Highlights Include:
* Non-cash charges for mark-to-market security valuations, and
build-up of allowance for loan losses, result in net loss for the
fourth quarter of 2008
* Net income for full year 2008 remains positive at $719,000 in
spite of fourth quarter loss
* Financial market turmoil, along with the economic conditions in
Michigan and the nation, continue to create credit and valuation
issues impacting earnings
* Net interest margin stable
* Capital remains strong and all affiliate banks continue to meet
regulatory well-capitalized requirements
ALMA, Mich., Feb. 13, 2009 (GLOBE NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced non-cash charges included in earnings in the fourth quarter of 2008 of $3.9 million related to mark-to-market accounting adjustments in the valuation of securities, and elevated provision for loan loss expense of $2.9 million, leading to a fourth quarter net loss. Firstbank had been informed that regulatory consideration is being given to excluding these non-cash mark-to-market charges from net income as an industry-wide issue; however, as of this date Firstbank's accounting treatment to include these non-cash charges in fourth quarter income has not been overturned. Earnings per share of ($0.33) for the fourth quarter of 2008 compared to $0.10 in the third quarter of 2008 and to $0.21 in the fourth quarter of 2007. Net loss was $2,460,000 for the quarter ended December 31, 2008, compared to net income of $737,000 for the quarter ended September 30, 2008 and net income of $1,566,000 for the quarter ended December 31, 2007. Returns on average assets and average equity for the fourth quarter of 2008 were (0.70%) and (8.4%), respectively. All per share amounts are fully diluted.
Earnings per share of $0.10 for the full year of 2008 compared to $1.22 in 2007. Net income was $719,000 for 2008, compared to $8,386,000 for 2007. Returns on average assets and average equity for 2008 were 0.05% and 0.6%, respectively.
Total assets of Firstbank Corporation at December 31, 2008, were $1.425 billion, an increase of 4.4% over the year-ago period. Total portfolio loans of $1.158 billion were 3.3% above the level at December 31, 2007. Total deposits as of December 31, 2008, were $1.047 billion, compared to $1.011 billion at December 31, 2007, an increase of 3.5%.
Firstbank's net interest margin, at 3.82% in the fourth quarter of 2008, remained the same as in the third quarter of 2008, and was 8 basis points below the 3.90% of the fourth quarter of 2007. Growth in average earning assets in the fourth quarter of 2008 was 0.4% compared to the third quarter of 2008 and 4.1% compared to the fourth quarter of 2007. Net interest income in the fourth quarter of 2008 was 0.6% above the level in the third quarter and 2.2% above the year-ago period.
Gain on sale of mortgage loans began to strengthen in the fourth quarter of 2008, and was 54% above the level in the third quarter. For the full year of 2008 gain on sale of mortgages was 50% above the level in 2007. Sharp declines in mortgage interest rates in December of 2008 and continuing into the first quarter of 2009 are resulting in increased mortgage refinance activity. Other factors overshadowed the improved gain on sale of mortgages and resulted in declines in total non-interest income. Those factors include the security valuation adjustments referenced above, a decline in the value of deferred compensation assets carried on the books of the company, and losses on the sale of other real estate exceeding gains on sale of other real estate.
Firstbank continues to emphasize cost control during this period of economic uncertainty and pressure on revenues. Although salaries and employee benefits expense increased 7.8% in 2008 compared to 2007, this increase was caused by the full-year inclusion of Firstbank - West Michigan, which was acquired on July 1, 2007. Comparing the second half of 2008 with the second half of 2007, salaries and employee benefits expense decreased 1.8%, as a 4.0% decline in salary expense was partially offset by increasing benefits expense. Management believes that the company's benefits expense is beginning to show a more seasonal pattern of increasing expenses in the latter part of the year, because of the growing popularity of high-deductible medical plans. The increases in non-interest expenses other than salaries and employee benefits were driven mainly by factors related to problems in the economy and the financial system. FDIC insurance premiums increased 57% in the second half of 2008 compared to the year-earlier period. Legal fees related to loans, write-downs of the value of other real estate, and expenses related to the management of other real estate also increased.
Mr. Sullivan stated, "The turmoil in the financial markets, and the continued deterioration in Michigan's economy, took a very heavy toll on our fourth quarter earnings. The non-cash charges required by mark-to-market accounting have exacerbated the situation. In our company, the original dollar value of assets we held that have been subject to such adjustment amount to less than one percent of our total assets, and in most cases these assets continue to provide us the investment income according to the terms of the investment instrument. However, the illiquidity of the financial markets has depressed the trading values of the securities, which we are now required to recognize in our income statements, and which has had a very negative impact on our income. We anticipate that when the financial markets return to more traditional trading volumes and valuations that we will see some recovery of these losses upon sale of the securities. During the fourth quarter we recognized that the economic stresses continued to affect some of our customers to the extent that they have struggled, or in some cases become unable, to meet their financial obligations, and determined to increase the reserve for loan losses by $1.8 million. For the year 2008 our net charge-offs increased to $5.1 million, and we increased our provision for loan losses to nearly $8.3 million, with the net effect of adding approximately $3.2 million to the balance in our allowance for loan loss reserve.
"We continue to monitor the core strengths of our longer-term profitability factors in the face of unusually dramatic interest rate movements and weak economic activity. We are encouraged by our success in keeping discretionary costs under control and by holding our own in terms of a relatively stable net interest margin and modest growth in earning assets and deposits. Our strategy is to manage through the challenges of current times, and to emerge well-positioned to grow and prosper along with our customers and communities."
Sullivan continued, "When earnings are not what you want them to be, it is only small consolation to know that there are many other companies experiencing even more severe consequences of the turmoil in the economy and the financial system. Under the circumstances, we were pleased that full year earnings remained positive, even with elevated provision expense and non-cash charges, and that without the non-cash charges and build-up of allowance, fourth quarter earnings would have been positive."
At December 31, 2008, the ratio of the allowance for loan losses to loans increased to 1.26% from 1.11% at September 30, 2008, and increased from 1.02% at December 31, 2007. The ratio of allowance for loan loss to non-performing loans stood at 59% at December 31, 2008.
Net charge-offs of $1,120,000 in the fourth quarter of 2008 were 0.39% of average loans on an annualized basis, and net charge-offs of $5,140,000 for the full year 2008 were 0.45% of average loans. The ratio of non-performing loans (including loans past due over 90 days) to loans was 2.14% at December 31, 2008, compared to 1.81% as of September 30, 2008, and 1.26% at December 31, 2007.
Shareholders' equity decreased 2.2% in the fourth quarter of 2008, and was 3.1% below the level at December 31, 2007. The ratio of average equity to average assets was 8.4% in the fourth quarter of 2008 -- similar to levels over past years. Firstbank did not repurchase its common stock in 2008. All of Firstbank Corporation's affiliate banks continue to meet the regulatory well-capitalized requirements.
Firstbank Corporation has indicated that it plans to announce its first quarter, 2009, cash dividend (payable in March) on February 24, 2009.
Firstbank Corporation, headquartered in Alma, Michigan, is a financial services company using a multi-bank-charter format with assets of $1.4 billion and 53 banking offices serving Michigan's Lower Peninsula. Bank subsidiaries include: Firstbank - Alma; Firstbank (Mt. Pleasant); Firstbank - West Branch; 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
Twelve Months
Three Months Ended: Ended:
------------------------- ----------------
Dec 31 Sep 30 Dec 31 Dec 31 Dec 31
2008 2008 2007 2008 2007
------------------------- ----------------
Interest income:
Interest and fees on
loans $18,682 $19,136 $20,702 $76,604 $75,364
Investment securities
Taxable 976 918 856 $3,878 3,090
Exempt from federal
income tax 349 357 426 $1,408 1,326
Short term investments 33 91 168 301 1,082
------------------------- ----------------
Total interest income 20,040 20,502 22,152 82,191 80,862
Interest expense:
Deposits 5,784 6,164 7,661 25,468 28,649
Notes payable and other
borrowing 2,294 2,443 2,782 9,885 9,568
------------------------- ----------------
Total interest expense 8,078 8,607 10,443 35,353 38,217
Net interest income 11,962 11,895 11,709 46,838 42,645
Provision for loan losses 2,947 1,028 1,773 8,256 2,014
------------------------- ----------------
Net interest income after
provision for loan losses 9,015 10,867 9,936 38,582 40,631
Noninterest income:
Gain on sale of mortgage
loans 489 317 549 2,513 1,676
Service charges on
deposit accounts 1,183 1,218 1,237 4,825 4,475
Gain (loss) on trading
account securities (81) (200) (628) (454) (628)
Gain (loss) on sale of
AFS securities (3,851) (1,674) 7 (5,463) (123)
Mortgage servicing 70 180 162 258 555
Other 369 690 753 2,311 3,765
------------------------- ----------------
Total noninterest income (1,821) 531 2,080 3,990 9,720
Noninterest expense:
Salaries and employee
benefits 5,519 5,342 5,322 22,231 20,621
Occupancy and equipment 1,714 1,728 1,656 6,931 5,962
Amortization of
intangibles 245 264 206 1,071 1,135
FDIC insurance premium 180 166 160 562 270
Other 3,612 3,116 2,880 12,120 11,086
------------------------- ----------------
Total noninterest expense 11,270 10,616 10,224 42,915 39,074
Income before federal
income taxes (4,076) 782 1,792 (343) 11,277
Federal income taxes (1,616) 45 226 (1,062) 2,891
------------------------- ----------------
Net Income ($2,460) $737 $1,566 $719 $8,386
========================= ================
Fully Tax Equivalent Net
Interest Income $12,220 $12,160 $11,961 $47,922 $43,483
Per Share Data:
Basic Earnings ($0.33) $0.10 $0.21 $0.10 $1.22
Diluted Earnings ($0.33) $0.10 $0.21 $0.10 $1.22
Dividends Paid $0.225 $0.225 $0.225 $0.900 $0.900
Performance Ratios:
Return on Average
Assets(a) -0.70% 0.21% 0.45% 0.05% 0.69%
Return on Average
Equity(a) -8.4% 2.5% 5.2% 0.6% 7.8%
Net Interest Margin
(FTE)(a) 3.82% 3.82% 3.90% 3.80% 3.90%
Book Value Per Share(b) $15.17 $15.61 $16.01 $15.17 $16.01
Average Equity/Average
Assets 8.4% 8.4% 8.7% 8.5% 8.8%
Net Charge-offs $1,120 $590 $2,116 $5,140 $2,848
Net Charge-offs as a % of
Average Loans(c)(a) 0.39% 0.20% 0.76% 0.45% 0.28%
(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
2008 2008 2007
----------------------------------
ASSETS
Cash and cash equivalents:
Cash and due from banks $33,050 $35,589 $42,198
Short term investments 30,662 3,873 3,331
----------------------------------
Total cash and cash equivalents 63,712 39,462 45,529
Securities available for sale 113,095 119,756 105,130
Federal Home Loan Bank stock 9,084 8,760 8,007
Loans:
Loans held for sale 1,408 757 1,725
Portfolio loans:
Commercial 184,455 206,274 219,080
Commercial real estate 391,572 341,550 311,494
Residential mortgage 403,695 398,963 387,222
Real estate construction 103,206 130,405 126,027
Consumer 75,296 77,018 78,106
----------------------------------
Total portfolio loans 1,158,224 1,154,210 1,121,929
Less allowance for loan losses (14,594) (12,767) (11,477)
----------------------------------
Net portfolio loans 1,143,630 1,141,443 1,110,452
Premises and equipment, net 26,941 27,565 27,554
Goodwill 35,603 35,603 34,421
Other intangibles 3,881 4,126 5,832
Other assets 27,986 29,581 27,089
----------------------------------
TOTAL ASSETS $1,425,340 $1,407,053 $1,365,739
==================================
LIABILITIES AND SHAREHOLDERS'
EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts $149,179 $148,762 $152,126
Interest bearing accounts:
Demand 223,526 216,894 222,371
Savings 154,015 157,681 147,654
Time 489,081 463,193 453,864
Wholesale CD's 31,113 41,512 35,377
----------------------------------
Total deposits 1,046,914 1,028,042 1,011,392
Securities sold under agreements
to repurchase and overnight
borrowings 52,917 55,877 42,791
FHLB Advances and notes payable 162,274 153,865 139,035
Subordinated Debt 36,084 36,084 36,084
Accrued interest and other
liabilities 12,168 15,669 17,826
----------------------------------
Total liabilities 1,310,357 1,289,537 1,247,128
SHAREHOLDERS' EQUITY
Preferred stock; no par value,
300,000 shares authorized, none
issued
Common stock; 20,000,000 shares
authorized 113,411 112,970 111,436
Retained earnings 686 4,842 6,692
Accumulated other comprehensive
income/(loss) 886 (296) 483
----------------------------------
Total shareholders' equity 114,983 117,516 118,611
----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $1,425,340 $1,407,053 $1,365,739
==================================
Common stock shares issued and
outstanding 7,580,620 7,530,235 7,407,198
Principal Balance of Loans Serviced
for Others ($mil) $513.1 $514.5 $515.1
Asset Quality Ratios:
Non-Performing Loans / Loans(a) 2.14% 1.81% 1.26%
Non-Perf. Loans + OREO / Loans(a)
+ OREO 2.60% 2.24% 1.54%
Non-Performing Assets / Total
Assets 2.12% 1.84% 1.27%
Allowance for Loan Loss as a % of
Loans(a) 1.26% 1.11% 1.02%
Allowance / Non-Performing Loans 59% 61% 81%
Quarterly Average Balances:
Total Portfolio Loans(a) $1,153,716 $1,156,041 $1,118,551
Total Earning Assets 1,278,675 1,273,716 1,228,740
Total Shareholders' Equity 118,064 118,437 117,960
Total Assets 1,409,644 1,408,393 1,356,106
Diluted Shares Outstanding 7,540,644 7,498,223 7,378,262
(a) Total Loans less loans held for sale