie·i Bfi1od1Servke Jype
Bfilnd110 RSSD'
flopu[:or N:ome
Street Addreu
Cltv
St1te Zl11 Cnde
6S NORTH HOWARD AVENUE
CROSWHL
Ml
County
Cnu11trv
FOICUNINUM'
Olfke N umbe r•
Hud Olflcc
Head Office JO RSSO'
Cnmme11t1
Admln!str•
Ch1nle
6/2/'1014 No Servke !Hod Office}
Ch•n1e
6/2/2014 Fulf Service
643340 (ASHRN MICHIGAN BANI(
•3422-0l'. SANILAC UNTHO STATES
"'
0 EASHRN MICHIGAN BANK
643340 lllve 011lv
Branch
oc
oc
fu!! Scrvlce
20S86l0 CROSWEll..flEQ?.f\GAA-OHK:E
971249 36lfi MAlNSTRE(TOFFIC[
fORTGRATIOTOrFICE
31 NORTll llOWARD AVENUE
CROSWHL
Ml
UNITED STATES
186830
3 fASHRN MICHIGAN BANI(
643340 Reloc•ted
OECKERVlll[
0422 SANILAC
3616 MA!N STREIT
Ml
48427 SANILAC
UNITED STATES
23S275
8 EASTERN MICHIGAN BANK
643340
3061 l(RAfT ROAD
(ORT GRATIOT
Ml
UNIT£D .STATES
36S919
10 [ASTERN MICHIGAll BAllK
643340
Full Service
20S8005 LAK!PORT OHICE
1090 LAKESllOR[ ROAD
48059 STCLAIR
OK
LAKEPORT
Ml
480S9 STCLAIR
U/llUDSTATES
1!6829
2 EASHRN MICHIGAll BANK
643340
OK
full Scrvkc
20S7558 S446 MAI/I STREIT OFFICE
LEXINGTON
Ml
484S0.93 SANILAC
UNITED STATES
186828
1 EASTERN MICHIGAN BANK
643340
OK
full Servkc
5446 MAIN STREIT
3564277 MARYSVILLE BRANCll
2970 GRATIOT
MARYSV!llE
Ml
48040 STCLAIR
UNITED STATES
465218
11 EASTERN MICHIGAN BANK
643340
full Servi"
OK
Full .Service
OK
Full Service
OK
full Service
3114720
2415345 1728 MA!NSTREETOFFJC[
2U53l6 600 WATERSTREITOHIC[
1060277 324 SOUTH SANDUSKY ROAD omcr
MINOEN CITY
Ml
48456 SANILAC UNITEO STAHS
222675
.9 EASTERN MICHIGAN BANK
643340
600 WATERSTREET
PORT HURON
Ml
•"""'-« STCLAIR UNITEOSTATES
166812
S EASTERN MlCHIGAtl BANK
64ll40
124 SOUTH ElKSTR£IT
SANDUSKY
Ml
48471·13 SANILAC UNITEOSTAH.S
235274
7 EASTERN MICHIGAN BANK
643140
1728 MAlN .STREIT
Report Jtem 3
FR Y-6
Report Item
3:
Eastern Michigan Financial Corporation
Croswell, lVIichigan
Dece1nber 31, 2 0 1,i
Securities Holders
Securities Holders not listed in 3 (1)(a) through (3)(1) (c) that had
Current Seclll'ities Holders with ownership, control or holdings of 5 % or ownership, control or holdings of 5% or more with power to vote during
more with lJOWer to vote as of 12/3111,1.
(l) (a)
Names & Address (City, State,
Country)
the fiscal year ending- 12/31/14.
(l) (b)
Country of
( l) (c)
Number and
Citizenship or
Percentage of
Incorporation
Each Class of
-
Straffon Family LTD Partership
Denver, CO
USA
(2)(a)
(2)(b)
(2)(c)
Names & Address (City, State,
Country of
Number and
Citizenship or
Percentage of
Country)
Voting Seclll'ities
Incorporation
Each Class of
Voting Securities
80,640
Common Stock None
7.09%
0.00%
,
l'R Y-6
Eastern 1fi chigan Financial Corporation
Croswell, 1Ii chigan
D e c e m b e r 31, 201·1
Report Item 4: Insiders
(1) (2)
(3)(a)(b)(c) and (.J)(a)(b)(c)
(2)
(3)(a)
Names & Address (City, Slate,
Principnl
Tille & Position
Country)
Occupation if
other than with
(1)
(3)(b)
(4){a)
{4)(b)
{4) (c)
(S)(c)
Title & Position with
Percentage
with Bank Holding
Other Businesses
Voling Shnres in of Voting
companies
Company
(include nnmes of other
Bank Holding
Shares in
more of voting
businesses)
Company
Subsidiaries securities are held
Tille & Position wilh Subsidiaries (include names of subsidiaries)
Bank Holding
of
Percentage
List names of other
if25%
or
Company
1'imoLhy rvr Ward
Port Huron, MI
NIA
Dircclor, Pres,,
Director, President & CEO, Eastern Michigan Bnnk
'l'rensurer &
Director, Pres & Chairman, Eastern M'ichigan Financial Services, Inc.
Director, Pres. & Chairman, Eastern lvfichigan Real Estate Co,
Vice Chairman
Karen ·M. Lord
NIA
SVP, CFO
Burtchville, M l
SVP & CFO, Eastern lvfichigan Bank
Director, VP & 'l'reasurer, Easlern 1v1ichigan Real Estate Co,
NIA
OA6% N/A
N/A
NIA
0,05% N/A
N/A
NIA
0,00% N/A
N/A
NIA
0,13% N/A
N/A
Civil Engineer, DMJ
0,88% N/1\
N/A
0,06% N/A
Apsey Funeral
Home (100%1}
NIA
0,22% N/A
N/A
Owner, Pollock Rnndnll
0,24% N/A
Pollock
VP & Treasurer, Eastern Michigan Financial Services Inc.
John A. Hart
NIA
SVP, Senior Lender Senior VP, Loans, Eastern l\-1ichignn Bank
Director and VP, Eastern Michigan Roni Estate Co.
Shelby Township, MI
Director and VP, Eastern Michigan Financial Services, Inc.
Ann E. Mntthews
Croswell,
t\U
Earl E. DesJardins
Porl Huron, MI
NIA
SVP & Secretary
Senior Vice President, Operations, Enstern lvfichigan Bank
Director, VP & Secretary, Enstern 1vlichigan Real Estate Co.
Director, VP & Secretary, Enslern Michigan Financial Services, Inc.
Engineer
Director &
Diredor & Vice Chairman, Eastern 1fichigan Bank
Engineers &
Chairman
Surveyors, Inc.
Bradley D. Apsey
Funeral Home
Director
Director, Easlern.:rvlichigan Bank
Karen S. Flanagnn
Owner, Apsey
Funernl Home
Deckerville, lvU
Farmer
Director
Director, Enstcrn lvlichigan Bank
Funernl Home
Director
Direclor, Eastern Michigan Bank
Sandusky, MI
Ann Randall Kendrick
Funeral Home &
1vfarysvillc1 1vrI
(100%) & Marysville
lv[nrysville Funeral
Funeral Home
Home
Patricia
VI. Ryan
Porl Huron, lvlI
CPA
Director
Director, Eastern Michigan Bank
Partner, Frahm, 1\elley,
Butler & Ryan, PC
Handal!
Funeral Home
0.31%
NIA
Frahm, Kelley,
BuUcr & Ryan PC
(25%)
George
J. lvkNaughLon
Croswell, Ml
Farmer
Director
Director, Eastern 1'1ichignn Bnnk
NIA
0.15% N/A
N/A
Kathlene M. Partnka
Retired
Director
DirecLor, Enstcrn :tvfichigan Bank
NIA
Q,.15% N/A
N/A
Director
Director, Eastern Michigan Dnnk
NIA
0.5·1% N/A
N/A
Lexington,
l\11
Bnnker
John C. Willinms
Retired Electric
Croswell, Ml
& \Vater
,