Highlights Include: * Second quarter 2009 net income positive in spite of unusually large loan loss provision and FDIC special assessment * Earnings per share of $0.12 for the first half of 2009 compared to $0.33 in the first half of 2008 * Ratio of the allowance for loan losses to loans increased to 1.48% at June 30, 2009, compared to 1.26% at December 31, 2008, and 1.07% at June 30, 2008 * Balance sheet and loan growth remain muted by economic conditions and loan sales into the secondary market * Equity ratio remains strong and all affiliate banks continue to meet regulatory well-capitalized requirements
ALMA, Mich., July 28, 2009 (GLOBE NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced earnings per share of $0.12 for the first half of 2009 compared to $0.33 in the first half of 2008. Net income was $1,575,000 for the six months ended June 30, 2009, compared to $2,442,000 for the first half of 2008. Returns on average assets and average equity for the first half of 2009 were 0.24% and 2.5%, respectively. All per share amounts are fully diluted.
Significant amounts of expenses were booked in the second quarter of 2009 that are not expected to recur at the same level. The FDIC assessed a special charge in the second quarter to all banks to help with the costs of resolving bank failures across the country. The total amount of the assessment to Firstbank was $642,000, increasing the total quarterly FDIC insurance expense to $1,155,000. As a result of the continued deterioration in real estate values, the uncertainty surrounding the bankruptcies of GM and Chrysler, and the rising state unemployment rate to over 15%, we determined that additional reserves should be established for loan losses inherent in the portfolio. Our total loan loss provision in the second quarter was $5,276,000, which replenished the reserve for the current quarter net charge-offs of $2,736,000, and built the reserve by an additional $2,540,000 to reflect our growing concern about the Michigan economy. Second quarter net charge-offs while elevated, were in line with the prior two quarters, but when combined with the buildup of reserves to cover losses inherent in the portfolio, the provision expense in the second quarter of 2009 resulted in the highest quarterly provision expense in the company's history. In spite of these very large expense items, second quarter 2009 net income was slightly positive at $62,000, although earnings per share, calculated after payment of preferred dividends, were negative $0.04.
Helping to overcome these expenses was the continuing surge in mortgage revenues. Gain on sale of mortgage loans was $3,109,000 in the second quarter of 2009, up 31% from the $2,373,000 in the first quarter of 2009 and representing an increase of 450% over the level in the second quarter of 2008. Security gains of $187,000 in the first half of 2009 also helped total non-interest income to increase nearly 58% from the first half of 2008.
Firstbank was able to improve its net interest margin to 3.77% in the second quarter of 2009 from 3.66% in the first quarter of 2009. This improvement in margin helped net interest income in the first half of 2009 increase 2.1%, or $476,000, compared to the first half of 2008.
Non-interest expenses increased as a direct result of the difficult credit cycle, and promotional costs associated with the large increase in mortgage production. FDIC insurance expense, including the $642,000 special assessment discussed above, totaled $1,155,000 in the quarter -- an increase of $1,052,000 from the second quarter 2008 FDIC expense of $103,000. Legal and other expenses related to the collection and management of delinquent loans, and costs related to the maintenance and disposal of other real estate owned, amounted to over $525,000 during the quarter, an increase of over $300,000 from the second quarter of 2008. Promotional expenses associated with the strong mortgage production increased to $246,000 in the quarter, an increase of $208,000 from the second quarter of 2008.
Expense control efforts in the more manageable categories were successful. Comparing the first half of 2009 with the first half of 2008, salaries and employee benefits expense declined 1.7% and occupancy and equipment expense declined 6.7%. The total of other noninterest expense categories showed an increase from $5,392,000 in the first half of 2008 to $6,714,000 in the first half of 2009, but over 85% of the increase is related to legal and other costs of managing problem loans, and costs associated with the very profitable surge in the mortgage business, leaving the remaining costs in the category of other noninterest expense to increase less than 4%.
Total assets of Firstbank Corporation at June 30, 2009, were $1.426 billion, an increase of 2.7% over the year-ago period. Total portfolio loans of $1.130 billion were 2.0% below the year-ago level. Commercial and commercial Real estate loans increased 5.4% over this twelve month period, but residential mortgage, real estate construction, and consumer loans decreased. Although mortgage refinance activity is very strong in Firstbank's markets, this type of lending activity results in loans being financed in the secondary market rather than on the balance sheet of the company. While Firstbank has ample resources to increase loans on its balance sheet, demand for funding new ventures by quality borrowers remains weak due to uncertainty about the economy. Total deposits as of June 30, 2009, were $1.056 billion, compared to $1.014 billion at June 30, 2008, an increase of 4.2%.
Mr. Sullivan stated, "Our lenders continue to do an excellent job of working with borrowers who are financially stressed by the current economic conditions, to both protect the interests of the bank and our shareholders as well as structure credits in the best possible way to accommodate expected cash flows. The bankruptcies of General Motors and Chrysler in the second quarter are bellwethers that signify the depth of the recession, and while we have very little exposure to auto manufacturers and suppliers directly, we know that these problems will ripple through the economy. Therefore we thought it prudent not only to replenish the reserve for the loan losses that have occurred, but also to make a significant increase in the reserve for losses inherent in the portfolio. We, as every bank in the country, also were required to contribute to the FDIC to replenish their reserves due to failures of other banks, mostly outside of Michigan. Considering all of the credit related costs, we were pleased to make even a small amount of net income in the quarter.
"Our mortgage lenders, processors, and back room staff worked extremely hard again in the second quarter helping record numbers of customers to improve their financial positions, and achieving record levels of mortgage revenue for our company.
"We are very disappointed to experience such weak earnings, as are all of our shareholders, however, with good people doing the right things for both our customers and our shareholders and the continuing strong financial condition of our company and our banks, we are remaining well positioned to emerge from the recession in a strong competitive position and with excellent opportunity for earnings growth when the time arrives."
As a result of providing additional reserves for loan losses, at June 30, 2009, the ratio of the allowance for loan losses to loans increased to 1.48%, compared to 1.26% at December 31, 2008, and 1.07% at June 30, 2008. The ratio of allowance for loan loss to non-performing loans stood at 63% on June 30, 2009, compared to 59% at December 31, 2008.
Net charge-offs were $2,736,000 in the second quarter of 2009 after having risen to $2,054,000 in the first quarter. For the first half of 2009, net charge-offs were 0.84% of average loans on an annualized basis. The ratio of non-performing loans (including loans past due over 90 days) to loans was 2.34% at June 30, 2009, compared to 2.14% as of December 31, 2008, and 1.56% at June 30, 2008.
Total equity remained virtually unchanged during the second quarter of 2009 and was 28.7% above the level at December 31, 2008, reflecting the improvement obtained by the issuance of $33 million preferred stock at the end of January. The ratio of average equity to average assets rose to 10.5% in the second quarter of 2009 -- approximately two full percentage points over levels of 2007 and 2008. All of Firstbank Corporation's affiliate banks met the regulatory well-capitalized requirements prior to the issuance of preferred stock in January and continue to meet these requirements.
Firstbank Corporation, headquartered in Alma, Michigan, is a financial services company using a multi-bank-charter format with assets of $1.4 billion and 51 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
Three Months Ended: Six Months Ended:
---------------------------- ------------------
Jun 30 Mar 31 Jun 30 Jun 30 Jun 30
2009 2009 2008 2009 2008
---------------------------- ------------------
Interest income:
Interest and
fees on loans $ 17,504 $ 17,624 $ 19,031 $ 35,128 $ 38,786
Investment securities
Taxable 648 746 945 $ 1,394 1,984
Exempt from federal
income tax 321 332 349 $ 653 702
Short term
investments 23 30 86 53 177
---------------------------- ------------------
Total interest income 18,496 18,732 20,411 37,228 41,649
Interest expense:
Deposits 4,819 5,168 6,431 9,987 13,520
Notes payable and
other borrowing 1,821 1,963 2,463 3,784 5,148
---------------------------- ------------------
Total interest
expense 6,640 7,131 8,894 13,771 18,668
Net interest income 11,856 11,601 11,517 23,457 22,981
Provision for loan
losses 5,276 1,588 3,465 6,864 4,281
---------------------------- ------------------
Net interest income
after provision for
loan losses 6,580 10,013 8,052 16,593 18,700
Noninterest income:
Gain on sale of
mortgage loans 3,109 2,373 565 5,482 1,707
Service charges on
deposit accounts 1,122 1,083 1,256 2,205 2,424
Gain (loss) on
trading account
securities 16 (129) (160) (113) (173)
Gain (loss) on sale
of AFS securities 357 (57) (67) 300 62
Mortgage servicing (191) (352) 131 (543) 8
Other 715 279 622 994 1,252
---------------------------- ------------------
Total noninterest
income 5,128 3,197 2,347 8,325 5,280
Noninterest expense:
Salaries and
employee benefits 5,551 5,630 5,523 11,181 11,370
Occupancy and
equipment 1,529 1,727 1,740 3,256 3,489
Amortization of
intangibles 245 245 281 490 562
FDIC insurance
premium 1,155 371 103 1,526 216
Other 3,460 3,254 2,672 6,714 5,392
---------------------------- ------------------
Total noninterest
expense 11,940 11,227 10,319 23,167 21,029
Income before federal
income taxes (232) 1,983 80 1,751 2,951
Federal income taxes (294) 470 (212) 176 509
---------------------------- ------------------
Net Income 62 1,513 292 1,575 2,442
Preferred Stock
Dividends 413 275 0 688 0
---------------------------- ------------------
Net Income available
to Common
Shareholders ($ 351) $ 1,238 $ 292 $ 887 $ 2,442
============================ ==================
Fully Tax Equivalent
Net Interest Income $ 12,071 $ 11,829 $ 11,791 $ 23,900 $ 23,542
Per Share Data:
Basic Earnings ($ 0.04) $ 0.16 $ 0.04 $ 0.12 $ 0.33
Diluted Earnings ($ 0.04) $ 0.16 $ 0.04 $ 0.12 $ 0.33
Dividends Paid $ 0.100 $ 0.100 $ 0.225 $ 0.200 $ 0.450
Performance Ratios:
Return on Average
Assets (a) 0.03% 0.46% 0.10% 0.24% 0.37%
Return on Average
Equity (a) 0.3% 4.8% 1.2% 2.5% 4.3%
Net Interest Margin
(FTE) (a) 3.77% 3.66% 3.77% 3.72% 3.78%
Book Value Per
Share (b) $ 15.02 $ 15.10 $ 15.78 $ 15.02 $ 15.78
Average Equity/
Average Assets 10.5% 9.4% 8.6% 9.9% 8.6%
Net Charge-offs $ 2,736 $ 2,054 $ 2,687 $ 4,790 $ 3,430
Net Charge-offs as
a % of Average
Loans (c)(a) 0.96% 0.71% 0.94% 0.84% 0.60%
(a) Annualized
(b) Period End
(c) Total loans less loans held for sale
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
UNAUDITED
Jun 30 Mar 31 Dec 31 Jun 30
2009 2009 2008 2008
----------------------------------------------
ASSETS
Cash and cash
equivalents:
Cash and due from
banks $ 39,653 $ 24,759 $ 33,050 $ 40,283
Short term
investments 52,497 47,315 30,662 6,281
----------------------------------------------
Total cash and cash
equivalents 92,150 72,074 63,712 46,564
Securities available
for sale 108,091 104,637 113,095 96,991
Federal Home Loan Bank
stock 9,084 9,084 9,084 8,666
Loans:
Loans held for sale 2,676 5,071 1,408 191
Portfolio loans:
Commercial 183,287 177,635 184,455 214,185
Commercial real estate 395,227 398,648 391,572 334,903
Residential mortgage 390,318 395,945 403,695 393,293
Real estate
construction 88,668 90,665 103,206 132,896
Consumer 72,482 72,546 75,296 77,559
----------------------------------------------
Total portfolio loans 1,129,982 1,135,439 1,158,224 1,152,836
Less allowance for
loan losses (16,668) (14,128) (14,594) (12,328)
----------------------------------------------
Net portfolio loans 1,113,314 1,121,311 1,143,630 1,140,508
Premises and
equipment, net 25,616 26,396 26,941 27,959
Goodwill 35,513 35,603 35,603 35,553
Other intangibles 3,384 3,636 3,881 4,390
Other assets 36,302 37,143 27,986 28,336
----------------------------------------------
TOTAL ASSETS $1,426,130 $1,414,955 $1,425,340 $1,389,158
==============================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing
accounts $ 165,574 $ 142,862 $ 149,179 $ 148,385
Interest bearing
accounts:
Demand 226,078 229,827 223,526 219,161
Savings 162,879 161,554 154,015 160,862
Time 480,954 489,304 489,081 449,517
Wholesale CD's 20,700 12,502 31,113 35,783
----------------------------------------------
Total deposits 1,056,185 1,036,049 1,046,914 1,013,708
Securities sold under
agreements to
repurchase and
overnight borrowings 44,163 43,671 52,917 48,718
FHLB Advances and
notes payable 127,814 133,988 162,274 156,923
Subordinated Debt 36,084 36,084 36,084 36,084
Accrued interest and
other liabilities 13,953 17,222 12,168 15,605
----------------------------------------------
Total liabilities 1,278,199 1,267,014 1,310,357 1,271,038
SHAREHOLDERS' EQUITY
Preferred stock; no
par value, 300,000
shares authorized,
33,000 outstanding 32,707 32,707 0 0
Common stock;
20,000,000 shares
authorized 114,253 113,951 113,411 112,491
Retained earnings 50 1,164 686 5,790
Accumulated other
comprehensive income/
(loss) 921 119 886 (161)
----------------------------------------------
Total shareholders'
equity 147,931 147,941 114,983 118,120
----------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,426,130 $1,414,955 $1,425,340 $1,389,158
==============================================
Common stock shares
issued and
outstanding 7,669,227 7,630,637 7,580,620 7,484,368
Principal Balance of
Loans Serviced for
Others ($mil) $575.1 $534.5 $513.1 $517.3
Asset Quality Ratios:
Non-Performing Loans
/ Loans (a) 2.34% 2.07% 2.14% 1.56%
Non-Perf. Loans +
OREO / Loans (a)
+ OREO 3.14% 2.82% 2.60% 1.89%
Non-Performing Assets
/ Total Assets 2.51% 2.28% 2.12% 1.58%
Allowance for Loan
Loss as a % of
Loans (a) 1.48% 1.24% 1.26% 1.07%
Allowance / Non-
Performing Loans 63% 60% 59% 69%
Quarterly Average
Balances:
Total Portfolio
Loans (a) $1,137,106 $1,149,168 $1,153,716 $1,142,047
Total Earning Assets 1,283,676 1,305,113 1,278,675 1,257,478
Total Shareholders'
Equity 148,247 134,866 118,064 118,846
Total Assets 1,417,842 1,431,011 1,409,644 1,389,391
Diluted Shares
Outstanding 7,643,929 7,595,469 7,540,644 7,451,664
(a) Total Loans less loans held for sale