Highlights Include:
* Fourth quarter 2007 net income of $1,566,000, and net income of
$8,386,000 for full year 2007
* Earnings per share (diluted) of $0.21 for the fourth quarter and
$1.21 for full-year 2007, compared to $0.33 and $1.55
respectively for 2006
* Solid loan and core deposit growth both including and excluding
the effect of Firstbank - West Michigan
* Economic conditions in Michigan and nationally continue to create
credit and valuation issues impacting earnings
* Net interest margin stable, gain on sale of mortgage loans
increases
ALMA, Mich., Jan. 31, 2008 (PRIME NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced earnings per share of $0.21 for the fourth quarter of 2007 compared to $0.33 in the fourth quarter of 2006. Net income was $1,566,000 for the quarter ended December 31, 2007, compared to $2,168,000 for the quarter ended December 31, 2006. Returns on average assets and average equity for the fourth quarter of 2007 were 0.45% and 5.2%, respectively, compared with 0.79% and 8.9%, respectively, in the fourth quarter of 2006. 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 $1.21 for full year 2007 decreased 21.9% compared to 2006. Net income was $8,386,000 for 2007, down 17.9% from $10,208,000 for 2006. Returns on average assets and average equity for 2007 were 0.69% and 7.8%, respectively, compared with 0.95% and 10.7%, respectively, in 2006. The net interest margin in 2007, at 3.90%, was 23 basis points below the 4.13% level of 2006. Provision expense for loan losses in 2007 was $2,014,000, increasing considerably from $767,000 in 2006. The dual factors of margin pressure and stress in the credit markets were the major factors contributing to the declines in earnings and profitability measures for Firstbank. Both factors are related to the economic conditions in Michigan and nationally.
Balance sheet comparisons to prior-year 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 $238.3 million at December 31, 2007. Total assets at December 31, 2007, were $1.366 billion, an increase of 24.8% over the prior year end. Total portfolio loans of $1.122 billion were 23.4% above the level at December 31, 2006, with 19.2% of the increase due to the addition of $175 million loans of Firstbank - West Michigan. Total deposits as of December 31, 2007, were $1.011 billion, including $166 million deposits of Firstbank - West Michigan, compared to $835 million at December 31, 2006.
Firstbank's net interest margin, at 3.89% in the fourth quarter of 2007, maintained the same level as in the third quarter of 2007 and was remarkably stable for all four quarters of 2007. The net interest margin for full year 2007 was 3.90% compared to 4.13% in 2006. Most of 2007, prior to the prime rate decline on September 18th, was characterized by a flat yield curve. The latter portion of the year was affected by the declines in the prime rate, which were driven by the Federal Reserve's efforts to stimulate economic activity and ease stress on credit quality. A flat yield curve creates a difficult environment for achieving strong net interest spreads. Reductions in the prime rate have an immediate negative impact on Firstbank's net interest margin, but the company works to reduce deposit and other funding costs as quickly as possible. These two factors combined to hold Firstbank's increase in net interest income to only 6.4% while average earning assets were increasing 13.3%. The addition of Firstbank - West Michigan contributed to the growth in earning assets.
Also affecting earnings in the fourth quarter and full year of 2007 was a decision by Firstbank to change the accounting classification for its ownership of bank stocks from "available for sale" to "trading." Firstbank, from time to time, invests limited amounts in certain bank stocks that may prove to be of strategic value in the future. Due to the sharp declines in Michigan bank stock valuations that occurred in 2007, Firstbank determined that it would consider retaining or selling such positions on a regular basis and that trading account status therefore becomes more appropriate for accounting purposes. The change in classification resulted in recording a loss of $628,000 on trading account securities. At December 31, 2007, the total bank stock investment was carried at market value of $675,000.
Mr. Sullivan stated, "The dual factors of margin pressure and stress in the credit markets made this is an extremely challenging time for all banks and financial services providers. While our earnings do not compare favorably with our past record of recent years, we are proud that our adherence to the principles of sound asset quality, conservative lending practices, and appropriately conservative application of accounting principles, including timely recognition of any problem assets, puts us in a strong leadership position within the state of Michigan. While our provision expense increased in 2007, it amounted to 0.20% of average portfolio loans, a quite favorable level compared to many of the banks in our state. By keeping ourselves relatively strong, we believe that the current environment may present us with a number of opportunities to add value for our shareholders in the years ahead.
"We also remain diligent regarding cost containment, and continually evaluate our markets and the opportunities within our company to improve efficiency. As a result, we have recently decided to combine two of our banks, Firstbank - Lakeview and Firstbank (Mt. Pleasant). Those two banks already share a number of personnel and services, and the advantages of the separate charters in this particular situation have become less significant. However, we continue to see value in the multi-bank-charter format, because in most situations it facilitates our ability to compete in our local markets and also to grow by acquisition. We know that this format works well in most of the communities we serve, and we have a good support structure to operate it efficiently. The multi-bank-charter format differentiates us from other companies, and we are re-affirming our commitment to it.
"I continue to be extremely grateful for the quality of our people and the efforts they are making during these difficult times to serve our customers and shareholders well."
Most items of revenue and expense were affected by the inclusion for the second half of the year of Firstbank - West Michigan. Gain on sale of mortgage loans increased in each quarter of 2007, and for all of 2007 was 32.5% over the level in 2006. The declines in interest rates in the latter part of the year have helped to expand mortgage activity. Service charges on deposit accounts increased 16.9% in 2007. In spite of these increases total non-interest income declined 4.1% due in part to the loss booked to trading account securities mentioned above and a loss on sale of securities in the first quarter of 2007, which was incurred to help improve net interest margin for the rest of the year. Salary and employee benefits expense was 7.3% lower in the fourth quarter of 2007 than in the third quarter, as Firstbank worked to contain expense and reduced or eliminated certain bonus and health and welfare benefits expenses that had been accrued earlier in the year. For the full year, non-interest expense increased 12.2% over the level in 2006, with the increase driven largely by the inclusion of the new bank.
In the second quarter of 2007, Firstbank designated as non-accrual a $4.7 million loan on an apartment complex in southeast Michigan and established a $500,000 specific reserve related to this credit, as disclosed previously. During the fourth quarter, this situation progressed to the point it appears likely that Firstbank will take title to collateral in the near future. Therefore, Firstbank made the decision to write the loan down to the expected valuation that can be supported by the collateral in current market conditions. This required increased provision expense of $1.2 million in the fourth quarter and increased net charge-offs in the fourth quarter by $1.8 million.
Provision expense in the fourth quarter of $1,773,000 increased from $223,000 in the third quarter and included the $1.2 million related to the one credit discussed above. At December 31, 2007, the ratio of the allowance for loan losses to loans was 1.02%, compared to 1.06% at September 30, 2007, and compared to 1.10% at December 31, 2006. The ratio of allowance for loan loss to non-performing loans decreased from 106% at September 30, 2007, to 81% at December 31, 2007, but the impact of moving the credit discussed above from being classified as a non-performing loan to being classified as other real estate, would cause this ratio to rise above 100%. At this time, no further charge-off is anticipated upon either the change in classification, or the liquidation of the collateral, on this particular loan.
Net charge-offs of $2,116,000 in the fourth quarter of 2007 included the $1.8 million related to the specific credit, and were 0.76% of average loans on an annualized basis. For full year 2007, net charge-offs of $2,848,000 also included the $1.8 million related to this credit and were 0.28% of average loans, in line with the 0.26% of average loans for 2006. The ratio of non-performing loans (including loans past due over 90 days) to loans rose to 1.26% at December 31, 2007, compared to 1.00% as of September 30, 2007. Most of the increase was related to delinquencies in residential and commercial loans, with a resulting increase in non-accrual loans. The current non-performing loan classification of the specific credit, which is expected to become classified as other real estate, contributes 0.26% of the total non-performing loan ratio of 1.26% at December 31, 2007.
Shareholders' equity increased 0.7% in the fourth quarter of 2007, and was 23.5% above the level at December 31, 2006. The ratio of average equity to average assets stood at 8.7% in the fourth quarter of 2007 -- a level consistent over past years, indicating that strong equity capital has been maintained as the company has grown, which is especially important as many Michigan banks are experiencing more asset quality problems than Firstbank. Firstbank did not repurchase its common stock in the fourth quarter of 2007, and for the full year repurchased 103,100 shares, all in the third quarter of 2007.
Firstbank Corporation, headquartered in Alma, Michigan, is a financial services company using a multi-bank-charter format 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 Twelve Months
Ended: Ended:
------------------------- ----------------
Dec 31 Sep 30 Dec 31 Dec 31 Dec 31
2007 2007 2006 2007 2006
------------------------- ----------------
Interest income:
Interest and fees
on loans $20,702 $20,822 $17,303 $75,364 $67,200
Investment
securities
Taxable 856 921 534 3,090 2,139
Exempt from federal
income tax 426 363 266 1,326 1,000
Short term
investments 168 334 150 1,082 447
------------------------- ----------------
Total interest income 22,152 22,440 18,253 80,862 70,786
Interest expense:
Deposits 7,661 7,892 6,469 28,649 22,942
Notes payable and
other borrowing 2,782 2,808 1,992 9,568 7,778
------------------------- ----------------
Total interest expense 10,443 10,700 8,461 38,217 30,720
Net interest income 11,709 11,740 9,792 42,645 40,066
Provision for loan
losses 1,773 223 169 2,014 767
------------------------- ----------------
Net interest income
after provision for
loan losses 9,936 11,517 9,623 40,631 39,299
Noninterest income:
Gain on sale of
mortgage loans 549 428 309 1,676 1,265
Service charges on
deposit accounts 1,237 1,300 935 4,475 3,828
Gain (loss) on
trading account
securities (628) 0 0 (628) 0
Gain (loss) on sale
of AFS securities 7 0 0 (123) 7
Mortgage servicing 162 118 194 555 526
Other 753 1,121 930 3,765 4,507
------------------------- ----------------
Total noninterest
income 2,080 2,967 2,368 9,720 10,133
Noninterest expense:
Salaries and
employee benefits 5,322 5,743 4,817 20,621 18,591
Occupancy and
equipment 1,656 1,629 1,339 5,962 5,132
Amortization of
intangibles 305 332 161 1,234 665
FDIC insurance
premium 61 61 25 171 102
Other 2,880 3,369 2,677 11,086 10,332
------------------------- ----------------
Total noninterest
expense 10,224 11,134 9,019 39,074 34,822
Income before
federal income taxes 1,792 3,350 2,972 11,277 14,610
Federal income taxes 226 935 804 2,891 4,402
------------------------- ----------------
Net Income $ 1,566 $ 2,415 $ 2,168 $ 8,386 $10,208
========================= ================
Fully Tax Equivalent
Net Interest Income $11,961 $11,969 $9,971 $43,483 40,699
Per Share Data:
Basic Earnings $0.21 $0.33 $0.33 $1.21 $1.56
Diluted Earnings $0.21 $0.33 $0.33 $1.21 $1.55
Dividends Paid $0.225 $0.225 $0.214 $0.900 $0.852
Performance Ratios:
Return on Average
Assets (a) 0.45% 0.71% 0.79% 0.69% 0.95%
Return on Average
Equity (a) 5.2% 8.2% 8.9% 7.8% 10.7%
Net Interest Margin
(FTE) (a) 3.89% 3.89% 3.98% 3.90% 4.13%
Book Value Per
Share (b) $16.01 $15.98 $14.82 $16.01 $14.82
Average Equity/
Average Assets 8.7% 8.7% 8.8% 8.8% 8.9%
Net Charge-offs $2,116 $249 $892 $2,848 $2,359
Net Charge-offs as
a % of Average
Loans (c)(a) 0.76% 0.09% 0.39% 0.28% 0.26%
(a) Annualized
(b) Period End
(c) Total loans less loans held for sale
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
UNAUDITED
Dec 31 Sep 30 Dec 31
2007 2007 2006
------------------------------------
ASSETS
Cash and cash equivalents:
Cash and due from banks $42,198 $33,713 $32,084
Short term investments 3,331 20,695 24,853
------------------------------------
Total cash and cash
equivalents 45,529 54,408 56,937
Securities available for sale 105,130 97,832 69,125
Federal Home Loan Bank stock 8,007 7,684 5,924
Loans:
Loans held for sale 1,725 311 1,120
Portfolio loans:
Commercial 219,080 222,249 194,810
Commercial real estate 311,494 329,638 286,249
Residential mortgage 387,222 391,845 284,137
Real estate construction 126,027 93,278 81,218
Consumer 78,106 79,506 63,106
------------------------------------
Total portfolio loans 1,121,929 1,116,516 909,520
Less allowance for loan
losses (11,477) (11,821) (9,966)
------------------------------------
Net portfolio loans 1,110,452 1,104,695 899,554
Premises and equipment, net 27,554 27,412 20,232
Goodwill 35,181 35,193 20,094
Other intangibles 5,734 5,988 3,045
Other assets 27,088 28,471 19,061
------------------------------------
TOTAL ASSETS $1,366,400 $1,361,994 $1,095,092
====================================
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES
Deposits:
Noninterest bearing
accounts $152,126 $148,682 $131,942
Interest bearing accounts:
Demand 222,371 217,678 161,228
Savings 147,654 153,214 127,301
Time 453,864 447,690 350,710
Wholesale CD's 35,377 37,223 64,245
------------------------------------
Total deposits 1,011,392 1,004,487 835,426
Securities sold under
agreements to repurchase
and overnight borrowings 42,791 53,155 35,179
FHLB Advances and notes
payable 139,035 130,982 94,177
Subordinated Debt 36,084 36,084 20,620
Accrued interest and other
liabilities 18,487 19,449 13,617
------------------------------------
Total liabilities 1,247,789 1,244,157 999,019
SHAREHOLDERS' EQUITY
Preferred stock; no par
value, 300,000 shares
authorized, none issued
Common stock; 20,000,000
shares authorized 111,436 110,862 91,652
Retained earnings 6,692 6,764 4,552
Accumulated other
comprehensive income/(loss) 483 211 (131)
------------------------------------
Total shareholders' equity 118,611 117,837 96,073
------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,366,400 $1,361,994 $1,095,092
====================================
Common stock shares issued
and outstanding 7,407,198 7,374,060 6,484,202
Principal Balance of Loans
Serviced for Others ($mil) $515.1 $516.0 $472.0
Asset Quality Ratios:
Non-Performing Loans /
Loans (a) 1.26% 1.00% 0.47%
Non-Perf. Loans + OREO /
Loans (a) + OREO 1.54% 1.30% 0.65%
Non-Performing Assets /
Total Assets 1.26% 1.07% 0.54%
Allowance for Loan Loss as
a % of Loans (a) 1.02% 1.06% 1.10%
Allowance / Non-Performing
Loans 81% 106% 234%
Quarterly Average Balances:
Total Portfolio Loans (a) $1,118,551 $1,102,696 $915,191
Total Earning Assets 1,228,740 1,227,061 999,225
Total Shareholders' Equity 117,960 117,158 95,761
Total Assets 1,356,106 1,352,024 1,083,518
Diluted Shares Outstanding 7,378,262 7,391,851 6,543,831
(a) Total Loans less loans held for sale