Highlights Include:
* Earnings per share (diluted) of $0.33 for the third quarter and
$1.00 for first nine months of 2007, compared to $0.41 and $1.22
respectively for 2006
* Net charge-offs at 0.09% annualized for the third quarter and
0.10% annualized for the nine-months of 2007
* Stabilized net interest margin at 3.89% including 0.08% drag from
funding costs of ICNB purchase
* Third quarter 2007 results include $104,000 after tax loss on
disposition of real estate brokerage business
* Successful integration progress with ICNB/Firstbank - West
Michigan
ALMA, Mich., Oct. 25, 2007 (PRIME NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced earnings per share of $0.33 for the third quarter of 2007 compared to $0.41 in the third quarter of 2006. Net income was $2,415,000 for the quarter ended September 30, 2007, compared to $2,717,000 for the quarter ended September 30, 2006. Returns on average assets and average equity for the third quarter of 2007 were 0.71% and 8.2%, respectively, compared with 0.99% and 11.2%, respectively, in the third quarter of 2006. A loss of $104,000 after tax on the final disposition of Firstbank's interest in the real estate brokerage company C.A. Hanes was included in third quarter results. This factor, combined with the stabilized but low net interest margin and continuing weak mortgage activity, led to the decline in earnings and profitability compared to year-ago periods. All per share amounts are fully diluted and have been adjusted to reflect the 5% stock dividend paid in December of 2006.
Earnings per share of $1.00 for the first nine months of 2007 decreased 18.0% compared to the first nine months of 2006. Net income was $6,820,000 for the nine months ended September 30, 2007, down 15.2% from the $8,040,000 for the nine months ended September 30, 2006. Returns on average assets and average equity for the first nine months of 2007 were 0.78% and 8.9%, respectively, compared with 1.02% and 11.4%, respectively, in the first nine months of 2006. Provision expense in the first nine months of 2007 was $241,000, including some unique amounts in the first and second quarters, and a more normal level in the third quarter. The unique amounts have been reported previously and were a negative provision related to the pay-off of a loan which had specific reserves in the first quarter, and a $500,000 specific reserve established for a different credit in the second quarter.
Balance sheet comparisons to prior periods are affected by the acquisition of ICNB Financial Corporation on July 1, 2007, and the inclusion in the consolidated totals of its bank Firstbank - West Michigan, which had assets of $239.8 million at September 30, 2007. Total assets at September 30, 2007, were $1.4 billion, an increase of 26.0% over the year-ago period. Total portfolio loans of $1.117 billion were 22.4% above the level at September 30, 2006. Excluding the loans of Firstbank - West Michigan, total portfolio loans grew 2.8%, reflecting the sluggish economy in Michigan and the payoff of certain credits. Total deposits as of September 30, 2007, were $1.004 billion compared to $820 million at September 30, 2006. Excluding the deposits of Firstbank - West Michigan, total deposits grew 1.9%. Firstbank exhibited success in growing core deposits, as total deposits excluding wholesale deposits and excluding Firstbank - West Michigan deposits, increased 6.1%.
Firstbank's net interest margin, at 3.89% in the third quarter of 2007, decreased by 2 basis points from the 3.91% level for the second quarter of 2007 and was 26 basis points lower than the 4.15% level in the third quarter of 2006. The impact of interest expense on funds used to purchase ICNB Financial reduced the net interest margin by 8 basis points in the third quarter, indicating that the underlying net interest margin would have increased without this factor. While the underlying net interest margin showed stability and some improvement from the second to the third quarter, the 50 basis point reduction in the prime rate on September 17th had the immediate effect of reducing yields on loans tied to prime, while rates for deposit costs will adjust more slowly. The flat to negative yield curve in the 1-day to 5-year range continues to result in reduced spreads between funding costs and earning asset yields compared to past years.
Mr. Sullivan stated, "We recognize that during this economic cycle nationally, and especially in the state of Michigan, earnings will be under pressure. While our net interest margin is narrower than we would like, it improved from the second quarter to the third quarter when adjusting for the impact of funding the ICNB purchase. We are continuing to focus our efforts on asset quality, managing our banks, and growing our franchise. We have been very pleased with the integration of ICNB Financial and the cooperation and enthusiasm of their management and employees. Our people worked very hard to complete a challenging data processing conversion during the quarter, and overall we are on track with our expectations. The fit of their market areas with our other banks is very good.
"The third quarter was uneventful for us in terms of changes affecting the credits we watch most closely, and we feel that we are managing our credit quality well. However, given the problems being reported by other financial institutions in the state, we are being intentionally cautious, and believe it prudent to maintain adequate loan loss reserves and strong capital. It is also our intention to maintain maximum flexibility within our capital accounts during these difficult times, and as a result, have determined not to issue a stock dividend at year end 2007. The new shares issued in a stock dividend require a large transfer within the capital accounts from retained earnings to common stock and increase both direct and indirect expenses which are difficult to justify in this operating environment.
"Additionally we took another step toward eliminating non-productive ventures in real estate with the sale of our interest in C.A. Hanes Realty during the quarter. Our goal is to emerge from these times with a growing and loyal customer base, efficient and effective operations, highly competitive products and services, and a multi-bank structure that helps us differentiate our service to the benefit of our customers and retain and motivate our highly competent team of bankers."
Comparisons of the income statement to prior periods are affected by the acquisition of ICNB Financial. The major data processing conversion was completed in September. As a result third quarter expenses include costs associated with conversion of processes and systems, while the savings to be achieved through the consolidation of backroom functions and staff reductions will not be fully realized until future quarters. Firstbank Corporation's non-interest income increased 24.4% in the third quarter of 2007 compared to the second quarter of 2007. Gain on sale of mortgage loans increased 14.1% in the third quarter compared to the second quarter and was 23.7% above the year-ago level. In the third quarter of 2007, total non-interest expense increased 24.2% from the second quarter. Firstbank continues to balance expense control efforts with investments in technology, training, and branch expansion. Firstbank - West Michigan opened a new branch office in Hastings, Michigan, in late June, and Keystone Community Bank opened a new office in Paw Paw, Michigan, in September of 2007.
During the third quarter of 2007, Firstbank negotiated and completed the sale of its 55% interest in the real estate brokerage company, C.A. Hanes. An after tax loss on the sale of $104,000, was recorded in the third quarter of 2007, and the pre-tax loss amount of $158,000 was included in non-interest expense.
Provision expense in the third quarter of $223,000 decreased from $739,000 in the second quarter. Provision expense in the second quarter had been increased as a result of establishing the specific reserve mentioned above. No significant specific reserves had to be established in the third quarter. At September 30, 2007, the ratio of the allowance for loan losses to loans was 1.06%, up from 1.03% at June 30, 2007.
Net charge-offs were $249,000 in the third quarter of 2007, or 0.09% of average loans on an annualized basis. For the year-to-date, net charge-offs of $732,000 annualized to 0.10% of average loans and were 50% below the year-ago level. The ratio of non-performing loans (including loans past due over 90 days) to loans rose three basis points to 1.00% at September 30, 2007, compared to 0.97% as of June 30, 2007. The ratio of nonperforming loans and other real estate owned to loans and other real estate owned increased from 1.17% at June 30, 2007, to 1.30% at September 30. This increase was almost entirely due the inclusion of the newly acquired bank in the consolidated results. Firstbank Corporation was well aware of the other real estate owned position of ICNB and took appropriate steps to insure proper valuations of properties as they came onto the consolidated balance sheet. Management has been successful in decreasing the other real estate owned position since the date of acquisition.
Shareholders' equity increased 19.1% in the third quarter of 2007, and was 22.7% above the level at September 30, 2006. The ratio of average equity to average assets stood at 8.7% in the third quarter of 2007 - a level consistent over past years and indicating that strong equity capital has been maintained as the company has grown. Firstbank repurchased 103,100 shares in the third quarter of 2007.
Firstbank Corporation, headquartered in Alma, Michigan, is a seven bank financial services company with assets of $1.4 billion and 52 banking offices serving Michigan's Lower Peninsula. Bank subsidiaries include: Firstbank - Alma; Firstbank (Mt. Pleasant); Firstbank - West Branch; Firstbank - Lakeview; Firstbank - St. Johns; Keystone Community Bank; and Firstbank - West Michigan.
This press release contains certain forward-looking statements that involve risks and uncertainties. When used in this press release the words "anticipate," "believe," "expect," "hopeful," "potential," "should," and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning future business growth, changes in interest rates, and the resolution of problem loans. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
UNAUDITED
Three Months Ended: Nine Months Ended:
---------------------------- ------------------
Sep 30 Jun 30 Sep 30 Sep 30 Sep 30
2007 2007 2006 2007 2006
---------------------------- ------------------
Interest income:
Interest and
fees on loans $ 20,817 $ 17,042 $ 17,366 $ 54,657 $ 49,897
Investment
securities
Taxable 921 686 552 2,233 1,605
Exempt from
federal income
tax 363 267 245 900 734
Short term
investments 334 269 110 914 297
---------------------------- ------------------
Total interest
income 22,435 18,264 18,273 58,704 52,533
Interest expense:
Deposits 7,892 6,589 6,066 20,988 16,473
Notes payable and
other borrowing 2,808 2,001 2,000 6,786 5,786
---------------------------- ------------------
Total interest
expense 10,700 8,590 8,066 27,774 22,259
Net interest income 11,735 9,674 10,207 30,930 30,274
Provision for loan
losses 223 739 213 241 598
---------------------------- ------------------
Net interest income
after provision for
loan losses 11,512 8,935 9,994 30,689 29,676
Noninterest income:
Gain on sale of
mortgage loans 428 375 346 1,127 956
Service charges on
deposit accounts 1,290 994 955 3,228 2,893
Gain (loss) on sale
of securities 0 0 0 (130) 7
Mortgage servicing 141 130 128 416 332
Other 1,119 895 1,055 2,963 3,577
---------------------------- ------------------
Total noninterest
income 2,978 2,394 2,484 7,604 7,765
Noninterest expense:
Salaries and
employee benefits 5,744 4,827 4,589 15,301 13,774
Occupancy and
equipment 1,597 1,326 1,290 4,274 3,793
Amortization of
intangibles 332 436 168 929 504
FDIC insurance
premium 61 25 24 110 77
Other 3,408 2,354 2,496 8,191 7,655
----------------------------
Total noninterest
expense 11,142 8,968 8,567 28,805 25,803
Income before
federal income
taxes 3,348 2,361 3,911 9,488 11,638
Federal income
taxes 933 614 1,194 2,668 3,598
---------------------------- ------------------
Net Income $ 2,415 $ 1,747 $ 2,717 $ 6,820 $ 8,040
============================ ==================
Fully Tax Equivalent
Net Interest
Income $ 11,969 $ 9,855 $ 10,354 $ 31,522 30,728
Per Share Data:
Basic Earnings $ 0.33 $ 0.27 $ 0.41 $ 1.00 $ 1.22
Diluted Earnings $ 0.33 $ 0.27 $ 0.41 $ 1.00 $ 1.22
Dividends Paid $ 0.225 $ 0.225 $ 0.214 $ 0.675 $ 0.638
Performance Ratios:
Return on Average
Assets (a) 0.71% 0.65% 0.99% 0.78% 1.02%
Return on Average
Equity (a) 8.2% 7.2% 11.2% 8.9% 11.4%
Net Interest Margin
(FTE) (a) 3.89% 3.91% 4.15% 3.90% 4.18%
Book Value Per
Share (b) $ 15.98 $ 15.24 $ 14.70 $ 15.98 $ 14.70
Average Equity/
Average Assets 8.7% 9.0% 8.9% 8.8% 8.9%
Net Charge-offs $ 249 $ 319 $ 1,144 $ 732 $ 1,467
Net Charge-offs
as a % of Average
Loans (c)(a) 0.09% 0.14% 0.50% 0.10% 0.22%
(a) Annualized
(b) Period End
(c) Total loans less loans held for sale
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
UNAUDITED
Sep 30 Jun 30 Dec 31 Sep 30
2007 2007 2006 2006
-----------------------------------------------
ASSETS
Cash and cash
equivalents:
Cash and due from
banks $ 33,713 $ 31,305 $ 32,084 $ 29,194
Short term
investments 20,695 16,192 24,853 6,703
-----------------------------------------------
Total cash and
cash
equivalents 54,408 47,497 56,937 35,897
Securities available
for sale 97,832 73,407 69,125 71,900
Federal Home Loan
Bank stock 7,684 6,061 5,924 6,137
Loans:
Loans held for sale 311 628 1,120 1,236
Portfolio loans:
Commercial 222,249 198,637 194,810 205,424
Commercial real
estate 329,638 267,474 286,249 295,172
Residential
mortgage 391,845 299,456 284,137 279,883
Real estate
construction 93,278 89,173 81,218 67,743
Consumer 79,506 64,840 63,106 64,142
-----------------------------------------------
Total portfolio loans 1,116,516 919,580 909,520 912,364
Less allowance for
loan losses (11,821) (9,501) (9,966) (10,689)
-----------------------------------------------
Net portfolio loans 1,104,695 910,079 899,554 901,675
Premises and
equipment, net 27,412 20,179 20,232 19,916
Goodwill 35,193 19,819 20,094 20,094
Other intangibles 5,988 2,723 3,045 3,206
Other assets 28,471 19,055 19,061 20,600
-----------------------------------------------
TOTAL ASSETS $1,361,994 $1,099,448 $ 1,095,092 $1,080,661
===============================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing
accounts $ 148,682 $ 128,651 $ 131,942 $ 121,320
Interest bearing
accounts:
Demand 217,678 155,085 161,228 168,597
Savings 153,214 137,263 127,301 129,578
Time 447,690 363,673 350,710 332,849
Wholesale CD's 37,223 41,074 64,245 67,554
-----------------------------------------------
Total deposits 1,004,487 825,746 835,426 819,898
Securities sold under
agreements to
repurchase and
overnight borrowings 53,155 42,897 35,179 36,350
FHLB Advances and
notes payable 130,982 97,370 94,177 93,703
Subordinated Debt 36,084 20,620 20,620 20,620
Accrued interest and
other liabilities 19,449 13,894 13,617 14,075
-----------------------------------------------
Total liabilities 1,244,157 1,000,527 999,019 984,646
SHAREHOLDERS' EQUITY
Preferred stock; no
par value, 300,000
shares authorized,
none issued
Common stock;
20,000,000 shares
authorized 110,862 93,119 91,652 86,108
Retained earnings 6,764 6,026 4,552 10,047
Accumulated other
comprehensive
income/(loss) 211 (224) (131) (140)
-----------------------------------------------
Total shareholders'
equity 117,837 98,921 96,073 96,015
-----------------------------------------------
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $1,361,994 $1,099,448 $ 1,095,092 $1,080,661
===============================================
Common stock shares
issued and
outstanding 7,374,060 6,555,767 6,484,202 6,529,662
Principal Balance of
Loans Serviced for
Others ($mil) $ 516.0 $ 471.2 $ 472.0 $ 472.3
Asset Quality Ratios:
Non-Performing Loans /
Loans (a) 1.00% 0.97% 0.47% 0.43%
Non-Perf. Loans +
OREO / Loans (a)
+ OREO 1.30% 1.17% 0.65% 0.85%
Non-Performing Assets
/ Total Assets 1.07% 0.98% 0.54% 0.72%
Allowance for Loan
Loss as a % of
Loans (a) 1.06% 1.03% 1.10% 1.17%
Allowance / Non-
Performing Loans 106% 106% 234% 271%
Quarterly Average
Balances:
Total Portfolio
Loans (a) $1,102,696 $ 916,775 $ 915,191 $ 914,979
Total Earning Assets 1,227,061 1,012,900 999,225 995,226
Total Shareholders'
Equity 117,158 98,398 95,761 95,844
Total Assets 1,352,024 1,097,337 1,083,518 1,082,031
Diluted Shares
Outstanding 7,391,851 6,545,229 6,543,831 6,593,801
(a) Total Loans less loans held for sale