Annual Report (Form 10-K), fiscal year 1994

Item 1. Business.
Old Kent Financial Corporation ("Old Kent") is a bank holding company with its headquarters in Grand Rapids, Michigan. As of December 31, 1994, Old Kent owned directly and indirectly all of the stock of 17 commercial banks and 6 operating nonbank subsidiaries that had their principal offices in various cities in Michigan and Illinois. As of December 31, 1994, Old Kent Bank and Trust Company ("OKB-MI"), which is headquartered in Grand Rapids, Michigan, was Old Kent's largest subsidiary. On January 1, 1995, Old Kent consolidated 15 of its bank subsidiaries, all of which were Michigan banks, into a single bank that operates under the name "Old Kent Bank."
Old Kent's business is concentrated in a single industry segment--commercial banking. Old Kent's subsidiaries offer a wide range of commercial banking and fiduciary services. These include accepting deposits, commercial lending, consumer financing, real estate and lease financing, equipment leasing, bank credit cards, debit cards, safe deposit facilities, automated transaction machine services, cash management, electronic banking services, money transfer services, international banking services, corporate and personal trust services, personal investment and securities brokerage services, credit life insurance and other banking services.
The principal markets for these financial services are the Michigan and Illinois communities in which Old Kent subsidiaries are located and the areas immediately surrounding those communities. As of December 31, 1994, Old Kent and its subsidiaries served these markets through 207 full service banking offices located in and around those communities.
As of December 31, 1994, OKB-MI accounted for 41% of total deposits and 42% of total loans of Old Kent and its subsidiaries on a consolidated basis. At December 31, 1994, OKB-MI had assets of $4.6 billion, representing 42% of Old Kent's consolidated assets. Old Kent's 16 other subsidiary banks ranged in size from $78 million to $1.9 billion in total assets as of December 31, 1994. On a pro forma basis giving effect to the consolidation of the Michigan banks, at December 31, 1994, OKB-MI would have accounted for 81% of total deposits and 83% of total loans of Old Kent and its subsidiaries on a consolidated basis, with assets of $8.7 billion.
The principal source of revenues for Old Kent is interest and fees on loans, which accounted for 54.5% of total revenues in 1994, 49.7% in 1993, and 53.5% in 1992. Interest on securities is also a significant source of revenue, accounting for 25.8% of total revenues in 1994, 28.9% in 1993, and 29.7% in 1992.
Old Kent has had no foreign loans at any time during the last five years. The foreign activities of Old Kent primarily involve time
deposits with banks and placements for domestic customers of the banks. These activities did not significantly impact Old Kent's financial condition or results of operations. More detailed information concerning these foreign activities is contained in the statistical information that appears below.
OKB-MI's subsidiary, Old Kent Mortgage Company, originates residential mortgages through its offices located in Grand Rapids, suburban Chicago, Illinois, Central and Southern Florida, Minnesota, Ohio and Texas. On March 1, 1994, this subsidiary acquired Princeton Financial Corp. headquartered in Orlando with 12 other Florida offices. The acquisition was treated as a purchase for accounting purposes and, accordingly, results of operations of Princeton Financial Corp. subsidiaries are included from the date of purchase. At December 31, 1993, Princeton had assets of $65.6 million and stockholders' equity of $5.4 million. Old Kent Mortgage Company conducts a traditional retail and wholesale mortgage banking business in one- to four-family residential mortgage loans. Substantially all mortgage production is sold into the secondary market with servicing retained. Mortgage servicing for all of Old Kent's subsidiaries and independent investors is performed by OKB-MI's subsidiary, Old Kent Mortgage Services, Inc.
Effective May 2, 1994, Old Kent acquired EdgeMark Financial Corporation ("EdgeMark"), a bank holding company located in Chicago, Illinois. The acquisition was effected by a merger of EdgeMark with and into Old Kent - Illinois, Inc., a wholly owned subsidiary of Old Kent. The acquisition was treated as a purchase for accounting purposes and, accordingly, results of operations of EdgeMark subsidiaries are included from the date of purchase. At the effective date, EdgeMark had, on a consolidated basis, assets totaling approximately $522 million and deposits of approximately $456 million. EdgeMark stockholders received 1,917,566 shares of common stock of Old Kent. EdgeMark owned all the stock of five commercial banks located in Chicago, Countryside, Lombard, Lockport, and Rosemont, Illinois, that operated eight banking offices in six Illinois communities. The principal market for the financial services offered by EdgeMark and its subsidiaries was downtown Chicago and the surrounding metropolitan area. As described below, EdgeMark's subsidiary banks in Chicago, Lombard and Rosemont were consolidated with Old Kent Bank (Illinois) in October, 1994.
On October 14, 1994, Old Kent consolidated four of its six Illinois bank subsidiaries into a single bank, Old Kent Bank ("OKB-IL"), under the name "Old Kent Bank." OKB-IL has 26 branches primarily serving Cook, DuPage and Kane Counties. At December 31, 1994, the consolidated bank had assets of $1.9 billion, deposits of $1.5 billion and a total loan portfolio of $0.9 billion.
Effective February 1, 1995, Old Kent acquired First National Bank Corp. ("FNBC"), a bank holding company located in Clinton Township, Michigan. The acquisition was effected by a merger of FNBC with and into Old Kent. This transaction will be accounted for as a "pooling-of- interests." At December 31, 1994, FNBC had, on a consolidated basis, assets totaling approximately $531 million and deposits of approximately
$472 million. FNBC stockholders received approximately 2,636,817 shares of common stock of Old Kent. FNBC owned all the stock of First National Bank in Macomb County, a national banking association ("First National"), that operates 15 banking offices in Macomb County, Michigan. The principal market for the financial services offered by FNBC and First National was Macomb County, Michigan, and the communities within Macomb County.
The business of banking is highly competitive. In addition to competition from other commercial banks, banks face significant competition from nonbank financial institutions. Savings associations compete aggressively with commercial banks for deposits and loans. Credit unions and finance companies are significant factors in the consumer loan market. Insurance companies, investment firms and retailers are significant competitors for some types of business. Banks compete for deposits with a broad spectrum of other types of investments such as mutual funds, debt securities of corporations and debt securities of the federal government, state governments and their respective agencies. The principal methods of competition for financial services are price (interest rates paid on deposits, interest rates charged on borrowings and fees charged for services) and service (convenience and quality of services rendered to customers).
Banks and bank holding companies are extensively regulated. Other than First National, Old Kent's subsidiary banks are chartered under state law and are supervised and regulated by the Federal Deposit Insurance Corporation ("FDIC") and either the Financial Institutions Bureau of the State of Michigan or the Commissioner of Banks and Trust Companies of the State of Illinois. First National is a national banking association chartered under federal law and is supervised, examined and regulated by the United States Office of the Comptroller of the Currency. Some of the banks are members of the Federal Reserve System and are supervised, examined and regulated by the Federal Reserve System. Deposits of all of the banks are insured by the FDIC to the extent provided by law.
Federal and state laws which govern banks significantly limit their business activities in a number of respects. Prior approval of the Board of Governors of the Federal Reserve System ("Federal Reserve Board"), and in some cases various other governing agencies, is required for Old Kent to acquire control of any additional banks. The business activities of Old Kent and its subsidiaries are limited to banking and other activities closely related to banking.
Old Kent is a legal entity separate and distinct from its subsidiary banks and other subsidiaries. Transactions between Old Kent's subsidiary banks are significantly restricted. There are legal limitations on the extent to which Old Kent's subsidiary banks can lend or otherwise supply funds to Old Kent or certain of its affiliates. In addition, payment of dividends to Old Kent by subsidiary banks is subject to various state and federal regulatory limitations.
Federal law contains a "cross-guarantee" provision which could result in insured depository institutions owned by Old Kent being assessed
for losses incurred by the FDIC in connection with assistance provided to, or the failure of, any other insured depository institution owned by Old Kent. Under Federal Reserve Board policy, Old Kent is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each subsidiary bank. Under federal law, the FDIC also has authority to impose special assessments on insured depository institutions to repay FDIC borrowings from the United States Treasury or other sources and to establish semiannual assessment rates on Bank Insurance Fund ("BIF") member banks to maintain the BIF at the designated reserve ratio required by law.
Recently the FDIC has proposed a substantial reduction in assessment rates on deposits covered by the BIF. The amount and timing of that reduction is uncertain, but a reduction is not, in any event, expected to occur before the fourth quarter of 1995. If the proposal is adopted and implemented as announced, the lowering of assessment rates on Old Kent's subsidiary bank deposits covered by the BIF may have a favorable effect on Old Kent's results of operations. As a result of acquisitions, Old Kent subsidiaries also have some deposits insured under the FDIC's Savings Association Insurance Fund ("SAIF"). The FDIC does not presently propose to reduce assessment rates on SAIF insured deposits.
Banks are subject to a number of federal and state laws and regulations which have a material impact on their business. These include, among others, state usury laws, state laws relating to fiduciaries, the Truth In Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Expedited Funds Availability Act, the Community Reinvestment Act, electronic funds transfer laws, redlining laws, antitrust laws, environmental laws and privacy laws. The instruments of monetary policy of authorities such as the Federal Reserve Board may influence the growth and distribution of bank loans, investments and deposits, and may also affect interest rates on loans and deposits. These policies may have a significant effect on the operating results of banks.
The nature of the business of Old Kent's subsidiaries is such that they hold title, on a temporary or permanent basis, to a number of parcels of real property. These include property owned for branch offices and other business purposes as well as properties taken in or in lieu of foreclosure to satisfy loans in default. Under current state and federal laws, present and past owners of real property are exposed to liability for the cost of clean up of contamination on or originating from those properties, even if they are wholly innocent of the actions that caused the contamination. These liabilities can be material and can exceed the value of the contaminated property.
Currently, Old Kent is authorized to acquire subsidiary banks in any state in which state laws permit such acquisitions. Out-of-state bank holding companies in any state are permitted to acquire banks located in Michigan and Illinois if the laws of the state in which the out-of-state bank holding company is located authorize a bank holding company located in Michigan or Illinois to acquire ownership of banks in that state on a reciprocal basis. Under the recent Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("IBBEA"), a bank holding company may, after September 29, 1995, make certain interstate acquisitions even if state law would otherwise prohibit it. Starting June 1, 1997, IBBEA permits a bank in one state to acquire an out-of-state bank unless one of the states has enacted legislation prohibiting interstate bank acquisitions. IBBEA also permits a bank to establish a de novo branch in another state if the state has a law expressly permitting all out-of-state banks to establish de novo branches in that state.
In the aggregate, Old Kent and its subsidiaries had 4,998 employees (on a full time equivalent basis) at December 31, 1994. Old Kent and its subsidiaries are equal opportunity employers whose affirmative action programs comply with applicable federal laws and executive orders.
The statistical information on the following pages further describes certain aspects of the business of Old Kent. Additional statistical information describing the business of Old Kent appears in Management's Discussion and Analysis of Financial Condition and Results of Operations incorporated by reference in Item 7 and the Selected Financial Data incorporated by reference in Item 6.
Investment Portfolio
The following table shows, by class of maturities as of December 31, 1994, the amounts and weighted average yields of securities held-to-maturity and securities available-for-sale on the basis of amortized cost:
Loan Portfolio
The following table shows the maturity of loans (excluding residential mortgages of 1-4 family residences, consumer loans, credit card loans, and lease financing) outstanding at December 31, 1994. Also provided are the amounts due after one year classified according to their sensitivity to changes in interest rates.
Loan Portfolio (continued)
Foreign Outstandings: A summary of significant foreign outstandings for the three years ended December 31, 1994, is as follows:
Deposits The daily average amounts of deposits and rates paid on such deposits for the periods indicated are:
The time remaining until maturity of time deposits (all of which are time certificates of deposit) of $100,000 or more at December 31, 1994, is as follows:
Time deposits in the foreign office are all in amounts of $100,000 or more.
Short-Term Borrowed Funds
Short-term borrowed funds consist of federal funds purchased and securities sold under agreements to repurchase, bank notes, and treasury tax and loan demand notes. The following amounts and rates applied during the last three years:
Item 2.



Item 2. Properties.
The executive offices of Old Kent and the main office of OKB-MI are located in an office complex in downtown Grand Rapids, Michigan. This complex consists of two interconnected buildings, including a 10-story office building. Approximately 65% of the 281,000 square feet of space in the complex is occupied by Old Kent and OKB-MI. The balance is leased to others for terms of varying lengths.
Old Kent's operations center is housed in two buildings located near Grand Rapids. The two buildings, which have a total of 340,000 square feet, are owned by OKB-MI.
Old Kent's subsidiary banks conducted business from a total of 207 full service banking offices as of December 31, 1994. Of the full service banking offices, 157 are owned by the banks or their subsidiaries, and 50 are leased from various independent parties for various lease terms.
Item 3.

Item 3. Legal Proceedings.
Old Kent's subsidiaries are parties, as plaintiff or defendant, to a number of legal proceedings. Except as described below, all of these proceedings are considered to be ordinary routine litigation incidental to their business, and none is considered to be a material pending legal proceeding.
Old Kent and its subsidiary, OKB-MI, are named, among other defendants, in a lawsuit filed by Grow Group, Inc. ("Grow"), presently pending in the United States District Court for the Southern District of New York. Principal defendants in this case include Perrigo Company ("Perrigo"), Michael J. Jandernoa (Chairman of the Board and Chief Executive Officer of Perrigo, and presently a director of Old Kent) and certain other persons who are believed to have been directors and officers of Perrigo (the "Non-bank Defendants"), as well as Old Kent, OKB-MI, and National Bank of Detroit ("NBD"; now NBD Bank), with which OKB-MI participated in the financing arrangement that is in part the subject of the case.
The case was initiated on April 13, 1994, with the filing of a "Summons With Notice" in the Supreme Court, State of New York, County of New York. However, Old Kent was not then served with process or notice of the case. The case was subsequently removed to Federal Court where a complaint was filed on March 1, 1995.
In 1988, OKB-MI participated in a credit facility which partially financed the purchase of all of the stock of Perrigo from Grow by the Non- bank Defendants in the case. Grow now alleges that NBD and OKB-MI conspired with and aided and abetted the Non-bank Defendants in certain breaches of duties, fraud, and usurpation of corporate opportunity; misappropriated and used confidential and proprietary information for their own benefit; and breached a relationship of trust and confidence with Grow. Grow demands judgment against the defendants, jointly and severally, for
damages in an unspecified but apparently material amount, profits and benefits accruing to the defendants as a result of the alleged wrongful acts, punitive damages, interest and costs.
Discovery proceedings in this case have not yet been commenced. Accordingly, Old Kent presently has only limited information available to make an informed assessment of the materiality of the claims. However, based on the limited information presently available, Old Kent has no reason to believe that there is a basis for a meritorious claim against it in this case and intends to oppose the action vigorously.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Supplemental Item. Executive Officers of the Registrant.
Old Kent's executive officers are appointed annually by, and serve at the pleasure of, the Old Kent board of directors. Biographical information concerning executive officers who are not directors or nominated for election to the board of directors is presented below:
Martin J. Allen, Jr. (age 58) has been secretary of Old Kent since 1986 and a senior vice president of Old Kent since 1985. Prior to that, he served Old Kent in various other executive capacities. Mr. Allen is also a member of Old Kent's Management Committee.
David A. Dams (age 42) has been an executive vice president of OKB-MI since 1986. Prior to that, he served Old Kent in various other executive capacities. Mr. Dams is also a member of Old Kent's Management Committee and a director of Old Kent Financial Life Insurance Company, an Old Kent subsidiary.
E. Philip Farley (age 55) has been an executive vice president of OKB-MI since 1987. Prior to that, he served Old Kent in various other executive capacities. Mr. Farley is also a member of Old Kent's Management Committee.
Ralph W. Garlick (age 58) has been an executive vice president-senior credit officer of Old Kent since 1989. He was an executive vice president of OKB-MI from 1984 until 1989. Prior to that, he served Old Kent in various other executive capacities. Mr. Garlick is also President-Metro Detroit (since February, 1995) and a member of Old Kent's Management Committee.
Richard L. Haug (age 55) has been a senior vice president and general auditor of Old Kent since 1986.
Charles W. Jennings, Jr. (age 55) has been a senior vice president of human resources of Old Kent since 1984. Prior to
that, he served Old Kent in various other executive capacities. Mr. Jennings is also a member of Old Kent's Management Committee.
Kevin T. Kabat (age 38) has been an executive vice president of Old Kent since February 1995. He was senior vice president and manager of corporate operations and technology of Old Kent from 1993 until 1995, senior vice president and manager of corporate operations from 1990 until 1993, and a vice president and director of human resources of OKB-MI from 1986 until 1990. Prior to that, he served Old Kent in various other executive capacities. Mr. Kabat is also a member of Old Kent's Management Committee.
David L. Kerstein (age 51) became an executive vice president, retail banking, of Old Kent and OKB-MI in 1992. Prior to that, he was a senior vice president of Bank One (Texas), a bank, from 1990 until 1992, and a senior vice president of Citibank FSB (Chicago), a bank, from 1987 until 1990. Mr. Kerstein is also a member of Old Kent's Management Committee.
Leigh I. Sherman (age 46) has been a senior vice president and marketing director of Old Kent since 1989. He was formerly a senior vice president and marketing director of American Security Bank, a bank, for over 5 years. Mr. Sherman is also a member of Old Kent's Management Committee.
Robert H. Warrington (age 47) has been president of Old Kent Mortgage Company, an indirect subsidiary of Old Kent, since 1993. He was a senior vice president of OKB-MI from 1988 until 1993. Prior to that, he served Old Kent in various other executive capacities. Mr. Warrington is also a director of Old Kent Mortgage Company, president and a director of Old Kent Mortgage Services, Inc., and a member of Old Kent's Management Committee.
Thomas D. Wisnom (age 56) has been an executive vice president of Old Kent since 1985. Prior to that, he served Old Kent in various other executive capacities. Mr. Wisnom is also a member of Old Kent's Management Committee.
Richard W. Wroten (age 42) has been an executive vice president and chief financial officer of Old Kent since September 1991. From 1989 until 1991 he was an executive vice president and chief financial officer of First City Bancorporation of Texas, Inc., a bank holding company, and chief financial officer and a director of First City, Texas-Houston N.A., a commercial
bank.1 Until 1989, Mr. Wroten was a partner of Arthur Andersen & Co., an accounting firm. Mr. Wroten is also a member of Old Kent's Management Committee and a director of Old Kent Financial Life Insurance Company and Old Kent Mortgage Company, both of which are Old Kent subsidiaries. __________________________
1 On October 30, 1992, over a year after Mr. Wroten joined Old Kent, First City, Texas-Houston N.A. was placed in Federal Deposit Insurance Corporation receivership by bank regulators, and an involuntary, but uncontested, petition was filed placing First City Bancorporation of Texas, Inc., into a proceeding under Chapter 11 of the Federal Bankruptcy Code.
PART II
Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters.
The information under the caption "Cash Dividends" on pages 37 and 38 and under the captions "Old Kent Common Stock" and "Two-Year Range of Common Stock Prices" on page 71 of Old Kent's annual report to shareholders for the year ended December 31, 1994, is here incorporated by reference.
Item 6.

Item 6. Selected Financial Data.
The information under the caption "Five Year Summary of Selected Financial Data" on page 20 of Old Kent's annual report to shareholders for the year ended December 31, 1994, is here incorporated by reference.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The information under the caption "Financial Review" on pages 21 through 47 of Old Kent's annual report to shareholders for the year ended December 31, 1994, is here incorporated by reference.
Item 8.


Item 8. Financial Statements and Supplementary Data.
The financial statements, notes and the report of independent public accountants on pages 51 through 70 of Old Kent's annual report to shareholders for the year ended December 31, 1994, are here incorporated by reference.
The information under the caption "Quarterly Financial Data" on page 48 of Old Kent's annual report to shareholders for the year ended December 31, 1994, is here incorporated by reference.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10.



Item 10. Directors and Executive Officers of the Registrant.
The information set forth under the captions "Board of Directors" and "Compliance with Section 16(a) of the Exchange Act" in Old Kent's definitive Proxy Statement for its April 17, 1995, annual meeting of shareholders is here incorporated by reference.
Item 11.

Item 11. Executive Compensation.
The information set forth under the captions "Compensation of Executive Officers and Directors," "Executive Severance Agreements" and "Compensation of Directors" in Old Kent's definitive Proxy Statement for its April 17, 1995, annual meeting of shareholders is here incorporated by reference.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information set forth under the caption "Voting Securities" in Old Kent's definitive Proxy Statement for its April 17, 1995, annual meeting of shareholders is here incorporated by reference.
Item 13.

Item 13. Certain Relationships and Related Transactions.
The information set forth under the caption "Certain Relationships and Related Transactions" in Old Kent's definitive Proxy Statement for its April 17, 1995, annual meeting of shareholders is here incorporated by reference.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements. The following financial statements and report of independent public accountants of Old Kent Financial Corporation and its subsidiaries are filed as part of this report:
Report of Independent Public Accountants dated January 16, Consolidated Balance Sheets--December 31, 1994 and 1993 Consolidated Statements of Income for each of the three years in the period ended December 31, 1994 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1994 Consolidated Statements of Shareholders' Equity for each of the three years in the period ended December 31, 1994 Notes to Consolidated Financial Statements
The financial statements, the notes to financial statements, and the report of independent public accountants listed above are set forth in Item 8 of this report.
(2) Financial Statement Schedules. Not applicable.
(3) Exhibits. The following exhibits are filed as part of this report:
Old Kent will furnish a copy of any exhibit listed above to any shareholder of the registrant without charge upon written request to Mr. Martin J. Allen, Jr., Secretary, Old Kent Financial Corporation, One Vandenberg Center, Grand Rapids, Michigan 49503.
(b) Reports on Form 8-K.
Old Kent filed no Current Reports on Form 8-K during the last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
OLD KENT FINANCIAL CORPORATION (Registrant)
Date: March 29, 1995 By /s/ Richard W. Wroten Richard W. Wroten Executive Vice President and Chief Financial Officer (Duly authorized signatory for the Registrant and Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.
March 29, 1995 /s/ John M. Bissell* John M. Bissell Director
March 29, 1995 /s/ John D. Boyles* John D. Boyles Director
March 29, 1995 /s/ John C. Canepa* John C. Canepa Chairman of the Board and Director
March __, 1995 __________________________________ Richard M. DeVos, Jr. Director
March 29, 1995 /s/ Earl D. Holton* Earl D. Holton Director
March 29, 1995 /s/ Michael J. Jandernoa* Michael J. Jandernoa Director
March 29, 1995 /s/ John P. Keller* John P. Keller Director
March 29, 1995 /s/ Jerry K. Myers* Jerry K. Myers Director
March 29, 1995 /s/ William U. Parfet* William U. Parfet Director
March 29, 1995 /s/ Percy A. Pierre* Percy A. Pierre Director
March 29, 1995 /s/ Robert L. Sadler* Robert L. Sadler Vice Chairman of the Board and Director
March 29, 1995 /s/ Peter F. Secchia* Peter F. Secchia Director
March 29, 1995 /s/ B. P. Sherwood, III* B. P. Sherwood, III Vice Chairman of the Board, Treasurer, and Director
March 29, 1995 /s/ David J. Wagner* David J. Wagner President and Chief Executive Officer, and Director (Principal Executive Officer)
*By /s/ Richard W. Wroten Richard W. Wroten Attorney-in-Fact