Shareholder Information

Favorable economic conditions and an efficient experienced staff were the major reasons why 2015 was a very good year for Alden State Bank as it achieved a record $2,380,000 in net income and paid a record $778,000 in cash dividends to its shareholders.  This amounted to a $5.00 per share dividend paid to those shareholders who owned Alden State Bank’s common stock for the entire year of 2015.  This compares favorably to the $1,911,000 in net income and $620,000 in cash dividends Alden State Bank paid in 2014, which amounted to a $4.00 per share dividend, and the $1,473,000 in net income and $504,000 in cash dividends Alden State Bank paid in 2013, which amounted to a $3.25 per share dividend.   The book value of Alden State Bank’s common stock increased from $126.22 on December 31, 2014 to $133.99 on December 31, 2015 and its return on average equity increased from 10.01% in 2014 to 11.64% in 2015.  As the oldest surviving bank still headquartered in the five county region of Antrim, Charlevoix, Grand Traverse, Kalkaska, and Otsego Counties, Alden State Bank has thrived in large part because of its strong commitment to customer service and because its shareholders tend to have strong ties to this area and treat Alden State Bank stock as a long-term investment.    Alden State Bank’s goal is to remain a locally-owned independent community bank that will continue to provide banking services for many more generations of families in this part of Northern Lower Michigan.

Alden State Bank’s roots go back to the privately-held Farmers & Merchants Bank, which started in 1906 as a partnership. When the Farmers & Merchants Bank was incorporated into the Alden State Bank in 1947, it became eligible to pay dividends. Beginning in 1949, Alden State Bank began paying cash dividends. With the exception of the years 2009 and 2010, Alden State Bank has paid a cash dividend every year since 1949. Usually, this has been in the form of two cash dividends, one in June and the other in December. There is no guarantee of cash dividends being paid on Alden State Bank common stock and there is no guarantee of Alden State Bank common stock selling at any given price. For example in the 4th quarter of 2008, economic conditions deteriorated to the point where Alden State Bank made the difficult and yet most sensible decision to preserve its capital and not pay a cash dividend. This was during what is now known as The Great Recession, and both the stock market and the real estate market were suffering major declines. This adversely affected stock prices of almost all of the banks in this country including the common stock of Alden State Bank. That unstable economic situation made it extremely difficult for banks to raise additional capital if they needed too, and a large number of banks had to raise additional capital to cover their loan losses. Most of those banks raised additional capital by selling new shares at discounted prices causing severe dilution of to the value of the shares owned by their existing shareholders. So in the fourth quarter of 2008, the United States Government devised a bail-out program, the Troubled Asset Relief Program (TARP) to help stabilize the economy. Alden State Bank avoided having to sell additional stock to cover losses and never borrowed any TARP bail-out money. And unlike some of its banking competitors back then, Alden State Bank is still doing business in Northern Michigan. After the economy stabilized, Alden State Bank paid a small cash dividend in 2011. Its cash dividends were increased in 2012, 2013, 2014, and 2015.

There are 155,975 shares of Alden State Bank common stock outstanding. Although the exact number of shareholders will vary over the course of a year, it should number somewhere over 200. From time to time, shares of Alden State Bank common stock trade via direct transaction between a seller and a buyer. If you would like to purchase shares of Alden State Bank, you may contact us to be placed on a list of potential purchasers of Alden State Bank common stock. If you would like to sell your shares of Alden State Bank common stock, you may contact us and we will try to put you in contact with potential purchasers. The potential buyer and seller then negotiate and complete the transaction. Restrictions under various Federal and State securities regulations may apply. To complete any transfer of Alden State Bank common stock certificates or if you have any questions about our stock, please contact us at our main office in Alden at this address: Alden State Bank, 10564 Coy, P.O. Box 39, Alden MI 49612, phone (231) 331-4481. All purchasers of Alden State Bank common stock are required to provide certain information to comply with securities and banking regulations. This applies to all stock sales, name or address changes, gift transfers, inheritances, trust transfers, etc. because Alden State Bank acts as its own transfer agent. Alden State Bank is required by law to maintain accurate information as to its stock ownership and dividend payments. Failure to provide us with certain required information could result in an invalid common stock transfer or a missed dividend. If any future dividends are declared to be paid, they will be payable to only to shareholders as of record as of a given date.

There is no public market for the shares of Alden State Bank common stock and we expect none to develop in the foreseeable future. Shares of Alden State Bank common stock are an illiquid investment. Transactions in the shares of Alden State Bank common stock are infrequent. Alden State Bank does not make a market in its common stock and its common stock is not listed or quoted on any securities exchange. Thus, a shareholder may not be able sell shares of Alden State Bank common stock in the future on terms acceptable to the shareholder or at all. Shares of Alden State Bank common stock are not deposits. Shares of Alden State Bank common stock are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency and are subject to investment risk, including the possible loss of principal. Shares of Alden State Bank common stock have not been approved or disapproved by the FDIC.

Shares of Alden State Bank common stock are subordinated to the claims of depositors and other creditors. The purchase of shares of Alden State Bank common stock is suitable only for investors of substantial financial means who have no need for liquidity of their investment and understand and can afford the high financial and other risks of investment in the bank including the risk of loss of their entire investment. Shares of Alden State Bank common stock may not be used as collateral to secure a loan from Alden State Bank.

Shares of Alden State Bank common stock have not been registered under the Securities Act of 1933, as amended, nor under the securities laws of the State of Michigan; and, no such registration is contemplated. No sale or transfer of shares of Alden State Bank common stock will be permitted except in accordance with the provisions of the Securities Act of 1933, as amended, and its rules and regulations, the Michigan Uniform Securities Act, and Alden State Bank’s governing documents.

Throughout its history, Alden State Bank has sold additional common stock for various reasons. The last stock sales were to provide additional capital to support the establishment of branch offices in Elk Rapids in 1993, Bellaire in 1998, and Central Lake in 2002. Towards the end of 2015, Alden State Bank issued 975 new shares of common stock as an employee benefit where each full-time employee received 25 shares. Alden State Bank may for a number of different reasons issue additional shares of common stock in the future, which could dilute a shareholder’s ownership of shares of Alden State Bank common stock. It is likely that any future sales by Alden State Bank for any issuances of new shares of common stock or any other securities to raise additional capital will only be offered in the State of Michigan.

Shares of Alden State Bank common stock are exposed to a number of substantial risk factors which include, but are not limited to: Credit Risk, Market Risk, Liquidity Risk, Operational Risk, Legal Risk, Competition Risk and Reputational Risk. Credit Risk arises from the potential that a borrower or counterparty will fail to perform and obligation. Market Risk is the risk to Alden State Bank’s financial condition resulting from adverse movements in market rates or prices, such as interest rates, equity prices, real estate values, etc. Liquidity Risk arises from the potential that Alden State Bank may become unable to meet its obligations as they come due because of an inability to liquidate assets or obtain funding. Operational Risk arises from the potential that inadequate information systems, operation problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected losses. Legal Risk arises from the potential that unenforceable contracts, lawsuits, or adverse judgments can disrupt or otherwise negatively affect the operations or condition of Alden State Bank. Competition Risk is the potential that increased competition could cause a decline in Alden State Bank’s customer base and its revenues. Reputational Risk is the potential that adverse publicity could cause a decline in Alden State Bank’s customer base and its revenues.

Current financial information for the Alden State Bank can be found on this FDIC website. As all FDIC insured financial institutions are required submit quarterly reports of their financial condition and income, the FDIC website is an excellent place to find current financial information as to the Alden State Bank, other banks, and the banking industry. Alden State Bank’s quarterly reports of financial condition and income have not been approved or disapproved by the FDIC. To help you locate us faster on the FDIC website, use Alden State Bank’s FDIC Certificate number which is 17622.